UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 20-F



[]

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, 2008

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.



73,651,882



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



If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes [  ] No [X]



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 _X_  Non-accelerated filer  ___



Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



U.S. GAAP [  ]

International Financial Reporting Standards as issued

Other[ X]



by the International Accounting Standards Board [  ]



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 2 of 109

Index to Exhibits on Page 73



















































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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                                 | 38  
|Item 6.   | Directors, Senior Management and Employees                                   | 47  
|Item 7.   | Major Shareholders and Related Party Transactions                            | 57  
|Item 8.   | Financial Information                                                        | 59  
|Item 9.   | The Offer and Listing                                                        | 61  
|Item 10.  | Additional Information                                                       | 63  
|Item 11.  | Quantitative and Qualitative Disclosures about Market Risk                   | 70  
|Item 12.  | Description of Other Securities Other Than Equity Securities                 | 70  
|          |                                                                              |     
|          | PART II                                                                      |     
|          |                                                                              |     
|          |                                                                              |     
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                              | 70  
|Item 14.  | Material Modifications to the Rights of Security Holders and Use of Proceeds | 70  
|Item 15.  | Controls and Procedures                                                      | 70  
|Item 16.  | Reserved                                                                     | 71  
|Item 16A. | Audit Committee Financial Expert                                             | 71  
|Item 16B. | Code of Ethics                                                               | 71  
|Item 16C. | Principal Accountant Fees and Services                                       | 73  
|Item 16D. | Exemptions from Listing Standards for Audit Committees                       | 73  
|Item 16E. | Purchase of Equity Securities by the Issuer and Affiliated Purchasers        | 73  
|          |                                                                              |     
|          | PART III                                                                     |     
|          |                                                                              |     
|Item 17.  | Financial Statements                                                         | 73  
|Item 18.  | Financial Statements                                                         | 73  
|Item 19.  | Exhibits                                                                     | 73  

























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 the basis of one (1) new for every fifteen (15) old shares and the name of the company was changed to Dejour Enterprises Ltd. On June 6, 2003, the shareholders approved a resolution to complete a one-for-three-share consolidation, which became effective on October 1, 2003. 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, 2008, the Company had proven reserves and production of oil and gas in British Columbia and Alberta, Canada. Reserves attributable to the Company located in the State of Colorado as of December 31, 2007 were exchanged for additional exploration acreage.



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.



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.









4



PART I



ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS



1.A.1.  Directors

Table No. 1 lists as of 5/29/2009 the names of the Directors of the Company.



Table No. 1

Directors

______________________________________________________________________________

______________________________________________________________________________



|Name                      | Age | Date First Elected or Appointed
|------------------------- | --- | -------------------------------
|                          |     |                                
|Craig Sturrock (1)(4)     | 65  | August 22, 2005                
|Charles W.E. Dove (2) (3) | 53  | August 17, 2007                
|Robert L. Hodgkinson (2)  | 59  | May 18, 2004                   
|Harrison F. Blacker (5)   | 58  | April 2, 2008                  
|Robert Holmes (1)(6)      | 65  | October 17, 2008               
|Richard Patricio (1)(7)   | 35  | October 17, 2008               



(1)

Member of Audit Committee.

(2)

Suite 1100, 808 West Hastings Street, Vancouver, BC V6C 2X4

(3)

Mr. Dove subsequently resigned as a Director effective June 21, 2009.

(4)

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

(5)

1401 17th Street, #300, Denver, CO 80202

(6)

80800 Vista Bonita Trail, La Quinta, CA 92253

(7)

130 King Street West, Suite 2500, Toronto, ON M5X 1A9

______________________________________________________________________________

______________________________________________________________________________





1.A.2.  Senior Management

Table No. 2 lists, as of 5/29/2009, 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
|--------------------------------------------------------------- | --- | -------------------------
|                                                                |     |                          
|Robert L. Hodgkinson, Chairman & CEO                            | 59  | July 14, 2004            
|Mathew H. Wong, Corporate Secretary and Chief Financial Officer | 34  | July 14, 2004            
|Harrison F. Blacker, President and COO of Dejour Energy (USA)   | 58  | April 2, 2008            
|Charles W.E. Dove, President of Dejour Energy (Alberta) Ltd.    | 53  | April 3, 2006            

______________________________________________________________________________











5





1.B.  Advisors

The Companys Canadian Legal Counsel:

DuMoulin Black LLP

Contact: Corey Dean

595 Howe Street

Suite 1000

Vancouver, B.C. V6C 2T5 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 2004 to 2008 ended December 31st was derived from the audited financial statements of the Company as audited by Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants.



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

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Table No. 3

Selected Financial Data

(CDN$ in 000, except per share data)

________________________________________________________________________________

________________________________________________________________________________



|                                    | Year
Ended
Dec 31,
2008 | Year
Ended
Dec 31,
2007 | Year
Ended
Dec 31,
2006 | Year
Ended
Dec 31,
2005 | Year
Ended
Dec 31,
2004
|----------------------------------- | ----------------------- | ----------------------- | ----------------------- | ----------------------- | -----------------------
|CANADIAN GAAP                       |                         |                         |                         |                         |                        
|                                    |                         |                         |                         |                         |                        
|Revenue                             | $5,766                  | Nil                     | Nil                     | Nil                     | Nil                    
|Net Income (Loss) for the Period    | ($20,891)               | ($26,810)               | $23,888                 | ($1,612)                | ($392)                 
|Basic Income (Loss) Per Share       | ($0.29)                 | ($0.40)                 | $0.45                   | ($0.06)                 | ($0.04)                
|Dividends Per Share                 | Nil                     | Nil                     | Nil                     | Nil                     | Nil                    
|Weighted Avg. Shares, basic (000)   | 72,211                  | 66,588                  | 52,564                  | 25,612                  | 9,856                  
|Weighted Avg. Shares, diluted (000) | 72,211                  | 66,588                  | 56,558                  | 25,612                  | 9,856                  
|Year-end Shares (000)               | 73,652                  | 70,128                  | 60,900                  | 39,017                  | 15,796                 
|                                    |                         |                         |                         |                         |                        
|Working Capital                     | ($12,712)               | $11,335                 | $11,769                 | $12,167                 | $1,580                 
|Resource Properties                 | $57,684                 | $35,411                 | $25,880                 | $3,425                  | Nil                    
|Long-term Investments               | $2,722                  | $12,600                 | $36,539                 | -                       | -                      
|Long-Term Debt                      | $1,950                  | Nil                     | $2,852                  | Nil                     | Nil                    
|Capital Stock                       | $64,939                 | $61,393                 | $48,671                 | $18,190                 | $2,772                 
|Retained Earnings (Deficit)         | ($26,579)               | ($5,688)                | $21,123                 | ($2,765)                | ($1,153)               
|Total Assets                        | $62,306                 | $63,143                 | $80,678                 | $16,016                 | $1,631                 
|                                    |                         |                         |                         |                         |                        
|US GAAP                             |                         |                         |                         |                         |                        
|Net Income (Loss) for the Period    | ($34,181)               | ($29,523)               | $23,828                 | ($3,485)                | ($392)                 
|Earnings (Loss) Per Share           | ($0.47)                 | ($0.42)                 | $0.45                   | ($0.14)                 | ($0.04)                
|Resource Properties                 | $44,233                 | $34,783                 | $25,252                 | $1,917                  | Nil                    
|Retained Earnings (Deficit)         | ($44,515)               | ($10,334)               | $19,189                 | ($4,639)                | ($1,153)               
|Total Assets                        | $48,854                 | $62,515                 | $80,050                 | $14,509                 | $1,631                 





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.









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Table No. 4

U.S. Dollar/Canadian Dollar



|Period                       | Average | High  | Low   | Close
|---------------------------- | ------- | ----- | ----- | -----
|                             |         |       |       |      
|Fiscal Year Ended 12/31/2008 | $1.07   | $1.24 | $0.98 | $1.22
|Fiscal Year Ended 12/31/2007 | 1.02    | 1.16  | 0.95  | 0.99 
|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 



|May 2009      |  | $1.19 | $1.10 | $1.10
|------------- |  | ----- | ----- | -----
|April 2009    |  | 1.26  | 1.19  | 1.19 
|March 2009    |  | 1.30  | 1.22  | 1.26 
|February 2009 |  | 1.27  | 1.22  | 1.27 
|January 2009  |  | 1.27  | 1.18  | 1.24 
|December 2008 |  | 1.30  | 1.20  | 1.22 



3.B.  Capitalization and Indebtedness



Not Applicable



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 oil and natural gas in commercial quantities.  Many exploration projects do not result in the discovery of commercially recoverable oil and gas deposits and this occurrence could ultimately result in Dejour having to cease operations.

Dejour Has a Working Capital Deficit, 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:

As of December 31, 2008, the Company had a working capital deficit of ($12,712,251). One of the Companys oil and gas projects has advanced to the commercial production stage, but current cash flow is insufficient to meet the Companys cash requirements. The Company does not know if it will ever achieve self-sustaining commercial oil and gas operations. Historically, the only source of funds available to the Company has been through the sale of its common shares, debt and bank borrowings, and the sale of assets. Any future additional equity financing would cause dilution to current stockholders.



Dejour Will Require Additional Capital in Order to Repay Amounts Due:

As of December 31, 2008, the Company had a Promissory Note with a balance of $4,604,040 (US$3,780,000) due on the earlier of the Company completing an equity or debt financing, or July 1, 2009. The Company also has borrowed $1,950,000 under a Promissory Note issued by and borrowed a further $600,000 from a company controlled by the Companys CEO. These amounts are secured by the Companys assets. As of June 2009, Dejour has reached agreements with the lenders to restructure the debt amounts through the issuance of common shares and warrants and the issuance of new debt instruments due in 2010. These agreements are subject to the approval of the TSX and regulatory compliance. If the Company is unable to obtain the approvals necessary, the currently outstanding amounts will be due, and Dejour will require additional capital in order to meet its repayment requirements. If approval is received, Dejour will be required to raise additional capital to meet the new due dates in 2010.  If the Company is unable to repay these amounts, the lenders could foreclose upon the Companys assets, which could ultimately result in Dejour having to curtail or cease operations.



8



Dejour is Out of Compliance with Its Bank Loan Covenants:

The Companys subsidiary, Dejour Energy (Alberta) Ltd. (DEAL) has secured a revolving operating loan facility with a Canadian Bank for up to $7,000,000, subject to certain oil and gas production targets. The facility is secured by DEALs oil and gas assets in Canada, and as of December 31, 2008, the Company had drawn $5,550,000 against the line of credit. In accordance with the terms of the line of credit, DEAL is required to maintain an adjusted working capital ratio of not less than 1.10 to 1.00. As of December 31, 2008, DEALs working capital ratio was under the required ratio and thus was not in compliance with the covenant related to the loan facility. Subsequent to the year end, the terms of the revolving loan were restructured. The facility was reduced from $7,000,000 to $6,100,000, and the interest rate increased from the Canadian prime rate plus 1% to Canadian prime rate plus 3%. The adjusted working capital ratio requirement was waived for the three month period ended March 31, 2009, but the Company shall make certain repayments on the account using the proceeds from the sale of properties. If the Company is unable to complete the sale of properties or otherwise meet the terms of the facility, it may be required to repay the entire amount borrowed under the facility, or, if unable to repay, may lose certain of its Canadian assets.



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. As of March 31, 2009, there were 5,688,000 share purchase options outstanding, of which 1,960,083 share purchase options are vested and exercisable. If all the vested options were exercised, it would result in an additional 1,960,083 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, 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 exploration and production activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.



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.

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 CEO, Robert Hodgkinson, its President of Dejour (USA), Harrison Blacker, its President of DEAL, Charles Dove, and its Corporate Secretary and Chief Financial Officer Mr. Mathew Wong.



9



As a "Foreign Private Issuer, 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.  As a foreign Private Issuer, Dejours officers, directors and principal shareholders are exempt from Exchange Act Section 16s short-swing insider disclosure and profit recovery provisions. The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.



Risks Pertaining to the Industry



Oil and Gas Exploration Has a High Degree of Risk and the Companys Exploration Efforts May Be Unsuccessful, Which Would Have a Negative Effect on the Companys Operations:



There is no certainty that the expenditures to be made by the Company in the exploration of its current projects, or any additional project interests the Company may acquire, as described herein, will result in discoveries of recoverable oil and gas in commercial quantities.  An exploration project may not result in the discovery of commercially recoverable reserves and the level of recovery of hydrocarbons from a property may not be a commercially recoverable (or viable) reserve which can be legally and economically exploited. If exploration is unsuccessful and no commercially recoverable reserves are defined, management would be required to evaluate and acquire additional projects which would require additional capital, or the Company would have to cease operations altogether.



Hydrocarbon Exploration and Production Has Substantial Operating and Drilling Hazards Which Could Result in Failure of the Companys Projects or Substantial Liabilities Which May Not Be Covered by Insurance:



Oil and natural gas exploration and production operations are subject to all the risks and hazards typically associated with such operations. Hazards include well fires, explosions, blowouts, and oil spills, each of which could result in substantial damage to oil and natural gas wells, producing facilities, other property and the environment or in personal injury. Although the operator of each property in which the Company has an interest typically maintains liability insurance in an amount which they consider adequate, the nature of these risks is such that liabilities could exceed policy limits, in which event the Company, as an owner of an interest in these wells or as the operator, could incur significant costs that could have a materially adverse effect upon its financial condition. Oil and natural gas production operations are also subject to all the risks typically associated with such operations, including premature decline of reservoirs and the invasion of water into producing formations. Any unforeseen hazard could result in the failure of the Companys operations on that project, which would have a negative effect on the Companys financial condition or cause the Company to cease operations altogether.



The Oil and Gas Industry is Highly Competitive, and if Dejour is Unsuccessful in Competing With Other Oil and Gas Companies, It Would Negatively Affect the Companys Ability to Operate:



The oil and gas industry is highly competitive, including the acquisition of property interests, equipment, skilled personnel, and product marketing. The Company is required to directly compete with a substantial number of other oil and gas companies. Many of these other companies, both public and private, have significantly greater financial and personnel resources than the Company. Such competitors could outbid the Company for such projects, equipment or personnel, or produce oil and gas at lower costs which would have a negative effect on the Companys operations and financial condition, including forcing the Company to cease operations altogether.



Commodity Prices May Not Support Corporate Profit:



The petroleum industry in general is intensely competitive and there is no assurance that, even if commercial quantities of oil or gas are discovered and developed, a profitable market will exist for the sale of same.  Factors beyond the control of the Company may affect the marketability of any substances discovered.  The price of natural resources are volatile over short periods of time, and is affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased production due to improved recovery techniques. If the Company is unable to economically produce oil and gas from its projects, it would have a negative effect on the Companys financial condition, or require the Company to cease operations altogether.



10



Oil and Gas Reserve Information is Estimated and May Not Be Economic to Produce:



The Companys oil and gas reserves have been independently evaluated in accordance with applicable securities laws by independent professional consultants. These evaluations are based, in part, on a number of assumptions and variable factors such as historical and initial production rates, production decline rates, ultimate recovery of reserves, amount and timing of capital expenditures, marketability of oil and gas production, royalty rates, operating costs, and taxes and government levies. These assumptions were based on forecasts in effect and use at the time of the preparation of the report and may be subject to change or factors outside of the Companys control. Actual production, cash flows, and recovery rates from these reserve estimates will vary, and such variations could have a material effect on the Companys operations and financial condition.



The Company Must Successfully Replace Its Oil and Natural Gas Reserves:



The Companys future oil and natural gas reserves, production and cash flows to be derived therefrom are highly dependent on the Companys success in exploring the current reserve base and acquiring or discovering new reserves. Without the successful addition of new reserves, any existing reserves the Company may have at any particular time and the production therefrom will decline over time as such existing reserves are exploited. A future increase in Dejours reserves will depend not only on the Companys ability to develop any properties it may have from time to time, but also on its ability to select and acquire suitable prospects or producing properties. If the Company is unsuccessful in discovering and successfully exploiting additional reserves, it will have a negative effect on the Companys operations and financial condition.



The Companys Operations Are Subject to Substantial Environmental Regulations Which Could Have a Negative Effect on the Companys Operations and Financial Condition:



The current and anticipated future operations of the Company require permits from various federal, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing various elements of the petroleum industry.  The Companys exploration and production activities are subject to various laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies.



The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. All permits which the Company may require for future exploration may not be obtainable on reasonable terms or such laws and regulations, or new legislation or modifications to existing legislation, could have an adverse effect on any project that the Company might undertake.



Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions.



Amendments to current laws, regulations and permits governing operations and activities of oil and gas companies, or more stringent implementation thereof, could have a material adverse impact on the Company, which may adversely effect the Companys financial condition, or require the Company to cease operations altogether.



The Companys Title to Its Properties May Be Disputed By Third Parties Which Could Result in the Company Losing Title to Its Properties:



The Company has only done a preliminary title survey of its exploration properties in accordance with industry standards. These procedures do not guarantee the Companys title and therefore, in accordance with the laws of the jurisdictions in which these properties are situated, their existence and area could be in doubt. Unregistered agreements or transfers, or native land claims, may affect title.  If title is disputed, the Company will have to defend its ownership through the courts, which would likely be an expensive and protracted process and have a negative effect on the Companys operations and financial condition. In the event of an adverse judgment, the Company would lose its property rights.



11



Canada is a Signatory to the Kyoto Protocol Which Could Negatively Change Future Operations By Restricting the Companys Activities or Increasing Operating Costs:



Canada is a signatory to the United Nations Framework Convention on Climate Change and has ratified the Kyoto Protocol to set legally binding targets to reduce nationwide emissions of greenhouse gases, including carbon dioxide, methane, and nitrous oxide. Oil and gas exploration and production and other petroleum operations and related activities emit some greenhouse gases, which may subject the Canadian oil and gas industry, including the Company, to legislation or other regulatory initiatives designed to regulate emissions of greenhouse gasses. The federal government of Canada has proposed a Climate Change Plan for Canada, which suggests further legislation will set greenhouse gases emission reduction requirements for various industrial activities, including oil and gas exploration and production. Future federal legislation as well as Provincial emission reduction requirements, may require the reduction of emissions produced by the Companys operations and facilities. These new requirements and the additional costs required to comply could have a material effect on the Companys operations and financial condition.





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 Exchange and the NYSE Amex Stock Exchanges 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, 2008 there were 73,651,882 common shares issued and outstanding. As of December 31, 2008 there were no First Preferred Shares and no Second Preferred Shares issued and outstanding. As of March 31, 2009, the latest fiscal period for which financial statements are available, there were 73,725,512 common shares issued and outstanding, and 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$).







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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 the basis of one (1) new for every fifteen (15) old shares and the name of the company was changed to Dejour Enterprises Ltd. On June 6, 2003, the shareholders approved a resolution to complete a one-for-three-share consolidation which became effective on October 1, 2003. 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 2004 | Private Placement (1)                                         | 6,000,000        | 1,796,760     
|            | For bridge loan financing fee (2)                             | 200,000          | 50,000        
|            |                                                               |                  |               
|Fiscal 2005 | Shares issued as finders fee                                 | 185,791          | (120,764)     
|            | Private Placement (3)                                         | 1,000,000        | 500,000       
|            | Private Placement (4)                                         | 650,000          | 325,000       
|            | Private Placement (5)                                         | 8,076,923        | 5,250,000     
|            | Private Placement (6)                                         | 4,500,000        | 2,914,808     
|            | Private Placement (7)                                         | 6,617,500        | 6,516,625     
|            | Exercise of share purchase warrants and agents options       | 2,024,148        | 1,035,608     
|            | Exercise of stock options                                     | 154,965          | 52,286        
|            | Shares issued for services                                    | 11,500           | 9,200         
|            |                                                               |                  |               
|Fiscal 2006 | Private Placement (8)                                         | 5,300,000        | 7,950,000     
|            | Private Placement (9)                                         | 2,771,333        | 4,157,000     
|            | Exercise of share purchase warrants and agents options       | 7,551,194        | 7,426,683     
|            | Exercise of stock options                                     | 760,407          | 433,321       
|            | Shares issued for the acquisition of the Retamco Project (10) | 5,500,000        | 12,088,991    
|            |                                                               |                  |               
|Fiscal 2007 | Private Placement (11)                                        | 3,773,980        | 10,001,047    
|            | Private Placement (12)                                        | 1,000,000        | 1,820,000     
|            | Conversion of Convertible Debentures (13)                     | 273,399          | 394,752       
|            | Exercise of Warrants                                          | 3,444,490        | 2,859,863     
|            | Exercise of Stock Options                                     | 736,737          | 557,800       
|            |                                                               |                  |               
|Fiscal 2008 | Conversion of Convertible Debentures (14)                     | 884,242          | 1,214,497     
|            | Exercise of Warrants                                          | 958,263          | 1,447,464     
|            | Exercise of Stock Options                                     | 1,681,048        | 887,621       
|            |                                                               |                  |               
|Q1 FY 2009  | Exercise of Stock Options                                     | 73,630           | 20,248        



(1)

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.

(2)

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.



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(3)

The Private Placement consisted of 1,000,000 common shares issued at $0.50 per share. 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.

(4)

The Private Placement consisted of 650,000 common shares at $0.50 per share for gross proceeds of $325,000. 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 (3) above totaled $5,372.  The finders fees associated with this financing were paid to Rainwalker Management Ltd.

(5)

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.

(6)

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 $19,582; 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.

(7)

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.

(8)

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.







14

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(9)

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.

(10)

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.

(11)

The Private Placement consisted of 3,773,980 common share units at $2.65 per unit for gross proceeds of $10,001,047. Each unit consisted of one common share and one-half of a common share purchase warrant. Each full warrant is convertible to one common share at a price of $3.35 before May 25, 2009. Finders fees of $493,215 and other related costs of $30,564 were paid in relation to the placement. The Company also issued 217,139 agent compensation warrants, exercisable at $3.35 per share before December 31, 2008.

(12)

The Private Placement consisted of 1,000,000 flow-through common shares at a price of $1.82 per share. Gross proceeds from the placement were $1,820,000, which is committed to be spent on qualifying Canadian Exploration Expenditures. In relation to the placement, the Company paid $9,600 in related costs.

(13)

During the year, the Company issued 273,399 shares pursuant to the conversion of US$349,850 in principal and US$12,493 of interest payable of convertible debentures.

(14)

During the year, the Company issued 884,242 common shares pursuant to the conversion of US$1,047,995 in principal and US$145,731 of interest payable of convertible debentures.



Capital Expenditures



|Fiscal Year |                
|----------- | ---------------
|            |                
|Fiscal 2004 | $102,017 (1)   
|Fiscal 2005 | 3,551,508 (2)  
|Fiscal 2006 | $12,146,784 (3)
|Fiscal 2007 | $8,152,987 (4) 
|Fiscal 2008 | $27,658,300 (5)



(1)

These funds were 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.

(2)

$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.

(3)

$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)

$15,293 of these funds was spent on the purchase of equipment; and $8,137,694 was spent on the Companys resource properties. (For a breakdown on the resource property expenditures, see Note 6 to the Companys audited consolidated financial statements for the fiscal year ended December 31, 2007.)

(5)

$67,049 of these funds was spent on the purchase of equipment; and $27,591,251 was spent on the Companys resource properties. (For a breakdown on the resource property expenditures, see Note 7 to the Companys audited consolidated financial statements for the fiscal year ended December 31, 2008.)









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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.



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 CEO 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.





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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. 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.



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.



During this period Dejour continued to engage in exploration activity on its uranium projects located in the Athabasca Basin. On October 26, 2006, Dejour announced that it would sell all of its uranium property interests to Titan Uranium Incorporated (Titan), 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, were:



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.





17

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3.

Dejour retains a 1% Net Smelter Return (NSR) 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.



During Fiscal 2007, the Company focused on the acquisition and drilling of its oil and gas projects, including the North Barcus Creek project in Colorado and properties in the Peace River Arch area of Alberta. At North Barcus, the first two wells were drilled and logged at the end of September 2007. In Alberta, six prospects have been successfully produced.



In June 2008, the Company entered into a Purchase and Sale agreement with Retamco Operating. Dejour received an additional 64,000 net acres in Colorado and Utah from Retamco in exchange for Dejours 25% Working Interest in approximately 3,500 acres and two wells at North Barcus Creek and a cash payment of US$4,000,000.



In June 2008, the Company and its partner, Brownstone Ventures, signed a joint-operating agreement with Fidelity Exploration Production Company, a subsidiary of MDU Resources Group Inc., over 14,000 acres of leases held by Dejour and Brownstone. Under the agreement, Fidelity will be the operator of the acreage which will be owned 65% by Fidelity, 25% by Dejour, and 10% by Brownstone.



In November 2008, the Company signed a joint-venture agreement with Laramie Energy II LLC (Laramie) over approximately 22,000 gross acres (15,700 net to Dejour) in the Rangely prospect located in the northwest edge of the Piceance Basin in Colorado. Under the terms of the agreement, Laramie will begin a continuous drilling program on the acreage in the second half of 2009 and will have the right to earn up to 55% of the acreage covered under the agreement by completing at least four commercially productive wells over the next three to four years.



During Fiscal 2008, the Company completed the drilling of 11 wells, 9 of which were operated by the Company with an average working interest of 95%, and 2 wells partner-operated with an average working interest of 35%. 5 of the wells were placed in production as gas wells, 1 was placed in production as an oil well, and 1 well was producing oil and gas. Additional acreage totaling 6,350 net acres located in the Montney area in northeastern British Columbia was acquired through government rights auction.



Between January and April 2009, the Company disposed of all of its holdings in Titan Uranium for proceeds of $2,276,319. Dejour retains a 10% carried interest and 1% Net Smelter Return royalty in over 800,000 acres of uranium leases.



Plan Of Operations



Source of Funds for Fiscal 2009

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



18





As of December 31, 2008, Dejour had a negative working capital balance of ($12,712,251). Subsequent to the year-end, the Company sold all of its share position in Titan Uranium for proceeds of $2,276,319. Dejour intends to use the proceeds from the sale for drilling and completion on its Woodrush and Drake properties in Canada. Management anticipates continued revenues from oil and gas sales from its Canadian properties, but the cash flow is unlikely to provide for all of the Companys capital requirements. Therefore, management has been negotiating the sale of certain oil and gas assets, including 100% interests in certain of its non-core Canadian properties and a portion of its Drake/Woodbridge acreage.



In June 2009, the Company announced that it had completed the sale of certain Canadian oil and gas assets, which included the Companys 100% interest in the Carson Creek property in Alberta and 10% of the Companys interest in the Drake/Woodrush project, to unrelated third parties.  Proceeds from the sale of the interests were $3,000,000 in cash and $900,000 in escrow. The Company also announced it has letters of intent to sell additional minority property interests for a further $2,100,000, which, if completed, would increase the proceeds from the sale of Canadian property interests to $6,000,000.



The Company has also negotiated several agreements to reduce its outstanding debt. Under the first agreement, the Company and Brownstone Ventures have agreed to allow Dejour to convert a portion of its debt to Brownstone to equity units and a new one-year term debt note. Under the agreement:

·

US$2,000,000 of current debt will be converted into Dejour equity units. Dejour will issue Brownstone 6,666,667 common shares at a deemed price of $0.33 per share plus 3,333,333 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

US$1,780,000 of current debt will be converted into a Canadian dollar denominated 12% note due June 30, 2010. Dejour will also issue Brownstone 2,000,000 common share purchase warrants exercisable at $0.50 for a period of 2 years. The Company will be able to force the exercise of the warrants if Dejours common shares trade at a price of C$0.80 or greater for 30 consecutive calendar days.



Under the second agreement, Dejours Independent members of the Board of Directors have negotiated an agreement between the Company and related party Hodgkinson Equities Corporation (HEC), a private company controlled by Robert Hodgkinson, Dejours Chairman and CEO, in regards to Dejours outstanding debt to HEC. Under the agreement:

·

$450,000 of current debt will be converted into a 12% note due January 1, 2010. The due date is extendable until July 1, 2010 by a 6% bonus payable in shares.

·

$450,000 of current debt will be converted into Dejour equity units. The Company will issue to HEC 1,363,636 common shares at a deemed price of $0.33 per share and 681,818 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

$900,000 of current debt will be converted into minority property interests in certain of Dejours Canadian oil and gas leases. The deemed price for the conversions will be equal to the prices obtained by the Company through the sale of the same interests for cash to unrelated third parties.



The debt agreements are subject to the approval of the TSX and regulatory compliance.



Additional property interests may be sold to provide additional capital. The Company may also enter into additional joint-venture agreements which would allow exploration on a portion of the Companys properties funded by third-parties.



Use of Funds for Fiscal 2009

For Fiscal 2009, Dejour estimates that it might expend $3,500,000 on general/administrative expenses and $1,500,000 on property exploration expenses. The Companys recent asset sales and debt settlement agreements, as well as anticipated oil and gas revenues, are expected to be sufficient to meet the Companys capital needs for fiscal 2009.



Anticipated Changes to Facilities/Employees

In June 2009, the Company announced that Stephen R. Mut has been named as Special Assistant to the CEO/COO. Mr. Mut previously agreed to join the Companys Board of Directors at a future date, and he may stand for election to the Board at the next Annual General Meeting which is expected to be held during the Fourth Quarter of Fiscal 2009.



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



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United States vs. Foreign Sales/Assets

During the last five fiscal years, all of the Companys reported oil and gas revenue was recorded in fiscal 2008.



|Revenue for fiscal year ended: | Canada     | United States
|------------------------------ | ---------- | -------------
|                               |            |              
|12/31/2008                     | $5,751,672 | $13,883      



|Asset Location as of: | Canada      | United States
|--------------------- | ----------- | -------------
|                      |             |              
|12/31/2004            | $1,630,840  | Nil          
|12/31/2005            | $14,788,338 | $1,228,015   
|12/31/2006            | $55,495,194 | $25,182,534  
|12/31/2007            | $35,181,268 | $27,962,231  
|12/31/2008            | $32,421,045 | $29,884,691  



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 the basis of 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 December 31, 2008, Dejour had three wholly-owned subsidiaries.  Dejour Energy (USA) Inc. is incorporated in Nevada and is used to hold the Companys oil & gas properties in the US. Dejour Energy (Alberta) Ltd. is used to hold its oil & gas properties in Canada. During the fiscal year ended December 31, 2007, the Company acquired the remaining 10% of Dejour Energy (Alberta) Ltd. through the acquisition of 100% of Wild Horse Energy Ltd., which is incorporated in Alberta.



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.  Current monthly base rent is $6,974.





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Resource Properties



The Companys current focus is on oil and gas properties located in the United States and Canada. The Company formerly had direct interest in uranium exploration properties, which it sold to Titan Uranium Inc. in 2006 for Titan common shares. The Company sold all of its Titan common shares between January and April 2009, but retains a 1% NSR on all the properties sold to Titan, and a 10% working interest in each claim, carried by Titan to a completed bankable feasibility study after which the Company may elect to participate as to its 10% interest or convert to an additional 1% NSR.



The Company currently has oil and gas leases in northeastern British Columbia and Northwestern Alberta, and in the Piceance and Uinta Basins in Colorado and Utah. The Companys resource property interests are described below:



United States Oil and Gas Properties



1. Colorado/Utah Oil and Gas 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.



In August 2006, Brownstone Ventures (Brownstone) acquired a 10% interest in the acreage from Retamco, thus forming a joint-venture on the leases between Retamco, Dejour and Brownstone. Subsequently, the Company acquired an interest in an additional 21,866 net acres that are contained within an Area of Mutual Interest as defined in the purchase agreement.



In June 2008, the Company entered into a Purchase and Sale Agreement with Retamco Operating, a partner in the Colorado/Utah project. Under the Agreement, Dejour exchanged its 25% Working Interest in certain leases of approximately 3,500 acres at North Barcus Creek and two wells and US$4,000,000 for an additional 64,000 net acres. Brownstone also exchanged its interest in the North Barcus Creek wells and acreage with Retamco for an increased net interest in the same leases as Dejour.



In June 2008, the Company signed a joint operating agreement with Fidelity Exploration & Production Company (Fidelity), a subsidiary of MDU Resources Group Inc., covering 14,000 acres in the Paradox Basin located in Southeastern Utah.



In November 2008, the Company signed a joint-venture agreement with Laramie Energy II LLC (Laramie) covering 22,000 gross acres (15,700 net to Dejour) in the Rangely Project. Under the terms of the Agreement, Laramie will begin a continuous drilling program on the leases in the second half of 2009 and will have the right to earn up to 55% of the acreage covered under the agreement by completing at least four commercially productive wells over the next three to four years.



During Fiscal 2008, certain leases expired. As of December 31, 2008, the Company had approximately 128,000 net acres in the Colorado/Utah Project.



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[dejour200820fannualreport001.jpg]

The total current area of projects in which Dejour has an interest is 272,777 acres net to the Joint-Venture (approximately 128,000 acres net to Dejour) in 397 sections of land. Dejours interest  in the individual leases ranges from 25% to 72%, subject to an 80%-87.% Net Revenue Interest (NRI) except for 1 lease, in a total of 296 leases, The Company is the operator of 6 leases covering approximately 125,000 acres gross (72% WI Dejour and 28% WI for Brownstone). The other acreage includes approximately 150,000 acres gross (65% WI Retamco, 25% WI Dejour, and 10% WI Brownstone) with Retamco as the Operator, and approximately 14,000 acres gross (25% WI Dejour, 10% WI Brownstone, and 65% WI Fidelity) with Fidelity as the Operator.



The leases consist consisting of two project types. There are 17 Resource (Gas) projects covering 204,078 acres, and 1 Subthrust Project (Deep Oil) project covering 68,669 acres. The Company will pay an unpromoted proportionate share of all exploration expenses including seismic, drilling, completion or abandonment and equipping.



How Acquired



Under the original 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 included US$5 million cash, 5,500,000 common shares of the Company valued at US$10,726,700 ($2.17 CDN per share), a US$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 US$1,397,846. Subsequently, the Company acquired an interest in an additional 21,866 net acres that are contained within an Area of Mutual Interest as defined in the purchase agreement.



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Under the second agreement between the Company and Retamco dated June 17, 2008, Dejour exchanged its 25% Working Interest in certain leases of approximately 3,500 acres at North Barcus Creek, the two wells which were drilled under the original agreement, and US$4,000,000 for an additional 64,000 net acres.



New Joint-Venture Agreements



In June 2008, the Company and Brownstone signed an joint operating agreement with Fidelity Exploration & Production Company (Fidelity), a subsidiary of MDU Resources Group Inc., over 14,000 acres located in the Northern Paradox Basin in Southeastern Utah. Under the agreement, Dejour/Brownstone have granted Fidelity a 65% Working Interest in the leases (Dejour 25% WI, Brownstone 10% WI). Fidelity is the Operator of the project.



In November 2008, the Company and Brownstone announced they had signed a joint-venture agreement with Laramie Energy II LLC (Laramie), a private Exploration and Production Company headquartered in Denver, Colorado. Under the agreement, Laramie has the right to earn a 55% interest in approximately 22,000 acres gross (15,700 net to Dejour) located in the Rangely Prospect in Rio Blanco and Moffat counties at the northwestern edge of the Piceance basin.  Under the agreement, Laramie can earn up to a 55% of the acreage by completing at least four commercially productive wells under the following terms:

·

Laramie shall drill an Initial Earning Well to be spudded on or before December 1, 2009 to the contract depth of 100 feet below the top of the Carlisle share, being the stratigraphic equivalent of 4,695 depth;

·

Upon drilling the Initial Earning Well to contract depth and completing that well as a well capable of economic production, Dejour and Brownstone shall deliver to Laramie an assignment of an undivided 70% interest in Dejour/Brownstones right and title to 1,800 acres, including the 640 acre governmental section on which the Initial Earning Well is located;

·

If the Initial Well is completed and capable of producing in Paying Quantities, or is completed but not in Paying Quantities, Laramie shall have the option to drill Additional Earning Wells as a continuous optional drilling program. Such right shall continue as long as not more than 6 months (or 8 months with respect to a well that is producing but Laramie is evaluating whether it is production in Paying Quantities) elapses between the release of the drilling rig of the immediately preceding well and the commencement of spudding operations on the next Additional Earning Well.

·

For the Initial Earning Well and all Additional Earning Wells, Laramie shall pay for all costs and liabilities incurred to the date of first production. Thereafter, the joint-venture partners shall each be responsible for their respective working interest ownership share of costs.

·

If Laramie drills 4 Earning Wells, completed as wells capable of producing oil and/or gas in Paying Quantities, and pays for the costs in accordance with the agreement, Laramie shall be entitled to exercise an option to acquire an undivided 50% of Dejour/Brownstones right, title and interest in any of the leases in which Laramie had not already earned by paying Dejour/Brownstone $25 per net mineral acre.

·

The period in which Laramie shall have the right to commence the drilling of Additional Earning Wells shall terminate 3 years following the date of the agreement, or, if the Initial Earning Well or any Additional Earning Well is completed as a well capable of production in paying quantities, then the drilling term will be extended an additional year to 4 years from the date of the agreement.



Property Description



The Properties are located in Colorado and Utah, with most of them contained within the confines of the Piceance, Uinta and Paradox 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 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.



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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 feet to 3,800 feet thick, while the lower 1,000 feet to 2,000 feet 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 in 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.



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 feet.



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. Currently, due to insufficient processing and interstate transmission capacity in the Piceance basin, natural gas pricing has been at a discount to prevailing rates elsewhere. However, Piceance prices are expected to approach prevailing rates as additional gas plants and pipelines are completed.



North Barcus Creek Prospect

The North Barcus Creek project contains the first wells drilled by the joint-venture. Retamco as operator issued the Company 2 Authorities for Expenditures to drill the first 2 wells on the North Barcus Creek prospect located in Rio Blanco County, Colorado. The Company elected to participate in the drilling of the 2 wells, known as the #1-12 and #2-12, located in Section 12, T1N, R99W.



The #1-12 well is a direct offset to a well drilled in 1979 to a depth of 15,700 feet known as the Federal #22-12 well. The #2-12 well is located 1,800 feet from the #1-12 well. Both wells were completed and awaited connection to a pipeline.



Gustavson Associates was engaged by the Company to estimate the developed net reserves at North Barcus Creek as of December 31, 2007.



Summary of Net Developed Reserves

North Barcus Creek, Colorado

As of December 31, 2007



|Reserves Category               | Net Natural Gas
(MMCF) | Net Oil
MBO
|------------------------------- | ---------------------- | -----------
|                                |                        |            
|Proved Developed, Non-producing | 168.6                  | 8.1        



In June 2008, Dejour entered into a Purchase and Sale Agreement with Retamco. Under the agreement, Dejour exchanged its 25% Working Interest in certain leases of approximately 3,500 acres at North Barcus Creek, the two completed wells and US$4,000,000 for an additional 64,000 net acres in Colorado and Utah. As a result of the Agreement, the company disposed of its entire interest in the North Barcus Creek project, which contained all of Dejours proved reserves in the United States as of December 31, 2007.



Bonanza Prospect Area

The Bonanza Prospect Area is located in Uintah County, Utah, and consists of 2,334.51 gross acres of sparsely drilled acreage within the highly prospective Mesaverde-Mancos-Dakota gas resource trend in the Uinta-Piceance Basin. The acreage lies on the west flank of the Douglas Creek Anticline along the producing trend. It is surrounded by the prolific Natural Buttes.





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The area contains several prospective resource intervals. The Green River-Wasatch sandstones lie at a depth of 3,500 feet  5,000 feet and are the primary reservoirs in the Uinta Basin. In the Bonanza Area these reservoirs are at the eastern margins of the trend. The Mesaverde lies at a depth of 6,000 feet to 8,000 feet and includes both tight sandstone and coalbed methane reservoirs. These are the primary producing reservoirs in the Bonanza Area. The Mancos interval, from 8,000 to 13,000 feet, consists predominantly of shale, with thin, tight siltstone and sandstone beds.  The Mancos represents a significant reservoir target in the Bonanza Area. In addition, operators have been evaluating the resource potential of the Mancos shale itself as it lies in close proximity to the gas-generative window making it extremely attractive for shale gas production. From 9,000 to 14,000 feet in depth, the Dakota reservoirs also represent an attractive gas target in the Bonanza Area.



Book Cliffs Prospect Area

The Book Cliffs Prospect Area in Garfield and Mesa Counties, Colorado, consists of 13,734.52 gross acres of sparsely drilled acreage within the highly prospective conventional /continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the east flank of the Douglas Creek Anticline along the Mesaverde-Mancos-Dakota producing fairway. It is located near the peak gas-generative depocenter in the Piceance Basin, and targets are tight sandstone, siltstone, shale gas, and coalbed methane reservoirs.

Cisco Prospect Area

The Cisco Prospect Area in Grand County, Utah, consists of 20,284.88 gross acres of sparsely drilled acreage within the highly prospective conventional / tight gas resource trend in the Uinta-Piceance Basin. The acreage lies on the west flank of the Douglas Creek Anticline along the Dakota-Jurassic producing trend.



Dinosaur Prospect Area

The Dinosaur Prospect Area in Moffat County, Colorado and Uintah County, Utah, consists of 69,714.93 gross acres of sparsely drilled acreage within the highly prospective Pennsylvanian Weber Sandstone oil trend. It provides an opportunity to explore for oil reserves in a North American petroleum basin. The acreage lies on the north flank of the Douglas Creek Anticline, and north of the Rangely field. Any structural and / or stratigraphic traps present in the Dinosaur Area would be optimally located to trap oil migrating from the Palaeozoic generative basin to the northwest.



The main Dinosaur prospect is a subthrust play to test the same Pennsylvanian Weber Sandstone reservoir that is the primary producer at the Rangely Field to the south. Oil is trapped in the asymmetric, hanging wall of the Rangely anticline. The Dinosaur Areas prospective appeal is further enhanced by its proximity to the intersection of two major intersecting fault systems: the east-trending Uinta thrust system and the north-trending Douglas Creek Arch. At the intersection of fault systems rocks can be more intensely fractured. If as suggested in the literature, these faults are basement-related, they could have provided preferred lateral and vertical pathways for migrating oil and gas.



In addition to the subthrust play, there could be opportunities for undiscovered hangingwall anticlinal traps within the acreage, as has been demonstrated with the discovery of the Covenant Field on the southwestern margin of the Uinta Basin.



Anticipated drilling depth for the subthrust play is 15,000 feet.



Gibson Gulch Prospect Area

The Gibson Gulch Prospect Area in Garfield County, Colorado, consists of 3,625 gross acres of sparsely drilled acreage, within the highly prospective conventional / continuous gas resource trend in the Uinta-Piceance Basin.

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[dejour200820fannualreport002.jpg]

The acreage lies along the axis of the Piceance Basin depocenter, in the heart of the prolific Mesaverde producing trend. The Mesaverde, at a depth of  7,000 feet to 9,000 feet, is the primary target.  The interval includes both sandstone and coalbed methane reservoirs. Coal bed thickness ranges from 30 feet to 80 feet over the leased area.  Ash content for the Uinta-Piceance Basin is generally low (7  12%). Because of the high gas content, thick coal beds, and location within the peak gas-generative window, coal bed methane is an attractive target in the Gibson Gulch Area.

Green River Prospect Area

The Green River Prospect Area in Grand County, Utah, consists of 16,106.07 gross acres of sparsely drilled acreage in the transitional area between the Uinta-Piceance Basin and the Paradox Basin.



Gunnison Prospect Area

The Gunnison Prospect Area located in Delta County, Colorado, consists of 6,094.47 gross acres of sparsely drilled acreage within the Delta Co. coal district in the Uinta-Piceance Basin. The acreage lies along the southern margins of the Piceance Basin. This under-developed area is prospective for coalbed methane gas.



Meeker Prospect Area

The Meeker Prospect Area located in Moffat and Rio Blanco Counties, Colorado, consists of 474.14 gross acres of sparsely drilled acreage along the north-eastern margin of the Piceance Basin. The acreage is on trend with established oil producing fields.





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Pinyon Ridge Prospect Area

The Pinyon Ridge Prospect Area in Moffat and Rio Blanco Counties, Colorado, consists of 20,627.16 gross acres of sparsely drilled acreage along the highly prospective basin-centered gas resource trend in the Uinta-Piceance Basin. The acreage lies along the axis of the Piceance Basin at the northern margins of the Mesaverde-Mancos producing trend. Over seventy-five percent of the acreage, the objective reservoirs are Mesaverde and Mancos. However, the primary target in the westernmost lease block is the Pennsylvanian Weber Sandstone.



The Mesaverde interval at a depth from 1,000 to 7,000 feet includes both tight sandstone and coalbed methane reservoirs. These are the primary producing reservoirs in the Pinyon Ridge Area. Nine coalbed methane wells have been drilled in the Pinyon Ridge Area since 1993. Coal bed thickness ranges from 30 to 80 feet over the leased area.  Ash content for the Uinta-Piceance Basin is generally low (7  12%). Because of the high gas content, thick coalbeds, and location within the gas-generative window, coalbed methane remains an attractive target in the Pinyon Ridge Area.



The Mancos interval at a depth of 2,000 to 8,500 feet consists predominantly of shale with thin, tight siltstone and sandstone beds. No wells have been completed in the Mancos in the Pinyon Ridge Area, with the closest conventional Mancos production occurring at Rangely Field to the southwest. Recently, however, operators have been evaluating the resource potential of the Mancos shale itself. In the Pinyon Ridge Area the Mancos current lies within the peak gas-generative window making it extremely attractive for shale gas production.

The Dakota reservoirs at a depth of 5,000 to 9,000 feet represent an attractive oil target in the western portion of the Pinyon Ridge acreage. These reservoirs are oil productive at the Elk Springs Field.

Pennsylvanian Weber Sandstone at a depth of 3,000 to 12,000 feet are potential combination structural / stratigraphic traps associated with eolian dune sandstones deposited in a coastal environment. These sandstone bodies are thick and locally continuous and are oil productive at the Elk Springs, Rangely, and Ashley Valley fields.



Plateau Prospect Area

The Plateau Prospect Area in Mesa County, Colorado, consists of 414.23 gross acres of sparsely drilled acreage within the highly prospective continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the south flank of the Piceance Basin depocenter and targets include basin-centered gas, and coalbed methane reservoirs.



Rangely Prospect Area

The Rangely Prospect Area in Rangely County, Colorado, consists of 25,521.46 gross acres of sparsely drilled acreage within the highly prospective conventional / continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the east flank of the Douglas Creek Anticline along the Mesaverde-Mancos-Dakota producing trend.



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[dejour200820fannualreport003.jpg]



The Mancos interval, which lies at a depth of 1,000 to 4,000 feet, consists predominantly of shale with thin, tight siltstone and sandstone beds. The Mancos B represents a significant reservoir target in the Rangely Area. At a depth of 2,000 to 6,000 feet, the Dakota reservoirs also represent an attractive gas target.



In November 2008, the Company and Brownstone entered an agreement with Laramie on 22,000 gross acres (15,700 net to Dejour) on acreage within the Rangely prospect. Under the terms of the Agreement, Laramie will have the right to earn up to 55% of the acreage covered under the agreement by completing at least four commercially productive wells over the next three to four years. Drilling by Laramie is anticipated to begin in the 3rd quarter of 2009.



Rio Blanco Deep Prospect Area

The Rio Blanco Prospect Area in Rio Blanco County, Colorado, consists of 5,009.77 gross acres of sparsely drilled acreage within the highly prospective tight gas and continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the east flank of the Douglas Creek Anticline along the Mesaverde-Mancos-Dakota producing trend. The Rio Blanco Area is located near the axis of the peak gas-generative depocenter in the Piceance Basin and targets include tight gas and basincentered gas reservoirs.

Previously, reservoirs with good porosity and permeability were the primary completion targets. Wells which did not meet these criteria were considered non-commercial. In recent months, other operators in the area have been completing the same reservoir intervals, but completing a much broader resource interval. According to Colorado Oil and Gas Conservation Commission records, they have achieved better success, with indications of potentially much higher flow rates.





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Prospective Reservoirs on the property include Mesaverde, Mancos, and Dakota. The Mesaverde interval from 6,000 to 11,000 feet includes both tight sandstone and coalbed methane reservoirs. These are the primary producing reservoirs in the Rio Blanco Area. No coalbed methane wells have been drilled in the Rio Blanco Area. However, because of the high gas content of the coals, and their close proximity to the gas-generative window, the coal bed methane resource potential in the Rio Blanco Area is a prospective target.

The Mancos interval at 8,000 to 13,000 feet consists predominantly of shale, with thin, tight siltstone and sandstone beds.  The Mancos represents a significant resource target in the Rio Blanco Area. The Mancos current lies in close proximity to the peak gas-generative window making it extremely attractive for shale gas production. The Dakota reservoirs at 10,000 to 14,000 feet also represent an attractive gas target in the Rio Blanco Area.

Roan Creek Prospect Area (formerly Grand Valley West)



The Roan Creek Prospect Area in Garfield County, Colorado consists of 5,180.20 gross acres of previously sparsely drilled acreage within the highly prospective continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies near the axis of the Piceance Basin in the heart of the prolific Mesaverde-Mancos-Dakota producing trend.

The prospective reservoirs on the prospect are the Mesaverde, Mancos, and Dakota.



The Mesaverde interval at a depth of 5,000 to 8,500 feet includes both sandstone and coalbed methane reservoirs. These are the primary producing reservoirs in the West Grand Valley Area. Coal bed thickness ranges from 30 to 80 feet over the leased area.  Ash content for the Uinta-Piceance Basin is generally low, and because of the high gas content, thick coal beds, and location near the peak gas-generative window, coal bed methane is an attractive target in the West Grand Valley Area. The Mancos interval at 6,000 to 8,000 feet consists predominantly of shale, with thin, tight siltstone and sandstone beds. In the West Grand Valley Area the Mancos lies near the peak gas-generative window making it extremely attractive for shale gas production. Recently, operators have been evaluating the resource potential of the Mancos shale itself. The Dakota reservoirs at 9,000 to 11,000 foot depth represent an attractive target in the West Grand Valley Area. These reservoirs are located at the eastern margins of the Dakota producing fairway on the eastern flank of the Douglas Creek Arch.

Activity in the area from other operators has been vigorous, with recent drilling conducted by unrelated third parties on neighboring leases. Dejour and its joint-venture partners have applied for seven drill pad applications on the property in order to have it drill ready beginning in the fourth quarter of 2009.

San Juan Prospect Area

The San Juan Prospect Area consists of 677.59 gross acres located in Uintah County and San Juan County, Utah.



Sand Wash Prospect Area

The Sand Wash Prospect Area in Moffat County, Colorado consists of 517.77 gross acres of sparsely drilled acreage within the Sand Wash Basin. This area is considered prospective for coalbed methane.



Seep Ridge Prospect Area

The Seep Ridge Prospect Area in Uintah County, Utah consists of 1,443.38 gross acres of sparsely drilled acreage within the highly prospective conventional / continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the west flank of the Douglas Creek Anticline along the Mesaverde-Mancos-Dakota producing trend in the Uinta Basin.





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Tri-County Prospect Area

The Tri-County Prospect Area, which includes Bitter Creek, Displacement Point, and Tri-County South Prospect Areas in Uintah County, Utah, consists of 38,062.92 gross acres of sparsely drilled acreage within the highly prospective conventional / continuous gas resource trend in the Uinta-Piceance Basin. The acreage lies on the west flank of the Douglas Creek Anticline along the Mesaverde-Dakota-Entrada producing trend. It is surrounded by the existing Main Canyon, Fence Canyon, San Arroyo, South Canyon, and Baxter Pass fields. Several regional faults have been mapped on the acreage, and linear trends observed on surface maps may be associated with faults and/or fracture patterns. Faults and fractures have been associated with enhanced production from tight sandstone reservoirs in the Uinta-Piceance Basin. Drilling is in progress in areas surrounding the acreage.



The prospective reservoirs in the prospect area include the Mesaverde, Mancos, Dakota, and Jurassic Triassic (Morrison, Entrada, Curtis, and Wingate).

The Mesaverde interval from 1,300 to 4,200 feet includes both tight sandstone and coalbed methane reservoirs. Sporadic production from tight sandstone reservoirs has been recorded to the north and west of the Tri-County acreage. Development of the coalbed methane potential in adjacent Baxter Pass Field, Colorado, has been initiated by another, unrelated operator.  Coal bed thickness ranges from 10 to 25 feet over the leased area, and ash content for the Uinta-Piceance Basin is generally low.

The Mancos interval at a depth of 3,000 to 7,000 feet consists predominantly of shale, with thin, tight siltstone and sandstone beds. To-date, the reservoir targets have been primarily the siltstone / sandstone beds in the lower Mancos (Mancos B) which have been developed predominantly on 320 acre spacing units, with some sections on 160 acre units. Recently, operators have been evaluating the resource potential of the Mancos shale itself.

The Dakota reservoirs at 6,700 to 7,600 feet represent the primary target within the Tri-County acreage. These reservoirs are productive at several existing field which lie to the south of the acreage. To-date, the Dakota reservoirs have been developed predominantly on 320 acre spacing units, with some sections on 160 acre units.



The Jurassic-Triassic (Morrison, Entrada, Curtis, and Wingate) at 7,000 to 8,500 feetare potential stratigraphic traps associated with eolian dune sandstones which were deposited in a coastal environment. These sandstone bodies are thick and locally continuous. Technology advances in both completion techniques and subsurface imaging have revitalized the area.



Waddle Creek Prospect Area

The Waddle Creek Prospect Area in Routt and Moffat County, Colorado, consists of 887.83 gross acres of sparsely drilled acreage in the Sand Wash Basin.  Basal Mancos (Niobrara) is the target reservoir in the area.



Current and Anticipated Exploration



Dejour is not planning to fund any exploration expenditures on its Colorado/Utah properties in fiscal 2009.  The Companys joint-venture partner at Rangely, Laramie Energy, is expected to drill the first well under the agreement during the third quarter of 2009. Laramie can earn up to 55% of the acreage under the agreement from Dejour and Brownstone by funding and completing at least four commercially productive wells. Dejour is seeking industry and non-industry participants for additional joint-venture opportunities on its existing acreage.



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). However, in the 1st quarter of 2007, the Company reached an agreement with the operator such that the Company transferred its interest in the Merit Partners #1 wellbore, along with certain shallow rights in roughly 616 net acres of oil and gas leases. In exchange, Dejour received 100% ownership in roughly 1,736 net acres of oil and gas leases containing the rights below the base of the Hosston formation. The Company is not obligated to pay any share of plugging and abandonment costs for the Merit Partners #1 wellbore.



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[dejour200820fannualreport004.jpg]



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. Due to the agreement reached in the 1st quarter of 2007, the Company has no further ownership in the Merit Partners #1, and 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. As of March 31, 2008, Dejour holds a 35% working interest in 8,349 gross and 7,057 net acres. The Mississippi based corporation is seeking an operator for the project with the objective of drilling additional wells.





3. 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 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.



31



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.



Canadian Oil and Gas Properties



The Companys wholly-owned subsidiary, Dejour Energy (Alberta) Ltd., currently has interests in oil and gas properties in the Peace River Arch located in northeastern British Columbia and northwestern Alberta.



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 or DEAL) and was owned and funded 90% by Dejour, with Mr. Doves company, Wild Horse Energy Ltd. owning and funding the remaining 10%. During 2007, the Company acquired the remaining 10% of DEAL from Mr. Dove for $354,880, and DEAL became the Companys wholly-owned subsidiary.



During the 1st quarter of 2007, Dejour Alberta concluded business agreements on four additional prospects resulting with the drilling of four wells.  As of December 31, 2007, DEAL acquired an average 46% interest in approximately 33,570 acres and held the right of first refusal on an additional approximately 5,760 gross acres in the Peace River Arch.



During fiscal 2008, the Company acquired 6,352 gross and net acres of lands in the Montney natural gas area in Northeastern British Columbia.  The acreage is adjacent to existing pipeline infrastructure, and was acquired via government oil and gas auction. As at December 31, 2008, DEAL had an average interest of 54% in approximately 39,283 gross acres in the Peace River Arch.



Subsequent to the year-end, the Company disposed of several of its interests in its Canadian oil and gas properties in exchange for cash proceeds and forgiveness of debt, as described below.



Since commencing exploration on its Peace River Arch properties, the Company has drilled or participated in drilling 16 wells on 9 different project areas. 7 wells (5 gas, 1 oil and 1 gas and oil) have commenced production. Tie-in of 2 additional wells has been suspended due to low commodity prices.



The Canadian oil and gas property interests of the Company are described below:



Drake/Woodrush

In 2007, the Company purchased 2,108 acres of land in the Drake area of northeast British Columbia. In the second quarter of 2007, the Company drilled two gas wells, which were tied in and producing.



Working interest in lands earned last winter has been increased from 60% to 92% on 700 of the 1,400 acres earned. Interest in the remaining 700 acres remains at 100% before payout and 60% after payout. Final locations for the 2007/8 winter drilling were chosen based on interpretation of 3D seismic data purchased over all the Companys working interest land in the area.



The Company drilled four wells during the 2007/2008 winter season. Two of the wells were drilled on lands earned previously. The other two wells were drilled to evaluate the deeper Halfway formation as well as the proven Notikewin sands on land purchased at crown sale in which the Company has a 100% WI.  The deeper wells encountered significant quantities of sour gas and oil, which required the purchase and installation of additional equipment, facilities, and pipeline. These four wells were drilled and completed for production in Q1 2008. The six producing wells on the project are currently producing at a combined rate of approximately 2,000 mcf/day and 375 bopd.





32





The Company has budgeted approximately $1,500,000 for drilling and development at Drake/Woodrush in fiscal 2009. British Columbia has granted producers in the Northeastern portion of the Province a royalty-free production holiday, and the Company intends to focus its current work on the Woodrush oil pool to take advantage of the lowered royalty rates and the higher oil commodity prices. Scheduled work includes high resolution 3D seismic, and drilling of new wells during the fourth quarter. The capacity of the infrastructure placed on the project has been designed for additional development.



Subsequent to the 2008 year-end, the Company announced it had sold a 10% interest in Woodrush/Drake to an unrelated third party for approximately $3,000,000 cash. Funds from the sale of the interest will be used to reduce the Companys outstanding bank line of credit.



Saddle Hills

In the Saddle Hills area of Alberta, the Company participated in drilling a well in the first quarter of 2007 on a five section block of land at 30% working interest to earn 30% subject to 10% non-convertible royalty. The first well tested over 1.5 MMcf/d in total from two zones. The operator drilled one additional location on the property in Q1 2008 which has also been completed and tested gas. The operator has not tied in either of the two wells for production. DEAL completed a seismic program on behalf of the joint venture to aid in future development plans. Last winters gas well tested over 1.5 mmcf/day total from two zones.



Manning

In the Manning area of British Columbia, the Company participated at 40% working interest in a farm-in on seven sections of land. A test well commenced drilling in December 2007 and was completed in early 2008, and tested at rates of over 1.5 MMcf/d with water. This operator has not tied in the well for production, but it has earned the Company an interest in all seven sections subject to non-convertible royalty.



Carson Creek

At Carson Creek, Alberta, land was purchased privately by DEAL and a test well commenced drilling in late 2007. The well was completed in early 2008 and tested at approximately 3.0 MMcf/d with 100 bbls natural gas liquids per MMcf gas. The well was placed into production in Q4 2008 at rates of 700 Mcf/d and 200 bbls/d.



Subsequent to the year-end, in June 2009 the Company completed the sale of its 100% working interest in Carson Creek to an unrelated third party for $2,100,000.



Buick Creek (Montney)

In 2008, DEAL acquired 6,352 acres net and gross in the emerging Montney natural gas resource play in Northeastern British Columbia. The acreage was acquired at a Provincial Government drilling right auction. These lands are adjacent to necessary pipeline infrastructure. In early 2009, the Company also acquired an existing wellbore which the Company intends to use for re-entry and testing of the play.



Future Plans

The Company intends to focus its efforts during 2009 on Drake/Woodrush, with particular attention to drilling additional wells into the Woodrush oil pool. The Company has budgeted $1,500,000 for work at Drake/Woodrush.



In June 2009, the Company announced the sale of a 10% interest in Drake/Woodrush and its 100% interest in Carson Creek. Additionally, the Company announced the sale of additional minority property interests for a further $2,100,000, as well as the settlement of $900,000 of debt owed to Hodgkinson Equities Corporation, a related party, through the granting of minority property interests.





33



#





Oil and Gas Expenditures

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



|                                | Balance
Dec. 31, 2006 | Acquisition
Costs | Exploration &
Development | Write-down    | Balance
Dec. 31, 2007 | Acquisition
Costs | Exploration &
Development | Corporate Costs &
Capitalized Interests | Write-down    | Balance
Dec. 31, 2008
|------------------------------- | --------------------- | ----------------- | ------------------------- | ------------- | --------------------- | ----------------- | ------------------------- | --------------------------------------- | ------------- | ---------------------
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|US Oil and Gas Properties:      |                       |                   |                           |               |                       |                   |                           |                                         |              
|Colorado/Utah Projects          | $25,182,532           | $ 285,176         | $  1,940,653              | $           - | $27,408,361           | $3,807,764        | $    139,541              | $              -                        | $ (2,029,942) | $29,325,724          
|Lavaca Prospect                 | -                     | 381               | -                         | -             | 381                   | -                 | -                         | -                                       | -             | 381                  
|Tinsley Prospect                | 1                     | 37,023            | -                         | -             | 37,024                | 130,268           | -                         | -                                       | -             | 167,292              
|Turtle Bayou, Louisiana         | 1                     | -                 | -                         | -             | 1                     | -                 | -                         | -                                       | -             | 1                    
|                                | 25,182,534            | 322,580           | 1,940,653                 | $           - | 27,445,767            | 3,938,032         | 139,541                   | -                                       | (2,029,942)   | 29,493,398           
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|Canadian Oil and Gas Properties |                       |                   |                           |               |                       |                   |                           |                                         |              
|Carson Creek                    | -                     | -                 | 535,504                   | -             | 535,504               | 625               | 1,243,900                 | -                                       | -             | 1,780,029            
|Drake                           | -                     | 731,265           | 1,753,901                 | -             | 2,464,279             | 9,012             | 6,060,338                 | -                                       | -             | 8,533,629            
|Montney                         | -                     | -                 | -                         | -             | -                     | 907,732           | 2,000                     | 69,316                                  | -             | 979,048              
|Saddle Hills                    | -                     | 9,724             | 501,528                   | -             | 511,252               | -                 | 452,359                   | -                                       | -             | 963,611              
|Woodrush                        | -                     | -                 | 20,887                    | -             | 20,887                | -                 | 10,458,992                | -                                       | -             | 10,479,879           
|Others                          | 1                     | 905,068           | 3,509,785                 | (678,044)     | 3,736,810             | 17,428            | 4,234,361                 | -                                       | -             | 7,988,599            
|Asset retirement
obligations    | -                     | -                 | -                         |               | -                     | -                 | -                         | 404,311                                 | -             | 404,311              
|Property depletion              | -                     | -                 | -                         |               | -                     | -                 | -                         | (3,635,777)                             | -             | (3,635,777)          
|                                | 1                     | 1,646,057         | 6,300,718                 | (678,044)     | 7,268,732             | 934,797           | 22,451,950                | (3,162,150)                             | -             | 27,493,329           
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|                                | $25,182,535           | $1,968,637        | $8,241,371                | $(678,044)    | $34,714,499           | $ 4,872,829       | $  22,591,491             | $  (3,162,150)                          | $ (2,029,942) | $ 56,986,727         



Production and Reserves



As of December 31, 2008, the Company had 6 gross (4.84 net) producing oil or natural gas wells.



|          | Oil   | Natural Gas
|--------- | ----- | -----------
|          | Gross | Net        
|          |       |            
|Producing | 2     | 2          
|Shut-In   | 0     | 0          
|TOTAL     | 2     | 2          



An additional 2 gross and net wells were classified as suspended as of December 31, 2008.



The Companys wells at the end of fiscal 2007 ended December 31, 2007 were as follows:



|          | Oil   | Natural Gas
|--------- | ----- | -----------
|          | Gross | Net        
|          |       |            
|Producing | 0     | 0          
|Shut-In   | 0     | 0          
|TOTAL     | 0     | 0          





34





During the fiscal year ended December 31, 2008, the Company drilled the following wells:



|              | Exploratory Wells | Development Wells
|------------- | ----------------- | -----------------
|              | Gross             | Net              
|              |                   |                  
|Oil           | 0                 | 0                
|Natural Gas   | 3                 | 1.65             
|Dry Wells     | 1                 | 0.70             
|Service Wells | 0                 | 0                
|Suspended     | 2                 | 2                
|              |                   |                  
|Total  Wells  | 6                 | 4.35             



The following is the Companys total net oil and gas production for the fiscal year ended December 31, 2008. The Company had no oil or natural gas production during fiscal 2007 or 2006.



|Year Ended Dec 31, 2008 | Natural Gas
Oil
Natural Gas Liquids | 509,034 Mcf
8,058 bbls
764 bbls
|----------------------- | ----------------------------------- | -------------------------------



The following table includes the average prices the Company received for its production for the fiscal year ended December 31, 2008.

|                    | Fiscal Year
ended Dec. 31,
2008
|------------------- | -------------------------------
|                    |                                
|Oil                 | $   55.21/bbl                  
|Natural Gas         | $     9.48/mcf                 
|Natural Gas Liquids | $ 110.90/bbl                   



The following is the Companys oil and gas reserve estimates as of December 31, 2008 and December 31, 2007. All of the Companys reserves as of December 31, 2008 are from an independent resource calculation prepared by GLJ Petroleum Consultants and are located at the Drake/Woodrush Project in Alberta and British Columbia, Canada. The Companys reserves in the United States as of December 31, 2007 were located at the North Barcus Creek Project in Colorado from an independent resource calculations prepared by Gustavson Associates, but were disposed of as of December 31, 2008. The estimates are based on constant prices and costs.





35

#







|                                        |       | Dejours
Reserves as of
December 31, 2008
|--------------------------------------- | ----- | -----------------------------------------
|                                        | Net  
|Proved Developed Producing Reserves     |      
|Light and Medium Oil (Mbbl)             | 149  
|Natural Gas (Mmcf)                      | 1,753
|Natural Gas Liquids (Mbbl)              | 11   
|                                        |      
|Proved Developed Non-producing Reserves |      
|Light and Medium Oil (Mbbl)             | 0    
|Natural Gas (Mmcf)                      | 334  
|Natural Gas Liquids (Mbbl)              | 5    
|                                        |      
|Proved Undeveloped Reserves             |      
|Light and Medium Oil  (Mbbl)            | 130  
|Natural Gas (MMcf)                      | 54   
|Natural Gas Liquids (Mbbl)              | 0    
|                                        |      
|Total Proved Reserves                   |      
|Light and Medium Oil (Mbbl)             | 279  
|Natural Gas (MMcf)                      | 2,140
|Natural Gas Liquids (Mbbl)              | 16   





|                                        |         | Dejours
Reserves as of
December 31, 2007
|--------------------------------------- | ------- | -----------------------------------------
|                                        | Net    
|Proved Developed Producing Reserves     |        
|Light and Medium Oil (Mbbl)             | Nil    
|Natural Gas (Mmcf)                      | Nil    
|Natural Gas Liquids (Mbbl)              | Nil    
|                                        |        
|Proved Developed Non-producing Reserves |        
|Light and Medium Oil (Mbbl)             | 8.1    
|Natural Gas (Mmcf)                      | 409.6  
|Natural Gas Liquids (Mbbl)              | 5.0    
|                                        |        
|Proved Undeveloped Reserves             |        
|Light and Medium Oil  (Mbbl)            | Nil    
|Natural Gas (MMcf)                      | 1.584.0
|Natural Gas Liquids (Mbbl)              | Nil    
|                                        |        
|Total Proved Reserves                   |        
|Light and Medium Oil (Mbbl)             | 8.1    
|Natural Gas (MMcf)                      | 1,993.6
|Natural Gas Liquids (Mbbl)              | 5.0    







36







The Companys landholdings as of December 31, 2008 were as follows:



|                  | Undeveloped | Developed | Total 
|----------------- | ----------- | --------- | ------
|                  | Gross       | Net       | Gross 
|                  |             |           |       
|Colorado/Utah, US | 272,777     | 128,000   | Nil   
|Tinsley, US       | 7,057       | 2,470     | Nil   
|                  |             |           |       
|Canada            | 28,730      | 14,748    | 10,553
|                  |             |           |       



Uranium Property Interests



The Athabasca Basin Uranium Properties

The Athabasca Basin properties are without known reserves and the work completed by Dejour was exploratory in nature. Dejour currently has a 10% working interest and a 1% Net Smelter Royalty (NSR) on the Uranium properties.



Acquisition of Interest

Dejour Enterprises originally 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).



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, were:



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.

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.



Between January and April 2009, the Company disposed of all of its holdings in Titan Uranium for proceeds of $2,276,319.Dejour retains its working interest and NSR in the properties originally sold to Titan. However, the Company no longer maintains the right of first refusal on future financings, is no longer required to provide geologists to Titan, and its representatives have since resigned from the Titan Board of Directors.





37











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        



Recent Exploration Activities

As discussed above, Dejour sold all of its uranium property interests to Titan Uranium in a sales transaction that began in October 2006 and culminated on February 2, 2007. Currently, Dejour retains a carried 10% working interest and a 1% NSR on all the properties.



During 2007, Titan conducted exploration on several of the uranium projects, including surveying and drilling. 11,000 meters of drilling was completed in 2007, and an additional 9,000 meters of drilling was completed in 2008. In 2009, Titan has planned a further 9,000 meters of drilling. Titan has also signed several joint-ventures on certain of its properties, including a joint-venture on the Virgin Trend property with Japan Oil, Gas and Metals National Corporation.



Item 4a. Unresolved Staff Comments



Not Applicable





ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended 12/31/2008, 12/31/2007, and 12/31/2006 should be read in conjunction with the financial statements of the Company and the notes thereto.



Overview

During Fiscal 2006, Dejour received $19,189,006 in proceeds, net of financing costs, through the issuance of common shares.



During Fiscal 2007, received $14,705,331 in proceeds, net of financing costs, through the issuance of common shares.



During Fiscal 2008, received $2,335,085 in proceeds, net of financing costs, through the issuance of common shares.



38



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 in exchange for a 10% carried working interest in the properties, a 1% NSR, and 17,500,000 common shares and 3,000,000 warrants of Titan. During 2007 and 2008, Dejour actively explored its oil and gas property interests. In 2008, the Company acquired an additional 64,000 net acres in Colorado and Utah in exchange for its 25% interest in 2 wells at North Barcus Creek, roughly 3,682 net acres in Colorado, and US$4,000,000. Subsequent to the year ended December 31, 2008, the Company sold all of its common shareholding in Titan Uranium for proceeds of $2,276,319. For specific disclosure see ITEM 4.D. Property, Plant and Equipment.





Results of Operations



Fiscal 2008 ended 12/31/2008 vs. Fiscal 2007 ended 12/31/2007

The Companys net loss for the year ended December 31, 2008 was ($20,890,753), or ($0.29) per share, compared to a net loss for the year ended December 31, 2007 of ($26,810,673), or ($0.40) per share.



During fiscal 2008, the Company received its initial revenue from Oil and Gas operations of $5,765,555. $5,751,672 of the revenue was derived from the Companys interest in oil and gas wells in the Peace River Arch area of Alberta and British Columbia. The increase in Amortization, Depletion and Accretion of $3,656,980 from $33,959 in the prior year to $3,690,939 in the current year and Operating and Transportation in fiscal 2008 of $3,121,955 from $Nil in fiscal 2007 was due to the initiation of oil and gas production during 2008.



The largest components of the net loss were the Impairment of Investment in Titan Uranium common shares, which the Company received in fiscal 2006 in exchange for its uranium property interests. The Company uses the equity method of accounting for its investment in Titan, and wrote down the value of the shares in fiscal 2008 to the fair value by ($12,990,343) to $2,721,875 and by ($21,581,177) in fiscal 2007. The Company also recorded an Impairment of Oil and Gas Properties in fiscal 2008 of ($2,029,942) which was related to the expiration of certain leases in the Companys Colorado/Utah projects.



General and Administrative expenses in fiscal 2008 decreased slightly to $4,214,783 from fiscal 2007s $4,340,021. Major changes in General and Administrative components were a decrease of $381,000 in fees for Management and Consultants due to the change of status of several consultants to employees and the termination of a consulting agreement with a senior executive of the Company; a decrease of $243,000 in Investor Relations as the Company mailed out a large number of newsletters in fiscal 2007; a decrease of Travel and Accommodation of $53,000 and a decrease of $251,000 in Office and General Expenses, as management worked to reduce certain expenses. Professional, Regulatory, and Filing Fees rose $126,000 due to higher levels of business activities; Rent increased $123,000 and Salaries and Benefits increased $554,000 due to the setup of the Denver office and expansion of the Calgary office, and additional employees in fiscal 2008.



Interest Expense and Finance Fee rose to $481,252 from $293,536 due to amounts borrowed against the Bank Line of Credit established in August 2008. Stock-based Compensation rose to $2,719,957 from $2,461,400, with the increase mainly due to the vesting of stock options previously granted. Interest and Other Income decreased to $236,838 from $806,147 due to lower cash balances in fiscal 2008. Foreign Exchange loss was $675,599 from $141,670 in fiscal 2007 due to unfavorable changes in the Canadian/US Dollar exchange rate and its negative impact on the loan from a joint-venture partner which is denominated in US Dollars. During fiscal 2008, the Company recorded Equity Income from Titan of $3,636,710 compared to an Equity Loss of ($2,351,810) in fiscal 2007. Future Income Tax Expense in fiscal 2008 was ($596,240) compared to a recovery of $4,220,774 in fiscal 2007. The expense in the current year was due to the accounting net book value of oil and gas properties being in excess of value of the tax pools.



During fiscal 2008, the Company renounced $1,820,000 of Canadian Exploration Expenditures (CEEs) to flow-through common share investors compared to $7,950,000 renounced in fiscal 2007.



Fiscal 2007 ended 12/31/2007 vs. Fiscal 2006 ended 12/31/2006

The Companys net loss for the year ended December 31, 2007 was ($26,810,673), or ($0.40) per share, compared to net income for the year ended December 31, 2006 of $23,887,726, or $0.45 per share.



39



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. The Company realized a gain on disposition of its uranium properties of $30,177,082, which contributed to the net income recorded in fiscal 2006.



The investment in Titan has been accounted for using the equity method of accounting, and the Companys share of losses in Titan for the period ended December 31, 2007 was $2,351,810. During the year ended December 31, 2007, the Company recognized an impairment loss of $21,581,177 on its Titan investment, which was the largest component of the Companys net loss during the year.



Interest income of $806,147 in 2007 was higher than the $673,559 recorded in 2006, due to higher cash balances through the year. The Company also had a Gain on disposition of marketable securities in 2007 of $44,023 which was from the sale of 158,836 Brownstone Ventures shares which were received as a finders fee in 2006.



Expenses increased to $7,128,916 from $4,133,539 recorded in 2006. The large increases were due to increases in business activities companywide, including the newly acquired exploration properties in Canada and the initial drill program in Colorado. Major increases in expenses occurred in Stock-based Compensation, which rose to $2,461,400 from $1,295,127, with much of the rise due to the vesting of previously granted stock options; Fees for Management and Consultants increased to $1,633,271 as compared to $826,712 in 2006, and Office and General expenses increased to $375,238 from $224,475, with the increases due to a new office in Denver and additional consultants engaged to support the new oil and gas exploration programs; Interest and Finance expense for 2007 was $293,536 as compared to $107,031 as the Company had a full year of interest on its convertible debentures from July 2006. Professional Fees were $289,038 compared to $44,023, and Regulatory and Filing Fees rose to $230,285 from $92,713, with the increases due to legal fees paid for investigating potential oil and gas properties, as well as increased filings related to the Companys listing on the American Stock Exchange; and Travel and Accommodation was $285,439, which rose from $141,724, as the new oil and gas projects and exploration as well as the establishment of the new office in Denver resulted in the need for additional Company travel.



Dejour also had a Foreign Exchange Loss of $141,670 compared to a loss of $66,616 in 2006, with the larger loss contributable to unfavorable movements in rates during 2007; and recorded an Impairment of Oil and Gas Properties of $678,044, which was due to the write-off of expenditures on the Noel and Guatemala properties in Canada.



During February 2007, the Company renounced $7,950,000 of Canadian Exploration Expenditures (CEEs) to investors as compared to the renunciation of $3,090,000 in February 2006.  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.



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 working 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.



40



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.



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.



Liquidity and Capital Resources

As of December 31, 2008, Dejour had a negative working capital balance of ($12,712,251). Subsequent to the year-end, the Company sold all of its share position in Titan Uranium for proceeds of $2,276,319. Dejour intends to use the proceeds from the sale for drilling and completion on its Woodrush and Drake properties in Canada. Management anticipates continued revenues from oil and gas sales from its Canadian properties, but the cash flow is unlikely to provide for all of the Companys capital requirements. Therefore, management has been negotiating the sale of certain oil and gas assets, including 100% interests in certain of its non-core Canadian properties and a portion of its Drake/Woodbridge acreage.



In June 2009, the Company announced that it had completed the sale of certain Canadian oil and gas assets, which included the Companys 100% interest in the Carson Creek property in Alberta and 10% of the Companys interest in the Drake/Woodrush project, to unrelated third parties. Proceeds from the sale of the interests was $3,000,000 in cash and $900,000 in escrow. The Company also announced it has letters of intent to sell additional minority property interests for a further $2,100,000, which, if completed, would increase the proceeds from the sale of Canadian property interests to $6,000,000.



The Company has also negotiated several agreements to reduce its outstanding debt. Under the first agreement, the Company and Brownstone Ventures have agreed to allow Dejour to convert a portion of its debt to Brownstone to equity units and a new one-year term debt note. Under the agreement:

·

US$2,000,000 of current debt will be converted into Dejour equity units. Dejour will issue Brownstone 6,666,667 common shares at a deemed price of $0.33 per share plus 3,333,333 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

US$1,780,000 of current debt will be converted into a Canadian dollar denominated 12% note due June 30, 2010. Dejour will also issue Brownstone 2,000,000 common share purchase warrants exercisable at $0.50 for a period of 2 years. The Company will be able to force the exercise of the warrants if Dejours common shares trade at a price of C$0.80 or greater for 30 consecutive calendar days.



41



Under the second agreement, Dejours Independent members of the Board of Directors have negotiated an agreement between the Company and related party Hodgkinson Equities Corporation (HEC), a private company controlled by Robert Hodgkinson, Dejours Chairman and CEO, in regards to Dejours outstanding debt to HEC. Under the agreement:

·

$450,000 of current debt will be converted into a 12% note due January 1, 2010. The due date is extendable until July 1, 2010 by a 6% bonus payable in shares.

·

$450,000 of current debt will be converted into Dejour equity units. The Company will issue to HEC 1,363,636 common shares at a deemed price of $0.33 per share and 681,818 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

$900,000 of current debt will be converted into minority property interests in certain of Dejours Canadian oil and gas leases. The deemed price for the conversions will be equal to the prices obtained by the Company through the sale of the same interests for cash to unrelated third parties.



The debt agreements are subject to the approval of the TSX and regulatory compliance.



Additional property interests may be sold to provide additional capital. The Company may also enter into additional joint-venture agreements which would allow exploration on a portion of the companies properties funded by third-parties.



Fiscal 2008 Ended 12/31/2008

As at 12/31/2008, the Company had a working capital deficit of ($12,712,251) compared to working capital of $11,335,982 at 12/31/2007. Cash as of 12/31/2008 was $406,775, and Accounts Receivable was $782,856. The majority of the Accounts Receivable was for oil and gas sales which were received subsequent to the year-end. Current Liabilities include Bank Line of Credit of $5,500,000 which was obtained in August 2008; Loan from Joint-Venture Partner of $4,604,040 (US$4,000,000), the proceeds from which were used for the acquisition of additional Colorado/Utah acreage from Retamco; Loan from a Related Party from a company controlled by the CEO of Dejour totaling $600,000; and Accounts Payable and Accrued Liabilities of $3,741,770, which increased from $2,664,135 as of 12/31/2007 due to higher costs related to the initial oil and gas production. During fiscal 2008, the Company issued 884,242 shares of common stock under the conversion features of the Convertible Debentures. As of 12/31/2008, there were no Convertible Debentures outstanding.



During the year ended 12/31/2008, Dejour issued 3,523,553 common shares. The Company issued 1,681,048 common shares pursuant to the exercise of stock options for cash proceeds of $887,621; issued 958,263 common shares pursuant to the exercise of warrants for cash proceeds of $1,447,464; and issued 884,242 common shares pursuant to the conversion of the Convertible Debentures which included principal of$1,069,635 and capitalized interest of $144,862. These issuances are disclosed in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



Cash used for Operating Activities during the fiscal year ended 12/31/2008 was ($293,427) including the net loss for the year of ($20,890,753). The adjustments in the category of items not affecting cash for the fiscal year included Impairment of Investment in Titan Uranium of $12,990,343, Equity Income from Titan of ($3,636,710), Impairment of Oil and Gas Properties of $2,029,942, Amortization, Depletion and Accretion of $3,690,939, Non-cash Stock based Compensation Expenses was $2,719,957, Capitalized Interest on Convertible Debentures of $143,758, Unrealized Foreign Exchange Loss of $749,575, Future Income Taxes Expenses of $596,240, and Loss on Disposal of Investment of $8,846. Change in Non-cash Working Capital Balances was $1,304,436.



Cash Used for Investing Activities during the year ended 12/31/2008 totaled ($27,101,003). Resource Property Expenditures used cash of ($27,591,251) and Purchase of Equipment used cash of ($67,049). Proceeds from the Sale of Marketable Securities provided cash of $27,403, and Proceeds from the Sale of Titan Common Shares was $529,894. 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 2008, Ended 12/31/2008 vs. Fiscal 2007, Ended 12/31/2007.)



Cash Provided by Financing Activities during Fiscal 2008 was $14,289,550. Shares issued for cash provided cash of $2,335,085. Bank Line of Credit provided cash of $5,500,000, and Loans from Joint-Venture Partner and Related Party provided cash of $6,404,465.





42



Fiscal 2007 Ended 12/31/2007

As at 12/31/2007, the Companys working capital was $11,335,982 compared to working capital of $11,769,159 at 12/31/2006. The working capital included cash of $13,511,655 compared to cash of $17,660,163, as the Promissory Note of $5,827,000 as of December 31, 2006 was fully paid during 2007. Accounts Payable and Accrued Liabilities rose to $2,664,135 from $556,137 due to costs related to increased oil and gas exploration. Also during 2007 the Company issued Convertible Debentures which totaled $1,043,605 as of December 31, 2007 compared to $1,343,978 in 2006.



During the year ended 12/31/2007, Dejour issued 9,228,606 common shares for net proceeds of $14,705,331. These shares were issued pursuant to private placements as well as the exercise of share purchase options and share purchase warrants and for conversion of convertible debentures. These issuances are disclosed in ITEM 4. INFORMATION ON THE COMPANY, FINANCINGS.



Cash used for Operating Activities during the fiscal year ended 12/31/2007 was ($5,188,462) including the net loss for the year of ($26,810,673). The adjustments in the category of items not affecting cash for the fiscal year included Impairment of Investment in Titan Uranium of $21,581,177, Equity Loss from Titan of $2,351,810, Impairment of Oil and Gas Properties of $678,044, Amortization of $33,959, Non-cash Stock based Compensation Expenses was $2,461,400, and Non-cash consulting fees and other expenses of $54,889. Gain on Disposition of marketable securities was ($44,023), while Future Income Tax Recovery was ($4,220,774). The future income tax recovery occurred as a result of the renunciation of flow-through shares. Changes in Non-cash Working Capital Balances was ($1,274,271).



Cash Used for Investing Activities during the year ended 12/31/2007 totaled ($7,838,377). Resource Property Expenditures used cash of ($8,137,694) and Purchase of Equipment used cash of ($15,293). Proceeds from the Sale of Marketable Securities provided cash of $308,644, and Proceeds from the Sale of Titan Common Shares were $5,966. 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 2007, Ended 12/31/2007 vs. Fiscal 2006, Ended 12/31/2006.)



Cash Provided by Financing Activities during Fiscal 2007 was $8,878,331. Shares issued for cash provided cash of $14,705,331, and Promissory Note used cash of ($5,827,000) as the note issued by the Company matured during the year.



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.



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.)



43



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.



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 as mineral property costs.  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 undiscounted expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.  Mineral exploration costs are expensed as incurred until commercially mineable deposits are determined to exist within a particular property.  Accordingly, for all periods presented, the Company has capitalized all mineral exploration costs for US GAAP purposes unless the costs relate to unproven mineral properties.  In addition, under Canadian GAAP, cash flows relating to unproven mineral property costs are reported as investing activities. For US GAAP, these costs are classified as operating activities.



(b)

Stock-based compensation



The Company has granted stock options to certain directors, employees and consultants.  Under Canadian GAAP, prior to 2003, no compensation expense was recorded in connection with the granting of stock options.  Under previous US GAAP, the Company accounted for stock-based compensation in respect of stock options granted to directors and employees using the intrinsic value based method in accordance with APB Opinion No. 25.  Stock options granted to non-employees were accounted for by applying the fair value method using the Black-Scholes option pricing model in accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123).  Commencing January 1, 2003, under Canadian GAAP the Company expenses the fair value of all stock options granted and under US GAAP has elected to prospectively change its accounting policy to account for all stock options granted in accordance with SFAS 123.  On December 16, 2004, the FASB issued SFAS 123(R), Share-Based Payment, which is a revision of SFAS 123.  SFAS 123(R) supersedes APB Opinion 25, and amends SFAS 95, Statement of Cash Flows.  SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values at the date of grant.  As a result, effective January 1, 2003, there is no material difference between the Companys accounting for stock options under US GAAP versus Canadian GAAP.



(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.





44





(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 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. Effective January 1, 2007, the Company adopted new Canadian GAAP accounting standards issued by CICA relating to financial instruments. The new standards have been adopted on a prospective basis with no restatement to prior period financial statements. These new standards substantially harmonize Canadian GAAP with US GAAP with respect to reporting comprehensive income and loss. During the year, other comprehensive income recognized is $107,768 (2007 loss  $5,400).  For the year ended December 31, 2006, comprehensive loss equals the loss for the year under US GAAP.



(f)

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.



(g)

Recent accounting pronouncements



In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. SFAS 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS 161, effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, will be adopted by the Company beginning in the first quarter of 2009. The Company does not expect there to be any significant impact of adopting SFAS 161 on its financial position, cash flows and results of operations



In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  It is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Companys financial statements.



In May 2008, FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts  An interpretation of FASB Statement No. 60.  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprises risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted.  The adoption of this statement is not expected to have a material effect on the Companys financial statements.



For the reconciliation to U.S. GAAP, see Note 22 to the Audited Financial Statements for the Year Ended December 31, 2008.



45



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, 2008 information with respect to the Companys contractual obligations.



|Contractual Obligations                                                                  | Total      | Less than 1 year | 1-3 Years  | 3-5 years | More than 5 years
|---------------------------------------------------------------------------------------- | ---------- | ---------------- | ---------- | --------- | -----------------
|Debt Obligations (1)                                                                     | $7,154,040 | $5,204,040       | $1,950,000 | Nil       | Nil              
|Capital (Finance) Lease Obligations                                                      | Nil        | Nil              | Nil        | Nil       | Nil              
|Operating Lease Obligations (2)                                                          | $135,373   | $101,053         | $34,320    | Nil       | Nil              
|Purchase Obligations                                                                     | Nil        | Nil              | Nil        | Nil       | Nil              
|Other Long-Term Liabilities Reflected on the Company's Balance Sheet under Canadian GAAP | Nil        | Nil              | Nil        | Nil       | Nil              
|Total                                                                                    | $7,289,413 | $5,305,093       | $1,984,320 | Nil       | Nil              



(1)

Debt Obligations consist of

a)

Promissory Note issued to Brownstone Ventures. The Principal and Interest are repayable by the earlier of the Company completing an equity or debt financing and July 1, 2009. As of December 31, 2008, the balance of $4,604,040 (US$3,780,000) remained outstanding.

b)

Promissory Note issued to a private company controlled by Dejours CEO, Robert Hodgkinson. The principal, interest and loan fee were payable on demand after August 15, 2008, upon 10 days written notice by the lender.  In August 2008, the private company controlled by Dejours CEO signed a subordination and postponement agreement which restricts the principal repayment of the promissory note subject to the banks prior approval and DEAL meeting certain loan covenants.  As at December 31, 2008, $1,950,000 had been advanced on the promissory note.

c)

Loan of $600,000 from a private company controlled by Dejours CEO, Robert Hodgkinson.  There is no specific term of principal repayment, but the interest and loan fee are payable monthly.  As at December 31, 2008, $600,000 remained outstanding.

(2)

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.





46

#





ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES



6.A.  Directors and Senior Management



Table No. 6

Directors and Senior Management

5/1/2009



|Name                 | Position                                               | Age | Date of
First Election
Or Appointment                                                   
|-------------------- | ------------------------------------------------------ | --- | ----------------------------------------------------------------------------------------
|                     |                                                        |     |                                                                                         
|Robert L. Hodgkinson | CEO, Chairman and Director                             | 59  | May 18, 2004 (Director) and July 14, 2004 (Chairman and CEO)                            
|                     |                                                        |     |                                                                                         
|Harrison F. Blacker  | Director and
President of
Dejour Energy
(USA)          | 58  | April 2, 2008                                                                           
|                     |                                                        |     |                                                                                         
|Charles W.E Dove (1) | Director and
President of
Dejour Energy
(Alberta) Ltd. | 53  | August 17, 2007
(Director) and
April 3, 2006 (President of
Dejour Energy
(Alberta) Ltd.)
|                     |                                                        |     |                                                                                         
|Mathew H. Wong       | Corporate Secretary and Chief Financial Officer        | 33  | July 14, 2004                                                                           
|                     |                                                        |     |                                                                                         
|Craig Sturrock (2)   | Director                                               | 65  | August 22, 2005                                                                         
|                     |                                                        |     |                                                                                         
|Robert Holmes (2)    | Director                                               | 65  | October 17, 2008                                                                        
|                     |                                                        |     |                                                                                         
|Richard Patricio (2) | Director                                               | 35  | October 17, 2008                                                                        
|                     |                                                        |     |                                                                                         



(1)

In order to meet the NYSE Amex and National Instrument 58-201 Corporate Governance Rules regarding Independent Board Members, Mr. Dove resigned as a Director effective June 21, 2009. He remains President of Dejour Energy (Alberta) Ltd.

(2)  Member of Audit Committee

______________________________________________________________________________



Robert L. Hodgkinsonhas been a Director of Dejour since May 18, 2004 and the Chairman since July 14, 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. 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. Mr. Hodgkinson is also a Director of Royce Resources (formerly known as AADCO Automotive) an unrelated company traded on the TSX Venture Exchange that used to be 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. Mr. Hodgkinson also served as Director of Titan Uranium Inc. as a Dejour representative on Titans Board until his resignation in April 2009 due to Dejours sale of the majority of its shareholdings in Titan.



47



Harrison Blacker has been a Director and President of Dejour Energy (USA) since April 2, 2008.He has over 30 years of expertise managing oil and gas operations with major corporations in the United States, South America, China and the Middle East. Prior to joining Dejour, Mr. Blacker was CEO of China Oman Energy Company, a joint venture between Oman Oil Company, IPIC and China Gas Holdings, importing and distributing LNG and LPG from the Middle East into China. Mr. Blacker held positions as VP of Business Development and Senior Investor Advisor with Oman Oil Company and Portfolio Manager, Latin American Business Unit and General Manager/President of Venezuela Energy with Atlantic Richfield Corporation (ARCO). Mr. Blacker began his career with Amoco Production Company working in offshore construction and field operations in the Gulf of Mexico. He graduated with a Master of Science in Mechanical Engineering from the University of Florida in 1976. He previously served as Director of China Gas Holdings Ltd. from 2005 to 2007, and as a Director of Compania Logistica de Hidrocarburos from 2003 to 2006.



Charles W.E. Dove: Mr. Dove holds a Bachelor of Science degree from the University of Victoria, and is a designated Professional Geophysicist with the Association of Professional Engineers, Geologists, and Geophysicists of Alberta. He has memberships in the Canadian Society of Exploration Geophysicists and the Society of Exploration Geophysicists. He has been President of Dejour Energy (Alberta) Ltd. since April 2006, and from June 2002 to April 2006 was President of Dove & Kay Exploration Ltd., a geophysical consulting and project management company. In his professional history, he held positions with CDEC Oil and Gas Ltd., Diamond Shamrock Exploration Ltd., Quintana Exploration Ltd., and Rustum Petroleum Ltd., where he discovered and developed oil and gas reserves in Western Canada. In 1989, Mr. Dove formed his own consulting firm working with several large oil and gas firms in Canada, and was a co-founder and major shareholder of Innovative Energy Ltd., which was sold to Dennison Mines in 2001.



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, include management of all accounting functions and supervising all regulatory filings in Canada.



Craig Sturrock has been a Director 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.



Richard Patriciohas been a Director since October 17, 2008. Mr. Patricio is Vice President Corporate & Legal Affairs and Secretary of Pinetree Capital and Brownstone Ventures Inc., one of Dejour's major shareholders. Mr. Patricio holds an LLB from the University of Toronto, and is a lawyer licensed to practice in the Province of Ontario. He previously practiced law in Toronto and from 2001 to 2005 he was in-house General Counsel for Teknion Corporation, a senior TSX listed company. In addition to his duties as an officer of Pinetree Capital, which is traded on the TSX Exchange, and Brownstone Ventures, which is traded on the TSX Venture Exchange, he also serves as a Director of Quetzal Energy Ltd., which trades on the TSX Venture Exchange; a Director of Mega Silver Inc., which trades on the TSX Venture Exchange; and as a Director of X-Terra Resources Corporation, which trades on the TSX Venture Exchange.



Robert Holmeshas been a Director since October 17, 2008.Mr. Holmes began his career as an Investment Executive with Merrill, Lynch, Pierce, Fenner & Smith, and subsequently held various senior executive positions with the firm Blyth, Eastman, Dillon & Company (purchased by Paine Webber & Co.). In 1980, Mr. Holmes co-founded Gilford Securities, Inc., a member of the NYSE, and in 1992 founded a hedge fund, Gilford Partners. He has served on several boards including the North Central College Trustees in Naperville, IL; Board of Trustees Sacred Heart Schools Chicago; Crested Butte Academy in Crested Butte, CO; and Mary Wood Country Day School in Rancho Mirage, CA. He graduated with a BA in Political Science from North Central College in 1965.



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.



48





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



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

The Company does not have a Compensation Committee of its Board of Directors. Executive Compensation is approved by a majority of the Boards independent Directors. During fiscal 2007, an independent executive compensation consulting firm was engaged to review the compensation of its senior officers. The Board of Directors sets the annual compensation, bonus and other benefits of the Chief Executive Officer and approves compensation for all other executive officers of the Company after considering the recommendations of the Chief Executive Officer and the report from the independent executive compensation consultant.



The Company compensates its executive officers through a combination of base compensation, bonuses and common stock options. The base compensation provides an immediate cash incentive for the executive officers. Bonuses encourage and reward exceptional performance over the fiscal year. Common Stock options ensure that the executive officers are motivated to achieve long term growth of the Company and continuing increases in shareholder value.



Base compensation, including that of the Chief Executive Officer, are set by the Board of Directors on the basis of the applicable executive officers responsibilities, experience and past performance. The compensation program is intended to provide a base compensation competitive among companies of a comparable size and character in the oil and gas industry. In making such an assessment, the Board considers the objectives set forth in the Companys business plan and the performance of executive officers and employees in executing the plan in combination with the overall result of the activities undertaken.



An annual bonus may be paid for each fiscal year based on the Boards assessment of the Companys general performance and the relative contribution of each of the executive officers, including the Chief Executive Officer, to that performance.



The Stock Option Plan provides long term incentive compensation which is considered an integral part of the Companys overall compensation program. Upon the recommendation of management and approval by the Board of Directors, stock options are granted under the Option Plan to new directors, officers and key employees, usually upon their commencement of employment with the Company. The Board approves the granting of additional stock options from time to time based on its assessment of the appropriateness of doing so in light of the long term strategic objectives of the Company, its current stage of development, the need to retain or attract key technical and managerial personnel in a competitive industry environment, the number of stock options already outstanding, overall market conditions, and the individuals level of responsibility and performance within the Company. Total options outstanding are presently limited to 10% of the total number of shares outstanding under the rules of the TSX Exchange.



Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended 12/31/2008 was $998,427, paid to Mathew H. Wong ($219,925); Douglas W. Cannaday ($105,025); Harrison Blacker ($203,919); Charles Dove ($213,333); and Robert Hodgkinson ($256,225).





49





Table No. 7

Annual Compensation



|                                                                   | Annual Compensation | Long Term Compensation |                           
|------------------------------------------------------------------ | ------------------- | ---------------------- | --------------------------
|                                                                   |                     |                        |                           
|Name and
Principal Position                                        | Year                | Annual
Salary          | Consulting
Fees
($)       
|Robert L. Hodgkinson, 
Chief Executive Officer                     | 2008
2007
2006      | $46,725
Nil
Nil        | $209,500
$187,500
$136,670
|                                                                   |                     |                        |                           
|Douglas W. Cannaday, 
Former President and Chief Operating Officer | 2008
2007
2006      | Nil
Nil
Nil            | $105,025
$157,500
$129,000
|                                                                   |                     |                        |                           
|Mathew Wong,
Chief Financial Officer                               | 2008
2007
2006      | $46,725
Nil
Nil        | $173,200
$146,965
$107,640
|                                                                   |                     |                        |                           
|Harrison Blacker,
Director and President
of Dejour Energy (USA)    | 2008                | US$187,500             | Nil                       
|                                                                   |                     |                        |                           
|Charles Dove,
Director and
President of Dejour
Energy (Alberta)    | 2008
2007
2006      | $40,000
Nil
Nil        | $173,333
$172,750
$105,625
|                                                                   |                     |                        |                           
|R. Marc Bustin,
Former Director                                    | 2008
2007
2006      | Nil
Nil
Nil            | Nil
Nil
Nil               
|                                                                   |                     |                        |                           
|Lloyd Clark,
Former Director                                       | 2008
2007
2006      | Nil
Nil
Nil            | Nil
Nil
Nil               
|                                                                   |                     |                        |                           
|Archibald Nesbitt,
Former Director                                 | 2008
2007
2006      | Nil
Nil
Nil            | Nil
Nil
Nil               
|                                                                   |                     |                        |                           
|Craig Sturrock,
Director                                           | 2008
2007
2006      | Nil
Nil
Nil            | Nil
Nil
Nil               
|                                                                   |                     |                        |                           
|Robert Holmes,
Director                                            | 2008                | Nil                    | Nil                       
|                                                                   |                     |                        |                           
|Richard Patricio,
Director                                         | 2008                | Nil                    | Nil                       



(1)

The Other Compensation for Charles Dove in fiscal 2007 consists of $354,880 paid for Wild Horse Energy Ltd., a private company owned by Mr. Dove, which owned a 10% interest in DEAL.

(2)

The Other Compensation is for Directors Fees.





50







Table No. 8

Stock Option Grants in Fiscal 2008



|Name                      | Number of Options Granted | Exercise Price per Share | Grant Date *          | Expiration Date      
|------------------------- | ------------------------- | ------------------------ | --------------------- | ---------------------
|Robert Hodgkinson         | 100,000 *
375,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2013
10/28/2013
|                          |                           |                          |                       |                      
|Douglas Cannady           | 100,000 *                 | $1.40                    | 02/14/2008            | 02/14/2013           
|                          |                           |                          |                       |                      
|Mathew Wong               | 100,000 *
175,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2013
10/28/2013
|                          |                           |                          |                       |                      
|Harrison Blacker          | 500,000 *
300,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2013
10/28/2013
|                          |                           |                          |                       |                      
|Charles Dove              | 100,000 *
300,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2013
10/28/2013
|                          |                           |                          |                       |                      
|R. Marc Bustin            | 100,000*
50,000           | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2010
10/28/2013
|                          |                           |                          |                       |                      
|Lloyd Clark               | 100,000*
50,000           | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2010
10/28/2013
|                          |                           |                          |                       |                      
|Archibald Nesbitt         | 100,000 *
100,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2010
10/28/2013
|                          |                           |                          |                       |                      
|Craig Sturrock            | 100,000 *
100,000         | $1.40
0.45               | 02/14/2008
10/28/2008 | 02/14/2010
10/28/2013
|                          |                           |                          |                       |                      
|Robert Holmes             | 100,000                   | $0.45                    | 10/28/2008            | 10/28/2013           
|                          |                           |                          |                       |                      
|Richard Patricio          | 100,000                   | $0.45                    | 10/28/2008            | 10/28/2013           
|                          |                           |                          |                       |                      
|Employees and Consultants | 125,000*                  | $1.60                    | 01/03/2008            | 01/03/2010           
|                          | 150,000*                  | 1.50                     | 02/14/2008            | 02/14/2011           
|                          | 270,000*                  | 1.40                     | 02/14/2008            | 02/14/2011           
|                          | 275,000*                  | 1.40                     | 02/14/2008            | 02/14/2009           
|                          | 75,000*                   | 1.45                     | 05/01/2008            | 05/01/2011           
|                          | 345,000
755,000           | 0.45
0.45                | 10/28/2008
10/28/2008 | 10/28/2010
10/28/2013



*  These options were subsequently cancelled.





Director Compensation.  The Company has compensation agreements for its Directors who are not executive officers. Under the agreements, Directors receive $2,500 per meeting for the first 4 meetings each year, and $1,500 for each meeting thereafter. 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.



Stock Options.  The Company may grant stock options to Directors, Senior Management and employees.  5,254,000 stock options are outstanding as of May 1, 2009. 1,681,048 options were exercised during Fiscal 2008. Refer to ITEM #6.E., "Share Ownership" and Table No. 11 for information about stock options outstanding.





51

#





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 | Compensation Package
on Termination of Contract, in the event of a change in control
|----------------------- | --------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------
|                        |                             |                                                                                        |                                                                                     
|Robert Hodgkinson       | $189,000                    | 2 times annual base consulting fee                                                     | 2 times annual base consulting fee                                                  
|Mathew Wong             | $138,000                    | 1 times annual base consulting fee                                                     | 2 times annual base consulting fee                                                  
|Charles Dove            | $189,000                    | 1 times annual base consulting fee                                                     | 2 times annual base consulting fee                                                  



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 2008 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: Robert Holmes, Richard Patricio and Craig Sturrock.



6.D.  Employees

As of 05/01/2009, the Company had six non-officer/director employees. In the Vancouver office are two employees - an Office Manager and an Accounts Payable Administrator; in Calgary is one employee - a Vice-President of Dejour (Alberta); and in the Denver office are three employees - an Executive Assistant, a Vice-President of Operations of Dejour (USA), and a Geologic Manager.





52

#





6.E.  Share Ownership

Table No. 9 lists, as of 5/01/2009, 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



|Title of Class | Name of Beneficial Owner   |     | Amount and Nature of Beneficial Ownership | Percent of Class
|-------------- | -------------------------- | --- | ----------------------------------------- | ----------------
|               |                            |     |                                           |                 
|Common         | Robert L. Hodgkinson       | (1) | 5,339,454                                 | 7.24%           
|Common         | Charles Dove               | (2) | 560,000                                   | 0.76%           
|Common         | Harrison Blacker           | (3) | 255,478                                   | 0.35%           
|Common         | Mathew H. Wong             | (4) | 239,072                                   | 0.32%           
|Common         | Craig Sturrock             | (5) | 365,000                                   | 0.49%           
|Common         | Robert Holmes              | (6) | 683,000                                   | 0.93%           
|Common         | Richard Patricio           | (7) | 20,000                                    | 0.03%           
|               | Total Directors/Management |     | 7,462,004                                 | 10.08%          



(1)

Of these shares, 56,250 are represented by vested stock options and 9,000 are represented by currently exercisable share purchase warrants. 1,500,000 of these shares are owned by 7804 Yukon Inc., a private company owned by Robert Hodgkinson; 964,204 are common shares owned by 858642 Alberta Ltd., a private company owned by Robert Hodgkinson; 2,500,000 are common shares owned by Hodgkinson Equities Corp., a private company owned by Robert Hodgkinson. A further 318,750 stock options have been granted but not yet vested.

(2)

Of these shares, 45,000 are represented by vested stock options and 65,000 are represented by currently exercisable share purchase warrants. 106,500 are common shares owned by Lynn Dove, Mr. Doves wife. A further 255,000 stock options have been granted but not yet vested.

(3)

Of these shares, 45,000 are represented by vested stock options. A further 255,000 stock options have been granted but not yet vested.

(4)

Of these shares, 26,250 are represented by vested stock options. 40,098 of these common shares are held by 390855 BC Ltd., a private company owned by Mathew Wong; 172,724 common shares are owned by Pui Ngor Lee, Mr. Wongs mother. A further 148,750 stock options have been granted but not yet vested.

(5)

Of these shares, 15,000 are represented by vested stock options. A further 85,000 stock options have been granted but not yet vested.

(6)

Of these shares, 20,000 are represented by vested stock options. A further 130,000 stock options have been granted but not yet vested.

(7)

Of these shares, 20,000 are represented by vested stock options. A further 130,000 stock options have been granted but not yet vested.



# Based on 73,725,512 shares outstanding as of 5/1/2009, and stock options and share purchase warrants exercisable within 60 days for each holder.







53

#





The Company is aware of three persons/companies who each beneficially own 5% or more of the Registrant's voting securities. Table No. 10 lists as of 5/1/2009, 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         | Brownstone Ventures Inc. | 5,793,140                                 | 7.86%           
|Common         | Retamco Operating Inc.   | 5,505,019                                 | 7.47%           
|Common         | Robert L. Hodgkinson (1) | 5,339,454                                 | 7.24%           



(1)

Of these shares, 56,250 are represented by vested stock options and 9,000 are represented by currently exercisable share purchase warrants. 1,500,000 of these shares are owned by 7804 Yukon Inc., a private company owned by Robert Hodgkinson; 964,204 are common shares owned by 858642 Alberta Ltd., a private company owned by Robert Hodgkinson; 2,500,000 are common shares owned by Hodgkinson Equities Corp., a private company owned by Robert Hodgkinson. A further 318,750 stock options have been granted but not yet vested.



# Based on 73,725,512 shares outstanding as of 5/1/2009, and stock options and share purchase warrants exercisable within 60 days for each holder.



Stock Options.  The terms of incentive options grantable by the Company are prepared 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. At the Companys Annual General Meeting held on October 17, 2008, shareholders approved a resolution modifying the Plan as 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.



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.





54





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.



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.



55



At the Companys Annual General Meeting of Shareholders held on October 17, 2008, shareholders approved a resolution which ratified a revised Plan. Under the resolution, options will be exercisable over periods of up to five years as determined by the Board and are required to have an exercise price no less than the closing market price of the Companys shares prevailing on the day the option is granted, less a discount of up to 25%, the amount of the discount varying with market price in accordance with the policies of the Exchange. The Plan contains no vesting requirements, but permits the Board to specify a vesting schedule in its discretion. The Plan provides that if a change in control occurs, all shares subject to option shall immediately become vested and may thereupon be exercised in whole or in part by the option holder.



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. 11 as of 5/1/2009, as well as the number of options granted to employees/consultants/former officers and directors.



Table No. 11

Stock Options Outstanding



|Name                         | Number of Options Held | Number of
Options
Vested | Exercise Price per Share | Grant Date | Expiration Date
|---------------------------- | ---------------------- | ------------------------ | ------------------------ | ---------- | ---------------
|                             |                        |                          |                          |            |                
|Robert Hodgkinson            | 375,000                | 37,500                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             |                        |                          |                          |            |                
|Charles Dove                 | 300,000                | 30,000                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             |                        |                          |                          |            |                
|Harrison Blacker             | 300,000                | 30,000                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             |                        |                          |                          |            |                
|Mathew Wong                  | 175,000                | 17,500                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             |                        |                          |                          |            |                
|Craig Sturrock               | 100,000                | 10,000                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             |                        |                          |                          |            |                
|Robert Holmes                | 100,000                | 10,000                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             | 50,000                 | 2,500                    | $0.45                    | 02/12/2009 | 02/12/2014     
|                             |                        |                          |                          |            |                
|Richard Patricio             | 100,000                | 10,000                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             | 50,000                 | 2,500                    | $0.45                    | 02/12/2009 | 02/12/2014     
|                             |                        |                          |                          |            |                
|Employees/Consultants/Former | 48,000                 | 24,000                   | $0.55                    | 01/12/2009 | 07/15/2009     
|Officers and Directors       | 50,000                 | 25,000                   | $0.45                    | 02/12/2009 | 08/12/2009     
|                             | 36,000                 | 36,000                   | $0.275                   | 11/24/2004 | 10/31/2009     
|                             | 25,000                 | 20,833                   | $1.75                    | 10/30/2006 | 11/01/2009     
|                             | 100,000                | 100,000                  | $2.00                    | 01/31/2007 | 01/31/2010     
|                             | 365,000                | 365,000                  | $2.00                    | 04/02/2007 | 04/01/2010     
|                             | 10,000                 | 7,500                    | $2.00                    | 11/21/2007 | 10/31/2010     
|                             | 125,000                | 125,000                  | $1.60                    | 01/03/2008 | 01/03/2010     
|                             | 200,000                | 125,000                  | $1.40                    | 02/14/2008 | 02/14/2010     
|                             | 345,000                | 86,250                   | $0.45                    | 10/28/2008 | 10/28/2010     
|                             | 100,000                | 50,000                   | $0.55                    | 01/12/2009 | 12/31/2010     
|                             | 180,000                | 22,500                   | $0.45                    | 02/12/2009 | 02/12/2011     
|                             | 150,000                | 150,000                  | $1.50                    | 02/14/2008 | 02/14/2011     
|                             | 195,000                | 81,250                   | $1.40                    | 02/14/2008 | 02/14/2011     
|                             | 75,000                 | 25,000                   | $1.45                    | 05/01/2008 | 05/01/2011     
|                             | 955,000                | 95,500                   | $0.45                    | 10/28/2008 | 10/28/2013     
|                             | 645,000                | 32,250                   | $0.45                    | 02/14/2009 | 02/14/2014     
|                             |                        |                          |                          |            |                
|                             |                        |                          |                          |            |                
|Total Officers/Directors     | 1,550,000              | 150,000                  |                          |            |                
|Total Consultants            | 3,604,000              | 1,371,083                |                          |            |                
|Total Outstanding            | 5,154,000              | 1,521,083                |                          |            |                



______________________________________________________________________________





56









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 4/30/2009, the Companys shareholders list showed 73,725,512 common shares issued and outstanding. Including holdings by depository institutions, the Company had 141 registered shareholders resident in Canada holding 57,113,607 common shares, or 77.47% of the total issued and outstanding shares; 47 shareholders resident in the United States holding 16,587,236 common shares, or 22.50% of the issued and outstanding common shares; and 3 shareholders resident in other countries holding 24,669 common shares, or 0.03% of the issued and outstanding 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)

In June 2008, the Company issued a promissory note with a face value of $4,078,800 (US$4,000,000) to joint-venture partner Brownstone Ventures Inc. The note is secured by a general security agreement issued by the Company in favor of Brownstone, and bears interest at 5% per annum. The principal and interest are repayable by the earliest of the Company completing an equity or debt financing and July 1, 2009. On July 1, 2008, a repayment of $222,948 (US$220,000) was made and as of December 31, 2008, $4,604,040 (US$3,780,000) remained outstanding.

b)

In May 2008, DEAL issued a promissory note for up to $2,000,000 to a private company controlled by Dejours CEO, Robert Hodgkinson. The promissory note is secured by the assets, equipment, fixtures, inventory and accounts receivable of DEAL, bears interest at the Royal Bank of Canada Prime Rate per annum, and has a loan fee of 1% of the outstanding amount per month.  The principal, interest and loan fee were payable on demand after August 15, 2008, upon 10 days written notice by the lender.  Upon securing the bank line of credit in August 2008, the private company controlled by Dejours CEO signed a subordination and postponement agreement which restricts the principal repayment of the promissory note subject to the banks prior approval and DEAL meeting certain loan covenants.  As at December 31, 2008, $1,950,000 had been advanced on the promissory note.

c)

In August 2008, the Company borrowed $600,000 from a private company controlled by Dejours CEO, Robert Hodgkinson. The loan is secured by all assets of the Company, repayable on demand, bears interest at the Canadian prime rate per annum, and has a loan fee of 1% of the outstanding amount per month.  There is no specific term of principal repayment, but the interest and loan fee are payable monthly.  The $600,000 loan was repaid in Fiscal 2009.

d)

In September 2008, as consideration for the private company controlled by the CEO of the Company agreeing to postpone the $2,000,000 promissory note and providing the additional loan of $600,000, the private company was granted an option to become a working interest partner with DEAL.  Upon electing to become a working interest partner, the private company must pay DEAL an amount equal to 10% of the actual price paid for the acquisition of the lands in the emerging Montney natural gas resource play in northeastern British Columbia.  The private company is also required to pay its pro-rata share of the operating costs. Subsequent to December 31, 2008, the private company controlled by the CEO of the Company exercised its option and elected to become a working interest partner with DEAL.  The option price was $90,642.



57



e)

During 2008, the Company incurred a total of $209,500 (2007 - $187,500; 2006 - $136,670) in consulting fees and accrued $19,562 (2007 - US$34,195; 2006 - US$17,282) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 9 to the financial statements, and paid $Nil (2007 - $63,000; 2006 - $63,000) bonus to a private company (HEC) controlled by the CEO, Robert Hodgkinson.  In June 2008, US $400,000 of convertible debentures was converted to 296,296 units. Each unit consists of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008. The Company also issued 50,806 Units to settle US $68,587 of accrued interest.  In October 2006, the Company assigned 25% of its interest in the Noel Area, 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.

f)

During 2008, the Company incurred a total of $105,025 (2007 - $157,500; 2006 - $129,000) in consulting fees and accrued $4,904 (2007 - US$21,320; 2006 - US$14,830) of interest at 8% per annum related to US$400,000 of convertible debentures as discussed in Note 9 to the financial statements, and $Nil (2007 - $63,000; 2006 - $63,000) bonus payments to the President of a private company controlled by the former President of the Company, Douglas Cannaday. In June 2008, US$200,000 of convertible debentures was converted to 148,148 Units. Each Unit consists of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008. The Company also issued 12,700 Units to settle US $17,145 of accrued interest.  In April 2007, US$200,000 of convertible debentures was converted to 148,148 Units. Each Unit consists of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008. The Company also issued 9,254 Units to settle US $12,493 of accrued interest.

g)

During 2008, the Company incurred $173,200 (2007 - $146,965; 2006 - $107,640) in consulting fees to a private company controlled by the CFO the Company, Mathew Wong, and also accrued $12,948 (2007 - US$32,222; 2006 - US$14,830) of interest at 8% per annum related to US$400,000 of convertible debentures, as discussed in Note 9 in the financial statements, to an individual related to the CFO. In June 2008, US$250,150 of convertible debentures was converted to 185,296 Units. Each Unit consists of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008. The Company also issued 44,444 Units to settle US $59,999 of accrued interest.  In November 2007, US $149,850 of convertible debentures was converted to 111,000 units. Each unit consists of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008.

h)

During 2008, the Companys subsidiary DEAL incurred a total of $173,333 (2007 - $172,750; 2006 - $105,625) in consulting fees to private companies controlled by Charles Dove, Director of Dejour and President of DEAL.

i)

During 2008, the Company received rental income of $28,700 from private companies controlled by officers and employees of the Company. The amounts included $13,600 from a private company controlled by Robert Hodgkinson, Director and CEO of the Company; $9,600 from a private company controlled by Mathew Wong, Chief Financial Officer of the Company; and $5,500 from a private company controlled by a vice-president of the Company.

i)

During 2007, the Company purchased Wild Horse Energy Ltd., a private company owned by Charles Dove, Director, for $354,880. Wild Horse owns the remaining 10% of DEAL the Company did not already own.

j)

During 2008, the Company incurred $76,054 (2007 - $113,556; 2006 - $Nil) in consulting fees to a private company controlled by a vice-president of the Company.



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 $72,700 and $67,000, and audit related fees of $6,800 and $6,800, during the years ended 12/31/2008 and 12/31/2007 respectively, to Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants.



Shareholder Loans

---No Disclosure Required---





58

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Amounts Owing to Senior Management/Directors

In May 2008, DEAL issued a promissory note for up to $2,000,000 to Hodgkinson Equities Corporation (HEC), a private company controlled by Dejours CEO, Robert Hodgkinson. The promissory note is secured by the assets, equipment, fixtures, inventory and accounts receivable of DEAL, bears interest at the Royal Bank of Canada Prime Rate per annum, and has a loan fee of 1% of the outstanding amount per month.  The principal, interest and loan fee were payable on demand after August 15, 2008, upon 10 days written notice by the lender.  Upon securing the bank line of credit in August 2008, the private company controlled by the CEO of the Company signed a subordination and postponement agreement which restricts the principal repayment of the promissory note subject to the banks prior approval and DEAL meeting certain loan covenants.  As at December 31, 2008, $1,950,000 had been advanced on the promissory note. In June 2009 Dejours Independent members of the Board of Directors negotiated an agreement between the Company HEC in regards to Dejours outstanding debt to HEC. Under the agreement:

·

$450,000 of current debt will be converted into a 12% note due January 1, 2010. The due date is extendable until July 1, 2010 by a 6% bonus payable in shares.

·

$450,000 of current debt will be converted into Dejour equity units. The Company will issue to HEC 1,363,636 common shares at a deemed price of $0.33 per share and 681,818 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

$900,000 of current debt will be converted into minority property interests in certain of Dejours Canadian oil and gas leases. The deemed price for the conversions will be equal to the prices obtained by the Company through the sale of the same interests for cash to unrelated third parties.



The debt agreements are subject to the approval of the TSX and regulatory compliance.



In August 2008, the Company borrowed $600,000 from a private company controlled by the CEO of the Company. Robert Hodgkinson. The loan is secured by all assets of the Company, repayable on demand, bears interest at the Canadian prime rate per annum, and has a loan fee of 1% of the outstanding amount per month.  There is no specific term of principal repayment, but the interest and loan fee are payable monthly.  The $600,000 loan was repaid subsequent to the December 31, 2008 year end.



There have been no other transactions since 12/31/2008, 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.



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 31st2008 and 2007





59

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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 year ended December 31, 2008, the Company sold all of its share position in Titan Uranium for proceeds of $2,276,319.



In September 2008, as consideration for a private company controlled by the CEO of the Company, Robert Hodgkinson agreeing to postpone repayment of a $2,000,000 promissory note and providing an additional loan of $600,000, the private company was granted an option to become a working interest partner with DEAL.  Upon electing to become a working interest partner, the private company must pay DEAL an amount equal to 10% of the actual price paid for the acquisition of the lands in the emerging Montney natural gas resource play in northeastern British Columbia.  The private company is also required to pay its pro-rata share of the operating costs. Subsequent to December 31, 2008, the private company controlled by the CEO of the Company exercised its option and elected to become a working interest partner with DEAL.  The option price was $90,642.



In June 2009, the Company announced that it had completed the sale of certain Canadian oil and gas assets, which included the Companys 100% interest in the Carson Creek property in Alberta and 10% of the Companys interest in the Drake/Woodrush project, to unrelated third parties. Proceeds from the sale of the interests was $3,000,000 in cash and $900,000 in escrow. The Company also announced it has letters of intent to sell additional minority property interests for  further proceeds of $2,100,000, which, if completed, would increase the proceeds from the sale of Canadian property interests to $6,000,000.



In June 2009, management announced that it had negotiated several agreements to reduce Dejours outstanding debt. Under the first agreement, the Company and Brownstone Ventures have agreed to allow Dejour to convert a portion of its debt to Brownstone to equity units and a new one-year term debt note. Under the agreement:

·

US$2,000,000 of current debt will be converted into Dejour equity units. Dejour will issue Brownstone 6,666,667 common shares at a deemed price of $0.33 per share plus 3,333,333 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

US$1,780,000 of current debt will be converted into a Canadian dollar denominated 12% note due June 30, 2010. Dejour will also issue Brownstone 2,000,000 common share purchase warrants exercisable at $0.50 for a period of 2 years. The Company will be able to force the exercise of the warrants if Dejours common shares trade at a price of C$0.80 or greater for 30 consecutive calendar days.



Under the second agreement, Dejours Independent members of the Board of Directors have negotiated an agreement between the Company and related party Hodgkinson Equities Corporation (HEC), a private company controlled by Robert Hodgkinson, Dejours Chairman and CEO, in regards to Dejours outstanding debt to HEC. Under the agreement:

·

$450,000 of current debt will be converted into a 12% note due January 1, 2010. The due date is extendable until July 1, 2010 by a 6% bonus payable in shares.

·

$450,000 of current debt will be converted into Dejour equity units. The Company will issue to HEC 1,363,636 common shares at a deemed price of $0.33 per share and 681,818 common share purchase warrants exercisable at a price of $0.55 for a period of 5 years.

·

$900,000 of current debt will be converted into minority property interests in certain of Dejours Canadian oil and gas leases. The deemed price for the conversions will be equal to the prices obtained by the Company through the sale of the same interests for cash to unrelated third parties.



The two debt agreements are subject to the approval of the TSX and regulatory compliance.





60







ITEM 9.  THE OFFER AND LISTING



9.A.  Common Share Trading Information



The Company's common shares trade on the TSX Exchange in Toronto, Ontario, and the NYSE AMEX under the symbol "DEJ".  The Company traded on the TSX Venture Exchange in Vancouver, British Columbia, Canada, until November 20, 2008 when it began trading on the TSX. The Company changed its symbol to DEJ after a 1 for 3 share consolidation effective October 1, 2003. The Company changed its TSX trading symbol on May 23, 2007 to DEJ to coincide with its listing on the American Stock Exchange (now NYSE AMEX) on the same day under the symbol DEJ.



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



Table No. 13

TSX and TSX Venture Exchange

Common Shares Trading Activity

- Sales -

Canadian Dollars



|Period                          | High  | Low  
|------------------------------- | ----- | -----
|                                |       |      
|Month ended 04/30/2009          | $0.40 | $0.23
|Month ended 03/31/2009          | $0.42 | $0.24
|Month ended 02/28/2009          | $0.50 | $0.33
|Month ended 01/31/2009          | $0.76 | $0.43
|Month ended 12/31/2008          | $0.52 | $0.36
|Month ended 11/30/2008          | $0.74 | $0.40
|                                |       |      
|Fiscal Year Ended 12/31/2008    | $2.17 | $0.33
|Fiscal Year Ended 12/31/2007    | $3.28 | $1.02
|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 Quarter Ended 03/31/2009 | $0.76 | $0.23
|Fiscal Quarter Ended 12/31/2009 | $0.84 | $0.33
|Fiscal Quarter Ended 09/30/2008 | $1.97 | $0.61
|Fiscal Quarter Ended 06/30/2008 | $2.17 | $1.37
|Fiscal Quarter Ended 03/31/2008 | $1.81 | $1.20
|Fiscal Quarter Ended 12/31/2007 | $2.35 | $1.30
|Fiscal Quarter Ended 09/30/2007 | $2.76 | $1.02
|Fiscal Quarter Ended 06/30/2007 | $3.28 | $2.18
|Fiscal Quarter Ended 03/31/2007 | $3.07 | $2.13
|Fiscal Quarter Ended 12/31/2006 | $2.97 | $1.73





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Table Number 13.a lists the Companys trading on the NYSE AMEX (formerly the American Stock Exchange) since the initial listing on May 23, 2007.



Table No. 13.a

NYSE AMEX

Common Shares Trading Activity

- Sales -

United States Dollars



|Period                          | High  | Low  
|------------------------------- | ----- | -----
|                                |       |      
|Month ended 04/30/2009          | $0.34 | $0.18
|Month ended 03/21/2009          | $0.35 | $0.12
|Month ended 02/29/2009          | $0.42 | $0.26
|Month ended 01/31/2009          | $0.67 | $0.35
|Month ended 12/31/2008          | $0.44 | $0.25
|Month ended 11/30/2008          | $0.64 | $0.30
|                                |       |      
|Fiscal Year Ended 12/31/2008    | $2.17 | $0.25
|Fiscal Year Ended 12/31/2007    | $2.95 | $1.29
|                                |       |      
|Fiscal Quarter Ended 03/31/2009 | $0.67 | $0.12
|Fiscal Quarter Ended 12/31/2008 | $0.80 | $0.25
|Fiscal Quarter Ended 09/30/2008 | $2.00 | $0.60
|Fiscal Quarter Ended 06/30/2008 | $2.17 | $1.33
|Fiscal Quarter Ended 03/31/2008 | $1.95 | $0.93
|Fiscal Quarter Ended 12/31/2007 | $2.36 | $1.31
|Fiscal Quarter Ended 09/30/2007 | $2.95 | $1.29
|Fiscal Quarter Ended 06/30/2007 | $2.65 | $2.04



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. 11 for additional information.



Table No. 14 lists, as of 5/1/2009, share purchase warrants outstanding, the exercise price, and the expiration date of the share purchase warrants.  As of May 1, 2009, the Company was aware of 92 holders of its 2,104,129 outstanding share purchase warrants.  These warrants were issued in conjunction with a private placement.





62







Table No. 14

Share Purchase Warrants Outstanding



|Number of Share Purchase
Warrants Outstanding | Exercise Price | Expiration Date of Share Purchase Warrants
|--------------------------------------------- | -------------- | ------------------------------------------
|                                              |                |                                           
|107,148                                       | $ 3.35         | May 18, 2009                              
|1,996,981                                     | $ 3.35         | May 25, 2009                              
|Total      2,104,129                          |                |                                           



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 Exchange in Toronto, Ontario, Canada and the NYSE AMEX under the symbol DEJ.



Refer to ITEM #9.A.4.



ITEM 10.  ADDITIONAL INFORMATION



10.A.  Share Capital



10.A.1.  Authorized/Issued Capital.  As of 12/31/2008, 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 12/31/2008 there were 73,651,882 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, the Company issued the following shares for assets other than cash:



|Fiscal 2008 | 884,242   | Conversion of Convertible Debentures              
|----------- | --------- | --------------------------------------------------
|Fiscal 2007 | 273,399   | Conversion of Convertible Debentures              
|Fiscal 2006 | 5,500,000 | For Acquisition of interest in the Retamco Project
|Fiscal 2005 | 11,500    | For Services                                      
|Fiscal 2004 | 200,000   | For Bridge Loan Financing                         
|TOTAL       | 6,869,141 |                                                   



The total number of shares issued for assets other than cash in the last 5 fiscal years is 6,869,141 shares, or 9.33% of the common shares issued and outstanding as of December 31, 2008.



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.---







63









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.



|Fiscal Year | Nature of Share Issuance                                 | Number of Shares | Gross Proceeds
|----------- | -------------------------------------------------------- | ---------------- | --------------
|            |                                                          |                  | $             
|Fiscal 2004 | Private Placement                                        | 6,000,000        | 1,796,760     
|            | For bridge loan financing fee                            | 200,000          | 50,000        
|            |                                                          |                  |               
|Fiscal 2005 | Shares issued as finders fee                            | 185,791          | (120,764)     
|            | Private Placement                                        | 1,000,000        | 500,000       
|            | Private Placement                                        | 650,000          | 325,000       
|            | Private Placement                                        | 8,076,923        | $5,250,000    
|            | Private Placement                                        | 4,500,000        | 2,914,808     
|            | Private Placement                                        | 6,617,500        | 6,516,625     
|            | Exercise of share purchase warrants and agents options  | 2,024,148        | 1,035,608     
|            | Exercise of stock options                                | 154,965          | 52,286        
|            | Shares issued for services                               | 11,500           | 9,200         
|            |                                                          |                  |               
|Fiscal 2006 | Private Placement                                        | 5,300,000        | 7,950,000     
|            | Private Placement                                        | 2,771,333        | 4,157,000     
|            | Exercise of share purchase warrants and agents options  | 7,551,194        | 7,426,683     
|            | Exercise of stock options                                | 760,407          | 433,321       
|            | Shares issued for the acquisition of the Retamco Project | 5,500,000        | 12,088,991    
|            |                                                          |                  |               
|Fiscal 2007 | Private Placement                                        | 3,773,980        | 10,001,047    
|            | Private Placement                                        | 1,000,000        | 1,820,000     
|            | Conversion of Convertible Debentures                     | 273,399          | 394,752       
|            | Exercise of Warrants                                     | 3,444,490        | 2,859,863     
|            | Exercise of Stock Options                                | 736,737          | 557,800       
|            |                                                          |                  |               
|Fiscal 2008 | Conversion of Convertible Debentures                     | 884,242          | 1,214,497     
|            | Exercise of Warrants                                     | 958,263          | 1,447,464     
|            | Exercise of Stock Options                                | 1,681,048        | 887,621       
|            |                                                          |                  |               
|Q1 FY 2009  | Exercise of Stock Options                                | 73,630           | 20,248        



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.





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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.



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.



65



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:



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



(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;



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(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 has also completed the purchase of Wild Horse Energy Ltd. from a related party. The Companys agreement with Titan Uranium regarding the Canadian uranium properties, its participating agreement with Retamco Operating regarding the Colorado and Utah Oil and Gas Leases, the Farmout Agreement with Laramie Energy, and the acquisition agreement with Retamco 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 are 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 the Companys amended fiscal 2006 Form 20-F Annual Report; The Wild Horse Energy purchase agreement has been filed as exhibits to the fiscal 2007 Annual Report; and the Laramie Energy and Retamco Acquisition agreements have been filed as exhibits to this Annual Report.



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.



67



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.



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.





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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.



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.



69



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 2008/2007/2006 is included with the related financial statements in this Annual Report.



10.H.  Document on Display

All documents incorporated and referred by reference in this 20-F Annual Report may be viewed at the Companys registered office located at Suite 1100, 808 West Hastings Street, Vancouver, British Columbia.



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



Disclosure Controls and Procedures

The Companys management, including the President, has reviewed and evaluated the effectiveness of the Companys disclosure controls and procedures as of December 31, 2008.  Based on that review and evaluation, the President has concluded that the Companys disclosure controls and procedures are effective in providing management with all material information required to be disclosed in this annual report on a timely basis.



Managements Annual Report on Internal Control over Financial Reporting



Management is responsible for establishing and maintaining adequate internal control over financial reporting. All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Managements framework for evaluating the effectiveness of its internal controls is based upon the criteria established in Internal Control Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.



70



As at December 31, 2008, management assessed the effectiveness of our internal controls over financial reporting and concluded that such internal controls over financial reporting are effective and that there were no material weaknesses in our internal controls over financial reporting.



Attestation Report of the Registered Accounting Firm.

The Companys auditor, Dale Matheson Carr-Hilton Labonte LLP, Chartered Accountants, has attested to managements evaluation of internal controls over financial reporting for the year ended December 31, 2008.  The auditors attestation is included within this annual report on Form 20-F.



Changes in Internal Controls Over Financial Reporting

There has been no change in the Companys internal controls over financial reporting that occurred during the period covered by this Form 20-F, that has materially affected or is reasonably likely to materially affect, the Companys internal controls over financial reporting.



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 NYSE AMEX.



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.







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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.



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.

Whistleblower Policy



Effective December 28, 2007, the Companys audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees and consultants who have concerns regarding questionable accounting or auditing matters.



A copy of the Companys Whistleblower Policy has been filed as an amendment to the Companys Fiscal 2007 20-F Annual Report.



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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, 2008, 2007 and 2006.



|                    | 2008    | 2007       | 2006     
|------------------- | ------- | ---------- | ---------
|Audit Fees:         |         |            |          
|Audit Fees:         | $72,700 | $   67,000 | $  42,672
|Audit Related Fees: | Nil     | Nil        | Nil      
|Tax Fees            | Nil     | Nil        | Nil      
|Other Fees (1)      | 6,800   | 6,800      | 6,800    
|                    |         |            |          
|Total Fees:         | $79,500 | $   73,800 | $  49,472



(1)

Other Fees are for reviewing the Companys 20-F Registration Statement, and assistance with broker due diligence on private placement financings.





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.





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 March 20, 2009.



Consolidated Balance Sheets at December 31, 2008 and 2007.



Consolidated Statements of Operations and Deficit for the years ended December 31, 2008, 2007, and 2006.



Consolidated Statements of Cash Flows for years ended December 31, 2008, 2007, and 2006.



73



Notes to Consolidated Financial Statements



(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                                                                                                                                                       | 
|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:
Retamco Purchase Agreement
Laramie Farmout Agreement
Certifications of the CEO and CFO                                                                    | 

Signature Page



















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[dejour200820fannualreport005.jpg]





CONSOLIDATED FINANCIAL STATEMENTS



December 31, 2008







INDEPENDENT AUDITORS REPORT



CONSOLIDATED BALANCE SHEETS



CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT



CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)



CONSOLIDATED STATEMENTS OF CASH FLOWS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





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[dejour200820fannualreport006.jpg]

INDEPENDENT AUDITORS REPORT



To the Shareholders of Dejour Enterprises Ltd.



We have completed integrated audits of the 2008 and 2007 consolidated financial statements of Dejour Enterprises Ltd. and of its internal control over financial reporting as at December 31, 2008 and 2007. Our opinions, based on our audits, are presented below.



Consolidated financial statements

We have audited the accompanying consolidated balance sheets of Dejour Enterprises Ltd. as at December 31, 2008 and 2007, and the related consolidated statements of operations and deficit, comprehensive loss and accumulated other comprehensive income (loss) 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 of the Companys financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. A financial statement audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.



Internal control over financial reporting

We have also audited Dejour Enterprises Ltd.s internal control over financial reporting as at December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, which is set out in Managements Report on Internal Control Over Financial Reporting included in Managements Discussion and Analysis.  Our responsibility is to express an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.



We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

contd





76









Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at December 31, 2008 based on criteria established in Internal Control  Integrated Framework issued by the COSO.



DMCL



DALE MATHESON CARR-HILTON LABONTE LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 20, 2009





COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING DIFFERENCES



In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in Note 1 to the financial statements.  Our report to the shareholders dated March 20, 2009 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors report when these are adequately disclosed in the financial statements.





DMCL



DALE MATHESON CARR-HILTON LABONTE LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 20, 2009















[dejour200820fannualreport007.jpg]



77









DEJOUR ENTERPRISES LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in Canadian Dollars)



|                                              | December 31,
2008 | December 31,
2007   
|--------------------------------------------- | ----------------- | --------------------
|                                              |                   |                     
|ASSETS                                        |                   |                     
|Current                                       |                   |                     
|Cash and cash equivalents                     | $      406,775    | $ 13,511,655        
|Accounts receivable                           | 782,856           | -                   
|Advances for oil and gas projects             | 216,430           | 1,006,917           
|Marketable securities (Note 4)                | -                 | 36,250              
|Prepaids and other receivables                | 269,730           | 488,900             
|Unrealized financial instrument gain          | 107,768           |                     
|                                              | 1,783,559         | 15,043,722          
|                                              |                   |                     
|Equipment, net(Note 5)                        | 116,584           | 88,287              
|Investment in Titan(Note 6)                   | 2,721,875         | 12,600,000          
|Uranium properties(Note 7 (a))                | 696,991           | 696,991             
|Oil and gas properties(Note 7 (b))            | 56,986,727        | 34,714,499          
|                                              |                   |                     
|                                              | $ 62,305,736      | $  63,143,499       
|                                              |                   |                     
|LIABILITIES                                   |                   |                     
|Current                                       |                   |                     
|Bank line of credit (Note 8)                  | $   5,550,000     | $                  -
|Accounts payable and accrued liabilities      | 3,741,770         | 2,664,135           
|Convertible debentures (Note 9)               | -                 | 1,043,605           
|Loan from related party (Note 10 (b))         | 600,000           | -                   
|Loan from joint-venture partner (Note 10 (a)) | 4,604,040         | -                   
|                                              | 14,495,810        | 3,707,740           
|Loan from related party(Note 10 (b))          | 1,950,000         | -                   
|Asset retirement obligations(Note 11)         | 363,109           | -                   
|Future income tax liabilities(Note 17)        | 1,133,140         | -                   
|                                              | 17,942,059        | 3,707,740           
|                                              |                   |                     
|SHAREHOLDERS' EQUITY                          |                   |                     
|Share capital (Note 12)                       | 64,939,177        | 61,393,964          
|Contributed surplus (Note 14)                 | 5,895,560         | 3,735,270           
|Deficit                                       | (26,578,828)      | (5,688,075)         
|Accumulated other comprehensive income (loss) | 107,768           | (5,400)             
|                                              | 44,363,677        | 59,435,759          
|                                              |                   |                     
|                                              | $  62,305,736     | $ 63,143,499        



Contingency (Note 8)

Commitments (Notes 8 and 10)

Subsequent Events (Note 21)



Approved on behalf of the Board:



Robert Hodgkinson

Craig Sturrock

Robert Hodgkinson  Director

Craig Sturrock - Director



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





78









DEJOUR ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(Expressed in Canadian Dollars)



|                                                                         | Year Ended
December 31,
2008 | Year Ended
December 31,
2007
|------------------------------------------------------------------------ | ---------------------------- | ----------------------------
|                                                                         |                              |                             
|OIL AND NATURAL GAS REVENUE                                              | $     5,765,555              | $                   -       
|                                                                         |                              |                             
|EXPENSES                                                                 |                              |                             
|Amortization, depletion and accretion                                    | 3,690,939                    | 33,959                      
|General and administrative                                               | 4,214,783                    | 4,340,021                   
|Interest expense and finance fee                                         | 481,252                      | 293,536                     
|Operating and transportation                                             | 3,121,955                    | -                           
|Stock based compensation (Note 13)                                       | 2,719,957                    | 2,461,400                   
|                                                                         | 14,228,886                   | 7,128,916                   
|                                                                         |                              |                             
|LOSS BEFORE THE FOLLOWING AND INCOME TAXES                               | (8,463,331)                  | (7,128,916)                 
|Interest and other income                                                | 236,838                      | 806,147                     
|(Loss) gain on disposition of investment                                 | (8,846)                      | 44,023                      
|Equity income (loss) from Titan (Note 6)                                 | 3,636,710                    | (2,351,810)                 
|Foreign exchange loss                                                    | (675,599)                    | (141,670)                   
|Impairment of investment in Titan (Note 6)                               | (12,990,343)                 | (21,581,177)                
|Impairment of oil and gas properties (Note 7 (b))                        | (2,029,942)                  | (678,044)                   
|LOSS BEFORE INCOME TAXES                                                 | (20,294,513)                 | (31,031,447)                
|                                                                         |                              |                             
|FUTURE INCOME TAX (EXPENSE) RECOVERY(Note 17)                            | (596,240)                    | 4,220,774                   
|                                                                         |                              |                             
|NET LOSS FOR THE YEAR                                                    | (20,890,753)                 | (26,810,673)                
|                                                                         |                              |                             
|(DEFICIT) RETAINED EARNINGS, BEGINNING OF THE YEAR                       | (5,688,075)                  | 21,122,598                  
|                                                                         |                              |                             
|DEFICIT, END OF THE YEAR                                                 | $  (26,578,828)              | $      (5,688,075)          
|                                                                         |                              |                             
|NET LOSS PER SHARE - BASIC AND DILUTED                                   | $             (0.29)         | $               (0.40)      
|                                                                         |                              |                             
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING  BASIC AND DILUTED | 72,210,852                   | 66,588,825                  





















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





79











DEJOUR ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

(Expressed in Canadian Dollars)



|                                                               | Year Ended
December 31,
2008 | Year Ended
December 31,
2007
|-------------------------------------------------------------- | ---------------------------- | ----------------------------
|                                                               |                              |                             
|NET LOSS FOR THE YEAR                                          | $   (20,890,753)             | $   (26,810,673)            
|Unrealized loss on available for sale marketable securities    | -                            | (5,400)                     
|Unrealized financial instrument gain                           | 107,768                      | -                           
|                                                               |                              |                             
|COMPREHENSIVE LOSS FOR THE YEAR                                | $   (20,782,985)             | $   (26,816,073)            
|                                                               |                              |                             
|                                                               |                              |                             
|ACCUMULATED OTHER COMPREHENSIVE LOSS,
BEGINNING OF THE YEAR    | $            (5,400)         | $                    -      
|Adjustment for new accounting standards adoption               | -                            | 98,168                      
|Unrealized gains (losses) arising during the year              | 107,768                      | (18,750)                    
|Realized losses (gains) during the year                        | 5,400                        | (84,818)                    
|                                                               |                              |                             
|ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
END OF THE YEAR | $         107,768            | $            (5,400)        



















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







80











DEJOUR ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)



|                                                       | Year ended
December 31,
2008 | Year ended
December 31,
2007
|------------------------------------------------------ | ---------------------------- | ----------------------------
|                                                       |                              |                             
|CASH FLOWS USED IN OPERATING ACTIVITIES                |                              |                             
|Net loss for the year                                  | $  (20,890,753)              | $ (26,810,673)              
|Adjustment for items not affecting cash:               |                              |                             
|Amortization, depletion and accretion                  | 3,690,939                    | 33,959                      
|Equity (income) loss from Titan                        | (3,636,710)                  | 2,351,810                   
|Non-cash stock based compensation                      | 2,719,957                    | 2,461,400                   
|Capitalized interests on convertible debentures        | 143,758                      | 54,889                      
|Unrealized foreign exchange loss                       | 749,575                      | -                           
|Impairment of investment in Titan                      | 12,990,343                   | 21,581,177                  
|Impairment of oil and gas properties                   | 2,029,942                    | 678,044                     
|Future income tax expense (recovery)                   | 596,240                      | (4,220,774)                 
|Loss (gain) on disposal of investment                  | 8,846                        | (44,023)                    
|Changes in non-cash working capital balances (Note 15) | 1,304,436                    | (1,274,271)                 
|                                                       | (293,427)                    | (5,188,462)                 
|                                                       |                              |                             
|CASH FLOWS USED IN INVESTING ACTIVITIES                |                              |                             
|Purchase of equipment                                  | (67,049)                     | (15,293)                    
|Proceeds from sales of marketable securities           | 27,403                       | 308,644                     
|Disposal of investment in Titan (Note 6)               | 529,894                      | 5,966                       
|Resource properties expenditures                       | (27,591,251)                 | (8,137,694)                 
|                                                       | (27,101,003)                 | (7,838,377)                 
|                                                       |                              |                             
|CASH FLOWS FROM FINANCING ACTIVITIES                   |                              |                             
|Bank line of credit                                    | 5,550,000                    | -                           
|Loans from joint-venture partner and related party     | 6,404,465                    | (5,827,000)                 
|Shares issued for cash                                 | 2,335,085                    | 14,705,331                  
|                                                       | 14,289,550                   | 8.878,331                   
|                                                       |                              |                             
|DECREASE IN CASH AND CASH EQUIVALENTS                  | (13,104,880)                 | (4,148,508)                 
|                                                       |                              |                             
|CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR       | 13,511,655                   | 17,660,163                  
|                                                       |                              |                             
|CASH AND CASH EQUIVALENTS, END OF THE YEAR             | $      406,775               | $13,511,655                 



Supplemental cash flow information (Note 15)









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







81









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 1  NATURE OF OPERATIONS AND BASIS OF PRESENTATION



Dejour Enterprises Ltd. (the Company) is a public company trading on the New York Stock Exchange Alternext (NYSE-Alt) and the Toronto Stock Exchange (TSX), under the symbol DEJ.  The Company ceased to trade on the TSX Venture Exchange (TSX-V) and graduated to the TSX effective November 20, 2008.  The Company is in the business of exploring and developing energy projects with a focus on oil and gas in North America.



These consolidated financial statements are prepared in accordance with generally accepted accounting principles (GAAP) in Canada. All dollar amounts are stated in Canadian dollars, the Companys reporting currency, unless otherwise indicated.  Certain of the comparative figures have been reclassified to conform to the current years presentation, if necessary.



The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Dejour Energy (USA) Corp., incorporated in Nevada, and Dejour Energy (Alberta) Ltd. (DEAL) and Wild Horse Energy Ltd. (Wild Horse), incorporated in Alberta.  DEAL was incorporated in April 2006 with a joint venture partner who owned 10% of DEAL. In June 2007, the Company purchased that 10% ownership of DEAL through the acquisition of outstanding shares of Wild Horse which holds the 10% interest in DEAL, and DEAL became the Companys wholly-owned subsidiary. All intercompany transactions are eliminated upon consolidation.



In accordance with the terms of the revolving operating loan facility (see Note 8), DEAL is required to maintain an adjusted working capital ratio of not less than 1.10:1.  The adjusted working capital ratio is defined as the ratio of (i) current assets plus any undrawn availability under the facility, to (ii) current liabilities less any amount drawn under the facility.  As at December 31, 2008, DEALs adjusted working capital ratio was approximately 0.60:1 and therefore was not in compliance with the covenant related to the loan facility.



The consolidated financial statements for the year ended December 31, 2008 have been prepared on a going concern basis, which presumes the Company will continue in operation for the foreseeable future and will realize its assets and discharge its liabilities in the normal course of operation.  During the year, the Company has incurred a net loss of $20,890,753 (2007  $26,810,673).  The Companys continued existence is dependent upon managements ability to raise required funding through future equity issuances, debt, asset sales or a combination thereof.  Management is also aware that significant material uncertainties exist, related to current economic conditions that could cast significant doubt upon the entitys ability to continue to finance its exploration activities. As a result, management plans on reducing spending in order to preserve cash and maintain liquidity until overall market conditions improve.  Management is not able to assess the likelihood or timing of improvements in the equity markets for raising capital for future acquisitions or expenditures. This uncertainty represents a liquidity risk and may impact the Companys ability to continue as a going concern in the future.



NOTE 2  RECENTLY ADOPTED ACCOUNTING POLICIES AND FUTURE ACCOUNTING PRONOUNCEMENTS



(a)

Recently Adopted Accounting Policies



(i)

Effective January 1, 2008, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants (CICA) under CICA Handbook Section 1400 General Standards for Financial Presentation, which has been amended to include requirements to assess and disclose the Companys ability to continue as a going concern.  The adoption of this new standard had no effect on the amounts disclosed in the financial statements and affected only disclosure.



(ii)

Effective January 1, 2008, the Company adopted the new recommendations of the CICA under CICA Handbook Section 1535 Capital Disclosures.  The section specifies the disclosure of (i) an entitys objectives, policies, and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance.  The adoption of this new standard had no effect on the amounts disclosed in the financial statements and affected only disclosure.





82









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 2  RECENTLY ADOPTED ACCOUNTING POLICIES AND FUTURE ACCOUNTING PRONOUNCEMENTS (continued)



(a)

Recently Adopted Accounting Policies (continued)



(iii)

Effective January 1, 2008, the Company adopted the new recommendations of the CICA under CICA Handbook Section 3862, Financial Instruments  Disclosures and Section 3863, Financial Instruments  Presentation to replace Section 3861. Section 3862 establishes standards for disclosures about financial instruments and non-financial derivatives and identifies the information that should be disclosed about them. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives.  Transitional provisions are complex and vary based on the type of financial instruments under the consideration. The adoption of this new standard had no effect on the amounts disclosed in the financial statements and affected only disclosure.



(iv)

Effective January 1, 2008, the Company adopted the new recommendations of the CICA under CICA Handbook Section 1506 Accounting Changes.  This Section prescribes the criteria for changing accounting policies, togetherwith the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. This Section is intended to enhance the relevance and reliability of an entity's financial statements and the comparability of those financial statements over time and with the financial statements of other entities.  The adoption of this new standard had no effect on the amounts disclosed in the financial statements.



(v)

Effective January 1, 2008, the Company adopted the new recommendations of the CICA under CICA Handbook Section 3031 Inventories.  This Section provides expanded guidance on the measurement and disclosure requirements for inventories. Specifically, the new standard requires that inventories be measured at the lower of cost and net realizable value, and provides more guidance on the determination of cost and its subsequent recognition as expense, including any write-down to net realizable value. The adoption of this new standard had no effect on the amounts disclosed in the financial statements.



(b)

Future Accounting Pronouncements



The following accounting pronouncements are applicable to future reporting periods.  The Company is currently evaluating the effects of adopting these standards:



(i)

In January 2006, the CICA Accounting Standards Board (AcSB) adopted a strategic plan for the direction of accounting standards in Canada.  As part of that plan, accounting standards in Canada for public companies are expected to converge with International Financial Reporting Standards (IFRS) by the end of 2011.  The impact of the transition to IFRS on the Companys financial statements has not yet been determined.



(ii)

The AcSB issued CICA Handbook Section 3064 which replaces Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill remain unchanged from the standards included in the previous Section 3062. The section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. Accordingly, the Company will adopt the new standards for its 2009 fiscal year. The Company is currently evaluating the impact of the adoption of this new section on its consolidated financial statements.



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES





(a)

Cash and Cash Equivalents



Cash and cash equivalents consist of cash and highly liquid investments having maturity dates of three months or less from the date of acquisition that are readily convertible to cash.



83









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)



(b)

Marketable Securities



Marketable securities are designated as available-for-sale and are measured and carried at fair 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.  Changes in fair market value are recognized in comprehensive income.



(c)

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.



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, exploration for and development 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 consulting fees. 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.  Costs of significant unproved properties, net of impairment, and estimated salvage values are excluded from the depletion and depreciation calculation.





84







DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)



(b)

Resource Properties (continued)



Oil and gas properties (continued)



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, technologies 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 evaluates its oil and gas assets on an annual basis using a ceiling test to determine that the costs are recoverable and do not exceed the fair value of the properties.  The costs are assessed to be recoverable if the sum of the undiscounted cash flows expected from the production of proved reserves less unproved properties exceed the carrying value of the oil and gas assets.  If the carrying value of the oil and gas assets is not assessed to be recoverable, an impairment loss is recognized to the extent that the carrying value exceeds the sum of the discounted cash flows expected form the production of proved and probable reserves less unproved properties.  The cash flows are estimated using the future product prices and costs and are discounted using a risk-free rate.



(c)

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

45%

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. One-half of the annual rates are used in the year of the acquisition.



(d)

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.



(e)

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 loss per share figure is equal to that of basic loss per share since the effects of options and warrants have been excluded as they are anti-dilutive.



(f)

Joint Operations



Exploration, development, and production activities may be conducted jointly with others and accordingly, the Company only reflects its proportionate interest in such activities.



85









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)



(g)

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 income (loss) for the year.



(h)

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, the amounts recorded for depletion and depreciation of oil and natural gas property, plant, and equipment, the provision for asset retirement obligations, future income tax effects and the determination of fair value of stock-based compensation.  The cost recovery ceiling test is based on estimates of proved reserves, production rates, oil and natural gas prices, futures cost, and other relevant assumptions.  By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.



(i)

Financial Instruments



A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument to another entity.  Upon initial recognition all financial instruments, including derivatives, are recognized on the balance sheet at fair value.  Subsequent measurement is then based on the financial instruments being classified into one of five categories: held for trading, held to maturity, loans and receivables, available for sale and other liabilities.



The Companys financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, bank line of credit, accounts payable, loan from joint-venture partner, and loan from related party.  Except for marketable securities, management has determined that the fair value of these financial instruments approximates their carrying values due to their immediate or short-term maturity.



On adopting these standards, the Company designated its cash and cash equivalents and bank line of credit as held-for-trading, which are measured at fair value.  Marketable securities are designated as available for sale which are measured at fair value.  Receivables are classified under loans and receivables, which are measured at amortized cost. Accounts payable, loan from joint-venture partner, and loan from related party are classified as other financial liabilities, which are measured at amortized cost.



The Company enters into derivative financial instruments to manage its exposure to volatility in commodity prices.  These instruments are not used for trading or other speculative purposes.  For derivative instruments that do qualify as effective accounting hedges, policies and procedures are in place to ensure that documentary and approvals requirements are met. The documentation specifically ties the derivative financial instruments to their use, and in the case of commodities, to the mitigation of market price risk associated with cash flows expected to be generated.  The Company also identifies all relationships between hedging instruments and hedged items, as well as its risk management objective and the strategy for undertaking hedge transactions. This would include linking the particular derivative to specific assets and liabilities or to specific firm commitments or forecasted transactions. Where specific hedges are executed, the Company assesses, both at





86









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)



(i)

Financial Instruments (continued)



the inception of the hedge and on an ongoing basis, whether the derivative used in the particular hedging transaction is effective in offsetting changes in fair value or cash flows of the hedged item.



Cash flow hedges:  The effective portion of changes in the fair value of financial instruments designated as a cash flow hedge is recognized in other comprehensive income, net of tax, with any ineffective portion being recognized immediately in net income.  Gains and losses are recovered from other comprehensive income and recognized in net income in the same period as the hedged item.



Fair value hedges:  Both the financial instrument designated as the hedging item, and the underlying hedged asset or liability are measured at fair value.  Changes in the fair value of both the hedging and hedged item are reflected in net income immediately.



Hedge accounting is discontinued prospectively when the derivative no longer qualifies as an effective hedge, or the derivative is terminated or sold, or upon the sale or early termination of the hedged item.  Derivative instruments that qualify as hedges, or have been designated as hedges, are recorded at fair value on inception.  At the end of each reporting period, the change in the fair value of the hedging derivative is recognized in other comprehensive income.  When hedge accounting is discontinued or when the hedged item is sold or early terminated, the amounts previously recognized in accumulated other comprehensive income are reclassified to net income.



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.



(j)

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.



(k)

Revenue Recognition



Revenues from the sale of oil and natural gas are recorded when title passes to an external party and collectability is reasonably assured.



(l)

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. 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 for directors and employees and over the service life for consultants.  The fair value of options and other stock based awards issued or altered in the period, are determined using the Black-Scholes option pricing model.



The Company has granted stock options to directors, consultants and employees as described in Note 13.



(m)

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



87









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 3  SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)



(m)

Asset Retirement Obligations (continued)



fair values of the obligations are recognized on a systematic basis over the remaining period until the obligations are expected to be settled.  On recognition of the liability, there is a corresponding increase in the carrying amount of the related assets known as the asset retirement cost, which is depleted on a unit-of-production basis over the life of the assets.  The liability is adjusted each reporting period to reflect the passage of time, with the accretion charged to earnings, and for revisions to the estimated future cash flows.  Actual costs incurred upon settlement of the obligations are charged against the liability.



(n)

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.



(o)

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 other than a temporary decline, 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.



(p)

Comprehensive Income



The Company follows CICA Handbook, Section 1530, Comprehensive Income.  Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources.  Section 1530 establishes standards for reporting and presenting certain gains and losses not normally included in net income or loss, such as unrealized gains and losses related to available for sale securities, and gains and losses resulting from the translation of self-sustaining foreign operations, in a statement of comprehensive income.



NOTE 4  MARKETABLE SECURITIES



As at December 31, 2008, the Company had sold all of its marketable securities.  As at December 31, 2007, the Company had 25,000 common shares of Brownstone Ventures Inc. (Brownstone), with a cost of $41,650 and a fair value of $36,250.  During the year ended December 31, 2008, the Company received proceeds of $27,403 from the sale of 25,000 Brownstone shares resulting in a loss of $14,247.





88









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 5  EQUIPMENT

|                                  | December 31, 2008 |               | December 31, 2007
|--------------------------------- | ----------------- | ------------- | -----------------
|                                  |                   | Accumulated   |                  
|                                  | Cost              | Amortization  | Net              
|Furniture, fixtures and equipment | $   134,373       | $      55,711 | $    78,662      
|Computer equipment                | 83,837            | 51,642        | 32,195           
|Software                          | 15,570            | 9,843         | 5,727            
|                                  | $  233,780        | $    117,196  | $  116,584       



NOTE 6  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 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, under the following terms:



(a)

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;



(b)

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. These warrants expired unexercised on December 15, 2008;



(c)

The Company retained a 1% Net Smelter Return on all properties and 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.  During the year ended December 31, 2007, the Company recognized an impairment loss of $21,581,177 and wrote down its investment in Titan to $12,600,000, the fair value as at December 31, 2007.



During the year ended December 31, 2008, the Company recognized an impairment loss of $12,990,343 and wrote down its investment in Titan to $2,721,875, the fair value as at December 31, 2008.



The Company owned approximately 31.7% of Titans shares as at December 31, 2008.  The Companys share of income in Titan for the year ended December 31, 2008 was $3,636,710 (2007 loss: $2,351,810).   During the year ended December 31, 2008, the Company received proceeds of $529,894 from the sale of 750,000 Titan shares, resulting in a gain of $5,401.



NOTE 7  RESOURCE PROPERTIES



(a)

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 6 and realized a gain on disposition of $30,177,082. The





89









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 7  RESOURCE PROPERTIES (continued)



(a)

Uranium Properties (continued)



carrying value of the remaining 10% carried interest and 1% net smelter return was $696,991 as at December 31, 2008 and December 31, 2007.



(b)

Oil and Gas Properties



United States (US) Oil and Gas Projects



Colorado / Utah Oil & Gas Projects



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 had also been capitalized to the project (refer to Note 9).



In July 2006, the Company also received 183,836 common shares of Brownstone, a working interest partner in the Colorado/Utah Projects, with a fair value of $306,271 recorded as a finders fee for assisting Brownstone in its purchase of its 10% interest in the above Retamco projects (refer to Note 4).



In June 2008, the Company entered into a Purchase and Sale Agreement with Retamco, resulting in the acquisition of an additional 64,000 net acres.  The additional acreage was acquired in exchange for the Company's 25% working interest in approximately 3,500 acres and two wells at North Barcus Creek, and a cash payment of $4,078,800 (US$4,000,000). The North Barcus Creek wells were drilled on joint acreage by Retamco at the end of 2007 and are awaiting production tie-in. As part of the transaction, Brownstone provided the Company with a $4,078,800 (US $4,000,000) secured loan, due on July 1, 2009, which was used to purchase the additional acreage interests (refer to Note 10(a)).



During the year ended December 31, 2008, a number of leases expired.  As a result, the Company recorded an impairment of oil and gas properties of $2,029,942.



As at December 31, 2008, the Company had working interests ranging from 25% to 72% and net revenue interests ranging from 78% to 87.5%, in approximately 272,777 net acres of lands in US.



Tinsley and Lavaca Projects



In 2006, the Company was advised by the operator of the Tinsley and Lavaca Prospect that the wells were 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 two of these properties at $1 each, as it has not yet determined if these two properties contain any economical resources. In 2007, the Company re-activated the Tinsley Prospect and entered into a new contract to test and drill the area.  There were no activities during 2008.



Canadian Oil and Gas Projects



In October 2006, DEAL concluded a Participation Agreement allowing it to participate in the drilling of a natural gas well in an area known as the Noel Area, in British Columbia, Canada.  DEAL paid 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 was dry. The Company recorded an impairment provision of $678,044 during the year ended December 31, 2007.



As at December 31, 2008, the Company owned an average 54% working interest in approximately 39,283 acres of lands in Canada.



90











DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 7  RESOURCE PROPERTIES (continued)



(b)

Oil and Gas Properties (continued)



Canadian Oil and Gas Projects (continued)



The Companys exploration and development activities relating to the Canadian oil and gas properties for the year ended December 31, 2008 are summarized in the table below.



A continuity summary of capitalized acquisition costs and exploration expenditures in the Companys oil and gas properties for the years ended December 31, 2008 and 2007 are as follows:



|                                | Balance
Dec. 31, 2006 | Acquisition
Costs | Exploration &
Development | Write-down    | Balance
Dec. 31, 2007 | Acquisition
Costs | Exploration &
Development | Corporate Costs &
Capitalized Interests | Write-down    | Balance
Dec. 31, 2008
|------------------------------- | --------------------- | ----------------- | ------------------------- | ------------- | --------------------- | ----------------- | ------------------------- | --------------------------------------- | ------------- | ---------------------
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|US Oil and Gas Properties:      |                       |                   |                           |               |                       |                   |                           |                                         |              
|Colorado/Utah Projects          | $25,182,532           | $ 285,176         | $  1,940,653              | $           - | $27,408,361           | $3,807,764        | $    139,541              | $              -                        | $ (2,029,942) | $29,325,724          
|Lavaca Prospect                 | -                     | 381               | -                         | -             | 381                   | -                 | -                         | -                                       | -             | 381                  
|Tinsley Prospect                | 1                     | 37,023            | -                         | -             | 37,024                | 130,268           | -                         | -                                       | -             | 167,292              
|Turtle Bayou, Louisiana         | 1                     | -                 | -                         | -             | 1                     | -                 | -                         | -                                       | -             | 1                    
|                                | 25,182,534            | 322,580           | 1,940,653                 | $           - | 27,445,767            | 3,938,032         | 139,541                   | -                                       | (2,029,942)   | 29,493,398           
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|Canadian Oil and Gas Properties |                       |                   |                           |               |                       |                   |                           |                                         |              
|Carson Creek                    | -                     | -                 | 535,504                   | -             | 535,504               | 625               | 1,243,900                 | -                                       | -             | 1,780,029            
|Drake                           | -                     | 731,265           | 1,753,901                 | -             | 2,464,279             | 9,012             | 6,060,338                 | -                                       | -             | 8,533,629            
|Montney                         | -                     | -                 | -                         | -             | -                     | 907,732           | 2,000                     | 69,316                                  | -             | 979,048              
|Saddle Hills                    | -                     | 9,724             | 501,528                   | -             | 511,252               | -                 | 452,359                   | -                                       | -             | 963,611              
|Woodrush                        | -                     | -                 | 20,887                    | -             | 20,887                | -                 | 10,458,992                | -                                       | -             | 10,479,879           
|Others                          | 1                     | 905,068           | 3,509,785                 | (678,044)     | 3,736,810             | 17,428            | 4,234,361                 | -                                       | -             | 7,988,599            
|Asset retirement
obligations    | -                     | -                 | -                         |               | -                     | -                 | -                         | 404,311                                 | -             | 404,311              
|Property depletion              | -                     | -                 | -                         |               | -                     | -                 | -                         | (3,635,777)                             | -             | (3,635,777)          
|                                | 1                     | 1,646,057         | 6,300,718                 | (678,044)     | 7,268,732             | 934,797           | 22,451,950                | (3,162,150)                             | -             | 27,493,329           
|                                |                       |                   |                           |               |                       |                   |                           |                                         |               |                      
|                                | $25,182,535           | $1,968,637        | $8,241,371                | $(678,044)    | $34,714,499           | $ 4,872,829       | $  22,591,491             | $  (3,162,150)                          | $ (2,029,942) | $ 56,986,727         



In determining the Companys depletion, $979,048 (2007: nil) of unproven properties was excluded from the depletion calculation.  Future development costs required to complete proved, undeveloped wells of $1,199,000 were added to the Companys Canadian oil and gas properties net book value in the depletion calculation.  The Company performed a ceiling test calculation at December 31, 2008 to assess the recoverable value of the properties.  The oil and gas future prices are based on the January 1, 2009 commodity price forecast of independent reserve evaluators.  Based on these assumptions, the undiscounted value of future net revenues from the Companys proved reserves exceeded the carrying value of oil and gas properties at December 31, 2008.





91









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 8  BANK LINE OF CREDIT



In August 2008, DEAL secured a revolving operating loan facility with a Canadian Bank for up to $7,000,000, subject to certain production targets.  This facility, secured by DEALs oil and gas assets in Canada, is at an interest rate of Canadian prime plus 1%.  As at December 31, 2008, $5,550,000 had been drawn on the line of credit.  In accordance with the terms of the facility, DEAL is required to maintain an adjusted working capital ratio of not less than 1.10:1.  The adjusted working capital ratio is defined as the ratio of (i) current assets plus any undrawn availability under the facility, to (ii) current liabilities less any amount drawn under the facility.  This working capital ratio requirement only applies to DEAL, not to the parent company.  As at December 31, 2008, DEALs adjusted working capital ratio was approximately 0.60:1 and therefore was not in compliance with the covenant related to the loan facility.  However, DEAL is currently working with the bank to restructure the loan terms and to correct the loan facility covenant violation.



NOTE 9  CONVERTIBLE DEBENTURES



The convertible debentures, denominated in US dollars, were unsecured, bore an 8% coupon, payable quarterly and were convertible at US $1.35 per unit.  The debentures matured on July 15, 2008.  Each unit consisted of one common share and one warrant, exercisable at US $1.50 per share, expiring on July 15, 2008. During the year ended December 31, 2008, $47,422 (US $46,505) of interest payable was capitalized to principal of the convertible debentures, and prior to July 15, 2008 all of the outstanding convertible debentures, $1,069,635 (US $1,047,995) plus $144,862 (US $145,731) of capitalized interests, were converted to 884,242 common shares. During the year ended December 31, 2007, $367,386 (US $349,850) of convertible debentures plus $14,030 (US $12,493) of interest payables were converted to 273,399 common shares and $97,440 (US $99,226) of interest payable was capitalized as principal of the convertible debentures. The convertible debenture was made up of the following:



|                                     | In US Dollar      |                   | Canadian Dollar Equivalent
|------------------------------------ | ----------------- | ----------------- | --------------------------
|                                     | December 31,
2008 | December 31,
2007 |                           
|8% convertible debenture             | US$           -   | US$ 1,047,995     |                           
|Capitalization of interest           | -                 | 99,226            |                           
|                                     |                   |                   |                           
|                                     | -                 | 1,147,221         |                           
|Equity portion                       | -                 | (247,730)         |                           
|Accumulated amortization of discount | -                 | 163,243           |                           
|                                     |                   |                   |                           
|Balance                              | US$            -  | US$ 1,062,734     |                           



NOTE 10  LOANS FROM JOINT-VENTURE PARTNER AND RELATED PARTY



(a) Loan from joint-venture partner



On June 18, 2008, a promissory note with a face value of $4,078,800 (US $4,000,000) was issued to Brownstone (refer to Note 7(b)). The US $4,000,000 promissory note is secured by a general security agreement issued by the Company in favour of Brownstone, and bears interest at 5% per annum. The principal and interest are repayable by the earlier of the Company completing an equity or debt financing and July 1, 2009. On July 1, 2008, a repayment of $222,948 (US$220,000) was made and as at December 31, 2008, $4,604,040 (US$3,780,000) remained outstanding.



(b) Loan from related party



On May 15, 2008, DEAL issued a promissory note for up to $2,000,000 to a private company controlled by the Chief Executive Officer (CEO) of the Company. The promissory note is secured by the assets, equipment, fixtures, inventory and accounts receivable of DEAL, bears interest at the Royal Bank of Canada Prime Rate per annum, and has a loan fee of 1% of the outstanding amount per month. The principal, interest and loan fee were payable on demand after August 15, 2008, upon 10 days written notice by the lender.  Upon securing the bank line of credit (refer to Note 8), the private company controlled by the CEO of the Company signed a subordination and postponement agreement which restricts the principal repayment of the promissory note subject to the banks prior approval and DEAL meeting certain loan covenants (refer to Note 8).  As at December 31, 2008, $1,950,000 had been advanced on the promissory note.



92









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 10  LOANS FROM JOINT-VENTURE PARTNER AND RELATED PARTY (continued)



(b) Loan from related party (continued)



On August 11, 2008, the Company borrowed $600,000 from a private company controlled by the CEO of the Company.  The loan is secured by all assets of the Company, repayable on demand, bears interest at the Canadian prime rate per annum, and has a loan fee of 1% of the outstanding amount per month.  There is no specific term of principal repayment, but the interest and loan fee are payable monthly.



On September 12, 2008, as consideration for the private company controlled by the CEO of the Company agreeing to postpone the $2,000,000 promissory note and providing the additional loan of $600,000, the private company was granted an option to become a working interest partner with DEAL.  Upon electing to become a working interest partner, the private company must pay DEAL an amount equal to 10% of the actual price paid for the acquisition of the lands in the emerging Montney natural gas resource play in northeastern British Columbia.  The private company is also required to pay its pro-rata share of the operating costs. Subsequent to December 31, 2008, the private company controlled by the CEO of the Company exercised its option and elected to become a working interest partner with DEAL.  The option price was $90,642.



The transactions are considered to be in the normal course of operations and are measured at the exchange amounts which are the amounts established and agreed to by the related parties.



NOTE 11  ASSET RETIREMENT OBLIGATIONS



The total future asset retirement obligations were estimated based on the Companys net ownership interest in all wells and facilities, the estimated cost to abandon and reclaim the wells and facilities and the estimated timing of the cost to be incurred in future periods.  The Company estimated the total undiscounted amount of the cash flows required to settle the retirement obligations related to its oil and gas properties in Canada as at December 31, 2008 to be $720,137.  These obligations are expected to be settled by year 2029.  A credit adjusted risk-free rate of 5% and an inflation rate of 2.5% was used to calculate the present value of the asset retirement obligations.



|Balance at December 31, 2007         | $                    -
|------------------------------------ | ----------------------
|Liabilities incurred during the year | 404,311               
|Accretion expense                    | 16,412                
|Actual costs incurred                | (57,614)              
|                                     |                       
|Balance at December 31, 2008         | $       363,109       





93









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 12  SHARE CAPITAL



Authorized:

Unlimited common shares

Unlimited first preferred shares, issuable in series

Unlimited second preferred shares, issuable in series



|                                                               | Common
Shares | Value          
|-------------------------------------------------------------- | ------------- | ---------------
|                                                               |               |                
|Balance at December 31, 2006                                   | 60,899,723    | $    48,671,383
|- For conversion of convertible debenture                      | 273,399       | 394,752        
|- For cash by private placements                               | 4,773,980     | 11,287,668     
|- For cash on exercise of warrants                             | 3,444,490     | 2,859,863      
|- For cash on exercise of stock options                        | 736,737       | 557,800        
|- Contributed surplus reallocated on exercise of stock options | -             | 335,038        
|- Renounced flow through share expenditures                    | -             | (2,712,540)    
|                                                               |               |                
|Balance at December 31, 2007                                   | 70,128,329    | $  61,393,964  
|                                                               |               |                
|- For conversion of convertible debentures                     | 884,242       | 1,214,497      
|- For cash on exercise of stock options                        | 1,681,048     | 887,621        
|- For cash on exercise of warrants                             | 958,263       | 1,447,464      
|- Contributed surplus reallocated on exercise of stock options | -             | 532,531        
|- Renounced flow through share expenditures                    | -             | (536,900)      
|                                                               |               |                
|Balance at December 31, 2008                                   | 73,651,882    | $  64,939,177  



During the year ended December 31, 2008:



In January 2008, the Company renounced $1,820,000 flow-through funds to investors, using the look-back rule. Of this $1,820,000, $263,222 of renounced Canadian Exploration Expenditures (CEEs) had been spent by December 31, 2007 and the remaining flow-through funds had been fully spent by February 29, 2008. As a result of the renunciation, future income tax recovery of $536,900 was recognized against share capital.



In February 2008, the Company filed a Part XII.6 tax return with the Canada Revenue Agency related to CEEs with an effective date of renunciation of December 31, 2006 and paid $236,348 of Part XII.6 tax.



During the year ended December 31, 2007, the Company completed the following private placements:



In May 2007, the Company completed a private placement and issued 3,773,980 Units at $2.65 per Unit.  Each Unit consists of one common share and half of one share purchase warrant, exercisable at $3.35 per share before May 25, 2009.  Gross proceeds raised were $10,001,047.  The Company paid finders fees of $493,215 and other related costs of $30,564. The Company also issued 217,139 agent compensation options, exercisable at $3.35 per share before December 31, 2008.  The grant date fair values of the agents options, estimated to be $43,428, were included in share capital on a net basis and accordingly were not recorded as a separate component of shareholders equity.



In November 2007, the Company completed a private placement and issued 1,000,000 flow-through shares (FTS) at $1.82 per share. Gross proceeds raised of $1,820,000 were committed to be spent on CEE, of which $263,222 had been spent to December 31, 2007. In connection with this private placement, the Company paid $9,600 related costs. There were no finders fees or commissions related to this private placement.





94









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 13  STOCK OPTIONS AND SHARE PURCHASE WARRANTS



During the year ended December 31, 2008, the Company granted 4,945,000 (2007  3,095,000) options to its officers, directors, consultants, employees and advisors. In addition, 1,693,053 (2007  1,291,567) options were cancelled or expired with a weighted average exercise price at $1.83.



As at December 31, 2008, there were 7,198,380 options outstanding with a weighted average exercise price at $1.22, of which 3,255,505 were vested. The vested options can be exercised for up to periods ending October 28, 2013 to purchase common shares of the Company at prices ranging from $0.275 to $2.10 per share.



The Company expenses the fair value of all stock options granted over their respective vesting periods for directors and employees and over the service life for consultants. The fair value of the options granted during the year ended December 31, 2008 was determined to be $2,406,250 (2007 - $4,572,350). The Company determined the fair value of stock options granted using the Black-Scholes option pricing model using the following weighted average assumptions: Expected option life of 4.05 years (2007  4.40 years), risk-free interest rate of 2.95% (2007  3.92%) and expected volatility of 81.10% (2007  91.09%).



During the year ended December 31, 2008, the Company recognized a total of $2,719,957 (2007 - $2,461,400) of stock based compensation relating to the vesting of options.



As at December 31, 2008, there were 3,942,875 unvested options included in the balance of the outstanding options. The following table summarizes information about stock option transactions:



|                              | Outstanding Options | Weighted Average
Exercise Price | Weighted
Average
Remaining
Contractual
Life
|----------------------------- | ------------------- | ------------------------------- | -------------------------------------------
|                              |                     |                                 |                                            
|Balance, December 31, 2006    | 4,560,785           | $            1.14               | 1.93 years                                 
|Options granted               | 3,095,000           | 2.20                            |                                            
|Options exercised             | (736,737)           | 0.76                            |                                            
|Options cancelled and expired | (1,291,567)         | 2.39                            |                                            
|                              |                     |                                 |                                            
|Balance, December 31, 2007    | 5,627,481           | 1.49                            | 1.96 years                                 
|Options granted               | 4,945,000           | 0.88                            |                                            
|Options exercised             | (1,681,048)         | 0.53                            |                                            
|Options cancelled and expired | (1,693,053)         | 1.83                            |                                            
|                              |                     |                                 |                                            
|Balance, December 31, 2008    | 7,198,380           | $            1.22               | 2.94 years                                 





95









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 13  STOCK OPTIONS AND SHARE PURCHASE WARRANTS (continued)



Details of stock options vested and exercisable as at December 31, 2008 are as follows:



|Number of Options
Outstanding and
vested | Exercise Price | Weighted Average
Remaining Contractual Life
(Years)
|---------------------------------------- | -------------- | ---------------------------------------------------
|109,630                                  | $     0.275    | 0.83                                               
|43,125                                   | 0.450          | 1.82                                               
|120,250                                  | 0.450          | 4.83                                               
|200,000                                  | 1.400          | 0.25                                               
|781,417                                  | 1.400          | 1.91                                               
|18,750                                   | 1.450          | 2.33                                               
|150,000                                  | 1.500          | 2.12                                               
|125,000                                  | 1.600          | 0.01                                               
|18,750                                   | 1.750          | 0.84                                               
|947,500                                  | 2.000          | 2.67                                               
|741,083                                  | 2.100          | 0.33                                               
|                                         |                |                                                    
|3,255,505                                | $    1.663     | 1.67                                               





The following table summarizes information about warrant transactions:



|                           | Outstanding Warrants | Weighted
Average
Exercise Price | Weighted
Average Remaining
Contractual Life
|-------------------------- | -------------------- | ------------------------------- | -------------------------------------------
|                           |                      |                                 |                                            
|Balance, December 31, 2006 | 4,544,506            | $       1.03                    | 0.41 years                                 
|Warrants issued            | 2,372,531            | 3.15                            |                                            
|Warrants exercised         | (3,444,490)          | 0.83                            |                                            
|Warrants expired           | (1,100,016)          | 1.64                            |                                            
|                           |                      |                                 |                                            
|Balance, December 31, 2007 | 2,372,531            | 3.15                            | 1.31 years                                 
|Warrants issued            | 884,242              | 1.53                            |                                            
|Warrants exercised         | (958,263)            | 1.53                            |                                            
|Warrants expired           | (194,381)            | 1.53                            |                                            
|                           |                      |                                 |                                            
|Balance, December 31, 2008 | 2,104,129            | $      3.35                     | 0.40 years                                 





Details of warrants outstanding as at December 31, 2008 are as follows:



|Number of
Warrants
Outstanding | Exercise Price | Weighted Average
Remaining
Contractual Life
(Years)
|------------------------------ | -------------- | ---------------------------------------------------
|2,104,129                      | $         3.35 | 0.40                                               





96









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 14  CONTRIBUTED SURPLUS



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



|Balance at December 31, 2006                          |  |  |  | $       1,648,398
|----------------------------------------------------- |  |  |  | -----------------
|Stock compensation on vesting of options              |  |  |  | 2,461,400        
|Value of conversion feature on convertible debenture  |  |  |  | (39,490)         
|Allocated to share capital on exercise of options     |  |  |  | (335,038)        
|                                                      |  |  |  |                  
|Balance at December 31, 2007                          |  |  |  | 3,735,270        
|Stock compensation on vesting of options              |  |  |  | 2,719,957        
|Value of conversion feature on convertible debentures |  |  |  | (27,136)         
|Allocated to share capital on exercise of options     |  |  |  | (532,531)        
|                                                      |  |  |  |                  
|Balance at December 31, 2008                          |  |  |  | $     5,895,560  





NOTE 15  SUPPLEMENTAL CASH FLOW INFORMATION



|                                                      | December 31,
2008 | December 31,
2007  
|----------------------------------------------------- | ----------------- | -------------------
|                                                      |                   |                    
|Changes in non-cash working capital balances:         |                   |                    
|Accounts receivable                                   | $   (782,856)     | $                 -
|Prepaids and other receivables                        | 219,170           | (303,038)          
|Advances for oil and gas projects                     | 790,487           | (1,006,917)        
|Accounts payable and accrued liabilities              | 1,077,635         | 35,684             
|                                                      | $  1,304,436      | $ (1,274,271)      
|                                                      |                   |                    
|Change in non-cash financing and investing activities |                   |                    
|Common shares issued for convertible debentures       | $  1,214,497      | 394,752            
|Conversion feature on convertible debentures          | (27,136)          | (39,490)           
|Convertible debentures issued                         | -                 | 1,043,605          
|                                                      |                   |                    
|Other cash flow information:                          |                   |                    
|Interest paid                                         | $     374,679     | $        92,201    
|                                                      |                   |                    
|Components of cash and cash equivalents               |                   |                    
|Cash                                                  | $     406,775     | $   5,565,701      
|Money market instruments                              | -                 | 358,424            
|Bank acceptances                                      | -                 | 7,587,530          
|                                                      | $     406,775     | $ 13,511,655       





97









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 16  RELATED PARTY TRANSACTIONS



During the year ended December 31, 2008 and 2007, the Company entered into the following transactions with related parties:



a)

The Company incurred a total of $608,279 (2007 - $777,021) in consulting fees, directors and meeting attendance fees to independent directors and private companies controlled by officers and directors of the Company.



b)

The Company received total rental income of $28,700 (2007 - $Nil) from private companies controlled by officers of the Company.



c)

DEAL incurred a total of $173,333 (2007 - $172,750) in consulting fees to a private company controlled by the President of DEAL.



d)

On May 15, 2008, DEAL issued a promissory note for up to $2,000,000 to a private company controlled by the CEO of the Company. As at December 31, 2008, $1,950,000 had been advanced on the promissory note.  On August 11, 2008, the Company borrowed $600,000 from the private company controlled by the CEO of the Company (refer to Note 10(b)).



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 17  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:



|                                                                            | 2008              | 2007            
|--------------------------------------------------------------------------- | ----------------- | ----------------
|                                                                            |                   |                 
|Loss before income taxes                                                    | $  (20,294,513)   | $  (31,031,447) 
|Corporate tax rate                                                          | 31.00%            | 30.83%          
|                                                                            |                   |                 
|Expected tax recovery                                                       | (6,291,299)       | (9,566,995)     
|Increase (decrease) resulting from:                                         |                   |                 
|Differences in foreign tax rates and change
in effective tax rates          | (84,595)          | 192,229         
|Impact of foreign exchange rate changes                                     | (350,194)         | -               
|Titan shares and warrants investment                                        | 886,123           | 4,398,806       
|Change in future tax asset valuation allowance                              | 5,407,647         | -               
|Stock based compensation, share issue costs
and other permanent differences | 1,122,460         | 1,402,088       
|Other adjustments                                                           | (93,902)          | (646,902)       
|                                                                            |                   |                 
|Future income tax expense (recovery)                                        | $         596,240 | $    (4,220,774)





98









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 17  FUTURE INCOME TAXES (continued)



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



|                                  |                                            | 2008                 | 2007         
|--------------------------------- | ------------------------------------------ | -------------------- | -------------
|Future income tax assets          |                                            |                     
|                                  | Non-capital losses available               | $   5,253,487        | $   1,635,108
|                                  | Capital losses available                   | 1,594,217            | 964,695      
|                                  | Share issue costs and other                | 322,842              | 401,468      
|                                  |                                            | 7,170,546            | 3,001,271    
|Future income tax liabilities     |                                            |                     
|                                  | Long term investments                      | (392,403)            | (1,202,370)  
|                                  | Resource pools in excess of net book value | (1,312,812)          | (608,077)    
|                                  |                                            | (1,705,215)          | (1,810,447)  
|                                  |                                            |                      |              
|Net future income tax assets      | 5,465,331                                  | 1,190,824           
|                                  |                                            |                     
|Valuation allowance               | (6,598,471)                                | (1,190,824)         
|                                  |                                            |                     
|Net future income tax liabilities | $ (1,133,140)                              | $                  -



The Company has approximately $16,446,000 (2007  $5,304,000) of non-capital losses which can be applied to reduce future taxable income, expiring as follows:



| | Year of Expiry | Amount        
| | -------------- | --------------
| |                |               
| | 2015           | $    1,729,000
| | 2026           | 2,830,000     
| | 2027           | 4,739,000     
| | 2028           | 7,148,000     
| |                | 16,446,000    



In addition, the Company has Canadian exploration and development expenditures totaling approximately $23,979,000, unamortized share issue costs of approximately $798,000 and capital loss carry forwards of approximately $11,058,000 which may be available to reduce future taxable income.  Both the exploration and development expenditures and the capital losses can be carried forward indefinitely.



NOTE 18  COMMITMENT



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 payments.  The Company is committed under operating lease agreement for the premises to future minimum payments as follows:



| | 2009 | $  101,053
| | ---- | ----------
| | 2010 | 34,320    
| |      | $  135,373





99









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 19  SEGMENTED DISCLOSURE



As at December 31, 2008 and 2007, the Companys significant assets, losses and revenue by geographic location were as follows:



|                                     | December 31,
2008 | December 31,
2007    
|------------------------------------ | ----------------- | ---------------------
|Canada                               |                   |                      
|Revenue                              | $  5,751,672      | $                   -
|Interest and other income            | 124,208           | 806,147              
|Future income tax (expense) recovery | (596,240)         | 4,220,774            
|Segmented loss                       | (17,301,636)      | (26,738,906)         
|Assets:                              |                   |                      
|Current Assets                       | 1,428,149         | 14,528,145           
|Equipment, net                       | 80,701            | 87,399               
|Investment in Titan                  | 2,721,875         | 12,600,000           
|Uranium properties                   | 696,991           | 696,991              
|Oil and gas properties               | 27,493,329        | 7,268,733            
|                                     | 32,421,045        | 35,181,267           
|                                     |                   |                      
|U.S.A.                               |                   |                      
|Revenue                              | $       13,883    | $                  - 
|Interest and other income            | 112,630           | -                    
|Segmented loss                       | (3,589,117)       | (71,767)             
|Assets:                              |                   |                      
|Current Assets                       | 355,410           | 515,577              
|Equipment, net                       | 35,883            | 888                  
|Investment in Titan                  | -                 | -                    
|Oil and gas properties               | 29,493,398        | 27,445,766           
|                                     | 29,884,691        | 27,962,232           
|Total assets                         | $  62,305,736     | $  63,143,499        





NOTE 20  FINANCIAL INSTRUMENTS, RISK MANAGEMENT AND CAPITAL MANAGEMENT STRATEGY



The Company is engaged primarily in mineral and oil and gas exploration and production 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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.



The Company also has exposure to a number of risks from its use of financial instruments including: credit risk, liquidity risk, and market risk.  This note presents information about the Companys exposure to each of these risks and the Companys objectives, policies and processes for measuring and managing risk, and the Companys management of capital.



The Board of Directors has overall responsibility for the establishment and oversight of the Companys risk management framework.  The Board has implemented and monitors compliance with risk management policies.  The Companys risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Companys activities.





100









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 20  FINANCIAL INSTRUMENTS, RISK MANAGEMENT AND CAPITAL MANAGEMENT STRATEGY (continued)



(a)

Credit Risk



Credit risk relates to the Companys receivables from joint venture partners and oil and natural gas marketers and the risk of financial loss if a customer, partner or counterparty to a financial instrument fails to meet its contractual obligations.  A substantial portion of the Companys accounts receivable are with customers in the energy industry and are subject to normal industry credit risk.  The Company generally grants unsecured credit but routinely assesses the financial strength of its partners and marketers.



Receivables from oil and natural gas marketers are normally collected on the 25th day of the month following production.  The Company sells the majority of its production to one oil and natural gas marketer and therefore is subject to concentration risk.  To date the Company has not experienced any collection issues with its oil and natural gas marketer.  Joint venture receivables are typically collected within one to three months of the joint venture bill being issued to the partner.  The Company attempts to mitigate the risk from joint venture receivables by obtaining joint venturer approval of significant capital expenditures prior to expenditure.  However, the receivables are from participants in the oil and natural gas sector, and collection of the outstanding balances is dependent on industry factors such as commodity price fluctuations, escalating costs and the risk of unsuccessful drilling.  In addition, further risk exists with joint venture partners as disagreements occasionally arise that increases the potential for non-collection.  The Company does not typically obtain collateral from oil and natural gas marketers or joint venturers; however in certain circumstances, it may elect to cash call a joint venture partner in advance of the work, and it also has the ability to withhold production from joint venture partners in the event of non-payment.



As at December 31, 2008, the Companys receivables consisted of $282,786 (2007  $858,088) from joint venture partners, $424,207 (2007  $Nil) of receivables from an oil and natural gas marketer, and $75,863 (2007  $333,030) of other receivables.  The carrying amount of accounts receivable and cash and cash equivalents represents the maximum credit exposure.  The Company does not have an allowance for doubtful accounts as at December 31, 2008.





(b)

Liquidity Risk



Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due.  The Companys approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Companys reputation.



As the industry in which the Company operates is very capital intensive, the majority of the Companys spending is related to its capital programs.  The Company prepares annual capital expenditure budgets, which are regularly monitored and updated as considered necessary.  Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditures.  To facilitate the capital expenditure program, the Company has a revolving reserve based credit facility (see Note 8).  The Company also attempts to match its payment cycle with collection of oil and natural gas revenues on the 25th of each month.



Accounts payable are considered due to suppliers in one year or less while the bank line of credit, which is subject to renewal after a 364-day revolving period, could be potentially due within the next year if the facility is not renewed for a further 364-day period.



(c)

Market Risk



Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the Companys net earnings or the value of financial instruments.  The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.  The Company utilizes financial derivatives to manage certain market risks.  All such transactions are conducted in accordance with the risk management policy that has been approved by the Board of Directors.





101









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 20  FINANCIAL INSTRUMENTS, RISK MANAGEMENT AND CAPITAL MANAGEMENT STRATEGY (continued)



(d)

Foreign Currency Exchange Risk



Foreign currency exchange rate risk is the risk that the fair value of financial instruments or future cash flows will fluctuate as a result of changes in foreign exchange rates.  Although substantially all of the Companys oil and natural gas sales are denominated in Canadian dollars, the underlying market prices in Canada for oil and natural gas are impacted by changes in the exchange rate between the Canadian and United States dollars.  Given that changes in exchange rate have an indirect influence, the impact of changing exchange rates cannot be accurately quantified.  The Company had no forward exchange rate contracts in place as at or during the year ended December 31, 2008.



(e)

Interest Rate Risk



Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates.  The Company is exposed to interest rate fluctuations on its credit facility which bears a floating rate of interest.  The Company had no interest rate swaps or financial contracts in place at or during the year ended December 31, 2008.



(f)

Commodity Price Risk



Commodity price risk is the risk that the fair value of financial instruments or future cash flows will fluctuate as a result of changes in commodity prices.  Commodity prices for oil and natural gas are impacted by world economic events that dictate the levels of supply and demand.  The Company has attempted to mitigate commodity price risk through the use of financial derivative sales contracts.  As at December 31, 2008, the Company had outstanding a natural gas derivatives contract for 1,000 gigajoules (GJ) per day for the period from January 1, 2009 to December 31, 2009.  This contract consisted of a $6.27 CAD per GJ forward sale agreement.  During the year ended December 31, 2008, no gain was realized under this contract.  However, as at December 31, 2008, an unrealized gain of $107,768 relating to this contract was recorded in accumulated other comprehensive income.



(g)

Capital Management Strategy



The Companys policy on capital management is to maintain a prudent capital structure so as to maintain financial flexibility, preserve access to capital markets, maintain investor, creditor and market confidence, and to allow the Company to fund future development.  The Company considers its capital structure to include shareholders equity of $44,363,677 (2007  $59,435,759), bank line of credit of $5,550,000 (2007  $Nil), loan from joint-venture partner of $4,604,040 (2007  $Nil), loan from related party of $2,550,000 (2007  $Nil), and working capital deficiency excluding unrealized financial instrument gain of $12,820,019 (2007 working capital  $11,335,982).  In order to maintain or adjust capital structure, the Company may from time to time issue shares and adjust its capital spending to manage current and projected operating cash flows and debt levels.



The Companys share capital is not subject to any external restrictions.  The revolving operating loan facility with a Canadian Bank (see Note 8) has no restrictions other than a requirement to maintain an adjusted working capital ratio of not less than 1.10:1 by DEAL.  As at December 31, 2008, the Company was in compliance with all flow-through share expenditure requirements but was not in compliance with the covenant related to the loan facility as DEALs adjusted working capital ratio was approximately 0.60:1.  However, DEAL is currently working with the bank to restructure the loan terms and to correct the loan facility covenant violation.  The Company has not paid or declared any dividends, nor are any contemplated in the foreseeable future.  There have been no changes to the Companys capital management strategy during the year ended December 31, 2008.



102









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 21  SUBSEQUENT EVENTS



(a)

Stock Options and Share Issuances



Subsequent to December 31, 2008, the Company granted a total of 1,223,000 incentive stock options with a weighted average exercise price at $0.46 per share to independent directors, management, officers, employees and consultants of the Company.



Subsequent to December 31, 2008, 73,630 common shares were issued upon the exercise of stock options for proceeds of $20,248, 249,750 incentive stock options were forfeited, and 2,410,000 incentive stock options were cancelled.



(b)

Investment in Titan Uranium Inc.



Subsequent to December 31, 2008, the Company received proceeds of $2,159,722 from the sale of 16,150,000 Titan shares, resulting in a loss of $464,653.   As at March 20, 2009, the Company had 600,000 shares of Titan.



(c)

Natural Gas Derivatives Contract



As at December 31, 2008, the Company had outstanding a natural gas derivatives contract for 1,000 GJ per day for the period from January 1, 2009 to December 31, 2009.  This contract consisted of a $6.27 CAD per GJ forward sale agreement.  Subsequent to December 31, 2008, the Company unwound the natural gas hedge, resulting in a realized gain of $289,561.



(d)

Loan from Related Party



On August 11, 2008, the Company borrowed $600,000 from a private company controlled by the CEO of the Company.  Subsequent to December 31, 2008, the $600,000 loan had been repaid.  Refer to Note 10(b).



Subsequent to December 31, 2008, a private company controlled by the CEO of the Company exercised its option and elected to become a working interest partner with DEAL.  Refer to Note 10(b).  The private companys option price was $90,642, equal to 10% of the actual price paid for the acquisition of the lands in the emerging Montney natural gas resource play in northeastern British Columbia.  The private company is also required to pay its pro-rata share of the operating costs.



NOTE 22  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 as mineral property costs.  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 undiscounted expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.  Mineral exploration costs are expensed as incurred until commercially mineable deposits are determined to exist within a particular property.  Accordingly, for all periods presented, the Company has capitalized all mineral exploration costs for US GAAP purposes unless the costs relate to unproven mineral properties.  In addition, under Canadian GAAP, cash flows relating to unproven mineral property costs are reported as investing activities. For US GAAP, these costs are classified as operating activities.





103









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 22  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (continued)



(b)

Stock-based compensation



The Company has granted stock options to certain directors, employees and consultants.  Under Canadian GAAP, prior to 2003, no compensation expense was recorded in connection with the granting of stock options.  Under previous US GAAP, the Company accounted for stock-based compensation in respect of stock options granted to directors and employees using the intrinsic value based method in accordance with APB Opinion No. 25.  Stock options granted to non-employees were accounted for by applying the fair value method using the Black-Scholes option pricing model in accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123).  Commencing January 1, 2003, under Canadian GAAP the Company expenses the fair value of all stock options granted and under US GAAP has elected to prospectively change its accounting policy to account for all stock options granted in accordance with SFAS 123.  On December 16, 2004, the FASB issued SFAS 123(R), Share-Based Payment, which is a revision of SFAS 123.  SFAS 123(R) supersedes APB Opinion 25, and amends SFAS 95, Statement of Cash Flows.  SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values at the date of grant.  As a result, effective January 1, 2003, there is no material difference between the Companys accounting for stock options under US GAAP versus Canadian GAAP.



(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 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. Effective January 1, 2007, the Company adopted new Canadian GAAP accounting standards issued by CICA relating to financial instruments. The new standards have been adopted on a prospective basis with no restatement to prior period financial statements. These new standards substantially harmonize Canadian GAAP with US GAAP with respect to reporting comprehensive income and loss. During the year, other comprehensive income recognized is $107,768 (2007 loss  $5,400).  For the year ended December 31, 2006, comprehensive loss equals the loss for the year under US GAAP.





104











DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 22  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (continued)



(f)

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.



(g)

Recent accounting pronouncements



In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. SFAS 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS 161, effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, will be adopted by the Company beginning in the first quarter of 2009. The Company does not expect there to be any significant impact of adopting SFAS 161 on its financial position, cash flows and results of operations



In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  It is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Companys financial statements.



In May 2008, FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts  An interpretation of FASB Statement No. 60.  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprises risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted.  The adoption of this statement is not expected to have a material effect on the Companys financial statements.



105









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 22  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (continued)



(h)

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,
2008 | December 31,
2007
|                                                                   |                   |                  
|Total assets, under Canadian GAAP                                  | $  62,305,736     | $  63,143,499    
|Exploration costs  unproven resource properties                   | (628,018)         | (628,018)        
|Add: Resource properties accumulated depletion under Canadian GAAP | 3,635,777         | -                
|Less: Resource properties accumulated depletion under US GAAP      | (4,063,107)       | -                
|Less: Resource properties impairment under US GAAP                 | (12,395,905)      | -                
|                                                                   |                   |                  
|Total assets, under US GAAP                                        | $ 48,854,483      | $  62,515,481    
|(ii)     Liabilities                                               |                   |                  
|                                                                   | December 31,
2008 | December 31,
2007
|                                                                   |                   |                  
|Total liabilities, under Canadian GAAP                             | $  17,942,059     | $   3,707,740    
|Add:  flow through issue cost liability under US GAAP              | -                 | 70,000           
|                                                                   |                   |                  
|Total liabilities, under US GAAP                                   | $  17,942,059     | $   3,777,740    
|(iii)   Share Capital                                              |                   |                  
|                                                                   | December 31,
2008 | December 31,
2007
|                                                                   |                   |                  
|Total share capital, under Canadian GAAP                           | $  64,939,177     | $ 61,393,964     
|Add:  flow through issue cost under Canadian GAAP                  | 4,669,883         | 4,132,983        
|Less:  flow through issue cost under US GAAP                       | (185,000)         | (185,000)        
|                                                                   |                   |                  
|Total share capital, under US GAAP                                 | $  69,424,060     | $ 65,341,947     





106









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 22  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (continued)



(h)

Reconciliation (continued)



|(iv)   Deficit                                                     |                   |                  
|------------------------------------------------------------------ | ----------------- | -----------------
|                                                                   | December 31,
2008 | December 31,
2007
|                                                                   |                   |                  
|Deficit, under Canadian GAAP                                       | $  (26,578,828)   | $ (5,688,075)    
|Add:  gain on disposal of uranium properties                       | 5,652,166         | 5,652,166        
|Less:  exploration costs  unproven resource property expenditures | (6,280,184)       | (6,280,184)      
|Less:  flow through share future tax recovery under Canadian GAAP  | (4,669,883)       | (4,132,983)      
|Add:  flow through share future tax recovery under US GAAP         | 185,000           | 115,000          
|Add:  Resource properties depletion under Canadian GAAP            | 3,635,777         | -                
|Less:  Resource properties depletion under US GAAP                 | (4,063,107)       | -                
|Less:  Resource properties impairment under US GAAP                | (12,395,905)      | -                
|                                                                   |                   |                  
|Deficit, under US GAAP                                             | $  (44,514,964)   | $ (10,334,076)   



|(v)     Net (loss) income for the year                            |                                 
|----------------------------------------------------------------- | --------------------------------
|                                                                  | For  the year ended December 31,
|                                                                  | 2008                            
|                                                                  |                                 
|Net (loss) income for the year, under Canadian GAAP               | $ (20,890,753)                  
|Add: gain on disposal of uranium properties                       | -                               
|Less: exploration costs  unproven resource property expenditures | -                               
|Less: flow through share future tax recovery under Canadian GAAP  | (536,900)                       
|Add: flow through share future tax recovery under US GAAP         | 70,000                          
|Add: Resource properties depletion under Canadian GAAP            | 3,635,777                       
|Less: Resource properties depletion under US GAAP                 | (4,063,107)                     
|Less: Resource properties impairment under US GAAP                | (12,395,905)                    
|                                                                  |                                 
|Net (loss) income for the year, under US GAAP                     | $ (34,180,888)                  
|(vi)   Cash used in operating activities                          |                                 
|                                                                  | For the year ended December 31, 
|                                                                  | 2008                            
|                                                                  |                                 
|Cash used in operating activities, under Canadian GAAP            | $   (293,427)                   
|Less: exploration costs  unproven resource property expenditures | -                               
|                                                                  |                                 
|Cash used in operating activities, under US GAAP                  | $   (293,427)                   



107









DEJOUR ENTERPRISES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 2008



NOTE 22  RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) (continued)



(h)

Reconciliation (continued)



|(vii)  Cash used in investing activities                        |                                 |                 |               
|--------------------------------------------------------------- | ------------------------------- | --------------- | --------------
|                                                                | For the year ended December 31,
|                                                                | 2008                            | 2007            | 2006          
|                                                                |                                 |                 |               
|Cash used in investing activities, under Canadian GAAP          | $ (27,101,003)                  | $  (7,838,377)  | $ (12,146,784)
|Add: exploration costs- unproven resource property expenditures | -                               | -               | 4,772,771     
|Cash used in investing activities, under US GAAP                | $ (27,101,003)                  | $   (7,838,377) | $ (7,374,013) 













108



















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:  June 26, 2009 | Signed:  /s/  Robert L. Hodgkinson  
|--------------------- | ------------------------------------
|                      |                                     
|                      | Robert L. Hodgkinson,
Chairman & CEO























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