Filed pursuant to Rule 424(b)(2)
Registration No. 333-183587
Prospectus Supplement
(To Prospectus Dated November 19, 2013)
Dejour Energy Inc.
6,000,000 Units consisting of
One Common Share
and
One warrant to purchase one Common Share
We are offering 6,000,000 common shares, no
par value, and warrants to purchase up to 6,000,000 common shares issuable from time to
time upon the exercise of the warrants. We are offering the common shares and
warrants in units, each unit consisting of one common share together with one
warrant, each warrant exercisable at a price of
$0.35 for one common
share. Each warrant will entitle the holder to purchase one common share,
subject to adjustment, at any time, prior to the earlier of (a) the close of
business on December 31, 2015 or (b) (i) with respect to half the common shares
exercisable pursuant to the warrants, if at any time on or before December 1,
2014, the volume weighted average trading price per Common Share during any five
consecutive trading day period on the NYSE MKT averages at least
US$0.45 per Common Share
and we elect to accelerate half the warrant pursuant to the terms thereof (the
date of expiration pursuant to such terms, the Partial Termination Date) and
(ii) with respect to balance of the common shares exercisable pursuant to the
warrants, if at any time on or before December 1, 2014 and 10 days after the
Partial Termination Date, the volume weighted average trading price per Common
Share during any five consecutive trading day period on the NYSE MKT averages at
least US$0.45 per Common
Share and we elect to accelerate half the warrant pursuant to the terms
thereof.
The units will be sold at a
negotiated price of
$0.25 per unit. Units
will not be issued or certificated. The common shares and warrants are
immediately separable and will be issued separately. We do not expect that the
warrants will be listed for trading on any securities exchange.
Our common shares are traded on
the Toronto Stock Exchange and on the NYSE MKT (formerly NYSE Amex), in both
cases under the symbol DEJ.
On August 11, 2014, the last
reported sale price of our common shares on the Toronto Stock Exchange was
Cdn$0.36 per common share
and on the NYSE MKT was
$0.33 per common share.
There is no market through which the warrants may be sold and purchasers may
not be able to resell the warrants. This may affect the pricing of the warrants
in the secondary market, the transparency and availability of trading prices,
and the liquidity of the warrants.
The aggregate market value of our
outstanding voting and non-voting common equity held by non-affiliates
on August 11, 2014, was
approximately
$54.3 million. We have
not issued any securities pursuant to Instruction I.B.5 of Form F-3 during the
12 calendar month period that ends on and includes the date of this prospectus
supplement.
Investing in our securities
involves a high degree of risk. See the sections entitled Risk Factors
beginning on page S-9 of this prospectus supplement, Risk Factors beginning on
page 4 of the accompanying prospectus, and the risk factors described in the
documents incorporated by reference into this prospectus supplement and the
accompanying prospectus.
Neither the United States
Securities Exchange Commission (SEC) nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
The securities offered by this
prospectus supplement and accompanying prospectus have not been and will not be
qualified for sale under the securities laws of any province or territory in
Canada and are not being offered for sale in Canada or to any resident of Canada
and may not be offered or sold, directly or indirectly, in Canada, or to or for
the account of any resident of Canada. This prospectus supplement and
accompanying prospectus have not been filed in respect of, and will not qualify,
any distribution of securities in any province or territory of Canada.
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Number of units
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Per unit
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(1)
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Total Offering
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Offering price
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$
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0.25
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6,000,000
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$
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1,500,000.00
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Proceeds, before expenses, to us
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$
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0.25
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6,000,000
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$
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1,500,000.00
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(1)
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A unit consists of one common share and one warrant to
purchase one common share. This table does not include common shares
issuable upon exercise of the warrants offered hereby. This table is based
on the sale
of 6,000,000 units and
does not reflect the potential proceeds from the exercise of warrants
covering additional common shares registered in this offering which have
an exercise price of
$0.35 per common
share. See Description of Warrants in this prospectus supplement.
Assuming exercise of all the warrants at an exercise price of
$0.35 per share,
the proceeds to us, before expenses, would be
$2,100,000.
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We expect that delivery of the
securities being offered pursuant to this prospectus supplement and the
accompanying prospectus will be made on or
about August 15, 2014.
Prospective investors should
be aware that the acquisition of the units may have tax consequences both in the
United States and in Canada. This prospectus supplement and the accompanying
prospectus may not describe these tax consequences fully. Investors should read
the tax discussion in this prospectus supplement under the captions Certain
U.S. Federal Income Tax Considerations and Certain Canadian Federal Income Tax
Considerations.
The date of this prospectus supplement
is August 11, 2014.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
ABOUT THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus supplement, which
describes the specific terms of this offering of units consisting of common
shares and warrants, and also adds to and updates information contained in the
accompanying prospectus and the documents incorporated by reference into this
prospectus supplement and the accompanying prospectus. The second part is the
accompanying prospectus, which gives more general information, some of which may
not be applicable to this offering. To the extent there is a conflict between
information contained in this prospectus supplement and information contained in
the accompanying prospectus or any document incorporated by reference, the
information in this prospectus supplement shall control.
This
prospectus supplement relates to a registration statement on Form F-3 that we
filed with the Securities and Exchange Commission, which we refer to as the
SEC, utilizing a shelf registration process. Under this shelf registration
process, we may, from time to time, offer and sell any of the securities or any
combination of the securities described in the accompanying prospectus in one or
more offerings. You should read this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus.
You
should rely only on the information contained in or incorporated by reference
into this prospectus supplement and the accompanying prospectus. We have not
authorized any other person to provide you with additional or different
information. If anyone provides you with additional or different information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus is accurate only as of the respective
dates of those documents. Our business, financial condition, results of
operations and prospects may have changed since those dates.
These
securities will not be offered or sold in Canada or to any individual or company
in Canada in contravention of the securities laws of Canada or any province or
territory thereof. We will not distribute any materials related to these
securities in Canada in contravention of the securities laws of Canada or any
province or territory thereof.
Unless
stated otherwise or the context otherwise requires, references in this
prospectus supplement and the accompanying prospectus to the Company,
Dejour, we or us includes Dejour Energy Inc. and each of its subsidiaries
through which it conducts its business.
Currency and Financial Information
Unless
otherwise stated, currency amounts in this prospectus supplement are stated in
United States dollars. References in this prospectus supplement to $ are to
U.S. dollars and references to Cdn$ are to Canadian dollars. The consolidated
financial statements incorporated by reference into this prospectus supplement
and the accompanying prospectus, and the selected consolidated financial data
derived from those consolidated financial statements included in this prospectus
supplement, are presented in Canadian dollars.
The following table lists, for each period presented, the high
and low exchange rates, the average of the exchange rates during the period
indicated, and the exchange rates at the end of the period indicated, for one
Canadian dollar, expressed in United States dollars, based on the noon exchange
rate published by the Bank of Canada.
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Six Months Ended
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June 30,
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Year ended December 31,
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2014
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2013
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2013
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2012
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2011
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High for the period
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$0.9422
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$1.0164
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$1.0164
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$1.0299
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$1.0583
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Low for the period
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$0.8888
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$0.9495
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$0.9710
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$0.9599
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$0.9430
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End of period
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$0.9367
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$0.9513
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$0.9402
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$1.0051
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$0.9833
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Average for the period
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$0.9117
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$0.9844
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$0.9348
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$1.004
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$1.0111
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On August 11, 2014, the Bank of Canadas noon exchange rate was Cdn$1.00 =
$0.9145.
On
January 1, 2011, we adopted International Financial Reporting Standards (IFRS)
for financial reporting purposes, using a transition date of January 1, 2010.
Our annual audited consolidated financial statements for the year ended December
31, 2013, including 2012 and 2011 required comparative information, have been
prepared in accordance with IFRS, as issued by the International Accounting
Standards Board and interpretations of the International Financial Reporting
Interpretations Committee. Our financial statements prior to the fiscal year
ended December 31, 2010 were prepared in accordance with Canadian generally
accepted accounting principles then in effect (Canadian GAAP). IFRS and
Canadian GAAP differ from United States generally accepted accounting principles
in certain respects, and therefore our financial statements may
not be comparable to the financial statements of United States companies.
S-1
ENFORCEMENT OF CIVIL LIABILITIES
The enforcement by investors of civil liabilities
under U.S. federal securities laws may be affected adversely by the fact that we
are incorporated under the laws of the Province of British Columbia, Canada,
that many of our officers and directors are residents of countries other than
the United States, that some of the experts named in this prospectus supplement
and the accompanying prospectus are residents of a countries other than the
United States, and some of our assets and the assets of said persons may be
located outside the United States. There is some doubt as to the enforceability
in Canada in original actions, or in actions for enforcement of judgments of
United States courts, of civil liabilities predicated upon the United States
federal securities laws. In addition, awards for punitive damages in actions
brought in the United States or elsewhere may be unenforceable in Canada. See
Risk Factors
It may be difficult to enforce judgments or bring actions
outside the United States against us and certain of our directors and
officers.
FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus and the documents
incorporated by reference into this prospectus supplement and the accompanying
prospectus contain forward-looking statements within the meaning of applicable
securities legislation. Any statements that are not of historical fact and
express or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as expects or
does not expect, is expected, anticipates or does not anticipate,
plans, estimates or intends, or stating that certain actions, events or
results may, could, would, might or will be taken, occur or be
achieved) may be forward-looking statements. Forward-looking statements concern
such matters as our anticipated results and developments in our operations in
future periods, planned exploration and, if warranted, development of our
properties, plans related to our business and other matters that may occur in
the future. Forward-looking statements relate to analyses and other information
that are based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management.
In
particular, the forward-looking statements contained in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference into this prospectus supplement and the accompanying prospectus
concern, among other things:
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drilling inventory, drilling plans and timing of drilling, re-completion
and tie-in of wells;
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productive capacity of wells, anticipated or expected production rates and
anticipated dates of commencement of production;
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drilling, completion and facilities costs;
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results of our various projects;
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ability to lower cost structure in certain of our projects;
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our growth expectations;
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timing of development of undeveloped reserves;
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the performance and characteristics of our oil and natural gas properties;
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oil and natural gas production levels;
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the quantity of oil and natural gas reserves;
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capital expenditure programs;
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supply and demand for oil and natural gas and commodity prices;
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the impact of federal, provincial, and state governmental regulation on our
business;
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expected levels of royalty rates, operating costs, general administrative
costs, costs of services and other costs and expenses;
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expectations regarding our ability to raise capital and to continually add
to reserves through acquisitions, exploration and development;
S-2
Forward-looking statements are subject to a
variety of known and unknown risks, uncertainties and other factors that could
cause actual events or results to differ from those expressed or implied by the
forward-looking statements, including, without limitation:
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risks related to the marketability and price of oil and natural gas being
affected by factors outside our control;
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risks related to world oil and natural gas prices being quoted in U.S.
dollars and our production revenues being adversely affected by an
appreciation in the Canadian dollar;
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risks related to our ability to execute projects being dependent on factors
outside our control;
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risks related to oil and gas exploration having a high degree of risk and
exploration efforts failing;
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risks related to cumulative unsuccessful exploration efforts;
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risks related to oil and natural gas operations involving hazards and
operational risks;
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risks related to seasonal factors and unexpected weather;
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risks related to competition in the oil and gas industry;
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risks related to the fact that we do not control all of the assets that are
used in the operation of our business;
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risks related to our ability to market oil and natural gas depending on our
ability to transport the product to market;
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risks related to high demand for drilling equipment;
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risks related to title to our properties;
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risks related to our ability to continue to meet our oil and gas lease or
license obligations;
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risks related to our ability to renew oil and gas leases and licenses;
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risks related to our anticipated substantial capital needs for oil and gas
exploration, development and future acquisitions;
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risks related to our cash flow from reserves not being sufficient to fund
our ongoing operations;
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risks related to covenants in issued debt, including those regarding
working capital and those restricting the ability to conduct future
financings;
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risks related to negotiations with lenders when we are in default with
respect to covenants in issued debt;
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risks related to renewal or refinancing;
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risks related to our being exposed to third party credit risks;
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risks related to our being able to find, acquire, develop and commercially
produce oil and natural gas;
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risks related to our properties not producing as projected;
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risks related to our estimated reserves being based upon estimates;
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risks related to future oil and gas revenues not resulting in revenue
increases;
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risks related to our managing growth;
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risks related to our being dependent on key personnel;
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risks related to our operations being subject to federal, state,
provincial, local and other laws, controls and regulations;
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risks related to uncertainty regarding claims of title and right of
aboriginal people;
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risks related to environmental laws and regulations;
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risks related to our facilities, operations and activities emitting
greenhouse gases;
S-3
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risks related to our not having paid dividends to date;
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risks related to our stock price being volatile;
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risks related to our being a foreign private issuer;
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risks related to the issuance of additional common shares negatively
affecting the market price;
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risk related to losing our listing on the NYSE MKT; and
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risks related to the warrants.
This
list is not exhaustive of the factors that may affect the realization of the
results contemplated by our forward-looking statements. Some of the important
risks and uncertainties that could affect the realization of our expected
results are described further under the sections entitled Risk Factors in this
prospectus supplement, Risk Factors and Uncertainties in the accompanying
prospectus, and in the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus. If one or more of these risks or
uncertainties materializes, or if our underlying assumptions prove incorrect,
our actual results may vary materially from those expected, estimated or
projected. Forward-looking statements are not a prediction of future events or
circumstances, and those future events or circumstances may not occur. Given
these uncertainties, you are cautioned not to place undue reliance on such
forward-looking statements. Forward-looking statements are based on our beliefs,
opinions and expectations at the time they are made and speak only as of the
date they are made, and we do not assume any obligation to update our
forward-looking statements if those beliefs, opinions, expectations or other
circumstances should change, except as required by applicable law.
We qualify
all the forward-looking statements contained in this prospectus supplement, the
accompanying prospectus and the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus by the foregoing
cautionary statements.
S-4
PROSPECTUS SUPPLEMENT SUMMARY
The
following summary provides an overview of certain information about Dejour and
may not contain all the information that is important to you. This summary is
qualified in its entirety by, and should be read together with, the information
contained in other parts of this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus. You should carefully read this
entire prospectus supplement, the accompanying prospectus and the documents
incorporated by reference into this prospectus supplement and the accompanying
prospectus before making a decision about whether to invest in our
securities.
Our Company
Dejour
Energy Inc. 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, our issued shares were consolidated on the basis of one new share for
every 15 old shares, and the name of the company was changed to Dejour
Enterprises Ltd. On June 6, 2003, our shareholders approved a resolution to
complete a one-for-three-share consolidation, which became effective on October
1, 2003. Dejour was continued in British Columbia under the
Business
Corporations Act (British Columbia)
in 2005. On March 9, 2011, Dejour
changed its name to Dejour Energy Inc.
Our
authorized capital consists of an unlimited number of common shares, preferred
shares and series 1 preferred shares. There are no indentures or agreements
limiting the payment of dividends and there are no conversion rights, special
liquidation rights, pre-emptive rights or subscription rights attaching to our
common shares.
Our executive office is located at:
598 999 Canada Place
Vancouver,
British Columbia V6C 3E1
Canada
Telephone: (604) 638-5050
Our Business
We
are in the business of acquiring, exploring and developing energy projects with
a focus on oil and gas exploration in Canada and the United States. We hold
approximately 62,400 net acres of oil and gas leases in the following regions:
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the Peace River Arch of northwestern British Columbia and northeastern
Alberta, Canada; and
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the Piceance, Paradox and Uinta Basins in the U.S. Rocky Mountains.
Over
the past three years, we have evolved our forward focus from acquiring resource
potential toward conversion of resources into reserves. This process involved
several distinct steps on the same continuum including:
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classification and prioritization of acreage based on economic promise,
technical robustness, infrastructural and logistic advantage and commercial
maturity;
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evaluation and development planning for top tier acreage positions;
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developing partnerships within financial and industry circles to speed the
exploitation process; and
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aggressively bringing production on line where feasible.
As
a result of these moves, our asset characterization has moved toward more
tangible low-risk near-term development projects, moderate risk appraisal
opportunities and moderate- to high-risk exploration potential.
Our
business objective is to grow our oil and gas production and generate sufficient
cash flow to continue to expand our operations and enhance shareholder value.
Recent Developments
In
March 2014, we completed the purchase of certain natural gas producing assets
and related processing facilities adjacent to our existing oilfield in Woodrush
Field, Northern British Columbia (the Drake/Woodrush Oilfield). This
acquisition of assets at Ft. St. John, British Columbia, resulting in the
acquisition of an additional 9,600 net acres (44% developed). The assets
acquired included a 54% working interest in a Halfway formation well, a 74%
working interest in 2 shut-in natural gas wells, and a 96.8% working interest in
a sour processing facility. Funding for the purchase was provided by cash on
hand and available credit from the current credit facility of Dejour Energy
(Alberta) Ltd. (DEAL) with its Canadian bank. The properties so acquired have
a fair value of Cdn$2,146,000, applying a 10% discount factor to expected
future net cash flows. We also assumed related decommissioning liabilities of
$1,520,000, applying a weighted average discount rate of 2.04% and an inflation
rate of 2%. The total cash consideration paid is $626,000.
S-5
On
June 30, 2014, we closed the sale of 65% of our working interest in the initial
four wells drilled in 2013 at our Kokopelli project in Colorado, together with
certain related production facilities, for Cdn$4,136,000 (US$3,876,000) cash and
a 25% carried working interest in a US$16.0 million drilling and completion
program planned for 2014 to be funded 100% by the purchaser of the assets.
On
July 3, 2014, we closed the acquisition of an additional 24% working interest in
the Drake/Woodrush Oilfield to increase our working interest to 99%. As
consideration for the purchase, we issued 9,600,000 common shares at a price of
Cdn$0.202 per share for a deemed value of Cdn$1,939,000. A company controlled by
our CEO has a 5% working interest in the Drake/Woodrush Oilfield and the CEO
abstained from voting when our board of directors approved the acquisition. On
July 14, 2014, we obtained the regulatory approval for the acquisition and the
issuance of the shares from the TSX.
On
November 21, 2013, the NYSE MKT notified us that we were not in compliance with
three of the NYSE MKTs continued listing standards, namely:
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1.
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Section 1003(a)(ii) of the Company Guide since it
reported stockholders equity of less than US$4,000,000 as of September
30, 2013 and net losses in three of its four most recent fiscal years then
ended;
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2.
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Section 1003(a)(iii) of the Company Guide since it
reported stockholders equity of less than US$6,000,000 as of September
30, 2013 and net losses in its five most recent years then ended,
and
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3.
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Section 1003(a)(iv) of the Company Guide since it has
sustained losses which are so substantial in relation to its overall
operations or its existing financial resources, or its financial condition
has become so impaired it appears questionable , in the opinion of the
Exchange, as to whether such it will be able to continue operations and/or
meet its obligations as they mature.
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The
NYSE MKT also requested that we submit a Plan of Compliance in prescribed form
addressing how we intend to regain compliance with Sections 1003(a)(ii) and
(iii) by May 22, 2015 and Section 1003(a)(iv) by April 4, 2014. We submitted our
Plan of Compliance on the due date of December 23, 2013 and updated it on April
3, 2014 and July 15, 2014.
In
a letter dated June 18, 2014, NYSE MKT confirmed that we resolved the continued
listing deficiencies with respect to Sections 1003(a)(ii) and (iii) of the
Company Guide. With respect to the remaining deficiency NYSE MKT, in a letter
dated August 4, 2014, stated that the Exchange has determined that, in
accordance with Section 1009 of the Company Guide, the Company made a reasonable
demonstration of its ability to regain compliance with Section 1003(a)(iv) of
the Company Guide by the end of the revised plan period of July 15, 2014.
Subject
to making a public announcement that we are still not compliant with Section
1003(a)(iv), providing NYSE MKT staff with quarterly updates on the Companys
progress with respect to its original Plan of Compliance submitted on December
23, 2013, and obtaining NYSE MKT prior approval to issuing additional shares,
NYSE MKT stated in its August 4, 2014 letter it is prepared to continue the
listing of our shares for trading on NYSE MKT through November 30, 2014 at which
time NYSE MKT will again review our progress toward achieving the targets
established in the Plan of Compliance.
Further Information
Prospective
purchasers of units should read the description of our company and our business
under the heading SummaryThe Company in the accompanying prospectus and under
the heading ITEM 4. INFORMATION ON THE COMPANY in our Annual Report on Form
20-F for the fiscal year ended December 31, 2013, filed with the SEC on April
29, 2014 and incorporated by reference into this prospectus supplement and the
accompanying prospectus.
S-6
THE OFFERING
The
following is a brief summary of certain terms of this offering and is not
intended to be complete. It does not contain all of the information that will be
important to a holder of common shares and warrants. For a more complete
description of our common shares and warrants, see the sections entitled
Description of Common Shares and Description of Warrants in this prospectus
supplement and the accompanying prospectus.
Offering:
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6,000,000 Units. Each unit consists of one common share and one warrant to purchase
one common share. The common shares and warrants offered hereby are
immediately separable and will be issued separately.
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Anti-Dilution:
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If we, at any time during the six months following the
Closing Date (the Equity Financing Adjustment Period), complete an
offering of Common Shares (or securities convertible into Common Shares)
at a price or exercise price per Common Share of less than the purchase
price for the Units set forth on the signature page hereto (the Equity
Financing), then within 10 business days following the closing date of
the Equity Financing, we shall issue to the Investor an aggregate number
of Common Shares, together with all other Common Shares issued to such
Investor under this Agreement, equal to the amount determined by
multiplying the number of Units purchased hereunder by a fraction: (i) the
numerator of which shall be the purchase price per Unit set forth on the
signature page hereto; and (ii) the denominator of which shall be the
purchase price (or exercise price) per Common Share sold in the Equity
Financing. If at any time during the Equity Financing Adjustment Period we
complete any reorganization, reclassification, stock dividend, stock split
or similar transaction in respect of the Common Shares (a Transaction),
then for purposes of the formula set forth in the prior sentence, the
purchase price of the Units set forth on the signature page hereto shall
be adjusted by multiplying the purchase price per Unit purchased hereunder
by a fraction: (i) the numerator of which shall be the number of Common
Shares purchased as part of Units purchased hereunder; and (ii) the
denominator of which shall be the number of Common Shares into which such
Common Shares are converted upon completion of the Transaction.
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Warrants:
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Each warrant will entitle the holder to purchase one
common share, subject to adjustment and early termination, at an exercise
price of $0.35 per common share.
Each warrant will entitle the holder to purchase one common share, subject
to adjustment, at any time, prior to the earlier of (a) the close of
business on December 31, 2015 or (b) (i) with respect to half the common
shares exercisable pursuant to the warrants, if at any time on or before
December 1, 2014, the volume weighted average trading price per Common
Share during any five consecutive trading day period on the NYSE MKT
averages at least US$0.45 per Common
Share and we elect to accelerate half the warrant pursuant to the terms
thereof (the date of expiration pursuant to such terms, the Partial
Termination Date) and (ii) with respect to balance of the common shares
exercisable pursuant to the warrants, if at any time on or before December
1, 2014 and 10 days after the Partial Termination Date, the volume
weighted average trading price per Common Share during any five
consecutive trading day period on the NYSE MKT averages at least US$ per
Common Share and we elect to accelerate half the warrant pursuant to the
terms thereof. The warrants will be freely transferable, subject to the
terms and conditions of the warrants, as contained in the form of warrant
certificate. See the section entitled Description of Warrants in this
prospectus supplement and the accompanying prospectus. This prospectus
supplement also relates to the offering of the common shares issuable upon
exercise of the warrants.
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Amount:
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$1,500,000.00
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Price to the Purchasers:
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$0.25 per unit
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S-7
Common Shares
Outstanding Before
Offering
(1)
:
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176,117,787 common shares
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Common Shares
Outstanding After Offering:
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182,117,787 common shares
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Use of Proceeds:
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The net proceeds from the sale of the units in this
offering are estimated to be approximately $1,425,000, after deducting the
estimated offering expenses, if all of the units are sold hereunder. We
intend to use the net proceeds from this offering for exploration,
development and acquisition of oil and gas properties and working capital
purposes.
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Risk Factors:
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Investing in the units involves risks that are
described under the sections
entitled Risk Factors beginning on
page S-9 of this prospectus
supplement, Risk Factors beginning on
page 3 of the accompanying
prospectus, and in the documents
incorporated by reference into this
prospectus supplement and the
accompanying prospectus, including our
Annual Report on Form 20-F
for the fiscal year ended December 31,
2013, as filed with the
SEC.
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Tax Considerations:
|
Purchasing the units, holding the common shares and
warrants, and exercising the warrants may have tax consequences in the
United States. See the sections entitled Certain U.S. Federal Income Tax
Considerations and Certain Canadian Federal Income Tax Considerations
in this prospectus supplement.
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Listing Symbol:
|
Our common shares are traded on the Toronto Stock
Exchange and on the NYSE MKT, in both cases under the symbol DEJ. There
is no market through which the warrants may be sold and purchasers may not
be able to resell the warrants purchased in the offering.
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_______________
(1)
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These figures do not include 11,776,924 common shares
reserved for issuance pursuant to outstanding stock options, which are
exercisable at a weighted average price of Cdn$0.24 per common share, and
31,629,152 common shares reserved for issuance pursuant to outstanding
warrants, which are exercisable at a weighted average price of Cdn$0.38
per common share as at August 11, 2014. The maximum number of stock
options available for issuance under the Company's incentive stock option
plan is 17,611,778 of which 11,776,924 are issued, leaving 5,834,854
available to be issued as at August 11, 2014.
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S-8
RISK FACTORS
An
investment in a company engaged in oil and gas exploration involves an unusually
high amount of risk, both unknown and known, present and potential, including,
but not limited to the risks enumerated below. An investment in our units,
common shares and warrants is highly speculative and subject to a number of
known and unknown risks. Only those persons who can bear the risk of the entire
loss of their investment should purchase our securities. An investor should
carefully consider the risks described below, together with the risks described
in the accompanying prospectus and the documents incorporated by reference into
this prospectus supplement and the accompanying prospectus, before investing in
our units, common shares or warrants. The risks described below are not the only
ones we face. Additional risks that we are not currently aware of or that we
currently believe are immaterial may become important factors that affect our
business. The risk factors set forth below, in the accompanying prospectus and
the documents incorporated by reference into this prospectus supplement and the
accompanying prospectus, may have a significant impact on our business,
financial condition and/or results of operations and could cause actual results
to differ materially from those projected in any forward-looking statements. See
Forward-Looking Statements.
Our
failure to successfully address the risks and uncertainties that we face would
have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common shares may decline
and investors may lose all or part of their investment. We cannot assure you
that we will successfully address these risks or other unknown risks that may
affect our business.
Risks related to commodity price fluctuations
The
marketability and price of oil and natural gas are affected by numerous factors
outside of our control. Material fluctuations in oil and natural gas prices
could adversely affect our net production revenue and oil and natural gas
operations.
Prices
for oil and natural gas may fluctuate widely in response to relatively minor
changes in the supply of and demand for oil and natural gas, market uncertainty
and a variety of additional factors that are beyond our control, such as:
-
the domestic and foreign supply of and demand for oil and natural gas;
-
the price and quantity of imports of crude oil and natural gas;
-
overall domestic and global economic conditions;
-
political and economic conditions in other oil and natural gas producing
countries, including embargoes and continued hostilities in the Middle East
and other sustained military campaigns, and acts of terrorism or sabotage;
-
the ability of members of the Organization of Petroleum Exporting Countries
to agree to and maintain oil price and production controls;
-
the level of consumer product demand;
-
weather conditions;
-
the impact of the U.S. dollar exchange rates on oil and natural gas prices;
and
-
the price and availability of alternative fuels.
Our
ability to market our oil and natural gas depends upon our ability to acquire
space on pipelines that deliver such commodities to commercial markets. We are
also affected by deliverability uncertainties related to the proximity of our
reserves to pipelines and processing and storage facilities and operational
problems affecting such pipelines and facilities, as well as extensive
governmental regulation relating to price, taxes, royalties, land tenure,
allowable production, the export of oil and natural gas and many other aspects
of the oil and natural gas business.
Both
oil and natural gas prices are unstable and are subject to fluctuation. Any
material decline in prices could result in a reduction of our net production
revenue. The economics of producing from some wells may change as a result of
lower prices, which could result in reduced production of oil or natural gas and
a reduction in the volumes and net present value of our reserves. We might also
elect not to produce from certain wells at lower prices. All of these factors
could result in a material decrease in our net production revenue and a
reduction in our oil and natural gas acquisition, development and exploration
activities.
S-9
Because
world oil and natural gas prices are quoted in U.S. dollars, our production
revenues could be adversely affected by an appreciation of the Canadian dollar.
World
oil and natural gas prices are quoted in U.S. dollars, and the price received by
Canadian producers, including us, is therefore affected by the Canadian/U.S.
dollar exchange rate, which will fluctuate over time. In recent years, the
Canadian dollar has increased materially in value against the U.S. dollar, which
may negatively affect our production revenues. Further material increases in the
value of the Canadian dollar would exacerbate this potential negative effect and
could have a material adverse effect on our financial condition and results of
operations. An increase in the exchange rate for the Canadian dollar and future
Canadian/U.S. exchange rates could also negatively affect the future value of
our reserves as determined by independent petroleum reserve engineers.
Risks related to operating an exploration, development and
production company
Our ability to execute projects will depend on certain factors outside of
our control. If we are unable to execute projects on time, on budget or at all,
we may not be able to effectively market the oil and natural gas that we
produce.
We
manage a variety of small and large projects in the conduct of our business. Our
ability to execute projects and market oil and natural gas will depend upon
numerous factors beyond our control, including:
-
the availability of adequate financing;
-
the availability of processing capacity;
-
the availability and proximity of pipeline capacity;
-
the availability of storage capacity;
-
the supply of and demand for oil and natural gas;
-
the availability of alternative fuel sources;
-
the effects of inclement weather;
-
the availability of drilling and related equipment;
-
accidental events;
-
currency fluctuations;
-
changes in governmental regulations; and
-
the availability and productivity of skilled labor.
Because
of these factors, we could be unable to execute projects on time, on budget or
at all, and may not be able to effectively market the oil and natural gas that
we produce.
Oil
and gas exploration has a high degree of risk and our exploration efforts may be
unsuccessful, which would have a negative effect on our operations.
There
is no certainty that the expenditures to be made by us in the exploration of our
current projects, or any additional project interests we may acquire, 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 that can be legally and
economically exploited. If exploration is unsuccessful and no commercially
recoverable reserves are defined, we would be required to evaluate and acquire
additional projects that would require additional capital, or we would have to
cease operations altogether.
Cumulative unsuccessful exploration efforts could result in us having to cease
operations.
The
expenditures to be made by us in the exploration of our properties 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 us having
to cease operations.
Oil
and natural gas operations involve many hazards and operational risks, some of
which may not be fully covered by insurance. If a significant accident or event
occurs for which we are not fully insured, our business, financial condition,
results of operations and prospects could be adversely affected.
S-10
Our
involvement in the oil and natural gas exploration, development and production
business subjects us to all of the risks and hazards typically associated with
those types of operations, including hazards such as fire, explosion, blowouts, sour gas releases and spills, each of
which could result in substantial damage to oil and natural gas wells,
production facilities, other property and the environment or personal injury. In
particular, we may explore for and produce sour natural gas in certain areas. An
unintentional leak of sour natural gas could result in personal injury, loss of
life or damage to property, and may necessitate an evacuation of populated
areas, all of which could result in liability to us. In accordance with industry
practice, we are not fully insured against all of these risks. Although we
maintain liability insurance in an amount that we consider consistent with
industry practice, the nature of these risks is such that liabilities could
exceed policy limits, in which event we could incur significant costs that could
have a material adverse effect upon our business, financial condition, results
of operations and prospects. In addition, the risks we face are not, in all
circumstances, insurable and, in certain circumstances, we may elect not to
obtain insurance to deal with specific risks due to the high premiums associated
with such insurance or other reasons. For instance, we do not have insurance to
protect against the risk from terrorism. Oil and natural gas production
operations are also subject to all of the risks typically associated with those
operations, including encountering unexpected geologic formations or pressures,
premature decline of reservoirs and the invasion of water into producing
formations. Losses resulting from the occurrence of any of these risks could
have a material adverse effect on our business, financial condition, results of
operations and prospects.
Seasonal
factors and unexpected weather patterns may lead to declines in exploration and
production activity.
The
level of activity in the Canadian oil and natural gas industry is influenced by
seasonal weather patterns. Oil and natural gas development activities, including
seismic and drilling programs in northern Alberta and British Columbia, are
restricted to those months of the year when the ground is frozen. Wet weather
and spring thaw may make the ground unstable. Consequently, municipalities and
provincial transportation departments enforce road bans that restrict the
movement of rigs and other heavy equipment, thereby reducing activity levels. In
addition, certain oil and natural gas producing areas are located in areas that
are inaccessible other than during the winter months because the ground
surrounding the sites in these areas consists of swampy terrain, and additional
seasonal weather variations will also affect access to these areas. Seasonal
factors and unexpected weather patterns may lead to declines in exploration and
production activity during certain parts of the year.
The
petroleum industry is highly competitive, and increased competitive pressures
could adversely affect our business, financial condition, results of operations
and prospects.
The
petroleum industry is competitive in all of its phases. We compete with numerous
other organizations in the search for, and the acquisition of, oil and natural
gas properties and in the marketing of oil and natural gas. Our competitors
include oil and natural gas companies that have substantially greater financial
resources, staff and facilities than us. Our ability to increase our reserves in
the future will depend not only upon our ability to explore and develop our
present properties, but also upon our ability to select and acquire other
suitable producing properties or prospects for exploratory drilling. Competitive
factors in the distribution and marketing of oil and natural gas include price
and methods and reliability of delivery and storage.
We
do not control all of the assets that are used in the operation of our business
and, therefore, cannot ensure that those assets will be operated in a manner
favorable to us.
Other
companies operate some of the assets in which we have an interest. As a result,
we have a limited ability to exercise influence over the operation of those
assets or their associated costs, which could adversely affect our financial
performance. Our return on assets operated by others will therefore depend upon
a number of factors that may be outside of our control, including the timing and
amount of capital expenditures, the operators expertise and financial
resources, the approval of other participants, the selection of technology and
risk management practices.
Our
ability to market oil and natural gas depends on our ability to transport our
product to market. If we are unable to expand and develop the infrastructure in
the areas surrounding certain of our assets, we may not be able to effectively
market the oil and natural gas that we produce.
Due
to the location of some of our assets, both in Canada and the United States,
there is minimal infrastructure currently available to transport oil and natural
gas from our existing and future wells to market. As a result, even if we are
able to engage in successful exploration and production activities, we may not
be able to effectively market the oil and natural gas that we produce, which
could adversely affect our business, financial condition, results of operations
and prospects.
S-11
Demand
and competition for drilling equipment could delay our exploration and
production activities, which could adversely affect our business, financial
condition, results of operations and prospects.
Oil
and natural gas exploration and development activities depend upon the
availability of drilling and related equipment (typically leased from third
parties) in the particular areas where such activities will be conducted. Demand
for such limited equipment or access restrictions may affect the availability of
such equipment to us and may delay exploration and development activities. To
the extent we are not the operator of our oil and natural gas properties, we
depend upon the operators of the properties for the timing of activities related
to the properties and are largely unable to direct or control the activities of
the operators.
Title
to our oil and natural gas producing properties cannot be guaranteed and may be
subject to prior recorded or unrecorded agreements, transfers, claims or other
defects.
Although
title reviews may be conducted prior to the purchase of oil and natural gas
producing properties or the commencement of drilling wells, those reviews do not
guarantee or certify that an unforeseen defect in the chain of title will not
arise to defeat our claim. Unregistered agreements or transfers, or native land
claims, may affect title. If title is disputed, we will need to defend our
ownership through the courts, which would likely be an expensive and protracted
process and have a negative effect on our operations and financial condition. In
the event of an adverse judgment, we would lose our property rights. A defect in
our title to any of our properties may have a material adverse effect on our
business, financial condition, results of operations and prospects.
We
may be unable to meet all of the obligations necessary to successfully maintain
each of the licenses and leases and working interests in licenses and leases
related to our properties, which could adversely affect our business, financial
condition, results of operations and prospects.
Our
properties are held in the form of licenses and leases and working interests in
licenses and leases. If we or the holder of the license or lease fails to meet
the specific requirement of a license or lease, the license or lease may
terminate or expire. None of the obligations required to maintain each license
or lease may be met. The termination or expiration of our licenses or leases or
the working interests relating to a license or lease may have a material adverse
effect on our business, financial condition, results of operations and
prospects.
Risks related to financing continuing and future operations
We
have a working capital deficiency and will be required to raise capital through
financings. We may not be able to obtain capital or financing on satisfactory
terms, or at all.
As
of June 30, 2014, we had a working capital deficiency of approximately Cdn$4.4
million and an accumulated deficit of Cdn$93.1 million. Cdn$2.6 million of the
working capital deficit relates to our bank line of credit, (maximum credit
limit of Cdn$2.9 million), while Cdn$1.6 million relates to non-cash provisions
for warrant and derivative liabilities.
On
June 5, 2014, and amended on June 27, 2014 and again on July 29, 2014, DEAL
renewed its credit facility with its bank for a maximum amount of Cdn$2.8
million. Effective August 1, 2014, the credit facility reduces by Cdn$100,000
per month. Interest on the loan is prime plus 3%, payable monthly and the amount
outstanding is payable on demand any time. Collateral for the credit facility is
provided by a Cdn10.0 million first floating charge over all the assets of DEAL,
a general assignment of DEALs book debts and a Cdn$10.0 million debenture with
a first floating charge over all our assets. The next annual review of the
credit facility is scheduled for November 1, 2014.
On
June 30, 2014, we paid Cdn$3,563,000 to our lender to settle our outstanding
secured loan facility of Cdn$3.5 million plus accrued interest of Cdn$63,000.
With this payment, all outstanding debt obligations to the lender were
extinguished and the lender released and discharged the collateral security
taken in respect of the loan facility.
We
expect to incur general and administration expenses of approximately Cdn$3.0
million over the next twelve months. We cannot assure you that debt or equity
financing will be available to us, and even if debt or equity financing is
available, it may not be on terms acceptable to us. Our inability to access
sufficient capital for our operations would have a material adverse effect on
our business, financial condition, results of operations and prospects.
We
anticipate making substantial capital expenditures for future acquisition,
exploration, development and production projects. We may not be able to obtain
capital or financing necessary to support these projects on satisfactory terms,
or at all.
S-12
We
anticipate making substantial capital expenditures for the acquisition,
exploration, development and production of oil and natural gas reserves in the
future. If our revenues or reserves decline, we may not have access to the
capital necessary to undertake or complete future drilling programs. Debt or
equity financing, or cash generated by operations, may not be available to us or
may not be sufficient to meet our requirements for capital expenditures or other
corporate purposes. Even if debt or equity financing is available, it may not be
on terms acceptable to us. Our inability to access sufficient capital for our
operations could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Our
cash flow from our reserves may not be sufficient to fund our ongoing activities
at all times, thereby causing us to forfeit our interest in certain properties,
miss certain acquisition opportunities and reduce or terminate our operations.
Our
cash flow from our reserves may not be sufficient to fund our ongoing activities
at all times and we are currently utilizing our bank line of credit to fund our
working capital deficit. From time to time, we may require additional financing
in order to carry out our oil and gas acquisition, exploration and development
activities. Failure to obtain such financing on a timely basis could cause us to
forfeit its interest in certain properties, not be able to take advantage of
certain acquisition opportunities and reduce or terminate our level of
operations. If our revenues from our reserves decrease as a result of lower oil
and natural gas prices or otherwise, our ability to expend the necessary capital
to replace our reserves or to maintain our production will be impaired. If our
cash flow from operations is not sufficient to satisfy our capital expenditure
requirements, there can be no assurance that additional debt or equity financing
will be available to meet these requirements or, if available, on favorable
terms.
Debt
that we incur in the future may limit our ability to obtain financing and to
pursue other business opportunities, which could adversely affect our business,
financial condition, results of operations and prospects.
From
time to time, we may enter into transactions to acquire assets or equity of
other organizations. These transactions may be financed in whole or in part with
debt, which may increase our debt levels above industry standards for oil and
natural gas companies of a similar size. Depending upon future exploration and
development plans, we may require additional equity and/or debt financing that
may not be available or, if available, may not be available on acceptable terms.
None of our organizational documents currently limit the amount of indebtedness
that we may incur. The level of our indebtedness from time to time could impair
our ability to obtain additional financing on a timely basis to take advantage
of business opportunities that may arise.
We
may be exposed to the credit risk of third parties through certain of our
business arrangements. Non-payment or non-performance by any of these third
parties could have an adverse effect on our financial condition and results of
operations.
We
may be exposed to third-party credit risk through our contractual arrangements
with our current or future joint venture partners, marketers of our petroleum
and natural gas production and other parties. In the event those entities fail
to meet their contractual obligations to us, those failures could have a
material adverse effect on our financial condition and results of operations. In
addition, poor credit conditions in the industry and of joint venture partners
may affect a joint venture partners willingness to participate in our ongoing
capital program, potentially delaying the program and the results of the program
until we find a suitable alternative partner.
Risks related to maintaining reserves and acquiring new
sources of oil and natural gas
Our
success depends upon our ability to find, acquire, develop and commercially
produce oil and natural gas, which depends upon factors outside of our control.
Oil
and natural gas operations involve many risks that even a combination of
experience, knowledge and careful evaluation may not be able to overcome. Our
long-term commercial success depends upon our ability to find, acquire, develop
and commercially produce oil and natural gas. We have only recently commenced
production of oil and natural gas. There is no assurance that our other
properties or future properties will achieve commercial production. Without the
continual addition of new reserves, our existing reserves and our production
will decline over time as our reserves are exploited. A future increase in our
reserves will depend not only upon our ability to explore and develop any
properties we may have from time to time, but also upon our ability to select
and acquire new suitable producing properties or prospects. No assurance can be
given that we will be able to locate satisfactory properties for acquisition or
participation. Moreover, if acquisitions or participations are identified, we
may determine that current market conditions, the terms of any acquisition or
participation arrangement, or pricing conditions, may make the acquisitions or
participations uneconomical, and further commercial quantities of oil and
natural gas may not be produced, discovered or acquired by us, any of which
could have a material adverse effect on our business, financial condition,
results of operations and prospects.
S-13
Properties
that we acquire may not produce as projected, and we may be unable to determine
reserve potential, identify liabilities associated with the properties or obtain
protection from sellers against such liabilities.
Our
long-term commercial success depends upon our ability to find, acquire, develop
and commercially produce oil and natural gas reserves. However, our review of
acquired properties is inherently incomplete, as it generally is not feasible to
review in depth every individual property involved in each acquisition. Even a
detailed review of records and properties may not necessarily reveal existing or
potential problems, nor will it permit a buyer to become sufficiently familiar
with the properties to assess fully their deficiencies and potential.
Inspections may not always be performed on every well, and environmental
problems, such as ground water contamination, are not necessarily observable
even when an inspection is undertaken.
Our
estimated reserves are based on many assumptions that may prove to be
inaccurate. Any material inaccuracies in the reserve estimates or the underlying
assumptions may adversely affect the quantities and present value of our
reserves.
There
are numerous uncertainties inherent in estimating quantities of oil, natural gas
reserves and the future cash flows attributed to the reserves. Our reserve and
associated cash flow estimates are estimates only. In general, estimates of
economically recoverable oil and natural gas reserves and the associated future
net cash flows are based upon a number of variable factors and assumptions, such
as historical production from the properties, production rates, ultimate reserve
recovery, timing and amount of capital expenditures, marketability of oil and
gas, royalty rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially from actual
results. All estimates are to some degree speculative, and classifications of
reserves are only attempts to define the degree of speculation involved. For
those reasons, estimates of the economically recoverable oil and natural gas
reserves attributable to any particular group of properties, classification of
such reserves based on risk of recovery and estimates of future net revenues
associated with reserves prepared by different engineers, or by the same
engineers at different times, may vary. Our actual production, revenues, taxes
and development and operating expenditures with respect to our reserves will
vary from our estimates of them, and those variations could be material.
Estimates
of proved reserves that may be developed and produced in the future are often
based upon volumetric calculations and upon analogy to similar types of reserves
rather than actual production history. Recovery factors and drainage areas are
estimated by experience and analogy to similar producing pools. Estimates based
on these methods are generally less reliable than those based on actual
production history. Subsequent evaluation of the same reserves based upon
production history and production practices will result in variations in the
estimated reserves, and those variations could be material.
Our
future oil and natural gas production may not result in revenue increases and
may be adversely affected by operating conditions, production delays, drilling
hazards and environmental damages.
Future
oil and natural gas exploration may involve unprofitable efforts, not only from
dry wells, but also from wells that are productive but do not produce sufficient
petroleum substances to return a profit after drilling, operating and other
costs. Completion of a well does not assure a profit on the investment or
recovery of drilling, completion and operating costs. In addition, drilling
hazards or environmental damage could greatly increase the cost of operations,
and various field operating conditions may adversely affect the production from
successful wells. These conditions include delays in obtaining governmental
approvals or consents, shut-ins of connected wells resulting from extreme
weather conditions, insufficient storage or transportation capacity or other
geological and mechanical conditions. While diligent well supervision and
effective maintenance operations can contribute to maximizing production rates
over time, production delays and declines from normal field operating conditions
cannot be eliminated and can be expected to adversely affect revenue and cash
flow levels to varying degrees.
Risks related to management of the Company
We may experience difficulty managing our anticipated growth.
We
may be subject to growth-related risks including capacity constraints and
pressure on our internal systems and controls. Our ability to manage growth
effectively will require us to continue to implement and improve our operational
and financial systems and to attract and retain qualified management and
technical personnel to meet the needs of our anticipated growth. Our inability
to deal with this growth could have a material adverse effect on our business,
financial condition, results of operations and prospects.
We
depend upon key personnel and the absence of any of these individuals could
result in us having to cease operations.
S-14
Our
ability to continue our operation business depends, in large part, upon our
ability to attract and maintain qualified key management and technical
personnel. Competition for such personnel is intense and we may not be able to
attract and retain such personnel.
Strategic
relationships upon which we may rely are subject to change, which may diminish
our ability to conduct our operations.
Our
ability to successfully acquire additional licenses, to discover reserves, to
participate in drilling opportunities and to identify and enter into commercial
arrangements depends on developing and maintaining close working relationships
with industry participants and government officials and on our ability to select
and evaluate suitable properties and to consummate transactions in a highly
competitive environment. We may not be able to establish these strategic
relationships, or if established, we may not be able to maintain them. In
addition, the dynamics of our relationships with strategic partners may require
us to incur expenses or undertake activities we would not otherwise be inclined
to undertake in order to fulfill our obligations to these partners or maintain
our relationships. If our strategic relationships are not established or
maintained, our business prospects may be limited, which could diminish our
ability to conduct our operations.
We
cannot be certain that current expected expenditures and any current or planned
completion/testing programs will be realized.
We believe that the costs used to
prepare internal budgets are reasonable, however, there are assumptions,
uncertainties, and risk that may cause our allocated funds on a per well basis
to change as a result of having to alter certain activities from those
originally proposed or programmed to reduce and mitigate uncertainties and
risks. These assumptions, uncertainties, and risks are inherent in the
completion and testing of wells and can include but are not limited to: pipe
failure, casing collapse, unusual or unexpected formation pressure,
environmental hazards, and other operating or production risk intrinsic in oil
and or gas activities. Any of the above may cause a delay in any of our
completion/testing programs or our ability to determine reserve potential.
Risks related to federal, state, local and other laws,
controls and regulations
We
are subject to complex federal, provincial, state, local and other laws,
controls and regulations that could adversely affect the cost, manner and
feasibility of conducting our oil and natural gas operations.
Oil
and natural gas exploration, production, marketing and transportation activities
are subject to extensive controls and regulations imposed by various levels of
government, which may be amended from time to time. Governments may regulate or
intervene with respect to price, taxes, royalties and the exportation of oil and
natural gas. Regulations may be changed from time to time in response to
economic or political conditions. The implementation of new regulations or the
modification of existing regulations affecting the oil and natural gas industry
could reduce demand for crude oil and natural gas and increase our costs, any of
which may have a material adverse effect on our business, financial condition,
results of operations and prospects. In addition, in order to conduct oil and
natural gas operations, we require licenses from various governmental
authorities. We cannot assure you that we will be able to obtain all of the
licenses and permits that may be required to conduct operations that we may
desire to undertake.
There
is uncertainty regarding claims of title and rights of the aboriginal people to
properties in certain portions of western Canada, and such a claim, if made in
respect of our property or assets, could adversely affect our business,
financial condition, results of operations and prospects.
Aboriginal
peoples have claimed aboriginal title and rights to a substantial portion of
western Canada. We are not aware that any claims have been made in respect of
its property and assets. However, if a claim arose and was successful it would
have an adverse effect on our business, financial condition, results of
operations and prospects.
We
are subject to stringent environmental laws and regulations that may expose us
to significant costs and liabilities, which could adversely affect our business,
financial condition, results of operations and prospects.
All
phases of the oil and natural gas business present environmental risks and
hazards and are subject to environmental regulation under a variety of federal,
provincial, state and local laws and regulations. Environmental legislation
provides for, among other things, restrictions and prohibitions on spills,
releases or emissions of various substances produced in association with oil and
natural gas operations. The legislation also requires that wells and facility
sites be operated, maintained, abandoned and reclaimed to the satisfaction of
applicable regulatory authorities. Compliance with legislation can require
significant expenditures, and a breach of applicable environmental legislation
may result in the imposition of fines and penalties, some of which may be
material. Environmental legislation is evolving in a manner expected to result
in stricter standards and enforcement, larger fines and liability and
potentially increased capital expenditures and operating costs. The
discharge of oil, natural gas or other pollutants into the air, soil or water
may give rise to liabilities to governments and third parties and may require us
to incur costs to remedy any discharge. Environmental laws may result in a
curtailment of production or a material increase in the costs of production,
development or exploration activities, or otherwise adversely affect our
business, financial condition, results of operations and prospects.
S-15
As a public company, our compliance costs and risks have increased
in recent years.
Legal,
accounting and other expenses associated with public company reporting
requirements have increased significantly in the past few years. We anticipate
that general and administrative costs associated with regulatory compliance will
continue to increase with on-going compliance requirements under the
Sarbanes-Oxley Act of 2002, as well as any new rules implemented by the SEC,
Canadian Securities Administrators, the NYSE MKT and the Toronto Stock Exchange
in the future. These rules and regulations have significantly increased our
legal and financial compliance costs and made some activities more
time-consuming and costly. We cannot assure you that we will continue to
effectively meet all of the requirements of these regulations, including Section
404 of the Sarbanes-Oxley Act and National Instrument 52-109 of the Canadian
Securities Administrators. Any failure to effectively implement internal
controls, or to resolve difficulties encountered in their implementation, could
harm our operating results, cause us to fail to meet reporting obligations, or
result in our principal executive officer and principal financial officer being
required to give a qualified assessment of our internal control over financial
reporting. Any such result could cause investors to lose confidence in our
reported financial information, which could have a material adverse effect on
the trading price of our common shares and our ability to raise capital. These
rules and regulations have made it more difficult and more expensive for us to
obtain director and officer liability insurance, and we may be required to
accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage in the future. As a result, it may be more
difficult for us to attract and retain qualified individuals to serve on our
board of directors or as executive officers.
We
are not in compliance with the NYSE MKT continued listing standards and we may
lose our listing on the NYSE MKT if we are unable to maintain compliance with
continued listing standards.
On
November 21, 2013, we were informed by NYSE MKT that we were not in compliance
with three of the NYSE MKTs continued listing standards, namely:
|
1.
|
Section 1003(a)(ii) of the Company Guide since it
reported stockholders equity of less than US$4,000,000 as of September
30, 2013 and net losses in three of its four most recent fiscal years then
ended;
|
|
2.
|
Section 1003(a)(iii) of the Company Guide since it
reported stockholders equity of less than US$6,000,000 as of September
30, 2013 and net losses in its five most recent years then ended,
and
|
|
3.
|
Section 1003(a)(iv) of the Company Guide since it has
sustained losses which are so substantial in relation to its overall
operations or its existing financial resources, or its financial condition
has become so impaired it appears questionable , in the opinion of the
Exchange, as to whether such it will be able to continue operations and/or
meet its obligations as they mature.
|
The
NYSE MKT also requested that we submit a Plan of Compliance in prescribed form
addressing how we intend to regain compliance with Sections 1003(a)(ii) and
(iii) by May 22, 2015 and Section 1003(a)(iv) by April 4, 2014. We submitted our
Plan of Compliance on the due date of December 23, 2013 and updated it on April
3, 2014 and July 15, 2014.
In
a letter dated June 18, 2014, NYSE MKT confirmed that we resolved the continued
listing deficiencies with respect to Sections 1003(a)(ii) and (iii) of the
Company Guide. With respect to the remaining deficiency NYSE MKT, in a letter
dated August 4, 2014, stated that the Exchange has determined that, in
accordance with Section 1009 of the Company Guide, the Company made a reasonable
demonstration of its ability to regain compliance with Section 1003(a)(iv) of
the Company Guide by the end of the revised plan period of July 15, 2014.
Subject
to making a public announcement that we are still not compliant with Section
1003(a)(iv), providing NYSE MKT staff with quarterly updates on our progress
with respect to its original Plan of Compliance submitted on December 23,
2013, and obtaining NYSE MKT prior approval to issuing additional shares , NYSE
MKT stated in its August 4, 2014 letter it is prepared to continue the listing
of our shares for trading on NYSE MKT through November 30, 2014 at which time
NYSE MKT will again review our progress toward achieving the targets established
in the Plan of Compliance.
S-16
Risks Related to Our Being a Foreign Private Issuer
As a foreign private issuer, our shareholders may receive less
complete and timely data.
We
are a foreign private issuer as defined in Rule 3b-4 under the United States
Securities Exchange Act of 1934. Our equity securities are accordingly exempt
from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act, pursuant to
Rule 3a12-3 of the Exchange Act. Therefore, we are not required to file a
Schedule 14A proxy statement in relation to our annual meetings of shareholders.
The submission of proxy and annual meeting of shareholder information on Form
6-K may result in shareholders having less complete and timely information in
connection with shareholder actions. The exemption from Section 16 rules
regarding reports of beneficial ownership and purchases and sales of common
shares by insiders and restrictions on insider trading in our securities may
result in shareholders having less data and there being fewer restrictions on
insiders activities in our securities.
It
may be difficult to enforce judgments or bring actions outside the United States
against us and certain of our directors and officers.
It
may be difficult to bring and enforce suits against us. We are incorporated in
British Columbia, Canada. Many of our directors and officers are not residents
of the United States and some of our assets are located outside of the United
States. As a result, it may be difficult for U.S. holders of our common shares
to effect service of process on these persons within the United States or to
enforce judgments obtained in the U.S. based on the civil liability provisions
of the U.S. federal securities laws against us or our officers and directors. In
addition, a shareholder should not assume that the courts of Canada (i) would
enforce judgments of U.S. courts obtained in actions against us or our officers
or directors predicated upon the civil liability provisions of the U.S. federal
securities laws or other laws of the United States, or (ii) would enforce, in
original actions, liabilities against us or our officers or directors predicated
upon the U.S. federal securities laws or other laws of the United States.
Risks Related to This Offering
We
have not paid any dividends on our common shares. Consequently, your only
opportunity currently to achieve a return on your investment will be if the
market price of our common shares appreciates above the price that you pay for
our common shares.
We
have not declared or paid any dividends on our common shares since our
incorporation. Any decision to pay dividends on our common shares will be made
by our board of directors on the basis of our earnings, financial requirements
and other conditions existing at such future time. Consequently, your only
opportunity to achieve a return on your investment in our securities will be if
the market price of our common shares appreciates and you are able to sell your
common shares at a profit.
Our
common share price has been volatile and your investment in our common shares
could suffer a decline in value.
Our
common shares are traded on the Toronto Stock Exchange and the NYSE MKT. The
market price of our common shares may fluctuate significantly in response to a
number of factors, some of which are beyond our control. These factors include
price fluctuations of precious metals, government regulations, disputes
regarding mining claims, broad stock market fluctuations and economic conditions
in the United States.
You
will experience immediate and substantial dilution in the net book value per
share of the common shares you purchase and may also experience further
dilution.
The
net book value per share of our common shares was $9,005,000 (Cdn$9,847,000) as of June 30, 2014. Since the
price per share of our common shares being offered is substantially higher than
the net book value per share of our common shares, you will suffer substantial
dilution in the net book value of the common shares you purchase in this
offering. Based on the offering price of $0.25 per unit, if you purchase units in
this offering, you will suffer immediate and substantial dilution of $0.179 per
common share in the net book value of the common shares. For the purpose of this
calculation, we will allocate $0.24 of the purchase price for the unit to the common
share and $0.01 of the purchase price for each unit to the warrant and
shares issuable upon exercise of the warrants have not been included. See
Dilution below for a more detailed discussion of the dilution you will incur
if you purchase common shares in this offering.
Dilution
through officer, director, employee, consultant or agent options could adversely
affect our shareholders.
Because
our success is highly dependent upon our officers, directors, employees,
consultants and agents, we have granted to some or all of our key officers,
directors, employees, consultants and agents options to purchase common shares
as non-cash incentives. To the extent that we grant significant numbers of
options and those options are exercised, the interests of our other shareholders may be
diluted. As of August 11, 2014, there were 11,776,924 common share purchase
options outstanding, of which 284,352 common share purchase options are vested
and exercisable. If all the vested options were exercised, it would result in an
additional 11,492,572 common shares being issued and outstanding.
S-17
The
issuance of additional common shares may negatively affect the trading price of
our common shares.
We have issued equity securities in the past and may continue to issue equity
securities to finance our activities in the future, including to finance future
acquisitions, or as consideration for acquisitions of businesses or assets. In
addition, outstanding options and warrants to purchase our common shares may be
exercised, resulting in the issuance of additional common shares. Further, the
issuance by us of additional common shares could trigger anti-dilution
protections covering the common shares issued in this offering. The issuance by
us of additional common shares would result in dilution to our shareholders, and
even the perception that such an issuance may occur could have a negative effect
on the trading price of our common shares.
Management will have broad discretion in determining how to use the proceeds of
this offering.
We
have not determined the amounts we plan to spend on any of the areas listed in
Use of Proceeds below or the timing of such expenditures. Accordingly, the
amount and timing of our actual expenditures will depend upon numerous factors,
including the progress of our oil and natural gas acquisition, development and
exploration activities and the amount of cash generated by our operations. As a
result, our management will have broad discretion to allocate the net proceeds
from this offering, and may spend the proceeds in ways with which our
shareholders may not agree. Pending application of the net proceeds as described
in Use of Proceeds, we intend to invest the net proceeds primarily in bank
deposits or other substantially similar secure deposits in financial
institutions. These investments may not yield a favorable return to our
shareholders.
There is no trading market for the warrants and we do not expect such a trading
market to develop.
There
is currently no public market through which the warrants offered by this
prospectus supplement may be sold and we do not intend to apply for the listing
of the warrants on any securities exchange, which may affect the pricing of the
warrants in the secondary market, the transparency and availability of trading
prices, and the liquidity of the warrants.
S-18
USE OF PROCEEDS
The
net proceeds to us from the sale of the units are estimated to be approximately
$1.425 million, based on an offering price of
$0.25 per unit and the sale of all of the units offered by this prospectus supplement
and after deducting estimated offering expenses.
We
intend to use the net proceeds from this offering for exploration, development
and acquisition of oil and gas properties and working capital purposes.
Until
such time as the net proceeds of the offering are used as described above, we
intend to invest the net proceeds primarily in bank deposits or other
substantially similar secure deposits in financial institutions.
Depending
on opportunities, economic conditions and the results of the activities
described above we may use a portion of the net proceeds to invest in property
acquisitions or complete other corporate activities designed to achieve our
corporate goals. Estimated costs and the scope of such activities cannot be
determined at this time.
S-19
CONSOLIDATED CAPITALIZATION
The
following table sets forth our cash and consolidated capitalization as at June 30, 2014 on an actual basis and as adjusted to give effect to the issuance of
the maximum number of common shares and warrants offered by this prospectus
supplement, after deducting the estimated expenses of the offering payable by us
(assuming the application of the net proceeds from this offering as described
under the section entitled Use of Proceeds). Consolidated capitalization
includes both debt and shareholders equity.
The
table below should be read in conjunction with our audited annual consolidated
financial statements as at and for the year ended December 31, 2013, our
unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2014, in each case including the notes thereto, and
the managements discussion and analysis thereof, in each case incorporated by
reference into this prospectus supplement and the accompanying prospectus.
|
|
As at
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
(All amounts in Cdn$)
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
(Unaudited)
|
|
|
(Unaudited) (1
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
912,000
|
|
|
2,470,000
|
|
|
|
|
|
|
|
|
Bank line of credit
|
|
2,560,000
|
|
|
2,560,000
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
1,028,000
|
|
|
1,028,000
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
583,000
|
|
|
583,000
|
|
|
|
|
|
|
|
|
Financial contract liability
|
|
3,240,000
|
|
|
3,240,000
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital: Authorized: Unlimited number of common shares without par
value;
164,290,124 common shares issued and outstanding as of June 30, 2014;
unlimited
number of preferred shares without par value, of which nil were issued
and
outstanding as of June 30, 2014
|
|
93,165,000
|
|
|
94,723,000
|
|
|
|
|
|
|
|
|
Contributed Surplus
|
|
9,095,000
|
|
|
9,095,000
|
|
|
|
|
|
|
|
|
Deficit
|
|
(93,091,000
|
)
|
|
(93,091,000
|
)
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
678,000
|
|
|
678,000
|
|
|
|
|
|
|
|
|
Total Shareholders Equity
|
|
9,847,000
|
|
|
11,405,000
|
|
|
|
|
|
|
|
|
Total Capitalization
|
$
|
17,258,000
|
|
$
|
18,816,000
|
|
____________________
(1)
|
The exchange rate used for conversion of the estimated
net proceeds of approximately US$1,425,000 from this offering into Canadian dollars
was Cdn$1.00 = US$0.9145, being the Bank of Canadas noon exchange rate on
August 11, 2014, or Cdn$1,558,000.
|
|
|
(2)
|
These figures do not include 11,776,924 common shares
reserved for issuance pursuant to outstanding stock options, which are
exercisable at a weighted average price of Cdn$0.24 per common share, and
31,629,152 common shares reserved for issuance pursuant to outstanding
warrants, which are exercisable at a weighted average price of Cdn$0.38
per common share, as at August 11, 2014. These figures also do not include
49,406,076 common shares issuable upon exercise of all outstanding stock options and warrants,
including warrants issued pursuant to this offering. Assuming exercise of
all 49,406,076 stock options and warrants, the aggregate common shares outstanding would be
231,523,863.
|
S-20
MARKET FOR COMMON SHARES
Our
common shares are traded on the TSX and on the NYSE MKT, in both cases under the
symbol DEJ. Our common shares began trading on the TSX on November 20, 2008,
prior to which our common shares traded on the TSX Venture Exchange. Our common
shares began trading on NYSE MKT on May 7, 2007.
The
following tables set forth the high and low trading prices of our common shares
on the TSX and the TSX Venture Exchange, as applicable, and on the NYSE MKT, for
the five most recent fiscal years:
Toronto Stock Exchange/TSX Venture Exchange (Cdn$)
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
High
|
|
|
Low
|
|
2013
|
$
|
0.24
|
|
$
|
0.10
|
|
2012
|
$
|
0.57
|
|
$
|
0.12
|
|
2011
|
$
|
0.61
|
|
$
|
0.24
|
|
2010
|
$
|
0.475
|
|
$
|
0.285
|
|
|
|
|
|
|
|
|
2009
|
$
|
0.76
|
|
$
|
0.23
|
|
NYSE MKT ($)
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
High
|
|
|
Low
|
|
2013
|
$
|
0.25
|
|
$
|
0.09
|
|
2012
|
$
|
0.59
|
|
$
|
0.12
|
|
2011
|
$
|
0.61
|
|
$
|
0.21
|
|
2010
|
$
|
0.497
|
|
$
|
0.2601
|
|
|
|
|
|
|
|
|
2009
|
$
|
0.67
|
|
$
|
0.12
|
|
The
following table contains the high and low trading prices for our common shares
for each fiscal quarter for our two most recent fiscal years and any subsequent
period:
Toronto Stock Exchange (Cdn$)
|
|
|
|
|
|
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
2014
|
|
|
|
|
|
|
Third Quarter (through August 11, 2014)
|
$
|
0.36
|
|
$
|
0.23
|
|
Second Quarter
|
$
|
0.34
|
|
$
|
0.19
|
|
First Quarter
|
$
|
0.32
|
|
$
|
0.13
|
|
2013
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.20
|
|
$
|
0.10
|
|
Third Quarter
|
$
|
0.24
|
|
$
|
0.18
|
|
Second Quarter
|
$
|
0.23
|
|
$
|
0.16
|
|
First Quarter
|
$
|
0.25
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.24
|
|
$
|
0.16
|
|
Third Quarter
|
$
|
0.26
|
|
$
|
0.14
|
|
Second Quarter
|
$
|
0.38
|
|
$
|
0.23
|
|
First Quarter
|
$
|
0.46
|
|
$
|
0.35
|
|
S-21
NYSE MKT ($)
|
|
|
|
|
|
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
Third Quarter (through August 11, 2014)
|
$
|
0.33
|
|
$
|
0.22
|
|
Second Quarter
|
$
|
0.31
|
|
$
|
0.17
|
|
First Quarter
|
$
|
0.29
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.19
|
|
$
|
0.09
|
|
Third Quarter
|
$
|
0.23
|
|
$
|
0.18
|
|
Second Quarter
|
$
|
0.24
|
|
$
|
0.17
|
|
First Quarter
|
$
|
0.25
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.25
|
|
$
|
0.16
|
|
Third Quarter
|
$
|
0.26
|
|
$
|
0.12
|
|
Second Quarter
|
$
|
0.39
|
|
$
|
0.21
|
|
First Quarter
|
$
|
0.57
|
|
$
|
0.34
|
|
The
following table contains the high and low trading prices for our common shares
for each of the most recent six months and subsequent period:
Toronto Stock Exchange (Cdn$)
|
|
|
|
|
|
|
Month Ended
|
|
High
|
|
|
Low
|
|
August 2014 (through August 11)
|
$
|
0.35
|
|
$
|
0.28
|
|
July 2014
|
$
|
0.35
|
|
$
|
0.23
|
|
June 2014
|
$
|
0.26
|
|
$
|
0.20
|
|
May 2014
|
$
|
0.26
|
|
$
|
0.19
|
|
April 2014
|
$
|
0.34
|
|
$
|
0.24
|
|
March 2014
|
$
|
0.32
|
|
$
|
0.15
|
|
February 2014
|
$
|
0.22
|
|
$
|
0.15
|
|
NYSE MKT ($)
|
|
|
|
|
|
|
Month Ended
|
|
High
|
|
|
Low
|
|
August 2014 (through August 11)
|
$
|
0.32
|
|
$
|
0.25
|
|
July 2014
|
$
|
0.29
|
|
$
|
0.22
|
|
June 2014
|
$
|
0.23
|
|
$
|
0.19
|
|
May 2014
|
$
|
0.24
|
|
$
|
0.17
|
|
April 2014
|
$
|
0.31
|
|
$
|
0.22
|
|
March 2014
|
$
|
0.29
|
|
$
|
0.14
|
|
February 2014
|
$
|
0.21
|
|
$
|
0.14
|
|
On
August 11, 2014, the last reported sale price of our common shares on the TSX
was Cdn$0.36 per common share and on the NYSE MKT was $0.33 per common share.
S-22
DILUTION
Our
net book value as of June 30 2014 was approximately
$9,005,000 (Cdn$9,847,000 based on the Bank of Canadas
noon exchange rate of Cdn$1 = $0.9145 in
effect on August 11, 2014), or $0.055 (Cdn$0.060) per common share. Net book
value per share is calculated by subtracting our total liabilities from our
total assets, and dividing this amount by the number of outstanding common
shares.
After
giving effect to the sale by us of all of the units offered in this offering at
an offering price of $0.25 per unit
($0.24 of the purchase price for the unit
is allocated to the common share), after deducting estimated offering expenses
payable by us, our as adjusted net book value as of June 30, 2014 would have
been approximately $10.4 million
(Cdn$11.4 million), or
$0.061 (Cdn$0.067) per share. This represents an
immediate increase in net book value of $0.006 (Cdn$0.007) per share to existing
shareholders and immediate dilution in net book value of
$0.179 (Cdn$0.195) per share to new investors
participating in this offering at the offering price. The following table
illustrates this dilution on a per common share basis:
Offering price per share
|
|
|
|
$
|
0.24
|
|
Historical net book value per share as of June
30, 2014
|
$
|
0.055
|
|
|
|
|
Increase per share
attributable to investors participating in this offering
|
$
|
0.006
|
|
|
|
|
As adjusted net book value per share after this offering
|
|
|
|
$
|
0.061
|
|
Dilution per share to investors
participating in this offering
|
|
|
|
$
|
0.179
|
|
The
above discussion and table are based on 164,290,124 common shares outstanding as
of the close of business on June 30, 2014. This number excludes the common
shares issuable upon exercise of the following options and warrants:
-
options representing the right to purchase a total of 11,776,924 common
shares at a weighted average exercise price of Cdn$0.24 per share;
-
warrants representing the right to purchase a total of 31,629,152 common
shares at a weighted average exercise price of Cdn$0.38 per share;
-
warrants offered hereby representing the right to purchase a total of
6,000,000 common shares at an exercise price of $0.35 per share.
Investors
that purchase common shares upon the exercise of the warrants offered hereby may
experience dilution depending on our net tangible book value at the time of
exercise.
DESCRIPTION OF COMMON SHARES
We
are authorized to issue an unlimited number of common shares of which, as of
June 30, 2014, 164,290,124
were issued and outstanding. Our common shares
are entitled to one vote per share on all matters submitted to a vote of our
shareholders, including the election of directors. Except as otherwise required
by law, the holders of our common shares will possess all voting power.
Generally, all matters to be voted on by shareholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all common shares that are present in person or
represented by proxy. One holder of common shares issued, outstanding and
entitled to vote, represented in person or by proxy, is necessary to constitute
a quorum at any meeting of our shareholders.
S-23
The
holders of our common shares are entitled to such dividends as may be declared
from time to time by our board of directors from funds legally available
therefor.
Upon
liquidation, dissolution or winding up of our company, holders of common shares
are entitled to receive
pro rata
our assets, if any, remaining after
payments of all debts and liabilities. No common shares have been issued subject
to call or assessment. There are no pre-emptive or conversion rights and no
provisions for redemption or purchase for cancellation, surrender, or sinking or
purchase funds attaching to our common shares.
In
the event of any merger or consolidation with or into another company in
connection with which our common shares are converted into or exchangeable for
shares, other securities or property (including cash), all holders of our common
shares will be entitled to receive the same kind and amount of shares and other
securities and property (including cash).
There
are no indentures or agreements limiting the payment of dividends on our common
shares and there are no special liquidation rights or subscription rights
attaching to our common shares.
Alteration of Share Structure
We
may alter our authorized share structure by directors resolution or ordinary
resolution of our shareholders, in each case determined by our board of
directors, to:
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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;
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increase, reduce or eliminate the maximum number of
shares that we are authorized to issue out of any class or series of
shares or establish a maximum number of shares that we are authorized to
issue out of any class or series of shares for which no maximum is
established;
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subdivide all or any of our unissued, or fully paid
issued, shares;
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if we are authorized to issue shares of a class or shares
with par value;
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(i)
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decrease the par value of those shares; or
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(ii)
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if none of the shares of that class of shares are
allotted or issued, increase the par value of those
shares;
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change all or any of our unissued, or fully paid issued,
shares with par value into shares without par value or any of our unissued
shares without par value into shares with par value;
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alter the identifying name of any of our shares; or
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by ordinary resolution of our shareholders, otherwise
alter our share or authorized share structure.
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On
June 14, 2013, our shareholders passed an ordinary resolution granting the board
of directors the discretion to consolidate our common shares.
Dividends
As
of the date of this prospectus, we have not paid any dividends to our
shareholders. The declaration of any future dividends will be at the discretion
of our board of directors and will depend upon our earnings, if any, our capital
requirements and financial position, general economic conditions, and other
pertinent factors. We currently do not intend to pay any dividends in the
foreseeable future, but rather to reinvest earnings, if any, in our exploration
activities.
DESCRIPTION OF WARRANTS
Each
warrant will entitle the holder to purchase one common share, subject to
adjustment, at any time, prior to the earlier of (a) the close of business on
December 31, 2015 or (b) (i) with respect to half the common shares exercisable
pursuant to the warrants, if at any time on or before December 1, 2014, the
volume weighted average trading price per Common Share during any five
consecutive trading day period on the NYSE MKT averages at least US$0.45 per Common
Share and we elect to accelerate half the warrant pursuant to the terms thereof
(the date of expiration pursuant to such terms, the Partial Termination
Date) and (ii) with respect to balance of the common shares exercisable
pursuant to the warrants, if at any time on or before December 1, 2014 and 10
days after the Partial Termination Date, the volume weighted average trading
price per Common Share during any five consecutive trading day period on the
NYSE MKT averages at least US$0.45 per Common Share and we elect to accelerate half
the warrant pursuant to the terms thereof. The warrants will be freely
transferable, subject to Canadian securities laws and the terms and conditions
contained in the warrant certificate.
S-24
Holders
of the warrants may exercise their warrants to purchase common shares on or
before the expiration date by delivering a notice of exercise form,
appropriately completed and duly signed and payment in cash of the exercise
price for the number of common shares with respect to which the warrant is being
exercised. Warrants may be exercised in whole or in part, but only for full
common shares.
The
common shares issuable on exercise of the warrants will be, when issued in
accordance with the terms of the warrants, duly and validly authorized, issued
and fully paid and non-assessable. We will authorize and reserve at least the
number of common shares issuable upon exercise of all outstanding warrants.
If
we effect certain stock-based distributions or changes in our capital structure,
such as a stock split or consolidation or stock dividend to all shareholders,
then we will adjust the exercise price and/or number of shares purchasable under
the warrants, as required by the terms of the warrants, to preserve the rights
of the warrant holders. If we effect a merger or consolidation or other
reorganization in which our common shares are reclassified or in which we are
not the surviving corporation, the warrants will become exercisable for the
securities that the holders of warrants would have received if the holders had
exercised the warrants in full immediately prior to the reorganization event.
The
number of common shares that may be acquired by a holder upon any exercise of a
warrant will be limited to the extent necessary to ensure that, following such
exercise (or other issuance), the total number of common shares then
beneficially owned by that holder and its affiliates and any other persons whose
beneficial ownership of common shares would be aggregated with the holders for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.99% of the
total number of our issued and outstanding common shares (including for such
purpose the shares of common shares issuable upon such exercise). A holder may
increase or decrease this limitation by written notice to us, but any such
increase or decrease will not be effective until the 61st day after notice is
delivered to us and will not be permitted to increase the limitation to greater
than 9.99% .
No
fractional common shares will be issued in connection with the exercise of a
warrant. In lieu of fractional shares, we will pay the holder an amount in cash
equal to the applicable fractional amount multiplied by the exercise price of
the warrant.
Subject
to compliance with Canadian securities laws, a warrant may be transferred by a
holder in whole or in part without our consent by the holder executing an
assignment in the form attached to the certificate representing the warrant and
upon payment of any necessary tax or other governmental charge imposed upon such
transfer.
If
there is not an effective registration statement filed with the SEC registering
the common shares issuable upon exercise of the warrants at the time a warrant
are exercised, the warrant may be exercised on a cashless basis, pursuant to the
terms of the warrants The warrants will not be listed on any securities exchange
or automated quotation system, and we do not intend to arrange for any exchange
or quotation system to list or quote the warrants.
We
will file the form of warrant certificate as an exhibit to our Report of Foreign
Issuer on Form 6-K that will be furnished to the SEC in connection with this
offering. See Where You Can Find More Information in this prospectus
supplement.
S-25
PLAN OF DISTRIBUTION
Pursuant
to General Instruction I.B.5. of Form F-3, we are permitted to utilize the
registration statement of which this prospectus supplement and the accompanying
prospectus form a part to sell a maximum amount of securities equal to one-third
of the aggregate market value of our outstanding voting and non-voting common
equity held by our non-affiliates in any 12-month period. We may, from time to
time, offer the securities registered hereby up to this maximum amount.
We
have entered into a subscription agreement directly with investors in connection
with this offering, and we will only sell to investors who have entered into
subscription agreements.
Confirmations
and definitive prospectuses will be distributed to all investors who agreed to
purchase the securities in this offering, informing investors of the closing
date as to such units. We currently anticipate that closing of the sale of the
units we are offering will take place on or about August 15, 2014. Investors will also be
informed of the date and manner in which they must transmit the purchase price
for their units purchased.
On the scheduled closing date, the following will occur:
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we will receive funds in the amount of the aggregate purchase price for the
units we sell;
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we will deliver to each of the investors, through the Deposit Withdrawal
Agent Commission system, the common shares being purchased; and
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we will deliver a copy to each investor of the warrants being purchased and
will arrange for delivery of the original warrants within 3 business days of
the closing date.
We estimate that our share of the total expenses of the offering will be
approximately
$
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It
is anticipated that we will arrange for an instant deposit of the common shares
to or for the account of the purchaser through the book-entry facilities of DTC
on the closing date of this offering. No certificate evidencing the common
shares will be issued to the purchaser, except in limited circumstances, and
registration will be made in the depositary services of DTC. The purchaser will
receive only a customer confirmation from registered dealer who is a DTC
participant and from or through whom a beneficial interest in the common shares
is purchased. The warrants will be delivered in registered, certificated form.
We
will file the form of securities purchase agreement as an exhibit to our Report
on Form 6-K that will be furnished to the SEC in connection with this offering.
See Where You Can Find More Information on page S-35.
Anti-Dilution
In
the securities purchase agreement, we will agree, subject to certain exceptions,
that if we issue any additional common shares during the six months following
the closing of this offering, that the purchasers of this offering will receive
additional shares based on a broad-based anti-dilution adjustment (except for
certain exempt issuances and subject to the limits imposed by General
Instruction I.B.5. of Form F-3, the NYSE MKT, any other principal market on
which the shares may be listed or quotes, or the TSX), which additional shares
shall be issued under the Registration Statement of which this prospectus
supplement forms a part.
Canadian Distribution Restrictions
The
securities offered by this prospectus supplement and accompanying prospectus
have not been and will not be qualified for sale under the securities laws of
any province or territory of Canada and are not being offered for sale in Canada
or to any resident of Canada and may not be offered or sold, directly or
indirectly, in Canada, or to or for the account of any resident of Canada. This
prospectus supplement and accompanying prospectus have not been filed in respect
of, and will not qualify, any distribution of securities in any province or
territory of Canada.
There
are restrictions under Canadian securities laws on investors' ability to resell
the common shares and common shares issuable upon exercise of the warrants over
the facilities of the Toronto Stock Exchange, or otherwise resell the common
shares and common shares issuable upon exercise of the warrants in Canada or to
or for the benefit of a resident of Canada. Unless permitted under Canadian
securities laws, the common shares and common shares issuable upon exercise of
the warrants may not be traded over the facilities of the Toronto Stock
Exchange, or in Canada or to or for the benefit of a resident of Canada, before
the date that is four months and a day after the closing date of the offering.
Any physical certificate representing the common shares and, if they are issued
before the date which four months and a day after closing, the common shares
issuable upon the exercise of the warrants, will bear the following legend:
S-26
UNLESS PERMITTED UNDER APPLICABLE
SECURITIES LEGISLATION IN CANADA, THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE SHALL NOT TRADE THE SECURITIES THROUGH THE FACILITIES OF THE
TORONTO STOCK EXCHANGE OR OTHERWISE INTO CANADA OR TO OR FOR THE BENEFIT OF A
CANADIAN RESIDENT BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE
ISSUANCE DATE.
WITHOUT PRIOR WRITTEN APPROVAL OF THE
TORONTO STOCK EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE CANADIAN SECURITIES
LAWS, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF
THE TORONTO STOCK EXCHANGE OR IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN
RESIDENT UNTIL THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE ISSUANCE DATE.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF
TRANSACTIONS ON CANADIAN STOCK EXCHANGES.
Any physical certificate representing
the warrants will bear the following legend:
UNLESS PERMITTED UNDER APPLICABLE
SECURITIES LEGISLATION IN CANADA, THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE SHALL NOT TRADE THE SECURITIES THROUGH THE FACILITIES OF THE
TORONTO STOCK EXCHANGE OR OTHERWISE INTO CANADA OR TO OR FOR THE BENEFIT OF A
CANADIAN RESIDENT UNTIL THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE
ISSUANCE DATE.
S-27
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general summary of certain U.S. federal income tax considerations
relevant to a U.S. Holder (as defined below) arising from and relating to the
acquisition of units acquired pursuant to this prospectus supplement, the
acquisition, ownership, and disposition of common shares acquired as part of the
units, the exercise, disposition, and lapse of warrants acquired as part of the
units, and the acquisition, ownership, and disposition of common shares received
on the exercise of the warrants (the warrant shares).
This
summary is for general information purposes only and does not purport to be a
complete analysis or listing of all potential U.S. federal income tax
consequences that may apply to a U.S. Holder arising from and relating to the
acquisition of units pursuant to this prospectus supplement, or the acquisition,
ownership, and disposition of units, common shares, warrants and warrant shares.
In addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder. Accordingly, this summary is not
intended to be, and should not be construed as, legal or U.S. federal income tax
advice with respect to any particular U.S. Holder. Except as expressly discussed
below, this summary does not address tax filing or reporting requirements. This
summary does not address the U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local or non-U.S. tax consequences to U.S.
Holders relating to the acquisition, ownership, and disposition of units, common
shares, warrants and warrant shares. In addition, except as specifically set
forth below, this summary does not discuss applicable income tax reporting
requirements. Each U.S. Holder should consult its own tax advisor regarding the
U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift,
U.S. state and local, and non-U.S. tax consequences relating to the acquisition,
ownership, and disposition of units, common shares, warrants and warrant shares.
No
opinion from legal counsel or ruling from the Internal Revenue Service (the
IRS) has been requested, or will be obtained, regarding the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of units,
common shares, warrants and warrant shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from,
and contrary to, the positions taken in this summary.
Authorities
This
summary is based on the Internal Revenue Code of 1986, as amended (the Code),
Treasury Regulations (whether final, temporary, or proposed), published rulings
of the IRS, published administrative positions of the IRS, the Convention
Between Canada and the United States of America with Respect to Taxes on Income
and on Capital, signed September 26, 1980, as amended (the Canada-U.S. Tax
Convention), and U.S. court decisions that are applicable and, in each case, as
in effect and available, as of the date of this prospectus supplement. Any of
the authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a
retroactive or prospective basis. This summary does not discuss the potential
effects, whether adverse or beneficial, of any proposed legislation that, if
enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For
purposes of this summary, the term U.S. Holder means a beneficial owner of
units, common shares, warrants and warrant shares acquired pursuant to this
prospectus supplement that is for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the U.S.;
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a corporation (or other entity taxable as a corporation for U.S. federal
income tax purposes) organized under the laws of the U.S., any state thereof
or the District of Columbia;
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an estate whose income is subject to U.S. federal income taxation
regardless of its source; or
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a trust that (1) is subject to the primary supervision of a court within
the U.S. and one or more U.S. persons has the authority to make all
substantial decisions of the trust or (2) has a valid election in effect under
applicable Treasury regulations to be treated as a U.S. person.
S-28
U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed
This
summary does not address the U.S. federal income tax considerations applicable
to U.S. Holders that are subject to special provisions under the Code, including
but not limited to the following: (a) U.S. Holders that are tax-exempt
organizations, qualified retirement plans, individual retirement accounts, or
other tax-deferred accounts; (b) U.S. Holders that are financial institutions,
underwriters, insurance companies, real estate investment trusts, or regulated
investment companies; (c) U.S. Holders that are broker-dealers, dealers, or
traders in securities or currencies that elect to apply a mark-to-market
accounting method; (d) U.S. Holders that have a functional currency other than
the U.S. dollar; (e) U.S. Holders that own units, common shares, warrants or
warrant shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (f) U.S. Holders that acquired units, common shares, warrants or
warrant shares in connection with the exercise of employee stock options or
otherwise as compensation for services; (g) U.S. Holders that hold units, common
shares, warrants or warrant shares other than as a capital asset within the
meaning of Section 1221 of the Code (generally, property held for investment
purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or
by attribution) 10% or more of the total combined voting power of our
outstanding shares. This summary also does not address the U.S. federal income
tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or
former long-term residents of the U.S.; (b) persons that have been, are, or will
be a resident or deemed to be a resident in Canada for purposes of the Canadian
Tax Act; (c) persons that use or hold, will use or hold, or that are or will be
deemed to use or hold units, common shares, warrants or warrant shares in
connection with carrying on a business in Canada; (d) persons whose units,
common shares, warrants or warrant shares constitute taxable Canadian property
under the Canadian Tax Act; or (e) persons that have a permanent establishment
in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that
are subject to special provisions under the Code, including but not limited to
U.S. Holders described immediately above, should consult their own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and non-U.S. tax consequences relating to
the acquisition, ownership and disposition of units, common shares, warrants and
warrant share
s.
Partnerships Not Addressed
If an entity or arrangement that is classified as a partnership (or other
pass-through entity) for U.S. federal income tax purposes holds units, common
shares, warrants or warrant shares, the U.S. federal income tax consequences to
such partnership and the partners (or other owners) of such partnership
generally will depend on the activities of the partnership and the status of
such partners (or owners). This summary does not address the tax consequences to
any such entity or owner. Partners (or other owners) of entities or arrangements
that are classified as partnerships or as pass-through entities for U.S. federal
income tax purposes should consult their own tax advisors regarding the U.S.
federal income tax consequences arising from and relating to the acquisition,
ownership, and disposition of units, common shares, warrants or warrant shares.
U.S. Federal Income Tax Consequences of the Acquisition of
Common Shares and Warrants
For
U.S. federal income tax purposes, the acquisition by a U.S. Holder of a unit
will be treated as the acquisition of two components: a component consisting of
one common share and a component consisting of one warrant. The purchase price
for each unit will be allocated between these two components in proportion to
their relative fair market values at the time the unit is purchased by the U.S.
Holder. This allocation of the purchase price for each unit will establish a
U.S. Holders initial tax basis for U.S. federal income tax purposes in the one
common share and one warrant that comprise each unit.
For
purposes of determining tax basis, we will allocate
$0.24 of the purchase price for each unit to the one common share and
$0.01 of the purchase price for each unit to the one warrant. However, the IRS will
not be bound by our allocation of the purchase price for the units, and
therefore, the IRS or a U.S. court may not respect the allocation set forth
above. Each U.S. Holder should consult its own tax advisors regarding the
allocation of the purchase price for the units.
U.S. Federal Income Tax Consequences of the Exercise and
Disposition of Warrants
The following discussion is subject to the rules described below under the
heading Passive Foreign Investment Company Rules.
Exercise of Warrants
A U.S. Holder generally will not recognize gain or loss on the exercise of a
warrant and related receipt of a warrant share (unless cash is received in lieu
of the issuance of a fractional warrant share). A U.S. Holders initial tax basis in the warrant share received on the exercise of a
warrant should be equal to the sum of (a) such U.S. Holders tax basis in such
warrant plus (b) the exercise price paid by such U.S. Holder on the exercise of
such warrant. A U.S. Holders holding period for the warrant share received on
the exercise of a warrant should begin on the date that such warrant is
exercised by such U.S. Holder.
S-29
Disposition of Warrants
A
U.S. Holder will recognize gain or loss on the sale or other taxable disposition
of a warrant in an amount equal to the difference, if any, between (a) the U.S.
dollar value of cash plus the fair market value of any property received and (b)
such U.S. Holders tax basis in the warrant sold or otherwise disposed of. Any
such gain or loss generally will be a capital gain or loss (provided that the
warrant share to be issued on the exercise of such warrant would have been a
capital asset within the meaning of Section 1221 of the Code if acquired by the
U.S. Holder), which will be long-term capital gain or loss if the warrant is
held for more than one year.
Expiration of Warrants Without Exercise
Upon
the lapse or expiration of a warrant, a U.S. Holder will recognize a loss in an
amount equal to such U.S. Holders tax basis in the warrant. Any such loss
generally will be a capital loss and will be long-term capital loss if the
warrants are held for more than one year. Deductions for capital losses are
subject to complex limitations under the Code.
Certain Adjustments to the Warrants
Under
Section 305 of the Code, an adjustment to the number of warrant shares that will
be issued on the exercise of the warrants, or an adjustment to the exercise
price of the warrants, may be treated as a constructive distribution to a U.S.
Holder of the warrants if, and to the extent that, such adjustment has the
effect of increasing such U.S. Holders proportionate interest in the our
earnings and profits or assets, depending on the circumstances of such
adjustment (for example, if such adjustment is to compensate for a distribution
of cash or other property to shareholders by us). Adjustments to the exercise price of warrants made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing dilution of the interest of the holders of the warrants should generally not be considered to result in a constructive distribution. Any such constructive
distribution would be taxable whether or not there is an actual distribution of
cash or other property. See more detailed discussion of the rules applicable to
distributions made by us at Ownership and Disposition of Common Shares and
Warrant Shares Taxation of Distributions below.
The
rules with respect to adjustments are complex and each U.S. Holder of warrants
should consult its own tax advisor in the event of an adjustment.
Ownership and Disposition of Common Shares and Warrant
Shares
The
following discussion is subject to the rules described below under the heading
Passive Foreign Investment Company Rules.
Taxation of Distributions
A
U.S. Holder that receives a distribution, including a constructive distribution,
with respect to a common share or warrant share (as well as any constructive
distribution on a warrant as described above) will be required to include the
amount of such distribution in gross income as a dividend (without reduction for
any Canadian income tax withheld from such distribution) to the extent of our
current or accumulated earnings and profits, as computed for U.S. federal
income tax purposes. To the extent that a distribution exceeds our current and
accumulated earnings and profits, such distribution will be treated first as a
tax-free return of capital to the extent of a U.S. Holder's tax basis in the
common shares or warrant shares and thereafter as gain from the sale or exchange
of such common shares or warrant shares (see Sale or Other Taxable Disposition
of Common Shares and Warrant Shares below). However, we may not maintain the
calculations of earnings and profits in accordance with U.S. federal income tax
principles, and each U.S. Holder should therefore assume that any distribution
by us with respect to the common shares (or warrants) or warrant shares (as well
as any constructive distribution on a warrant) will constitute ordinary dividend
income. Dividends received on common shares or warrant shares generally will not
be eligible for the dividends received deduction generally applicable to corporations. Subject to applicable
limitations and provided we are is eligible for the benefits of the Canada-U.S.
Tax Convention, dividends paid by us to non-corporate U.S. Holders, including
individuals, generally will be eligible for the preferential tax rates
applicable to long-term capital gains for dividends, provided certain holding
period and other conditions are satisfied, including that we are not classified
as a PFIC (as defined below) in the tax year of distribution or in the preceding
tax year. The dividend rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares and
Warrant Shares
S-30
A
U.S. Holder will recognize gain or loss on the sale or other taxable disposition
of common shares or warrant shares in an amount equal to the difference, if any,
between (a) the amount of cash plus the fair market value of any property
received and (b) such U.S. Holders tax basis in such common shares or warrant
shares sold or otherwise disposed of. Any such gain or loss generally will be
capital gain or loss, which will be long-term capital gain or loss if, at the
time of the sale or other disposition, such common shares or warrant shares are
held for more than one year.
Preferential
tax rates apply to long-term capital gains of a U.S. Holder that is an
individual, estate, or trust. There are currently no preferential tax rates for
long-term capital gains of a U.S. Holder that is a corporation. Deductions for
capital losses are subject to significant limitations under the Code.
Passive Foreign Investment Company Rules
If
we were to constitute a passive foreign investment company (PFIC) for any
year during a U.S. Holders holding period, then certain potentially adverse
rules could affect the U.S. federal income tax consequences to a U.S. Holder
from the acquisition, ownership and disposition of units, common shares,
warrants and warrant shares. We believe that we were not a PFIC for our tax year
ending on December 31, 2013, and based on our current and anticipated business
activities and financial expectations, we expect that we will not be a PFIC for
our current tax year and for the foreseeable future.
The
determination as to whether any corporation was, or will be, a PFIC for a
particular tax year depends, in part, on the application of complex U.S. federal
income tax rules, which are subject to differing interpretations. In addition,
whether any corporation will be a PFIC for any tax year depends on its assets
and income over the course of such tax year, and, as a result, our PFIC status
for our current tax year and any future tax year cannot be predicted with
certainty. Accordingly, there can be no assurance that the IRS will not
challenge our views (or a Subsidiary PFIC, as defined below) concerning our PFIC
status. Each U.S. Holder should consult its own tax advisor regarding our PFIC
status and any of our subsidiaries.
In
addition, in any year in which we are classified as a PFIC, such holder will be
required to file an annual report with the IRS containing such information as
Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. Each U.S. Holder
should consult its own tax advisor regarding the requirements of filing such
information returns under these rules, including the requirement to file a IRS
Form 8621.
We
will be a PFIC under Section 1297 of the Code if, for a tax year, (a) 75% or
more of our gross income for such tax year is passive income (the income test)
or (b) 50% or more of the value of our assets either produce passive income or
are held for the production of passive income (the asset test), based on the
quarterly average of the fair market value of such assets. Gross income
generally includes all sales revenues less the cost of goods sold, plus income
from investments and from incidental or outside operations or sources, and
passive income generally includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and securities, and
certain gains from commodities transactions.
In
addition, for purposes of the PFIC income test and asset test described above,
if we own, directly or indirectly, 25% or more of the total value of the
outstanding shares of another corporation, we will be treated as if we (a) held
a proportionate share of the assets of such other corporation and (b) received
directly a proportionate share of the income of such other corporation. In
addition, for purposes of the PFIC income test and asset test described above
and assuming certain other requirements are met, passive income does not
include certain interest, dividends, rents, or royalties that are received or
accrued by us from a related person (as defined in Section 954(d)(3) of the
Code), to the extent such items are properly allocable to the income of such
related person that is not passive income and certain other requirements are
satisfied.
Under certain attribution rules, if we are a PFIC, U.S. Holders will generally be deemed
to own their proportionate share of any subsidiary which is also a PFIC (a
Subsidiary PFIC), and will be subject to U.S. federal income tax on (i) a
distribution on the shares of a Subsidiary PFIC or (ii) a disposition of shares
of a Subsidiary PFIC, both as if the holder directly held the shares of such
Subsidiary PFIC.
If
we were a PFIC in any tax year and a U.S. Holder held units, common shares,
warrants or warrant shares, such holder generally would be subject to special
rules under Section 1291 of the Code with respect to excess distributions made
by us on the common shares, warrants or warrant shares and with respect to gain
from the disposition of units, common shares, warrants or warrant shares. An
excess distribution generally is defined as the excess of distributions with
respect to the common shares, warrants or warrant shares received by a U.S.
Holder in any tax year over 125% of the average annual distributions such
U.S. Holder has received from us during the shorter of the three preceding tax
years, or such U.S. Holders holding period for the common shares, warrants or
warrant shares, as applicable. Generally, a U.S. Holder would be required to
allocate any excess distribution or gain from the disposition of the units,
common shares, warrants or warrant shares ratably over its holding period for
the units, common shares, warrants or warrant shares. Such amounts allocated to
the year of the disposition or excess distribution would be taxed as ordinary
income and not eligible for certain preferred rates, and amounts allocated to prior tax years would be taxed as ordinary
income at the highest tax rate in effect for each such year and an interest
charge at a rate applicable to underpayments of tax would apply.
S-31
While
there are U.S. federal income tax elections that sometimes can be made to
mitigate these adverse tax consequences (including, without limitation, the QEF
Election under Section 1295 of the Code and the Mark-to-Market Election under
Section 1296 of the Code), such elections are available in limited circumstances
and must be made in a timely manner. Under proposed Treasury Regulations, if a
U.S. Holder has an option, warrant, or other right to acquire stock of a PFIC
(such as the warrants), such option, warrant or right is considered to be PFIC
stock subject to the default rules of Section 1291 of the Code that apply to
excess distributions and dispositions described above. However, for the
purposes of the PFIC rules, the holding period for any warrant shares acquired
upon the exercise of a warrant will begin on the date a U.S. Holder acquires the
units (and not the date the warrants are exercised). This will impact the
availability, and consequences, of the QEF Election and Mark-to-Market Election
with respect to the warrant shares. Thus, a U.S. Holder will have to account for
warrant shares and common shares under the PFIC rules and the applicable
elections differently. In addition, a QEF Election may not be made with respect
to the warrants and it is unclear whether the Mark-to-Market Election may be
made with respect to the warrants. Each U.S. Holder should consult its own tax
advisor regarding the potential application of the PFIC rules to the ownership
and disposition of units, common shares, warrants, and warrant shares, and the
availability of certain U.S. tax elections under the PFIC rules.
U.S.
Holders should be aware that, for each tax year, if any, that we are a PFIC, we
can provide no assurances that we will satisfy the record keeping requirements
of a PFIC, or that we will make available to U.S. Holders the information such
U.S. Holders require to make a QEF Election with respect to us or any Subsidiary
PFIC. Each U.S. Holder should consult its own tax advisor regarding the
potential application of the PFIC rules to the ownership and disposition of
units, common shares, warrants and warrant shares, and the availability of
certain U.S. tax elections under the PFIC rules.
Additional Considerations
Additional Tax on Passive Income
U.S.
Holders that are individuals, estates and certain trusts whose income exceeds
certain thresholds will be required to pay a 3.8% Medicare surtax on net
investment income including, among other things, dividends and net gain from
disposition of property (other than property held in certain trades or businesses). Each
U.S. Holder should consult its own tax advisor regarding the effect, if any, of
this tax on its ownership and disposition of units, common shares, warrants and
warrant shares.
Receipt of Foreign Currency
The
amount of any distribution paid to a U.S. Holder in foreign currency, or on the
sale, exchange or other taxable disposition of units, common shares, warrants
and warrant shares, generally will be equal to the U.S. dollar value of such
foreign currency based on the exchange rate applicable on the date of receipt
(regardless of whether such foreign currency is converted into U.S. dollars at
that time). If the foreign currency received is not converted into U.S. dollars
on the date of receipt, a U.S. Holder will have a basis in the foreign currency
equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who
receives payment in foreign currency and engages in a subsequent conversion or
other disposition of the foreign currency may have a foreign currency exchange
gain or loss that would be treated as ordinary income or loss, and generally
will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency received upon the sale, exchange or other taxable disposition of the common shares or warrant shares. Each U.S.
Holder should consult its own tax advisor regarding the U.S. federal income tax
consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject
to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or
through withholding) Canadian income tax with respect to dividends paid on the
common shares or warrant shares (or with respect to any deemed dividend on the
warrants) generally will be entitled, at the election of such U.S. Holder, to
receive either a deduction or a credit for such Canadian income tax paid.
Generally, a credit will reduce a U.S. Holders U.S. federal income tax liability on a dollar-for-dollar basis, whereas a
deduction will reduce a U.S. Holders income subject to U.S. federal income tax.
This election is made on a year-by-year basis and applies to all foreign taxes
paid (whether directly or through withholding) by a U.S. Holder during a year.
S-32
Complex
limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a U.S. Holders U.S.
federal income tax liability that such U.S. Holders foreign source taxable
income bears to such U.S. Holders worldwide taxable income. In applying this
limitation, a U.S. Holders various items of income and deduction must be
classified, under complex rules, as either foreign source or U.S. source.
Generally, dividends paid by a foreign corporation should be treated as foreign
source for this purpose, and gains recognized on the sale of stock of a foreign
corporation by a U.S. Holder should be treated as U.S. source for this purpose,
except as otherwise provided in an applicable income tax treaty, and if an
election is properly made under the Code. However, the amount of a distribution
with respect to the common shares, warrant shares or warrants that is treated as
a dividend may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own tax advisor
regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under
U.S. federal income tax law, certain categories of U.S.
Holders must file information returns with respect to their investment in, or
involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties)
are imposed on U.S. Holders that hold certain specified foreign financial assets in excess
of certain threshold amounts. The definition of specified foreign financial
assets includes not only financial accounts maintained in foreign financial
institutions, but also, unless held in accounts maintained by a financial
institution, any stock or security issued by a non-U.S. person, any financial
instrument or contract held for investment that has an issuer or counterparty
other than a U.S. person and any interest in a foreign entity. U.S. Holders may
be subject to these reporting requirements unless their units, common shares,
warrants or warrant shares are held in an account at certain financial
institutions. Penalties for failure to file certain of these information returns
are substantial. U.S. Holders should consult with their own tax advisors
regarding the requirements of filing information returns,
including the requirement to file an IRS Form 8938.
Payments
made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and
proceeds arising from the sale or other taxable disposition of, units, common
shares, warrants and warrant shares will generally be subject to information
reporting and backup withholding tax (currently at a rate of 28%), if a U.S.
Holder (a) fails to furnish such U.S. Holders correct U.S. taxpayer
identification number (generally on Form W-9), (b) furnishes an incorrect U.S.
taxpayer identification number, (c) is notified by the IRS that such U.S. Holder
has previously failed to properly report items subject to backup withholding
tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder
has furnished its correct U.S. taxpayer identification number and that the IRS
has not notified such U.S. Holder that it is subject to backup withholding tax.
However, certain exempt persons generally are excluded from these information
reporting and backup withholding rules. Any amounts withheld under the U.S.
backup withholding tax rules will be allowed as a credit against a U.S. Holders
U.S. federal income tax liability, if any, or will be refunded, if such U.S.
Holder furnishes required information to the IRS in a timely manner.
The
discussion of reporting requirements set forth above is not intended to
constitute an exhaustive description of all reporting requirements that may
apply to a U.S. Holder. A failure to satisfy certain reporting requirements may
result in an extension of the time period during which the IRS can assess a tax,
and under certain circumstances, such an extension may apply to assessments of
amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder
should consult its own tax advisor regarding the information reporting and
backup withholding rules.
S-33
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The
following is a summary of certain Canadian federal income tax considerations
generally applicable under
Income Tax Act
(Canada) (the Canadian Tax
Act) to a holder who acquires common shares or warrants as beneficial owner
pursuant to this prospectus supplement and who, at all relevant times, for the
purposes of the Canadian Tax Act, holds such common shares or warrants as
capital property, deals at arms length with us, is not affiliated with us and,
for purposes of the Canadian Tax Act, is not, and is not deemed to be, a
resident of Canada and has not and will not use or hold or be deemed to use or
hold the common shares or warrants in or in the course of carrying on business
in Canada (a Non-Resident Holder). Special rules, which are not discussed
below, may apply to a non-resident of Canada that is an insurer which carries on
business in Canada and elsewhere.
The
common shares and warrants will generally be considered capital property to a
Non-Resident Holder unless either (i) the Non-Resident Holder holds the common
shares or warrants in the course of carrying on a business or (ii) the
Non-Resident Holder has acquire the common shares or warrants in a transaction
or series of transactions considered to be an adventure or concern in the nature
of trade.
The
term US Holder, for the purposes of this section, means a Non-Resident Holder
who, for purposes of the Canada-U.S. Tax Convention, is at all relevant times a
resident of the United States and is a qualifying person within the meaning of
the Canada-U.S. Tax Convention. In some circumstances, fiscally transparent
entities (including limited liability companies) will be entitled to benefits
under the Convention. US Holders are urged to consult with their own tax
advisors to determine their entitlement to benefits under the Convention based
on their particular circumstances.
This
summary is based on the current provisions of the Canadian Tax Act, the
regulations thereunder (the Regulations), the current provisions of the
Canada-U.S. Tax Convention, counsels understanding of the current
administrative policies and assessing practices of the Canada Revenue Agency
(the CRA) publicly available prior to the date hereof. This summary also takes
into account all specific proposals to amend the Canadian Tax Act and
Regulations publicly announced by or on behalf of the Minister of Finance
(Canada) prior to the date hereof (collectively, the Proposed Tax Amendments).
No assurances can be given that the Proposed Tax Amendments will be enacted or
will be enacted as proposed. Other than the Proposed Tax Amendments, this
summary does not take into account or anticipate any changes in law or the
administration policies or assessing practice of CRA, whether by judicial,
legislative, governmental or administrative decision or action, nor does it take
into account provincial, territorial or foreign income tax legislation or
considerations, which may differ significantly from those discussed herein.
This
summary is of a general nature only and is not intended to be, nor should it be
construed to be, legal or tax advice to any particular holder and no
representations with respect to the income tax consequences to any particular
holder are made. This summary is not exhaustive of all Canadian federal income
tax considerations. Accordingly, prospective investors in common shares or
warrants should consult their own tax advisors with respect to their own
particular circumstances.
Currency Conversion
For
purposes of the Canadian Tax Act, all amounts relating to the acquisition,
holding or disposition of the common shares and warrants, including dividends,
adjusted cost base and proceeds of disposition must be converted into Canadian
dollars using the rate of exchange quoted by the Bank of Canada at noon on the
date on which the amount first arose or such other rate of exchange as is
acceptable to the CRA.
Exercise of Warrants
Upon
the exercise of a warrant, there will be no income tax consequences for a
Non-Resident Holder. When a warrant is exercised, the Non-Resident Holders cost
of the common share acquired thereby will be the aggregate of the Non-Resident
Holders adjusted cost base of such warrant and the exercise price paid for the
common share. The Non-Resident Holders adjusted cost base of the common share
so acquired will be determined by averaging such cost with the adjusted cost
base to the Non-Resident Holder of all common shares held by the Non-Resident
Holder as capital property immediately prior to such acquisition.
S-34
Disposition of Common Shares and Warrants
A
Non-Resident Holder will not be subject to tax under the Canadian Tax Act in
respect of any capital gain realized by such Non-Resident Holder on a
disposition of the common shares or warrants, nor will capital losses arising
from the disposition be recognized under the Canadian Tax Act, unless the common
shares or warrants constitute taxable Canadian property (within the meaning of
the Canadian Tax Act) of the Non-Resident Holder at the time of disposition and
the Non-Resident Holder is not entitled to relief under an applicable income tax
treaty or convention. As long as the common shares are then listed on a
designated stock exchange (which currently includes the TSX and the NYSE MKT) at
the time of disposition, the common shares and the warrants generally will not
constitute taxable Canadian property of a Non-Resident Holder, unless at any
time during the 60-month period immediately preceding the disposition: (i) the
Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at
arms length, or the Non-Resident Holder together with all such persons, owned
or was considered to own 25% or more of our issued shares of any class or series
of shares of our capital stock; and (ii) more than 50% of the fair market value
of the common shares was determined directly or indirectly from one or any
combination of real or immovable property situated in Canada, Canadian resource
properties (within the meaning of the Canadian Tax Act), timber resource
properties (within the meaning of the Canadian Tax Act) or a options in respect
of, or interests in, or civil law rights in, such properties, whether or not it
exists.
If
the common shares or warrants are taxable Canadian property to a Non-Resident
Holder, any capital gain realized on the disposition or deemed disposition of
such shares, may not be subject to Canadian federal income tax pursuant to the
terms of an applicable income tax treaty or convention between Canada and the
country of residence of a Non-Resident Holder.
A Non-Resident Holder whose shares are taxable Canadian
property should consult their own advisors.
Dividends on Common Shares
Under
the Canadian Tax Act, dividends on shares paid or credited, or deemed to be paid
or credited, to a Non-Resident Holder will be subject to Canadian withholding
tax at the rate of 25% of the gross amount of the dividends. This withholding
tax may be reduced pursuant to the terms of an applicable income tax treaty or
convention between Canada and the country of residence of a Non-Resident Holder.
Under the Canada-U.S. Tax Convention, a US Holder will generally be subject to
Canadian withholding tax at a rate of 15% of the amount of such dividends. In
the case of a US Holder that is a U.S. corporation that beneficially owns at
least 10% of our voting stock, such US Holder will generally be subject to
Canadian withholding tax at a rate of 5% of the amount of such dividends.
Pursuant to the Canada-U.S. Tax Convention, certain tax-exempt entities that are
US Holders may be exempt from Canadian withholding taxes, including any taxes
levied in respect of dividends received on the shares.
INTERESTS OF NAMED EXPERTS AND COUNSEL
None.
LEGAL MATTERS
Certain
legal matters relating to Canadian law, including the validity of the common
shares and warrants comprising the units offered by this prospectus supplement,
will be passed upon for us by Farris, Vaughan, Wills & Murphy LLP,
Vancouver, B.C., Canada. Certain legal matters relating to United States law
will be passed upon for us by Dorsey & Whitney LLP, Vancouver, B.C., Canada
and Seattle, Washington.
EXPERTS
The
consolidated financial statements of the Company and its subsidiaries, which
comprise the consolidated balance sheets as at December 31, 2013 and December
31, 2012 and the consolidated statements of comprehensive loss, changes in
shareholders equity and cash flows for the years ended December 31, 2013,
December 31, 2012 and December 31, 2011, have been incorporated by reference
herein in reliance upon the report of BDO Canada LLP, an independent registered
public accounting firm, given upon the authority of that firm as an expert in
accounting and auditing.
Information
relating to our oil and gas properties included or incorporated by reference
herein has been derived from reports, statements or opinions prepared or
certified by Deloitte LLP and Gustavson Associates, LLC, each independent
petroleum engineering consultants retained by us.
S-35
DOCUMENTS INCORPORATED BY REFERENCE
The
SEC allows us to incorporate by reference information that we file with the
SEC. This means that we can disclose important information to you by referring
you to those documents. Any information we reference in this manner is
considered part of this prospectus supplement and the accompanying prospectus.
Information we file with the SEC after the date of this prospectus supplement
will automatically update and, to the extent inconsistent, supersede the
information contained in this prospectus supplement and the accompanying
prospectus.
The
following documents filed with or furnished to the SEC are specifically
incorporated by reference into, and form a part of, this prospectus:
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(a)
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our Annual Report on Form 20-F for the fiscal year ended
December 31, 2013, filed with the SEC on April 29, 2014;
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(b)
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our Report of Foreign Issuer on Form 6-K furnished to the
SEC on July 22, 2014;
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(c)
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Exhibits 99.1 and 99.2 to our Report of Foreign Issuer on
Form 6-K , furnished to the SEC on March 21, 2014;
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(d)
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Exhibits 99.1 and 99.2 to our Report of Foreign Issuer on
Form 6-K, furnished to the SEC on May 13, 2014;
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(e)
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our Report of Foreign Issuer on Form 6-K furnished to the
SEC on July 15, 2014;
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(f)
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Exhibits 99.1 and 99.2 to our Report of Foreign Issuer on Form 6-K, furnished to the SEC on August 8, 2014 containing interim financial statements and MD&A;
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(g)
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the description of our common shares set forth in the
amendment to our registration statement on Form 8-A, as filed with the SEC
on February 15, 2012, including any further amendment to such registration
statement or report filed for the purpose of amending such description;
and
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(h)
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all other documents filed by us with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of
this prospectus but before the end of the offering of the securities
pursuant to this prospectus.
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In
addition, all reports and documents filed by us under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus supplement and prior to the termination of this offering, and any
Form 6-K furnished by us during such period or portions thereof that are
identified in such Form 6-K as being incorporated by reference herein, shall be
deemed to be incorporated by reference in and to be part of this prospectus
supplement and the accompanying prospectus from the date of filing of each such
document.
Any
statement contained in a document incorporated by reference herein and in the
accompanying prospectus shall be deemed to be modified or superseded for
purposes of this prospectus supplement and the accompanying prospectus to the
extent that a statement contained herein or therein or in any other later filed
document which also is incorporated by reference into this prospectus supplement
and the accompanying prospectus modifies or supersedes that statement. Any such
statement so modified shall not be deemed, except as so modified, to constitute
a part of this prospectus supplement or the accompanying prospectus. Any such
statement so superseded shall be deemed not to constitute a part of this
prospectus supplement or the accompanying prospectus.
Any
statement contained in a document incorporated by reference into this prospectus
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained in this prospectus, in one of those other
documents or in any other later filed document that is also incorporated by
reference into this prospectus modifies or supersedes that statement. Any such
statement so modified shall not be deemed, except as so modified, to constitute
a part of this prospectus. Any such statement so superseded shall be deemed not
to constitute a part of this prospectus.
The
information relating to us contained in this prospectus supplement and the
accompanying prospectus is not comprehensive and should be read together with
the information contained in the documents incorporated by reference.
Descriptions contained in the documents incorporated by reference as to the
contents of any contract or other document may not be complete. You should refer
to the copy of that contract or other document filed as an exhibit to our
filings.
S-36
WHERE YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form F-3 with the SEC under the
Securities Act in connection with this offering. This prospectus supplement and
the accompanying prospectus are part of the registration statement. This
prospectus supplement and the accompanying prospectus do not contain all of the
information contained in the registration statement, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. For
further information about us and our securities you are encouraged to refer to
the registration statement and the exhibits that are incorporated by reference
into it. Each statement made in this prospectus supplement concerning a document
filed as an exhibit to the registration statement is qualified by reference to
that exhibit for a complete statement of its provisions. Except for documents
specifically incorporated by reference into this prospectus supplement, the
information on the SECs website is not part of this prospectus supplement or
the accompanying prospectus, and any references to the SECs website or any
other website are inactive textual references only.
We
are subject to the informational requirements of the Exchange Act, and,
accordingly, we file annual and other reports and other information with the
SEC. The reports and other information we file with the SEC in accordance with
the Exchange Act can be read and copied, at prescribed rates, at the SECs
public reference room at 100 F Street, N.E., Washington, D.C., 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. Our SEC filings are also available electronically from the SECs
Electronic Document Gathering and Retrieval System (EDGAR) at www.sec.gov, as
well as from commercial document retrieval services.
EXPENSES OF THE OFFERING
The
following table contains the various expenses to be incurred by us in connection
with the offering of the securities being registered hereby. All amounts are
estimated except the SEC registration fee and FINRA filing
fee.
SEC registration fee
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$
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2,865
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Printing expenses
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1,000
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Legal fees and expenses
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55,000
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Exchange listing fees
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7,000
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FINRA filing fee
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0
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Accounting fees and expenses
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5,000
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Transfer agent fees
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2,500
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Miscellaneous expenses
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1,635
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Total
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$
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75,000
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S-37
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-183587
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DEJOUR ENERGY INC.
$25,000,000
Common Shares
Warrants
Units
We may offer and sell
from time to time up to an aggregate of $25,000,000 of common shares (issued separately or upon exercise of warrants), warrants
and units comprising any combination of common shares and warrants. The specific terms of any securities offered will be
described in supplements to this prospectus. You should read this prospectus and any applicable prospectus supplement carefully
before you purchase our securities. This prospectus may not be used to offer securities unless accompanied by a prospectus supplement.
We may offer and sell
these securities to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed
basis. The prospectus supplement for each offering of securities will describe in detail the plan of distribution. If underwriters,
dealers and agents are used to sell these securities, we will name them and describe their compensation in a prospectus supplement.
Our common shares are
traded on the Toronto Stock Exchange and on the NYSE MKT, in both cases under the symbol “DEJ.” On November 19, 2013,
the last reported sale price of our common shares on the Toronto Stock Exchange was Cdn$0.17 per common share and on the NYSE MKT
was $0.17 per common share.
There is currently no market through which the securities, other than the common shares, may be
sold and purchasers may not be able to resell the securities purchased under this prospectus. This may affect the pricing of the
securities in the secondary market, the transparency and availability of trading prices, the liquidity of the securities and the
extent of issuer regulation.
The aggregate market value
of our outstanding voting and non-voting common equity held by non-affiliates on November 19, 2013 was approximately $22,618,285.
We have not issued any securities pursuant to Instruction I.B.5 of Form F-3 during the 12 calendar month period that ends on and
includes the date hereof.
Our principal executive
offices are located at Suite 598 – 999 Canada Place, Vancouver, British Columbia V6C 3E1, Canada (telephone: (604) 638-5050).
Investing in our securities
involves risks. Prior to purchasing our securities, you should carefully consider the risk factors that will be described in any
applicable prospectus supplement and the risk factors described in our filings with the Securities and Exchange Commission, as
explained under the heading “Risk Factors” on page 3 of this prospectus.
Neither the United
States Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offence.
The date of this prospectus
is November 19, 2013.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
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2
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WHERE YOU CAN FIND MORE INFORMATION
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3
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ENFORCEMENT OF CIVIL LIABILITIES
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3
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DOCUMENTS INCORPORATED BY REFERENCE
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3
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RISK FACTORS
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4
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FORWARD-LOOKING STATEMENTS
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4
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DEJOUR ENERGY INC.
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7
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USE OF PROCEEDS
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7
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DESCRIPTION OF COMMON SHARES
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7
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DESCRIPTION OF WARRANTS
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8
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DESCRIPTION OF UNITS
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9
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
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10
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PLAN OF DISTRIBUTION
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10
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INTERESTS OF NAMED EXPERTS AND COUNSEL
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12
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LEGAL MATTERS
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12
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EXPERTS
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12
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ABOUT THIS
PROSPECTUS
This prospectus is a part
of a registration statement that we have filed with the SEC utilizing a “shelf” registration process. Under this shelf
registration process, we may sell the securities described in this prospectus in one or more offerings up to a total dollar amount
of initial aggregate offering price of $25,000,000. This prospectus provides you with a general description of the securities that
we may offer. Each time we sell securities under this process, we will provide a prospectus supplement that will contain specific
information about the terms of that offering, including a description of any risks relating to the offering if those terms and
risks are not described in this prospectus. A prospectus supplement may also add, update, or change information contained
in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus
supplement, you should rely on the information in the prospectus supplement.
Before investing in our
securities, please carefully read both this prospectus and any prospectus supplement together with the documents incorporated by
reference into this prospectus, as listed under “Documents Incorporated by Reference,” and the additional information
described below under “Where You Can Find More Information.”
We may sell securities
to or through underwriters or dealers, and we may also sell securities directly to other purchasers or through agents. To
the extent not described in this prospectus, the names of any underwriters, dealers, or agents employed by us in the sale of the
securities covered by this prospectus, the principal amounts or number of shares or other securities, if any, to be purchased by
such underwriters or dealers, and the compensation, if any, of such underwriters, dealers, or agents will be described in a prospectus
supplement.
Owning securities may
subject you to tax consequences in the United States. This prospectus or any applicable prospectus supplement may not describe
these tax consequences fully. You should read the tax discussion in any prospectus supplement with respect to a particular offering
and consult your own tax advisor with respect to your own particular circumstances.
You should rely only on
the information contained in or incorporated by reference into this prospectus or a prospectus supplement. We have not authorized
anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should
not rely on it. The distribution or possession of this prospectus in or from certain jurisdictions may be restricted by law. This
prospectus is not an offer to sell the securities and is not soliciting an offer to buy the securities in any jurisdiction where
the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom
it is not permitted to make such offer or sale. You should assume that the information contained in this prospectus and in any
applicable prospectus supplement is accurate only as of the date on the front cover of this prospectus or prospectus supplement,
as applicable, and the information incorporated by reference into this prospectus or any prospectus supplement is accurate only
as of the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects
may have changed since that date.
In this prospectus, unless
the context otherwise requires, references to “Dejour,” the “Company,” “we,” “us,”
or “our” refers to Dejour Energy Inc. and/or its wholly owned subsidiaries.
Currency and Financial Information
Unless otherwise stated,
currency amounts in this prospectus are stated in United States dollars. References in this prospectus to “$” are to
U.S. dollars and references to “Cdn$” are to Canadian dollars. The consolidated financial statements incorporated by
reference into this prospectus and the documents incorporated by reference into this prospectus, and the financial data derived
from those consolidated financial statements included in this prospectus, are presented in Canadian dollars.
The following table lists,
for each period presented, the high and low exchange rates, the average of the exchange rates during the period indicated, and
the exchange rates at the end of the period indicated, for one Canadian dollar, expressed in United States dollars, based on the
noon exchange rate published by the Bank of Canada.
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Nine Months
ended September 30,
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Year ended December 31,
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2013
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2012
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2011
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2010
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High for the period
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$
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0.9833
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$
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1.0299
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$
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1.0583
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$
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1.0054
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Low for the period
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$
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0.9455
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$
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0.9599
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$
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0.9430
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$
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0.9278
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End of period
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$
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0.9723
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$
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1.0051
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$
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0.9833
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$
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1.0054
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Average for the period
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$
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0.9645
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$
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1.0004
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$
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1.0111
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$
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0.9709
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On November 19, 2013,
the Bank of Canada’s noon exchange rate was Cdn$1 = $0.9555.
On January 1, 2011,
we adopted International Financial Reporting Standards (“IFRS”) for financial reporting purposes, using a transition
date of January 1, 2010. Our annual audited consolidated financial statements for the year ended December 31, 2012, including
2011 and 2010 required comparative information, have been prepared in accordance with IFRS, as issued by the International Accounting
Standards Board and interpretations of the International Financial Reporting Interpretations Committee. Our financial statements
prior to the fiscal year ended December 31, 2010 were prepared in accordance with Canadian generally accepted accounting principles
then in effect (“Canadian GAAP”). IFRS and Canadian GAAP differ from United States generally accepted accounting principles
in certain respects, and therefore our financial statements may not be comparable to the financial statements of United States
companies.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the
SEC a registration statement on Form F-3, of which the prospectus forms a part. This prospectus does not contain all the information
set out in the registration statement. For further information about us and the securities, please refer to the registration statement,
including the exhibits to the registration statement. The exhibits to the registration statement provide more details of the matters
discussed in this prospectus.
We are subject to the
information requirements of the Exchange Act, and we therefore file reports and other information with the SEC. The reports and
other information filed by us with the SEC may be read and copied at the SEC’s public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of the same documents can also be obtained from the public reference room of the SEC in Washington
by paying a fee. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains
a website (www.sec.gov) that makes available reports and other information that we file electronically with it, including the registration
statement that we have filed with respect to the offering of these securities.
ENFORCEMENT
OF CIVIL LIABILITIES
The enforcement by investors
of civil liabilities under U.S. federal securities laws may be affected adversely by the fact that we are incorporated under the
laws of the Province of British Columbia, Canada, that many of our officers and directors are residents of countries other than
the United States, that some of the experts named in this prospectus are residents of countries other than the United States, and
that some of our assets and the assets of said persons are located outside the United States.
In particular, it may
be difficult to bring and enforce suits against us or said persons under U.S. federal securities laws. It may be difficult for
U.S. holders of our common shares to effect service of process on us or said persons within the United States or to enforce judgments
obtained in the United States based on the civil liability provisions of the U.S. federal securities laws against us or said persons. In
addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions
against us, our officers or directors, or other said persons, predicated upon the civil liability provisions of the U.S. federal
securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us, our officers
or directors or other said persons predicated upon the U.S. federal securities laws or other laws of the United States.
DOCUMENTS
INCORPORATED BY REFERENCE
The following documents
filed with or furnished to the SEC are specifically incorporated by reference into, and form a part of, this prospectus:
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(a)
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our Annual Report on Form 20-F for the fiscal year ended December 31, 2012, filed with the SEC on April 29, 2013;
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(b)
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our Report of Foreign Issuer on Form 6-K containing interim financial statements and interim Management’s Discussion and Analysis for the three months ended March 31, 2013, furnished to the SEC on May 16, 2013;
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(c)
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our Report of Foreign Issuer on Form 6-K furnished to the SEC on June 21, 2013;
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(d)
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our Report of Foreign Issuer on Form 6-K containing interim financial statements and interim Management’s Discussion and Analysis for the three and six months ended June 30, 2013, furnished to the SEC on August 14, 2013;
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(e)
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the description of our common shares set forth in the amendment to our registration statement on Form 8-A, as filed with the SEC on February 15, 2012, including any further amendment to such registration statement or report filed for the purpose of amending such description; and
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(f)
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all other documents filed by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this prospectus but before the end of the offering of the securities pursuant to this prospectus.
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In addition, all subsequent
Annual Reports on Form 20-F, Form 40-F or Form 10-K, and all subsequent filings on Form 10-Q or Form 8-K, that we file pursuant
to the Exchange Act prior to the termination of this offering, are hereby incorporated by reference into this prospectus. Also,
we may incorporate by reference future reports on Form 6-K that we furnish subsequent to the date of this prospectus by stating
in those Form 6-Ks that they are being incorporated by reference into this prospectus.
Any statement contained
in a document incorporated by reference into this prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus, in one of those other documents or in any other later filed
document that is also incorporated by reference into this prospectus modifies or supersedes that statement. Any such statement
so modified shall not be deemed, except as so modified, to constitute a part of this prospectus. Any such statement so superseded
shall be deemed not to constitute a part of this prospectus.
Any person receiving a
copy of this prospectus, including any beneficial owner, may obtain without charge, upon written or oral request, a copy of any
of the documents incorporated by reference into this prospectus, except for the exhibits to those documents unless the exhibits
are specifically incorporated by reference into those documents. Requests should be directed to our principal executive offices,
Suite 598 – 999 Canada Place, Vancouver, British Columbia V6C 3E1, Canada, Attention: Chief Financial Officer; Telephone:
(604) 638-5050.
RISK FACTORS
An investment in our securities
is highly speculative and subject to a number of known and unknown risks. Only those persons who can bear the risk of the entire
loss of their investment should purchase our securities. You should carefully consider the risk factors incorporated by reference
to our Annual Report on Form 20-F for the fiscal year ended December 31, 2012 and the other information contained in
this prospectus, as updated by our subsequent filings under the Exchange Act and the risk factors and other information contained
in any applicable prospectus supplement, before purchasing any of our securities.
FORWARD-LOOKING
STATEMENTS
This prospectus and the
documents incorporated by reference into this prospectus contain “forward-looking statements” within the meaning of
applicable securities legislation. Any statements that are not of historical fact and express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but
not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates”
or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain
actions, events or results “may”, “could”, “would”, “might” or “will”
be taken, occur or be achieved) may be forward-looking statements. Forward-looking statements concern such matters as our anticipated
results and developments in our operations in future periods, planned exploration and, if warranted, development of our properties,
plans related to our business and other matters that may occur in the future. Forward-looking statements relate to analyses and
other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
In particular, the forward-looking
statements contained in this prospectus and the documents incorporated by reference into this prospectus concern, among other things:
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drilling inventory, drilling plans and timing of drilling, re-completion and tie-in of wells;
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productive capacity of wells, anticipated or expected production rates and anticipated dates of commencement
of production;
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drilling, completion and facilities costs;
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results of our various projects;
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ability to lower cost structure in certain of our projects;
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our growth expectations;
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timing of development of undeveloped reserves;
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the performance and characteristics of our oil and natural gas properties;
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oil and natural gas production levels;
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the quantity of oil and natural gas reserves;
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capital expenditure programs;
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supply and demand for oil and natural gas and commodity prices;
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the impact of federal, provincial, and state governmental regulation on our business;
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expected levels of royalty rates, operating costs, general administrative costs, costs of services
and other costs and expenses;
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expectations regarding our ability to raise capital and to continually add to reserves through acquisitions,
exploration and development;
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treatment under governmental regulatory regimes and tax laws;
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the renewal of our revolving credit facility; and
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realization of the anticipated benefits of acquisitions and dispositions.
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Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our expectations, or the
assumptions upon which they are based, will prove to be correct. We cannot guarantee future results, levels of activity, performance
or achievements. Consequently, we do not represent that actual results achieved will be the same in whole or in part as those set
out in the forward-looking statements included in this prospectus and in the documents incorporated by reference into this prospectus.
Some of the assumptions on which our forward-looking statements are based are set out under “Risk Factors” and elsewhere
in this prospectus and in the documents incorporated by reference into this prospectus. Forward-looking statements are subject
to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from
those expressed or implied by the forward-looking statements, including, without limitation:
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risks related to the marketability and price of oil and natural gas being affected by factors outside
our control;
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risks related to world oil and natural gas prices being quoted in U.S. dollars and our production
revenues being adversely affected by an appreciation in the Canadian dollar;
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risks related to our ability to execute projects being dependent on factors outside our control;
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risks related to oil and gas exploration having a high degree of risk and exploration efforts failing;
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risks related to cumulative unsuccessful exploration efforts;
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risks related to oil and natural gas operations involving hazards and operational risks;
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risks related to seasonal factors and unexpected weather;
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risks related to competition in the oil and gas industry;
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risks related to the fact that we do not control all of the assets that are used in the operation
of our business;
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risks related to our ability to market oil and natural gas depending on our ability to transport the
product to market;
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risks related to high demand for drilling equipment;
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risks related to title to our properties;
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risks related to our ability to continue to meet our oil and gas lease or license obligations;
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risks related to our ability to renew oil and gas leases and licenses;
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risks related to our anticipated substantial capital needs for future acquisitions;
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risks related to our cash flow from reserves not being sufficient to fund our ongoing operations;
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risks related to covenants in issued debt restricting the ability to conduct future financings;
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risks related to our being exposed to third party credit risks;
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risks related to our being able to find, acquire, develop and commercially produce oil and natural
gas;
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risks related to our properties not producing as projected;
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risks related to our estimated reserves being based upon estimates;
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risks related to future oil and gas revenues not resulting in revenue increases;
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risks related to our managing growth;
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risks related to our being dependent on key personnel;
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risks related to our operations being subject to federal, state, provincial, local and other laws,
controls and regulations;
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risks related to uncertainty regarding claims of title and right of aboriginal people;
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risks related to environmental laws and regulations;
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risks related to our facilities, operations and activities emitting greenhouse gases;
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risks related to our not having paid dividends to date;
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risks related to our stock price being volatile;
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risks related to our being a foreign private issuer;
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risks related to the issuance of additional common shares negatively affecting the market price;
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risks related to not meeting the conditions for closing of our revolving credit facility; and
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risks related to the warrants.
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Statements relating to
"reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future.
This list is not exhaustive
of the factors that may affect the realization of the results contemplated by our forward-looking statements. Some of the important
risks and uncertainties that could affect the realization of our expected results are described further under the section entitled
“Risk Factors” in this prospectus, and in the documents incorporated by reference into this prospectus. If one or more
of these risks or uncertainties materializes, or if our underlying assumptions prove incorrect, our actual results may vary materially
from those anticipated, believed, expected, estimated or projected. Forward-looking statements are not a prediction of future events
or circumstances, and those future events or circumstances may not occur. Given these uncertainties, you are cautioned not to place
undue reliance on such forward-looking statements. Forward-looking statements are based upon our beliefs, opinions and expectations
at the time they are made and speak only as of the date they are made, and we do not assume any obligation to update our forward-looking
statements if those beliefs, opinions, expectations or other circumstances should change, except as required by applicable law.
We qualify all the forward-looking statements contained in this prospectus and the documents incorporated by reference in this
prospectus by the foregoing cautionary statements.
DEJOUR ENERGY
INC.
We are in the business
of acquiring oil and gas properties worldwide and exploring for and developing commercial quantities of hydrocarbons on its properties
where feasible. Our focus areas are:
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The Peace River Arch of northeastern British Columbia and northwestern Alberta, Canada; and
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The Piceance, Paradox, and Uinta Basins in the US Rocky Mountains.
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Since inception, we have
explored for oil and gas on our properties and “high-graded” our prospects and discoveries so as to establish oil and
gas production as quickly as possible. This process involves:
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Classification and prioritization of acreage based on economic promise, technical robustness, infrastructural
and logistic advantage and commercial maturity;
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Evaluation and development planning for “top tier” acreage positions with most promise
for commerciality;
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Sourcing the requisite financing via financial and industry contacts to place projects of merit
into production; and
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Meeting all production and related environmental timelines for the establishment of production
on a timely basis.
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USE OF PROCEEDS
Unless otherwise indicated
in a prospectus supplement, the net proceeds that we receive from the sale of the securities offered by this prospectus will be
used by us for working capital and general corporate purposes. We have not allocated any portion of the net proceeds for any particular
use at this time. The net proceeds may be invested temporarily until they are used for their stated purpose. Specific
information concerning the use of proceeds from the sale of any securities will be included in the prospectus supplement relating
to such securities.
Description
of Common Shares
We are authorized to issue
an unlimited number of common shares of which, as of November 19, 2013, 148,916,374 were issued and outstanding. Our common shares
are entitled to one vote per share on all matters submitted to a vote of our shareholders, including the election of directors.
Except as otherwise required by law, the holders of our common shares will possess all voting power. Generally, all matters to
be voted on by shareholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all common shares that are present in person or represented by proxy. One holder of common shares issued,
outstanding and entitled to vote, represented in person or by proxy, is necessary to constitute a quorum at any meeting of our
shareholders.
The holders of our common
shares are entitled to such dividends as may be declared from time to time by our board of directors from funds legally available
therefor.
Upon liquidation, dissolution
or winding up of our company, holders of common shares are entitled to receive
pro rata
our assets, if any, remaining after
payments of all debts and liabilities. No common shares have been issued subject to call or assessment. There are no
pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase
funds attaching to our common shares.
In the event of any merger
or consolidation with or into another company in connection with which our common shares are converted into or exchangeable for
shares, other securities or property (including cash), all holders of our common shares will be entitled to receive the same kind
and amount of shares and other securities and property (including cash).
There
are no indentures or agreements limiting the payment of dividends on our common shares and there are no special liquidation rights
or subscription rights attaching to our common shares
.
Alteration of Share Structure
We may alter our authorized
share structure by directors’ resolution or ordinary resolution of our shareholders, in each case determined by our board
of directors, to:
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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;
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increase, reduce or eliminate the maximum number of shares that we are authorized to issue out of
any class or series of shares or establish a maximum number of shares that we are authorized to issue out of any class or series
of shares for which no maximum is established;
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subdivide all or any of our unissued, or fully paid issued, shares;
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if we are authorized to issue shares of a class or shares with par value;
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(i)
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decrease the par value of those shares; or
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(ii)
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if none of the shares of that class of shares are allotted or issued, increase the par value of those
shares;
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change all or any of our unissued, or fully paid issued, shares with par value into shares without
par value or any of our unissued shares without par value into shares with par value;
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alter the identifying name of any of our shares; or
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by ordinary resolution of our shareholders, otherwise alter our share or authorized share structure.
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On June 14, 2013, our
shareholders passed an ordinary resolution granting the board of directors the discretion to consolidate our common shares.
Dividends
As of the date of this
prospectus, we have not paid any dividends to our shareholders. The declaration of any future dividends will be at the discretion
of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, general economic
conditions, and other pertinent factors. We currently do not intend to pay any dividends in the foreseeable future, but rather
to reinvest earnings, if any, in our exploration activities.
Transfer Agent And Registrar
Our registrar and transfer
agent for our common shares is Computershare Trust Company of Canada, located at 510 Burrard Street, Vancouver, British Columbia
Canada V5K 1A1.
Trading of Our Common
Shares
Our common shares are
traded on the Toronto Stock Exchange and on the NYSE MKT, in both cases under the symbol “DEJ.” On November 19, 2013,
the last reported sale price of our common shares on the Toronto Stock Exchange was Cdn$0.17 per common share and on the NYSE MKT
was $0.17 per common share.
As of November 19, 2013,
we had 177 record holders of our common shares.
Description
of Warrants
We may issue warrants
that entitle the holder to purchase common shares. Warrants may be issued independently or together with common shares, and may
be attached to or separate from any offered securities. Each series of warrants may, at our discretion, be issued under a separate
warrant agreement to be entered into between us and a warrant agent, which will be described in the prospectus supplement relating
to the particular issue of warrants. Any warrant agent will act solely as our agent in connection with the warrants and will not
assume any obligation or relationship of agency or trust for or with any holders of warrants or beneficial owners of warrants.
The following description,
and any description of the warrants included in a prospectus supplement, may not be complete and is subject to and qualified in
its entirety by reference to the terms and provisions of the applicable warrant and warrant agreement, which we will file with
the SEC in connection with any offering of warrants.
The prospectus supplement
relating to a particular issue of warrants will describe the terms of the warrants, including the following:
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the title of the warrants;
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the offering price for the warrants, if any;
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the aggregate number of the warrants;
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the designation and terms of the common shares that may be purchased upon exercise of the warrants;
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if applicable, the designation and terms of the securities that the warrants are issued with and the
number of warrants issued with each security;
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if applicable, the date from and after which the warrants and any securities issued with the warrants
will be separately transferable;
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the number and price of common shares that may be purchased upon exercise of a warrant;
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the dates on which the right to exercise the warrants commence and expire;
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if applicable, the minimum or maximum amount of the warrants that may be exercised at any one time;
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any applicable material U.S. federal income tax considerations;
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anti-dilution provisions of the warrants, if any;
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redemption or call provisions, if any, applicable to the warrants; and
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any additional terms of the warrants, including terms, procedures, and limitations relating to the
exchange and exercise of the warrants.
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Each warrant will entitle
the holder of the warrant to purchase common shares at the exercise price provided in the applicable prospectus supplement. The
exercise price may be subject to adjustment upon the occurrence of events described in the applicable prospectus supplement. Holders
may exercise warrants at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After
the close of business on the expiration date, unexercised warrants will become void. The place or places where, and the manner
in which, warrants may be exercised will be specified in the applicable prospectus supplement.
Prior to the exercise
of any warrants to purchase common shares, holders of the warrants will not have any of the rights of holders of the underlying
common shares, including the right to receive payments of dividends, if any, on the underlying common shares, or to exercise any
applicable right to vote.
DESCRIPTION
OF UNITS
We may issue units comprised
of one or more of the other securities that may be offered under this prospectus, in any combination. Each unit will be issued
so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security. The unit agreement or other documentation under which a unit is issued
may provide that the securities included in the unit may not be held or transferred separately at any time, or at any time before
a specified date. The following description, and any description of the units included in a prospectus supplement, may not be complete
and is subject to and qualified in its entirety by reference to the terms and provisions of the applicable unit and unit agreement
or other documentation under which a unit is issued, if any, which we will file with the SEC in connection with any offering of
units.
The prospectus supplement
relating to a particular issue of units will describe, among other things:
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the securities comprising the units, including whether and under what circumstances those securities
may be held or transferred separately;
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any material provisions related to the issuance, payment, settlement, transfer or exchange of the
units or of the securities comprising the units;
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any applicable material U.S. federal income tax considerations; and
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any material provisions of the governing unit agreement that differ from those described above.
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MATERIAL
FEDERAL INCOME TAX CONSEQUENCES
Information regarding
material United States federal income tax consequences to persons investing in the securities offered by this prospectus will be
set forth in an applicable prospectus supplement. You are urged to consult your own tax advisors prior to any acquisition
of our securities.
PLAN OF
DISTRIBUTION
We may sell the securities
in one or more of the following ways from time to time:
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through underwriters or dealers for resale to the public or to institutional investors;
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directly to a limited number of institutional purchasers or to a single purchaser;
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if indicated in the prospectus supplement, pursuant to delayed delivery contracts, by remarketing
firms or by other means.
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Any dealer or agent, in
addition to any underwriter, may be deemed to be an underwriter within the meaning of the Securities Act, and any discounts or
commissions they receive from us and any profit they receive on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Securities Act. The terms of the offering of the securities with respect
to which this prospectus is being delivered will be set forth in the applicable prospectus supplement and will include:
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the name or names of any underwriters, dealers, or agents;
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the purchase price of such securities and the proceeds to us from such sale;
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any underwriting discounts, agency fees, and other items constituting underwriters’ or agents’
compensation;
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the public offering price;
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any discounts or concessions that may be allowed or re-allowed or paid to dealers and any securities
exchanges on which the securities may be listed; and
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the securities exchange on which the securities may be listed, if any.
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If underwriters are used
in the sale of securities, the securities will be acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be offered to the public either through underwriting syndicates represented
by managing underwriters or directly by one or more underwriters acting alone. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase the securities described in the applicable prospectus supplement
will be subject to certain conditions precedent. Further, unless otherwise so stated, the underwriters will be obligated
to purchase all such securities if any are so purchased by them. Any public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
The securities may be
sold directly by us or through agents designated by us from time to time. Any agents involved in the offer or sale of
the securities in respect of which this prospectus is being delivered, and any commissions payable by us to those agents, will
be described in the applicable prospectus supplement. Unless otherwise indicated in the applicable prospectus supplement,
any such agent will be acting on a best-efforts basis for the period of its appointment.
If dealers are used in
the sale of any securities, we will sell the securities to the dealers as principals. Any dealer may resell the securities
to the public at varying prices to be determined by the dealer at the time of resale. The name of any dealer and the
terms of the transaction will be provided in the prospectus supplement with respect to the securities being offered.
Securities may also be
offered and sold, if so indicated in the applicable prospectus supplement, in connection with a remarketing upon their purchase
in accordance with a redemption or repayment pursuant to their terms or otherwise by one or more firms, which we refer to as the
“remarketing firms,” acting as principals for their own accounts or as our agents, as applicable. Any remarketing
firm will be identified and the terms of its agreement, if any, with us and its compensation will be described in the applicable
prospectus supplement.
Remarketing firms may
be deemed to be underwriters, as that term is defined in the Securities Act, in connection with the securities remarketed by them.
If indicated in the applicable
prospectus supplement, we will authorize agents, underwriters, or dealers to solicit offers by certain specified institutions to
purchase the securities to which this prospectus and the applicable prospectus supplement relates from us at the public offering
price provided in the applicable prospectus supplement, plus, if applicable, accrued interest pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions
described in the applicable prospectus supplement, and the applicable prospectus supplement will provide the commission payable
for solicitation of those contracts.
Underwriters will not
be obligated to make a market in any securities. We can give no assurance regarding the activity of trading in, or liquidity
of, any securities.
Under agreements that
may be entered into by us, underwriters, dealers, agents and remarketing firms who participate in the offer and sale of our securities
may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act, and applicable
Canadian provincial securities legislation, or to contribution with respect to payments that such underwriters, dealers, agents
or remarketing firms may be required to make in respect thereof. Underwriters, dealers, agents and remarketing firms may be customers
of, engage in transactions with, or perform services for, us in the ordinary course of business.
Each series of securities
will be a new issue and other than the common shares, which are quoted on the NYSE MKT and TSX, will have no established trading
market. We may elect to list any series of securities on an exchange, and in the case of the common shares, on any additional
exchange, but unless otherwise specified in the applicable prospectus supplement, we are not obligated to do so. Any
underwriters to whom securities are sold for public offering and sale may make a market in the securities, but the underwriters
will not be obligated to do so and may discontinue any market making at any time without notice. The securities may
or may not be listed on a national securities exchange or a foreign securities exchange. No assurance can be given as
to the liquidity of the trading market for any of the securities.
The place, time of delivery,
and other terms of the offered securities will be described in the applicable prospectus supplement.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
None.
LEGAL MATTERS
Farris, Vaughan, Wills
& Murphy LLP, Vancouver, B.C., Canada, has provided an opinion on the validity of the securities offered by this prospectus.
Certain legal matters related to this prospectus will be passed upon on our behalf by Dorsey & Whitney LLP, Seattle, Washington
and Vancouver, B.C., Canada, with respect to matters of United States law. Counsel named in the applicable prospectus supplement
will pass upon legal matters for any underwriters, dealers or agents.
EXPERTS
The consolidated financial
statements of the Company and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2012 and December
31, 2011 and the consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years
ended December 31, 2012, December 31, 2011 and December 31, 2010, have been incorporated by reference herein in reliance upon the
report of BDO Canada LLP, an independent registered public accounting firm, given upon the authority of that firm as an expert
in accounting and auditing.
Information relating to
our oil and gas properties included or incorporated by reference herein has been derived from reports, statements or opinions prepared
or certified by Deloitte LLP and Gustavson Associates, LLC, each independent petroleum engineering consultants retained by us.
PROSPECTUS
DEJOUR ENERGY INC.
$25,000,000
Common Shares
Warrants
Units
November 19, 2013
DEJOUR ENERGY INC.
August 11, 2014
Grafico Azioni DXI Capital (CE) (USOTC:DXIEF)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni DXI Capital (CE) (USOTC:DXIEF)
Storico
Da Giu 2023 a Giu 2024