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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
10-Q
(MARK
ONE)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended December 31, 2004
o 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
ENVIRONMENTAL
REMEDIATION HOLDING COPORATION
(Name
of small business issuer in its charter)
|
Colorado |
88-0218499 |
|
(State
of Incorporation) |
(I.R.S.
Employer Identification No.) |
5444
Westheimer Road
Suite
1570
Houston,
Texas 77056
(Address
of executive offices, including zip code.)
(713)
626-4700
(Registrant's
telephone number)
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 o
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act)
Yes
x No o
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 common shares outstanding as of February 7, 2004 was
635,843,798.
TABLE
OF CONTENTS
ENVIRONMENTAL
REMEDIATION HOLDING CORPORATION
Part
I. Financial Information
|
Item
1. |
|
Financial
Statements |
|
Page |
| |
|
|
|
|
| |
|
Balance
Sheets as of December 31, 2004 |
|
|
| |
|
and
September 30, 2004 |
|
2 |
| |
|
|
|
|
| |
|
Statements
of Operations for the Three Months Ended |
|
|
| |
|
December
31, 2004 and 2003 |
|
3 |
| |
|
|
|
|
| |
|
Statements
of Cash Flows for the Three Months Ended |
|
|
| |
|
December
31, 2004 and 2003 |
|
4 |
| |
|
|
|
|
| |
|
Notes
to the Financial Statements |
|
5 |
| |
|
|
|
|
|
Item
2. |
|
Management's
Discussion and Analysis of Financial Condition |
|
|
| |
|
and
Results of Operations |
|
13 |
| |
|
|
|
|
|
Item
3. |
|
Quantitative
and Qualitative Disclosures about Market Risk |
|
15 |
| |
|
|
|
|
|
Item
4. |
|
Controls
and Procedures |
|
15 |
| |
|
|
|
|
| |
|
|
|
|
| |
|
Part
II. Other Information |
|
|
| |
|
|
|
|
|
Item
1. |
|
Legal
Proceedings |
|
16 |
| |
|
|
|
|
|
Item
2. |
|
Unregistered
Sale of Securities and Use of Proceeds |
|
16 |
| |
|
|
|
|
|
Item
3. |
|
Defaults
Upon Senior Securities |
|
17 |
| |
|
|
|
|
|
Item
4. |
|
Submission
of Matters to a Vote of Security Holders |
|
17 |
| |
|
|
|
|
|
Item
5. |
|
Other
Information |
|
17 |
| |
|
|
|
|
|
Item
6. |
|
Exhibits
and Reports on Form 8-K |
|
17 |
| |
|
|
|
|
| |
|
Signatures |
|
18 |
ENVIRONMENTAL
REMEDIATION HOLDING CORPORATION
BALANCE
SHEETS
| |
|
|
|
|
|
| |
|
(unaudited) |
|
(audited) |
|
| ASSETS |
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
Cash |
|
$ |
915,330 |
|
$ |
20,272 |
|
|
Restricted
cash |
|
|
3,026
|
|
|
3,026
|
|
|
Prepaid
expenses and other current assets |
|
|
26,258
|
|
|
26,258
|
|
|
Total
current assets |
|
|
944,614
|
|
|
49,556
|
|
|
DRSTP
concession fee |
|
|
5,679,000
|
|
|
5,679,000
|
|
|
TOTAL
ASSETS |
|
|
6,623,614
|
|
|
5,728,556
|
|
| |
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
|
135,564
|
|
|
227,970
|
|
|
Accounts
payable and accrued liabilities, related party |
|
|
59,603
|
|
|
—
|
|
|
Accrued
officers salaries |
|
|
723,035
|
|
|
723,035
|
|
|
Accrued
interest |
|
|
1,807
|
|
|
65,917
|
|
|
Accrued
interest, related party |
|
|
58,493
|
|
|
2,256,189
|
|
|
Asset
retirement obligation |
|
|
485,000
|
|
|
485,000
|
|
|
Current
portion of convertible debt |
|
|
33,512
|
|
|
1,626,033
|
|
|
Total
current liabilities |
|
|
1,497,014
|
|
|
5,384,144
|
|
|
LONG
TERM DEBT |
|
|
|
|
|
|
|
|
Line
of credit, related party |
|
|
1,000,000
|
|
|
—
|
|
|
Nonconvertible
debt, related party |
|
|
10,134,084
|
|
|
403,644
|
|
|
Convertible
debt, related party, net of discount |
|
|
—
|
|
|
8,969,420
|
|
|
Total
long term debt |
|
|
11,134,084
|
|
|
9,373,064
|
|
| |
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
12,631,098
|
|
|
14,757,208
|
|
| |
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES |
|
|
—
|
|
|
—
|
|
|
SHAREHOLDERS’
EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; authorized
10,000,000;
none issued and outstanding |
|
|
|
|
|
|
|
|
Common
stock, $0.0001 par value; authorized 950,000,000
shares;
issued and outstanding 608,749,835 and
599,952,982
at December 31, 2004 and September 30, 2004,
respectively |
|
|
60,876
|
|
|
59,996
|
|
|
Additional
paid-in capital |
|
|
69,553,065
|
|
|
59,505,459
|
|
|
Accumulated
deficit |
|
|
(75,228,301 |
) |
|
(68,137,233 |
) |
|
Deferred
compensation |
|
|
(393,124 |
) |
|
(456,874 |
) |
|
Total
shareholders’ deficit |
|
|
(6,007,484 |
) |
|
(9,028,652 |
) |
|
TOTAL
LIABILITIES & SHAREHOLDERS DEFICIT |
|
$ |
6,623,614 |
|
$ |
5,728,556 |
|
ENVIRONMENTAL
REMEDIATION HOLDING CORPORATION
STATEMENTS
OF OPERATIONS
| |
|
|
|
|
|
| |
|
(unaudited) |
|
(unaudited) |
|
|
COSTS
AND EXPENSES |
|
|
|
|
|
|
General
and administrative expense |
|
$ |
643,235 |
|
$ |
564,702 |
|
|
Interest
expense |
|
|
698,258
|
|
|
421,894
|
|
|
Loss
on extinguishment of debt |
|
|
5,749,575
|
|
|
—
|
|
| |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(7,091,068 |
) |
$ |
(986,596 |
) |
| |
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted |
|
$ |
(0.01 |
) |
$ |
— |
|
| |
|
|
|
|
|
|
|
|
Weighted
average number of common shares
outstanding |
|
|
602,051,555
|
|
|
584,232,944
|
|
ENVIRONMENTAL
REMEDIATION HOLDING CORPORATION
STATEMENTS
OF CASH FLOWS
| |
|
|
|
|
|
| |
|
(unaudited) |
|
(unaudited) |
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net
loss |
|
$ |
(7,091,068 |
) |
$ |
(986,596 |
) |
|
Adjustments
to reconcile net loss to net cash used by operating
activities |
|
|
|
|
|
|
|
|
Amortization of beneficial conversion feature associated with convertible
debt |
|
|
413,503
|
|
|
152,502
|
|
|
Amortization
of deferred compensation |
|
|
63,750
|
|
|
—
|
|
|
Loss
on extinguishment of debt |
|
|
5,749,575
|
|
|
—
|
|
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets |
|
|
—
|
|
|
4,793
|
|
|
Accounts
payable and other accrued liabilities |
|
|
83,240
|
|
|
64,253
|
|
|
Accounts
payable, and accrued liabilities related party |
|
|
59,603
|
|
|
—
|
|
|
Accrued
interest |
|
|
284,756
|
|
|
269,392
|
|
|
Net
cash used by operating activities |
|
|
(436,641 |
) |
|
(495,656 |
) |
| |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds
from line of credit, related party |
|
|
1,000,000
|
|
|
—
|
|
|
Proceeds
from convertible debt, related party |
|
|
402,099
|
|
|
—
|
|
|
Repayment
of convertible debt, related party |
|
|
(70,400 |
) |
|
|
|
|
Proceeds
from common stock, net of expenses |
|
|
— |
|
|
243,750
|
|
|
Proceeds
from convertible debt, related party |
|
|
— |
|
|
228,570
|
|
|
Net
cash provided by financing activities |
|
|
1,331,699
|
|
|
472,320
|
|
|
Net
increase in cash |
|
|
895,058
|
|
|
(23,336 |
) |
|
Cash,
beginning of period |
|
|
20,272
|
|
|
23,336
|
|
|
Cash,
end of period |
|
$ |
915,330 |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
Noncash
operating and financing activities: |
|
|
|
|
|
|
|
|
Stock
issued in exchange for: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
175,645 |
|
$ |
60,991 |
|
|
Convertible
debt and accrued interest |
|
|
1,677,371
|
|
|
1,066,834
|
|
|
Stock
to be issued for accrued interest, related party |
|
|
2,461,712
|
|
|
—
|
|
|
Stock
to be issued for inducement to restructure convertible debt and provide
line of credit |
|
|
5,749,575
|
|
|
—
|
|
|
Beneficial
conversion feature associated with convertible debt |
|
|
331,699
|
|
|
354,371
|
|
|
Exchange
of convertible and non convertible debt, related party |
|
|
10,134,084
|
|
|
—
|
|
|
Beneficial
conversion feature repurchased |
|
|
347,517
|
|
|
—
|
|
NOTE
1 - BUSINESS ORGANIZATION
The
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 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 for the year
ended September 30, 2004.
General
Business and Nature of Operations and Significant Accounting Policies
Environmental
Remediation Holding Corporation (“ERHC”) is an independent oil and gas company.
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 and
production in the Gulf of Guinea offshore of central West Africa. The Company’s
current focus is to exploit its only assets, which are rights to working
interest in exploration acreage in the Joint Development Zone (“JDZ”) between
the Democratic Republic of Sao Tome & Principe (“DRSTP”) and the Federal
Republic of Nigeria (“FRN”) and in the exclusive territorial waters of Sao Tome
(the “Exclusive Economic Zone” or “EEZ”). The Company intends to form
relationships with other oil and gas companies with technical and financial
capabilities to assist the Company in exploiting its assets in the EEZ and the
JDZ. The Company currently has no other operations.
In
May 1997, the Company entered into an exclusive joint venture with the DRSTP
(the “1997 Agreement”). The 1997 Agreement required the Company to pay a
$5,000,000 concession fee to the Sao Tome government. In July 2002, the
1997 Agreement was replaced by a Memorandum of Agreement (the “2001 Agreement”)
which was embodied in a Consent Award issued by the arbitrator as a result of
the satisfaction of several conditions, including the ratification of a treaty
between the FRN and the DRSTP.
The
2001 Agreement gives the Company rights to participate in exploration and
production activities in both the exclusive territorial waters of Sao Tome’s EEZ
and an area between Sao Tome and FRN that the two nations have designated as a
JDZ.
In
April 2003, the Company and DRSTP entered into an Option Agreement (the “2003
Option Agreement”) in which the Company relinquished certain financial interests
in the JDZ in exchange for additional exploration rights in the JDZ. In April
2003, the Company entered into an Administration Agreement with the JDA. The
Administration Agreement is the formal agreement by the JDA that it will fully
implement the ERHC preferential rights to acreage interests in the JDZ as set
forth in the 2003 Option Agreement and describes certain procedures regarding
the exercising of these rights. The Company retains exploration rights in the
EEZ via the 2001 Agreement and has acquired additional exploration rights in the
JDZ via the 2003 Option Agreement. The Company currently has no other
operations.
Concentration
of risks
The
Company primarily transacts its business with two financial institutions. From
time to time the amount on deposit in either one of theses institutions may
exceed the $100,000 federally insured limit. The balances are maintained
in demand accounts to minimize risk.
Should
circumstances impede the Company from perfecting its interests in the 2001
Agreement with DRSTP, or the 2003 Option Agreement the Company’s business would
be materially affected. Should the Company perfect its interests in the 2001
Agreement and the 2003 Option Agreement, there is no certainty that the Company
will be able to obtain sufficient financial and other resources to develop
its interests.
Asset
retirement obligation
The
Company’s asset retirement obligation (“ARO”) relates to the plugging and
abandonment of certain oil and gas properties in Wichita Falls, Texas. The
provisions of Statement of Financial Accounting Standards (“SFAS”) No. 143
“Accounting
for Asset Retirement Obligations” require
the fair value of a liability for an asset retirement obligation to be recorded
and a corresponding increase in the carrying amount of the associated asset. The
cost of the tangible asset, including the initially recognized asset retirement
cost is depleted over the useful life of the asset. If the fair value of the
estimated asset retirement obligation changes, an adjustment is recorded to the
retirement obligation and the asset retirement cost. The offsetting ARO
liability is recorded at fair value, and accretion expense recognized as the
discounted liability is accredited to its expected settlement value. The fair
value of the ARO asset and liability is measured using expected future cash out
flows discounted at the Company’s credit adjusted risk free interest rate. These
oil and gas properties were abandoned and written off during the year ended
September 30, 1999 and the Company believes the current liability is fully
accreted and represents management’s best estimate of the fair value of the
outstanding obligation.
Impairment
of long-lived assets
The
Company evaluates the recoverability of long-lived assets when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
Impairments are charged to operations in the period to which events and
circumstances indicate that such assets might be impaired. Management of
the Company has evaluated its investment in its DRSTP concession fee in light of
its 2003 Option Agreement and believes that there have been no events or
circumstances that would indicate that such asset might be impaired.
Income
taxes
The
Company accounts for income taxes under the provisions of SFAS No. 109 -
“Accounting
for Income Taxes,”
which provides for an asset and liability approach in accounting for income
taxes. Under this approach, deferred tax assets and liabilities are
recognized based on anticipated future tax consequences, using currently enacted
tax laws, attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases.
Common
stock issued for goods received and services rendered
The
Company has issued shares of common stock for goods received and services
rendered. The costs of the goods or services are valued according to the terms
of relative agreements or market value on the date of obligation. The cost of
the goods or services has been charged to operations.
Net
loss per share
Basic
earnings (loss) per share is computed by dividing net earnings or loss by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net earnings or loss by the
weighted average number of shares outstanding, after giving effect to
potentially dilutive common share equivalents outstanding during the
period. Potentially dilutive common share equivalents are not included in
the computation of diluted earnings per share if they are anti-dilutive.
Diluted loss per common share is the same as basic for all periods presented
because the effect of potentially dilutive common shares arising from
outstanding stock warrants and options was anti-dilutive.
Stock-based
compensation
In
November 2004, the board of directors authorized a 2004 Compensatory Stock
Option Plan. The Company has set a record date and the plan was adopted at a
special meeting of the stockholders of the Company held on February 4,
2005.
The
Company has adopted SFAS No. 123 - “Accounting
for Stock Based Compensation.”
Under SFAS No. 123, the Company is permitted to either record expenses for
stock options and other employee compensation plans based on their fair value at
the date of grant or to continue to apply the current accounting policy
under Accounting Principles Board, (“APB”) Opinion No. 25 “Accounting
for Stock Issued to Employees,”
and recognize compensation expense, if any, based on the intrinsic value of the
equity instrument at the measurement date. In December of 2002, the Financial
Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting
for Stock- Based Compensation - Transition and Disclosure - An Amendment to FASB
Statement No. 123” to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. The
Company elected to not change to the fair value based method of accounting for
stock based compensation. Additionally, the statement amended disclosure
requirements of SFAS No. 123 to require more prominent disclosure in both
annual and interim financial statements. We elected to continue following APB
No. 25 and when required, provide the pro forma provisions of SFAS
No. 123.
During
the year ended September 30, 2004, the Company issued options to purchase
3,000,000 shares of common stock to an employee as part of his initial
compensation package. These options have an exercise price of $0.30 per share,
with 1,000,000 options vesting each of July, 2004, 2005 and 2006.
Had
compensation costs for stock options granted to an employee plan been determined
based on the fair value at the grant date for the three months ended December
31, 2004 and 2003, consistent with the provisions of SFAS No. 123, the
net loss and net loss per share would have been reflective of the pro forma
amounts indicated below:
| |
|
|
Three
Months Ended December 31 |
|
| |
|
|
2004 |
|
|
2003 |
|
| |
|
|
|
|
|
|
|
|
Net
loss - as reported |
|
$ |
(7,091,068 |
) |
$ |
(986,596 |
) |
| |
|
|
|
|
|
|
|
|
Plus:
stock-based compensation expense
determined using the intrinsic value
of the
option at the measurement date |
|
|
63,750 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
Less:
stock-based employee compensation
determined under fair value method
for all
awards granted to employees |
|
|
(107,479 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
Net
loss - pro forma |
|
$ |
(7,134,797 |
) |
$ |
(986,596 |
) |
| |
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share - as reported |
|
$ |
(0.01 |
) |
$ |
— |
|
|
Basic
and diluted net loss per share - pro forma |
|
$ |
(0.01 |
) |
$ |
— |
|
| |
|
|
|
|
|
|
|
The
Company did not grant options to employees during the three months ended
December 31, 2004 and 2003.
New
accounting pronouncements
On
December 16, 2004, FASB issued SFAS No. 123 (revised 2004), “Share-Based
Payment” (“SFAS
No. 123(R)”), which is a revision of SFAS No. 123,
“Accounting for Stock-Based Compensation.” SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting
for Stock Issued to Employees,”
and amends SFAS No. 95,
“Statement of Cash Flows.” Generally,
the approach in SFAS No. 123(R) is similar to the approach described in SFAS No.
123. However, SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative. The new standard will be effective for public entities in the first
interim or annual reporting period beginning after June 15, 2005. The Company
has not yet assessed the impact of adopting this new standard.
Note
2 - Sao Tome Concession
Concession
Fee Payment
The
1997 Agreement required the Company to pay a $5,000,000 concession fee to the
DRSTP.
In
October 1999, the DRSTP claimed that the Company had breached certain terms of
the 1997 Agreement and announced a termination of the Agreement. The Company
immediately exercised its rights to have the matter settled via international
arbitration in accordance with the terms of the 1997 Agreement.
Concession
Fee Agreement
After
the acquisition by Chrome Energy, LLC a company affiliated with Sir Emeka Offor,
the chairman of the board of directors of the Company, (“Chrome”) in February
2001, the Company initiated negotiations with the DRSTP concurrent with the
arbitration process. On May 21, 2001, the Company and the DRSTP reached the 2001
Agreement, witnessed by the FRN which replaced the 1997 Agreement and suspended
the arbitration process. In July 2002, the 2001 Agreement was embodied in a
Consent Award issued by the arbitrator as a result of the satisfaction of
several conditions, including the ratification of a treaty between the FRN and
the DRSTP relative to the JDZ between the countries, and will remain in effect
through September 30, 2024.
The
2001 Agreement gives ERHC rights to participate in exploration and production
activities in both the EEZ of the DRSTP and an area between DRSTP and the FRN
that the two nations have designated as a JDZ. Since the 2001 Agreement replaces
the 1997 Agreement, it requires the Company to relinquish its rights arising
under the 1997 Agreement including any interest it had in STPetro, S.A. the
national petroleum company of the DRSTP in which the Company previously owned a
49% equity interest (“STPetro”).
The
2003 Option Agreement gives ERHC rights to participate in exploration and
production activities in the JDZ in exchange for relinquishing its rights
to participate in exploration and production activities in the JDZ granted under
the 2001 Agreement. ERHC received the following rights under the 2003 Option
Agreement:
| |
ERHC
may exercise options to acquire fractional working interests in six (6) of
the nine (9) blocks that have been announced by the JDA will be available
for bidding in the JDZ. A block is an area designated as an individual
unit for exploration or production of crude oil and natural gas. These
options must be exercised in sequence and are subject to certain
restrictions of choice. Additionally, the amount of signature bonus that
is payable by ERHC to acquire these working interests is zero in four (4)
blocks. ERHC must pay its proportionate share of any signature bonuses in
two (2) blocks. Specifically, the percentages and signature bonuses
payable in each option pick are as follows: |
| |
|
| |
|
Working
Interest |
|
| |
Option
Pick |
Percentage |
Signature
Bonus Payable |
| |
ERHC
Choice 1 |
15% |
$0 |
| |
ERHC
Choice 2 |
15% |
100%
of 15% of the total Signature Bonus |
| |
ERHC
Choice 3 |
20% |
$0 |
| |
ERHC
Choice 4 |
30% |
$0 |
| |
ERHC
Choice 5 |
25% |
$0 |
| |
ERHC
Choice 6 |
20% |
100%
of 20% of the total Signature Bonus |
On
March 29, 2004, the Company received a notification on exercise of preferential
rights in the JDZ from the JDA inviting the Company to exercise its preferential
rights in the JDZ.
On
April 20, 2004, the Company exercised its preferential rights in the JDZ under
the April 7, 2003 Administration Agreement with the JDA. The following
represents the choices made by the Company and the status of any Signature Bonus
payable by the Company for each relevant block:
|
Choice
1 |
|
15% |
Signature
Bonus |
|
Bonus
Free |
|
Block
6 |
|
Choice
2 |
|
15% |
Signature
Bonus |
|
Bonus
Payable |
|
Block
5 |
|
Choice
3 |
|
20% |
Signature
Bonus |
|
Bonus
Free |
|
Block
3 |
|
Choice
4 |
|
30% |
Signature
Bonus |
|
Bonus
Free |
|
Block
2 |
|
Choice
5 |
|
25% |
Signature
Bonus |
|
Bonus
Free |
|
Block
4 |
|
Choice
6 |
|
20% |
Signature
Bonus |
|
Bonus
Payable |
|
Block
9 |
This
exercise of the Company’s rights was subject to the following condition: if no
license is awarded or a license is awarded and subsequently withdrawn by the JDA
prior to the commencement of operations, for any reason (for example, a failure
by the licensee(s) to meet the signature bonus conditions), the Company will be
entitled to receive its nominated percentage working interest in that block in
any future licensing of that block.
Under
the 2001 Agreement ERHC retained the following rights to participate in
exploration and production activities in the EEZ subject to certain
restrictions: (a) right to receive up to two blocks of ERHC's choice without the
payment of signature bonus, 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 required to pay its proportionate share of the signature bonus and all
other costs related to the exploration and exploitation of the blocks in the
EEZ. The above is only a brief summary of the terms of the 2001 Agreement and
the 2003 Option Agreement and such summaries do not purport to be complete and
are qualified in their entirety by reference to the text of the 2001 Agreement
and 2003 Option Agreement, respectively (any and all related documents). The
2001 Agreement and 2003 Option Agreement have been filed with the SEC and are
available on the U.S. Securities and Exchange Commission’s (“SEC”) web site at
www.sec.gov.
In
August 2004, the Company entered into a Participation Agreement with Pioneer
Natural Resources whereby the companies will jointly apply for rights in the
production sharing contract for Block 2 of the JDZ.
In
September 2004, the Company entered into a Participation Agreement with Noble
Energy International, Ltd., a subsidiary of Noble Energy, Inc., whereby the
companies will jointly apply for rights in the production sharing contract for
Block 4 of the JDZ.
In
December 2004, the Company entered into a Participation Agreement with Pioneer
Natural Resources whereby the companies will jointly apply for rights in the
production sharing contract for Block 3 of the JDZ.
Note
3 - Notes Payable
Convertible
debt - non-related party
During
the quarter ended December 31, 2004 non-affiliated noteholders agreed to convert
$1,592,521 of convertible debt and $84,850 of accrued interest into 8,386,853
shares of common stock. The conversion price was $0.20 per share.
As
of December 31, 2004, the Company has $33,512 of nonaffiliated convertible debt
and $1,807 accrued but unpaid interest outstanding. As of December 31, 2004, if
the outstanding convertible debt and accrued interest were converted using the
conversion price of $0.20 per share, the Company would be required to issue
176,599 shares of common stock.
Convertible
debt - related party
During
the three months ended December 31, 2004, the company reached an agreement with
Chrome to restructure the outstanding debt totaling $10,134,084 and enter into a
new working capital line of credit.
Pursuant
to the debt restructure agreement, the Company issued a 12% note
with a principal amount of $10,134,084, to be settled at the option of the
Company at $0.175 per share, and expiring on January 31, 2007. The Company also
issued a 10% working capital line of credit in the amount of $2,500,000
which expires in January 2007 to be settled at the option of the Company at
$0.175 per share. At December 31, 2004, the total outstanding under these two
notes was $11,134,084 and if the principal is settled with common stock, the
Company would be obligated to issue 63,623,337 shares of common
stock.
The
Company agreed to issue Chrome 14,023,352 shares of common stock, 12,465,202
issued immediately, 623,260 shares issued on the advance of $1,000,000 and the
remainder issued throughout the term of the working capital loan. In addition
the Company issued 12,308,359 share of common stock to satisfy current interest
accrued but not paid of $2,461,712. (see Note 4.)
As
of February 6, 2005, a total of $1,750,000 has been funded under the line of
credit.
Note
4 - Shareholders’
Equity (Deficit)
Common
stock issued for settlement of accounts payable
During
October 2004, the Company issued 100,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of $36,437.
During
October 2004, the Company issued 160,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of $70,463.
During
October 2004, the Company issued 150,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of
$68,745.
Common
stock issued for conversion of debt and payment of accrued interest
During
the quarter ended December 31, 2004 non-affiliated noteholders agreed to convert
$1,677,371 of convertible debt and accrued interest into 8,386,853 shares of
common stock. The conversion price was $0.20 per share.
The Company agreed to issue Chrome 14,023,352 shares of common
stock, 12,465,202 issued immediately, 623,260 shares issued on the advance of
$1,000,000 and the remainder issued throughout the term of the working capital
loan. In addition the Company issued 12,308,359 share of common stock to satisfy
current interest accrued but not paid of $2,461,712. The shares of common stock
to Chrome for entering into the debt restructuring had a fair value of
$5,749,575 and have been recorded as a loss on extinguishment of debt. As of
December 31, 2004, the certificate representing these shares have not been
issued.
Note
5 - Commitments and Contingencies
Pending
Litigation and Other Contingencies
During
August 1999 and February 2001, the Company underwent changes of control.
Following the changes of control of the Company, new management and the new
board of directors were required to expend significant Company resources to
settle claims and expenses arising out of the conduct of prior management. In
addition, the Company faces additional unresolved claims and disputes, including
suits seeking recoveries in excess of $1.0 million brought by former employees
and officers for back salary and other amounts. The Company is defending
its position vigorously, but there is no certainty that the Company will
prevail. The Company is proceeding in the hope that a settlement can be
reached. As of December 31, 2004 and 2003, officers’ salaries of $723,035
have been accrued and management believes this amount will be sufficient to
settle any amounts that may be due. The Company is subject to other legal
proceedings which have arisen in the ordinary course of business and have not
been fully adjudicated. Although there can be no assurance as to the
ultimate disposition of these matters and the proceedings disclosed above, in
the opinion of management, based upon information available at this time, the
cost of defense or settlement of these actions, individually or in the
aggregate, will not have a materially adverse effect on the financial position,
results of operations, or cash flows of the Company.
Additionally,
from time to time, certain potential obligations are presented to the Company
that may have originated during periods not under existing management’s
control. These alleged obligations are generally for goods and services
for which the Company has no record. The Company actively investigates
these claims as they arise. All known material obligations of the Company
have been recorded and reflected in the financial statements, but there is no
certainty that all material claims have been presented to the Company nor have
the benefits of available statutes of limitations been considered, should they
apply.
Commitments
Through
December 31, 2004, the Company was a party to a management services agreement
with Chrome Oil Services, Ltd., a company affiliated with Sir Emeka Offor, the
chairman of the board of directors of the Company, (“COS”). Pursuant to that
agreement, COS provides the Company with management and business development
services. COS provides these services to the Company for a management fee of
$68,000 per month. As of December 31, 2004, the Chief Financial Officer
and Secretary of the Company are employees of COS that provides services to the
Company and these persons receive salaries and overhead expense reimbursement
from COS, not from the Company. Expenses not covered under the management
services agreement are paid by the Company which includes primarily general
office supplies. During each of the three months ended December 31, 2004 and
2003, total expenses incurred under this management services agreement were
$204,000. On December 23, 2004, the Company and COS cancelled, effective
December 31, 2004, the management services agreement.
The
Company’s executive officers incurred significant direct expense for travel and
related expenses of approximately $96,000 and $103,000 during the three months
ended December 31, 2004, and 2003 respectively, which were reimbursed by the
Company to COS or directly to the officers.
As
of December 31, 2004, the Company’s Houston, Texas office is leased by COS,
pursuant to the management services agreement, and is provided for the Company
pursuant to such agreement. This lease for office space expires February
2006. Effective January 1, 2005, the Company has agreed to assume the
obligations under the lease held by COS. The monthly base rent payment is $3,242
based on approximately 1,900 square feet of office space.
To
date, members of the board of directors have not received any compensation, but
have been reimbursed for expenses incurred in the performance of their
duties. In the future, the Company may decide to pay its directors.
Through
December 31, 2004, the Company had two officers and support staff that provide
services to the Company pursuant to the management services agreement with COS.
Effective January 1, 2005, the Company will assume payroll and related benefits
of officers and support staff.
In
May 2002, the Company entered into an agreement with a consulting group to
advise the Company in securing financing of up to $1,500,000 and in structuring
a joint venture arrangement with a partner. The Company is required to pay an
initial fee of 1,000,000 shares of common stock as well as to reimburse the
consultant for out of pocket expenses. In addition, the Company is obligated to
pay a 2.5% fee of the amount of capital raised and an additional fee of
2,000,000 shares of common stock contingent upon the successful first closing of
a joint venture transaction. During the three month period ended December 31,
2004, no funds were raised and no expenses were incurred under this agreement.
During the three month period ended December 31, 2003, this consulting group
assisted the Company in selling 1,000,000 shares of common stock at $0.25 per
share resulting in net proceeds of $247,750. During the three month period ended
December 31, 2003, total expenses incurred under this consulting agreement were
$8,712, of which $6,250 was charged against additional paid-in-capital as an
offset to proceeds received in the offering.
In
June 2002, the Company entered into an agreement with a consultant to assist the
Company in securing an agreement with a strategic oil and gas industry partner
to prepare the Company for participation in the award of licenses in Sao
Tome. The Company is required to pay an initial fee of 1,000,000 shares of
common stock as well as to reimburse the consultant for out of pocket
expenses. In addition, the Company is obligated to pay a 2% fee of the
cash proceeds received by the Company from a partner, a 1% fee of future carried
costs paid by the partner and 3,000,000 shares of common stock contingent upon
the successful first closing of a transaction. During the three month period
ended December 31, 2004 and 2003, no expenses were incurred under this
consulting agreement. The agreement was terminated in June 2004 except for
certain future transactions which may require payment of the
contingency.
During
May 2003, the Company entered into an agreement with a consultant to provide
general consulting services to the Company including transaction support,
evaluation of geological and seismic data, preparation of valuations and
participation in meetings with potential partners or purchasers of the Company
in connection with its oil and gas interests in the JDZ and the EEZ. The
terms of the agreement provide for monthly payments of $10,000 plus expenses for
twelve months beginning September 2003. In addition, the agreement
provides for a success fee of $50,000 should the Company close a transaction for
the sale of its interest in the JDZ or the EEZ. During July 2004, the Company
revised the agreement to a month-to-month arrangement effective June 1, 2004. In
addition, the revised agreement provides for an additional success fee of
500,000 shares of common stock. During the three month periods ended December
31, 2004 and 2003, total expenses incurred under this consulting agreement were
$43,971 and $47,718 respectively.
Note
6 - Subsequent Events
On
January 10, 2005, the Company provided for the cashless exercising of 400,000
warrants relating to the issuance of 229,788 shares of the Company’s common
stock.
On
January 25, 2005, the Board of Directors approved the increase in the salary of
the President and Chief Executive Officer, Mr. Ali Memon, to $200,000 per annum,
effective February 1, 2005. Additionally, the Company agreed to amend the
exercise price of the options granted to Mr. Memon from $0.30 per share to $0.20
per share. The financial impact of this change will be recognized in the three
month period ending March 31, 2005.
On
January 28, 2005, the Company entered into a Letter Agreement with Chrome
whereby the Company agreed to convert its two outstanding notes with Chrome
pursuant to their terms, contingent upon Chrome funding the entire $2,500,000.
As of February 6, 2005, $1,750,000 has been funded under the line of credit. The
total of these two notes after funding the full amount of the working capital
line of credit will be $12,634,084. Accordingly, the Company is obligated to
issue 72,194,766 shares of common stock to settle the principal of such notes,
assuming the line of credit is fully funded.
During
January 2005, the Company issued 175,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of $80,500.
The
Company set a record date and a special meeting of the stockholders of the
Company to be held on February 4, 2005 to vote on the adoption of the stock
option plan. On February 4, 2005, the stockholders approved the 2004
Compensatory Stock Option Plan. No options have been issued pursuant to the
stock option plan.
On
February 4, 2005, the stockholders approved changing the name of the Company to
“ERHC Energy Inc.”
During
February, 2005, the Company issued 70,000 shares of Rule 144 restricted
common stock and paid $9,000 in settlement of a lawsuit.
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
You
must read the following discussion of the results of the operations and
financial condition of the Company in conjunction with its financial statements,
including the notes included in this Form 10-K filing. The Company’s
historical results are not necessarily an indication of trends in operating
results for any future period.
Overview
The
Company’s current focus is to exploit its only assets, which are rights to
working interests in exploration acreage in the JDZ and the EEZ. The
Company has entered into Participation Agreements with Pioneer Natural Resources
with respect to Blocks 2 and 3 and Noble Energy with respect to Block 4 to
jointly evaluate and apply for interests in production sharing contracts in
these JDZ Blocks. The technical and operational expertise in conducting
exploration operations will be provided by the Company’s co-ventures. On
December 15, 2004, pursuant to these Participation Agreements, ERHC and its
respective co-ventures submitted bids on Blocks 2, 3 and 4 in the JDZ.
Results
of Operations
Three
Months Ended December 31, 2004 Compared with Three Months Ended December 31,
2003
During
the three months ended December 31, 2004, the Company incurred a net loss of
$7,091,068, compared to a net loss of $986,596 for the three months ended
December 31, 2003. A significant portion of the increase in net loss for
the three months ended December 31, 2004 was attributable to a $5,749,575
non-cash loss on extinguishment of debt during the three months ended December
31, 2004 as the result of the issuance of shares in conjunction with the Chrome
debt restructuring. Interest expense increased by $276,364 due to a $261,001
increase in the amortization of the debt discount during the three months ended
December 31, 2004 as compared to the three months ended December 31, 2003. This
increase in amortization is recorded due to the beneficial conversion feature
attributable to borrowings on the Chrome line of credit during the three months
ended December 31, 2004. General and administrative expenses increased by
$78,533 for the three months ended December 31, 2004 as compared to the three
months ended December 31, 2003 primarily due to $63,750 in amortization of
deferred compensation charges in the period.
Through
December 31, 2004, the Company was a party to a management services agreement
with COS. Pursuant to that agreement, COS provides the Company with management
and business development services. COS provides these services to the Company
for a management fee of $68,000 per month. The Chief Financial Officer and
Secretary are employees of COS that provided services to the Company and these
persons receive salaries and overhead expense reimbursement from COS, not from
the Company. Expenses not covered under the management services agreement are
paid by the Company which includes primarily general office supplies. During
each of the three months ended December 31, 2004 and 2003, total expenses
incurred under this management services agreement were $204,000. On
December 23, 2004, the Company and COS cancelled, effective December 31, 2004,
the management services agreement. The Company’s executive officers incurred
significant travel expenses of approximately $96,000 and $103,000 for the
quarters ended December 31, 2004 and 2003, respectively, as they continued
negotiations with officials of the FRN and DRSTP as well as numerous trips to
the United States from Nigeria by several Chrome executives while managing the
ongoing affairs of the Company. The Company anticipates travel related
expenses to continue to be significant as the Company further develops its
business interests. The net loss per common share was $0.01, basic and
diluted, for the three months ended December 31, 2004 compared to a net loss per
common share of $0.00, basic and diluted, for the three months ended December
31, 2003.
During
the three months ended December 31, 2004 and 2003, the Company had no
revenues from which cash flows could be generated to support operations and thus
relied on borrowings funded from its line of credit provided by Chrome as well
as the sale of common stock.
Liquidity
and Capital Resources
As
of December 31, 2004, the Company had $915,330 in cash and cash equivalents and
negative working capital of $552,400. Of this negative working capital amount,
$723,035 relates to accrued officers salaries will which most likely be settled
in stock. The company also has a $2,500,000 line of credit with Chrome. As of
December 31, 2004, the Company had drawn $1,000,000 of the $2,500,000 line of
credit from Chrome.
Historically,
the Company has financed its operations from the sale of debt and equity
securities (including the issuance of its securities in exchange for goods and
services) and from advances from bank and other debt agreements. There
have been no cash flows generated from operations in the past two years. In the
three months ending December 31, 2004, the Company drew $1,000,000 from the
Chrome line of credit.
Should
it be required, management will raise additional capital through the sale of
common stock and from various debt financing arrangements, and will attempt to
continue raising capital resources until such time as the Company generates
revenues sufficient from operations. However, there is no assurance that
such financing will be obtained.
The
Company presently intends to utilize any available sources of funds to provide
for general corporate overhead and to continue to pursue its interests in Sao
Tome and the JDZ/EEZ.
Debt
Financing Arrangements
As of
December 31, 2004, $10,134,084 of long term debt of the Company is outstanding
under a 12% note maturing on January 31, 2007 and $1,000,000 is outstanding
under a 10% working capital line of credit of up to $2,500,000 with a maturity
of January 31, 2007. Both notes are issued to Chrome and may be settled with
common stock of the Company, at the Company’s option, at $0.175 per share.
During
the three months ended December 31, 2004 the company agreed to issue Chrome
14,023,352 shares of common stock, 12,465,202 issued immediately, 623,260 shares
issued on the advance of $1,000,000 and the remainder issued throughout the term
of the working capital loan. In addition the Company issued 12,308,359 share of
common stock to satisfy current interest accrued but not paid of $2,461,712. The
shares of common stock to Chrome for entering into the debt restructuring had a
fair value of $5,749,575 and has been recorded as a charge to
expense.
During
the three months ended December 31, 2004 non-affiliated noteholders agreed to
convert $1,592,521 of convertible debt and $84,853 of accrued interest into
8,386,853 shares of common stock. The conversion price was $0.20 per share. As
of December 31, 2004, the Company has $33,512 of nonaffiliated convertible debt
and $1,807 accrued but unpaid interest outstanding. As of December 31, 2004, if
the outstanding convertible debt was converted using the conversion price of
$0.20 per share, the Company would be required to issue 176,599 shares of common
stock.
As
of February 6, 2005, a total of $1,750,000 has been funded under the line of
credit and there is $750,000 available for further borrowings.
Item
3. Quantitative and Qualitative Disclosures about Market Risk
The
Company’s current focus is to exploit its only assets, which are rights to
working interests in the JDZ and EEZ under agreements with the JDA and
DRSTP. The Company intends 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. Should circumstances impede the
Company from perfecting its interests in the 2001 Agreement with DRSTP or the
2003 Option Agreement, the Company would cease to exist. Should the Company
perfect its interests in the 2001 Agreement and the 2003 Option Agreement, there
is no certainty that the Company will be able to obtain sufficient financial and
other resources to develop its interests. The Company currently has no
other operations.
Currently
the Company transacts business exclusively in the United States and all of the
Company’s contracts are denominated in $US. As a result, our financial
statement results are unlikely to be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Market
risks relating to the Company’s operations result primarily from changes in
interest rates as well as credit risk concentrations. The Company’s
interest expense is generally not sensitive to changes in the general level of
interest rates in the United States, particularly because a substantial majority
of its indebtedness is at fixed rates.
We
do not hold derivative financial or commodity instruments, nor do we engage in
any foreign currency denominated transactions.
Item
4. Controls and Procedures
An
evaluation was performed under the supervision and the participation of the
Company’s management including the Chairman, Chief Executive Officer (“CEO”) and
Chief Financial Officer (“CFO”), of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures within 90 days of
the filing date of this Quarterly Report on Form 10-Q. Based on that
evaluation, the Company’s management, including the Chairman, CEO and CFO
concluded that the Company’s disclosure controls and procedures were
effective. There have been no significant changes in the Company’s
internal controls or in other factors that could significantly affect these
internal controls subsequent to the date of their evaluation.
Forward
Looking Statements
This
report contains forward-looking statements. These statements relate to future
events or Environmental Remediation Holding Corporation’s (“Company” or “ERHC”)
future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause ERHC or its industry’s actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by the forward-looking statements.
In
some cases, you can identify forward-looking statements by terminology such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.
Although
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, there can be no guarantee of future results, levels
of activity, performance, or achievements. Moreover, neither the Company nor any
other person assumes responsibility for the accuracy and completeness of these
forward-looking statements. The Company is under no duty to update any of the
forward-looking statements after the date of this report to conform prior
statements to actual results.
Part
II. Other Information
Item
1. Legal Proceedings
Except
as described below, the Company is not aware of any other material legal
proceedings pending to which it is a party or its property is subject.
From time to time, the Company may be subject to proceedings, lawsuits and other
claims in the ordinary course of business, the resolution of which, in the
opinion of management should not have a materially adverse effect on the
Company’s financial position. The Company is opposing vigorously each of
the claims discussed below and intends to continue to do so unless an agreeable
resolution may otherwise be secured with regard to each such claim.
Sam
L. Bass, Jr. v. ERHC.
U.S. District Court, Western District of Louisiana, No. 6:99CV1668. This
case was commenced in 1999 by a former officer and director of the Company,
asserting claims for past due salaries, penalty wages and attorney’s fees.
The plaintiff is seeking damages of approximately $1.2 million in damages.
The named plaintiff in the case has died and his widow and executrix, Sheila
Bass, has substituted herself as plaintiff. Trial dates have been
postponed. While the parties have not reached written settlement,
the matter has been settled in principle and is expected to be finalized
shortly. Should written settlement not be reached, the matter will be
returned to trial.
Charles
Briley v. ERHC.
Fifteenth Judicial District Court, Lafayette Parish, Louisiana, No. 2002-2016
(filed April 18, 2002). Charles Briley has filed this breach of contract
action alleging that he is a former consultant to the Company, and that he is
due unpaid consulting fees. He seeks recovery of approximately $30,000, plus
125,000 shares of restricted common stock. The matter was settled in
February, 2005 for $9,000 and 70,000 shares of originally issued, 144 restricted
stock. See Subsequent events.
George
LeBlanc v. ERHC.
Fifteenth Judicial District Court, Lafayette Parish, Louisiana, No. 2002-2017
(filed April 18, 2002). George LeBlanc, a former ERHC consultant, has
filed this breach of contract action alleging that he is due unpaid consulting
fees totaling $15,500, along with 125,000 shares of restricted common
stock. Trial dates have been postponed. While the parties have
not reached written settlement, the matter has been settled in principle and is
expected to be finalized shortly. Should written settlement not be
reached, the matter will be returned to trial.
Robert
McKnight v. ERHC.
Fifteenth Judicial District Court, Lafayette Parish, Louisiana, No. 2002-2018
(filed April 18, 2002). Robert McKnight, a former ERHC consultant, has
filed this breach of contract action alleging that he is due unpaid consulting
fees totaling $83,000, along with $8,619 in unpaid medical bills. Trial
dates have been postponed. While the parties have not reached
written settlement, the matter has been settled in principle and is expected to
be finalized shortly. Should written settlement not be reached, the matter
will be returned to trial.
Item
2. Unregistered Sale of Securities and Use of Proceeds
Common
stock issued for settlement of accounts payable
During
October 2004, the Company issued 100,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of $36,437.
During
October 2004, the Company issued 160,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of $70,463.
During
October 2004, the Company issued 150,000 shares of common stock to one creditor
for an accounts payable balance owed in the aggregate amount of
$68,745.
Common
stock issued for conversion of debt and payment of accrued interest
During
the quarter ended December 31, 2004 non-affiliated noteholders agreed to convert
$1,677,371 of convertible debt and accrued interest into 8,386,853 shares of
common stock. The conversion price was $0.20 per share.
During
the quarter ended December 31, 2004, the Company agreed to issue Chrome
25,397,022 shares of common stock, of which 12,308,560 represented accrued
interest totaling $2,461,712, and the remainder for agreement to the debt
restructuring and provide an additional working capital line of credit pursuant
to the agreementThe shares were issued on February 3, 2005.
Item
3. Defaults Upon Senior Securities
None
Item
4. Submission of Matters to a Vote of Security Holders
The
Company set a record date and a special meeting of the stockholders of the
Company to be held on February 4, 2005 to vote on the adoption of a stock option
plan and to change the name of the Company to “ERHC Energy Inc.”
On
February 4, 2005, the stockholders approved both proposals as
follows:
| |
For
|
Against |
Abstain |
|
|
Proposition
1 - Name change |
565,966,612 |
235,714 |
102,544 |
|
|
Proposition
2 - Adoption of stock option plan |
370,702,526 |
3,140,950 |
1,003,248 |
|
Item
5. Other Information
The
Employment Agreement of Ali Memon was amended effective February 1, 2005. See
Exhibit 10.7.
Item
6. Exhibits and Reports on Form 8-K
|
EXHIBIT
NO. |
|
IDENTIFICATION
OF EXHIBIT |
|
10.1 |
|
Option
Agreement, dated April 7, 2003, by and between the Company and the
Democratic Republic of Sao Tome and Principe (incorporated herein by
reference to Exhibit 10.1 of Form 8-K filed April 2,
2003). |
|
10.2 |
|
Management
and Administrative Services Agreement by and between Chrome Oil Services,
Ltd. and the Company. (Incorporated by reference to Form 10-KSB filed
September 24, 2001). |
|
10.3 |
|
Letter
Agreement, dated November 29, 2004, by and between the Company and Chrome
(incorporated herein by reference to Exhibit 10.1 of Form 8-K filed
December 29, 2004). |
|
10.4 |
|
Promissory
Note, dated December 15, 2004, made by the Company in favor of Chrome
(incorporated herein by reference to Exhibit 10.2 of Form 8-K filed
December 29, 2004). |
|
10.5 |
|
Promissory
Note, dated December 15, 2004, made by the Company in favor of Chrome
(incorporated herein by reference to Exhibit 10.3 of Form 8-K filed
December 29, 2004). |
|
10.6 |
|
Employment
Agreement with Ali Memon. (incorporated herein by reference to Exhibit
10.6 of Form 10-K filed December 29, 2004). |
|
10.7* |
|
Amendment
to Employment Agreement with Ali Memon |
|
31.1* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
31.2* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
31.3* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
32.1* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
|
32.2* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
|
32.3* |
|
Certification
Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
*Filed
herein
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
presons, in the capacities and on the dates indicated below, have signed this
report
ENVIRONMENTAL REMEDIATION HOLDING COPORATION
| Name |
Title |
Date |
| /s/ Sir Emeka Offor |
Chairman of Board |
Date: February 9, 2005 |
| Sir Emeka Offor |
|
|
| |
|
|
| /s/ Ali Memon |
Chief Executive Officer President and Director |
Date: February 9, 2005 |
| Ali Memon |
|
|
| |
|
|
| /s/ Cosmas (Ike) Okpala |
Chief Financial Officer |
Date: February 9, 2005 |
| Cosmas (Ike) Okpala |
|
|