UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 20-F/A

Amendment #1



[]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

OR

[  ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report



Dejour Enterprises Ltd.

(Exact name of Registrant as specified in its charter)



__________British Columbia, Canada_____________

(Jurisdiction of incorporation or organization)



Suite 1100, 808 West Hastings Street, Vancouver, British Columbia V6C 2X4

(Address of principal executive offices)



Securities to be registered pursuant to Section 12(b) of the Act:

None



Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None



Indicate the number of outstanding shares of each of Dejour Enterprises Ltd.s classes of capital or common stock as of the close of the period covered by the annual report.



60,899,723



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ___     No   xxx



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.            Yes xxx   No ___



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



Large accelerated filer   Accelerated filer   Non-accelerated filer  xxx



Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 xxx   Item 18 ___



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No xxx    N/A







Page 1 of 135

Index to Exhibits on Page 68

























































































2

#





Dejour Enterprises Ltd.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS



|          | PART I                                                                       | Page
|--------- | ---------------------------------------------------------------------------- | ----
|          |                                                                              |     
|Item 1.   | Identity of Directors, Senior Management and Advisors                        | 5   
|Item 2.   | Offer Statistics and Expected Timetable                                      | 6   
|Item 3.   | Key Information                                                              | 6   
|Item 4.   | Information on the Company                                                   | 12  
|Item 5.   | Operating and Financial Review and Prospects                                 | 34  
|Item 6.   | Directors, Senior Management and Employees                                   | 42  
|Item 7.   | Major Shareholders and Related Party Transactions                            | 52  
|Item 8.   | Financial Information                                                        | 53  
|Item 9.   | The Offer and Listing                                                        | 54  
|Item 10.  | Additional Information                                                       | 56  
|Item 11.  | Quantitative and Qualitative Disclosures about Market Risk                   | 64  
|Item 12.  | Description of Other Securities Other Than Equity Securities                 | 64  
|          |                                                                              |     
|          | PART II                                                                      |     
|          |                                                                              |     
|          |                                                                              |     
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                              | 64  
|Item 14.  | Material Modifications to the Rights of Security Holders and Use of Proceeds | 64  
|Item 15.  | Controls and Procedures                                                      | 64  
|Item 16.  | Reserved                                                                     | 64  
|Item 16A. | Audit Committee Financial Expert                                             | 64  
|Item 16B. | Code of Ethics                                                               | 65  
|Item 16C. | Principal Accountant Fees and Services                                       | 66  
|Item 16D. | Exemptions from Listing Standards for Audit Committees                       | 66  
|Item 16E. | Purchase of Equity Securities by the Issuer and Affiliated Purchasers        | 67  
|          |                                                                              |     
|          | PART III                                                                     |     
|          |                                                                              |     
|Item 17.  | Financial Statements                                                         | 67  
|Item 18.  | Financial Statements                                                         | 67  
|Item 19.  | Exhibits                                                                     | 67  

































3



INTRODUCTION

Dejour Enterprises Ltd. (Dejour or the Company) 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 a 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. The Company was continued in British Columbia under the Business Corporations Act (British Columbia)in 2005.

The authorized capital of Dejour consists of three classes of shares: an unlimited number of common shares; an unlimited number of preferred shares designated as First Preferred Shares, issuable in series; and an unlimited number of preferred shares designated as Second Preferred Shares, issuable in series. 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.

The First Preferred Shares have priority over the Common Shares and the Second Preferred Shares with respect to the payment of dividends and in the distribution of assets in the event of a winding up of Dejour. The Second Preferred Shares have priority over the Common Shares with respect to dividends and surplus assets in the event of a winding up of Dejour.



BUSINESS OF DEJOUR ENTERPRISES LTD.



Since the divestiture of its uranium exploration property interests in December 2006, Dejour Enterprises Ltd. is principally an exploration-stage company engaged in the acquisition and exploration of oil and gas properties.



As of the end of the Companys most recent fiscal year ended December 31, 2006, the Company had no known proven reserves of oil and gas on the Companys properties.  The Company did not have any commercially producing wells or sites.  The Company has not reported any revenue from operations since incorporation.  As such, the Company is defined as an exploration-stage company.



FINANCIAL AND OTHER INFORMATION



In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$ or $).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).





FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute forward-looking statements. Some, but not all, forward-looking statements can be identified by the use of words such as anticipate, believe, plan, estimate, expect, and intend, statements that an action or event may, might, could, orshould be taken or occur, or other similar expressions. Although the Company has attempted to identify important factors that could cause actual results to differ materially from expected results, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Registrant, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.







4



Such factors include, among others, the following risks: the risks associated with outstanding litigation, if any, risks associated with project development; the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; uncertainties and risks related to carrying on business in foreign countries; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain officer, directors or promoters of the Registrant with certain other projects; the absence of dividends; currency fluctuations; competition; dilution; the volatility of the Registrants common share price and volume; and tax consequences to U.S. Shareholders. We are obligated to keep our information current and revise any forward-looking statements because of new information, future events or otherwise.



PART I



ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS



1.A.1.  Directors

Table No. 1 lists as of 6/30/2007 the names of the Directors of the Company.



Table No. 1

Directors

______________________________________________________________________________

______________________________________________________________________________



|Name                         | Age | Date First Elected of Appointed
|---------------------------- | --- | -------------------------------
|Craig Sturrock (1)(3)        | 63  | August 22, 2005                
|R. Marc Bustin (4)           | 54  | August 30, 2005                
|Douglas W. Cannaday (2)      | 54  | July 14, 2004                  
|Lloyd A. Clark      (5)(1)   | 75  | February 7, 2005               
|Robert L. Hodgkinson (2)     | 57  | May 18, 2004                   
|Archibald J. Nesbitt  (1)(6) | 58  | November 24, 2004              



(1)

Member of Audit Committee.

(2)

Suite 1100, 808 West Hastings Street, Vancouver, B.C. Canada V6C 2X4

(3)

27th Floor, 595 Burrard Street, Vancouver, BC V7X 1J2

(4)

327 Rosehill Wynd, Delta, BC V4M 3L8

(5)

2091  206 Street, Langley, BC V2Z 2A4

(6)

30078 Township Road 250, Calgary, AB T3Z 1L5



______________________________________________________________________________

______________________________________________________________________________





1.A.2.  Senior Management

Table No. 2 lists, as of 6/30/2007, the names of the Senior Management of the Company.  The Senior Management serves at the pleasure of the Board of Directors.



Table No. 2

Senior Management

______________________________________________________________________________

______________________________________________________________________________



|Name and Position                                               | Age | Date of First Appointment
|--------------------------------------------------------------- | --- | -------------------------
|                                                                |     |                          
|Douglas W. Cannaday, President & COO                            | 54  | December 15, 2005        
|Robert L. Hodgkinson, Chairman & CEO                            | 57  | December 15, 2005        
|Mathew H. Wong, Corporate Secretary and Chief Financial Officer | 32  | July 14, 2004            

______________________________________________________________________________



5



1.B.  Advisors

The Companys Canadian Legal Counsel:

Dumoulin & Black

Contact: Corey Dean

595 Howe Street

Suite 1000

Vancouver, B.C. V6C 2X4 Canada

Telephone: 604-687-1224



The Companys Bank is:

Canadian Imperial Bank of Commerce

400 Burrard Street

Vancouver, B.C. V6C 3A6 Canada

Telephone: 604-267-0080



1.CAuditors

The Companys auditor is:

Dale Matheson Carr-Hilton LaBonte LLP

Suite 1500, 1140 West Pender Street

Vancouver, B.C. Canada V6E 4G1

Telephone: 604-687-4747

Facsimile: 604-689-2778



ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

--- No Disclosure Necessary ---



ITEM 3.  KEY INFORMATION.



3.A.1.  Selected Financial Data



The selected financial data of the Company for Fiscal 2006/2005/2004 ended December 31st was derived from the audited financial statements of the Company.  LaBonte & Co., independent Chartered Accountant, was the Companys auditor for fiscal years 2002 and 2001.  On January 1, 2004, LaBonte & Co. merged with Dale Matheson Carr-Hilton and formed Dale Matheson Carr-Hilton LaBonte LLP.  As a result of the merger, Dale Matheson Carr-Hilton LaBonte LLP was the Companys auditor for fiscal years 2003, 2004, 2005 and 2006.



The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Annual Report.



The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.



Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and Canadian/USA Generally Accepted Auditing Standards (GAAS).  All material numerical differences between Canadian GAAP and US GAAP, as applicable to the Company, are described in footnotes to the financial statements.





















6



Table No. 3

Selected Financial Data

(CDN$ in 000, except per share data)

________________________________________________________________________________

________________________________________________________________________________



|                                    | Year
Ended
12/31/06 | Year
Ended
12/31/05 | Year
Ended
12/31/04 | Year
Ended
12/31/03 | Year
Ended
12/31/02
|----------------------------------- | ------------------- | ------------------- | ------------------- | ------------------- | -------------------
|CANADIAN GAAP                       |                     |                     |                     |                     |                    
|                                    |                     |                     |                     |                     |                    
|Revenue                             | Nil                 | Nil                 | Nil                 | Nil                 | Nil                
|Net Income (Loss) for the Period    | $23,888             | ($1,612)            | ($392)              | ($76)               | ($221)             
|Basic Income (Loss) Per Share       | $0.45               | ($0.06)             | ($0.04)             | ($0.02)             | ($0.09)            
|Dividends Per Share                 | Nil                 | Nil                 | Nil                 | Nil                 | Nil                
|Weighted Avg. Shares, basic (000)   | 52,564              | 25,612              | 9,856               | 3,791               | 2,365              
|Weighted Avg. Shares, diluted (000) | 56,558              | 25,612              | 9,856               | 3,791               | 2,365              
|Period-end Shares (000)             | 60,900              | 39,017              | 15,796              | 9,596               | 7,095              
|                                    |                     |                     |                     |                     |                    
|Working Capital                     | $11,769             | $12,167             | $1,580              | $119                | ($148)             
|Mineral Properties                  | $25,880             | $3,425              | Nil                 | Nil                 | Nil                
|Long-term Investments               | 36,539              | -                   | -                   | -                   | -                  
|Long-Term Debt                      | $2,852              | Nil                 | Nil                 | Nil                 | $380               
|Capital Stock                       | $48,671             | $18,190             | $2,772              | $880                | $157               
|Retained Earnings (Deficit)         | $21,123             | ($2,765)            | ($1,153)            | ($761)              | ($685)             
|Total Assets                        | $80,678             | $16,016             | $1,631              | $132                | $27                
|                                    |                     |                     |                     |                     |                    
|US GAAP                             |                     |                     |                     |                     |                    
|Net Income (Loss) for the Period    | $23,713             | ($3,485)            | ($392)              | ($76)               | ($221)             
|Earnings (Loss) Per Share           | $0.39               | ($0.14)             | ($0.04)             | ($0.02)             | ($0.09)            
|Mineral Properties                  | $25,252 08          | $1,917              | Nil                 | Nil                 | Nil                
|Retained Earnings (Deficit)         | $19,440             | ($4,639)            | ($1,153)            | ($761)              | ($685)             
|Total Assets                        | $80,050             | $14,509             | $1,631              | $132                | $27                





Note: The above figures were adjusted for 1:3 and 1:15 share consolidations in 2003 and 2001 respectively.

________________________________________________________________________________



3.A.3.  Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).



Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended December 31st, the average rates for the period, and the range of high and low rates for the period.



For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.



Table No. 4

U.S. Dollar/Canadian Dollar

______________________________________________________________________________

______________________________________________________________________________



|Period                       | Average | High | Low  | Close
|---------------------------- | ------- | ---- | ---- | -----
|                             |         |      |      |      
|Fiscal Year Ended 12/31/2006 | 1.13    | 1.17 | 1.10 | 1.17 
|Fiscal Year Ended 12/31/2005 | 1.21    | 1.27 | 1.16 | 1.17 
|Fiscal Year Ended 12/31/2004 | 1.30    | 1.40 | 1.19 | 1.20 



7

|Fiscal Year Ended 12/31/2003 | 1.39 | 1.58 | 1.29 | 1.29
|---------------------------- | ---- | ---- | ---- | ----
|Fiscal Year Ended 12/31/2002 | 1.57 | 1.61 | 1.51 | 1.58
|Fiscal Year Ended 12/31/2001 | 1.55 | 1.60 | 1.49 | 1.59

______________________________________________________________________________

______________________________________________________________________________



3.B.  Capitalization and Indebtedness

Table No. 5 sets forth the capitalization and indebtedness of the Company as of 03/31/2007.  There have been no changes since 03/31/2007.



Table No. 5

Capitalization and Indebtedness

As of March 31, 2007



______________________________________________________________________________



|SHAREHOLDERS EQUITY                      |            
|----------------------------------------- | -----------
|64,367,073 shares issued and outstanding  | $48,826,232
|Contributed Surplus                       | $1,967,724 
|Retained Earnings (deficit)               | $21,122,598
|Net Stockholders Equity                  | $70,092,349
|TOTAL CAPITALIZATION                      | $74,852,044
|                                          |            
|Stock Options Outstanding (At 3/31/2007): | 4,781,668  
|Warrants Outstanding (At 3/31/2007):      | 1,199,738  
|Preference Shares Outstanding:            | Nil        
|Capital Leases:                           | Nil        
|Guaranteed Debt                           | Nil        
|Secured Debt:                             | Nil        

______________________________________________________________________________

______________________________________________________________________________



3.C.  Reasons For The Offer And Use Of Proceeds

--- No Disclosure Necessary ---



3.D.  Risk Factors

Risks Pertaining to the Company:

Cumulative Unsuccessful Exploration Efforts By Dejour Personnel Could Result In the Company Having to Cease Operations:

The expenditures to be made by Dejour in the exploration of its properties as described herein may not result in discoveries of mineralized material in commercial quantities.  Most exploration projects do not result in the discovery of commercially mineable ore deposits and this occurrence could ultimately result in Dejour having to cease operations. Management feels that if exploration efforts were unsuccessful for a period of ten years, the Company would cease operations. If that were the case, investors would lose their entire investment in the Company.

Dejour Has No Reserves on the Properties in Which It Has an Interest and If Reserves Are Not Defined the Company Could Have to Cease Operations:

The properties in which Dejour has an interest or the concessions in which Dejour has the right to earn an interest are in the exploratory stage only and are without a known body of ore.  If Dejour does not ultimately find a body of ore, it would have to cease operations. As stated above, management believes that if reserves are not defined on any of the properties on which Dejour has an interest after a period of ten years, the Company would cease operations. If that were the case, investors would lose their entire investment in the Company.



8

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:

None of the Companys properties have advanced to the commercial production stage and the Company has no history of earnings or positive cash flow from operations. The Company does not know if it will ever generate material revenue from mining operations or if it will ever achieve self-sustaining commercial mining operations. Historically, the only source of funds available to the Company has been through the sale of its common shares. Any future additional equity financing would cause dilution to current stockholders.



Dejour currently (3/31/2007) has 4,781,668 share purchase options outstanding and 1,199,738-share purchase warrants outstanding.  If all of the share purchase warrants and share purchase options were exercised, the number of common shares issued and outstanding would increase from 64,367,073 (As of 3/31/2007) to 70,348,479.  This represents an increase of 10% in the number of shares issued and outstanding and would result in significant dilution to current shareholders.

Dilution Through Employee/Director/Consultant/Agents Options Could Adversely Affect Dejours Stockholders

Because the success of Dejour is highly dependent upon its respective employees, the Company has 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 the other stockholders of the Company may be diluted. There are currently 4,781,668 share purchase options outstanding, which, if exercised, would result in an additional 4,781,668 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)

The Amount of Capital Necessary to Meet All Environmental Regulations Associated with the Exploration Programs of the Company Could Be In An Amount Great Enough to Force Dejour to Cease Operations:

The current and anticipated future operations of the Company, including further exploration activities require permits from various Federal and Provincial governmental authorities in Canada and the United States.   Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters.  Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.



Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, 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. Parties engaged in resource exploration may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.



9



Large increases in capital expenditures resulting from any of the above factors could force Dejour to cease operations. If that were the case, investors would lose their entire investment in the Company.

The Risks Associated with Penny Stock Classification Could Affect the Marketability of the Common Stock of Dejour and Shareholders Could Find It Difficult to Sell Their Stock:

The Companys stock is subject to penny stock rules as defined in 1934 Securities and Exchange Act rule 3a51-1.  The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.  The Companys common shares are subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities.  Penny stocks generally are equity securities with a price of less than U.S. $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).



The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customers account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customers confirmation.



In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Companys common shares in the United States and shareholders may find it more difficult to sell their shares.

Dejour is Dependent on Key Personnel and the Absence of Any of These Individuals Could Result in the Company Having to Cease Operations:

While engaged in the business of exploring mineral properties, the nature of Dejours business, its ability to continue its exploration of potential exploration projects, and to develop a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management personnel.  Competition for such personnel is intense and the Company may not be able to attract and retain such personnel.  Dejours growth will depend, on the efforts of its Senior Management, particularly its President, Douglas Cannaday, its Chairman, Robert Hodgkinson and its Corporate Secretary and Chief Financial Officer Mr. Mathew Wong.

U.S. Investors May Not Be Able to Enforce Their Civil Liabilities Against Us or Our Directors, Controlling Persons and Officers

It may be difficult to bring and enforce suits against Dejour.  The Company is a corporation incorporated in the province of British Columbia under the British ColumbiaCorporations Act.  A majority of the Company's directors must be residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada.  As a result, it may be difficult for U.S. holders of our common shares to affect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them.



10



In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.



However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions.  Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:

a)

where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;

b)

the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;

c)

the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;

d)

a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;

e)

the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;

f)

the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or

g)

there has not been compliance with applicable Canadian law dealing with the limitation of actions.

As a "foreign private Company, Dejour is 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.  The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.



Risks Pertaining to the Industry



Mineral Prices May Not Support Corporate Profit for Dejour:

The resource exploration industry is intensely competitive and even if commercial quantities of mineral resources are developed (which is not guaranteed), a profitable market may not exist for the sale.  If a profitable market does not exist, Dejour could have to cease operations.

















11





Operating Hazards and Risks Associated with the Exploration-stage Mining Industry Could Result in Dejour Having to Cease Operations:

Resource exploration activities generally involve a high degree of risk.  Hazards such as unusual or unexpected formations and other conditions are involved.  Operations in which the Company has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of exploration facilities, damage to life and property, environmental damage and legal liability for any or all damage.  Dejour may become subject to liability for cave-ins and other hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to the Companys perception of the relevant risks.  The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration activities and could force Dejour to cease operations.



ITEM 4.  INFORMATION ON THE COMPANY



4.A. History and Development of the Company



Introduction

The Companys executive office is located at:

Suite 1100, 808 West Hastings Street

Vancouver, British Columbia, Canada V6C 2X4

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.



The Company's fiscal year ends December 31st.



The Company's common shares trade on the TSX Venture Exchange under the symbol: DEJ.



The authorized capital of Dejour consists of three classes of shares: an unlimited number of common shares; an unlimited number of preferred shares designated as First Preferred Shares, issuable in series; and an unlimited number of preferred shares designated as Second Preferred Shares, issuable in series. 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.



The First Preferred Shares have priority over the Common Shares and the Second Preferred Shares with respect to the payment of dividends and in the distribution of assets in the event of a winding up of Dejour. The Second Preferred Shares have priority over the Common Shares with respect to dividends and surplus assets in the event of a winding up of Dejour.



As of December 31, 2006 there were 60,899,723 common shares issued and outstanding. As of December 31, 2006 there were no First Preferred Shares and no Second Preferred Shares issued and outstanding. As of March 31, 2007, the latest fiscal period for which financial statements are available, there were 64,367,073 common shares issued and outstanding. As of March 31, 2007, there were no First Preferred Shares and no Second Preferred Shares issued and outstanding.



In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).



12



Incorporation and Name Changes

Dejour Enterprises Ltd. (Dejour or the Company) was originally 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 a 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. In 2005, the Company was continued into British Columbia under the Business Corporations Act (British Columbia).



Financings

The Company has financed its operations through funds raised in loans, public/private placements of common shares, shares issued for property, shares issued in debt settlements, and shares issued upon exercise of stock options and share purchase warrants.

__ ___________________________________________________________________________



|Fiscal Year | Nature of Share Issuance                                       | Number of Shares | Gross Proceeds
|----------- | -------------------------------------------------------------- | ---------------- | --------------
|            |                                                                |                  | $             
|Fiscal 2000 | Private Placements (1)                                         | 10,000,000       | 1,500,000     
|            | Exercise of Warrants (1)                                       | 2,882,000        | 576,400       
|            | Investment in Securities (2)                                   | 2,000,000        | 1,080,000     
|Fiscal 2001 | None                                                           |                  |               
|Fiscal 2002 | Private Placement (3)                                          | 1,480,000        | 99,900        
|Fiscal 2003 | Private Placement (4)                                          | 2,000,000        | 200,000       
|            | Shares Issued for Settlement of Debt (5)                       | 5,230,925        | 523,092       
|Fiscal 2004 | Private Placement (6)                                          | 6,000,000        | 1,796,760     
|            | For bridge loan financing fee (7)                              | 200,000          | 50,000        
|Fiscal 2005 | Private Placement (8)                                          | 8,076,923        | $5,249,999    
|            | Shares issued as finders fee (8)                              | 185,791          | (120,764)     
|            | Private Placement (9)                                          | 1,000,000        | 500,000       
|            | Private Placement (10)                                         | 650,000          | 325,000       
|            | Private Placement (11)                                         | 4,500,000        | 2,914,808     
|            | Private Placement (12)                                         | 6,617,500        | 6,516,625     
|            | Exercise of share purchase warrants and agents options (15)   | 2,024,148        | 1,035,608     
|            | Exercise of stock options                                      | 154,965          | 52,286        
|            | Shares issued for service                                      | 11,500           | 9,200         
|Fiscal 2006 | Private Placement (13)                                         | 5,300,000        | 7,950,000     
|            | Private Placement (14)                                         | 2,771,333        | 4,157,000     
|            | Exercise of share purchase warrants and agents options (15)   | 7,551,194        | 7,426,683     
|            | Exercise of stock options                                      | 760,407          | 433,321       
|            | Shares issued for the acquisition of the Retamco Project. (16) | 5,500,000        | 12,088,991    



(1)

During the year ended December 31, 2000, Dejour completed two private placements. Each private placement consisted of 5,000,000 units and each unit consisted of one common share and one common share purchase warrant which entitled the holder to purchase an additional common share at a price of $0.20. During 2000, 2,882,000 common share purchase warrants from the first private placement were exercised and the remaining 2,118,000 expired. The 5,000,000 common share purchase warrants from the second private placement expired in December 2001.





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(2)

On December 14, 2000, Dejour completed the purchase of 786,190 common shares of a company called Instantdocuments.com, Inc. Dejour paid for these shares by issuing 2,000,000 of its common stock, which had a deemed value of $1,080,000. (Dejour subsequently wrote off its entire interest in Instantdocuments.com, Inc. as disclosed later in this document.)

(3)

In January 2002, Dejour completed a private placement of 1,480,000 units at a price of $0.675 per unit for total proceeds of $99,900. Each unit consisted of one common share and one share purchase warrant which entitled the holder to purchase one additional common share at a price of $0.10 per share. All of these share purchase warrants expired without being converted into common shares.

(4)

In October 2003, Dejour completed a private placement of 2,000,000 common shares at a price of $0.10 per common share.  Share issuance costs of $9,900 were incurred.

(5)

In October 2003, management negotiated shares for debt settlements with a majority of the Company's debt holders and creditors. The policies of the TSX Venture Exchange required disinterested shareholder approval for a share for debt settlement, which may result in the creation of a new control position. The Company negotiated a share for debt settlement of $523,093 in debt at a price of $0.10 for each post-consolidated share issued for an aggregate share issuance of 5,230,925 post-consolidation shares. The shares for debt transaction was approved by disinterested shareholders at the annual meeting held on May 5, 2003 and was subsequently also approved by the TSX Venture Exchange.

(6)

In December 2004, the Company issued 3,000,000 flow-through common shares at $0.35 per share, and 3,000,000 common shares units at $0.30 per unit. Each unit consisted of one common share and one half of a flow-through share purchase warrant, exercisable at $0.45 per share by December 31, 2005. As at December 31, 2004, 1,500,000 share purchase warrants were outstanding. Proceeds from the exercises of flow-through warrants can only be spent on Canadian Exploration Expenditures (CEE), as defined in the Income Tax Act. Net proceeds from the issuance of flow-through common shares were $966,000, after a finders fee of $84,000. Net proceeds from the issuance of common share units were $830,760, after a finders fee of $69,240.  The shares issued in this private placement had a hold period until April 18, 2005.

(7)

In December 2004, Dejour issued 200,000 shares at a deemed value of $0.25 to a company controlled by Robert Hodgkinson, the Chairman of the Company, as part of the consideration for a $250,000 bridge loan that he made to the Company.  The shares issued had a hold period until April 8, 2005.

(8)

In March 2005, pursuant to the terms of this private placement, 8,076,923 units (the Units) were sold to subscribers at a price of $0.65 cents per Unit for gross proceeds of $5,250,000. Each Unit consists of one common share and one half of one transferable common share purchase warrant (each whole share purchase warrant, a Warrant). Each Warrant is exercisable into one additional common share of the Corporation at an exercise price of $0.80 per common share until March 17, 2007.  In connection with these private placements the Company paid finders fees of $262,786, paid other costs of $61,036, issued 185,791 additional units as finders fees and issued 717,692 agents options.  The agents options are exercisable into units at a price of $0.70 per unit with each unit consisting of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $0.85 per share to March 17, 2007.





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(9)

The shares issued through this private placement all had a hold period until May 19, 2005. The finders fees associated with this financing included $22,500 in cash and 200,000 warrants to purchase additional common shares at a price of $0.65 per common share until September 30, 2005. The finders fees associated with this financing were paid to Woodstone Capital Inc. and Haywood Securities Inc.

(10)

The shares issued through this private placement all had a hold period until May 19, 2005. The finders fees associated with this financing consisted of $14,625 in cash and 50,000 warrants to purchase additional common shares at a price of $0.65 per common share until September 30, 2005. Other costs associated with this and the financing described at (9) above totaled $5,372.  The finders fees associated with this financing were paid to Rainwalker Management Ltd.

(11)

This private placement consisted of the sale of 4,500,000 units at a price of US$0.55 per unit for gross proceeds of Cdn$2,914,808. Each unit consisted of one common share and one half of one share purchase warrants with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $0.80 per share to March 17, 2007. In connection with this private placement the Company paid finders fees of $109,058; paid other costs of 419,582; and, issued 306,736 share purchase warrants to finders with each warrant being exercisable into a common share at a price of $0.80 per share until March 17, 2007.

(12)

In December 2005, the Company completed a private placement and issued a total of 4,317,500 units at $0.95 per unit and 2,300,000 flow through common shares at $1.05 per share for total gross proceeds of $6,516,625. Each unit consists of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $1.10 per share to December 14, 2007. In connection with this private placement the Company paid finders fees of $275,144, paid other costs of $39,414 and issued 503,701 warrants to finders with each warrant being exercisable into a common share at a price of $1.10 per share to December 14, 2007. Proceeds from the flow through common shares totaling $2,415,000 are committed to be spent on Canadian Exploration Expenditures (CEE) of which none had been spent to December 31, 2005. Accordingly, as at December 31, 2005, approximately $2,415,000 of cash was not available for general administrative purposes. In accordance with the accounting recommendations relating to accounting for flow-through shares, upon renouncing the expenditures, the Company will reduce the flow-through share proceeds and recognize a future tax liability by an amount approximating the tax effect of the timing difference resulting from renouncing exploration expenditures using currently enacted tax rates.

(13)

This private placement consisted of the sale of 5,300,000 flow-through shares at a price of $1.50 per flow-through share.  Gross proceeds raised of $7,950,000 are committed to be spent on Canadian Exploration Expenditures (CEE), of which $2,600,000 had been spent to December 31, 2006.  Accordingly, as at December 31, 2006, approximately $5,350,000 was not available for general administrative purposes.  In connection with this private placement, the Company paid finders fees of $477,000 and issued 424,000 warrants, exercisable at $1.65 per share before September 2, 2007.















15

(14)

This private placement consisted of the sale of 2,771,333 units at a price of $1.50 per unit. This private placement financing closed in two separate tranches. The first closed during the first fiscal period ended March 31, 2006 and the second closed on April 10, 2006. The first tranche raised $1,025,000 and the second tranche raised $3,132,000. Each unit consists of one common share and one half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to purchase one additional common share at a price of $1.65 per common share until December 31, 2007. For assistance in this private placement, the Company paid finders fees in the amount of $183,150 and issued the finders 133,100 common share purchase warrants which allow the holders to purchase one additional common share at a price of $1.65 until December 31, 2007.

(15)

These share purchase warrants were associated with prior private placement financings.

(16)

These shares were issued to Retamco Operating Co., an unrelated private company, in partial payment for Dejours interest in the Retamco Oil & Gas Project located in western Colorado and eastern Utah.



Note: The above figures were adjusted for 1:3 and 1:15 share consolidations in 2003 and 2001 respectively.



Capital Expenditures



|Fiscal Year |                  
|----------- | -----------------
|            |                  
|Fiscal 2000 | Less than $500.00
|Fiscal 2001 | $272,936 (1)     
|Fiscal 2002 | $12,614 (1)      
|Fiscal 2003 | Nil              
|Fiscal 2004 | $102,017 (2)     
|Fiscal 2005 | 3,551,508 (3)    
|Fiscal 2006 | $12,146,784 (4)  



(1)

These funds are related to the Turtle Bayou #16 oil well located in Terrebonne Parish, Louisiana. The funds consisted of acquisition costs and drilling costs. Dejour management determined that this well was not commercially viable and it was subsequently written off.

(2)

These funds are related to acquisition and exploration costs pertaining to the Golden Prairie Prospect property. Based on the unfavorable results of the exploratory drilling, Dejour management decided to write off its investment in this property.

(3)

$126,356 of these funds was spent on furniture and equipment and the balance of $3,425,152 were spent on the Companys resource properties. (For a breakdown on the resource property expenditures, see Note 4 to the Companys audited consolidated financial statements for the fiscal year ended December 31, 2005.)

(4)

$25,036 of these funds was spent on the purchase of capital equipment; $107,983 were spent on expenditures related to the acquisition of Titan shares; and, $12,013,765 was spent on the Companys resource properties. (For a breakdown on the resource property expenditures, see Note 5 to the Companys audited consolidated financial statements for the fiscal year ended December 31, 2006.



4.B.  BUSINESS OVERVIEW



Historical Corporate Development

The Companys principal business since its incorporation has been the acquisition and exploration of natural resource properties.



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From inception in March 1968 to February 1999, Dejour had been mainly engaged in the acquisition and exploration of mineral resource properties.  In February 1999, Dejour shifted its efforts away from the mineral exploration industry and became involved in a start-up technology company called iSecuritas.



iSecuritas was located in Dallas, Texas. The business of the company was offering its customers secure same day document delivery over the Internet along with the development and implementation of digital signature encryption. Dejours involvement in this company consisted of assisting in fund raising. Dejours efforts primarily included investment in iSecuritas and by December 14, 2000 its equity interest was 51.8%. The table below summarizes the actions of Dejour relating in iSecuritas:



|Date       | Action of Dejour                                                                                                                                                     
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                                                                      
|02/16/1999 | Acquisition of a convertible note in iSecuritas in the amount of U.S. $250,000.                                                                                      
|04/14/1999 | Purchase by Dejour of an additional 1,500,000 common shares of iSecuritas.                                                                                           
|01/26/2000 | Dejour converted the note, which it acquired on 2/16/1999 into common shares of iSecuritas. After the conversion, Dejour owned 4,279,166 common shares of iSecuritas.
|11/14/2000 | Dejour acquired an additional 620,143 common shares of iSecuritas.                                                                                                   
|12/14/2000 | Dejour acquired an additional 786,190 common shares of iSecuritas.                                                                                                   



iSecuritas was unable to attract additional investment capital and as a result shut down its business operations. At December 31, 2001 Dejour wrote off its equity investment in iSecuritas and recorded a US$50,000 impairment provision on a US$100,000 secured note that it held from iSecuritas.



On July 13, 2001 the shares of Dejour were suspended from trading on the Toronto Stock Exchange because the Toronto Stock Exchange deemed it an inactive Company. Dejour was deemed an inactive Company because it was not actively engaged in any business activities. The former activities associated with iSecuritas ceased to exist with the failure of that company and Dejour was not active in any other industry. During the period of suspension, the shares of Dejour traded on the TSX Venture Exchange (formerly Canadian Venture Exchange) as an inactive Company.



As part of its efforts to regain the status of an active Company, Dejour reached an agreement on August 21, 2001 to acquire a 50% interest in a private companys interest in an oil well located in Louisiana. The private company, 7804 Yukon, Inc., had a 1.75% working interest in this well. 7804 Yukon, Inc. is wholly owned by Robert Hodgkinson, the current Chairman and COO of the Company, who, at that time was a director of Dejour. On December 18, 2001, the operator of the well announced that after exploratory drilling, the well was deemed to not be commercially viable.



On September 21, 2001, a Special Resolution was passed by Dejour shareholders, which resulted in a consolidation of the Companys share capital in the amount of one new common share for each fifteen of the old common shares. The legal name of the company was also changed to Dejour Enterprises Ltd. as a result of the Special Resolution.



The only activities that Dejour was involved in during the year ended December 31, 2002 consisted of efforts to regain an active status on the Canadian Venture Exchange. These efforts consisted of raising capital and searching for mineral properties in which it could acquire an interest and subsequently explore. The fund raising efforts consisted of a private placement, which raised $99,900. No mineral properties were acquired during this time.



17



In early 2003, management decided that in order for the Company to meet the listing requirements of the TSX Venture Exchange the existing debt had to be satisfied and additional capital was required for the Company to operate. The debt was satisfied through the issuance of 5,230,925 common shares of Dejour to the creditors. As described earlier in ITEM 4. INFORMATION ON THE COMPANY, Financings: the Company received shareholder approval to issue these shares in settlement of the debt. The Company also sold 2,000,000 common shares at a price of $0.20 per share. Also, at the annual meeting held on June 6, 2003, the Company received approval for a share consolidation in the amount of one new common share for each three old common shares. Management felt that the consolidation was necessary to attract future investor interest as they felt Canadian investors favored public companies, in the start-up category, which had a small amount of outstanding shares.



The Company applied for conditional approval of a plan of reactivation from the TSX Venture Exchange, which included a listing continuation from inactive status to a Tier 2 listing on the TSX Venture Exchange.



The plan of reactivation included the Company's acquisition of rights to participate in an oil and gas exploration joint venture, initially targeting 9.25 sections of prospective Jurassic oil lands known as the Golden Prairie Prospect. By the terms of this agreement, Dejour paid a net 30% cost (approximately $95,000) of drilling the initial test well to earn a net 24.5% APO WI After Pay Out Working Interest). This prospect was located in SW Saskatchewan adjacent to the Alberta border, in the northeast corner of a 20,000 sq. mi. focus area known as the Sweetgrass Arch.



Results of exploratory drilling on the first well in the Golden Prairie Prospect indicated that it was not commercially productive and Dejour wrote its interest down to nominal carrying value, which at December 31, 2004 was $2.



At its option, Dejour can extend the joint venture beyond the Golden Prairie Prospect to subsequently cover some 288 additional sections of prospective oil and gas lands referred to as the Fox Project.



To finance this reactivation and joint venture participation the Company arranged, subject to Exchange approval, an interim $250,000 bridge loan with Hodgkinson Equities Corp., a holding company of an officer, director and control shareholder of the Company. The loan would be for a maximum term of 18 months, pay 8% interest per annum and include a 20% equity bonus at $0.25 per share. The bridge loan was completed as disclosed in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



Beginning in early 2005, Dejour began searching for mineral properties that management believed had potential of uranium mineralization or oil and/or gas. Disclosure pertaining to the mineral properties is found in ITEM 4.D Property, Plant and Equipment.



Through the first quarter of Fiscal 2006, ended March 31, 2006, Dejour continued exploration work on its uranium properties and on its oil and gas properties.



On May 9, 2006, Dejour announced that it had entered into a binding Letter of Intent, with an unrelated private Texas corporation, to participate in the exploration drilling of properties located in western Colorado and eastern Utah, which were believed to contain reserves of oil and gas. This transaction closed on August 4, 2006 at a total cost to Dejour of $25,182,532.





18



During this period Dejour continued to engage in exploration activity on its uranium projects located in the Athabasca Basin. (For additional disclosure, see Item 4.D. Property, Plant and Equipment.



On October 26, 2006, Dejour announced that it would sell all of its uranium property interests to Titan Uranium Incorporated, an unrelated public company that trades on the TSX Venture Exchange under the symbol TUE. The terms of this acquisition, which closed in December 2006, are:



1.

Titan paid Dejour 17,500,000 fully paid and assessable common shares in the capital of Titan;

2.

Titan paid Dejour 3,000,000 transferable common share purchase warrants, entitling the holder to acquire up to 3,000,000 common shares in the capital of Titan at an exercise price of $2.00 per common share for a period of 24 months, subject to a forced exercise position whereby Titan can call the automatic exercise of the warrants in the event that Titans common shares trade on the TSX Venture Exchange at a price of $4.00 or more for twenty consecutive trading days.

3.

Dejour retains a 1% Net Smelter Return on all contributed properties. (NSR" is an acronym for net smelter return, which means the amount actually paid to the mine or mill owner from the sale of ore, minerals and other materials or concentrates mined and removed from mineral properties. This type of royalty provides cash flow that is free of any operating or capital costs and environmental liabilities. A percentage of an NSR royalty on an ore body can effectively equate to a larger percentage of the economic value of the ore body. A net smelter royalty depends on mine production and there is currently no mine production from any of these properties. There is no guarantee that there ever will be any mine production from any of these properties.)

4.

Dejour to retain a 10% working interest in each claim carried by Titan to completed bankable feasibility study after which Dejour may elect to participate as to its 10% interest or convert to an additional 1% Net Smelter Return.

5.

Titan to provide Dejour with a first right of refusal on all future financing, as long as Dejours ownership in the stock of Titan is greater than 10% of the outstanding shares.

6.

Dejour to provide two full-time and one part-time geologists on terms to be agreed; and,

7.

Titan to appoint two Dejour representatives to the Titan Board of Directors.



The above sale was closed in escrow on December 15, 2006 and approved by the shareholders of each company at their respective meetings held on January 22, 2007 and on February 2, 2007.  Approval was also received from the TSX Venture Exchange.



Dejour is an exploration stage company and there is no assurance that commercially viable oil and gas deposits exist on any of its current properties.  Further evaluation will be required on each property before a final evaluation as to the economics and legal feasibility of the property is determined.



Plan Of Operations



Source of Funds for Fiscal 2007/2008

The Companys primary source of funds since incorporation has been through the issuance of common shares.







19



Dejour had a working capital balance of $11,769,159 on 12/31/2006. Dejour intends to use its working capital to complete exploration work on the properties in which it has an interest and for general working capital.



Use of Funds for Fiscal 2007/2008

During Fiscal 2007 and Fiscal 2008, respectively, Dejour estimates that it might expend $1.4 million and $2.2 million on general/administrative expenses including property evaluation costs prior to acquisition.  During Fiscal 2007 and Fiscal 2008 respectively, the Company estimates that it might expend $5.0 million and $8.0 million on property acquisition/exploration expenses.



Anticipated Changes to Facilities/Employees

Management of the Company anticipates no changes to either facilities or employees in the near future.



United States vs. Foreign Sales/Assets

The Company has had no revenue during the past five fiscal years.





|Asset Location as of: | Canada      | United States
|--------------------- | ----------- | -------------
|                      |             |              
|12/31/2002            | $27,360     | Nil          
|12/31/2003            | $131,793    | Nil          
|12/31/2004            | $1,630,842  | Nil          
|12/31/2005            | $14,788,338 | $1,228,015   
|12/31/2006            | $55,495,196 | $25,182,535  





Material Effects of Government Regulations

The current and anticipated future operations of the Company, including further exploration activities, require permits from various Canadian Federal and Provincial governmental.  Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters.  Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.  The Company has had no material costs related to compliance and/or permits in recent years, and anticipates no material costs in the next year.



Seasonality

Dependency upon Patents/Licenses/Contracts/Processes

Sources/Availability of Raw Materials

--- No Disclosure Necessary ---



4.C. Organization Structure

Dejour Enterprises Ltd. is incorporated under the laws of British Columbia, Canada. The Company was originally 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 a one (1) new for every fifteen (15) old shares and the name of the Company was changed to Dejour Enterprises Ltd. In 2005, the Company was continued in British Columbia under the Business Corporations Act (British Columbia).



As at June 22, 2007, Dejour has two subsidiaries.  100% owned Dejour Energy (USA) Corp is used to hold the Companys oil & gas properties in the US, and 90% owned Dejour Energy (Alberta) Ltd. is used to hold its oil & gas properties in Canada. Subsequent to the end of the fiscal year ended December 31, 2007, the Company acquired the remaining 10% of Dejour Energy (Alberta) Ltd.



20



4.D.  Property, Plant and Equipment



The Companys executive offices are located in rented premises of approximately 5,720 sq. ft. at Suite 1100, 808 West Hastings Street, Vancouver, British Columbia Canada V6C 2X4.  The Company began occupying these facilities on May 1, 2005.  Monthly basic rent is $7,700.



1. The Athabasca Basin Uranium Properties

The Athabasca Basin properties are without known reserves and the work completed by Dejour was exploratory in nature. Dejours interest in these 15 properties stemmed from earlier exploration work, as described below, that was done in the area.



Acquisition of Interest

Dejour Enterprises acquired a 100% interest in 50 mineral claims and 4 mineral prospecting permits (Fifteen Properties) in the Athabasca Sandstone Basin in Northern Saskatchewan. The properties were acquired by staking (50 claims totaling 192,515 hectares or 475,704 acres) and by permitting (4 permits totaling 138,676 hectares or 342,668 acres).



Location

The fifteen properties are located along the southern and eastern margins of the Athabasca Sandstone Basin east and west of Cree Lake in northern Saskatchewan. They are located anywhere from 280 km to 450 km northwest to northeast of the town of La Ronge. The most easterly property is 80 km northeast of the McArthur River Mine and the most westerly one is 60 km southeast of the former Cluff Lake Mine.



|Name Of Property         | North Latitude | West Longitude
|------------------------ | -------------- | --------------
|Maybelle                 |                | 58°00        
|Gartner Lake             |                | 57°50        
|R-Seven                  |                | 57°50        
|Meanwell                 |                | 57°35        
|Sandhill                 |                | 57°29        
|Virgin River Trend North |                | 58°00        
|Virgin River Trend South |                | 57°07        
|Fleming                  |                | 57°23        
|Bozo                     |                | 57°33         
|Hoppy North              |                | 57°04        
|Hoppy South              |                | 57°58        
|Sheila                   |                | 57°50         
|Umpherville Lake         |                | 57°15        
|Umpherville West         |                | 57°54        
|Thorburn Lake            |                | 58°03        



Accessibility, Climate, Infrastructure and Physiography

The properties are located 280 km to 450 km northwest and northeast of the town of La Ronge in northern Saskatchewan, Canada. La Ronge is serviced by scheduled commercial airlines and all-weather roads. The properties are situated 10km to 70km from all weather gravel roads leading from La Ronge to uranium mines and communities in Northern Saskatchewan.



21



The climate varies from -50°C in the winter to +30° in the summer. Freeze up begins in late October and breakup occurs in mid to late May. During the period of freeze up  from December to April  accessibility in the area is enhanced by frozen muskegs and lakes.



Access to the properties is normally via float-plane or ski-equipped aircraft or helicopter. The area can also be reached via winter roads which branch off the gravel roads noted above.



The topography of the area is typical of the Canadian Shield in northern Saskatchewan. Low rounded hills, ridges drumlins and eskers are common, with lakes and muskegs occupying the intervening lowlands. Local relief is less than 50 metres. The elevation is approximately 510m ASL. The area has been glacially scoured, with ice movement from the northeast to southwest. Lakes are often aligned with faults and major structural lineaments. Outcrop exposure is poor and most of the area is covered by glacial drift consisting of morainal and glacio-lacustrine material. The area has mixed stands of jack pine, black spruce (minor trembling aspen and paper birch) with tamarack, willows and alders present in the low wet areas.



History

Dejours Properties are situated along the southern and eastern margins of the Athabasca Basin. The Athabasca Basin became the focus for uranium exploration following the discovery in 1968 of a new, unconformity-related, high-grade type of uranium deposit along the eastern edge of the Basin at Rabbit Lake. This marked the beginning of the uranium exploration boom in the Athabasca Basin. Major discoveries were made in the 1970s (Collins Bay, Key Lake and Midwest) and the 1980s (Cigar Lake, McArthur, Eagle Point, and Dominique-Peter).



The main exploration focus was on the definition of sub-Athabasca basement graphitic rocks, recognizable as electromagnetic conductors, because of the role they played in controlling the locations of the unconformity-type uranium deposits at or near the Athabasca basement contact.



The basin has been explored sporadically from the late 1960s through to the present day with most of the work being carried out in the late 1970s and 1980s. The main companies involved were Saskatchewan Mining Development Company, now Cameco Corp, Cogema, and Uranerz Exploration and Mining Limited. These and numerous other exploration companies flew airborne electromagnetic, magnetic and radiometric surveys, carried out prospecting, ground geophysics, till and lake water and lake sediment sampling and diamond drilling. The majority of the work was carried out on the east side of the basin. The exploration work carried out to date on and in the vicinity of Dejours has not been exhaustive. New and improved exploration technologies which have been successful in defining anomalies elsewhere In the Athabasca Basin have not been used on Dejours properties.



Property Geology

The Dejour properties are underlain by metamorphosed Aphebian sedimentary rocks, which contain graphitic horizons, and felsic intrusive rocks. These in turn are overlain by the flat lying late Proterozoic Athabasaca Sandstone Formation which consists primarily of coarse sandstone with pebbly and conglomeratic layers. The thickness of the Sandstone varies considerably from property to property. On the Virgin River Trend South property the sandstone has been completely eroded, on the Virgin River North property the sandstone is 800m to 1500m thick and on the remaining thirteen properties the sandstone is 100 to 800m thick. On several properties the sandstone is cut by thin diabase dykes. Pre-Athabasca and post-Athabasca faulting is common on all the properties.





22



On the Maybelle and Gartner properties on the very west side of the Athabasca Basin the sandstone also has a thin cover of Cretaceous clastic sediments.



All of the properties have been glaciated and have a thin veneer of glacial sediments covering the sandstone and basement rocks.



On all of the Dejour properties the information available from government and exploration sources indicates that the properties have geological features comparable to those found in the vicinity of uranium mineralization.



2005 Activities

After acquiring claims and permits in 2004 and the first quarter of 2005, Dejour initially concentrated on compiling the historical uranium exploration data. This was done in order to properly assess the work that had been done on the properties so as to determine how best to follow up existing anomalies and to determine which exploration techniques should be used to further explore the properties.



Seven of Dejours properties were then flown with state of the art Geotem 1000 (1969 line kilometres) and Megatem II (5395 line km) electromagnetic systems in order to define basement graphitic horizons.



The airborne EM surveys were successful in confirming and extending known anomalies and also identified horizons not previously detected by earlier lower powered surveys. As a result of the information a total of 18 additional claims comprising 60,129 hectares (148,581 acres) were staked to cover the new airborne anomalies. A total of 250 kilometres of EM anomalies have now been defined on Dejour properties.



Dejour completed lithogeochemical sampling of sandstone boulders on the Virgin Trend North and Fleming properties. The sampling confirmed and extended the boron and clay alteration anomaly at the south end of the Virgin Trend property. The results on the Fleming property showed erratic anomalous samples and more sampling may be required. Similar lithogeochemical anomalies are known in the vicinity of uranium mineralization in the eastern part of the Basin.



Activities During Fiscal 2006

As disclosed in Item 4.B. Business Overview, Dejour sold all of its uranium property interests in a sales transaction that began in October 2006 and culminated on February 2, 2007.



Retamco Project

In July 2006, the Company successfully concluded the purchase of its 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 CAD$25,152,510 in cash, stock, note and debentures. Additional costs of $361,932 relating to the acquisition have also been capitalized to the project.



Subsequently, the Company acquired an interest in an additional 19,791 net acres (31 sections) such that the current total of leases is 284.  These additional 17 leases are contained within an Area of Mutual Interest as defined in the purchase agreement.















23



[dejour200620famend1001.jpg]



The total current area of projects is 293,473 gross acres (275,934 net acres to the joint-venture) consisting of two project types. There are 17 Resource (Gas) projects (220,465 gross/207,934 net acres) and 1 Subthrust Project (Deep Oil) project (73,009 gross/68,000 net acres). The Company holds a 25% working interest in the Natural Gas Resource projects which are a well defined stratigraphic gas resource, containing low geologic risk natural gas assets plus the opportunity for deeper Jurassic reserves.  The Company holds a 12.5% interest in the deep Subthrust Oil project located in the northern Piceance/Uinta Basins. Leasehold acreage NRI is 80%.  Dejour will pay an unpromoted proportionate share of all exploration expenses including seismic, drilling, completion or abandonment and equipping.



The lease details for each project are as follows:



|Prospect
Name | Lease
#   | JV Gross
Acres | JV Net
Acres | Dejour
Net Acres | Effective
Date | Expiration
Date
|------------- | --------- | -------------- | ------------ | ---------------- | -------------- | ---------------
|              |           |                |              |                  |                |                
|Ashley        | UTU 81189 | 1,920.00       | 1,920.00     | 480.00           | 1/10/2005      | 9/30/2015      
|              |           |                |              |                  |                |                
|Bitter Creek  | UTU 73460 | 640.00         | 640.00       | 160.00           | 1/10/1996      | 9/30/2006      
|              | UTU 73461 | 2,111.84       | 2,111.84     | 527.96           | 1/10/1996      | 9/30/2006      
|              | UTU 73462 | 1,920.00       | 1,920.00     | 480.00           | 1/10/1996      | 9/30/2006      
|              | UTU 84267 | 1,563.90       | 1,563.90     | 390.98           | 1/04/1998      | 3/31/2008      



24



|        | ML 46436  | 1,280.00  | 1,280.00 | 320.00   | 1/04/1999 | 1/4/2009  
|------- | --------- | --------- | -------- | -------- | --------- | ----------
|        | UT-01-90a | 1,455.60  | 360.08   | 90.02    | 4/20/2004 | 4/20/2009 
|        | UT-01-90b | 1,455.60  | 360.08   | 90.02    | 4/20/2004 | 4/20/2009 
|        | UT-01-90c | 1,295.60  | 362.13   | 90.53    | 4/20/2004 | 4/20/2009 
|        | UTU 76801 | 160.00    | 160.00   | 40.00    | 1/12/1997 | 11/30/2007
|        | UTU 81207 | 640.00    | 640.00   | 160.00   | 1/10/2005 | 9/30/2015 
|        |           | 12,522.54 | 9.398.02 | 2,349.51 |           |           
|        |           |           |          |          |           |           
|Bonanza | UTU 75118 | 40.00     | 40.00    | 10.00    | 1/04/1996 | 3/31/2006 
|        | UTU 64575 | 2,093.61  | 1,046.81 | 261.70   | 1/10/1998 | 9/30/2008 
|        | ML 50083  | 200.90    | 200.90   | 50.23    | 1/12/2005 | 1/12/2010 
|        |           | 2,334.51  | 1,287.71 | 321.93   |           |           
|        |           |           |          |          |           |           
|Cisco   | ML 49171  | 200.00    | 200.00   | 50.00    | 1/9/2003  | 1/9/2013  
|        | ML 49211  | 640.00    | 640.00   | 160.00   | 1/12/2003 | 1/12/2013 
|        | ML 49212  | 440.00    | 440.00   | 110.00   | 1/12/2003 | 1/12/2013 
|        | UTU 81022 | 200.00    | 200.00   | 50.00    | 1/2/2005  | 1/31/2015 
|        | ML 49254  | 640.00    | 640.00   | 160.00   | 1/3/2004  | 1/3/2014  
|        | ML 49255  | 640.68    | 640.68   | 160.17   | 1/3/2004  | 1/10/2005 
|        | UTU 81170 | 643.92    | 643.92   | 160.98   | 1/10/2005 | 9/30/2015 
|        | UTU 81186 | 681.16    | 681.16   | 170.29   | 1/10/2005 | 9/30/2015 
|        | UTU 81187 | 454.70    | 454.70   | 113.68   | 1/10/2005 | 9/30/2015 
|        | ML 49336  | 640.00    | 640.00   | 160.00   | 1/6/2004  | 1/6/2014  
|        | ML 49484  | 320.00    | 320.00   | 80.00    | 1/12/2004 | 1/12/2004 
|        | ML 49486  | 450.90    | 450.90   | 112.73   | 1/12/2004 | 1/12/2004 



|                   | ML 49487  | 320.00    | 320.00    | 80.00    | 1/12/2004 | 1/12/2014 
|------------------ | --------- | --------- | --------- | -------- | --------- | ----------
|                   | ML 49489  | 640.96    | 640.96    | 160.24   | 1/12/2004 | 1/12/2014 
|                   | ML 49657  | 280.00    | 280.00    | 70.00    | 1/3/2005  | 1/03/2015 
|                   | UTU 82564 | 645.20    | 645.20    | 161.30   | 1/10/2005 | 09/30/2015
|                   | UTU 82569 | 2,524.78  | 2,524.78  | 631.20   | 1/10/2005 | 09/30/2015
|                   | UTU 82579 | 1,037.72  | 1,037.72  | 259.43   | 1/10/2005 | 09/30/2015
|                   | UTU 82591 | 1,919.92  | 1,919.92  | 479.98   | 1/10/2005 | 09/30/2015
|                   | ML 49973  | 640.00    | 640.00    | 160.00   | 1/9/2005  | 1/09/2015 
|                   | UTU 85253 | 1,304.16  | 1,304.16  | 326.04   | *         | *         
|                   | UTU 85254 | 320.00    | 320.00    | 80.00    | 1/1/2007  | 12/31/2016
|                   | UTU 85269 | 2,240.00  | 2,240.00  | 560.00   | *         | *         
|                   | UTU 85447 | 1,820.78  | 1,820.78  | 455.20   | *         | *         
|                   |           | 19,644.88 | 19,644.88 | 4,911.22 |           |           
|                   |           |           |           |          |           |           
|Displacement Point | ML 47558  | 639.28    | 639.28    | 159.82   | 1/5/1997  | 1/5/2007  
|                   | UTU 71654 | 1,760.00  | 1,760.00  | 440.00   | 1/4/1997  | 03/31/2007
|                   | UTU 84266 | 240.00    | 240.00    | 60.00    | 1/4/1997  | 03/31/2007
|                   | UTU 74430 | 678.55    | 678.55    | 169.64   | 1/7/1998  | 06/30/2008
|                   | UTU 72739 | 2,556.35  | 2,556.35  | 639.09   | 1/4/1998  | 03/31/2008
|                   | UTU 73472 | 280.00    | 280.00    | 70.00    | 1/10/2000 | 09/30/2010
|                   | UTU 73714 | 2,120.00  | 2,120.00  | 530.00   | 1/1/1999  | 12/31/2008
|                   | UTU 73715 | 1,840.00  | 1,840.00  | 460.00   | 1/1/1995  | 12/31/2004
|                   | UTU 73927 | 1,360.00  | 1,360.00  | 340.00   | 1/4/1995  | 03/31/2005
|                   | UTU 73928 | 120.00    | 120.00    | 30.00    | 1/4/1995  | 03/31/2005
|                   | UTU 73475 | 842.80    | 842.80    | 210.70   | 1/10/2000 | 09/30/2010
|                   | ML 46307  | 640.00    | 640.00    | 160.00   | 1/3/1999  | 1/3/2009  
|                   | ML 46312  | 439.73    | 439.73    | 109.93   | 1/3/1999  | 1/3/2009  
|                   | ML 46309  | 640.00    | 640.00    | 160.00   | 1/3/1997  | 1/3/2007  
|                   | UTU 73189 | 440.00    | 440.00    | 110.00   | 1/6/1997  | 05/31/2007
|                   | UTU 72039 | 2,240.00  | 2,240.00  | 560.00   | 116/1997  | 05/31/2007
|                   | UTU 72075 | 1,280.00  | 1,280.00  | 320.00   | 117/1998  | 06/30/2008
|                   | UTU 70905 | 1,280.00  | 384.00    | 96.00    | 1/1/1999  | 12/31/2008
|                   | UTU 76739 | 409.35    | 409.35    | 102.34   | 1/10/2001 | 09/30/2011
|                   | UTU 76739 | 210.50    | 210.50    | 52.63    | 1/10/2003 | 09/30/2008
|                   | ML 47798  | 40.00     | 40.00     | 10.00    | 1/12/1997 | 1/12/2007 
|                   | UTU 77555 | 40.00     | 40.00     | 10.00    | 1/10/1998 | 09/30/2008
|                   | UTU 81218 | 440.00    | 220.00    | 55.00    | 1/10/2005 | 09/30/2015
|                   | UTU 84714 | 157.84    | 78.92     | 19.73    | 1/10/2005 | 09/30/2015
|                   |           | 20,694.40 | 19,499.48 | 4,874.87 |           |           





25

|Evacuation Creek | UTU 73029 | 489.83    | 489.83    | 122.46   | 1/4/1999  | 03/31/2009
|---------------- | --------- | --------- | --------- | -------- | --------- | ----------
|                 |           |           |           |          |           |           
|Gorge Spring     | UTU 72067 | 2,406.46  | 2,406.46  | 601.62   | 1/7/1997  | 06/30/2007
|                 | UTU 72068 | 1,392.22  | 1,392.22  | 348.06   | 1/7/1998  | 06/30/2008
|                 | UTU 84199 | 959.08    | 959.08    | 239.77   | 1/7/1998  | 06/30/2008
|                 | UTU 73031 | 1,982.13  | 1,982.13  | 495.53   | 1/4/1996  | 03/31/2006
|                 | UTU 73033 | 631.67    | 631.67    | 157.92   | 1/4/1996  | 03/31/2006
|                 | UTU 73032 | 1,408.23  | 1,408.23  | 352.06   | 1/4/1996  | 03/31/2006
|                 | UTU 72399 | 1,881.47  | 1,881.47  | 470.37   | 1/10/1995 | 09/30/2005
|                 | UTU 73929 | 1,114.98  | 1,114.98  | 278.75   | 1/4/1995  | 03/31/2005
|                 | UTU 73932 | 1,117.92  | 1,117.92  | 279.48   | 1/4/1995  | 03/31/2005
|                 | UTU 73935 | 1,918.64  | 1,918.64  | 479.66   | 1/4/1995  | 03/31/2005
|                 | UTU 72738 | 210.24    | 210.24    | 52.56    | 1/4/1996  | 03/31/2006
|                 | UTU 72674 | 419.39    | 419.39    | 104.85   | 1/1/1996  | 12/31/2005
|                 | ML 45900  | 640.00    | 640.00    | 160.00   | 1/6/1998  | 1/6/2008  
|                 | ML 45899  | 642.16    | 642.16    | 160.54   | 1/6/1998  | 1/6/2008  
|                 | ML 46737  | 640.00    | 640.00    | 160.00   | 1/11/1999 | 1/11/2009 
|                 | UTU 81219 | 800.39    | 400.20    | 100.05   | 1/10/2005 | 09/30/2015
|                 | UTU 81220 | 360.00    | 360.00    | 90.00    | 1/10/2005 | 09/30/2015
|                 | UTU 84203 | 640.00    | 640.00    | 160.00   | 1/10/2005 | 09/30/2015
|                 |           | 19,164.98 | 18.764.79 | 4,691.20 |           |           
|                 |           |           |           |          |           |           
|Green River      | ML 49253  | 640.00    | 640.00    | 160.00   | 1/3/2004  | 1/3/2014  
|                 | ML 49256  | 720.00    | 720.00    | 180.00   | 1/3/2004  | 1/3/2014  
|                 | ML 49257  | 280.00    | 280.00    | 70.00    | 1/3/2004  | 1/3/2014  
|                 | ML 49258  | 640.00    | 640.00    | 160.00   | 1/3/2004  | 1/3/2014  
|                 | ML 49259  | 640.36    | 640.36    | 160.09   | 1/3/2004  | 1/3/2014  
|                 | UTU 80206 | 3,334.78  | 3,334.78  | 833.70   | 1/8/2002  | 07/31/2012
|                 | ML 49174  | 640.00    | 640.00    | 160.00   | 1/9/2003  | 1/9/2013  
|                 | UTU 81008 | 2,200.00  | 2,200.00  | 550.00   | 1/2/2005  | 01/31/2015
|                 | UTU 81009 | 794.51    | 794.51    | 198.63   | 1/2/2005  | 01/31/2015
|                 | UTU 81174 | 996.59    | 996.59    | 249.15   | 1/5/2004  | 04/30/2014
|                 | UTU 81175 | 880.00    | 880.00    | 220.00   | 1/512004  | 04/30/2014
|                 | UTU 81176 | 640.00    | 640.00    | 160.00   | 1/10/2005 | 09/30/2015
|                 | UTU 81228 | 1,373.92  | 1,373.92  | 343.48   | 1/5/2004  | 04/30/2014
|                 | ML 49660  | 1,181.42  | 1,181.42  | 295.36   | 1/3/2005  | 1/31/2015 
|                 | UTU 84937 | 808.70    | 808.70    | 202.18   | 1/10/2006 | 09/30/2016
|                 | UTU 84941 | 335.79    | 335.79    | 83.95    | 1/10/2006 | 09/30/2016
|                 |           | 16,106.07 | 16,106.07 | 4,026.52 |           |           



|Oil Shale        | ML 49190  | 1,559.75 | 1,559.75 | 389.94   | 1/9/2003  | 1/9/2013  
|---------------- | --------- | -------- | -------- | -------- | --------- | ----------
|                 | ML 49191  | 1,994.58 | 1,994.58 | 498.65   | 1/9/2003  | 1/9/2013  
|                 | ML 49189  | 40.00    | 40.00    | 10.00    | 1/9/2003  | 1/9/2013  
|                 |           | 3,594.33 | 3,594.33 | 898.58   |           |           
|                 |           |          |          |          |           |           
|San Juan         | UTU 81304 | 677.59   | 677.59   | 169.40   | 1/5/2004  | 04/30/2014
|                 |           |          |          |          |           |           
|Seep Ridge       | ML 49154  | 640.88   | 640.88   | 160.22   | 1/9/2003  | 1/9/2013  
|                 | ML 49786  | 640.00   | 640.00   | 160.00   | 1/6/2005  | 1/6/2010  
|                 | ML 50421  | 162.50   | 162.50   | 40.63    | 1/9/2006  | 1/91/2011 
|                 |           | 1,443.38 | 1,443.38 | 360.85   |           |           
|                 |           |          |          |          |           |           
|Tri County South | UTU 73460 | 80.00    | 80.00    | 20.00    | 1/10/1994 | 09/30/2004
|                 | ML 49401  | 640.00   | 640.00   | 160.00   | 1/9/2004  | 1/9/2014  
|                 | UTU 79804 | 320.00   | 320.00   | 80.00    | 1/9/2001  | 08/31/2011
|                 | ML 49155  | 277.74   | 138.87   | 34.72    | 1/9/2003  | 1/9/2013  
|                 | UTU 81207 | 320.00   | 320.00   | 80.00    | 1/10/2005 | 09/30/2015
|                 | UTU 81208 | 1,928.24 | 1,928.24 | 482.06   | 1/10/2005 | 09/30/2015
|                 | ML 49776  | 640.00   | 640.00   | 160.00   | 1/6/2005  | 1/6/2010  
|                 | ML 49789  | 40.00    | 40.00    | 10.00    | 1/6/2005  | 1/6/2010  
|                 | UTU 84678 | 1,920.00 | 1,920.00 | 480.00   | *         | *         
|                 | ML 50427  | 640.00   | 640.00   | 160.00   | 1/9/2006  | 1/9/2011  
|                 | UTU 85601 | 191.64   | 191.64   | 47.91    | *         | *         
|                 |           | 6,997.62 | 6,858.75 | 1,714.69 |           |           









26



|Book Cliffs | COC 60439 | 1,159.56 | 1,159.56 | 289.89 | 1/6/1997  | 1/6/2007  
|----------- | --------- | -------- | -------- | ------ | --------- | ----------
|            | COC 66372 | 945.07   | 945.07   | 236.27 | 1/2/2003  | 01/31/2013
|            | COC 66374 | 1,215.81 | 1,215.81 | 303.95 | 1/2/2003  | 01/31/2013
|            | COC 66376 | 285.24   | 285.24   | 71.31  | 1/2/2003  | 01/31/2013
|            | COC 87584 | 861.67   | 861.67   | 215.42 | 1/10/2004 | 09/30/2014
|            | COC 67585 | 900.41   | 900.41   | 225.10 | 1/10/2004 | 09/30/2014
|            | COC 67586 | 1,920.40 | 1,920.40 | 480.10 | 1/10/2004 | 09/30/2014
|            | COC 68354 | 320.00   | 320.00   | 80.00  | 1/6/2005  | 05/31/2015
|            | COC 59673 | 632.64   | 632.64   | 158.16 | 1/12/2006 | 11/31/2016
|            | CDC 65150 | 200.00   | 200.00   | 50.00  | 1/9/2001  | 08/31/2011
|            | COC 65147 | 80.14    | 80.14    | 20.04  | 1/9/2001  | 08131/2011



|                  | COC 67576 | 2,287.64  | 2,287.64  | 571.91   | 1/10/2004 | 9/30/2014 
|----------------- | --------- | --------- | --------- | -------- | --------- | ----------
|                  | COO 69665 | 1,413,83  | 1,413.83  | 353.46   | 1/12/2006 | 11/31/2016
|                  | COC 69803 | 1,580.85  | 1,580.85  | 395.21   | 1/12/2006 | 11/31/2016
|                  | COC 69804 | 970.82    | 970.82    | 242.71   | 1/12/2006 | 11/31/2016
|                  | COC 69812 | 1,520.00  | 1,520.00  | 380.00   | 1/12/2006 | 11/31/2016
|                  | COC 69813 | 1,280.00  | 1,280.00  | 320.00   | 1/12/2006 | 11/31/2016
|                  | COC 65577 | 120.00    | 120.00    | 30.00    | 1/12/2001 | 11/30/2011
|                  | COC 70012 | 1,214.84  | 1,214.84  | 303.71   | 6/1/2007  | 5/31/2017 
|                  | COC 70013 | 1,264.51  | 1,264.51  | 316.13   | 6/1/2007  | 5/31/2017 
|                  |           | 20,173.43 | 20,173.43 | 5,043.36 |           |           
|                  |           |           |           |          |           |           
|Gibson Gulch      | COC 65531 | 1,520.00  | 1,520.00  | 380.00   | 1/12/2001 | 11/30/2011
|                  | COC 65522 | 919.74    | 919.74    | 229.94   | 1/12/2001 | 11/30/2011
|                  | COC 66370 | 680.00    | 680.00    | 170.00   | 1/12/2002 | 11/30/2012
|                  | COC 68793 | 465.58    | 465.58    | 116.40   | 1/2/2006  | 01/31/2016
|                  | COC 69659 | 40.00     | 40.00     | 10.00    | 1/7/2006  | 06/30/2016
|                  |           | 3,625.32  | 3,625.32  | 906.33   |           |           
|                  |           |           |           |          |           |           
|Grand Valley West | COC 67373 | 1,960.72  | 1,960.72  | 490.18   | 1/7/2004  | 06/30/2014
|                  | COC 67375 | 1,918,93  | 1,918.93  | 479.73   | 1/7/2004  | 06/30/2014
|                  | COC 67555 | 1,28000   | 1,280.00  | 320.00   | 1/10/2004 | 09/30/2014
|                  | COC 68097 | 20.55     | 20.55     | 5.14     | 1/4/2005  | 03/31/2015
|                  |           | 5,180.20  | 5,180.20  | 1,295.05 |           |           
|                  |           |           |           |          |           |           
|Gunnison          | COC 65551 | 1,164.13  | 1,164.13  | 291.03   | 1/12/2001 | 11/30/2011
|                  | COC 65553 | 640.00    | 640.00    | 160.00   | 1/12/2001 | 11/30/2011
|                  | COC 69385 | 480.92    | 480.92    | 120.23   | 1/8/2006  | 07/31/2016
|                  | COC 69388 | 2,529.42  | 2,529.42  | 632.36   | 1/8/2006  | 07/31/2016
|                  | COC 65511 | 1,280.00  | 1,280.00  | 320.00   | 1/12/2001 | 11/30/2011
|                  | COC 71265 | 1,347.90  | 673.97    | 168.49   |           |           
|                  |           | 7,442.37  | 6,768.44  | 1,692.11 |           |           
|                  |           |           |           |          |           |           
|Meeker            | COC 61055 | 160.00    | 160.00    | 40.00    | 1/11/1997 | 10/31/1997
|                  | COC 65793 | 235.73    | 235.73    | 58.93    | 1/4/2002  | 03/31/2012
|                  | COC 67393 | 171.47    | 171.47    | 42.87    | 1/7/2004  | 06/30/2014
|                  | COC 66021 | 168.32    | 168.32    | 42.08    | 1/4/2003  | 03/31/2013
|                  | COC 67380 | 1,800.00  | 1,800.00  | 450.00   | 1/7/2004  | 06/30/2014
|                  | COC 59489 | 45.75     | 45.75     | 11.44    | 1/8/1998  | 07/31/2008
|                  | COC 64885 | 96.26     | 96.26     | 24.07    | 1/6/2001  | 05/31/2011
|                  | COC 64894 | 40.00     | 40.00     | 10.00    | 1/6/2001  | 05/31/2011





| | COC 65839 | 282.14    | 282.14    | 70.54    | 1/4/2002  | 03/31/2012
| | --------- | --------- | --------- | -------- | --------- | ----------
| | COC 67390 | 1,547.28  | 1,547.28  | 386.82   | 1/7/2004  | 06/30/2014
| | COC 67391 | 998.79    | 998.79    | 249.70   | 1/7/2004  | 06/30/2014
| | COC 67392 | 799.48    | 799.48    | 199.87   | 1/7/2004  | 06/30/2014
| | COC 67383 | 739.92    | 739.92    | 184.98   | 1/7/2004  | 06/30/2014
| | COG 70064 | 1,233.85  | 1,23385   | 308.46   | 1/10/2006 | 09/30/2016
| | COC 70065 | 2,030.00  | 2,030.00  | 507.50   | 1/10/2006 | 09/30/2016
| | COC 70066 | 2,365.15  | 2,365.15  | 591.29   | 1/10/2006 | 09/30/2016
| | COC 70067 | 1,920.00  | 1,920.00  | 480.00   | 1/18/2007 | 07/31/2017
| |           | 14,634.14 | 14,634.14 | 3,658.54 |           |           









27



|Pinyon Ridge | COC 66385 | 1,000.00  | 1,000.00  | 250.00   | 1/12/2002 | 11/30/2012
|------------ | --------- | --------- | --------- | -------- | --------- | ----------
|             | COC 67175 | 1,280.00  | 1,280.00  | 320.00   | 1/12/2003 | 11/30/2013
|             | COC 67176 | 1,720.18  | 1,720.18  | 430.05   | 1/12/2003 | 11/30/2013
|             | COC 67177 | 2,360.00  | 2,360.00  | 590.00   | 1/12/2003 | 11/30/2013
|             | Museum    | 320.00    | 320.00    | 80.00    | 4/13/2004 | 04/13/2009
|             | COC 67810 | 1,000.00  | 1,000.00  | 250.00   | 1/9/2004  | 08/31/2014
|             | 8529.5    | 640.00    | 640.00    | 160.00   | 8/16/2005 | 08/16/2010
|             | COC 69423 | 1,084.12  | 1,084.12  | 271.03   | 1/4/2006  | 03/31/2016
|             | COC 69427 | 1,720.00  | 1,720.00  | 430.00   | 1/8/2006  | 07/31/2016
|             | COC 69735 | 760.00    | 760.00    | 190.00   | 1/12/2006 | 11/31/2016
|             | COC 69737 | 1,120.00  | 1,120.00  | 280.00   | 1/12/2006 | 11/31/2016
|             | COC 69755 | 861.42    | 861.42    | 215.36   | 1/12/2006 | 11/31/2016
|             | COC 69780 | 640.00    | 640.00    | 160.00   | 1/6/2006  | 5/31/2016 
|             | COC 69781 | 1,921.44  | 1,921.44  | 480.36   | 1/12/2006 | 11/31/2016
|             | COC 69782 | 1,120.00  | 1,120.00  | 280.00   | 1/7/2006  | 6/30/2016 
|             | COO 66386 | 1,000.00  | 1,000.00  | 250.00   | 1/12/2002 | 11/30/2012
|             | COC 66388 | 2,080.00  | 2,080.00  | 520.00   | 1/12/2002 | 11/30/2012
|             |           | 20,627.16 | 20,627.16 | 5,156.79 |           |           
|Plateau      | COC 65774 | 280.00    | 140.00    | 35.00    | 1/4/2002  | 03/31/2012
|             | COC 65772 | 1,086.29  | 543.15    | 135.79   | 1/4/2002  | 03/31/2012
|             | COC 68802 | 534.53    | 534.53    | 133.63   | 1/2/2006  | 01/31/2016
|             | COC 68804 | 1,602.81  | 1,602.81  | 400.70   | 1/2/2006  | 01/31/2016
|             | COC 68805 | 1,280.00  | 1,280.00  | 320.00   | 1/2/2006  | 01/31/2016
|             | COC 70012 | 1,214.84  | 1,214.84  | 303.71   | 1/6/2007  | 05/31/2017
|             | COC 70013 | 1,264.51  | 1,264.51  | 316.13   | 1/6/2007  | 05/31/2017
|             |           | 7,262.98  | 5,315.33  | 1,328.83 |           |           



|Rangely         | COC 10333 | 40.00     | 40.00     | 10.00    | 1/3/1970  | HBP       
|--------------- | --------- | --------- | --------- | -------- | --------- | ----------
|                | COC 65851 | 1,602.33  | 801.17    | 200.29   | 1/4/2002  | 03/31/2012
|                | COC 65852 | 1,493.38  | 746.69    | 186.67   | 1/4/2002  | 03/31/2012
|                | COC 65853 | 2,091.78  | 1,045.89  | 261.47   | 1/4/2002  | 03/31/2012
|                | COC 65854 | 1,327.12  | 663.56    | 165.89   | 1/4/2002  | 03/31/2012
|                | COC 65848 | 585.94    | 292.97    | 73.24    | 114/2002  | 03/31/2012
|                | COC 66390 | 531.19    | 531.19    | 132.80   | 1/12/2002 | 11/30/2012
|                | COC 64927 | 757.51    | 757.51    | 189.38   | 1/6/2001  | 05/31/2011
|                | COC 64931 | 147.01    | 147.01    | 36.75    | 1/6/2001  | 05/31/2011
|                | COC 67404 | 1,274.00  | 1,274.00  | 318.50   | 1/7/2004  | 06/30/2014
|                | COC 67405 | 2,560.00  | 2,560.00  | 640.00   | 1/7/2004  | 06/30/2014
|                | COC 67406 | 2,560.00  | 2,560.00  | 640.00   | 1/7/2004  | 06/30/2014
|                | COC 67407 | 2,550.56  | 2,550.56  | 637.64   | 117/2004  | 06/30/2014
|                | COC 67408 | 2,560.00  | 2,560.00  | 640.00   | 1/7/2004  | 06/30/2014
|                | COC 67422 | 1,163.88  | 1,163.88  | 290.97   | 1/7/2004  | 06/30/2014
|                | COC 67423 | 1,926.56  | 1,926.56  | 481.64   | 117/2004  | 06/30/2014
|                | COC 68143 | 2,350.20  | 2,350.20  | 587.55   | 1/4/2005  | 03/31/2015
|                |           | 25,521.46 | 21,971.19 | 5,492.80 |           |           
|                |           |           |           |          |           |           
|Rio Blanco Deep | COC 65775 | 659.16    | 659.16    | 164.79   | 1/4/2002  | 03/31/2012
|                | COC 61210 | 1,599.07  | 1,599.07  | 399.77   | 1/11/1997 | 10/31/2007
|                | COC 67397 | 2,535.17  | 2,535.17  | 633.79   | 1/7/2004  | 06/30/2014
|                | COC 67398 | 216.37    | 216.37    | 54.09    | 1/7/2004  | 06/30/2014
|                | CO-02-65a | 544.40    | 90.73     | 22.68    | 5/3/2007  | 5/3/2012  
|                | CO-02-65b | 544.40    | 90.73     | 22.68    | 1/3/2007  | 1/3/2012  
|                | CO-02-65c | 544.40    | 90.73     | 22.68    | 5/3/2007  | 5/3/2012  
|                |           | 5,554.17  | 5,100.50  | 1,275.13 |           |           
|                |           |           |           |          |           |           
|Sand Wash       | COC 65847 | 100.00    | 100.00    | 25.00    | 1/6/2002  | 05/31/2012
|                | COC 65846 | 150.00    | 150.00    | 37.50    | 1/6/2002  | 05/31/2012
|                | COC 61703 | 1,000.00  | 1,000.00  | 250.00   | 1/6/1998  | 05/31/2008
|                | COC 61766 | 243.24    | 243.24    | 60.81    | 1/6/1998  | 05/31/2008
|                | COC 61807 | 600.00    | 600.00    | 150.00   | 1/6/1998  | 05/31/2008
|                | COC 61817 | 126.52    | 126.52    | 31.63    | 1/6/1998  | 05/31/2008
|                | COC 61826 | 640.00    | 640.00    | 160.00   | 1/6/1998  | 05/31/2008
|                | COC 64902 | 159.86    | 159.88    | 39.97    | 1/6/2001  | 05/31/2011
|                | COC 65179 | 5.00      | 5.00      | 1.25     | 1/9/2001  | 08/31/2011
|                | COC 65182 | 212.14    | 212.14    | 53.04    | 1/9/2001  | 08/31/2011
|                | COC 61224 | 163.89    | 163.89    | 40.97    | 1/11/1997 | 10/31/2007
|                | COC 67170 | 199.73    | 199.73    | 49.93    | 1/12/2003 | 11/30/2013
|                | COC 69699 | 39.71     | 39.71     | 9.93     | 1/12/2006 | 11/30/2016
|                | COC 69698 | 41.55     | 41.55     | 10.39    | 1/7/2006  | 06/30/2016
|                |           | 3,681.66  | 3,681.66  | 920.42   |           |           



28



|Waddle Creek | COC 61059 | 283.92   | 283.92   | 70.98  | 1/11/1997 | 10/31/2007
|------------ | --------- | -------- | -------- | ------ | --------- | ----------
|             | COC 66151 | 527.83   | 527.83   | 131.96 | 1/7/2002  | 06/30/2012
|             | COC 61602 | 40.00    | 40.00    | 10.00  | 1/4/1998  | 03/31/2008
|             | COC 69695 | 320.00   | 320.00   | 80.00  | 1/12/2006 | 11/30/2016
|             |           | 1,171.75 | 1,171.75 | 292.94 |           |           



|Overthrust Projects (12.5% working interest) |           
|-------------------------------------------- | ----------
|                                             |           
|Utah Dinosaur                                | UTU 81193 
|                                             | UTU 81194 
|                                             | UTU 81195 
|                                             | UTU 81196 
|                                             | UTU 81197 
|                                             | UTU 81198 
|                                             | UTU 81199 
|                                             | UTU 81200 
|                                             | UTU 81209 
|                                             | UTU 81210 
|                                             | UTU 81211 
|                                             | UTU 81212 
|                                             | UTU 81213 
|                                             | UTU 81214 
|                                             | UTU 81215 
|                                             | UTU 81216 
|                                             | UTU 80630 
|                                             | UTU 81760 
|                                             | UT-01-257a
|                                             | UT-01-257b
|                                             | UT-01-257c
|                                             | UT-01-257d
|                                             |           



|Colorado Dinosaur | COC 67404 | 316.56   | 316.56   | 39.57  | 1/07/2004 | 06/30/2014
|----------------- | --------- | -------- | -------- | ------ | --------- | ----------
|                  | COC 67400 | 919.36   | 919.36   | 114.92 | 1/07/2004 | 06/03/2014
|                  | COC 67403 | 960.00   | 960.00   | 120.00 | 1/07/2004 | 06/30/2014
|                  | COC 67409 | 1,236.16 | 1,236.16 | 154.52 | 1/07/2004 | 06/30/2014
|                  | COC 67410 | 1,418.53 | 1,418.53 | 177.32 | 1/07/2004 | 06/30/2014
|                  | COC 67411 | 1,480.00 | 1,480.00 | 185.00 | 1/07/2004 | 06/30/2014
|                  | COC 67421 | 2,133.76 | 2,133.76 | 266.72 | 1/07/2004 | 06/30/2014
|                  | COC 67424 | 448.60   | 448.60   | 56.08  | 1/07/2004 | 06/30/2014
|                  | COC 67401 | 1,103.68 | 1,103.68 | 137.96 | 1/07/2004 | 06/30/2014
|                  | COC 67402 | 720.00   | 720.00   | 90.00  | 1/07/2004 | 06/30/2014
|                  | COC 67412 | 2,438.28 | 2,438.28 | 304.79 | 1/07/2004 | 06/30/2014
|                  | COC 67420 | 1,600.00 | 1,600.00 | 200.00 | 1/07/2004 | 06/30/2014
|                  | COC 67426 | 1,529.51 | 1,529.51 | 191.19 | 1/07/2004 | 06/30/2014
|                  | 8018.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 05/20/2009
|                  | 8019.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 05/20/2009
|                  | 8020.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 05/20/2009
|                  | 8021.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 05/20/2009
|                  | 8076.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 08/19/2009
|                  | 8077.4    | 640.00   | 640.00   | 80.00  | 5/20/2004 | 08/19/2009
|                  | CDC 68533 | 200.00   | 200.00   | 25.00  | 1/12/2005 | 11/30/2015
|                  | Museum    | 2,485.66 | 112.27   | 14.03  | 4/10/2005 | 4/10/2010 
|                  | COC 69433 | 1,710.37 | 1,710.37 | 213.80 | 1/08/2006 | 07/31/2016
|                  | COC 69434 | 1,920.00 | 1,920.00 | 240.00 | 1/08/2006 | 07/31/2016
|                  | COC 69435 | 1,280.00 | 1,280.00 | 160.00 | 1/08/2006 | 07/31/2016
|                  | COC 69436 | 1,160.00 | 1,160.00 | 145.00 | 1/08/2006 | 07/31/2016
|                  | COC 69443 | 1,280.00 | 1,280.00 | 160.00 | 1/08/2006 | 07/31/2016
|                  | COC 69444 | 948.94   | 948.94   | 118.62 | 1/08/2006 | 07/31/2016
|                  | COC 69445 | 395.77   | 395.77   | 49.47  | 1/08/2006 | 07131/2016
|                  | COC 69446 | 320.00   | 320.00   | 40.00  | 1/08/2006 | 07/31/2016
|                  | COC 69448 | 1,919.92 | 1,919.92 | 239.99 | 1/08/2006 | 07/31/2016

29

| | COC 69451 | 1,398.91  | 1,398.91  | 174.86   | 1/08/2006  | 07/31/2016
| | --------- | --------- | --------- | -------- | ---------- | ----------
| | COO 69452 | 1,239.79  | 1,239.79  | 154.97   | 1/08/2006  | 07/31/2016
| | COC 69453 | 1,759.52  | 1,759.52  | 219.94   | 1/08/2006  | 07/31/2016
| | COC 69454 | 1,920.00  | 1,920.00  | 240.00   | 1/08/2006  | 07/31/2016
| | COC 69457 | 1,280.00  | 1,280.00  | 160.00   | 1/08/2006  | 07/31/2016
| | COC 69458 | 51.67     | 51.67     | 6.46     | 1/08/2006  | 07/31/2016
| | COC 69459 | 279.38    | 279.38    | 34.92    | 1/08/2006  | 07/31/2016
| | Weidlich  | 3,034.81  | 1,300.25  | 162.53   | 10/24/2006 | 10/24/2011
| | COC 70761 | 230.96    | 230.96    | 28.87    | 1/10/2007  | 09/30/2017
| | COC 70762 | 800.00    | 800.00    | 100.00   | 1/10/2007  | 09/30/2017
| |           | 45,760.14 | 41,652.19 | 5,206.52 |            |           

*  Lease Pending



The current working interest partners are:





Natural Gas Resource       Overthrust Oil



Dejour Energy (USA) Corp.

25%

12.5%

Brownstone Ventures (US) Inc.

10%

10%

Retamco Operating, Inc.

65%

77.5%



Under the agreement between the Company, Retamco Operating Inc. (Retamco), and Brownstone Ventures (US) Inc. dated July 14, 2006, Dejour and Brownstone agreed to participate in the exploration and development of Retamcos leasehold interests. The cost to Dejour includes USD$5 million cash, 5,500,000 common shares of the Company valued at USD$10,726,700 ($2.17 CDN per share), a USD$5,000,000 zero coupon note maturing in stages from January 2, 2007 to June 30, 2007, and the issuance of a two-year, 8% convertible debenture with face value of USD$1,397,846.



The Properties are located in Colorado and Utah, with most of them contained within the confines of the Piceance and Uinta Basins.  The natural gas properties consist of both conventional and unconventional reservoir development opportunities along with CBM (coalbed methane) prospects, while the Utah Dinosaur and Colorado Dinosaur projects are deeper, subthrust oil exploration projects. The leases are primarily Federal, State, and Fee mineral leases and typically have 5 to 10 year lease periods before expiration which will allow sufficient time to evaluate and, if warranted, explore and develop the leases.



The properties were assembled by Retamco Operating, Inc. a Texas corporation. Retamco currently is the Operator. However, subject to experience and qualification, it is contemplated that new Operators for the geologically different may designated in the future.



The Piceance and Uinta basin region lies at an elevation ranging from about 5,000 feet up to about 9,500 feet, and has an arid to semi-arid climate, with most of the land covered in limited and low-lying vegetation, primarily sage. The area is sparsely settled, although access to much of the area is provided by several highways and then by secondary roads used for ranching, or 4x4 access for the remainder. Precipitation in the basins averages about 17 inches per year.



The basins have several hydrocarbon targets. The Mesaverde formation is the primary gas target for most of the region, with the upper portion of the formation known as the Williams Fork. The Williams Fork is often 2,500 to 3,800 thick, while the lower 1,000 to 2,000 of the formation contains the primary gas targets. The gas sands are considered to be unconventional tight gas and newer fracturing technology is used. Several other gas bearing formations, including Mancos, Dakota, and Entrada sands are targets in the basin as well. Current spacing the region is 40-acres; however, based on an improved understanding of the basins, recent studies have indicated that a 10-acre spacing in select areas may provide for higher gas recoveries.



30



The Overthrust Oil projects are located in Moffat County, Colorado and Uintah County, Utah. The prospects are on the flank of the Douglas County Anticline and the primary target is the Weber formation. This formation is a  Pennsylvanian age sandstone, with the anticipated drilling depth of 15,000.



The region contains several historic oil and gas fields, and infrastructure exists to support these operations. However, the project areas are currently within one of the most active exploration regions in North America, and significant new infrastructure capacity is currently under construction, including new pipelines and gas plants.



Current and Anticipated Exploration

The North Barcus Creek Prospect, consisting of approximately 1,590 acres, was the first of the Companys project areas to be drilled. The United States Bureau of Land Management issued drilling permits for the project in April 2007, and drilling on the first of two initial wells commenced in July 2007. Well No. 1-12 was drilled to a total depth of 11,500 feet, and Well No. 1-12, approximately 1,800 feet away, was drilled to a total depth of approximately 11,425 feet. Both wells have been evaluated by independent consultants with the #1-12 Well estimated to contain 263 of net pay and #2-12 Well estimated to contain 254 of net pay.  Completion operations on both wells has commenced. Additional drilling is contemplated upon receipt of additional permits.



The Operator of the projects contemplates ramping up operations such that 3-5 rigs are drilling which could result in an estimated 30 wells drilled per year.



2. Tinsley Prospect

By agreement dated September 1, 2005 the Company acquired the rights to participate in an oil and gas exploration joint venture known as the Tinsley Deep Prospect (the Tinsley Prospect). The Company acquired a 35% interest in the project located in Yazoo County, Mississippi. Originally, the project consisted of 5,100 acres gross (4,613 net acres).

























































31



[dejour200620famend1002.jpg]

The Company paid acquisition costs representing the Companys interest which include payment for leasehold interests, brokerage, seismic processing and prospect development. In the initial well the Company shall pay 46.583333% of the drilling and/or abandonment costs, and 34.9375% of completion costs to earn a 34.9375% WI BPO (working interest before payout) [28.21875% NRI BPO (net revenue interest before payout)] and 29.428126% WI APO (working interest after payout) [25.633635% NRI APO (net revenue interest after payout)]. The agreement also contains an Area of Mutual Interest consisting of approximately 45 sq. miles defined by the area covered by certain seismic data.



During December 2005 the operator commenced drilling operations on a test well known as the Merit Partners #1. The well was drilled to a total depth of 11,237 feet. In March 2006, the Company was advised by the operator of the project that the well was not economic. As a result, the Company recorded an impairment provision of $2,375,926.



32



In the 1st quarter of 2007 Dejour reached an agreement with the Operator such that it intends to transfer its interest in the Merit Partners #1 wellbore along with certain shallow rights in roughly 616 net acres of oil & gas leases (a portion of the Tinsley Prospect) and in return it expects that it will end up with approximately a 100% ownership of 1,736 net acres of oil & gas leases containing the rights below the base of the Hosston formation (a portion of the Tinsley Prospect).  The Company will not be required to pay its share of plugging and abandonment costs.



The Company subsequently concluded an agreement with a private Mississippi based company with Dejour contributing its land interest and technical information from the Tinsley Prospect to a new joint venture. The Mississippi based corporation has commenced to acquire additional land, identified new joint venture partners as well as an operator. Together with Dejour, new wells may be drilled over the next 12 months.



Lavaca Prospect

By agreement dated October 1, 2005 the Company acquired the rights to participate in an oil and gas exploration joint venture known as the Lavaca Prospect located in Mitchell County, Texas (the Lavaca Prospect). The Lavaca Prospect is comprised of 6,181 gross acres and 3,998 net acres. The operator commenced drilling operations on a test well in November 2005.



The Company paid acquisition costs representing the Companys 10% interest which included payment for leasehold interests, brokerage and prospect development. In the initial well the Company will pay 13.3% of the drilling and/or abandonment costs and 10% of completion costs estimated at to earn a 10% WI (working interest) [7.5% NRI (net revenue interest)]. The agreement also contains an Area of Mutual Interest consisting of all land within one mile from the outside borders of the leasehold lands.



In September 2006, the Company was advised by the operator of the Lavaca Prospect that the Purvis #1 well is not economic and commenced operations to plug and abandon the well.  As a result, the Company recorded an impairment provision of $220,148 in 2006.



Alberta Oil & Gas Joint Venture

Commencing April 1, 2006 the Company entered into a joint venture arrangement with Charles W.E. Dove, who has been an advisory board member of the Company since November 2004, and a principal with Dove & Kay Exploration Ltd. of Calgary.



Mr. Dove, a geophysicist, with over 30 years oil & gas experience, left his geophysical consulting business to join with Dejour to identify, generate and pursue certain oil & gas opportunities in the Western Sedimentary Basin.  The Joint Venture is incorporated as Dejour Energy (Alberta) Ltd. (Dejour Alberta) and is owned and funded 90% by Dejour, with Mr. Doves company, Wild Horse Energy Ltd. owning and funding the remaining 10%.



Numerous oil and gas prospects are presently being developed or negotiated.  Dejour Alberta has elected to manage risk by taking varying working interest positions based upon reserve potential and perceived exploration risk.  These interests range from 10% to 100%.  Most business terms are structured in such a way that a drilling or re-entry commitment is tied to additional drilling options or other lands on the various prospects.



During the 1st quarter of 2007, Dejour Alberta concluded business agreements on four additional prospects resulting with the drilling of four wells.  Land acquisition through purchase or earning has resulted in Dejour Alberta owning an average 22% interest in approximately 45,000 acres of land in the Peace River Arch area of Alberta and British Columbia.



33



In October 2006 Dejour Alberta successfully concluded a Participation Agreement allowing it to participate in the drilling of a high potential natural gas well in an area known as the Noel Area, in N.E. British Columbia, Canada.  The Company then assigned 25% of its interest in the Noel Area to a company controlled by the CEO of the Company. Dejour Alberta will pay 15% of the costs to earn a 9.375% working interest in 2,220 acres with an option to drill additional wells earning 2,220 acres to a maximum of 10,725 acres.  Drilling commenced in the 1st quarter of 2007 and the well is expected to reach total depth around the end of April 2007.  Dejour Albertas estimated cost for drilling the first test well is $700,000.  Negotiations to add more land to this Noel prospect are ongoing.



Dejour Alberta has successfully drilled two wells on the 100% before payout in northern BC, refer to as the Drake lands, resulting in two gas wells.  Production tests indicate these two wells should produce at a combined rate of 1500 to 2000 mcf/day.  The wells will be tied in and produced as soon as ground conditions permit.  These wells have earned 60% interest in additional lands on which two more low risk wells are planned for the next winter drilling season.  There exists potential on this land in deeper formations which will be investigated over the summer prior to finalizing depths for future drilling.



Land evaluation, posting for sale and acquisition is ongoing in other areas, after which additional results will be released.  To facilitate the growing operation in Alberta and British Columbia and in that Dejour Alberta has increased its retained working interests in prospects and obtained the required permits to drill and operate oil and gas properties.  As operator in the Drake area, the second well drilled was taken from initial license application to being drilled and cased in approximately 3 weeks. Independent valuation consultants based in Calgary, Alberta are in the process of conducting an independent evaluation of the winter season drilling and land acquisition results.



Oil and Gas Expenditures

The continuity of expenditures on Dejours oil & gas properties is as follows:



|Name           | 12/31/2005 | Acquisition Cost | Drilling Costs | Write-down   | 12/31/2006 
|-------------- | ---------- | ---------------- | -------------- | ------------ | -----------
|               |            |                  |                |              |            
|Retamco        | Nil        | $25,182,532      | Nil            | Nil          | $25,182,532
|Lavaca         | $163,522   | Nil              | $56,526        | ($20,147)    | Nil        
|Tinsley        | $1,064,391 | Nil              | $1,311,536     | ($2,375,927) | $1         
|Golden Prairie | $1         | Nil              | Nil            | Nil          | $1         
|Turtle Bayou   | $1         | Nil              | Nil            | Nil          | $1         
|Totals         | $1,228,015 | $25,182,532      | $1,368,062     | ($2,596,074) | $25,182,535





ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended 12/31/2006, and 12/31/2005 should be read in conjunction with the financial statements of the Company and the notes thereto.



Overview

During Fiscal 2003, Dejour raised $200,000 through the sale of shares.



During Fiscal 2004, Dejour raised $1,950,000 in gross proceeds through the sale of shares.



During Fiscal 2005, Dejour raised $15,784,810 in proceeds, net of financing costs, through the sale of shares.



34



During Fiscal 2006, Dejour raised $19,189,006 in proceeds, net of financing costs, through the sale of shares.



Dejour was involved in a reactivation process during Fiscal 2004 as described in ITEM 4. INFORMATION ON THE COMPANY. During Fiscal 2005, Dejour obtained interests in mineral properties located in the both Athabasca Basin of Canada and in the United States as described earlier in this document in ITEM 4.D. Property, Plant and Equipment. During Fiscal 2006, Dejour sold its interests in the uranium properties located in the Athabasca Basin to Titan Uranium and obtained a 37% interest in Titan Uranium. Dejour was also actively exploring its other property interests during Fiscal 2006. For specific disclosure see ITEM 4.D. Property, Plant and Equipment.



Results of Operations



Fiscal 2006 ended 12/31/2006 vs. Fiscal 2005 ended 12/31/2005

The Companys net income for the year ended December 31, 2006 was $23,887,726, or $0.45 per share, compared to a net loss of $1,611,919, or $0.06 per share in the year ended December 31, 2005.



In December 2006, the Company completed the sale of the Companys uranium properties, consisting of 68 claims and 4 permits totaling 966,969 acres located in the Athabasca Basin, Saskatchewan, Canada, and all related exploration data to Titan Uranium Inc. (Titan), a public company traded on the TSX-V.



According to an Estimate Valuation Report by independent business valuator BDO Dunwoody Valuation Inc., the estimated value of the 17.5 million common shares of Titan and 3.0 million Titan warrants received were approximately $31.5 million and $4.8 million respectively.  This figure excludes the values for the 1% NSR and 10% carried interest.



The Company realized a gain on disposition of its uranium properties of $30,177,082.



The investment in Titan has been accounted for using the equity method of accounting and includes related legal fees and other costs of acquisition of $107,983.  The Companys share of losses in Titan for the period ended December 31, 2006 was $19,031. The Company owned approximately 33% of Titan as at April 2, 2007.



Interest income of $673,559 was significantly higher in 2006 than $99,530 in 2005, due to a higher cash balance derived from equity financings completed in late 2005 and early 2006.



Investor relations expenses in 2006 were $1,079,161, as compared to $626,686 in 2005.  In 2006, the Company incurred more trade shows, travel and newsletter printing costs to broaden the Companys shareholders base and to better communicate the Companys business plan to potential investors.



In 2006, the Company had been actively looking for projects that would add to shareholder values.  Due to significantly increased business activities, management and consulting fees rose to $826,712 in 2006 from $454,410 in 2005.  Office and general expenses also increased to $224,475 in 2006 from $159,799 in 2005.  Rent also increased to $175,655 in 2006 from $126,718 in 2005, as the Company setup an office in Calgary, Alberta.



Regulatory filing fees decreased to $92,713 in 2006 from $150,474 in 2005.  The Company incurred a one-time cost to list the Companys shares on the Frankfurt Stock Exchange and registered with the Securities Exchange Commission (SEC) as a foreign private issuer in 2005.



35



The granting and vesting of stock options during 2006 resulted in non-cash stock-based compensation expenses of $1,295,127, compared to $308,434 in 2005.  The Company determined the fair value of stock options using the Black-Scholes option pricing model.



In February 2006, the Company renounced $3,090,000 of Canadian Exploration Expenditures (CEEs) to investors.  The Company had previously unrecognized future income tax assets related to a loss carry forward to be applied against taxable income in future years.  Under Canadian generally accepted accounting principles, the Companys previously unrecognized future income tax assets were offset against future income tax liabilities resulting from the renunciation of CEEs.



As discussed previously, the Company successfully closed the sale of its uranium properties to Titan and recorded a gain on disposition of $30,177,082. This resulted in Dejour realizing a net profit for Fiscal 2006 in the amount of $23,887,726.



Fiscal 2005 Ended 12/31/2005 vs. Fiscal 2004 ended 12/31/2004

The Companys net loss for the year ended December 31, 2005 was $1,611,919, or $0.06 per share, compared to a net loss of $392,099, or $0.04 per share in the year ended December 31, 2004.



Interest income of $99,530 in 2005 was due to a higher cash balance derived from equity financings completed during 2005.  In 2004 no interest income was earned.



Investor relations expenses in 2005 were $626,686, as compared to $12,753 in 2004. The Company was reactivated to Tier 2 Issuer status on the TSX Venture Exchange in November 2004, and therefore 2004 investor relations expenses were small. In 2005, the Company incurred trade shows, travel and newsletter printing costs to broaden the Companys shareholders base and to better communicate the Companys business plan to potential investors.



In 2005, the Company had been actively looking for projects that would add to shareholder value. Due to significantly increased business activities, management and consulting fees rose to $454,410 in 2005 from $67,434 in 2004. During 2005, the Company moved to a larger office premise to accommodate more staff. As a result, office and general expenses also increased to $206,740 in 2005 from $25,769 in 2004. Rent also increased to $126,718 in 2005 from $13,081 in 2004.



Regulatory filing fees increased to $150,474 in 2005 from $30,991 in 2004. The Company incurred a one-time cost to list the Companys shares on the Frankfurt Stock Exchange and registered with the Securities Exchange Commission (SEC) as a foreign private issuer.



The granting and vesting of stock options during 2005 resulted in non-cash stock-based compensation expenses of $308,434, compared to $6,131 in 2004.



In February 2005, the Company renounced $1,050,000 of Canadian Exploration Expenditures (CEEs) to investors. The Company had previously unknot recognized future income tax assets related to losses carried forward and which were available be applied against taxable income in future years. Under Canadian generally accepted accounting principles, the Companys previously unrecognized future income tax assets were offset against future income tax liabilities resulting from the renunciation of CEEs. This resulted in a future income tax recovery of $366,135 in 2005.



In 2005, the Company capitalized $1,228,013 in oil & gas exploration expenditures and $2,197,139 in uranium exploration expenditures.



36



Fiscal 2004 Ended 12/31/2004 vs. Fiscal 2003 Ended 12/31/2003

Dejour had no income during the fiscal year ended 12/31/2004 and minimal income during the fiscal year ended 12/31/2003. Interest from bank deposits for the year ended 12/31/2003 was $465.



The Companys net loss for the year ended December 31, 2004 was ($392,099) or ($0.04) per share, compared to a net loss of ($76,425) or ($0.02) per share for the year ended December 31, 2003.



During 2004, management successfully reactivated the Company from inactive to Tier 2 Company status at the TSX Venture Exchange. To fund its reactivation efforts, the Company arranged an interim $250,000 bridge loan with Hodgkinson Equity Corporation, a private company wholly owned by Robert Hodgkinson an officer and director of Dejour. The Company paid interest of $2,082 in cash and 200,000 common shares valued at $50,000 as consideration for the bridge loan. Therefore, interest and finance fees increased to $52,087 in 2004 from $15,074 in 2003.



In 2004, the Company completed a non-brokered private placement and raised gross proceeds of $1.95 million. The Company actively looked for projects during Fiscal 2004. As a result of these activities in 2004, management and consulting fees increased from $18,000 in 2003 to $53,942, and professional fees increased from $10,602 in 2003 to $53,942. Travel and investor relation expenses increased as well.



In 2004, the Company completed initial drilling on the Golden Prairie Prospect. The poor results obtained from this drilling resulted in the Company writing this property down to nominal carrying value.



Liquidity and Capital Resources



Fiscal 2006 Ended 12/31/2006

As at 12/31/2006, Dejour had working capital of $11,769,159 as compared to working capital of $12,167,334 at 12/31/2005. The decrease in working capital of $398,175 was largely because of a promissory note in the amount of $5,827,000, included in the category of short-term liabilities. For disclosure pertaining to this promissory see Note 6  Promissory Note and Convertible Debentures, to the Audited Financial Statements for the Year Ended December 31, 2006.



During the year ended 12/31/2006, Dejour issued 16,382,934 common shares for net proceeds of $19,189,006. All of these shares were issued pursuant to the private placements and the exercise of share purchase options and share purchase warrants disclosed in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS. Dejour also issued 5,500,000 common shares, at a deemed value of $12,088,991, for the acquisition of the Retamco Project.



Cash used for Operating Activities during the year ended 12/31/2006 was ($1,769,373) including the net income for the fiscal year of $23,887,726. The adjustments in the category of items not affecting cash for the fiscal year were $29,726 for amortization; $19,031 for equity loss in Titan; ($306,271) of non-cash finders fee income; $1,295,127 of non-cash compensation resulting from the issuance of stock options. $282,075 in non-cash consulting and other fees; $453,926 for future income tax recovery; $2,596,074 for the impairment of oil and gas properties; and ($30,177,082) for the gain on the disposal of the uranium properties. The future income tax recovery occurred as a result of the renunciation of flow-through shares.











37



Cash Used for Investing Activities during the year ended 12/31/2006 totaled ($12,146,784) which consisted of expenditures on Dejours mineral properties; the purchase of furniture and equipment; and expenditures related to the acquisition of Titan shares. These activities are described in ITEM 4.B BUSINESS OVERVIEW; ITEM 4.D, PROPERTY PLANT AND EQUIPMENT and ITEM 5, OPERATING AND FINANCIAL REVIEW AND PROSPECTS (Results of Operations, Fiscal 2006, Ended 12/31/2006 vs. Fiscal 2005, Ended 12/31/2005.



Cash Provided by Financing Activities during Fiscal 2006 was $19,189,006 and consisted of the cash received for the issuance of common shares as described in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



Fiscal 2005 Ended 12/31/2005

As at 12/31/2005, Dejour had working capital of $12,167,334 as compared to working capital of $1,579,739 at 12/31/2004. The increase in working capital of $10,587,595 was because of the successful completion of private placements which closed during the period January 1, 2005 through December 31, 2005. Cash and cash equivalents of $12,387,314 represented the majority of the current asset position at 12/31/2005 and the current liabilities of $312,222 were simply debts incurred in the normal course of business such as monthly rent, current amounts owing for property investigation costs, regulatory and filing fees and travel. None of these liability accounts were past due and were paid as agreed.



During the year ended 12/31/2005, Dejour issued 23,220,827 common shares for net proceeds of $15,784,810. All of these shares were issued pursuant to the private placements, shares issued for services, and the exercise of share purchase options and share purchase warrants disclosed in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



Cash used for Operating Activities during the year ended 12/31/2005 was ($1,438,826) including the net loss for the fiscal year of ($1,611,919). The adjustments in the category of items not affecting cash for the fiscal year were $14,713 for amortization; $308,434 of non-cash compensation resulting from the issuance of stock options, $9,200 in non-cash consulting fees; and, ($366,135) for future income tax recovery. The future income tax recovery occurred as a result of the renunciation of flow-through shares.



Effective January 1, 2003 the Company adopted the new accounting recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook, Section 3870, Stock-based compensation and other stock-based payments,released in November 2003, whereby it will be expensing all stock-based compensation awards, made or altered on or after January 1, 2003, on a prospective basis. The standard requires that all new or altered stock based awards provided to employees and non-employees are measured and recognized using a fair value based method. Fair values are determined using the Black-Scholes option pricing model. Any consideration paid by employees on the exercise of the options is credited to share capital.



The Company granted 2,606,192 stock options to directors and consultants during the year ended 12/31/2005 as compared to 950,000 stock options during the year ended 12/31/2004.



Cash Used for Investing Activities during the year ended 12/31/2005 totaled ($3,551,508) which consisted of expenditures on Dejours mineral properties and the purchase of furniture and equipment. These activities are described in ITEM 4.B BUSINESS OVERVIEW; ITEM 4.D, PROPERTY PLANT AND EQUIPMENT and ITEM 5, OPERATING AND FINANCIAL REVIEW AND PROSPECTS (Results of Operations, Fiscal 2005, Ended 12/31/2005 vs. Fiscal 2004, Ended 12/31/2004.







38



Cash Provided by Financing Activities during Fiscal 2005 was $15,784,810 and consisted of the cash received for the issuance of common shares as described in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



US GAAP Reconciliation

The financial statements included with this annual report have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP).  A description of US GAAP and practices prescribed by the US Securities and Exchange Commission (SEC) that result in material measurement differences from Canadian GAAP are as follows:



(a)

Interest in unproven mineral properties

Under US GAAP, pursuant to EITF 04-2, the Company classified its mineral rights as tangible assets and accordingly acquisition costs are capitalized provided certain criteria are met.  US GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In performing the review for recoverability, the Company is to estimate the future cash flows expected to result from the use of the asset and its eventual disposition.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized.  However, SEC staff has indicated that their interpretation of US GAAP requires mineral exploration costs to be expensed as incurred until commercially mineable deposits are determined to exist within a particular property.  Accordingly, for all periods presented, the Company has expensed all mineral exploration costs for US GAAP purposes.  In addition, under Canadian GAAP, cash flows relating to resource property costs are reported as investing activities. For US GAAP, these costs would be characterized as operating activities.



(b)

Stock-based compensation

The Financial Accounting Standards Board (FASB) in the US issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). The statement encourages entities to adopt a fair value methodology of accounting for employee stock-based compensation.



Under US GAAP stock options granted to non-employees for services rendered to the Company are required to be accounted for as compensation cost and charged to operations as the services are performed and the options are earned. The compensation cost is to be measured based on the fair value of the stock options granted. This method is similar to the Canadian standard adopted as of January 1, 2003. The stock-based compensation expense in respect of stock options granted to non-employees, under US GAAP, based upon the fair value of the options granted, determined using the Black Scholes option pricing model, would be $nil cumulatively from the date of adoption of SFAS 123 to December 31, 2002.



In December 2004, the FASB issued SFAS No.123R (revised 2004), "Share-Based Payment." SFAS No. 123(R) provides investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements.  That cost will be measured based on the fair value of the equity or liability instruments issued.  SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.  SFAS No. 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."  Public entities will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005 or December 15, 2005 for small business issuers.



39



To December 31, 2006, the Company only granted stock options to consultants and did not grant any stock options to employees.



(c)

Income taxes

Under US GAAP, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Under Canadian GAAP, the effect of a change in tax rates is recognized in the period of substantive enactment. The application of this difference under US GAAP does not result in a material difference between future income taxes as recorded under Canadian GAAP.



(d)

Flow-through shares

Under Canadian GAAP, future income tax liabilities resulting from the renunciation of qualified resource expenditures by the Company in connection with the issuance of flow-through common shares are recorded as a reduction of share capital at the time of renunciation.  Under US GAAP, the cost of the renounced expenditures is recorded as a liability and reduction of share capital on issuance of the flow through shares.  Under Canadian GAAP, the amount of this reduction is measured as the tax effected value of the renounced expenditures while under US GAAP, the amount of this reduction is measured by comparison of the flow-through common share price versus the fair value of the Companys ordinary common shares.



(e)

Reporting comprehensive income

Statement of Financial Accounting Standards No. 130 (SFAS 130) Reporting Comprehensive Income,establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income equals net income (loss) for the year as adjusted for all other non-owner changes in shareholders equity.  SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement.  For the years ended December 31, 2006, 2005 and 2004 comprehensive loss equals the loss for the year.



(f)

Exploration stage company

Pursuant to US GAAP, the Company would be considered an exploration stage company as the Company is devoting its efforts to establishing commercially viable resource properties. However, the identification of the Company as such for accounting purposes does not impact the measurement principles applied to these consolidated financial statements.



(g)

Statements of cash flows

For Canadian GAAP, all cash flows relating to mineral property costs are reported as investing activities. For US GAAP, mineral property acquisition costs would be characterized as investing activities and mineral property exploration costs as operating activities.



The Company has included a subtotal in cash flows from operating activities. Under US GAAP, no such subtotal would be disclosed.



(h)

Recent accounting pronouncements

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140, to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, Accounting for the Impairment or Disposal of Long-Lived Assets, to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.



40

SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. This standard is not expected to have a significant effect on the Companys future reported financial position or results of operations nor will it result in a difference between the Companys reporting under Canadian GAAP versus US GAAP.



In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.



In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on de-recognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.



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



In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative a qualitative factor. SAB No. 108 is effective for period ending after November 15, 2006. The adoption of this statement had no material effect on the Company's reported financial position or results of operations.

41



In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R). This statement requires employers to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.  This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement had no material effect on the Company's reported financial position or results of operations.



In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.



For the reconciliation to U.S. GAAP, see Note 15 to the Audited Financial Statements for the Year Ended December 31, 2006.



5.E.  Off-Balance Sheet Arrangements

The Company has no Off-Balance Sheet Arrangements.



5.F.  Tabular Disclosure of Contractual Obligations

The following table lists as of December 31, 2006 information with respect to the Companys contractual obligations.



|                                                                                        
|----------------------------------------------------------------------------------------
|Contractual Obligations                                                                 
|Long-Term Debt Obligations                                                              
|Capital (Finance) Lease Obligations                                                     
|Operating Lease Obligations(1)                                                          
|Purchase Obligations                                                                    
|Other Long-Term Liabilities Reflected on the Company's Balance Sheet under Canadian GAAP
|Total                                                                                   



(1)

Operating Lease Obligations represent the office lease for the Companys head office that expires on May 1, 2010.



Critical Accounting Policies



Please refer to Notes to the audited financial statements.



ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES



6.A.  Directors and Senior Management





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Table No. 6

Directors and Senior Management

6/30/2006

______________________________________________________________________________

______________________________________________________________________________

|Name                     | Position                                        | Age | Date of
First Election
Or Appointment                           
|------------------------ | ----------------------------------------------- | --- | ----------------------------------------------------------------
|                         |                                                 |     |                                                                 
|Douglas W. Cannaday      | President and Director                          | 54  | July 14, 2004 (Director) and December 15, 2004 (President)      
|                         |                                                 |     |                                                                 
|Lloyd A. Clark           | Director                                        | 75  | February 7, 2005                                                
|                         |                                                 |     |                                                                 
|Robert L. Hodgkinson (1) | CEO, Chairman and Director                      | 57  | May 18, 2004 (Director) and December 15, 2004 (Chairman and CEO)
|                         |                                                 |     |                                                                 
|Archibald J. Nesbitt (1) | Director                                        | 58  | November 24, 2004                                               
|                         |                                                 |     |                                                                 
|Mathew H. Wong           | Corporate Secretary and Chief Financial Officer | 32  | July 14, 2004                                                   
|                         |                                                 |     |                                                                 
|Craig Sturrock (1)       | Director                                        | 63  | August 22, 2005                                                 
|                         |                                                 |     |                                                                 
|R. Marc Bustin           | Director                                        | 54  | August 30, 2005                                                 



(1) Member of Audit Committee

______________________________________________________________________________



Douglas W. Cannadayis the President, Chief Operating Officer and a Director of Dejour. He has been an officer since December 15, 2004 and a Director since July 14, 2004. He was the President of an unaffiliated public company, Uranium Power Corp., from 2002 until the end of 2003 when he became affiliated with Dejour. From 1999 until 2004, Mr. Cannaday also worked in Ecuador in the area of placer gold mining. During that time he was the President of Hampton Court Resources Ecuador S.A., a company located in the city of Quito. He has been working in the area of oil and gas exploration and production in both Canada and the United States for the past twenty-five years. He was an Officer and Director of Tod Mountain Development Ltd. from 1979 until 1992. This is a destination, four-season resort located in Kamloops, British Columbia which is known today as Sun Peaks Resort at Tod Mountain.



Lloyd A. Clark has been a Director of Dejour since February 7, 2005. Dr. Clark has been engaged as an independent Consulting Geological Engineer since 1985. Most of this work consists of general mineral exploration, applied geochemistry, ore deposit models, exploration project and deposit evaluations and compilations for mining companies.  From 1976 until 1984 he was the Chief Geologist and Exploration Manager for an unrelated public company called Cameco. From 1970 until 1976 he was the Senior Research Geologist and Chief of the Geochemical Research and Laboratory Division for Kennecott Exploration Inc., an unrelated public company at their Salt Lake City, Utah location. Dr. Clark received his PhD in Geology from McGill University and his MSc in Geology from the University of Saskatchewan.









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Robert L. Hodgkinsonhas been a Director of Dejour since May 18, 2004 and the Chairman since December 16, 2004. He is the President of a private company called Hodgkinson Equities Corporation, which he established in 1988. His company provides consulting services to emerging businesses in the petroleum resource industry. These consulting services consist of assistance in the areas of administration and capital formation. Mr. Hodgkinson is also a Director of an unrelated private company call AADCO Automotive Inc. (www.aadco.com) AADCO Automotive Inc. is a private company located in Ontario, Canada that is involved in recycling used automobile parts. He is also the Chief Executive Officer of an unrelated closely held corporation called Ocean Biosource Inc., a manufacturer of powdered specialty fish proteins with operation based in Ensenada, Mexico. (www.oceanbiosource.com) In 1989 he founded an oil/gas exploration company called Optima Petroleum Corp. This company was engaged in exploration, development and production of oil and gas. It grew to participation in over 120 wells with revenues in the range of U.S. $100 million. The company is now based in LaFayette, Louisiana and is called Petroquest Energy. (www.petroquestenergy.com)



Archibald J. Nesbitt: Mr. Nesbitt holds an LLB from the University of Western Ontario, and a B.Comm. from Queens University. Mr. Nesbitts career in the resource business began with the formation of a prospecting syndicate with his late father John C. Nesbitt in 1966, focusing on the exploration for uranium near Uranium City, Saskatchewan, where 20 years prior, John C. Nesbitt had discovered the Nesbitt Labine and Gunnar Uranium mines.



Mathew H. Wong has been Corporate Secretary and Chief Financial Officer of Dejour since July 14, 2004. Mr. Wong holds the designations of Chartered Financial Analyst (CFA); Certified Public Accountant (CPA) and Chartered Accountant (CA). He received his Bachelor of Commerce degree in Accounting from the University of British Columbia in 1995. From 1995 until 1998 he was employed by Ernst & Young LLP in their Vancouver, British Columbia office as a Senior Staff Accountant and then as an Analyst for Ernst & Young Corporate Finance Inc. From 2001 until 2004 he was Corporate Accounting Manager for Mitsubishi Canada Limited. At Mitsubishi he managed the accounting functions including, financial statement closings, variance analysis and budgeting for three offices which had over $750 million in sales. His responsibilities at Dejour, includes management of all accounting functions and supervising all regulatory filings in Canada.



Craig Sturrock has been a member of the Board of Directors since August 22, 2005. He has been a tax attorney since 1971 and is a partner at Thorsteinssons LLP, a law firm located in Vancouver, British Columbia. His practice focuses on civil and criminal tax litigation.



R. Marc Bustin has been a member of the Board of Directors since August 30, 2005. He is a professor of petroleum and coal geology in the Department of Earth Sciences at the University of British Columbia.



The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.



The Senior Management serves at the pleasure of the Board of Directors.

















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No Director and/or Senior Management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Senior Management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.



There are no family relationships between any two or more Directors or Senior Management.



There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.



6.B.  Compensation



Cash Compensation

Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended 12/31/2006 was $499,310, paid to Mathew H. Wong ($107,640); Douglas W. Cannaday ($192,000); and Robert Hodgkinson ($199,670).





|                                                            |                     | Annual Compensation           | Long Term Compensation |                         
|----------------------------------------------------------- | ------------------- | ----------------------------- | ---------------------- | ------------------------
|                                                            |                     |                               |                        |                         
|Name and
Principal Position                                 | Year                | Base Consulting
Fees ($)      | Bonus
($)              | Other 
Annual 
Comp.
($)
|Robert L. Hodgkinson, 
Chief Executive Officer              | 2006
2005
2004
2003 | $136,670
$100,000
Nil
Nil     | $63,000
Nil
Nil
Nil    | Nil
Nil
Nil
Nil         
|Mathew H. Wong, 
Chief Financial Officer                    | 2006
2005
2004
2003 | $107,640
$64,480 $14,030
Nil  | Nil
Nil
Nil
Nil        | Nil
Nil
Nil
Nil         
|Douglas W. Cannaday, 
President and Chief Operating Officer | 2006
2005
2004
2003 | $179,000
$122,356
$22,500
Nil | $13,000
Nil
Nil
Nil    | Nil
Nil
Nil
Nil         













45



Table No. 7

Stock Option Grants in Fiscal 2006 Ended 12/31/2006 and Fiscal 2007 to June 30, 2007



|Name           | Number of Options Granted | % Of Total Options Granted | Exercise Price per Share | Grant Date | Expiration Date | Mkt. Value of Securities Underlying Options on Date of Grant
|-------------- | ------------------------- | -------------------------- | ------------------------ | ---------- | --------------- | ------------------------------------------------------------
|D. Cannaday    | 250,000                   | 19%                        | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               | 250,000                   | 16%                        | $2.50                    | 04/02/2007 | 04/01/2012      | $2.70                                                       
|               |                           |                            |                          |            |                 |                                                             
|L. Clark       | 100,000                   | 8%                         | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               |                           |                            |                          |            |                 |                                                             
|R. Hodgkinson  | 250,000                   | 19%                        | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               | 510,000                   | 32%                        | $2.50                    | 04/02/2007 | 04/02/2012      | $2.50                                                       
|               |                           |                            |                          |            |                 |                                                             
|A. Nesbitt     | 100,000                   | 8%                         | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               |                           |                            |                          |            |                 |                                                             
|M. Wong        | 100,000                   | 8%                         | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               | 75,000                    | 5%                         | $2.50                    | 04/02/2007 | 04/01/2012      | $2.70                                                       
|               |                           |                            |                          |            |                 |                                                             
|Craig Sturrock | 25,000                    | 2%                         | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               |                           |                            |                          |            |                 |                                                             
|R. Marc Bustin | 50,000                    | 4%                         | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               |                           |                            |                          |            |                 |                                                             
|Charles Dove   | 250,000                   | 16%                        | $2.50                    | 04/02/2007 | 04/01/2012      | $2.50                                                       
|               |                           |                            |                          |            |                 |                                                             
|Consultants    | 100,000                   | 100%                       | $1.25                    | 01/24/2006 | 07/31/2007      | $1.32                                                       
|               | 200,000                   | 80%                        | $1.40                    | 03/03/2006 | 04/01/2009      | $1.47                                                       
|               | 50,000                    | 20%                        | $1.40                    | 03/03/2006 | 07/31/2007      | $1.47                                                       
|               | 410,000                   | 31%                        | $2.10                    | 04/30/2006 | 04/30/2009      | $2.15                                                       
|               | 100,000                   | 100%                       | $1.80                    | 06/26/2006 | 10/31/2007      | $1.85                                                       
|               | 25,000                    | 100%                       | $1.75                    | 10/30/2006 | 11/01/2009      | $1.74                                                       
|               | 200,000                   | 100%                       | $1.95                    | 11/20/2006 | 11/30/2008      | $1.83                                                       
|               | 350,000                   | 100%                       | $2.35                    | 01/31/2007 | 01/31/2010      |                                                             
|               | 515,000                   |                            | $2.50                    | 04/02/2007 | 04/01/2012      | $2.50                                                       



______________________________________________________________________________

______________________________________________________________________________



The following table gives certain information concerning stock option exercises during Fiscal 2006 by our Senior Management and Directors.  It also gives information concerning stock option values.



Table No. 8

Aggregated Stock Options Exercises in Fiscal 2006

Fiscal Year-end Unexercised Stock Options

Fiscal Yearend Stock Option Values

Senior Management/Directors



|Name              | Number of Shares Acquired on Exercise | Aggregate Value Realized | Number of Unexercised Options at 12/31/2006 Exercisable/Unexercisable | Value of Unexercised In-the-Money Options at 12/31/2006 Exercisable/Unexercisable
|----------------- | ------------------------------------- | ------------------------ | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------
|                  |                                       |                          |                                                                       |                                                                                  
|Robert Hodgkinson | 29,112                                | $60,583                  | 271,103/218,897                                                       | 458,269/164,681                                                                  
|                  | 175,000                               | $367.500                 |                                                                       |                                                                                  
|                  |                                       |                          |                                                                       |                                                                                  
|Mathew Wong       | 54,863                                | $64,464                  | 41,769/136,598                                                        | 51,595/180,230                                                                   
|                  | 25,000                                | 28,125                   |                                                                       |                                                                                  
|                  | 12,603                                | 17,455                   |                                                                       |                                                                                  
|                  | 4,167                                 | 4,625                    |                                                                       |                                                                                  

_____________________________________  _________________________________________

___________________________________  ___________________________________________







46



Director Compensation.  The Company had no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors.  The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director.  Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.



Stock Options.  The Company may grant stock options to Directors, Senior Management and employees.  3,960,000 stock options have been granted and 321,558 were exercised during Fiscal 2006 and through 6/30/2007. Refer to ITEM #6.E., "Share Ownership" and Table No. 8 for information about stock options outstanding.



Change of Control Remuneration The Company has management contracts with the following Named Executive Officers or the companies controlled by the Named Executive Officers:



|Named Executive
Officer | Annual Base
Consulting
Fees | Compensation Package on Termination of Contract, other than for termination with cause.
|----------------------- | --------------------------- | ---------------------------------------------------------------------------------------
|                        |                             |                                                                                        
|Robert Hodgkinson       | $126,000                    | 2 times annual base consulting fee.                                                    
|Mathew Wong             | $138,000                    | 1 times annual base consulting fee.                                                    
|Douglas Cannaday        | $126,000                    | 2 times annual base consulting fee.                                                    





Other Compensation.  No Senior Management/Director received other compensation in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Senior Management/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.



Bonus/Profit Sharing/Non-Cash Compensation.  The Company pays the CEO and President a bonus equal to 50% of the annual base consulting fees, subject to the approval of the Board of Directors.



Pension/Retirement Benefits.  No funds were set aside or accrued by the Company during Fiscal 2006 to provide pension, retirement or similar benefits for Directors or Senior Management.



6.C.  Board Practices



6.C.1.  Terms of Office.  Refer to ITEM 6.A.1.



6.C.2.  Directors Service Contracts.  --- No Disclosure Necessary ---



6.C.3.  Board of Director Committees.

The Company has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Companys audits, the Companys internal accounting controls, and the professional services furnished by the independent auditors to the Company.  The current members of the Audit Committee are: Lloyd Clark, Archibald Nesbitt and Craig Sturrock.  The Audit Committee met once during the year ended 12/31/2006 and twice during the first six months of 2007.



47



6.D.  Employees

As of 6/30/2007, the Company had no employees, but only independent contractors.



6.E.  Share Ownership

Table No. 7 lists, as of 6/30/2007, Directors and Senior Management who beneficially own the Company's voting securities, consisting solely of common shares, and the amount of the Company's voting securities owned by the Directors and Senior Management as a group.



Table No. 9

Shareholdings of Directors and Senior Management

Shareholdings of 5% Shareholders

______________________________________________________________________________

______________________________________________________________________________



|Title of Class | Name of Beneficial Owner   |     | Amount and Nature of Beneficial Ownership | Percent of Class
|-------------- | -------------------------- | --- | ----------------------------------------- | ----------------
|               |                            |     |                                           |                 
|Common         | Douglas W. Cannaday        | (1) | 1,626,126                                 | 2.12%           
|Common         | Lloyd A. Clark             | (2) | 213,588                                   | 0.31%           
|Common         | Robert L. Hodgkinson       | (3) | 4,729,571                                 | 6.80%           
|Common         | Craig Sturrock             | (4) | 227,084                                   | 0.33%           
|Common         | Marc Bustin                | (5) | 150,000                                   | 0.22%           
|Common         | Archibald J. Nesbitt       | (6) | 432,742                                   | 0.63%           
|Common         | Mathew H. Wong             | (7) | 728,112                                   | 1.05%           
|               | Total Directors/Management |     | 8,107,223                                 | 11.7%           



(1)

Of these shares, 523,613 are represented by currently exercisable share purchase options and 157,402 are represented by currently exercisable share purchase warrants. Shares upon debt conversion represent 296,296 shares.

(2)

Of these shares, 129,288 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants.

(3)

Of these shares, 392,218 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants. Shares upon debt conversion represent 626,853 shares.

(4)

Of these shares, 77,084 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants.

(5)

Of these shares 125,000 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants.

(6)

Of these shares, 128,242 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants.

(7)

Of these shares, 67,738 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants. Shares upon debt conversion represent 626,853 shares.



# Based on 68,531,931 shares outstanding as of 6/30/2007 and currently exercisable stock options, share purchase warrants and Shares upon debt conversion.





48



The Company is aware of two persons/companies who each beneficially own 5% or more of the Registrant's voting securities. Table No. 10 lists as of 6/30/07, persons and/or companies holding 5% or more beneficial interest in the Companys outstanding common stock.



Table No. 10

5% or Greater Shareholders



|Title of Class | Name of Owner            | Amount and Nature of Beneficial Ownership | Percent of Class
|-------------- | ------------------------ | ----------------------------------------- | ----------------
|               |                          |                                           |                 
|Common         | Steve Gose               | 5,505,019                                 | 8.03%           
|Common         | Robert L. Hodgkinson (1) | 4,729,571                                 | 6.80%           



(1)

Of these shares, 392,218 are represented by currently exercisable share purchase options and none are represented by currently exercisable share purchase warrants. Shares upon debt conversion represent 626,853 shares.



# Based on 68,531,931 shares outstanding as of 6/30/2007 and currently exercisable stock options, share purchase warrants and Shares upon debt conversion.



Stock Options.  The terms of incentive options grantable by the Company are done in accordance with the rules and policies of the TSX Exchange and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options, and any amendments thereto.  The Company adopted a formal written stock option plan (the "Plan") on 6/2/2006.



Such terms and conditions, including the pricing of the options, expiry and the eligibility of personnel for such stock options; and are described below.



The principal purposes of the Companys stock option program are to (a) assist the company in attracting, retaining, and motivating directors, officers and employees of the Company and, (b) to closely align the personal interests of such directors, officers and employees with the interests of the Company and its shareholders.



The Plan provides that stock options may be granted to service providers for the Company.  The term service providers means (a) any full or part-time employee or Officer, or insider of the Company or any of its subsidiaries; (b) any other person employed by a company or individual providing management services to the Company; (c) any other person or company engaged to provide ongoing consulting services for the Company or any entity controlled by the Company or (d) any individual engaged to provide services that promote the purchase or sale of the issued securities (any person in (a), (b), (c) or (d) hereinafter referred to as an Eligible Person); and (e) any registered retirement savings plan established by such Eligible Person, or any corporation controlled by such Eligible Person, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Person and/or spouse, children and/or grandchildren of such Eligible Person.  For stock options to Employees, Consultants or Management Company Employees, the Company must represent that the optionee is a bona fide Employee, Consultant or Management Company Employee as the case may be.  The terms insider Controlled and subsidiary shall have the meanings ascribed thereto in the Securities Act (Ontario) from time to time.  Subject to the foregoing, the board of directors or Committee, as applicable, shall have full and final authority to determine the persons who are to be granted options under the Plan and the number of shares subject to each option.



49



The Plan shall be administered by the board of directors of the Company or a committee established by the board of directors for that purpose.  Subject to approval of the granting of options by the board of directors or Committee, as applicable, the Company shall grant options under the Plan.



The Plan provides that the aggregate number of shares of the Company, which may be issued and sold under the Plan, will not exceed 10% of the issued shares of the Company.  The Company shall not, upon the exercise of any option, be required to issue or deliver any shares prior to (a) the admission of such shares to listing on any stock exchange on which the Companys shares may them be listed, and (b) the completion of such registration or other qualification of such shares under any law, rules or regulation as the Company shall determine to be necessary or advisable.  If any shares cannot be issued to any optionee for whatever reason, the obligation of the Company to issue such shares shall terminate and any option exercise price paid to the Company shall be returned to the optionee.



If a stock option expires or otherwise terminates for any reason without having been exercised in full, the number of common shares reserved for issuance under that expired or terminated stock option shall again be available for the purposes of the Plan.  Any stock option outstanding when the Plan is terminated will remain in effect until it is exercised or it expires.  The Plan provides that it is solely within the discretion of the Board to determine who should receive stock options and in what amounts, subject to the following conditions:



(a)

options will be non-assignable and non-transferable except that they will be exercisable by the personal representative of the option holder in the event of the option holders death;

(b)

options may be exercisable for a maximum of five years from grant date;

(c)

options to acquire no more than 5% of the issued shares of the Company may be granted to any one individual in any 12-month period;

(d)

options to acquire no more than 2% of the issued shares of the Company may be granted to any one consultant in any 12-month period;

(e)

options to acquire no more than an aggregate of 2% of the issued shares of the Company may be granted to an employee conducting investor relations activities (as defined in TSX Venture Exchange Policy 1.1), in any 12 month period;

(f)

options to acquire no more than 10% of the issued shares of the Company may be granted to any insiders in any 12-month period;

(g)

options held by an option holder who is a director, employee, consultant or management company employee must expire within 90 days after the option holder ceases to be a director, employee, consultant or management company employee;

(h)

options held by an option holder who is engaged in investor relations activities must expire within 30 days after the option holder ceases to be employed by the Company to provide investor relations activities; and

(i)

in the event of an option holders death, the option holders personal representative may exercise any portion of the option holders vested outstanding options for a period of one year following the option holders death.



The Plan provides that other terms and conditions may be attached to a particular stock option, such terms and conditions to be referred to in a schedule attached to the option certificate.  Stock options granted to directors, senior officers, employees or consultants will vest when granted unless otherwise determined by the Board on a case by case basis, other than stock options granted to consultants performing investor relations activities, which will vest in stages over 12 months with no more than one-fourth of the options vesting in any three month period.





50



The price at which an option holder may purchase a common share upon the exercise of a stock option will be as set forth in the option certificate issued in respect of such option and in any event will not be less than the discounted market price of the Companys common shares as of the date of the grant of the stock option (the Award Date).  The market price of the Companys common shares for a particular Award Date will typically be the closing trading price of the Companys common shares on the day immediately preceding the Award Date, or otherwise in accordance with the terms of the Plan.  Where there is no such closing price or trade on the prior trading day market price shall mean the average of the most recent bid and ask of the shares of the Company on any stock exchange on which the shares are listed or dealing network on which the shares of the Company trade.



In no case will a stock option be exercisable at a price less than the minimum prescribed by each of the organized trading facilities or the applicable regulatory authorities that would apply to the award of the stock option in question.



Common shares will not be issued pursuant to stock options granted under the Plan until they have been fully paid for by the option holder.  The Company will not provide financial assistance to option holders to assist them in exercising their stock options.



The names and titles of the Directors/Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options is set forth in Table No. 10 as of 6/30/2007, as well as the number of options granted independent contractors.



Table No. 11

Stock Options Outstanding



|Name           | Number of Options Held | Number of
Options
Vested | Exercise Price per Share | Grant Date | Expiration Date
|-------------- | ---------------------- | ------------------------ | ------------------------ | ---------- | ---------------
|               |                        |                          |                          |            |                
|D. Cannaday    | 150,000                | 129,863                  | $0.275                   | 11/24/2004 | 10/31/2009     
|               | 150,000                | 125,000                  | $0.55                    | 02/09/2005 | 02/08/2008     
|               | 200,000                | 133,333                  | $0.60                    | 09/07/2005 | 09/30/2008     
|               | 250,000                | 104,167                  | $2.10                    | 04/30/2006 | 04/30/2009     
|               | 250,000                | 31,250                   | $2.50                    | 04/02/2007 | 04/01/2012     
|               |                        |                          |                          |            |                
|L. Clark       | 36,000                 | 29,288                   | $0.275                   | 11/24/2004 | 10/31/2009     
|               | 75,000                 | 58,333                   | $0.55                    | 02/09/2005 | 02/08/2008     
|               | 100,000                | 41,667                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               |                        |                          |                          |            |                
|A. Nesbitt     | 100,000                | 86,575                   | $0.275                   | 11/24/2004 | 10/31/2009     
|               | 100,000                | 41,667                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               |                        |                          |                          |            |                
|M. Wong        | 32,634                 | 12,497                   | $0.275                   | 11/24/2004 | 10/31/2009     
|               | 12,533                 | 4,200                    | $0.55                    | 02/09/2005 | 02/08/2008     
|               | 100,000                | 41,667                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               | 75,000                 | 9,375                    | $2.50                    | 04/02/2007 | 04/01/2012     
|               |                        |                          |                          |            |                
|R. Hodgkinson  | 65,000                 | 49,301                   | $0.55                    | 02/09/2005 | 02/08/2008     
|               | 175,000                | 175,000                  | $0.60                    | 08/26/2005 | 08/31/2008     
|               | 250,000                | 104,167                  | $2.10                    | 04/30/2006 | 04/30/2009     
|               | 510,000                | 63,750                   | $2.50                    | 04/02/2007 | 04/01/2012     
|               |                        |                          |                          |            |                
|R. Marc Bustin | 50,000                 | 37,500                   | $0.55                    | 07/15/2005 | 07/15/2008     
|               | 100,000                | 66,667                   | $0.60                    | 08/26/2005 | 08/31/2008     
|               | 50,000                 | 20,833                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               |                        |                          |                          |            |                
|C. Sturrock    | 100,000                | 66,667                   | $0.60                    | 08/26/2005 | 08/31/2008     
|               | 25,000                 | 10,417                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               |                        |                          |                          |            |                
|               |                        |                          |                          |            |                
|Charles Dove   | 50,000                 | 43,288                   | $0.275                   | 11/24/2004 | 10/31/2009     
|               | 100,000                | 41,667                   | $2.10                    | 04/30/2006 | 04/30/2009     
|               | 250,000                | 31,250                   | $2.50                    | 04/02/2007 | 04/01/2012     



51



|Consultants              | 248,630   | 208,356   | $0.275 | 11/24/2004 | 10/31/2009
|------------------------ | --------- | --------- | ------ | ---------- | ----------
|                         | 150,000   | 125,000   | $0.55  | 02/09/2005 | 02/08/2008
|                         | 47,542    | 30,762    | $0.66  | 04/15/2005 | 04/15/2008
|                         | 199,628   | 103,908   | $0.55  | 07/15/2005 | 07/15/2008
|                         | 310,000   | 310,000   | $0.60  | 08/26/2005 | 08/31/2008
|                         | 90,000    | 56,667    | $0.60  | 09/28/2005 | 09/30/2008
|                         | 28,501    | 6,834     | $0.90  | 11/01/2005 | 10/31/2008
|                         | 62,500    | 62,500    | $1.25  | 01/24/2006 | 07/31/2007
|                         | 200,000   | 100,000   | $1.40  | 03/03/2006 | 04/01/2009
|                         | 25,000    | 25,000    | $1.40  | 03/03/2006 | 07/31/2007
|                         | 350,000   | 140,000   | $2.10  | 04/30/2006 | 04/30/2009
|                         | 100,000   | 83,333    | $1.80  | 06/26/2006 | 10/31/2007
|                         | 25,000    | 6,250     | $1.75  | 10/30/2006 | 11/01/2009
|                         | 200,000   | 75,000    | $1.95  | 11/20/2006 | 11/30/2008
|                         | 350,000   | 91,667    | $2.35  | 01/31/2007 | 01/31/2010
|                         | 515,000   | 64,375    | $2.50  | 04/02/2007 | 04/01/2010
|                         |           |           |        |            |           
|Total Officers/Directors | 3,356,167 | 1,559,389 |        |            |           
|Total Consultants        | 2,901,801 | 1,489,649 |        |            |           
|Total Outstanding        | 6,257,968 | 3,049,038 |        |            |           

______________________________________________________________________________





ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



7.A.  Major Shareholders.



7.A.1.a.  Holdings By Major Shareholders.

Refer to ITEM #6.E and Table No. 7.



7.A.1.b.  Significant Changes in Major Shareholders Holdings.

---No Disclosure Required---



7.A.1.c.  Different Voting Rights.  The Companys major shareholders do not have different voting rights.



7.A.2. Share Ownership.

On 6/30/2007, the Companys shareholders list showed 68,531,931 common shares outstanding and 230 registered shareholders.  The Company has researched the indirect holding by depository institutions and other financial institutions estimates that there are: 6,811 holders of record" resident in Canada, holding 27,456,450 common shares; 6,177 holders of record" resident in the USA, holding 36,048,118 common shares; and, 143 holders of record resident elsewhere holding 5,027,363 common shares.



7.A.3.  Control of the Company  The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents.  The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., History and Growth of the Company, and ITEM #6.E., Share Ownership.



7.A.4.  Change of Control of Company Arrangements

---No Disclosure Necessary---



7.B.  Related Party Transactions



a)

During 2006, the Company incurred a total of $136,670 (2005 - $100,000) in consulting fees and accrued $17,282 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6, and a $63,000 bonus payment to a private company (HEC) controlled by the CEO, Robert Hodgkinson.  In October 2006, the Company assigned 25% of its interest in the Noel Area, described in Note 5, to HEC, which agreed to assume 25% of the related obligations.  In November 2006, the Company had received $234,251 from HEC, being the estimated 25% share of the exploration expenditures for the Noel Area.



52



b)

During 2006, the Company incurred a total of $179,000 (2005 - $122,356) in consulting fees and accrued $8,641 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6, and a $13,000 bonus payment to the President of a private company controlled by the President of the Company, Douglas Cannaday.

c)

During 2006, the Company incurred $107,640 (2005 - $64,480) in consulting fees to a private company controlled by the CFO The Company, Mathew Wong, also accrued $17,282 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6 to an individual related to the CFO.

d)

During 2006, the Companys 90% owned joint venture subsidiary (DEAL) incurred $105,625 of consulting fee to a company controlled by a director of DEAL.

e)

During 2005, the Company reimbursed $156,994 (2004 - $29,250; 2003 - nil) to a private company controlled by Robert Hodgkinson, the Chairman and CEO of the Company, for certain out of pocket expenditures in connection with the Companys oil and gas and uranium exploration activities. In addition during 2005, the Company incurred $100,000 in fees (2004  nil; 2003  nil) and $35,243 (2004 - $25,605; 2003  nil) in expense reimbursements to this private company. At December 31, 2005 $21,724 (2004 - $6,059) is owing to this company and is included in accounts payable.

f)

During 2005, the Company paid $57,350 (2004  nil; 2003  nil) to a private company controlled by Robert Hodgkinson, Chairman and CEO, as consideration for the acquisition of certain furniture and equipment.



These transactions are in the normal course of operations and are measured at the exchange amount established and agreed to by the related parties.



Audit Fees

The Company incurred audit fees of $42,000 and $19,750, audit related fees of $5,000 and $3,200, and other fees of $2,250 and $2,000 during the years ended 12/31/2006 and 12/31/2005, respectively to Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants.



Shareholder Loans

---No Disclosure Required---



Amounts Owing to Senior Management/Directors

There is no money owing to members of senior management of members of the Board of Directors.



There have been no transactions since 12/31/2006, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest.



7.C.  Interests of Experts and Counsel

---No Disclosure Necessary---



ITEM 8.  FINANCIAL INFORMATION



8.A.  Consolidated Statements and Other Financial Information

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.





53



The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report.  The audit reports of Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants, are included herein immediately preceding the financial statements.



Audited Financial Statements:

Fiscal Years Ended December 31st2005 and 2006



8.A.7.  Legal/Arbitration Proceedings

The Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.



The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.



8.B.  Significant Changes

Subsequent to the end of the fiscal year ended December 31, 2006, the Company has completed one private placement. On May 24, 2007, Dejour announced that it closed a private placement raising gross proceeds of $10 million.  Between January 1, 2007 to June 30, 2007, 3,442,990 warrants were exercised, raising $2,857,388 and 252,817 options were exercised raising $215,172.



ITEM 9.  THE OFFER AND LISTING





9.A.  Common Share Trading Information



The Company's common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada, under the symbol "DJE".  The Company applied for listing on the TSX Venture Exchange and began trading on the TSX Venture Exchange on 07/13/2001.



Table No. 13 lists the high, low and closing sales prices on the TSX Venture Exchange for the last six months, last nine fiscal quarters, and last five fiscal years.

______________________________________________________________________________

______________________________________________________________________________



Table No. 13

TSX Venture Exchange (formerly the Canadian Venture Exchange)

And Toronto Stock Exchange (TSE)

Common Shares Trading Activity

- Sales -

Canadian Dollars



|Period                       | High      | Low      
|---------------------------- | --------- | ---------
|                             |           |          
|Month ended 12/31/2006       | $2.90     | $2.22    
|Month ended 01/31/2007       | $2.55     | $2.17    
|Month ended 02/28/2007       | $2.75     | $2.01    
|Month ended 03/31/2007       | $2.71     | $2.07    
|Month ended 04/30/2007       | $3.28     | $2.47    
|Month ended 05/31/2007       | $2.61     | $2.31    
|                             |           |          
|Fiscal Year Ended 12/31/2006 | $2.97     | $0.99    
|Fiscal Year Ended 12/31/2005 | $1.07     | $0.41    
|Fiscal Year Ended 12/31/2004 | $0.50     | $0.21    
|Fiscal Year Ended 12/31/2003 | $0.33     | $0.11    
|Fiscal Year Ended 12/31/2002 | No Trades | No Trades
|Fiscal Year Ended 12/31/2001 | No Trades | No Trades



54

|                                |       |      
|------------------------------- | ----- | -----
|Fiscal Quarter Ended 03/31/2007 | $3.07 | $2.13
|Fiscal Quarter Ended 12/31/2006 | $2.97 | $1.73
|Fiscal Quarter Ended 09/30/2006 | $2.22 | $1.35
|Fiscal Quarter Ended 06/30/2006 | $1.94 | $1.39
|Fiscal Quarter Ended 03/31/2006 | $2.83 | $1.27
|Fiscal Quarter Ended 12/31/2005 | $1.13 | $0.79
|Fiscal Quarter Ended 09/30/2005 | $0.86 | $0.47
|Fiscal Quarter Ended 06/30/2005 | $0.69 | $0.41
|Fiscal Quarter Ended 03/31/2005 | $1.00 | $0.50

______________________________________________________________________________

______________________________________________________________________________



9.A.5.  Common, First Preferred and Second Preferred Share Description



Registrar/Common Shares Outstanding/Shareholders

The authorized capital of Dejour consists of three classes of shares: an unlimited number of common shares; an unlimited number of preferred shares designated as First Preferred Shares, issuable in series; and an unlimited number of preferred shares designated as Second Preferred Shares, issuable in series. 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.

The First Preferred Shares have priority over the Common Shares and the Second Preferred Shares with respect to the payment of dividends and in the distribution of assets in the event of a winding up of Dejour. The Second Preferred Shares have priority over the Common Shares with respect to dividends and surplus assets in the event of a winding up of Dejour.



Computershare Trust Company of Canada (located at 510 Burrard Street, Vancouver, British Columbia Canada V5K 1A1) is the registrar and transfer agent for the common shares.



Stock Options

Refer to ITEM 6.E. and Table No. 8 for additional information.



Table No. 14 lists, as of 3/31/2007, share purchase warrants outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants.  As of March 31, 2007, the Company was aware of 42 holders of its 1,199,738 share purchase warrants, 14 of whom were resident in Canada, 25 offshore and 3 in the United States.  These warrants were issued in conjunction with one private placement.



Table No. 14

Share Purchase Warrants Outstanding

______________________________________________________________________________



|Effective Date of Issuance | Number of Share Purchase Warrants Originally Issued | Number of Share Purchase Warrants Still Outstanding | Exercise Price | Expiration Date of Share Purchase Warrants
|-------------------------- | --------------------------------------------------- | --------------------------------------------------- | -------------- | ------------------------------------------
|                           |                                                     |                                                     |                |                                           
|March and April 2006       | 2,824,333                                           | 1,199,738                                           | $1.65          | 12/31/2007                                
|                           |                                                     |                                                     |                |                                           

______________________________________________________________________________







55



9.A.6.  Differing Rights

9.A.7.a.  Subscription Warrants/Right

9.A.7.b.  Convertible Securities/Warrants

---No Disclosure Necessary---



9.C.  Stock Exchanges Identified



The common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada.



Refer to ITEM #9.A.4.



ITEM 10.  ADDITIONAL INFORMATION



10.A.  Share Capital



10.A.1.  Authorized/Issued Capital.  As of 12/31/2006, there were an unlimited number of common shares authorized; an unlimited number of first preferred shares, issuable in series authorized; and, an unlimited number of second preferred shares, issuable in series authorized. At 12/31/2006 there were 60,899,723 common shares issued; no first preferred shares, issuable in series issued; and, no second preferred shares, issuable in series issued.



During the last five years, less than 1% of the capital has been paid for with assets other than cash.



10.A.2.  Shares Not Representing Capital.

10.A.3.  Shares Held By Company.

---No Disclosure Necessary---



10.A.4.  Stock Options/Share Purchase Warrants

10.A.5.  Stock Options/Share Purchase Warrants

---Refer to Table No. 8 and Table No. 10.---





10.A.6.  History of Share Capital

The Company has financed its operations through funds raised in public/private placements of common shares and Special Warrants; and shares issued upon conversion of Special Warrants.  (Refer to Item 4.A for details of the share issuances noted below, items (1) through (16)).

|Fiscal Year | Nature of Share Issuance                                     | Number of Shares | Gross Proceeds
|----------- | ------------------------------------------------------------ | ---------------- | --------------
|            |                                                              |                  | $             
|Fiscal 2000 | Private Placements (1)                                       | 10,000,000       | 1,500,000     
|            | Exercise of Warrants (1)                                     | 2,882,000        | 576,400       
|            | Investment in Securities (2)                                 | 2,000,000        | 1,080,000     
|Fiscal 2001 | None                                                         |                  |               
|Fiscal 2002 | Private Placement (3)                                        | 1,480,000        | 99,900        
|Fiscal 2003 | Private Placement (4)                                        | 2,000,000        | 200,000       
|            | Shares Issued for Settlement of Debt (5)                     | 5,230,925        | 523,092       
|Fiscal 2004 | Private Placement (6)                                        | 6,000,000        | 1,796,760     
|            | For bridge loan financing fee (7)                            | 200,000          | 50,000        
|Fiscal 2005 | Private Placement (8)                                        | 8,076,923        | $5,249,999    
|            | Shares issued as finders fee (8)                            | 185,791          | (120,764)     
|            | Private Placement (9)                                        | 1,000,000        | 500,000       
|            | Private Placement (10)                                       | 650,000          | 325,000       
|            | Private Placement (11)                                       | 4,500,000        | 2,914,808     
|            | Private Placement (12)                                       | 6,617,500        | 6,516,625     
|            | Exercise of share purchase warrants and agents options (15) | 2,024,148        | 1,035,608     
|            | Exercise of stock options                                    | 154,965          | 52,286        
|            | Shares issued for service                                    | 11,500           | 9,200         



56



|Fiscal 2006 | Private Placement (13)                                         | 5,300,000 | 7,950,000 
|----------- | -------------------------------------------------------------- | --------- | ----------
|            | Private Placement (14)                                         | 2,771,333 | 4,157,000 
|            | Exercise of share purchase warrants and agents options (15)   | 7,551,194 | 7,426,683 
|            | Exercise of stock options                                      | 760,407   | 433,321   
|            | Shares issued for the acquisition of the Retamco Project. (16) | 5,500,000 | 12,088,991



Note: The above figures were adjusted for 1:3 and 1:15 share consolidations in 2003 and 2001 respectively.

______________________________________________________________________________

____________________  ________________________________________________________





10.A.7.  Resolutions/Authorizations/Approvals

---No Disclosure Necessary---



10.B.  Memorandum and Articles of Association

Dejour Enterprises Ltd. (Dejour or the Company) 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 Company changed its name to Dejour Enterprises Ltd.. At the Companys Annual General held on June 3, 2005, shareholders approved the continuance of the Company from the Province of Ontario to the Province of British Columbia and adopted new Articles under the Business Corporations Act (British Columbia) (the New Act).



There are no restrictions on what business the Company may carry on in the Articles of Incorporation.



Under Article 17 of the Companys Articles and Division 3 of the New Act, a director must declare its interest in any existing or proposed contract or transaction with the Company and is not allowed to vote on any transaction or contract with the Company in which has a disclosable interest, unless all directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution. A director may hold any office or place of profit with the Company in conjunction with the office of director, and no director shall be disqualified by his office from contracting with the Company. A director or his firm may act in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services. A director may become a director or other officer or employee of, or otherwise interested in, any corporation or firm in whom the Company may be interested as a shareholder or otherwise. The director shall not be accountable to the Company for any remuneration or other benefits received by him from such other corporation or firm subject to the provisions of the New Act.



Article 16 of the Companys articles addresses the duties of the directors. Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders as governed by the New Act. Article 19 addresses Committees of the Board of Directors. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors powers, except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors resolution. Directors may also by resolution appoint one or more committees other than the executive committee.





57



These committees may be delegated any of the directors powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, and the power to appoint or remove officers appointed by the directors. Article 18 details the proceedings of directors. A director may, and the Secretary or Assistant Secretary, if any, on the request of a director must call a meeting of the directors at any time. The quorum necessary for the transaction of the business of the directors may be fixed by the directors and if not so fixed shall be deemed to a majority of the directors. If the number of directors is set at one, it quorum is deemed to be one director.



Article 8 details the borrowing powers of the Directors. They may, on behalf of the Company:



•

Borrow money in a manner and amount, on any security, from any source and upon any terms and conditions as they deem appropriate;

•

Issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation of the Company or any other person at such discounts or premiums and on such other terms as they consider appropriate;

•

Guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

•

Mortgage, charge, or grant a security in or give other security on, the whole or any part of the present or future assets and undertaking of the Company.



A director need not be a shareholder of the Company, and there are no age limit requirements pertaining to the retirement or non-retirement of directors. The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of directors, if any, will be determined by the shareholders. The remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such who is also a director. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Companys business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive. Unless other determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.



Article 21 provides for the mandatory indemnification of directors, former directors, and alternate directors, as well as his or hers heirs and legal personal representatives, or any other person, to the greatest extent permitted by the New Act. The indemnification includes the mandatory payment of expenses actually and reasonably incurred by such person in respect of that proceeding. The failure of a director, alternate director, or officer of the Company to comply with the Business Corporations Act or the Companys Articles does not invalidate any indemnity to which he or she is entitled. The directors may cause the Company to purchase and maintain insurance for the benefit of eligible parties who:





58



a)

is or was a director, alternate director, officer, employee or agent of the Company;



b)

is or was a director, alternate director, officer employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;



c)

at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;



d)

at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;



against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position



The rights, preferences and restrictions attaching to each class of the Companys shares are as follows:

Common Shares



The authorized share structure consists of an unlimited number of common shares without par value. All the shares of common stock of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.



Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, 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.



Under Article 9 and subject to the New Act, the Company may alter its authorized share structure by directors resolution or ordinary resolution, 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 or consolidate 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





59



(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 otherwise alter its share or authorized share structure.



Subject to Article 9.2 and the New Act, the Company may:



(1)

by directors resolution or ordinary resolution, in each case determined by the directors, create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, if none of those shares have been issued, or vary or delete any special rights or restrictions attached to the shares of any class or series of shares, if none of those shares have been issued; and



(2)

by special resolution of the shareholders of the class or series affected, do any of the acts in 91) above if any of the shares of the class or series of shares has been issued.



The Company may by resolution of its directors or by ordinary resolution, in each case as determined by the directors, authorize an alteration of its Notice of Articles in order to change its name.



The directors may, whenever they think fit, call a meeting of shareholders. An annual general meeting shall be held once every calendar year at such time (not being more than 15 months after holding the last preceding annual meeting) and place as may be determined by the Directors.



There are no limitations upon the rights to own securities.



There are no provisions that would have the effect of delaying, deferring, or preventing a change in control of the Company.



There is no special ownership threshold above which an ownership position must be disclosed. However, any ownership level above 10% must be disclosed to the TSX Venture Exchange and the British Columbia Securities Commission.



A copy of the Companys new articles is filed as an exhibit to this Form 20-F Annual Report.





10.C.  Material Contracts

The Company has 6 consulting agreements and an office lease agreement currently in effect. The Companys agreement with Titan Uranium regarding the Canadian uranium properties and its participating agreement with Retamco Operating regarding the Colorado and Utah Oil and Gas Leases are also considered to be material contracts. Copies of the consulting agreements and the office lease agreement have been previously filed as exhibits to the Companys 20-F Registration Statement and is available on the Securities and Exchange Commissions EDGAR site available at www.sec.gov. Copies of the Titan Uranium and Retamco agreements have been filed as exhibits to this amended Form 20-F Annual Report.







60



10.D.  Exchange Controls

Canada has no system of exchange controls.  There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors.  There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Companys securities, except as discussed in ITEM 10, Taxation" below.



Restrictions on Share Ownership by Non-Canadians:  There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.



10.E.  Taxation



Canadian Federal Income Tax Considerations

The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a "U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada  United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada.  Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.



Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares.  The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.



In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.













61



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended 12/31/2003 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.



Dividends

A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares.  Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%.  If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend.  The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.



Disposition of Common Shares

A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act.  Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company.  The Canadian Venture Exchange is a prescribed stock exchange under the Tax Act.  A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.



A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada.  The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.



62



United States Taxation

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares.  The gain or loss will be a capital gain or capital loss if the Company's common shares are a capital asset in U.S. Taxpayer's hands.



For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares.  A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.  A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.



Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255.  In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return.  Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company.  A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year.  The Company believes that it was not a passive foreign investment company for the taxable year ended 12/31/2004 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.



10.F.  Dividends and Paying Agents

The Company has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.



Notwithstanding the aforementioned: the Company is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders.  The Company has not nominated any financial institutions to be the potential paying agents for dividends in the United States.



10.G.  Statement by Experts

The Companys auditor for its financial statements for each of the preceding three years was Dale Matheson Carr-Hilton LaBonte, Independent Chartered Accountants.  Their audit report for Fiscal 2006/2005/2005 is included with the related financial statements in this Annual Report.





63



10.H.  Document on Display

--- No Disclosure Necessary ---



ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---





ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A.  Debt Securities            --- No Disclosure Necessary ---

12.B.  Warrants and Rights        --- No Disclosure Necessary ---

12.C.  Other Securities           --- No Disclosure Necessary ---

12.D.  American Depository Shares  -- No Disclosure Necessary ---





PART II



ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---





ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS

--- No Disclosure Necessary ---





ITEM 15.  CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys President and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures [as defined in the Exchange Act Rule 13a-15(e)] as of the end of the period covered by this report.  Based upon that evaluation, the officers concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Companys periodic SEC filings, and that information is recorded, processed, summarized and reported as and when required.



There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.



There were no changes in the Companys internal control over financial reporting that occurred during the Companys most recently completed fiscal year ended 12/31/2006 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.  Nor were there any deficiencies or material weaknesses in the Company's internal controls requiring corrective actions.





ITEM 16.  RESERVED



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Craig Sturrock is the Audit Committee financial expert.  He has been a tax attorney since 1971 and is a partner at Thorsteinssons LLP, a leading tax law firm in Vancouver.  He has many years of experience working with clients and Canada Revenue Agency on financial and tax matters. Mr. Sturrock is considered to be Independent under the standards of the American Stock Exchange.







64



ITEM 16B. CODE OF ETHICS

The Company has adopted the following written Code of Conduct and Ethics:



The attitude and actions of the Chief Executive Officer (the CEO), President, Chief Financial Officer (the CFO) and Corporate Controller (collectively as Executives) and employees of Dejour Enterprises Ltd. (the Company) are crucial for maintaining the Companys commitment to (i) honest and ethical conduct, (ii) full, fair, accurate, timely and understandable disclosure in the Companys public reports and communications, and (iii) compliance with applicable governmental laws, rules and regulations.  Accordingly, the Companys Board of Directors has developed and adopted this Code of Conduct and Ethics (the Code) applicable to its Executives and employees with the goal of promoting the highest moral, legal and ethical standards and conduct within the Company.



Honest and Ethical Conduct

While the Company expects honest and ethical conduct in all aspects of the Companys business from all employees, the Company expects the highest possible honest and ethical conduct and integrity from the Executives.  These Executives must set an example for the Companys employees and the Company expects these officers to foster a culture of transparency, integrity and honesty.  Integrity requires adherence to both the form and the spirit of technical and ethical accounting standards and principles.

Conflicts of Interest

Service to the Company should never be subordinated to personal gain and advantage.   If any of the Executives or employees becomes aware that he or she is in a situation that presents an actual or apparent conflict of interest (i.e., any situation where that individuals private interest or personal gain interferes or appears to interfere with the interests of the Company), or is concerned that an actual or apparent conflict of interest might develop, he or she is required to discuss the matter with the Audit Committee for the purpose of developing a means for the ethical handling of that situation.



Disclosure



The Executives, among others, have a supervisory role with respect to the preparation of the Companys reports and documents filed with or submitted to the various securities commissions in Canada, the United States Securities and Exchange Commission (the SEC) and the Companys other public communications and are responsible for taking all steps reasonably necessary to cause the disclosure in these reports, documents and other communications to be full, fair, accurate, timely and understandable.  Adequate supervision includes closely reviewing and critically analyzing the financial information to be disclosed, ensuring that proper accounting controls have been applied, that transactions are properly authorized and recorded, and that relevant records have been properly retained.  Full, fair and accurate disclosure includes the full reporting of facts, professional judgments and opinions, whether favorable or unfavorable.



Each of the Executives shall promptly bring to the attention of the Audit Committee any information he or she may have concerning (i) significant deficiencies in the design or operation of internal controls which could adversely affect the Companys ability to record, process, summarize and report financial data, or (ii) any fraud, whether or not material, or any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Companys financial reporting, disclosure or internal controls.



65

In the performance of their duties, the Executives are prohibited from knowingly misrepresenting facts. The Executives will be considered to have knowingly misrepresented facts if he or she knowingly (i) makes, or permits or directs another to make, materially false or misleading entries in financial statements or records; (ii) fails to correct materially false and misleading financial statements or records; (iii) signs, or permits another to sign, a document containing materially false and misleading information; or (iv) falsely responds, or fails to respond, to specific inquires of the Companys external auditors.



The Executives are prohibited from directly or indirectly taking any action to interfere with, fraudulently influence, coerce, manipulate or mislead the Companys independent public auditors in the course of any audit of the Companys financial statements or accounting books and records.



Compliance with Law



It is the Companys policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of the Executives and employees to adhere to the standards and restrictions imposed by those laws, rules and regulations, and in particular, those relating to accounting and auditing matters. Each of the Executives and employees shall promptly bring to the attention of the Audit Committee any information he or she may have concerning evidence of a material violation of securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of a violation of the Companys Code.

Accountability

The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code by the Executives and employees with the goal of deterring wrongdoing and promoting accountability for adherence to this Code.  Actions may include written notice, censure, demotion or re-assignment, suspension with or without pay or benefits and termination of employment.

Violations of this Code may also constitute violations of law and may result in civil and criminal penalties for the violator, the violators supervisors and the Company.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES



The following table details the fees incurred by the Company to Dale Matheson Carr-Hilton LaBonte LLP, Independent Chartered Accountants, for professional services provided to the Company for the fiscal years ended December 31, 2006 and 2005.



|                        | 2006      | 2005     
|----------------------- | --------- | ---------
|Audit Fees:             |           |          
|Audit Fees:             | $  42,000 | $  19,750
|Audit Related Fees: (1) | 5,000     | 3,200    
|Tax Fees                | Nil       | Nil      
|Other Fees (2)          | 2,250     | 2,000    
|                        |           |          
|Total Fees:             | $  49,250 | $  24,950



(1)

Audit Related fees are for reviewing the Companys 20-F Registration Statement.

(2)

Other Fees are for assistance with broker due diligence on private placement financings.



66



ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

ITEM 16E. PURCHASES OF EQUITY SECFURITIES BY THE COMPANY/AFFILIATED PURCHASERS

---Not Applicable---



PART III



ITEM 17.  FINANCIAL STATEMENTS

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.



The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report.  The audit report of Dale Matheson Carr-Hilton Labonte LLP, Independent Chartered Accountants, is included herein immediately preceding the audited financial statements.



Audited Financial Statements



Unaudited Financial Statements





ITEM 18.  FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM #17.





ITEM 19.  EXHIBITS



The financial statements thereto as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report.  The report of Dale Matheson Carr-Hilton LaBonte LLP, Independent Chartered Accountants, for the audited financial statements are included herein immediately preceding the audited financial statements.



Audited Financial Statements



Auditors Report dated April 2, 2007



Consolidated Balance Sheets at December 31, 2006 and 2005.



Consolidated Statements of Operations and Deficit for the years ended December 31, 2006, 2005, and 2004.



Consolidated Statements of Cash Flows for years ended December 31, 2006, 2005, and 2004.



Notes to Consolidated Financial Statements





























67



(B) Index to Exhibits:



|                                                                                                                                                                                                                                                 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                                                                                                                                                                                                                                                 | 
|1. Certificate of Incorporation, Certificates of Name Change, Articles of Incorporation, Articles of Amalgamation and By-Laws                                                                                                                    | 
|2. Instruments defining the rights of holders of the securities being registered
***See Exhibit Number 1***                                                                                                                                      | 
|3. Voting Trust Agreements  N/A                                                                                                                                                                                                                 | 
|4. List of Foreign Patents  N/A                                                                                                                                                                                                                 | 
|5. Calculation of earnings per share  N/A                                                                                                                                                                                                       | 
|6. Explanation of calculation of ratios  N/A                                                                                                                                                                                                    | 
|7. List of Subsidiaries  N/A                                                                                                                                                                                                                    | 
|8. Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities  N/A                                                                    | 
|9. Other Documents:
Agreement between the Company and Titan Uranium dated December 13, 2006.
Agreement between the Company, Retamco Operating, and Brownstone Ventures dated July 14, 2006.

Incorporated by reference to Form 20-F and Form 6-K | 



Signature Page



































































68











































DEJOUR ENTERPRISES LTD.



CONSOLIDATED FINANCIAL STATEMENTS



DECEMBER 31, 2006















































INDEPENDENT AUDITORS REPORT



CONSOLIDATED BALANCE SHEETS



CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT



CONSOLIDATED STATEMENTS OF CASH FLOWS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS











69

#





[dejour200620famend1003.jpg]





INDEPENDENT AUDITORS REPORT



To the Shareholders of Dejour Enterprises Ltd.



We have audited the consolidated balance sheets of Dejour Enterprises Ltd. as at December 31, 2006 and 2005 and the consolidated statements of operations and deficit and cash flows for the years ended December 31, 2006, 2005 and 2004.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with Canadian generally accepted auditing standards and with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years ended December 31, 2006, 2005 and 2004 in accordance with Canadian generally accepted accounting principles.





DMCL



DALE MATHESON CARR-HILTON LABONTE LLP

CHARTERED ACCOUNTANTS



Vancouver, Canada

April 2, 2007

























[dejour200620famend1004.jpg]















70







DEJOUR ENTERPRISES LTD.

CONSOLIDATED BALANCE SHEETS





|(In Canadian $)                          | December 31,    | December 31,   
|---------------------------------------- | --------------- | ---------------
|                                         | 2006            | 2005           
|                                         |                 |                
|ASSETS                                   |                 |                
|Current                                  |                 |                
|Cash and cash equivalents                | $  17,660,163   | $  12,387,314  
|Marketable securities (Note 5)           | 306,271         | -              
|Prepaids and other                       | 185,862         | 92,242         
|                                         | 18,152,296      | 12,479,556     
|                                         |                 |                
|Investment in Titan(Note 3)              | 36,538,953      | -              
|Equipment(Note 4)                        | 106,953         | 111,643        
|Resource properties(Note 5)              | 25,879,526      | 3,425,154      
|                                         |                 |                
|                                         | $  80,677,728   | $  16,016,353  
|                                         |                 |                
|                                         |                 |                
|LIABILITIES                              |                 |                
|Current                                  |                 |                
|Accounts payable and accrued liabilities | $       556,137 | $       312,222
|Promissory note (Note 6)                 | 5,827,000       | -              
|                                         | 6,383,137       | 312,222        
|                                         |                 |                
|Long term liabilities                    |                 |                
|Convertible debentures (Note 6)          | 1,343,978       | -              
|Future income tax liabilities (Note 11)  | 1,508,234       | -              
|                                         | 2,852,212       | -              
|                                         |                 |                
|SHAREHOLDERS' EQUITY                     |                 |                
|Share capital (Note 8)                   | 48,671,383      | 18,190,174     
|Contributed surplus (Note 10)            | 1,648,398       | 279,085        
|Retained earnings (deficit)              | 21,122,598      | (2,765,128)    
|                                         | 71,442,379      | 15,704,131     
|                                         |                 |                
|                                         | $  80,677,728   | $  16,016,353  







Approved on behalf of the Board











|Robert Hodgkinson          |  | Douglas Cannaday         
|---------------------------- |  | ---------------------------
|Robert Hodgkinson  Director |  | Douglas Cannaday  Director







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





71





DEJOUR ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT



|(In Canadian $)                                                  | Year ended   | Year ended   | Year ended   
|---------------------------------------------------------------- | ------------ | ------------ | -------------
|                                                                 | December 31, | December 31, | December 31, 
|                                                                 | 2006         | 2005         | 2004         
|                                                                 |              |              |              
|EXPENSES                                                         |              |              |              
|Amortization                                                     | $  29,726    | $  14,713    | $           -
|Interest expense and finance fee                                 | 107,031      | 1,589        | 52,087       
|Investor relations                                               | 1,079,161    | 626,686      | 12,753       
|Fees for management and consultants                              | 826,712      | 454,410      | 67,434       
|Stock-based compensation for management and consultants (Note 9) | 1,295,127    | 308,434      | 6,131        
|Office and general                                               | 224,475      | 159,799      | 25,769       
|Professional fees                                                | 44,023       | 34,636       | 53,942       
|Property investigation costs                                     | 117,192      | 91,834       | 10,430       
|Regulatory and filing fees                                       | 92,713       | 150,474      | 30,991       
|Rent                                                             | 175,655      | 126,718      | 13,081       
|Travel and accommodation                                         | 141,724      | 61,350       | 17,465       
|                                                                 | 4,133,539    | 2,030,643    | 290,083      
|                                                                 |              |              |              
|LOSS BEFORE THE FOLLOWING AND INCOME TAXES                       | (4,133,539)  | (2,030,643)  | (290,083)    
|Finders fee (Note 5)                                            | 306,271      | -            | -            
|Interest income                                                  | 673,559      | 99,530       | -            
|Gain on disposition of uranium properties (Note 5)               | 30,177,082   | -            | -            
|Equity loss from Titan (Note 3)                                  | (19,031)     | -            | -            
|Foreign exchange gain (loss)                                     | (66,616)     | (46,941)     | -            
|Impairment of oil and gas properties (Note 5)                    | (2,596,074)  | -            | (102,016)    
|                                                                 |              |              |              
|INCOME (LOSS) BEFORE INCOME TAXES                                | 24,341,652   | (1,978,054)  | (392,099)    
|                                                                 |              |              |              
|FUTURE INCOME TAX (EXPENSES) RECOVERY(Notes 8 and 11)            | (453,926)    | 366,135      | -            
|                                                                 |              |              |              
|NET INCOME (LOSS) FOR THE YEAR                                   | 23,887,726   | (1,611,919)  | (392,099)    
|                                                                 |              |              |              
|DEFICIT, BEGINNIN OF YEAR                                        | (2,765,128)  | (1,153,209)  | (761,110)    
|                                                                 |              |              |              
|RETAINED EARNINGS (DEFICIT), END OF YEAR                         | $21,122,598  | $(2,765,128) | $(1,153,209) 
|                                                                 |              |              |              
|                                                                 |              |              |              
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 
basic            | 52,564,033   | 25,611,539   | 9,856,071    
|                                                                 |              |              |              
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 
diluted          | 56,557,807   | 25,611,539   | 9,856,071    
|                                                                 |              |              |              
|BASIC EARNINGS (LOSS) PER SHARE                                  | $  0.45      | $   (0.06)   | $  (0.04)    
|DILUTED EARNINGS (LOSS) PER SHARE                                | $  0.42      | $   (0.06)   | $  (0.04)    

















72



DEJOUR ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS



|(In Canadian $)                                         | Year ended   | Year ended   | Year ended  
|------------------------------------------------------- | ------------ | ------------ | ------------
|                                                        | December 31, | December 31, | December 31,
|                                                        | 2006         | 2005         | 2004        
|                                                        |              |              |             
|CASH FLOWS FROM OPERATING ACTIVITIES                    |              |              |             
|Net income (loss) for the year                          | $23,887,726  | $(1,611,919) | $(392,099)  
|Adjustment for items not affecting cash                 |              |              |             
|Amortization                                            | 29,726       | 14,713       | -           
|Equity loss from Titan                                  | 19,031       | -            | -           
|Non-cash finders fee income                            | (306,271)    | -            | 50,000      
|Non-cash stock-based compensation                       | 1,295,127    | 308,434      | 6,131       
|Non-cash consulting fees and other expenses             | 282,075      | 9,200        | -           
|Impairment of oil and gas properties                    | 2,596,074    | -            | 102,016     
|Future income tax expenses (recovery)                   | 453,926      | (366,135)    | -           
|Gain on disposal of uranium properties                  | (30,177,082) | -            | -           
|                                                        | (1,919,668)  | (1,645,707)  | (233,952)   
|                                                        |              |              |             
|Changes in non-cash working capital balances            | 150,295      | 206,881      | 2,145       
|                                                        |              |              |             
|                                                        | (1,769,373)  | (1,438,826)  | (231,807)   
|                                                        |              |              |             
|CASH FLOWS FROM INVESTING ACTIVITIES                    |              |              |             
|Expenditures related to the acquisition of Titan shares | (107,983)    | -            | -           
|Purchase of equipment                                   | (25,036)     | (126,356)    | -           
|Resource properties expenditures                        | (12,013,765) | (3,425,152)  | (102,017)   
|                                                        |              |              |             
|                                                        | (12,146,784) | (3,551,508)  | (102,017)   
|                                                        |              |              |             
|CASH FLOWS FROM FINANCING ACTIVITIES                    |              |              |             
|Issuance of common shares for cash                      | 19,189,006   | 15,784,810   | 1,796,760   
|                                                        |              |              |             
|                                                        | 19,189,006   | 15,784,810   | 1,796,760   
|                                                        |              |              |             
|INCREASE IN CASH AND CASH EQUIVALENTS                   | 5,272,849    | 10,794,476   | 1,462,936   
|                                                        |              |              |             
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR            | 12,387,314   | 1,592,838    | 129,902     
|                                                        |              |              |             
|CASH AND CASH EQUIVALENTS, END OF YEAR                  | $17,660,163  | $12,387,314  | $1,592,838  





Supplementary Cash Flow Information See Note 12



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

















73





DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 1- NATURE OF OPERATIONS AND BASIS OF PRESENTATION





During 2004, Dejour Enterprises Ltd. (the Company or Dejour) was reactivated to Tier 2 Issuer status on the TSX Venture Exchange (TSX-V) and is currently exploring and developing early stage energy projects with a focus on uranium and oil and gas.



Since its reactivation, the Company acquired interests in and staked uranium exploration properties in the Athabasca Basin region of Saskatchewan and acquired the rights to participate in oil and gas exploration joint ventures.



During 2006, the Company acquired interest in an oil and gas exploration joint venture known as the Retamco project in Piceance and Uinta Basins in the States of Colorado and Utah, USA.



In December 2006, the Company closed the disposition of its uranium properties to Titan Uranium Inc. (Titan) for 36.5% of Titans issued shares and three million share purchase warrants.  The Company retained a 10% carried working interest and a 1% net smelter royalty in the properties.  See Note 3.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles.  Except as indicated in Note 15, they also comply, in all material respects, with United States generally accepted accounting principles. All amounts in these financial statements are expressed in Canadian dollars.



Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its inactive wholly-owned subsidiary, Dejour Energy (USA) Corp., incorporated in Nevada, and its 90% owned joint venture subsidiary Dejour Energy (Alberta) Ltd. incorporated in April 2006 which has been accounted for using the proportionate consolidation method.  All intercompany transactions are eliminated upon consolidation.



Marketable Securities

Marketable securities are carried at the lower of cost or market value.  Market value is based on the closing price at the balance sheet date or the closing price on the last day the security traded if there were no trades at the balance sheet date.



Resource Properties



Mineral properties:

The Company records its interests in mineral properties at the lower of cost or estimated recoverable value.  Where specific exploration programs are planned and budgeted by management, the cost of mineral properties and related exploration expenditures are capitalized until the properties are placed into commercial production, sold, abandoned or determined by management to be impaired in value.  These costs will be amortized over the estimated useful lives of the properties following the commencement of production or written off if the properties are sold or abandoned.



The costs include the cash or other consideration and the assigned value of shares issued, if any, on the acquisition of mineral properties.  Costs related to properties acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made.  For properties held jointly with other parties the Company only records its proportionate share of acquisition and exploration costs.  The proceeds from options granted are deducted from the cost of the related property and any excess is deducted from other remaining capitalized property costs.  The Company does not accrue estimated future costs of maintaining its mineral properties in good standing. To date the Company has not recorded any asset retirement obligations for its mineral properties as no amounts are presently determinable.











74



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont)





Resource Properties (cont)

Capitalized costs as reported on the balance sheet represent costs incurred to date and may not reflect recoverable value.  Recovery of carrying value is dependent upon future commercial success or proceeds from disposition of the mineral interests.



Management evaluates each mineral interest on a reporting period basis or as events and changes in circumstances warrant, and makes a determination based on exploration activity and results, estimated future cash flows and availability of funding as to whether costs are capitalized or charged to operations. Mineral property interests, where future cash flows are not reasonably determinable, are evaluated for impairment based on managements intentions and determination of the extent to which future exploration programs are warranted and likely to be funded.



General exploration costs not related to specific properties and general administrative expenses are charged to operations in the year in which they are incurred.



The Company does not have any producing mineral properties and all of its efforts to date have been exploratory in nature.



Oil and gas properties:

The Company follows the full cost method of accounting for its oil and gas operations whereby all costs related to the acquisition of petroleum and natural gas interests are capitalized.  Such costs include land and lease acquisition costs, annual carrying charges of non-producing properties, geological and geophysical costs, interest costs, costs of drilling and equipping productive and non-productive wells, and direct exploration salaries and related benefits.  Proceeds from the disposal of oil and gas interests are recorded as a reduction of the related expenditures without recognition of a gain or loss unless the disposal would result in a change of 20 percent or more in the depletion rate.



Depletion and depreciation of the capitalized costs will be computed using the unit-of-production method based on the estimated proven reserves of oil and gas determined by independent consultants.



Estimated future removal and site restoration costs are provided over the life of proven reserves on a unit-of-production basis.  Costs, which include the cost of production, equipment removal and environmental clean-up, are estimated each period by management based on current regulations, costs, technology and industry standards.   The charge is included in the provision for depletion and depreciation and the actual restoration expenditures are charged to the accumulated provision accounts as incurred.



The Company applies a ceiling test to capitalized costs to ensure that such costs do not exceed estimated future net revenues from production of proven reserves at year end market prices less future production, administrative, financing, site restoration, and income tax costs plus the lower of cost or estimated net realizable value of unproved properties.



Equipment

Equipment is recorded at cost with amortization being provided using the declining balance basis at the following rates:



Office furniture and equipment

20%

Computer equipment

30%

Software

100%



The carrying values of all categories of equipment are reviewed for impairment whenever events or changes in circumstances indicate the recoverable value may be less than the carrying amount. Recoverable value is based on estimates of undiscounted and discounted future net cash flows expected to be recovered from specific assets or groups through use or future disposition.



Investments

The Company accounts for its investments in other companies over which it has significant influence using the equity basis of accounting whereby the investments are initially recorded at cost and subsequently adjusted to recognize the Companys share of earnings or losses of the investee company and reduced by dividends received.  Carrying values of equity investments are reduced to estimated market values if there is other than a temporary decline in the value of the investment.

75

DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont)





Earnings (Loss) per Share

The Company uses the treasury stock method for the computation and disclosure of earnings (loss) per share.  The treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments which assume that proceeds received from in-the-money warrants and stock options are used to repurchase common shares at the prevailing market rate.



Basic earnings (loss) per share figures have been calculated using the weighted monthly average number of shares outstanding during the respective periods.  Diluted earnings per share for 2006 has been presented based on weighted average fully diluted shares outstanding of 56,557,807.  Diluted loss per share figures is equal to those of basic loss per share for 2004 and 2005 since the effects of options and warrants have been excluded as they are anti-dilutive.



Foreign Currency Translation

The financial statements are presented in Canadian dollars.  Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Non-monetary items are translated at historical exchange rates, except for items carried at market value, which are translated at the rate of exchange in effect at the balance sheet date.  Revenue and expenses are translated at average rates of exchange during the year.  Exchange gains or losses arising on foreign currency translation are included in the determination of operating results for the year.



The Company's US subsidiary is an integrated foreign operation and is translated into Canadian dollars using the temporal method.  Monetary items are translated at the exchange rate in effect at the balance sheet date; non-monetary items are translated at historical exchange rates. Income and expense items are translated at the average exchange rate for the period.  Translation gains and losses are reflected in loss for the year.



Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates. The significant areas requiring managements estimates relate to the recoverability of the carrying value of the Companys resource properties, future income tax effects and the determination of fair value of stock-based compensation.



Financial Instruments

The Companys financial instruments consist of cash and cash equivalents, marketable securities, accounts payable and accrued liabilities, promissory notes and convertible debentures.  Management has determined that the fair value of these financial instruments approximates their carrying values due to their immediate or short-term maturity, except for fair value of debt and equity components of convertible debentures and promissory notes which are as disclosed in Note 6. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.



Net smelter royalties and related rights to earn or relinquish interests in mineral properties constitute derivative instruments.  No value or discounts have been assigned to such instruments as there is no reliable basis to determine fair value until properties are in development or production and reserves have been determined.



Future Income Taxes

Future income taxes are recognized for the future income tax consequences attributable to differences between financial statement carrying values and their corresponding tax values (temporary differences).  Future income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in years in which temporary differences are expected to be recovered or settled.  The effect on futures income tax assets and liabilities of a change in tax rates is included in income in the period in which the change occurs.  The amount of future income tax assets recognized is limited to the amount that, in the opinion of management, is more likely than not to be realized.



76



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont)





Stock-Based Compensation

The Company follows the recommendations of the CICA Handbook in accounting for stock-based compensation. The Company adopted the fair value method for all stock-based compensation to employees and consultants. Under the fair value based method, compensation cost is measured at fair value at the date of grant and is expensed over the award's vesting period. The Company has adopted the fair value based method for options granted or altered to non-employees and employees in fiscal years commencing on or after January 1, 2002. The fair value of options and other stock based awards to employees or consultants, issued or altered in the period, are determined using the Black-Scholes option pricing model.



The Company has granted stock options to directors and employees as described in Note 9.



Asset retirement obligations

The Company reviews and recognizes legal obligations associated with the retirement of tangible long-lived assets, including rights to explore or exploit natural resources.  When such obligations are identified and measurable, the estimated fair values of the obligations are recognized on a systematic basis over the remaining period until the obligations are expected to be settled.



Mineral property related retirement obligations are capitalized as part of deferred exploration and development costs and are accounted for in the same manner as all other capitalized costs.



Flow-Through Shares

The Company provides certain share subscribers with a flow-through component for tax incentives available on qualifying Canadian exploration expenditures.  The Company renounces the qualifying expenditures upon the issuance of the respective flow-through common shares and accordingly is not entitled to the related taxable income deductions from such expenditures.



The Company has adopted the recommendation by the Emerging Issues Committee (EIC) of the CICA relating to the recording of flow-through shares.  EIC 146 stipulates that future income tax liabilities resulting from the renunciation of qualified resource expenditures by the Company from the issuance of flow-through shares are recorded as a reduction of share capital.  Any corresponding realization of future income tax benefits resulting in the utilization of prior year losses available to the Company not previously recorded, whereby the Company did not previously meet the criteria for recognition, are reflected as part of the Companys operating results in the period the expenses are renounced to the share subscribers and applicable tax filing have been made with the Canada Revenue Agency..



Risk Management

The Company is engaged primarily in mineral and oil and gas exploration and manages related industry risk issues directly.  The Company may be at risk for environmental issues and fluctuations in commodity pricing.  Management is not aware of and does not anticipate any significant environmental remediation costs or liabilities in respect of its current operations.  The Company is not exposed to significant credit concentration or interest rate risk.



The Companys functional currency is the Canadian dollar. The Company operates in foreign jurisdictions, giving rise to significant exposure to market risks from changes in foreign currency rates.  The financial risk is the risk to the Company's operations that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.



Impairment of long-lived assets

The CICA has issued CICA Handbook, section 3063,Impairment of long-lived assets which provides guidance on recognizing, measuring and disclosing the impairment of long-lived assets. The guidance replaces the write-down provisions in section 3061 of the CICA Handbook,Property, plant and equipment.



The determination of when to recognize an impairment loss for a long-lived asset to be held and used is made when its carrying value exceeds the total undiscounted cash flows expected from its use and eventual disposition. When impairment is indicated, the amount of the impairment loss is determined as the excess of the carrying value of the amount over its fair value based on estimated discounted cash flows from use or disposition.



Comparative Figures

Certain of the comparative figures have been reclassified to conform to the current years presentation.

77



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 3  INVESTMENT IN TITAN URANIUM INC.



In December 2006, the Company sold a 90% interest in its uranium properties, consisting of 68 claims and 4 permits totalling 966,969 acres located in the Athabasca Basin, Saskatchewan, Canada, and all related exploration data to Titan Uranium Inc. (Titan), a public company traded on the TSX-V, under the following terms:



1.

Titan issued the Company 17,500,000 fully paid and assessable common shares in the capital of Titan (representing a 36.47% of Titans issued and outstanding shares at closing).  The Company is restricted from transferring beneficial ownership of Titan shares until the first anniversary of the date of closing, at which time up to 20% of the original number may be traded in any twelve month period, and any trades in excess of this annual limit will be subject to prior approval of the Board of Directors of Titan;



2.

Titan issued the Company 3,000,000 transferable common share purchase warrants, entitling the holder to acquire up to 3,000,000 common shares in the capital of Titan at an exercise price of $2.00 per common share for a period of 24 months, subject to a forced exercise provision whereby Titan can call the automatic exercise of the warrants should Titans common shares trade on the TSX-V at a price of $4.00 or more for 20 consecutive trading days.  50% of these warrants were vested on the date of closing and the remaining 50% will vest twelve months after closing.



3.

The Company retained a 1% Net Smelter Return on all properties;



4.

The Company retained a 10% working interest in each claim, carried by Titan to completed bankable feasibility study after which the Company may elect to participate as to its 10% interest or convert to an additional 1% Net Smelter Return.



The estimated fair market value of Titans shares and warrants at the date of acquisition were $31,650,000 and $4,800,000 respectively.  The investment in Titan has been accounted for using the equity method of accounting and includes related legal fees and other costs of acquisition of $107,983.  The Companys share of losses in Titan for the period ended December 31, 2006 was $19,031. The Company owned approximately 33% of Titan as at April 2, 2007.





NOTE 4 EQUIPMENT



|                                  | 2006     |              | 2005    
|--------------------------------- | -------- | ------------ | --------
|                                  |          | Accumulated  |         
|                                  | Cost     | Amortization | Net     
|Furniture, fixtures and equipment | $96,066  | $24,872      | $71,194 
|Computer equipment                | 53,338   | 18,596       | 34,742  
|Software                          | 2,033    | 1,016        | 1,017   
|                                  | $151,437 | $44,484      | $106,953























78



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 5 - RESOURCE PROPERTIES



Uranium Properties



In 2005 and 2006, the Company acquired interests in and staked uranium exploration properties in the Athabasca Basin region of Saskatchewan, Canada and commenced exploration on certain properties.  In December 2006 the Company sold a 90% interest in these properties to Titan as disclosed in Note 3.  The Company realized a gain on disposition of $30,177,082.

|                         | December 31, 2004 | Acquisition Costs | Exploration & Development Cost | December 31, 2005 | Exploration & Development Costs | Disposal (Note 3) | December 31, 2006
|------------------------ | ----------------- | ----------------- | ------------------------------ | ----------------- | ------------------------------- | ----------------- | -----------------
|                         |                   |                   |                                |                   |                                 |                   |                  
|Bozo                     | $      -          | $1,604            | $1,694                         | $3,298            | $9,381                          | $(11,411)         | $1,268           
|Fleming Island           | -                 | 33,369            | 314,513                        | 263,605           | 105,219                         | (331,942)         | 36,882           
|Gartner Lake             | -                 | 51,754            | 125,876                        | 208,141           | 23,362                          | (208,353)         | 23,150           
|Hoppy North              | -                 | 20,035            | 2,045                          | 22,080            | 33,885                          | (50,369)          | 5,596            
|Hoppy South              | -                 | 13,235            | 2,139                          | 15,374            | 23,405                          | (34,901)          | 3,878            
|Maybelle River           | -                 | 35,291            | 144,406                        | 178,372           | 18,739                          | (177,400)         | 19,711           
|Meanwell Lake            | -                 | 34,753            | 63,729                         | 153,683           | 539,460                         | (623,829)         | 69,314           
|R-Seven                  | -                 | 120,786           | 287,868                        | 351,883           | 1,730,127                       | (1,873,809)       | 208,201          
|Sand Hill Lake           | -                 | 184,247           | 269,934                        | 505,568           | 1,099,548                       | (1,444,604)       | 160,512          
|Sheila Project           | -                 | 7,903             | 2,045                          | 9,948             | 18,981                          | (26,036)          | 2,893            
|Thornburn Lake           | -                 | 29,178            | 2,369                          | 31,547            | 28,586                          | (54,120)          | 6,013            
|Umpherville Lake         | -                 | 11,402            | 2,045                          | 13,447            | 17,632                          | (27,971)          | 3,108            
|Umpherville West         | -                 | 3,343             | 1,695                          | 5,038             | 9,467                           | (13,054)          | 1,451            
|Virgin Trend North       | -                 | 123,087           | 255,826                        | 342,978           | 1,109,288                       | (1,307,039)       | 145,227          
|Virgin Trend South       | -                 | 19,739            | 31,229                         | 92,177            | 5,691                           | (88,081)          | 9,787            
|                         |                   |                   |                                |                   |                                 |                   |                  
|Total Uranium Properties | $       -         | $689,726          | $1,507,413                     | $2,197,139        | $4,772,771                      | $(6,272,919)      | $696,991         



Oil & Gas Properties



|                        | December 31, 2005 | Acquisition Costs | Exploration & Development | Write-down   | December 31, 2006
|----------------------- | ----------------- | ----------------- | ------------------------- | ------------ | -----------------
|                        |                   |                   |                           |              |                  
|Retamco Project         | $         -       | $25,182,532       | $       -                 | $         -  | $25,182,532      
|Lavaca Prospect         | 163,622           | -                 | 56,526                    | (220,148)    | -                
|Tinsley Prospect        | 1,064,391         | -                 | 1,311,536                 | (2,375,926)  | 1                
|Golden Prairie Prospect | 1                 | -                 | -                         | -            | 1                
|Turtle Bayou, Louisiana | 1                 | -                 | -                         | -            | 1                
|                        | $1,228,015        | $25,182,532       | $1,368,062                | $(2,596,074) | $25,182,535      



|                        | December 31, 2004 | Acquisition Costs | Exploration
& Development | December 31, 2005
|----------------------- | ----------------- | ----------------- | ------------------------- | -----------------
|                        |                   |                   |                           |                  
|Lavaca Prospect         | $          -      | $    50,150       | $     113,472             | $     163,622    
|Tinsley Prospect        | -                 | 295,459           | 768,932                   | 1,064,391        
|Golden Prairie Prospect | 1                 | -                 | -                         | 1                
|Turtle Bayou, Louisiana | 1                 | -                 | -                         | 1                
|                        | $         2       | $  345,609        | $     882,404             | $  1,228,015     

79

DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 5 - RESOURCE PROPERTIES (cont)



Retamco Project



In July 2006, the Company concluded the purchase of interests in 267 oil and gas leases covering 254,068 net acres in the Piceance and Uinta Basins in the States of Colorado and Utah from Retamco Operating Co. (Retamco), a private Texas corporation.  The cost to the Company was $25,182,532 and included cash of $5,511,000 (US$5,000,000), 5,500,000 common shares valued at $12,088,991 (US$10,726,700), a promissory note with face value of $5,643,000 (US$5,000,000) and the issuance of a $1,577,609 (US$1,397,846) two-year 8% convertible debenture.  Additional costs of $361,932 relating to the acquisition have also been capitalized to the project.  See Notes 6 and 8.



The project consists of two project types.  The Natural Gas Resource project covers 188,422 net acres containing natural gas assets; the second project is the Overthrust Oil project covering 65,646 net acres in the northern Piceance/Uinta Basins.



The Company owns a 25% net working interest in the Natural Gas Resource project and a 12.5% net working interest in the Overthrust Oil project.  Leasehold acreage NRI is 80%.  The Company will pay an unpromoted proportionate share of all exploration expenses including seismic, drilling, completion, equipping or abandonment.



The Company received 183,836 common shares of Brownstone Ventures Inc. (Brownstone, a working interest partner in the Retamco Project) with a fair value of $306,271 as a finders fee for assisting Brownstone in its purchase of its 10% interest in the Natural Gas Resource and Overthrust Oil projects.. As at December 31, 2006, the market value of Brownstone shares was $404,439.



Other Projects



In 2006, the Company was advised by the operator of the Tinsley and Lavaca Prospect that the wells are not economic.  As a result, the Company recorded an impairment provision of $2,596,074.  The Company currently holds interests in these oil and gas properties and carries three of these properties at $1 each, as it has not yet determined if these three properties contain any economical resources.



In October 2006, the Company entered into a Participation Agreement allowing it to participate in the drilling of a natural gas well in an area known as the Noel Area, in N.E. British Columbia, Canada.  The Company then assigned 25% of its interest in the Noel Area to a company controlled by the CEO of the Company.  After this farm-out agreement, the Company will pay 15% of the costs to earn a 9.375% working interest in 2220 acres with an option to drill additional wells earning 2220 acres to a maximum of 10,725 acres.  Drilling commenced in March 2007 and the well is expected to reach total depth around the end of April 2007.  The Companys share of the estimated cost for drilling the first test well is $700,000.



NOTE 6  PROMISSORY NOTE AND CONVERTIBLE DEBENTURES



On July 14, 2006, a promissory note with face value $5,643,000 (US$5,000,000) and convertible debenture with a face value of $1,577,609 (US$1,397,846) were issued to Retamco for the acquisition of the Retamco project.  Refer to Note 5.



The US$5,000,000 promissory note is secured, bore no interest to January 1, 2007 and thereafter it bears interest at 4.4% per annum. This promissory note matures as follows:



|January 2, 2007 | US$      2,000,000 | (paid subsequently)
|--------------- | ------------------ | -------------------
|March 31, 2007  | 1,500,000          | (paid subsequently)
|June 30, 2007   | 1,500,000          |                    
|                | US$      5,000,000 |                    



The Company estimated that the fair value of the promissory note at the date of issue was $4,877,058 and has capitalized the accreted interest to December 31, 2006 as resource property costs.  The fair value of the promissory note approximates its carrying value at December 31, 2006.The convertible debenture matures on July 15, 2008, is unsecured, bears an 8% coupon, payable quarterly and is convertible at $1.52 (US$1.35) per unit.  Each unit consists of one common share and one warrant, exercisable at $1.69 (US$1.50) per share, expiring on July 15, 2008.

80

DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 6  PROMISSORY NOTE AND CONVERTIBLE DEBENTURES (continued)



As at December 31, 2006, the face value of the debenture was US$1,397,846.  The Company recognized the value of the embedded conversion feature of $331,706 (US$284,629) as additional contributed surplus.  The Company will record further interest expense over the term of the convertible debentures of $331,706 (US$284,629) resulting from the difference between the stated value and the estimated fair value at the date of issuance. The carrying value of the convertible debenture will be accreted to the face value of US$1,397,846 to maturity.  At December 31, 2006, accrued interest of $60,395 (US$51,824) is included in accrued liabilities.



NOTE 7 - RELATED PARTY TRANSACTIONS



The Company entered into the following transactions with related parties:



a)

During 2006, the Company incurred a total of $136,670 (2005 - $100,000) in consulting fees and accrued $17,282 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6, and a $63,000 bonus payment to a private company (HEC) controlled by the CEO.  In October 2006, the Company assigned 25% of its interest in the Noel Area, described in Note 5, to HEC, which agreed to assume 25% of the related obligations.  In November 2006, the Company had received $234,251 from HEC, being the estimated 25% share of the exploration expenditures for the Noel Area.

b)

During 2006, the Company incurred a total of $179,000 (2005 - $122,356) in consulting fees and accrued $8,641 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6, and a $13,000 bonus payment to the President of a private company controlled by the President of the Company.

c)

During 2006, the Company incurred $107,640 (2005 - $64,480) in consulting fees to a private company controlled by the CFO The Company also accrued $17,282 (2005  nil) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 6 to an individual related to the CFO.

d)

During 2006, the Companys 90% owned joint venture subsidiary (DEAL) incurred $105,625 of consulting fee to a company controlled by a director of DEAL.



These transactions are in the normal course of operations and are measured at the exchange amount established and agreed to by the related parties.



NOTE 8 - SHARE CAPITAL



Authorized:

Unlimited common shares

Unlimited first preferred shares, issuable in series

Unlimited second preferred shares, issuable in series

|                                                               | Shares     | Value          
|-------------------------------------------------------------- | ---------- | ---------------
|Common shares issued:                                          |            |                
|Balance at December 31, 2004                                   | 15,795,962 | $   2,726,819  
|                                                               |            |                
|Common shares issued during 2005:                              |            |                
|- for cash by private placements                               | 21,030,214 | 14,696,916     
|- for services                                                 | 11,500     | 9,200          
|- for cash on exercise of agents options                      | 217,783    | 152,448        
|- for cash on exercise of warrants                             | 1,806,365  | 883,160        
|- for cash on exercise of stock options                        | 154,965    | 52,286         
|- contributed surplus reallocated on exercise of stock options | -          | 35,480         
|- renounced flow through share expenditures                    | -          | (366,135)      
|                                                               |            |                
|Balance at December 31, 2005                                   | 39,016,789 | 18,190,174     
|Common shares issued during 2006:                              |            |                
|- for acquisition of Retamco Project (Note 5)                  | 5,500,000  | 12,088,991     
|- for cash by private placements                               | 8,071,333  | 11,329,002     
|- for cash on exercise of agents options                      | 499,909    | 349,937        
|- for cash on exercise of warrants                             | 7,051,285  | 7,076,746      
|- for cash on exercise of stock options                        | 760,407    | 433,321        
|- contributed surplus reallocated on exercise of stock options | -          | 257,520        
|- renounced flow through share expenditures                    | -          | (1,054,308)    
|                                                               |            |                
|Balance at December 31, 2006                                   | 60,899,723 | $    48,671,383

81





DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 8 - SHARE CAPITAL (cont)





During 2006, the Company completed the following:

In March 2006, the Company completed a private placement and issued 5,300,000 flow-through shares (FTS) at $1.50 per share.  Gross proceeds raised of $7,950,000 are committed to be spent on Canadian Exploration Expenditures (CEE), of which $2,600,000 had been spent to December 31, 2006.  Accordingly, as at December 31, 2006, approximately $5,350,000 was not available for general administrative purposes.  In connection with this private placement, the Company paid finders fees of $477,000 and issued 424,000 warrants, exercisable at $1.65 per share before September 2, 2007.   The grant date fair values of the agents warrants, estimated to be $63,600 have been included in share capital on a net basis and accordingly have not been recorded as a separate component of shareholders equity.



In March 2006, the Company completed a private placement and issued 683,333 Units at $1.50 per Unit.  Each Unit consists of one common share and half of one share purchase warrant, exercisable at $1.65 per share before December 31, 2007.  Gross proceeds raised were $1,025,000.  The Company paid finders fees of $45,000 and issued 41,000 warrants, exercisable at $1.65 per share before December 31, 2007.  The grant date fair values of the warrants and agents warrants, estimated to be $51,250 and $6,150 respectively, have been included in share capital on a net basis and accordingly have not been recorded as a separate component of shareholders equity.



In April 2006, the Company completed a private placement and issued 2,088,000 Units at $1.50 per Unit.  Each Unit consists of one common share and half of one share purchase warrant, exercisable at $1.65 per share before December 31, 2007.  Gross proceed raised was $3,132,000.  The Company paid finders fees of $138,150 and issued 92,100 warrants, exercisable at $1.65 per share before December 31, 2007. The grant date fair values of the warrants and agents warrants, estimated to be $156,600 and $13,815 respectively, have been included in share capital on a net basis and accordingly have not been recorded as a separate component of shareholders equity.



In July 2006, the Company issued 5,500,000 shares for the acquisition of Retamco Project.  See Note 5.



During 2005, the Company completed the following:

In January 2005, the Company completed two private placements and issued a total of 1,650,000 common shares at $0.50 per share for gross proceeds of $825,000.  In connection with these private placements the Company paid finders fees of $37,125, paid other costs of $5,372 and issued 250,000 warrants to finders with each warrant being exercisable into a common share at a price of $0.65 per share to September 30, 2005.  The grant date fair value of these warrants has been included in share capital on a net basis and accordingly has not been recorded as a separate component of shareholders equity.



In March 2005, the Company completed a private placement and issued a total of 8,076,923 units at $0.65 per unit for gross proceeds of $5,250,000.  Each unit consists of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $0.80 per share to March 17, 2007.  In connection with these private placements the Company paid finders fees of $262,786, paid other costs of $61,036, issued 185,791 additional units as finders fees and issued 717,692 agents options.  The agents options are exercisable into units at a price of $0.70 per unit with each unit consisting of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $0.85 per share to March 17, 2007.  The grant date fair values of the finders fee units, agents options and the warrants have been included in share capital on a net basis and accordingly have not been recorded as a separate component of shareholders equity.



In September 2005, the Company completed a private placement and issued a total of 4,500,000 units at US$0.55 per unit for gross proceeds of CDN$2,914,808.  Each unit consists of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $0.80 per share to March 17, 2007.  In connection with this private placement the Company paid finders fees of $109,058, paid other costs of $19,582 and issued 306,736 warrants to finders with each warrant being exercisable into a common share at a price of $0.80 per share to March 17, 2007.  The grant date fair value of these warrants has been included in share capital on a net basis and accordingly has not been recorded as a separate component of shareholders equity.



82



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 8 - SHARE CAPITAL (cont)





In December 2005, the Company completed a private placement and issued a total of 4,317,500 units at $0.95 per unit and 2,300,000 flow through common shares at $1.05 per share for total gross proceeds of $6,516,625.  Each unit consists of one common share and one half share purchase warrant with each whole share purchase warrant entitling the holder to purchase an additional common share of the Company at a price of $1.10 per share to December 14, 2007.  In connection with this private placement the Company paid finders fees of $275,144, paid other costs of $39,414 and issued 503,701 warrants to finders with each warrant being exercisable into a common share at a price of $1.10 per share to December 14, 2007.  The grant date fair value of these warrants has been included in share capital on a net basis and accordingly has not been recorded as a separate component of shareholders equity.  Proceeds from the flow through common shares totalling $2,415,000 are committed to be spent on CEE of which none had been spent to December 31, 2005.  Accordingly, as at December 31, 2005, approximately $2,415,000 of cash was not available for general administrative purposes.  In accordance with the accounting recommendations relating to accounting for flow-through shares, upon renouncing the expenditures, the Company will reduce the flow-through share proceeds and recognize a future tax liability by an amount approximating the tax effect of the timing difference resulting from renouncing exploration expenditures using currently enacted tax rates.  During 2006 the Company recorded a future income tax recovery of $1,054,308 relating to the resulting future tax liability offset through the realization of previously unrecorded future tax assets due to their uncertainty of realization. Refer to Note 11.





NOTE 9  STOCK OPTIONS AND WARRANTS



During the year ended December 31, 2006 the Company granted a total of 2,010,000 (2005  2,606,192) options to its insiders, consultants and advisors.  All options vest on a quarterly basis over periods ranging from eighteen months to three years.  The vested options can be exercised for periods ending between July 31, 2007 and November 1, 2009 to purchase common shares of the Company at prices ranging from $0.275 to $2.10 per share.  In accordance with accounting recommendations effective January 1, 2003, the Company expenses the fair value of all stock options granted over their respective vesting periods.  The fair value of the options granted during 2006 was determined to be $3,045,400 (2005 - $923,827).  The Company determined the fair value of stock options granted during the year using the Black-Scholes option pricing model using the following weighted average assumptions: expected option life of 2.86 years (2005  2.83 years), risk-free interest rate of 3.5% (2005  3.5%) and expected volatility of 96% (2005  96%).  During the current year the Company recognized a total of $1,295,127 (2005 - $308,434) of stock based compensation relating to the vesting of options.



The following table summarizes information about stock option transactions:



|                              | Outstanding Options | Weighted
Average
Exercise Price | Weighted
Average Remaining
Contractual Life
|----------------------------- | ------------------- | ------------------------------- | -------------------------------------------
|                              |                     |                                 |                                            
|Balance, December 31, 2004    | 950,000             | $  0.275                        | 4.83 years                                 
|Options granted               | 2,606,192           | 0.603                           |                                            
|Options exercised             | (154,965)           | 0.337                           |                                            
|Options cancelled and expired | (90,035)            | 0.415                           |                                            
|                              |                     |                                 |                                            
|Balance, December 31, 2005    | 3,311,192           | 0.527                           | 2.71 years                                 
|Options granted               | 2,010,000           | 1.847                           |                                            
|Options exercised             | (760,407)           | 0.570                           |                                            
|Options cancelled and expired | -                   | -                               |                                            
|                              |                     |                                 |                                            
|Balance, December 31, 2006    | 4,560,785           | $  1.14                         | 1.93 years                                 







83



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 9 - STOCK OPTIONS AND WARRANTS (cont)





Details of options exercisable as at December 31, 2006 are as follows:



|Number    | Exercise Price | Remaining Contractual Life
|--------- | -------------- | --------------------------
|402,529   | $0.275         | 1.83 years                
|389,307   | 0.550          | 1.24 years                
|735,000   | 0.600          | 1.65 years                
|33,334    | 0.650          | 0.25 years                
|22,332    | 0.660          | 1.29 years                
|2,250     | 0.900          | 0.58 years                
|66,667    | 1.250          | 0.09 years                
|100,000   | 1.400          | 2.25 years                
|2,083     | 1.750          | 2.84 years                
|50,000    | 1.800          | 0.83 years                
|25,000    | 1.950          | 1.92 years                
|331,750   | 2.100          | 2.33 years                
|          |                |                           
|2,160,252 |                |                           





During the year ended December 31, 2006, the Company issued 554,700 warrants in connection with a private placement financing as described in Note 8.  These warrants are exercisable into units at a price of $1.65 per unit until December 31, 2007.  Each unit consists of one common share and one half of a share purchase warrant.  Each whole share purchase warrant is exercisable into a common share at a price of $1.65 per share until December 31, 2007.  As at December 31, 2006, 179,637 of these agents warrants remain unexercised.



The following table summarizes information about warrants:



|                           | Outstanding Warrants | Weighted
Average
Exercise Price | Weighted
Average Remaining
Contractual Life
|-------------------------- | -------------------- | ------------------------------- | -------------------------------------------
|                           |                      |                                 |                                            
|Balance, December 31, 2004 | 1,500,000            | $         0.45                  | 1.00 years                                 
|Warrants issued            | 9,709,436            | 0.88                            |                                            
|Warrants exercised         | (1,806,365)          | 0.49                            |                                            
|Warrants expired           | -                    | -                               |                                            
|                           |                      |                                 |                                            
|Balance, December 31, 2005 | 9,403,071            | 0.89                            | 1.42 years                                 
|Warrants issued            | 2,192,720            | 1.56                            |                                            
|Warrants exercised         | (7,051,285)          | 1.00                            |                                            
|Warrants expired           | -                    | -                               |                                            
|Balance, December 31, 2006 | 4,544,506            | $         1.03                  | 0.41 years                                 









84



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 9 - STOCK OPTIONS AND WARRANTS (cont)





Details of warrants outstanding as at December 31, 2006 are as follows:



|Number    | Exercise
Price | Remaining
Contractual Life
|--------- | -------------- | --------------------------
|          |                |                           
|3,319,868 | $         0.80 | 0.21 years                
|12,500    | 0.85           | 0.21 years                
|1,212,138 | 1.65           | 0.89 years                
|          |                |                           
|4,544,506 |                |                           





NOTE 10  CONTRIBUTED SURPLUS



Details of changes in the Company's contributed surplus balance are as follows:

|Balance, December 31, 2004                            |         |           |  | $   6,131 
|----------------------------------------------------- | ------- | --------- |  | ----------
|Stock compensation on vesting of options              |         | 308,434  
|Allocated to share capital on exercise of options     |         | (35,480) 
|Balance, December 31, 2005                            |         |           |  | 279,085   
|Stock compensation on vesting of options              |         | 1,295,127
|Value of conversion feature on convertible debentures | 331,706
|Allocated to share capital on exercise of options     |         | (257,520)
|                                                      |         |           |  |           
|Balance, December 31, 2006                            |         |           |  | $1,648,398



NOTE 11  FUTURE INCOME TAXES



The actual income tax provisions differ from the expected amounts calculated by applying the Canadian combined federal and provincial corporate income tax rates to the Companys loss before income taxes.  The components of these differences are as follows:



|                                                             | 2006         | 2005         
|------------------------------------------------------------ | ------------ | -------------
|                                                             |              |              
|Income (loss) before income taxes                            | $ 24,341,652 | $ (1,978,054)
|Corporate tax rate                                           | 34.12%       | 34.90%       
|                                                             |              |              
|Expected tax expense (recovery)                              | 8,305,371    | (689,747)    
|Increase (decrease) resulting from:                          |              |              
|Change in corporate tax rate                                 | 53,546       | 64,516       
|Disposal of uranium properties utilizing Section 85 rollover | (5,601,176)  | -            
|Expiry of non-capital losses carried forward                 | -            | 98,074       
|Non-deductible stock-based compensation                      | 441,638      | 107,551      
|Change in future tax asset valuation allowance               | (3,490,610)  | 328,514      
|Share issue costs and other permanent differences            | (214,975)    | -            
|Renounced exploration expenditures and other adjustments     | 959,873      | (275,043)    
|                                                             |              |              
|Future income tax provision (recovery)                       | $  453,926   | $  (366,135) 



85





DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 11  FUTURE INCOME TAXES (cont)



The Companys tax-effected future income tax assets and liabilities are made up as follows:



|                                           |                                            | 2006        | 2005       
|------------------------------------------ | ------------------------------------------ | ----------- | -----------
|Future income tax assets                   |                                            |            
|                                           | Non-capital losses available               | $1,077,545  | $1,370,506 
|                                           | Capital losses available                   | 1,067,642   | 1,091,110  
|                                           | Resource pools in excess of net book value | 1,540,396   | 762,534    
|                                           | Share issue costs and other                | 407,359     | 266,460    
|                                           |                                            |             |            
|                                           |                                            | 4,092,942   | 3,490,610  
|Future income tax liabilities              |                                            |            
|                                           | Long term investments                      | (5,601,176) | -          
|                                           |                                            |             |            
|                                           |                                            | (1,508,234) | 3,490,610  
|Valuation allowance                        |                                            |            
|                                           | Valuation allowance, opening               | (3,490,610) | (3,162,096)
|                                           | Reversal (increase) of valuation allowance | 3,490,610   | (328,514)  
|                                           |                                            |             |            
|                                           | Valuation allowance, ending                | -           | (3,490,610)
|                                           |                                            |            
|Net future income tax assets (liabilities) | $(1,508,234)                               | $         -





The Company has approximately $2,884,000 (2005 - $3,930,000) of non-capital losses which can be applied to reduce future taxable income, expiring as follows:

|Year of Expiry |  | Amount    
|-------------- |  | ----------
|               |  |           
|2008           |  | $  420,000
|2009           |  | 243,000   
|2010           |  | 91,000    
|2014           |  | 284,000   
|2015           |  | 1,846,000 
|               |  |           
|               |  | $2,884,000



In addition, the Company has Canadian and Foreign exploration and development expenditures totalling approximately $5,211,000, unamortized share issue costs of approximately $1,152,000 and capital loss carryforwards of approximately $6,258,000 which may be available to reduce future taxable income. Both the exploration and development expenditures and the capital losses can be carried forward indefinitely.





















86



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 12  SUPPLEMENTARY CASH FLOW INFORMATION



|                                                                                        | 2006       | 2005  | 2004  
|--------------------------------------------------------------------------------------- | ---------- | ----- | ------
|                                                                                        | $          | $     | $     
|Supplemental information relating to non-cash financing activities                      |            |       |       
|Issuance of common shares for services                                                  | -          | 9,200 | -     
|Bonus shares issued for bridge loan financing fee                                       | -          | -     | 50,000
|Shares issued for Retamco Project                                                       | 12,088,991 | -     | -     
|Promissory note issued for Retamco Project                                              | 5,643,000  | -     | -     
|Convertible debenture issued for Retamco Project                                        | 1,577,609  | -     | -     
|Value of shares and warrants received as proceeds on disposition of resource properties | 36,450,000 | -     | -     
|                                                                                        |            |       |       
|Interest paid during the year                                                           | 107,031    | 1,589 | 2,082 
|Taxes paid during the year                                                              | 24,236     | -     | -     





NOTE 13  SUBSEQUENT EVENTS



Subsequent to the year-end, the Company granted a total of 1,950,000 options to consultants, and executive officers.  These options have an average exercise price $2.47per share, and average expiry date of four years.



Subsequent to the year-end, 3,336,453 warrants and 129,117 options were exercised for total proceeds of $2,741,582.



The Company incurred approximately $3,000,000 to $3,500,000 in acquisition and exploration expenditures to acquire interests approximating an average 25% in roughly 45,000 acres of oil and gas exploration properties in the Peace River Arch area near the border of BC and Alberta.







NOTE 14  COMMITMENTS



Effective May 1, 2005, the Company entered in to a five year lease on its office premises.  Under the terms of the lease the Company is required to make minimum annual payment.  The Company is committed under operating lease agreement for the premises to future minimum payments as follows:



2007

$     91,520

2008

95,334

2009

101,053

2010

34,320



$   322,227

























87



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 15  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)



These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP).  A description of US GAAP and practices prescribed by the US Securities and Exchange Commission (SEC) that result in material measurement differences from Canadian GAAP are as follows:



(a)

Interest in unproven mineral properties



Under US GAAP, pursuant to EITF 04-2, the Company classified its mineral rights as tangible assets and accordingly acquisition costs are capitalized provided certain criteria are met.  US GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In performing the review for recoverability, the Company is to estimate the future cash flows expected to result from the use of the asset and its eventual disposition.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized.  However, SEC staff has indicated that their interpretation of US GAAP requires mineral exploration costs to be expensed as incurred until commercially mineable deposits are determined to exist within a particular property.  Accordingly, for all periods presented, the Company has expensed all mineral exploration costs for US GAAP purposes.  In addition, under Canadian GAAP, cash flows relating to resource property costs are reported as investing activities. For US GAAP, these costs would be characterized as operating activities.



(b)

Stock-based compensation



The Financial Accounting Standards Board (FASB) in the US issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). The statement encourages entities to adopt a fair value methodology of accounting for employee stock-based compensation.



Under US GAAP stock options granted to non-employees for services rendered to the Company are required to be accounted for as compensation cost and charged to operations as the services are performed and the options are earned. The compensation cost is to be measured based on the fair value of the stock options granted. This method is similar to the Canadian standard adopted as of January 1, 2003. The stock-based compensation expense in respect of stock options granted to non-employees, under US GAAP, based upon the fair value of the options granted, determined using the Black Scholes option pricing model, would be $nil cumulatively from the date of adoption of SFAS 123 to December 31, 2002.



In December 2004, the FASB issued SFAS No.123R (revised 2004), "Share-Based Payment." SFAS No. 123(R) provides investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements.  That cost will be measured based on the fair value of the equity or liability instruments issued.  SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.  SFAS No. 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."  Public entities will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005 or December 15, 2005 for small business issuers.



To December 31, 2006, the Company only granted stock options to consultants and did not grant any stock options to employees.



(c)

Income taxes



Under US GAAP, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Under Canadian GAAP, the effect of a change in tax rates is recognized in the period of substantive enactment. The application of this difference under US GAAP does not result in a material difference between future income taxes as recorded under Canadian GAAP.



88



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 15  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (cont)



(d)

Flow-through shares



Under Canadian GAAP, future income tax liabilities resulting from the renunciation of qualified resource expenditures by the Company in connection with the issuance of flow-through common shares are recorded as a reduction of share capital at the time of renunciation.  Under US GAAP, the cost of the renounced expenditures is recorded as a liability and reduction of share capital on issuance of the flow through shares.  Under Canadian GAAP, the amount of this reduction is measured as the tax effected value of the renounced expenditures while under US GAAP, the amount of this reduction is measured by comparison of the flow-through common share price versus the fair value of the Companys ordinary common shares.



(e)

Reporting comprehensive income



Statement of Financial Accounting Standards No. 130 (SFAS 130) Reporting Comprehensive Income,establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income equals net income (loss) for the year as adjusted for all other non-owner changes in shareholders equity.  SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement.  For the years ended December 31, 2006, 2005 and 2004 comprehensive loss equals the loss for the year.



(f)

Exploration stage company



Pursuant to US GAAP, the Company would be considered an exploration stage company as the Company is devoting its efforts to establishing commercially viable resource properties. However, the identification of the Company as such for accounting purposes does not impact the measurement principles applied to these consolidated financial statements.



(g)

Statements of cash flows



For Canadian GAAP, all cash flows relating to mineral property costs are reported as investing activities. For US GAAP, mineral property acquisition costs would be characterized as investing activities and mineral property exploration costs as operating activities.



The Company has included a subtotal in cash flows from operating activities. Under US GAAP, no such subtotal would be disclosed.



(h)

Recent accounting pronouncements



In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140, to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, Accounting for the Impairment or Disposal of Long-Lived Assets, to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. This standard is not expected to have a significant effect on the Companys future reported financial position or results of operations nor will it result in a difference between the Companys reporting under Canadian GAAP versus US GAAP.









89



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 15  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (cont)



In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.



In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.



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



In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative a qualitative factor. SAB No. 108 is effective for period ending after November 15, 2006. The adoption of this statement had no material effect on the Company's reported financial position or results of operations.



In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R). This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.  This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement had no material effect on the Company's reported financial position or results of operations.



In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.

90



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 15  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (cont)



(i)

Reconciliation:



The effect of the differences between Canadian GAAP and US GAAP (including practices prescribed by the SEC) on the balance sheets, statements of operations and cash flows are summarized as follows:



|(i)   | Assets                                                  |                   |                  
|----- | ------------------------------------------------------- | ----------------- | -----------------
|      |                                                         | December 31,
2006 | December 31,
2005
|      |                                                         |                   |                  
|      | Total assets, under Canadian GAAP                       | $  80,677,728     | $  16,016,353    
|      | Exploration costs  unproven resource properties        | (628,018)         | (1,507,413)      
|      |                                                         |                   |                  
|      | Total assets, under US GAAP                             | $  80,049,710     | $  14,508,940    
|(ii)  | Liabilities                                             |                   |                  
|      |                                                         | December 31,
2006 | December 31,
2005
|      |                                                         |                   |                  
|      | Total liabilities, under Canadian GAAP                  | $  9,235,349      | $   312,222      
|      | Add:  flow through issue cost liability                 | -                 | 115,000          
|      |                                                         |                   |                  
|      | Total liabilities, under US GAAP                        | $  9,235,349      | $   427,222      
|      |                                                         |                   |                  
|(iii) | Share Capital                                           |                   |                  
|      |                                                         | December 31,
2006 | December 31,
2005
|      |                                                         |                   |                  
|      | Total share capital, under Canadian GAAP                | $  48,671,383     | $  18,190,174    
|      | Add:  flow through issue cost under Canadian GAAP       | 1,054,308         | 366,135          
|      | Less:  flow through issue cost under US GAAP            | -                 | (115,000)        
|      |                                                         |                   |                  
|      | Total share capital under US GAAP                       | $  49,725,691     | $  18,441,309    
|      |                                                         |                   |                  
|(iv)  | Retained Earnings (Deficit)                             |                   |                  
|      |                                                         | December 31,
2006 | December 31,
2005
|      |                                                         |                   |                  
|      | Retained Earnings (Deficit), under Canadian GAAP        | $ 21,122,598      | $ (2,765,128)    
|      | Add:  gain on disposal of uranium properties            | 5,652,166         | -                
|      | Less:  exploration costs  unproven resource properties | (6,280,184)       | (1,507,413)      
|      | Less:  flow through share future tax recovery           | (1,054,308)       | (366,135)        
|      |                                                         |                   |                  
|      | Retained Earnings (Deficit) under US GAAP               | $  19,440,542     | $ (4,638,676)    









91



DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

(In Canadian $)



NOTE 15  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (cont)



(i)

Reconciliation:



|(v)   | Net income (loss) for the year                         |               |              |              |            |                               
|----- | ------------------------------------------------------ | ------------- | ------------ | ------------ | ---------- | ------------------------------
|      |                                                        |               |              |              |            | For the year ended December 31
|      |                                                        |               |              |              |            | 2006                          
|      |                                                        |               |              |              |            |                               
|      | Net income (loss) for the year, under Canadian GAAP    | $23,887,726   | $(1,611,919) | $(392,099)  
|      | Add:  gain on disposal of uranium properties           | 5,652,166     | -            | -           
|      | Less:  exploration cost - unproven resource properties | (4,772,771)   | (1,507,413)  | -           
|      | Less:  flow through share future tax recovery          | (1,054,308)   | (366,135)    | -           
|      |                                                        |               |              |              |            |                               
|      | Net income (loss) for the year, under US GAAP          |               | $23,712,813  | $(3,485,467) | $(392,099)
|      |                                                        |               |              |              |            |                               
|(vi)  | Cash used in operating activities                      |               |              |              |           
|      |                                                        |               |              |              |            | For the year ended December 31
|      |                                                        |               |              |              |            | 2006                          
|      |                                                        |               |              |              |            |                               
|      | Cash used in operating activities, under Canadian GAAP | $(1,769,373)  | $(1,438,826) | $(231,807)  
|      | Less:  exploration costs - unproven resource property  |               |              |             
|      | expenditure                                            | (4,772,771)   | (1,507,413)  | (102,017)   
|      |                                                        |               |              |              |            |                               
|      | Cash used in operating activities, under US GAAP       | $ (6,542,144) | $(2,946,239) | $(333,824)  
|      |                                                        |               |              |              |            |                               
|(vii) | Cash used in investing activities                      |               |              |              |           
|      |                                                        |               |              |              |            | For the year ended December 31
|      |                                                        |               |              |              |            | 2006                          
|      |                                                        |               |              |              |            |                               
|      | Cash used in investing activities, under Canadian GAAP | $(12,146,784) | $(3,551,508) | $(102,017)  
|      | Add:                                                   |               |              |              |            | 4,772,771                     
|      |                                                        |               |              |              |            |                               
|      | Cash used in investing activities, under US GAAP       | $(7,374,013)  | $(2,044,095) | $         - 































92





Financial Statements



Titan Uranium Inc.

(a development stage company)

August 31, 2006 and 2005













































































93







[dejour200620famend1006.jpg]



AUDITORS REPORT











To the Shareholders of

Titan Uranium Inc.

(a development stage company)



We have audited the balance sheets of Titan Uranium Inc.as at August 31, 2006 and 2005 and the statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.



In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.





Vancouver, Canada,

[dejour200620famend1008.jpg]

November 21, 2006.























94





Titan Uranium Inc.

(a development stage company)



BALANCE SHEETS

[See Note 1 - Nature of Business and Basis of Presentation]



As at August 31



|                                           | 2006        | 2005       
|------------------------------------------ | ----------- | -----------
|                                           | $           | $          
|                                           |             |            
|ASSETS                                     |             |            
|Current                                    | 10,181,515  | 1,984,273  
|Restricted cash                            | 60,000      | -          
|Accounts receivable                        | 230,818     | 50,323     
|Prepaid expenses                           | 190,127     | 52,483     
|Total current assets                       | 10,662,460  | 2,087,079  
|Property and equipment [note 3]            | 102,031     | 37,070     
|Resource properties [note 4]               | 5,427,737   | 1,220,048  
|Reclamation deposit [note 6]               | 35,000      | -          
|Total assets                               | 16,227,228  | 3,344,197  
|                                           |             |            
|LIABILITIES AND SHAREHOLDERS EQUITY       |             |            
|Current                                    |             |            
|Accounts payable and accrued liabilities   | 731,870     | 185,767    
|Due to related parties [note 5]            | -           | 9,586      
|Total liabilities                          | 731,870     | 195,353    
|                                           |             |            
|Commitments [note 6]                       |             |            
|                                           |             |            
|Shareholders equity                       |             |            
|Share capital [notes 7]                    | 16,877,084  | 4,571,165  
|Share subscription receivable [note 8]     | (15,893)    | (50,428)   
|Contributed surplus [note 7]               | 2,904,619   | 298,645    
|Deficit                                    | (4,270,452) | (1,670,538)
|Total shareholders equity                 | 15,495,358  | 3,148,844  
|Total liabilities and shareholders equity | 16,227,228  | 3,344,197  



See accompanying notes



On behalf of the Board:



Arni Johannson

Phil Olson

Director

Director

















95





Titan Uranium Inc.

(a development stage company)



STATEMENTS OF OPERATIONS AND DEFICIT





Year ended August 31



|                                                                         | 2006        | 2005       
|------------------------------------------------------------------------ | ----------- | -----------
|                                                                         | $           | $          
|                                                                         |             |            
|EXPENSES                                                                 |             |            
|Accounting and audit                                                     | 29,871      | 23,210     
|Amortization                                                             | 30,522      | 11,278     
|Consulting fees [note 5]                                                 | 339,358     | 175,620    
|Investor relations and marketing                                         | 541,369     | 114,162    
|Legal                                                                    | 30,940      | 83,636     
|Listing, filing and transfer agent fees                                  | 49,831      | 28,479     
|Office and miscellaneous                                                 | 122,309     | 24,613     
|Rent and administration                                                  | 34,051      | 15,330     
|Salary                                                                   | 167,993     | -          
|Stock-based compensation [note 9]                                        | 1,168,766   | 157,105    
|Travel and entertainment                                                 | 207,811     | 65,852     
|Interest income                                                          | (122,907)   | (9,236)    
|Loss for the year                                                        | (2,599,914) | (690,049)  
|                                                                         |             |            
|Deficit, beginning of year                                               | (1,670,538) | (980,489)  
|Deficit, end of year                                                     | (4,270,452) | (1,670,538)
|                                                                         |             |            
|Loss per share  basic and diluted                                       | (0.13)      | (0.19)     
|                                                                         |             |            
|Weighted average number of common shares
outstanding  basic and diluted | 20,059,778  | 3,690,665  





See accompanying notes

































96





Titan Uranium Inc.

(a development stage company)



STATEMENTS OF CASH FLOWS



Year ended August 31



|                                                                | 2006        | 2005     
|--------------------------------------------------------------- | ----------- | ---------
|                                                                | $           | $        
|                                                                |             |          
|OPERATING ACTIVITIES                                            |             |          
|Loss for the year                                               | (2,599,914) | (690,049)
|Adjustment for item not involving cash:                         |             |          
|Amortization                                                    | 30,522      | 11,278   
|Stock-based compensation                                        | 1,168,766   | 157,105  
|                                                                | (1,400,626) | (521,666)
|Change in non-cash working capital items:                       |             |          
|Restricted cash                                                 | (60,000)    | -        
|Increase in accounts receivable                                 | (180,495)   | (50,323) 
|Increase in prepaid expenses                                    | (137,644)   | (52,483) 
|(Decrease) increase in accounts payable
and accrued liabilities | 546,103     | (77,726) 
|Reduction in advances to related parties                        | (9,586)     | (6,857)  
|Cash used in operating activities                               | (1,242,248) | (695,341)
|                                                                |             |          
|FINANCING ACTIVITIES                                            |             |          
|Issuance of common shares, net of issuance costs                | 13,777,662  | 3,431,510
|Repayment of loans payable                                      | -           | (37,500) 
|Cash provided by financing activities                           | 13,777,662  | 3,394,010
|                                                                |             |          
|INVESTING ACTIVITIES                                            |             |          
|Investment in resource properties                               | (4,207,689) | (666,048)
|Purchase of equipment                                           | (95,483)    | (48,348) 
|Reclamation deposit advanced                                    | (35,000)    | -        
|Cash used in investing activities                               | (4,338,172) | (714,396)
|                                                                |             |          
|Increase in cash position                                       | 8,197,242   | 1,984,273
|Cash and cash equivalents, beginning of year                    | 1,984,273   | -        
|Cash and cash equivalents, end of year                          | 10,181,515  | 1,984,273
|                                                                |             |          
|Supplemental cash flow information                              |             |          
|Interest paid in cash                                           | -           | -        
|Income taxes paid in cash                                       | -           | -        



See accompanying notes

















97





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005





1. NATURE OF BUSINESS AND BASIS OF PRESENTATION



Nature of business



The Company was incorporated under the Business Corporation Acts of Yukon on January 28, 1999. It was a Capital Pool Company as defined in the TSX Venture Exchange (TSX-V) Policy 2.4 until completing a Qualifying Transaction on May 31, 2005. Immediately prior to closing the Qualifying Transaction, the Company consolidated its issued share capital on a two for one new share basis pursuant to shareholder approval obtained at the Companys annual general meeting. The financial statements have been restated to reflect the share consolidation.



On May 30, 2005 the Company changed its name from Ceduna Capital Corp. to Titan Uranium Exploration Inc. On June 24, 2005 the Company changed its name from Titan Uranium Exploration Inc. to Titan Uranium Inc.



The Company completed its Qualifying Transaction by purchasing an option to acquire a 100% interest in eight mining leases located in Nunavut Territory known as the Thelon Uranium Project. Subsequent to this Qualifying Transaction the Company acquired mineral claims in the Athabasca region of Saskatchewan.



The Company is in process of exploring its resource properties and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of amounts shown for resource properties and related deferred exploration costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing and permitting to complete the development, and future profitable productions or proceeds from the disposition thereof.



These financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not generated any operating revenues to date and has experienced recurring operating losses and accumulated a deficit of $4,270,452 as at August 31, 2006. If the Company is unable to continue to raise additional financings through debt or equity this could impact the Companys ability to continue as a going concern. The operations of the Company have been funded by the issuance of share capital. The Companys continued operations, as intended, are dependent upon its ability to raise additional funding to meet its obligations and to attain profitable operations. Managements plan in this regard is to raise equity financing as required. There are no assurances that the Company will be successful in achieving these goals. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

























98





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



2. SIGNIFICANT ACCOUNTING POLICIES



The financial statements of the Company have been prepared based on the following significant accounting policies:



Use of estimates



The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of commitments and contingencies at the date of the financial statements and the amount of revenues and expenses reported during the period. Actual results could differ materially from those estimates. A significant area requiring the use of management estimates involved the determination of stock based compensation.



Cash and cash equivalents



Cash and cash equivalents consist of highly liquid investments which are readily convertible into cash with maturity dates of three months or less when purchased. As at August 31, 2006 cash equivalents totalled $5,588,333 [2005 - $1,809,236].



Restricted cash



Cash subject to restrictions is classified as restricted cash on the balance sheet. The Company currently holds $60,000 in a guaranteed interest certificate which is restricted for use as security against its credit card debt and has been presented as restricted cash.



Leases



Rental payments under operating leases are expensed as incurred.



Stock-based compensation



The Company follows the fair value method of accounting for stock options awards granted to employees and directors, as recommended by the Canadian Institute of Chartered Accountants Handbook section on stock-based compensation and other stock-based payments.



The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Companys common shares and an expected life of the options. The fair value of direct awards of stock is determined by the quoted market price of the Companys stock.















99





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



2. SIGNIFICANT ACCOUNTING POLICIES (contd.)



Stock-based compensation (contd.)



The prospective application of the fair value method did not have a cumulative impact on the Companys financial statements as the Company had not granted stock option awards prior to fiscal 2005.



Resource properties



The Company is in the exploration stage and accounts for its resource interests whereby all costs related to acquisition, exploration and development are capitalized. These costs will be amortized against revenue from future production or written off if the interest is abandoned or sold.



The carrying values of resource properties will be reviewed at least annually by management on a property-by-property basis to determine if they have become impaired. If impairment is deemed to exist, the resource property will be written down to its net recoverable value. The ultimate recoverability of the amounts capitalized for the resource properties is dependent upon the delineation of economically recoverable reserves, the Companys ability to obtain the necessary financing to complete their development and realize profitable production or proceeds from the disposition thereof. Managements estimates of recoverability of the Companys investment in various projects have been based on current conditions. However, it is possible that changes could occur in the near term which could adversely affect managements estimates and may result in future writedowns of capitalised property carrying values.



Asset retirement obligations



The Company recognizes the fair value of liabilities for asset retirement obligations in the period in which they incur and/or in which a reasonable estimate of such costs can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expenses using a systematic and rational method and is also adjusted to reflect period-to-period changes in the liability resulting from passage of time and revisions to either timing or the amount of the original estimate of the undiscounted cash flow. As at August 31, 2006 the Company does not have an asset retirement obligations.





















100





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



2. SIGNIFICANT ACCOUNTING POLICIES (contd.)



Earnings (loss) per share



Basic earnings (loss) per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury stock method. The treasury stock method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate.



As the Company incurred net losses in fiscal 2006 and 2005, the stock options and share purchase warrants, as disclosed in note 9, were not included in the computation of loss per share as their inclusion would be anti-dilutive.



Property and equipment



Property and equipment are carried at cost less accumulated amortization. The Company provides for amortization on the following basis:



Computer equipment

- 3 years straight line

Exploration equipment

- 3 years straight line

Leasehold improvements

- straight line over the term of the lease

Office furniture

- 5 years straight line



Income taxes



The Company follows the liability method of accounting for income taxes pursuant to Section 3465, Income Taxes, of The Handbook of the Canadian Institute of Chartered Accountants. Under this method, future income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, measured using substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on future income tax assets and liabilities of a change in income tax rates is included in the period that includes the enactment date. In addition, Section 3465 requires recognition of future tax benefits to the extent that realization of such benefits is more likely than not.































101





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



3. PROPERTY AND EQUIPMENT

|                       | Cost
$  | Accumulated
Amortization
$ | Net Book
Value
$
|---------------------- | ------- | -------------------------- | ----------------
|                       |         |                            |                 
|2006                   |         |                            |                 
|Computer equipment     | 22,176  | 6,730                      | 15,446          
|Exploration equipment  | 83,127  | 19,054                     | 64,073          
|Leasehold improvements | 22,274  | 10,748                     | 11,526          
|Office furniture       | 16,252  | 5,266                      | 10,986          
|                       | 143,829 | 41,798                     | 102,031         
|                       |         |                            |                 
|2005                   |         |                            |                 
|Computer equipment     | 23,506  | 4,316                      | 19,190          
|Leasehold improvements | 13,231  | 4,481                      | 8,750           
|Office furniture       | 11,611  | 2,481                      | 9,130           
|                       | 48,348  | 11,278                     | 37,070          





4. RESOURCE PROPERTIES

|                        | Acquisition
Costs
$ | Deferred
Exploration
Costs
$ | Total
$  
|----------------------- | ------------------- | ---------------------------- | ---------
|                        |                     |                              |          
|2006                    |                     |                              |          
|Thelon, Nunavut         | 10,000              | 1,535,105                    | 1,545,105
|Athabasca, Saskatchewan | 894,000             | 2,988,632                    | 3,882,632
|                        | 904,000             | 4,523,737                    | 5,427,737
|                        |                     |                              |          
|2005                    |                     |                              |          
|Thelon, Nunavut         | 10,000              | 297,435                      | 307,435  
|Athabasca, Saskatchewan | 894,000             | 18,613                       | 912,613  
|                        | 904,000             | 316,048                      | 1,220,048





















102





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



4. RESOURCE PROPERTIES (contd.)



[a]

Thelon, Nunavut Properties



On May 31, 2005, the Company purchased an option to acquire a 100% interest in eight mining leases located in Nunavut Territory and known as the Thelon Uranium Project (the Project).



Consideration to acquire the 100% interest in the Project consists of the Company:



[i]

issuing 100,000 common shares of the Company at a price of $0.10 per share (issued) being the fair value of the shares at the time of the agreement date;

[ii]

expending $1,000,000 on recommended exploration work on the Project to include at least 2,500 meters of diamond drilling on or before June 1, 2007;

[iii]

paying advanced royalties totalling $50,000 over a three year period ($30,000 paid, and a further $20,000 on or before June 1, 2007); and

[iv]

paying annual lease payments totalling on or after May 15 of each year ($20,000 paid).



Conditional upon acquiring a 100% interest in the Project, the Company will grant the optionor a 2% Net Smelter Royalty (NSR). This NSR may be reduced to 1% on the payment of $1,000,000 and be reduced to 0.5% on the payment of an additional $1,000,000. The Company will pay advance royalties of $20,000 per year while it owns this Project.



[b]

Athabasca, Saskatchewan Properties



On July 5, 2005 the Company entered into an agreement to acquire a 100% interest in thirty mineral dispositions (Claims) located in the Athabasca Basin, Saskatchewan.



Consideration to acquire the 100% interest in the Claims consist of the Company:



[i]

paying $350,000 and issuing to the vendor 800,000 common share in the capital of the Company for value of $544,000, being the fair value of the shares at the time of the closing of the agreement (paid and issued);

[ii]

issuing to the Vendor 400,000 transferable common share purchase warrants, entitling the holder to acquire up to 400,000 common shares in the capital of the Company at an exercise price of $0.75 per common share for a period of 24 months (issued);

[iii]

granting to the Vendor a 2% Net Smelter Return (NSR), with the option in favour of the Company to buy back 1% of the NSR by paying to the Vendor $1,000,000 at any time prior to commercial production from the Claims;















103





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



4. RESOURCE PROPERTIES (contd.)



[b]

Athabasca, Saskatchewan Properties (contd.)

[iv]

granting to the Vendor a 10% carried interest in the Claims with such carried interest remaining in effect until the commencement of commercial production by the Company on one or more Claims with all costs payable attributable to the Vendor to be paid by the Company and repaid by the Vendor from its working interest and/or initial NSR.

|                                                   | Deferred Exploration Costs
|-------------------------------------------------- | --------------------------
|                                                   | Thelon, NT
$              
|                                                   |                           
|2006                                               |                           
|Exploration costs:                                 |                           
|Additions                                          |                           
|Camp                                               | 463,846                   
|Consulting                                         | 183,662                   
|Drilling                                           | 101,279                   
|Mobilization/demobilization                        | 457,343                   
|Supplies and maintenance                           | 31,540                    
|Surveys                                            | -                         
|                                                   | 1,237,670                 
|Balance, beginning of year                         | 297,435                   
|Balance                                            | 1,535,105                 
|                                                   |                           
|2005                                               |                           
|Additions                                          |                           
|Accommodation and food                             | 6,053                     
|Consulting                                         | 109,232                   
|Mobilization/demobilization                        | 79,408                    
|Shipping/transportation                            | 68,692                    
|Supplies and maintenance                           | 34,050                    
|Additions for the year, being balance,
end of year | 297,435                   

































104





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



5. RELATED PARTIES



The Company has entered into the following transactions with parties not at arms length to the Company:



The Company paid or accrued consulting fees totalling $300,400 [2005 - $155,640] to directors and officers of the Company for the fiscal year 2006.



As at August 31, 2006 there was $nil due to directors for expenses [2005 - $9,586]. The amount is non-interest bearing, unsecured and due on demand.



The above transactions have been recorded at the exchange amounts which is the amount agreed to by the transacting parties. The exchange amount is equivalent to the fair value of the service provided.





6. COMMITMENTS



[i]

On May 1, 2005 the Company entered into a 3 year lease agreement for premises in North Vancouver. Minimum basic rent and occupancy is $2,478 per month. On August 1, 2006 the Company entered into a 3 year lease agreement for premises in Saskatoon. Minimum basic rent and occupancy is $2,514 per month. The minimum commitment over the next 3 years is as follows:



|     | $      
|---- | -------
|     |        
|2007 | 60,612 
|2008 | 49,992 
|2009 | 27,654 
|     | 138,258



[ii]

The Company has provided a $35,000 deposit at a financial institution that is serving as collateral for letters of credit that have been pledged in favour of the Kivalliq Inuit Association. The deposit is bearing interest at market rates. The deposit will be returned to the Company when the Company has satisfied its legal obligations with respect to site reclamation at the Companys Thelon mineral property located in Nunavut [see note 4].

































105





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



7. SHARE CAPITAL



[a]

Authorized: Unlimited number of common shares without par value



[b]

Issued and fully paid- common shares:

|                                                      | Shares
#   | Amount
$    | Contributed
Surplus
$
|----------------------------------------------------- | ---------- | ----------- | ---------------------
|                                                      |            |             |                      
|Balance, August 31, 2004                              | 1,644,375  | 676,767     | -                    
|Share consolidation 2 : 1                             | (822,187)  | -           | -                    
|                                                      | 822,188    | 676,767     | -                    
|Private placement                                     | 6,000,000  | 3,000,000   | -                    
|Conversion of promissory notes                        | 4,642,857  | 750,000     | -                    
|Shares issued for corporate finance fee               | 100,000    | 50,000      | -                    
|Shares issued for advisory fee                        | 50,000     | 25,000      | -                    
|Shares issued for finders fee                         | 37,909     | 13,268      | -                    
|Shares issued for property acquisitions               | 900,000    | 554,000     | -                    
|Exercise of warrants                                  | 177,678    | 72,141      | -                    
|Share issue costs                                     | -          | (570,011)   | -                    
|Agents warrants for prospectus                       | -          | -           | 141,540              
|Stock-based compensation [note 9]                     | -          | -           | 157,105              
|Balance, August 31, 2005                              | 12,730,632 | 4,571,165   | 298,645              
|Private placement                                     | 4,825,000  | 5,900,000   | -                    
|Private placement                                     | 2,631,594  | 5,000,029   | -                    
|Shares issued for corporate finance and
advisory fees | 313,610    | 360,716     | -                    
|Exercise of warrants                                  | 5,965,119  | 3,247,481   | -                    
|Contributed surplus transfer on exercise
of warrants  | -          | 519,078     | (519,078)            
|Exercise of options                                   | 731,750    | 447,700     | -                    
|Contributed surplus transfer on exercise
of options   | -          | 354,080     | (354,080)            
|Share issue costs                                     | -          | (1,802,473) | -                    
|Warrants granted                                      | -          | (1,720,692) | 2,310,366            
|Stock based compensation [note 9]                     | -          | -           | 1,168,766            
|Balance, August 31, 2006                              | 27,197,705 | 16,877,084  | 2,904,619            























106





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



7. SHARE CAPITAL (contd.)



Private Placements

On August 15, 2006 the Company completed its private placement of $5,000,029 by the issuance of 2,631,594 flow-through units. Each unit, priced at $1.90 per unit, consisted of one flow-through common share and one-half of one non-flow through common share purchase warrant. Each whole warrant entitles the holder to purchase an additional common share for a period of up to 24 months at a price of $2.50 per common share. The agents received a cash commission of 8% of the gross proceeds raised and 263,159 warrants entitling the holder to purchase one common share of the Company at a price of $2.00 per common share until August 15, 2008.



The estimated fair value of the agent warrants is recorded as $216,948. The estimated fair value of the common share purchase warrant is recorded as $776,320.



On January 25, 2006 the Company completed the non-brokered portion of an aggregate $2,600,000 private placement. The non-brokered portion consisted of 375,000 units at a price of $1.60 per unit for gross proceeds received of $600,000. Each unit consists of one common share and one-half one share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $2.00 until January 25, 2007. A finders fee of 8% of the gross proceeds was paid. In addition 52,500 warrants entitling the holder to purchase one common share of the Company at a price of $1.75 per common share until January 25, 2007 were issued.



On January 31, 2006 the Company completed the brokered portion of the private placement consisting of 1,250,000 units of a price of $1.60 per unit for gross proceeds of $2,000,000. The brokered private placement contained the same terms as the non-brokered private placement. The agents received a cash commission of 8% of the gross proceeds raised and 125,000 agent warrants entitling the agents to purchase one common share of the Company at a price of $1.75 per common share until January 31, 2007.



The estimated fair value of the agent warrants is recorded as $148,728. The estimated fair value of the common share purchase warrant is recorded as $359,372.



On December 21, 2005 the Company issued 200,000 flow-through common shares at a price of $1.50 per share for gross proceeds of $300,000 through a non-brokered private placement. A finders fee equal to 5% of the gross proceeds was paid.



On October 21, 2005 the Company issued 3,000,000 units at a price of $1.00 per unit for gross proceeds of $3,000,000 through a brokered private placement. Each unit consists of one common share and one-half share purchase warrant. The holder of each whole warrant is entitled to acquire an additional common share at a price of $1.35 per share until October 21, 2007.



The estimated fair value of these warrants is recorded as $585,000.

















107





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



7. SHARE CAPITAL (contd.)



Pursuant to the private placement, the Company issued 215,100 units and $24,900 to settle $240,000 agent fees. Each unit consists of one common share and one-half non-transferable share purchase warrant. The holder of each whole warrant is entitled to acquire an additional common share at a price of $1.35 per share until September 21, 2007. The Company also issued 30,000 units to settle a corporate finance fee. Each unit consists of one common share and one-half non-transferable share purchase warrant. The holder of each whole warrant is entitled to acquire an additional common share at a price of $1.10 per share until September 21, 2007. Additionally, 300,000 non-transferable broker warrants were issued. Each warrant entitles the holder to acquire a common share at a price of $1.10 per share until September 21, 2007.



The estimated fair value of these warrants is recorded as $223,997.



Prospectus Financing

On May 31, 2005, the Company issued 6,000,000 units at $0.50 per unit for gross proceeds of $3,000,000 pursuant to a prospectus offering. Each unit consists of one common share and one-half share purchase warrant. The holder of each whole warrant is entitled to acquire an additional common share at a price of $0.65 per share until November 30, 2006. The Company applied the residual approach and allocated total net proceeds to the common shares and $nil to the attached warrants.



Pursuant to the prospectus financing agreement, the Company issued 100,000 units to the agent to settle corporate finance fee of $50,000. These units have the same terms as the offered units including the fact that the 50,000 warrants are listed for trading. The Company also issued 600,000 non-transferable warrants to the agent which can be exercised at $0.50 per warrant until November 30, 2006 The estimated fair value of these warrants is recorded as $141,540. This amount has been recorded as share issue costs with a corresponding amount in contributed surplus on the balance sheet.



The Company issued 50,000 units to settle an advisory fee in the amount of $25,000 related to the prospectus financing. These units have the same terms as the offered units including the fact that the 25,000 warrants are listed for trading.



Conversion of Promissory Notes

On May 31, 2005, the Company issued 2,500,000 units and 1,000,000 common shares at a price of $0.10 per unit/share respectively for the conversion of $350,000 in non-interest bearing convertible promissory notes. Each unit consists of one common share and one non-transferable share purchase warrant with each warrant entitling the holder to purchase an additional common share of the Company at a price of $0.20 until May 31, 2006.



















108





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



7. SHARE CAPITAL (contd.)



Also on May 31, 2005, the Company issued 1,142,857 units at a price of $0.35 per unit for the conversion of the $400,000 non-interest bearing convertible promissory notes. Each unit consists of one common share and one-half non-transferable share purchase warrant. The holder of each whole warrant is entitled to acquire an additional common share at a price of $0.65 per share until November 30, 2006. The Company issued an additional 37,909 units to settle finders fees of $13,268.



Exercised Warrants

During the fiscal year 2006, 5,965,119 warrants were exercised for gross proceeds of $3,247,481 of which $15,893 was received subsequent to the year end.



Shares Held in Escrow

In connection with the Nunavut, Thelon property acquisition 130,000 common shares and common share warrants were placed in escrow. As of August 31, 2006 58,500 escrow shares have been released. Terms of the release from escrow are as follows:

10% on the Venture Exchange approval bulletin date (May 31, 2005)

15% 6 months from the bulletin date

15% 12 months from the bulletin date

15% 18 months from the bulletin date

15% 24 months from the bulletin date

15% 30 months from the bulletin date

15% 36 months from the bulletin date





8. SHARE SUBSCRIPTION RECEIVABLE



Prior to August 31, 2006, 7,143 warrants [2005 - 91,428] and 11,250 options were exercised at prices of $0.65 and $1.00 [2005 - $0.65 and $0.20], respectively for total proceeds of $15,893 [2005 - $50,428] which were received subsequent to quarter end.





































109





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



9. STOCK OPTIONS AND WARRANTS



Stock options



The Companys Board of Directors approved the adoption of a stock incentive plan in accordance with the policies of the TSX Venture Exchange. The Board of Directors is authorized to grant options to directors, officers, consultants or employees. The exercise price of options granted under the Stock Option Plan shall be as determined by the Board of Directors when such options are granted, subject to any limitations imposed by any relevant stock exchange or regulatory authority. The maximum number of options that may be granted must not exceed 20% of the common shares outstanding at the time of the grant.



On August 15, 2006 the Company granted 44,210 options with an exercise price of $2.00 and an expiry or August 15, 2011 to a consultant of the Company.



On August 23, 2006 the Company granted 100,000 options with an exercise price of $1.80 and an expiry or August 23, 2011 to a director of the Company.



On February 3, 2006 the Company granted a total of 400,000 stock options with an exercise price of $2.02 and an expiry of February 3, 2011. The options were granted to consultants of the Company. During the fiscal year 2006, 150,000 of these options were cancelled.



On November 15, 2005 the Company granted a total of 1,415,000 stock options with an exercise price of $1.00 and an expiry of November 15, 2010. Directors and officers of the Company were granted a total of 1,055,000 options and 360,000 were granted to consultants.





















































110





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



9. STOCK OPTIONS AND WARRANTS (contd.)



During the fiscal year 2005, the Company granted a total of 1,762,000 stock options under the Plan of which, 1,557,000 were granted to directors of the Company and 225,000 were granted to consultants. Prior to the share consolidation 160,000 options were granted to two directors. These options had an exercise price of $0.05 per share, being vested immediately and expiring September 20, 2009. As a result of the 2:1 share consolidation, the number of exercisable options decreased by 80,000 and the exercise price increased to $0.10 per option. On May 31, 2005 1,577,000 stock options were granted to directors and officers of the Company with an exercise price of $0.50 per share and an expiry of May 31, 2010. On June 6, 2005 105,000 stock options were granted to a Investor Relations firm with an exercise price of $0.53 per share with an expiry of June 6, 2010. Consistent with the Companys stock option plans these options vest as follows:



10% on grant date

15% 3 months from grant date

15% 6 months from grant date

15% 9 months from grant date

15% 12 months from grant date

15% 15 months from grant date

15% 18 months from grant date



The estimated fair value for the options granted during the fiscal year 2006 was $2,021,632. Prorating the total amount based on the vesting schedule $781,853 has been expensed as stock-based compensation in the statement of operations with a corresponding amount recorded as contributed surplus in shareholders deficiency. In addition and based on the vesting schedule a further $386,913 from options granted in fiscal year ended August 31, 2005 has been expensed.



The weighted average fair value of the options, being $0.72 per share, recognized in the statements of operations, has been estimated at the grant dates using the Black-Scholes option pricing model. Option pricing models require the input of highly subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate, and, therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Companys stock options. Weighted average assumptions used in the pricing model for the year are as follows:



Risk-free interest rate

3.7%

Expected life of options

4.0 years

Annualized volatility

108%

Dividend rate

Nil

























111



Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



9. STOCK OPTIONS AND WARRANTS (contd.)



Stock option transactions and the number of stock options outstanding are summarised as follows for the fiscal year 2006 and 2005:



|                      | Number
of
Options | Weighted
Average
Exercise Price
|--------------------- | ----------------- | -------------------------------
|                      |                   |                                
|As at August 31, 2004 | -                 | -                              
|Granted               | 1,762,000         | $0.48                          
|As at August 31, 2005 | 1,762,000         | $0.48                          
|Exercised             | (731,750)         | $(0.61)                        
|Cancelled             | (150,000)         | $2.02                          
|Granted               | 1,959,210         | $1.26                          
|As at August 31, 2006 | 2,839,460         | $0.92                          



|Number of
Shares
Outstanding | Number of
Shares
Exercisable | Weighted
Average
Exercise Price
Outstanding
Options | Weighted
Average
Exercise Price
Exercisable
Options | Expiry Date        | Weighted
Average
Life in Years
|---------------------------- | ---------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------------------ | ------------------------------
|                             |                              |                                                     |                                                     |                    |                               
|40,000                       | 40,000                       |                                                     |                                                     | September 20, 2009 | 3.0                           
|1,142,000                    | 905,450                      |                                                     |                                                     | May 31, 2010       | 3.7                           
|40,000                       | 8,500                        |                                                     |                                                     | June 6, 2010       | 3.8                           
|1,223,250                    | 586,500                      |                                                     |                                                     | November 15, 2010  | 4.2                           
|250,000                      | 100,000                      |                                                     |                                                     | February 3, 2011   | 4.4                           
|44,210                       | 4,421                        |                                                     |                                                     | August 15, 2011    | 5.0                           
|100,000                      | 10,000                       |                                                     |                                                     | August 23, 2011    | 5.0                           
|2,839,460                    | 1,654,871                    | $0.77                                               | $.92                                                |                    | 4.0                           





































112







Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



9. STOCK OPTIONS AND WARRANTS (contd.)



Warrants



The fair value of the warrants granted during the period was estimated using the Black-Scholes Pricing Model with the following weighted average assumptions:



Risk-free interest rate

3.7%

Expected life of options

1.7 years

Annualized volatility

111%

Dividend rate

Nil



At August 31, 2006, the Company had the following non-publicly traded share purchase warrants outstanding:



Number

of Shares

Exercise Price

Expiry Date



15,200

$0.50

November 30, 2006

71,500

$0.65

November 30, 2006*

49,296

$1.10

October 21, 2007

107,550

$1.35

October 21, 2007

177,500

$1.75

January 25, 2007

263,159

$2.00

August 15, 2008

754,255

$2.00

January 25, 2007

1,315,797

$2.50

August 15, 2008

2,754,257



* 49,750 warrants expired



At August 31, 2006, the Company had the following publicly traded share purchase warrants outstanding:



Number

of Shares

Exercise Price

Expiry Date



1,686,350

$0.65

November 30, 2006

1,077,740

$1.35

October 21, 2007

2,764,090



















113





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



10. NON-CASH TRANSACTIONS



The Company had the following non-cash transactions during the year ended August 31, 2006:



|                                                                                                                   | $      
|------------------------------------------------------------------------------------------------------------------ | -------
|                                                                                                                   |        
|[a]
215,100 units issued to settle corporate finance fees pursuant to the September private placement [see note 7] | 215,100
|[b]
30,000 units issued for agency fees pursuant to the September private placement [see note 7]                   | 30,000 
|[c]
300,000 non-transferable agent warrants issued pursuant to the September private placement [see note 7]        | 223,997
|[d]
48,510 units issued to settle corporate finance fees pursuant to the January private placement [see note 7]    | 77,616 
|[e]
177,500 non-transferable agent warrants issued pursuant to the January private placement [see note 7]          | 148,728
|[f]
20,000 units issued to settle corporate finance fees pursuant to the August private placement [see note 7]     | 38,000 
|[g]
263,159 non-transferable agent warrants issued pursuant to the August private placement [see note 7]           | 216,948
|[h]
Fair valuation of attached warrants pursuant to August placement [see note 7]                                  | 776,320
|[i]
Fair valuation of attached warrants pursuant to January placement [see note 7]                                 | 359,372
|[j]
Fair valuation of attached warrants pursuant to October placement [see note 7]                                 | 585,000





11. FINANCIAL INSTRUMENTS AND RISK



Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgement, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.



The Companys financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and amounts due to related parties. The fair values of these financial instruments approximate their carrying values, unless otherwise noted. It is not practical to determine the fair values of amounts due to related parties due to their related party nature and the absence of a secondary market for such instruments.



























114





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



11. FINANCIAL INSTRUMENTS AND RISK (contd.)



It is managements opinion that the Company is not exposed to significant interest rate, currency or credit risks arising from these financial instruments.





12. INCOME TAXES



A reconciliation of the statutory rate to the effective tax rate for the Company is as follows:



|                                      | 2006
$    | 2005
$   
|------------------------------------- | --------- | ---------
|                                      |           |          
|Loss for the year before income taxes | 2,600,000 | 690,000  
|                                      |           |          
|Income tax rate                       | 36.13%    | 35.37%   
|Anticipated income tax recovery       | 939,000   | 244,000  
|Permanent differences                 | (493,000) | (91,000) 
|Effect of rate change                 | (181,000) | (27,000) 
|Change in valuation allowance         | (265,000) | (126,000)
|Income tax recovery                   | -         | -        



Details of future income tax assets are as follows:



|                            | 2006
$      | 2005
$   
|--------------------------- | ----------- | ---------
|                            |             |          
|Future income tax assets    |             |          
|Loss carry forwards         | 835,000     | 498,000  
|Fixed assets                | 14,000      | 4,000    
|Other                       | 413,000     | 162,000  
|                            | 1,262,000   | 664,000  
|Future income tax liability | (22,000)    | -        
|                            | 1,240,000   | 664,000  
|Valuation allowance         | (1,240,000) | (664,000)
|Future income tax assets    | -           | -        



























115





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



12. INCOME TAXES (contd.)



Future tax benefits, which may arise as a result of these losses and resource expenditures have been offset by a valuation allowance and have not been recognised in these financial statements.



As at August 31, 2006, the Company has capital losses of $75,000 [2005 - $75,000], undepreciated capital costs of $146,000 [2005 - $48,000], and unused cumulative Canadian exploration and development expenditures of $5,357,000 [2005 - $1,220,000], to carry forward for income tax purposes and are available to reduce taxable income in future years. These amounts can be carried forward indefinitely.



As at August 31, 2006, the Company has non-capital losses of approximately $2,656,000 [2005 - $1,422,000] to carry forward for income tax purposes and are available to reduce taxable income in future years. If unutilised, the non-capital losses will expire as follows:

Non-capital

losses

$



2007

270,000

2008

183,000

2009

201,000

2010

88,000

2014

68,000

2015

516,000

2016

1,330,000

2,656,000



As at August 31, 2006, the Company has investment tax credits from pre-production mining expenditures of approximately $443,200 [2005 - $29,600] to carry forward for income tax purposes and are available to reduce taxable income in future years. If unutilised, the investment tax credits will expire as follows:

ITCs

$



2015

29,600

2016

413,600

443,200



13. COMPARATIVE FIGURES



Certain comparative amounts have been reclassified to conform with the financial statement presentation adopted for the current year.

















116





Titan Uranium Inc.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2006 and 2005



14. SUBSEQUENT EVENTS



Subsequent to August 31, 2006, the following events occurred:



[a]

On October 26, 206 a letter of intent between the Company and Dejour Enterprises Ltd. (Dejour). Under the terms of a binding letter of intent, Dejour and Titan have agreed, subject to due diligence, that Titan will acquire a 100% interest in Dejours claims. Consideration payable to acquire the claims follows:



1.

Titan to pay Dejour 17,500,000 fully paid and assessable common shares in the capital of Titan;

2.

Titan to pay Dejour 3,000,000 transferable common share purchase warrants, entitling the holder to acquire up to 3,000,000 common shares in the capital of the Company at an exercise price of C$2.00 per common share for a period of 24 months, subject to a forced exercise provision whereby Titan can call the automatic exercise of the warrants should Titans common shares trade on the Exchange at a price of $4.00 or more for 20 consecutive trading days;

3.

Dejour to retain a 1% Net Smelter Return on all contributed properties;

4.

Dejour to retain a 10% working interest in each Claim, carried by Titan to completed bankable feasibility study after which Dejour may elect to participate as to its 10% interest or convert to an additional 1% Net Smelter Return;

5.

Titan to provide Dejour with a first right of refusal on all future financing, as long as Dejours ownership in the stock of Titan is greater than 10% of the outstanding shares;

6.

Dejour to provide two full-time and one part-time geologists on terms to be agreed; and

7.

Titan to appoint two Dejour representatives to the Titan board of directors.



The acquisition is conditional upon the completion of additional due diligence and the receipt of both shareholder and regulatory approval to be acquired on or before the end of January 2007.



[b]

Up to November 29, 2006 a further 1,199,642 warrants have been exercised for proceeds of $1,160,695.



[c]

Up to November 29, 2006 a further 885,250 options have been exercised for proceeds of $610,270.

































117





















Titan Uranium Inc.

(a development stage company)





Interim Financial Statements

(Unadutied  Prepared by Management)



For the Three Months Ended November 30, 2006









































































118









UNAUDITED INTERIM FINANCIAL STATEMENTS



In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited financial statements for the period ended November 30, 2006.































































































119









Titan Uranium Inc.

(a development stage company)



BALANCE SHEETS

[Unaudited  Prepared by Management]

[See Note 1 - Nature of Business and Basis of Presentation]







November 30

August 31

2006

2006

(Unaudited)

(Audited)

$

$



ASSETS

Current

Cash and cash equivalents

9,930,063

10,181,515

Restricted cash

61,320

60,000

Accounts receivable

334,612

230,818

Prepaid expenses

44,428

190,127

Total current assets

10,370,423

10,662,460

Property and equipment [note 3]

141,689

102,031

Resource properties [note 4]

6,498,952

5,427,737

Reclamation deposit [note 6]

35,000

35,000

Total assets

17,046,064

16,227,228



LIABILITIES AND SHAREHOLDERS EQUITY

Current

Accounts payable and accrued liabilities

172,100

731,870

Total liabilities

172,100

731,870



Commitments [note 6]



Shareholders equity

Share capital [notes 7]

19,983,896

16,877,084

Share subscription receivable [note 8]

(568,558)

(15,893)

Contributed surplus [note 7]

2,594,236

2,904,619

Deficit

(5,135,610)

(4,270,452)

Total shareholders equity

16,873,964

15,495,358

Total liabilities and shareholders equity

17,046,064

16,227,228



See accompanying notes



On behalf of the Board:

Arni Johannson

Philip E. Olson

Director

Director

120





Titan Uranium Inc.

(a development stage company)



STATEMENTS OF OPERATIONS AND DEFICIT



For the Periods Ended November 30, 2006 and 2005



|                                                                         | Three Months
Ended
November 30
2006 | Three Months
Ended
November 30
2005
|------------------------------------------------------------------------ | ----------------------------------- | -----------------------------------
|                                                                         | $                                   | $                                  
|                                                                         |                                     |                                    
|EXPENSES                                                                 |                                     |                                    
|Accounting and audit                                                     | 4,150                               | 5,275                              
|Amortization                                                             | 13,829                              | 3,859                              
|Consulting fees [note 5]                                                 | 84,480                              | 78,852                             
|Investor relations and marketing                                         | 137,140                             | 148,089                            
|Legal                                                                    | 67,050                              | 19,482                             
|Listing, filing and transfer agent fees                                  | 24,494                              | 9,890                              
|Office and miscellaneous                                                 | 71,908                              | 12,628                             
|Rent and administration                                                  | 27,437                              | 8,158                              
|Salary                                                                   | 83,971                              | -                                  
|Stock-based compensation [note 9]                                        | 399,287                             | 209,336                            
|Travel and entertainment                                                 | 41,935                              | 68,867                             
|Interest income                                                          | (90,523)                            | (1,169)                            
|Loss for the period                                                      | (865,158)                           | (563,267)                          
|                                                                         |                                     |                                    
|Deficit, beginning of period                                             | (4,270,452)                         | (1,670,538)                        
|Deficit, end of period                                                   | (5,135,610)                         | (2,233,805)                        
|                                                                         |                                     |                                    
|Loss per share  basic and diluted                                       | (0.03)                              | (0.04)                             
|                                                                         |                                     |                                    
|Weighted average number of common shares
outstanding  basic and diluted | 28,065,970                          | 14,754,536                         



See accompanying notes































121





Titan Uranium Inc.

(a development stage company)



STATEMENTS OF CASH FLOWS





For the periods ended November 30, 2006 and 2005



|                                                       | Three Months
Ended
November 30
2006 | Three Months
Ended
November 30
2005
|------------------------------------------------------ | ----------------------------------- | -----------------------------------
|                                                       | $                                   | $                                  
|                                                       |                                     |                                    
|OPERATING ACTIVITIES                                   |                                     |                                    
|Loss for the year                                      | (865,158)                           | (563,267)                          
|Adjustment for item not involving cash:                |                                     |                                    
|Amortization                                           | 13,829                              | 3,859                              
|Stock-based compensation                               | 399,287                             | 209,336                            
|                                                       | (452,042)                           | (350,072)                          
|Change in non-cash working capital items:              |                                     |                                    
|Increase in restricted cash                            | (1,320)                             | -                                  
|Increase in accounts receivable                        | (103,794)                           | (8,684)                            
|Decrease in prepaid expenses                           | 145,699                             | 33,766                             
|(Decrease) in accounts payable
and accrued liabilities | (559,670)                           | (110,592)                          
|Reduction in advances to related parties               | -                                   | 7,708                              
|Cash used in operating activities                      | (971,227)                           | (427,874)                          
|                                                       |                                     |                                    
|FINANCING ACTIVITIES                                   |                                     |                                    
|Issuance of common shares, net of issuance costs       | 1,844,478                           | 3,324,738                          
|Cash provided by financing activities                  | 1,844,478                           | 3,324,738                          
|                                                       |                                     |                                    
|INVESTING ACTIVITIES                                   |                                     |                                    
|Investment in resource properties                      | (1,071,215)                         | (234,193)                          
|Purchase of equipment                                  | (53,488)                            | (9,363)                            
|Cash used in investing activities                      | (1,124,703)                         | (243,556)                          
|                                                       |                                     |                                    
|Increase (decrease) in cash position                   | (251,452)                           | 2,653,308                          
|Cash and cash equivalents, beginning of year           | 10,181515                           | 1,984,273                          
|Cash and cash equivalents, end of year                 | 9,930,063                           | 4,637,581                          
|                                                       |                                     |                                    
|Supplemental cash flow information                     |                                     |                                    
|Interest paid in cash                                  | -                                   | -                                  
|Income taxes paid in cash                              | -                                   | -                                  





See accompanying notes















122



Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



1. BASIS OF PRESENTATION



These interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not generated any operating revenues to date and has experienced recurring operating losses and accumulated a deficit of $5,135,610 as at November 30, 2006. If the Company is unable to continue to raise additional financings through debt or equity this could impact the Companys ability to continue as a going concern. The operations of the Company have been funded by the issuance of share capital. The Companys continued operations, as intended, are dependent upon its ability to raise additional funding to meet its obligations and to attain profitable operations. Managements plan in this regard is to raise equity financing as required. There are no assurances that the Company will be successful in achieving these goals. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

















































































123

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



2. SIGNIFICANT ACCOUNTING POLICIES



The financial statements of the Company have been prepared based on the following significant accounting policies:



Use of estimates



The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of commitments and contingencies at the date of the financial statements and the amount of revenues and expenses reported during the period. Actual results could differ materially from those estimates. A significant area requiring the use of management estimates involved the determination of stock based compensation.



Cash and cash equivalents



Cash and cash equivalents consist of highly liquid investments which are readily convertible into cash with maturity dates of three months or less when purchased. As at November 30, 2006 cash equivalents totalled $9,930,063 [August 31, 2006 - $10,181,515].



Restricted cash



Cash subject to restrictions is classified as restricted cash on the balance sheet. The Company currently holds $61,320 [August 31, 2006 - $60,000] in a guaranteed interest certificate which is restricted for use as security against its credit card debt and has been presented as restricted cash.



Leases



Rental payments under operating leases are expensed as incurred.



Stock-based compensation



The Company follows the fair value method of accounting for stock options awards granted to employees and directors, as recommended by the Canadian Institute of Chartered Accountants Handbook section on stock-based compensation and other stock-based payments.



The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Companys common shares and an expected life of the options. The fair value of direct awards of stock is determined by the quoted market price of the Companys stock.















124



Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



2. SIGNIFICANT ACCOUNTING POLICIES (contd.)



Stock-based compensation (contd.)



The prospective application of the fair value method did not have a cumulative impact on the Companys financial statements as the Company had not granted stock option awards prior to fiscal 2005.



Resource properties



The Company is in the exploration stage and accounts for its resource interests whereby all costs related to acquisition, exploration and development are capitalized. These costs will be amortized against revenue from future production or written off if the interest is abandoned or sold.



The carrying values of resource properties will be reviewed at least annually by management on a property-by-property basis to determine if they have become impaired. If impairment is deemed to exist, the resource property will be written down to its net recoverable value. The ultimate recoverability of the amounts capitalized for the resource properties is dependent upon the delineation of economically recoverable reserves, the Companys ability to obtain the necessary financing to complete their development and realize profitable production or proceeds from the disposition thereof. Managements estimates of recoverability of the Companys investment in various projects have been based on current conditions. However, it is possible that changes could occur in the near term which could adversely affect managements estimates and may result in future writedowns of capitalised property carrying values.



Asset retirement obligations



The Company recognizes the fair value of liabilities for asset retirement obligations in the period in which they incur and/or in which a reasonable estimate of such costs can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expenses using a systematic and rational method and is also adjusted to reflect period-to-period changes in the liability resulting from passage of time and revisions to either timing or the amount of the original estimate of the undiscounted cash flow. As at November 30, 2006 the Company does not have any asset retirement obligations.



































125



Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



2. SIGNIFICANT ACCOUNTING POLICIES (contd.)



Earnings (loss) per share



Basic earnings (loss) per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury stock method. The treasury stock method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate.



As the Company incurred net losses in the period ended November 30, 2006 and 2005, the stock options and share purchase warrants, as disclosed in note 9, were not included in the computation of loss per share as their inclusion would be anti-dilutive.



Property and equipment



Property and equipment are carried at cost less accumulated amortization. The Company provides for amortization on the following basis:



Computer equipment

- 3 years straight line

Exploration equipment

- 3 years straight line

Leasehold improvements

- straight line over the term of the lease

Office furniture

- 5 years straight line



Income taxes



The Company follows the liability method of accounting for income taxes pursuant to Section 3465, Income Taxes, of The Handbook of the Canadian Institute of Chartered Accountants. Under this method, future income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, measured using substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on future income tax assets and liabilities of a change in income tax rates is included in the period that includes the enactment date. In addition, Section 3465 requires recognition of future tax benefits to the extent that realization of such benefits is more likely than not.































126



Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



3. PROPERTY AND EQUIPMENT



|                       | Cost
$  | November 30
2006
Accumulated
Amortization
$ | Net Book
Value
$ | August 31

Net Book
Value
$
|---------------------- | ------- | ------------------------------------------- | ---------------- | ---------------------------
|                       |         |                                             |                  |                            
|2006                   |         |                                             |                  |                            
|Computer equipment     | 22,176  | 8,578                                       | 13,598           | 15,446                     
|Exploration equipment  | 136,615 | 28,210                                      | 108,405          | 64,073                     
|Leasehold improvements | 22,274  | 12,761                                      | 9,513            | 11,526                     
|Office furniture       | 16,252  | 6,079                                       | 10,173           | 10,986                     
|                       | 197,317 | 55,628                                      | 141,689          | 102,031                    



4. RESOURCE PROPERTIES



The continuity of expenditures on resource properties is as follows:



|                        | Balance,
August 31
2006
$ | Deferred
Exploration Costs
during
the three month
period
$ | Balance,
November 30,
2006
$
|----------------------- | ------------------------- | ---------------------------------------------------------- | ----------------------------
|                        |                           |                                                            |                             
|Thelon, Nunavut         | 1,545,105                 | 516,454                                                    | 2,061,559                   
|Athabasca, Saskatchewan | 3,882,632                 | 554,761                                                    | 4,437,393                   
|                        | 5,427,737                 | 1,071,215                                                  | 6,498,952                   





































127

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



4. RESOURCE PROPERTIES (contd.)



[a]

Thelon, Nunavut Properties



On May 31, 2005, the Company purchased an option to acquire a 100% interest in eight mining leases located in Nunavut Territory and known as the Thelon Uranium Project (the Project).



Consideration to acquire the 100% interest in the Project consists of the Company:



[i]

issuing 100,000 common shares of the Company at a price of $0.10 per share (issued) being the fair value of the shares at the time of the agreement date;

[ii]

expending $1,000,000 on recommended exploration work on the Project to include at least 2,500 meters of diamond drilling on or before June 1, 2007;

[iii]

paying advanced royalties totalling $50,000 over a three year period ($30,000 paid, and a further $20,000 on or before June 1, 2007); and

[iv]

paying annual lease payments totalling on or after May 15 of each year ($20,000 paid).



Conditional upon acquiring a 100% interest in the Project, the Company will grant the optionor a 2% Net Smelter Royalty (NSR). This NSR may be reduced to 1% on the payment of $1,000,000 and be reduced to 0.5% on the payment of an additional $1,000,000. The Company will pay advance royalties of $20,000 per year while it owns this Project.



[b]

Athabasca, Saskatchewan Properties



On July 5, 2005 the Company entered into an agreement to acquire a 100% interest in thirty mineral dispositions (Claims) located in the Athabasca Basin, Saskatchewan.



Consideration to acquire the 100% interest in the Claims consist of the Company:



[i]

paying $350,000 and issuing to the vendor 800,000 common share in the capital of the Company for value of $544,000, being the fair value of the shares at the time of the closing of the agreement (paid and issued);

[ii]

issuing to the Vendor 400,000 transferable common share purchase warrants, entitling the holder to acquire up to 400,000 common shares in the capital of the Company at an exercise price of $0.75 per common share for a period of 24 months (issued);

[iii]

granting to the Vendor a 2% Net Smelter Return (NSR), with the option in favour of the Company to buy back 1% of the NSR by paying to the Vendor $1,000,000 at any time prior to commercial production from the Claims;



















128

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



4. RESOURCE PROPERTIES (contd.)



[b]

Athabasca, Saskatchewan Properties (contd.)

[iv]

granting to the Vendor a 10% carried interest in the Claims with such carried interest remaining in effect until the commencement of commercial production by the Company on one or more Claims with all costs payable attributable to the Vendor to be paid by the Company and repaid by the Vendor from its working interest and/or initial NSR.





5. RELATED PARTIES



The Company has entered into the following transactions with parties not at arms length to the Company:



The Company paid or accrued consulting fees totalling $84,480 [August 31, 2006 - $300,400] to directors and officers of the Company for the fiscal year 2006.



The above transactions have been recorded at the exchange amounts which is the amount agreed to by the transacting parties. The exchange amount is equivalent to the fair value of the service provided.





6. COMMITMENTS



[i]

On August 1, 2006 the Company entered into a 3 year lease agreement for premises in Saskatoon. Minimum basic rent and occupancy is $2,514 per month. The minimum commitment over the next 3 years is as follows:



$



2007

22,626

2008

30,168

2009

27,654

80,448



[ii]

The Company has provided a $35,000 deposit at a financial institution that is serving as collateral for letters of credit that have been pledged in favour of the Kivalliq Inuit Association. The deposit is bearing interest at market rates. The deposit will be returned to the Company when the Company has satisfied its legal obligations with respect to site reclamation at the Companys Thelon mineral property located in Nunavut [see note 4].



















129



Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



7. SHARE CAPITAL



[a]

Authorized: Unlimited number of common shares without par value



[b]

Issued and fully paid- common shares:



|                                                     | Shares
#   | Amount
$   | Contributed
Surplus
$
|---------------------------------------------------- | ---------- | ---------- | ---------------------
|                                                     |            |            |                      
|Balance, August 31, 2006                             | 27,197,705 | 16,877,084 | 2,904,619            
|                                                     |            |            |                      
|Exercise of options                                  | 885,250    | 610,270    | -                    
|Exercise of warrants                                 | 2,162,992  | 1,786,872  | -                    
|Contributed surplus transfer on exercise
of options  | -          | 488,869    | (488,869)            
|Contributed surplus transfer on exercise
of warrants | -          | 220,801    | (220,801)            
|Stock based compensation                             | -          | -          | 399,287              
|Balance, November 30, 2006                           | 30,245,947 | 19,983,896 | 2,594,236            



Shares Held in Escrow

In connection with the Nunavut, Thelon property acquisition 130,000 common shares and common share warrants were placed in escrow. As of November 30, 2006 71,500 escrow shares have been released. Terms of the release from escrow are as follows:

10% on the Venture Exchange approval bulletin date (May 31, 2005)

15% 6 months from the bulletin date

15% 12 months from the bulletin date

15% 18 months from the bulletin date

15% 24 months from the bulletin date

15% 30 months from the bulletin date

15% 36 months from the bulletin date





8. SHARE SUBSCRIPTION RECEIVABLE



Prior to November 30, 2006, 963,350 warrants were exercised at a price of $0.65 for total proceeds of $626,178 which was received subsequent to quarter end.  In addition, $57,620 in subscriptions were received but shares not issued prior to quarter end for the exercise of 95,000 options.   At November 30, 2006, net proceeds of $568,558 was receivable for warrant and option exercises which was received subsequent to quarter end.















130

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



9. STOCK OPTIONS AND WARRANTS



Stock option transactions and the number of stock options outstanding are summarised as follows for the fiscal year 2006 and 2005:



|                        | Number
of
Options | Weighted
Average
Exercise Price
|----------------------- | ----------------- | -------------------------------
|                        |                   |                                
|As at August 31, 2006   | 2,839,460         | $0.92                          
|Exercised               | (885,250)         | ($0.68)                        
|As at November 30, 2006 | 1,954,210         | $1.01                          



|Number of
Shares
Outstanding | Number of
Shares
Exercisable | Weighted
Average
Exercise Price
Outstanding
Options | Weighted
Average
Exercise Price
Exercisable
Options | Expiry Date       | Weighted
Average
Life in Years
|---------------------------- | ---------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----------------- | ------------------------------
|                             |                              |                                                     |                                                     |                   |                               
|647,000                      | 647,000                      |                                                     |                                                     | May 31, 2010      | 3.4                           
|31,000                       | 15,250                       |                                                     |                                                     | June 6, 2010      | 3.5                           
|894,500                      | 470,000                      |                                                     |                                                     | November 15, 2010 | 4.0                           
|237,500                      | 57,500                       |                                                     |                                                     | February 3, 2011  | 4.2                           
|44,210                       | 25,000                       |                                                     |                                                     | August 15, 2011   | 4.7                           
|100,000                      | 11,053                       |                                                     |                                                     | August 23, 2011   | 4.7                           
|1,954,210                    | 1,225,803                    | $1.01                                               | $.68                                                |                   | 3.8                           



The weighted average fair value of the options, being $0.72 per share, recognized in the statements of operations, has been estimated at the grant dates using the Black-Scholes option pricing model. Option pricing models require the input of highly subjective assumptions including the expected volatility. Changes in the assumptions can materially affect the fair value estimate, and, therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Companys stock options. Weighted average assumptions used in the pricing model for the year are as follows:



Risk-free interest rate

3.7%

Expected life of options

4.0 years

Annualized volatility

108%

Dividend rate

Nil























131

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



9. STOCK OPTIONS AND WARRANTS (contd.)



Warrants



The fair value of the warrants granted during the period was estimated using the Black-Scholes Pricing Model with the following weighted average assumptions:



Risk-free interest rate

3.7%

Expected life of options

1.7 years

Annualized volatility

111%

Dividend rate

Nil



At November 30, 2006, the Company had the following non-publicly traded share purchase warrants outstanding:



Number

of Shares

Exercise Price

Expiry Date



9,600

$1.10

October 21, 2007

107,550

$1.35

October 21, 2007

136,045

$1.75

January 25, 2007

187,909

$2.00

August 15, 2008

677,404

$2.00

January 25, 2007

1,315,797

$2.50

August 15, 2008

2,434,305



At November 30, 2006, the Company had the following publicly traded share purchase warrants outstanding:



|Number
of Shares | Exercise Price | Expiry Date     
|---------------- | -------------- | ----------------
|                 |                |                 
|914,300          | $1.35          | October 21, 2007



































132

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



10. FINANCIAL INSTRUMENTS AND RISK



Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgement, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.



The Companys financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and amounts due to related parties. The fair values of these financial instruments approximate their carrying values, unless otherwise noted. It is not practical to determine the fair values of amounts due to related parties due to their related party nature and the absence of a secondary market for such instruments.



It is managements opinion that the Company is not exposed to significant interest rate, currency or credit risks arising from these financial instruments.













































































133

#





Titan Uranium Inc.

(a development stage company)



NOTES TO FINANCIAL STATEMENTS



November 30, 2006

(Unaudited)



11. SUBSEQUENT EVENTS



Subsequent to November 30, 2006, the following events occurred:



[a]

On December 15, 2006 the Company and Dejour Enterprises Ltd. (Dejour) closed the acquisition of Dejours uranium properties in the Athabasca Basin of Saskatchewan, Canada.  In consideration for the uranium assets, Titan issued to Dejour the following:



1.

Titan to pay Dejour 17,500,000 fully paid and assessable common shares in the capital of Titan;

2.

Titan to pay Dejour 3,000,000 transferable common share purchase warrants, entitling the holder to acquire up to 3,000,000 common shares in the capital of the Company at an exercise price of C$2.00 per common share for a period of 24 months, subject to a forced exercise provision whereby Titan can call the automatic exercise of the warrants should Titans common shares trade on the Exchange at a price of $4.00 or more for 20 consecutive trading days;

3.

Dejour to retain a 1% Net Smelter Return on all contributed properties;

4.

Dejour to retain a 10% working interest in each Claim, carried by Titan to completed bankable feasibility study after which Dejour may elect to participate as to its 10% interest or convert to an additional 1% Net Smelter Return;

5.

Titan to provide Dejour with a first right of refusal to participate in all equity financings of Titan to the extent necessary to enable Dejour to maintain its equity interest in Titan, as long as Dejours ownership in the stock of Titan is greater than 10% of the outstanding shares;

6.

Dejour to provide two full-time and one part-time geologists on terms to be agreed; and

7.

Titan to appoint two Dejour representatives to the Titan board of directors.



The acquisition was approved by the shareholders of both Titan and Dejour at meetings held on January 22, 2007 and is still awaiting final regulatory approval.



[b]

Up to January 23, 2007 a further 398,449 warrants have been exercised for proceeds of $748,511.



[c]

Up to January 23, 2007 a further 206,250 options have been exercised for proceeds of $143,305.

































134



















Signature Page



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.





Dejour Enterprises Ltd.

Registrant



|Dated:  October 24, 2007 | Signed:  /s/  Robert L. Hodgkinson  
|------------------------ | ------------------------------------
|                         |                                     
|                         | Robert L. Hodgkinson,
Chairman & CEO

























































135

#