10-Q 1 form10q.htm ERHC ENERGY 10-Q 6-30-09 form10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q
 
(Mark  One)

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

For the quarterly period ended June 30, 2009

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

For the transition period from ____________ to ____________

Commission File Number 0-17325
 
 
logo
 

 
Colorado
88-0218499
(State of Incorporation)
(I.R.S. Employer Identification No.)

5444 Westheimer Road
Suite1440
Houston, Texas 77056
(Address of principal executive offices, including zip code)

(713) 626-4700
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x   No  £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 [Missing Graphic Reference]of the Exchange Act. (Check one):
 
Large accelerated filer o
Accelerated filer x
Non-accelerated filer   o
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes£   No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

The number of shares of common stock, par value $0.0001 per share, outstanding as of July 31, 2009 was 722,688,550
 


 
 

 


ERHC ENERGY INC.
 
Part I. Financial Information
 
Page
         
         
Item 1.
   
         
     
4
         
     
5
         
     
6
         
     
8
         
Item 2.
   
14
         
Item 3.
   
20
         
Item 4.
   
20
         
Part II. Other Information
   
         
Item 1.
   
21
         
Item 6.
   
23
         
     
24
 
Table of Contents
 
Forward-Looking Statements

ERHC Energy Inc. (the “Company”) or its representatives may, from time to time, make or incorporate by reference certain written or oral statements of historical fact, statements  that  include, but are not limited to, information concerning the Company’s possible or assumed future business activities and results of operations and statements about the following subjects:
   
 
business strategy;
 
 
growth opportunities;
 
 
future development of concessions, exploitation of assets and other business operations;
 
 
future market conditions and the effect of such conditions on the Company’s future activities or results of operations;
 
 
future uses of and requirements for financial resources;
 
 
interest rate and foreign exchange risk;
 
 
future contractual obligations;
 
 
outcomes of legal proceedings including, without limitation, the ongoing investigations of the Company;
 
 
future operations outside the United States;
 
 
competitive position;
 
 
expected financial position;
 
 
future cash flows;
 
 
future liquidity and sufficiency of capital resources;
 
 
future dividends;
 
 
financing plans;
 
 
tax planning;
 
 
budgets for capital and other expenditures;
 
 
plans and objectives of management;
 
 
compliance with applicable laws; and
 
 
adequacy of insurance or indemnification.

These types of statements and other forward-looking statements inherently are subject to a variety of assumptions, risks and uncertainties that could cause actual results, levels of activity, performance or achievements to differ materially from those expected, projected or expressed in forward-looking statements.  These risks and uncertainties include, among others, the following:

 
general economic and business conditions;
 
 
worldwide demand for oil and natural gas;
 
 
changes in foreign and domestic oil and gas exploration, development and production activity;
 
 
oil and natural gas price fluctuations and related market expectations;
 
 
termination, renegotiation or modification of existing contracts;
 
 
the ability of the Organization of Petroleum Exporting Countries, commonly called OPEC, to set and maintain production levels and pricing, and the level of production in non-OPEC countries;
 
 
policies of the various governments regarding exploration and development of oil and gas reserves;
 
 
advances in exploration and development technology;
 
 
the political environment of oil-producing regions;
 
 
political instability in the Democratic Republic of Sao Tome and Principe and the Federal Republic of Nigeria;
 
 
casualty losses;
 
 
competition;
 
 
changes in foreign, political, social and economic conditions;
 
 
 •
 risks of international operations, compliance with foreign laws and taxation policies and expropriation or nationalization of equipment and assets;
 
 
risks of potential contractual liabilities;
 
 
foreign exchange and currency fluctuations and regulations, and the inability to repatriate income or capital;
 
 
risks of war, military operations, other armed hostilities, terrorist acts and embargoes;
 
 
 
regulatory initiatives and compliance with governmental regulations;
 
 
compliance with environmental laws and regulations
 
 
compliance with tax laws and regulations;
 
 
customer preferences;
 
 
effects of litigation and governmental proceedings;
 
 
cost, availability and adequacy of insurance;
 
 
adequacy of the Company’s sources of liquidity;
 
 
labor conditions and the availability of qualified personnel; and
 
 
various other matters, many of which are beyond the Company’s control.
 
The risks and uncertainties included here are not exhaustive.  Other sections of this report and the Company’s other filings with the U.S. Securities and Exchange Commission (“SEC”) include additional factors that could adversely affect the Company’s business, results of operations and financial performance.  Given these risks and uncertainties, investors should not place undue reliance on our statements concerning future intent.   Our statements included in this report speak only as of the date of this report.  The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any of our statements to reflect any change in its expectations with regard to the statements or any change in events, conditions or circumstances on which any forward-looking statements are based.

 
Item 1. Financial Statements

ERHC ENERGY INC.
 
A CORPORATION IN THE DEVELOPMENT STAGE
 
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
June 30, 2009 and September 30, 2008
 
             
   
June 30, 2009
   
September 30, 2008
 
             
ASSETS
           
             
Current assets:
           
Cash and cash equivalents
  $ 23,597,089     $ 26,581,069  
Short-term Investment
    -       5,175,943  
Prepaid expenses and other
    575,719       199,419  
Deferred tax asset - current
    2,018,398       2,018,398  
                 
Total current assets
    26,191,206       33,974,829  
                 
DRSTP concession fee
    2,839,500       2,839,500  
Furniture and equipment, net
    42,573       66,093  
Long-term investment
    3,175,738       -  
                 
Total assets
  $ 32,249,017     $ 36,880,422  
                 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
                 
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 5,011,037     $ 5,025,794  
Accrued board compensation
    49,063       164,101  
Accrued officer and consultants compensation
    195,175       190,833  
Accrued interest
    10,101       8,719  
Asset retirement obligation
    485,000       485,000  
Current portion of convertible debt
    33,513       33,513  
                 
Total current liabilities
    5,783,889       5,907,960  
                 
Commitments and contingencies:
               
                 
Shareholders' equity:
               
Preferred stock, par value $0.0001; authorized 10,000,000; none issued and outstanding
    -       -  
Common stock, par value $0.0001; authorized 950,000,000 shares; issued and outstanding 722,688,550 and 722,238,569 shares at June 30, 2009 and September 30, 2008, respectively
     72,269        72,224  
Additional paid-in capital
    92,070,478       91,964,474  
Accumulated deficit
    (65,677,619 )     (61,064,236 )
                 
Total shareholders’ equity
    26,465,128       30,972,462  
                 
Total liabilities and shareholders' equity
  $ 32,249,017     $ 36,880,422  
 
The accompanying notes are an integral part of the consolidated financial statements
 
 

ERHC ENERGY INC.
 
A CORPORATION IN THE DEVELOPMENT STAGE
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the Three Months and Nine Months Ended June 30, 2009 and 2008 and for the Period
 
From Inception, September 5, 1995, to June 30, 2009
 
                               
                           
Inception to
 
   
Three Months Ended June 30,
   
Nine Months Ended June,
   
June 30,
 
   
2008
   
2009
   
2008
   
2009
   
2009
 
                               
Costs and expenses:
                             
General and administrative
  $ 820,462     $ 1,261,847     $ 2,994,433     $ 2,889,509     $ 71,232,190  
Depreciation and depletion
    8,330       8,616       22,118       25,847       1,442,348  
Gain on sale of partial interest in DRSTP concession
    -       -       -       -       (30,102,250 )
Write-offs and abandonments
    -       -       -       -       7,742,128  
                                         
Total costs and expenses
    (828,792 )     (1,270,463 )     (3,016,551 )     (2,915,356 )     (50,314,416 )
                                         
Other income and (expenses):
                                       
Interest income
    225,079       8,339       979,904       420,514       4,810,041  
Loss from settlements
    -       -       -       -       (247,690 )
Other income
    -       -       -       -       439,827  
Interest expense
    (460 )     (461 )     (1,382 )     (1,383 )     (12,128,288 )
Provision for loss on deposits
            (2,117,158 )             (2,117,158 )     (2,117,158 )
Loss on extinguishment of debt
    -       -       -       -       (5,749,575 )
                                         
Total other income and expense
    224,619       (2,109,280 )     978,522       (1,698,027 )     (14,992,843 )
                                         
Income (loss) before benefit (provision) for income taxes
    (604,173 )     (3,379,743 )     (2,038,029 )     (4,613,383 )     (65,307,259 )
                                         
Benefit (provision) for income taxes:
                                       
Current
    -       -       480,000       -       (1,330,360 )
Deferred
    -       -       (480,000 )     -       960,000  
                                         
                                         
Total provision for income taxes
    -       -       -       -       (370,360 )
                                         
Net loss
  $ (604,173 )   $ (3,379,743 )   $ (2,038,029 )   $ (4,613,383 )   $ (65,677,619 )
                                         
Net loss per common share -Basic and diluted
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.01 )        
                                         
Weighted average number of shares of common shares outstanding- Basic and diluted
    722,238,569       722,688,550       722,164,116       722,500,657          

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


ERHC ENERGY INC.
 
A CORPORATION IN THE DEVELOPMENT STAGE
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended June 30, 2009 and 2008 and for the Period From
 
Inception, September 5, 1995 to June 30, 2009
 
                   
               
Inception to
 
   
Nine Months Ended June 30,
   
June 30,
 
   
2008
   
2009
   
2009
 
                   
Cash Flows From Operating Activities
                 
Net income (loss)
  $ (2,038,029 )   $ (4,613,383 )   $ (65,677,619 )
Adjustments to reconcile net income (loss) to net cash used by operating activities:
                       
Depreciation and depletion expense
    22,118       25,847       1,442,348  
Provision for loss on deposits
    -       2,117,158       2,117,158  
Write-offs and abandonments
    -       -       7,742,128  
Deferred income taxes
    480,000       -       (2,018,398 )
Compensatory stock options
    48,460       -       1,308,240  
Gain from settlement
    -       -       (252,310 )
Gain on sale of partial interest in DRSTP concession
    -       -       (30,102,250 )
Amortization of beneficial conversion feature associated with  convertible debt
    -       -       2,793,929  
Amortization of deferred compensation
    -       -       1,257,863  
Loss on extinguishment of debt
    -       -       5,682,368  
Stock issued for services
    -       -       20,897,077  
Stock issued for settlements
    -       -       225,989  
Stock issued for officer bonuses
    -       -       5,015,000  
Stock issued for interest and penalties on convertible debt
    -       -       10,631,768  
Stock issued for board compensation
    88,500       33,600       2,098,649  
Investment income
    -       (116,954 )     (292,897 )
Changes in operating assets and liabilities:
                       
Prepaid expenses and other current assets
    (34,504 )     (376,301 )     (575,717 )
Income tax refundable
    (480,000 )     -       -  
Accounts payable and other accrued liabilities
    (146,024 )     (13,374 )     (2,782,614 )
Accounts payable and accrued liabilities, related party
    (230,339 )     (38,246 )     316,689  
Accrued interest - related party
    1,382       -       -  
Accrued retirement obligation
    -       -       485,000  
                         
                         
Net cash used by operating activities
    (2,288,436 )     (2,981,653 )     (39,687,599 )

 
The accompanying notes are an integral part of these consolidated financial statements
 
ERHC ENERGY INC.
 
A CORPORATION IN THE DEVELOPMENT STAGE
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended June 30, 2009 and 2008 and for the Period From
 
Inception, September 5, 1995 to June 30, 2009
 
                   
               
Inception to
 
   
Nine Months Ended June 30,
   
June 30,
 
   
2008
   
2009
   
2009
 
                   
Cash Flows From Investing Activities
                 
Cash restricted as long-term investment
  $ -     $ -     $ (5,000,000 )
Purchase of DRSTP concession
    -       -       (5,679,000 )
Proceeds from sale of partial interest in DRSTP concession
    -       -       45,900,000  
Purchase of furniture and equipment
    (32,047 )     (2,327 )     (911,698 )
                         
Net cash provided (used) by investing activities
    (32,047 )     (2,327 )     34,309,302  
                         
Cash Flows From Financing Activities:
                       
Proceeds from warrants exercised
    -       -       160,000  
Proceeds from common stock, net of expenses
    -       -       6,955,049  
Proceeds from line of credit, related party
    -       -       2,750,000  
Proceeds from non-convertible debt, related party
    -       -       158,700  
Proceeds from convertible debt, related party
    -       -       8,207,706  
Proceeds from sale of convertible debt
    -       -       9,019,937  
Proceeds from bank borrowing
    -       -       175,000  
Proceeds from stockholder loans
    -       -       1,845,809  
Proceeds from stock subscription receivable
    -       -       913,300  
Repayment of shareholder loans
    -       -       (1,020,607 )
Repayment of long-term debt
    -       -       (189,508 )
                         
Net cash provided by financing activities
    -       -       28,975,386  
                         
Net increase (decrease) in cash  and cash equivalents
    (2,320,483 )     (2,983,980 )     23,597,089  
                         
Cash and cash equivalents, beginning of period
    34,721,933       26,581,069       -  
                         
Cash and cash equivalents, end of period
  $ 32,401,450     $ 23,597,089     $ 23,597,089  

The accompanying notes are an integral part of the consolidated financial statements
 
 
ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Business Organization

The consolidated financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods on a basis consistent with the annual audited financial statements.  All such adjustments are of a normal recurring nature.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for an entire year.  Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although ERHC Energy Inc. (“ERHC” or the “Company”) believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended September 30, 2008.

Note 2 – Fair Value of Financial Instruments

The Company adopted SFAS No. 157 as of October 1, 2008, to measure the fair value of certain of its financial assets required to be measured on a recurring basis. Under SFAS No. 157, based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
 
 
Level 1 — Quoted prices in active markets for identical assets or liabilities.

 
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Interest income on cash and cash equivalents is recognized as earned on the accrual basis.
 
The Company holds cash deposits in various domestic and international Financial institutions. In February 2009, certain restrictions were placed on one such Financial institution where the company has investments in certificates of deposit, and a receiver was appointed to takeover the institution. Management has ceased accruing interest on the balances. The amounts, totaling $5,292,897 was reclassified as non-current assets in the Level 3 category under FAS 157. At June 30, 2009, the receiver cannot accurately predict the amount of any recovery that might occur or when depositors might receive any recovery. The management has established a preliminary loss reserve of $2,117,158 leaving the remaining balance as non-current assets in Level 3 category under FAS 157.
 
 
Note 3 - Sao Tome Concession

In April 2003, the Company and the Democratic Republic of Sao Tome and Principe (“DRSTP”) entered into an Option Agreement (the “2003 Option Agreement”) in which the Company relinquished certain financial interests in the JDZ in exchange for exploration and production rights in the JDZ.  The Company additionally entered into an Administration Agreement with the Nigeria-Sao Tome and Principe Joint Development Authority (“JDA”).  The administration agreement is the formal agreement by the JDA that it will fully implement ERHC’s preferential rights to working interests in the JDZ acreage as set forth in the 2003 Option Agreement and describes certain procedures regarding the exercising of these rights.  ERHC retained under a previous agreement the following rights to participate in exploration and production activities in the Sao Tome and Principe Exclusive Economic Zone (“EEZ”) subject to certain restrictions:  (a) the right to receive up to two blocks of ERHC’s choice and (b) the option to acquire up to a 15% paid working interest in up to two blocks of ERHC’s choice in the EEZ.  The Company would be responsible for its proportionate share of exploration and exploitation costs in the EEZ blocks.

The following represents ERHC’s current rights in the JDZ blocks.

JDZ Block #
ERHC
Original
Participating
Interest(1)
ERHC
Joint Bid
Participating
Interest
Participating
Interest(s) Sold
Current ERHC
Retained
Participating
Interest
         
2
30%
35%
43% (2)
22%
3
20%
5%
15% (3)
10%
4
25%
35%
40.5% (4)
19.5%
5
15%
(5)
(5)
15%
6
15%
(5)
(5)
15%
9
20%
(5)
(5)
20%
 
(1)
Original Participating Interest granted pursuant to the Option Agreement, dated April 2, 2003, between DRSTP and ERHC (the “2003 Option Agreement”).
 
(2)
In March 2006, ERHC sold an aggregate 28.67% participating interest to Sinopec and an aggregate 14.33% participating interest to Addax Ltd.
 
 
(3)
In February 2006, ERHC sold a 15% participating interest to Addax Sub.
 
 
(4)
By a Participation Agreement made in November 2005 and subsequently amended, ERHC sold 40.5% participating interest to Addax.
 
 
(5)
No contracts have been entered into as of the date hereof. ERHC’s goal is to enter into agreements to exploit its interests in Blocks 5, 6 and 9.  Additionally, the Company intends to exploit its rights in the EEZ.
 
 
Particulars of Participating Agreements:

Date of Participation Agreement
Parties
Key Terms
JDZ Block 2 Participation Agreement
March 2, 2006
1a. Sinopec International Petroleum Exploration and Production Co. Nigeria Ltd
 
1b. Sinopec International Petroleum and Production Corporation
 
2a. Addax Energy Nigeria Limited
 
2b. Addax Petroleum Corporation
 
3.   ERHC Energy Inc
 
 
ERHC assigns 28.67% of participating interest to Sinopec International Petroleum Exploration and Production Co Nigeria Ltd (“Sinopec”) and a 14.33% participating interest to Addax Energy Nigeria Limited (“Addax”) leaving ERHC with a 22% participating interest.
Consideration from Sinopec to ERHC for the 28.67% interest (the “SINOPEC assigned interest”) is $13.6 million.
 
Consideration from Addax to ERHC for the 14.33% interest (the “Addax assigned interest”) is $6.8 million
 
In addition, Sinopec and Addax to pay all of ERHC’s future costs for petroleum operations (“the carried costs”) in respect of the 22% interest retained by ERHC (the “retained interest”) in Block 2.
 
Sinopec and Addax are entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil from the retained interest on Block 2 until Sinopec and Addax Sub recover 100% of ERHC’s carried costs.
 
 
JDZ Block 3 Participation Agreement
February 15, 2006
1. ERHC Energy Inc
 
2a. Addax Petroleum Resources Nigeria Limited
 
2b. Addax Petroleum Corporation
 
 
ERHC assigns 15% of participating interest to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) leaving ERHC with a 10% participating interest.
 
Consideration from Addax Sub to ERHC for the 15% acquired interest is $7.5 million.
 
In addition, Addax to pay all of ERHC’s future costs for petroleum operations as in respect of the 10% interest retained by ERHC in Block 3.
 
Addax is entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil until Addax Sub recovers 100% of the carried costs.


JDZ Block 4 Participation Agreement
November 17, 2005
1. ERHC Energy Inc
 
2a.Addax Petroleum Nigeria (Offshore 2) Limited
 
2b. Addax Petroleum NV
 
 
ERHC shall assign 33.3% (Note) of participating interest to Addax Petroleum Nigeria (Offshore 2) Limited (“Addax Petroleum”) (leaving ERHC with a 26.7% participating interest).
 
Consideration from Addax Petroleum to ERHC for the interest to be acquired by Addax Petroleum is fixed at $18 million.
 
In addition, Addax Petroleum  to pay all of ERHC’s future costs for petroleum operations (“the carried costs”) in respect of ERHC’s retained interest in Block 4.
 
Addax Petroleum is entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil until Addax Petroleum recovers 100% of ERHC’s carried costs.


(Note)
By an Amendment to the Participation Agreement dated February 23 2006, ERHC and Addax Petroleum amended the Participation Agreement so that the assigned interest to Addax Petroleum would be changed  to 33.3%.  By a second Amendment to the Participation Agreement, entered into on March 14 2006, ERHC and Addax Petroleum amended the Participation Agreement so that the assigned interest to Addax Petroleum would be 33.3% and ERHC’s participating interest would be 26.7%.  By a third Amendment to the Participation Agreement dated April 11 2006, ERHC and Addax Petroleum agreed that if Godsonic, a third party, did not meet financial and other obligations for the transfer of 9% of ERHC’s participating interest to Godsonic (and was foreclosed from all claims to the 9%), ERHC would transfer 7.2% out of the 9% interest to Addax Petroleum so that Addax Petroleum’s participating interest would be 40.5% in aggregate and ERHC’s participating interest would be 19.5% in aggregate.  The amount of fresh consideration to accrue from Addax Petroleum to ERHC for the transfer of the 7.2% is not stated in the third Amendment to the Participation Agreement.  On July 15, 2008, The London Court of International Arbitration (LCIA) confirmed that under the Participation Agreement between parties no further consideration is payable by Addax Petroleum to ERHC for Addax Petroleum’s 7.2% share of the 9%.   Following the ruling by the LCIA, ERHC’s share of JDZ Block 4 increased from 17.7 percent to 19.5%. The combined share of JDZ Block 4 held by ERHC and Addax Petroleum under the Participation Agreement is 60%.
 
 
Note 4 – Income Taxes

At June 30, 2009, the Company had a consolidated net operating loss carry-forward (“NOL”) of approximately $6,700,000 expiring through 2029. The NOLs are subject to certain limitations under the Internal Revenue Code of 1986, as amended, including Section 382 of the Tax Reform Act of 1986. During the fiscal year ended September 30, 2006, the Company recognized a significant gain on the sale of various participation interests. This gain utilized a substantial portion of the Company’s NOLs and such NOLs were adjusted to remove losses limited under Section 382.

The composition of deferred tax assets and the related tax effects at June 30, 2009 and September 30, 2008 are as follows:

   
June 30,
2009
   
September 30,
2008
 
             
Net operating losses
 
$
2,266,852
   
$
1,430,118
 
Deferred tax asset
   
2,018,398
     
2,018,398
 
Allowance for loss on deposits
   
719,834
         
Accrual for asset retirement
   
164,900
     
164,900
 
                 
Total deferred tax assets
   
5,169,984
     
3,613,416
 
Valuation allowance
   
(3,151,586
)
   
(1,595,018
)
                 
Net deferred tax assets
 
$
2,018,398
   
$
2,018,398
 

The difference between the income tax benefit (provision) in the accompanying consolidated statements of operations and the amount that would result if the U.S. federal statutory rate of 34% were applied to pre-tax income (loss) for the three and nine months ended June 30, 2009 and 2008, is as follows:

   
Three Months Ended June 30,
   
Nine Months Ended June 30,
 
   
2008
   
2009
   
2008
   
2009
 
                         
Benefit at federal statutory rate
 
$
205,199
   
$
1,149,112
   
$
692,930
   
$
1,568,550
 
Non-deductible stock based compensation
   
(16,476
)
   
-
     
(16,476
)
   
-
 
Non-deductible penalties
           
(11,982
           
(11,982
 
Change in valuation allowance
   
(188,723
)
   
(1,137,130
)
   
(676,454
)
   
(1,556,568
)
                                 
Provision for income taxes
 
$
-
   
$
-
   
$
-
   
$
-
 

In preparing the Company’s consolidated financial statements, the Company assesses the likelihood that its deferred tax assets will be realized from future taxable income. The Company establishes a valuation allowance if it determines that it is more likely than not that some portion of the deferred tax assets will not be realized. Changes in the valuation allowance, when recorded, would be included in its consolidated statements of operations as a provision for (benefit from) income taxes. The Company exercises significant judgment in determining its provisions for income taxes, its deferred tax assets and liabilities and its future taxable income for purposes of assessing its ability to utilize any future tax benefit from its deferred tax assets. During 2009, the Company assessed the need for a valuation allowance against its deferred tax assets. The deferred tax asset valuation allowance was $3,151,586 as of June 30, 2009. The valuation allowance relates to the net operating losses and certain deductions that may not be realized for tax purposes.
 
FIN 48
 
On October 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”, which provides a financial statement recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.
 
 
The Company is subject to taxation in the United States and various foreign jurisdictions. The Company’s tax years for 2005 through 2008 are subject to examination by the tax authorities. The Company’s tax return for the year ended September 30, 2006 is currently under audit by the United States Internal Revenue Service (the “IRS”).  Currently, an estimate of the range of the reasonably possible change in unrecognized tax benefits in the next 12 months cannot be made.

Note 5 – Commitments and Contingencies

Subpoenas:

On May 4, 2006, a Federal court search warrant initiated by the United States Department of Justice ("DOJ") was executed on the Company.  The ("DOJ") sought various records including, among other matters, documents, if any, related to correspondence with foreign governmental officials or entities in Sao Tome and Nigeria.  Related United States Securities and Exchange Commission ("SEC") subpoenas issued on May 9, 2006 and August 29, 2006 also requested a range of documents. ERHC continues to interface with both the DOJ and SEC investigators to respond to the SEC subpoenas and any additional requests for information from the DOJ or SEC.

On July 5, 2007, the U.S. Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations served ERHC with a subpoena in connection with its review of matters relating to the potential abuse of payments made to foreign governments. The subpoena, as amended on July 18, 2007, seeks documents and information regarding ERHC’s activities, particularly those related to the acquisition of ERHC’s interests in the Gulf of Guinea.

ERHC’s attorneys, Akin Gump Strauss Hauer & Feld LLP, are assisting ERHC in responding to the subpoenas.
 
JDZ Blocks 5 & 6.

On November 3, 2008, the Company filed a suit in Nigeria to prevent any tampering with its rights in JDZ Blocks 5 and 6. The lawsuit comes after the JDA and the Joint Ministerial Council (JMC) of the Nigeria-Săo Tomé and Príncipe JDZ failed to give a satisfactory response to the Company’s letters seeking clarification on the Company’s rights in JDZ Blocks 5 and 6 following media reports stating that the JMC had approved  the Company’s removal from the Blocks. The Company was awarded a 15% working interest in each of the Blocks in a 2005 bid/licensing round conducted by the JDA, following the exercise by ERHC of preferential rights in the Blocks as guaranteed by contract and treaty.  If the Company fails to prevail in its lawsuit, there could be significant adverse affects on the Company’s future planned operations in JDZ Blocks 5 and 6.
 
In November 2008, the Company dispatched notices of arbitration for service on the JDA and the governments of Nigeria and Sao Tome & Principe to commence arbitration in London. ERHC wants the London Court of International Arbitration to clarify that ERHC's interests in JDZ Blocks 5 and 6 remain intact.
 
From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business.  ERHC intends to defend these matters vigorously; the Company cannot predict with certainty, however, the outcome or effect of any of the litigation or investigatory matters specifically described above or any other pending litigation or claims.  There can be no assurance as to the ultimate outcome of these lawsuits and investigations.
 
Note 6 – Subsequent Events
 
The Company evaluated all subsequent events to June 30, 2009 through August 10, 2009 and concluded that there are no significant or material transactions to be reported for the period from July 1, 2009 to August 10, 2009.
 
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements (including the notes thereto) and Item 1A of Part II, “Risk Factors,” included elsewhere in this report and the Company’s audited consolidated financial statements and the notes thereto, Item 7, “Management’s Discussion and Analysis of Financial Condition and Plan of Operations” and Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended September 30, 2008.  The Company’s historical results are not necessarily an indication of trends in operating results for any future period.   References to “ERHC” or the “Company” mean ERHC Energy Inc., a Colorado corporation, and, unless expressly stated or the context otherwise requires, its wholly owned subsidiary.

Overview

ERHC reports as a development stage enterprise as there are currently no significant operations and no revenue has been generated from business activities. The Company was formed in 1986, as a Colorado corporation, and was engaged in a variety of businesses until 1996, when it began its current operations as an independent oil and gas company.  The Company’s goal is to maximize its value through exploration and exploitation of oil and gas reserves in the Gulf of Guinea offshore of central West Africa.  The Company’s current focus is to exploit its assets, which are rights to working interests in exploration acreage in the Joint Development Zone (“JDZ”) between the Democratic Republic of Sao Tome and Principe (“DRSTP or “Tome”) and the Federal Republic of Nigeria (“FRN or “Nigeria”) and in the exclusive territorial waters of Sao Tome (the “Exclusive Economic Zone” or “EEZ”). ERHC will not directly carry out the exploration and production operations in the Joint Development Zone, but will rely on reputable technical operators, with whom the Company has entered into partnership relationships, such as Addax Petroleum Inc. and Sinopec Corporation to carry out those operations. The Company has formed relationships with these upstream oil and gas companies to assist the Company in exploiting its assets in the JDZ.

Current Business Operations

ERHC’s operations are currently concentrated in the Gulf of Guinea, off the coast of central West Africa. ERHC believes this region has the possibility of significant oil and gas reserves and has worked to realize the value of the assets it has acquired in this region.  The Company’s current operations include those below, details of which can be found at the link http://www.erhc.com/en/cms/?169.

JDZ - ERHC has working interests in six of the nine Blocks in the JDZ, a 34,548 square kilometer area approximately 200 kilometers off the coastline of Nigeria and Săo Tomé & Principe that is adjacent to several large petroleum discovery areas.  With regard to drilling in the JDZ, the Joint Development Authority (JDA), which was set up by the governments of Nigeria and Sāo Tomé & Principe to administer the JDZ, has approved the budgets for drilling in  JDZ Blocks 2, 3, and 4 in which ERHC has interests. The JDA also has approved well locations in the three Blocks. Development of ERHC’s assets in the Joint Development Zone remains the principal focus of this company and management continues to concentrate time, energies and resources on accomplishing that objective.

During the quarter, significant progress occurred on the drilling timeline for the JDZ. Addax Petroleum, the operator (and ERHC’s consortium partner) in Block 4, advised that deepwater Pathfinder drillship should arrive in August 2009 to enable Addax Petroleum  to start exploration in the Deepwater Gulf of Guinea.  ERHC holds a 19.5 percent working interest in Block 4.  Also, Sinopec JDZ Block 2 Limited notified the Joint Development Authority of its intention to commence drilling in August  2009 in JDZ Block 2 where ERHC holds a 22 percent working interest. Substantial and positive developments towards exploration have also occurred in JDZ Block 3 in which ERHC holds 10 percent interest.  ERHC expects significant announcements from the Operator of the block in due course.
 
EEZ - The government of Săo Tomé & Principe has awarded ERHC rights to participate in exploration and production activities in the EEZ, which encompasses an area of approximately 160,000 square kilometers.   These rights were granted in a May 21, 2001 Memorandum of Agreement made between the DRSTP and the Company. The Company’s rights in the EEZ expire on October 1, 2024 provided that if the company has a producing working interest in any of the EEZ Block(s) at October 1, 2024, the Company’s rights extend in such Block(s), as long as the Block(s) remains in production.
 
picture
 
Operations in the JDZ

ERHC has interests in six of the nine Blocks in the JDZ, as follows:
 
 
JDZ Block 2:  22.0% Working interest percentage

 
JDZ Block 3:  10.0% Working interest percentage

 
JDZ Block 4:  19.5% Working interest percentage

 
JDZ Block 5:  15.0% Working interest percentage

 
JDZ Block 6:  15.0% Working interest percentage

 
JDZ Block 9:  20.0% Working interest percentage
 
The working interest represents ERHC’s share of all the hydrocarbons production from the blocks and obligates ERHC to pay a corresponding percentage of the costs of drilling, production and operating the blocks. These costs in blocks 2, 3 and 4 are currently being carried by the operators, up to the production point, whereupon the operators will recover their costs from the production revenues.

In early 2008, Addax Petroleum, an experienced exploration and production company that has participation agreements with ERHC in JDZ Blocks 2, 3 and 4, and is the operator of JDZ Block 4 publicly disclosed seismic images and maps showcasing the prospectivity of its JDZ interests.  This seismic was compiled by Geco-Prakla (now WesternGeco) in 1999 when WesternGeco shot a 2D seismic survey of approximately 5,900km covering the major part of the JDZ. Interpretation carried out by WesternGeco has led to the identification of 56 prospective structures within Blocks 1 to 9 in the JDZ, of which 17 were defined as prospects and 39 as leads. WesternGeco used reservoir parameters similar to those known from nearby fields in Nigeria and Equatorial Guinea. Combined recoverable reserves potential of the 17 prospects was estimated by WesternGeco. The scope of the WesternGeco report was to interpret and map seismic data, highlight prospectivity, and calculate volumetrics. .  However whatever the interpretation given, seismic data and visualization techniques are not conclusive in determining if hydrocarbons are present in economically producible amounts.

In February 2009, an independent engineering firm Netherland Sewell and Associates, Inc. (“NSA”) completed an independent assessment of the Company’s unrisked and risked prospective resources in three of the six Joint Development Zone (JDZ) Blocks in which the Company has interests. The NSA report examines oil prospects in JDZ Blocks 2, 3 and 4 and the findings are presented in “Analysis of Risked and Unrisked Resources  on page 20 of this Quarterly Report.
 
The estimate of "recoverable reserves potential" based on WesternGeco's report, which interpreted and mapped seismic data, highlighted prospectivity and calculated volumetrics, was not based on any attempt to comply with the SEC definition of reserves and, accordingly the estimate of recoverable reserves potential is not presented. ERHC Energy has access to the data compiled by WesternGeco under the terms of a data use license with WesternGeco. . 
 
Operations in JDZ Block 4

ERHC’s consortium partner Addax Petroleum is the operator of JDZ Block 4. WesternGeco’s interpretation of seismic data indicates significant recoverable reserves in JDZ Block 4.  However whatever the interpretation, seismic data and visualization techniques are not conclusive in determining if hydrocarbons are present in economically producible amounts. Addax Petroleum has secured JDA approval to explore the Kina Prospect. Addax Petroleum previously announced that it signed an agreement with a subsidiary of Transocean Ltd. for the provision and operation of the Deepwater Pathfinder drillship to commence its exploration drilling campaign in the Deepwater Gulf of Guinea. As of July 27, 2009, Addax Petroleum had announced that it expects to take delivery of the Deepwater Pathfinder in August 2009 and intends to commence the consecutive drilling of four wells, the first of which is the Kina prospect in Block 4 of the JDZ.  ERHC holds a 19.5 percent working interest in JDZ Block 4.

Operations in JDZ Block 3

Anadarko Petroleum is the operator of JDZ Block 3. WesternGeco’s interpretation of seismic data indicates significant recoverable reserves in JDZ Block 3.  However whatever the interpretation, seismic data and visualization techniques are not conclusive in determining if hydrocarbons are present in economically producible amounts. On August 8, 2007, Anadarko presented the initial proposals for exploration well locations for the Block. The Joint Development Authority has approved drilling at the Lemba Prospect. ERHC holds a 10 percent working interest in JDZ Block 3
 

Operations in JDZ Block 2 
 
ERHC’s consortium partner Sinopec is the operator in JDZ Block 2 in which ERHC holds a 22 percent working interest. WesternGeco’s interpretation of seismic data indicates significant recoverable reserves in JDZ Block 2.  However whatever the interpretation, seismic data and visualization techniques are not conclusive in determining if hydrocarbons are present in economically producible amounts. The JDA has approved drilling at the Tome Prospect in Block 2.  In 2007, Addax and Sinopec jointly entered into an agreement with a subsidiary of Aban Offshore Limited for the provision of the deepwater drillship, the Aban Abraham, which had recently been refurbished and upgraded in Singapore. Continuing delays with the Aban Abraham caused Addax and Sinopec to seek ­other deepwater drill ships.  Sinopec intends to use the drillship Sedco 702 for drilling in JDZ Block 2. Sinopec JDZ Block 2 Limited has notified the JDA of its intent to commence drilling in August 2009 in JDZ Block 2.  Sinopec believes that drillship Sedco 702 might be available for drilling in JDZ Block 2 around August 20, 2009.
 
Background of the JDZ
 
In the spring of 2001, the governments of Săo Tomé & Principe and Nigeria reached an agreement over a long-standing maritime border dispute. Under the terms of the agreement, the two established the Joint Development Zone to govern commercial activities within the disputed boundaries. The JDZ is administered by a Joint Development Authority (JDA) which oversees all future exploration and development activities in the JDZ. The remaining claimed waters of Săo Tomé & Principe are known as the Exclusive Economic Zone (EEZ). Revenues derived from the JDZ will be shared 60/40 between the governments of Nigeria and Săo Tomé & Principe, respectively.

Background of the EEZ
 
The Săo Tomé & Principe Exclusive Economic Zone (“EEZ”) describes waters of Săo Tomé that encompasses an area of approximately 160,000 square km. It is measured from claimed archipelagic baselines — territorial sea: 12 nautical miles, exclusive economic zone: 200 nautical miles. It is the largest in the Gulf of Guinea. Ocean water depths around the two islands exceed 5,000 feet, depths that have only become feasible for oil production over the past few years; however, oil and gas are produced in the neighboring countries of Nigeria, Equatorial Guinea, Gabon and Congo.  The African coast is less than 400 nautical miles offshore, which means the exclusive economic zones of the concerned countries overlap.

The government of Săo Tomé & Principe has awarded ERHC rights to participate in exploration and production activities in EEZ). ERHC’s rights include the following:

 
The right to receive up to two blocks of ERHC’s choice; and
 
 
The option to acquire up to a 15% paid working interest in another two blocks of ERHC’s choice.
 
ERHC would be responsible for its proportionate share of exploration and exploitation costs in the EEZ blocks.
 

Results of Operations

Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008

General and administrative expenses increased from $820,462 in the three months ended June 30, 2008 to $1,261,847 in the three months ended June 30, 2009.  This increase came despite an ongoing effort to reduce operating expenses and was due primarily to an increase in legal expenses as the Company pressed its legal options in protecting its interests in JDZ Blocks 5 and 6. See “Legal Proceedings” in Item 1 of Part II of this report.

During the three months ended June 30, 2009, the Company had a net loss of $3,379,743 compared with a net loss of $604,173 for the three months ended June 30, 2008.  The increase in loss was attributable to the increase in legal fees described above and the Company’s decision to make a $2,117,158 provision for loss against deposits, totaling $5,292,897,  in a financial institution that has been placed in receivership. Additionally, interest income decreased from $225,079 in the three months ended June 30, 2008 to $8,339 in the three months ended June 30, 2009, due to a decline in cash balance maintained by the Company,  a general decline in interest rates and loss of interest income as the Company switched from an interest bearing but not guaranty deposits to non interest bearing but guaranty deposits accounts.
 

Nine Months Ended June 30, 2009 Compared with Nine Months Ended June 30, 2008

General and administrative expenses decreased from $2,994,433 in the nine months ended June 30, 2008 to $2,889,509 in the nine months ended June 30, 2009.   During the nine months ended June 30, 2009, the Company had a net loss of $4,613,383 compared with a net loss of $2,038,029 for the nine months ended June 30, 2008.  The increase in loss was attributable to the Company’s decision to make a $2,117,158 provision for loss against deposits, totaling $5,292,897, in a financial institution that has been placed in receivership. Additionally, interest income decreased from $979,904 in the nine months ended June 30, 2008 to $420,514 in the nine months ended June 30, 2009, due to a decline in cash balance maintained by the Company, a general decline in interest rates and loss of interest income as the Company switched from an interest bearing but not guaranty deposits to non interest bearing but guaranty deposits accounts.  
 
Liquidity and Capital Resources

As of June 30, 2009, the Company had $23,597,089 in cash and cash equivalents and short-term investments and positive working capital of $20,407,317.  Management believes that this cash position should be sufficient to support the Company’s working capital requirements for more than 12 months.

Off-Balance Sheet Arrangements

At June 30, 2009, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition or results of operations.

Debt Financing Arrangements

At June 30, 2009, the Company had short-term debt of $33,513 bearing interest at 5.5% per year payable to an individual. The Company had other current liabilities of $5,750,376 including related party liabilities as follows: $195,175 in compensation due to certain officers and key employees, and $49,063 owed to the Company’s board of directors for directors’ fees. Included in current liabilities is also a $4,803,750 liability to Feltang International Inc. that will be satisfied upon issuance of 5,250,000 shares of common stock.
 
Analysis of Risked and Unrisked Resources

In February 2009, an independent engineering firm Netherland Sewell and Associates, Inc. completed an independent assessment of the Company’s unrisked and risked prospective resources in three of the six Joint Development Zone (JDZ) Blocks in which we have interests. The report examines oil prospects in JDZ Blocks 2, 3 and 4 as of December 31, 2008.  Following is a summary of the findings.
 
   
UNRISKED PROSPECTIVE RESOURCES
 
   
Low Estimate (P90)
   
Best Estimate (P50)
   
High Estimate (P10)
 
Prospect
 
Oil
(MBBL)
   
Gas
(MMCF)
   
Oil
(MBBL)
   
Gas
(MMCF)
   
Oil
(MBBL)
   
Gas
(MMCF)
 
JDZ 2
   
40,577
     
45,742
     
77,007
     
93,948
     
119,476
     
150,706
 
JDZ 3
   
18,045
     
21,092
     
27,343
     
32,953
     
37,877
     
46,378
 
JDZ 4
   
150,990
     
157,133
     
231,667
     
245,308
     
319,434
     
342,658
 
Total(1)
   
209,612
     
223,967
     
336,017
     
372,209
     
476,787
     
539,742
 

 
   
RISKED PROSPECTIVE RESOURCES
 
   
Low Estimate (P90)
   
Best Estimate (P50)
   
High Estimate (P10)
 
Prospect
 
Oil
(MBBL)
   
Gas
(MMCF)
   
Oil
(MBBL)
   
Gas
(MMCF)
   
Oil
(MBBL)
   
Gas
(MMCF)
 
JDZ 2
   
19,492
     
22,334
     
38,334
     
47,908
     
60,320
     
78,150
 
JDZ 3
   
5,807
     
6,817
     
8,751
     
10,543
     
12,094
     
14,771
 
JDZ 4
   
58,666
     
56,244
     
88,437
     
86,282
     
120,297
     
118,961
 
Total(1)
   
83,965
     
85,395
     
135,522
     
144,733
     
192,711
     
211,882
 

(1)Totals are the arithmetic sum of multiple probability distributions. Totals may not add because of rounding.
   
Below is a brief glossary of what the terms mean:

Oil volumes are expressed in thousands of barrels (MBBL).

Gas volumes are expressed in millions of cubic feet (MMCF).

Prospective resources are those quantities of petroleum estimated as of a given date, to be potentially recoverable from undiscovered accumulations. This report examines ERHC’s prospective resources as of December 31, 2008.

Unrisked prospective resources are the volumes estimated to be recoverable in the case of a successful petroleum discovery being made.

Risked prospective resources are calculated by multiplying the unrisked resources by the geological chance of success to account for the risk of drilling an unsuccessful exploration well.

P90 - The quantity for which there is a 90 percent probability that the quantities actually recovered will equal or exceed the low estimate.

P50 - The quantity for which there is a 50 percent probability that the quantities actually recovered will equal or exceed the best estimate.

P10 - The quantity for which there is a 10 percent probability that the quantities actually recovered will equal or exceed the high estimate.
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s current focus is to exploit its primary assets, which are rights to working interests in the JDZ and EEZ under agreements with the JDA and DRSTP.  The Company intends to continue to form relationships with other oil and gas companies with technical and financial capabilities to assist the Company in leveraging its interests in the EEZ and the JDZ.  The Company currently has no other operations.

As of June 30, 2009, all of the Company's operations were located outside the United States.  The Company’s primary assets are agreements with DRSTP and the JDA, which provide ERHC with rights to participate in exploration and production activities in the Gulf of Guinea off the coast of central West Africa.  This geographic area of interest is controlled by foreign governments that have historically experienced volatility, which is out of management’s control. The Company’s ability to exploit its interests in the agreements in this area may be impacted by this circumstance.

The future success of the Company’s international operations may also be adversely affected by risks associated with international activities, including economic and labor conditions, political instability, risk of war, expropriation, renegotiation or modification of existing contracts, tax laws (including host-country import-export, excise and income taxes and United States taxes on foreign subsidiaries) and changes in the value of the U.S. dollar versus the local currencies in which future oil and gas producing activities may be denominated.  As well, changes in exchange rates may adversely affect the Company's future results of operations and financial condition.

The Company holds no derivative financial or commodity instruments, nor does it engage in any foreign currency denominated transactions.

Item 4. Controls and Procedures

The Company’s Chief Operating Officer and Acting Chief Executive Officer and Principal Accounting Officer participated in an evaluation by management of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2009.  Based on their participation in that evaluation, the Company’s Chief Executive Officer and Principal Accounting Officer concluded that as of June 30, 2009, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that ERHC files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure under the Exchange Act. ERHC officers also concluded at June 30, 2009 that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.

There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

DOJ, SEC and U.S. Senate Committee Subpoenas

On May 4, 2006, a search warrant issued by the U.S. District Court of the Southern District of Texas, Houston Division, was executed on ERHC seeking various records including, among others, documents, if any, related to correspondence with foreign governmental officials or entities in Sao Tome and Nigeria.  The search warrant cited, among other things, possible violations of the FCPA, Section 10(b) of the Exchange Act, Rule 10b-5 under the Exchange Act and criminal conspiracy and wire fraud statutes.  ERHC filed suit in federal district court in Texas in June 2006 seeking to protect the Company’s attorney-client privileged documents and to allow its counsel to determine the factual basis for the DOJ’s search warrant affidavit, which is currently under seal.

A related SEC subpoena was issued on May 9, 2006, and a second related subpoena issued on August 29, 2006.  The subpoenas request from ERHC a range of documents including all documents related to correspondence with foreign governmental officials or entities in Sao Tome and Nigeria, personnel records (specifically, those regarding the Company’s former Chief Financial Officer, Franklin Ihekwoaba) and other corporate records.  The Company has been actively responding to both subpoenas.

On July 5, 2007, the U.S. Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations served ERHC with a subpoena, in connection with its review of matters relating to the potential abuse of payments made to foreign governments. The subpoena, as amended on July 18, 2007, seeks documents and information regarding ERHC’s activities, particularly those related to the acquisition of ERHC’s interests in the Gulf of Guinea.  ERHC’s attorneys, Akin Gump Strauss Hauer & Feld LLP, are assisting ERHC in responding to all subpoenas.

The Company anticipates that these investigations may be lengthy and does not know when they will conclude.  If violations are found, the Company may be subject to criminal, civil and/or administrative sanctions, including substantial fines, and the resolution or disposition of these matters could have a material adverse effect on its business, prospects, operations, financial condition and cash flows.

JDZ Blocks 5 & 6  

On November 3, 2008, the Company filed a suit in Nigeria to prevent any tampering with its rights in JDZ Blocks 5 and 6. The lawsuit comes after the JDA and the Joint Ministerial Council (JMC) of the Nigeria-Săo Tomé and Príncipe JDZ failed to give a satisfactory response to the Company’s letters seeking clarification on the Company’s rights in JDZ Blocks 5 and 6 following media reports stating that the JMC had approved of the Company’s removal from the Blocks. The Company was awarded a 15% working interest in each of the Blocks in a 2005 bid/licensing round conducted by the JDA, following the exercise by ERHC of preferential rights in the Blocks as guaranteed by contract and treaty.  If the Company fails to prevail in its lawsuit, there could be significant adverse affects on the Company’s future planned operations in JDZ Blocks 5 & 6.
 
In November 2008, the Company dispatched notices of arbitration for service on the JDA and the governments of Nigeria and Sao Tome & Principe to commence arbitration in London. ERHC wants the London Court of International Arbitration to clarify that ERHC's interests in JDZ Blocks 5 and 6 remain intact.

From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business.  ERHC intends to defend these matters vigorously; the Company cannot predict with certainty, however, the outcome or effect of any of the litigation or investigatory matters specifically described above or any other pending litigation or claims.  There can be no assurance as to the ultimate outcome of these lawsuits and investigations.

Item 1A.  Risk Factors

Our operations and financial results are subject to various risks and uncertainties that could affect our business, financial condition, results of operations, and trading price of our common stock, including but not limited to, failing financial institutions.  Please refer to our annual report on Form 10-K/A for fiscal year 2008 for additional information concerning these and other uncertainties that could negatively impact the Company.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not make any sales of unregistered securities during the third quarter of Fiscal 2009.

Item 3.  Defaults Upon Senior Securities

None.


Item 4.  Submission of Matters to A Vote of Security Holders

None.

Item 5. Other Information

On July 10, ERHC reported on Form 8-K that Mr. Clement Nwizubo, a director of the Company, had unexpectedly passed away.  Mr. Nwizubo was a valued director, chairperson of ERHC’s audit committee and the designated financial expert of the audit committee.   The Company is saddened by this development and is currently seeking a replacement for Mr. Nwizubo.
 
 
Item 6. Exhibits

   
Signitures
     
 
Rule 13a-14(a) Certification of the Chief Executive Officer
     
 
Rule 13a-14(a) Certification of the Principal Accounting Officer
     
 
Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
     
 
Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Accounting Officer
     
   
* Filed or furnished herewith. 
 

 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ERHC Energy Inc.
 
Name
Title
Date
     
/s/ Peter Ntephe
Chief Operating Officer , and
August 10, 2009
Peter Ntephe
Acting Chief Executive Officer
 
     
/s/ Sylvan Odobulu
Controller
August 10, 2009
Sylvan Odobulu
Principal Accounting Officer
 
 
 
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