ERHC Energy Inc - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - ERHC Energy Inc	ex31_1.htm
EX-31.2 - EXHIBIT 31.2 - ERHC Energy Inc	ex31_2.htm
EX-32.2 - EXHIBIT 32.2 - ERHC Energy Inc	ex32_2.htm
EX-32.1 - EXHIBIT 32.1 - ERHC Energy Inc	ex32_1.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, 2010

£ 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

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 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, 2010 was 723,050,444

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ERHC ENERGY INC.

Part I. Financial Information		Page


Item 1.	Financial Statements	4

	Unaudited Consolidated Balance Sheets at June 30, 2010 and September 30, 2009	4

	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2010 and 2009, and for the period from inception, September 5, 1995 to June 30, 2010	5

	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009, and for the period from inception, September 5, 1995 to June 30, 2010	6

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	23

Part II. Other Information

Item 1.	Legal Proceedings	24

Item 5.	Other Information	25

Item 6.	Exhibits	25

	Signatures	26

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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;

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future dividends;

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financing plans;

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tax planning;

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budgets for capital and other expenditures;

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plans and objectives of management;

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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;

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advances in exploration and development technology;

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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;

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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;

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•

regulatory initiatives and compliance with governmental regulations;

•

compliance with environmental laws and regulations

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compliance with tax laws and regulations;

•

customer preferences;

•

effects of litigation and governmental proceedings;

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cost, availability and adequacy of insurance;

•

adequacy of the Company’s sources of liquidity;

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labor conditions and the availability of qualified personnel; and

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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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, 2010 and September 30, 2009

	June 30,			September 30,
	2010			2009

ASSETS

Current assets:
Cash	$	19,152,423		$	22,428,728
Prepaid expenses and other		331,793			447,345

Total current assets		19,484,216			22,876,073

DRSTP concession fee		2,839,500			2,839,500
Furniture and equipment, net		41,354			67,275
Certificate of deposit		1,058,579			1,058,579
Deferred tax asset		2,018,398			2,018,398

Total assets	$	25,442,047		$	28,859,825

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities	$	5,070,312		$	5,050,590
Accounts payable and accrued liabilities, related party		170,980			115,236
Accrued interest		11,945			10,561
Convertible debt		33,513			33,513

Total current liabilities		5,286,750			5,209,900

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 723,050,444		72,305			72,305
Additional paid-in capital		92,357,276			92,330,993
Accumulated deficit		(72,274,284	)		(68,753,373	)

Total shareholders’ equity		20,155,297			23,649,925

Total liabilities and shareholders' equity	$	25,442,047		$	28,859,825

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

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ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended June 30, 2010 and 2009
and for the Period From Inception, September 5, 1995, to June 30, 2010

	Three Months Ended June 30,						Nine Months Ended June 30,						Inception to June 30,
	2010			2009			2010			2009			2010

Costs and expenses:
General and administrative	$	1,435,212		$	1,261,847		$	3,494,084		$	2,889,509		$	76,039,575
Depreciation and depletion		7,106			8,616			25,921			25,847			1,479,319
Gain on sale of partial interest in DRSTP concession		-			-			-			-			(30,102,250	)
Write-offs and abandonments		-			-			-			-			7,742,128

Total costs and expenses		(1,442,318	)		(1,270,463	)		(3,520,005	)		(2,915,356	)		(55,158,772	)

Other income and (expenses):
Interest income		88			8,339			477			420,514			4,811,734
Gain from settlements		-			-			-			-			117,310
Other income		-			-			-			-			439,827
Interest expense		(462	)		(461	)		(1,383	)		(1,383	)		(12,130,131	)
Provision for loss on deposits		-			(2,117,158	)		-			(2,117,158	)		(4,234,317	)
Loss on extinguishment of debt		-			-			-			-			(5,749,575	)

Total other income and (expenses), net		(374	)		(2,109,280	)		(906	)		(1,698,027	)		(16,745,152	)

Loss before benefit (provision) for income taxes		(1,442,692	)		(3,379,743	)		(3,520,911	)		(4,613,383	)		(71,903,924	)

Benefit (provision) for income taxes:
Current		-			-			-			-			(1,330,360	)
Deferred		-			-			-			-			960,000

Total benefit (provision) for income taxes		-			-			-			-			(370,360	)

Net loss	$	(1,442,692	)	$	(3,379,743	)	$	(3,520,911	)	$	(4,613,383	)	$	(72,274,284	)

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		723,050,444			722,688,550			723,050,444			722,500,657

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

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ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2010 and 2009, and for the Period From
Inception, September 5, 1995 to June 30, 2010

							Inception to
	Nine Months Ended June 30,						June 30,
	2010			2009			2010

Cash Flows From Operating Activities
Net loss	$	(3,520,911	)	$	(4,613,383	)	$	(72,274,284	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and depletion expense		25,921			25,847			1,479,319
Provision for loss on deposits		-			2,117,158			4,234,317
Write-offs and abandonments		-			-			7,742,128
Deferred income taxes		-			-			(2,018,398	)
Compensatory stock options		26,283			-			1,334,523
Gain from settlement		-			-			(617,310	)
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		-			33,600			2,431,648
Investment income		-			(116,954	)		-
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		115,552			(376,301	)		(331,792	)
Accounts payable and other accrued liabilities		21,106			(13,374	)		(2,721,492	)
Accounts payable and accrued liabilities, related party		55,744			(38,246	)		170,977
Accrued retirement obligation		-			-			365,000

Net cash used in operating activities		(3,276,305	)		(2,981,653	)		(43,803,620	)

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

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ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2010 and 2009, and for the Period From
Inception, September 5, 1995 to June 30, 2010 (continued)

							Inception to
	Nine Months Ended June 30,						June 30,
	2010			2009			2010

Cash Flows From Investing Activities
Purchase of long-term investment	$	-		$	-		$	(5,292,896	)
Purchase of DRSTP concession		-			-			(5,679,000	)
Proceeeds from sale of partial interest in DRSTP concession		-			-			45,900,000
Purchase of furniture and equipment		-			(2,327	)		(947,447	)

Net cash provided by (used in) investing activities		-			(2,327	)		33,980,657

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		(3,276,305	)		(2,983,980	)		19,152,423

Cash and cash equivalents, beginning of period		22,428,728			26,581,069			-

Cash and cash equivalents, end of period	$	19,152,423		$	23,597,089		$	19,152,423

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

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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, 2009.

Note 2 – Fair Value of Financial Instruments

The Company adopted new guidance as of October 1, 2008, related to the measurement of the fair value of certain of its financial assets required to be measured on a recurring basis. Under the new guidance, 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.

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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.

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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 totaling $5,292,896, and a receiver was appointed to takeover the institution. Management has ceased accruing interest on the balances. As of June 30, 2010, 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 $4,234,317 leaving the remaining balance $1,058,579 as non-current assets in the Level 3 category.

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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 Joint Development Authority (“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.

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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.

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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 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 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 Oil, a third party, did not meet financial and other obligations for the transfer of 9% of ERHC’s participating interest to Godsonic Oil (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%.

On October 2, 2009, Sinopec International Petroleum Exploration and Production Corporation acquired all of the outstanding shares of Addax Petroleum Corporation.

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Note 4 – Income Taxes

At June 30, 2010, the Company had a consolidated net operating loss carry-forward (“NOL”) of approximately $17,296,000 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, 2009 are as follows:

	June 30, 2010			September 30, 2009

Net operating losses	$	5,880,643		$	4,683,533
Deferred tax asset		2,018,398			2,018,398
Allowance for loss on deposits		1,439,668			1,439,668
Accrued stock-based compensation		88,587			88,587

Total deferred tax assets		9,427,296			8,230,186
Valuation allowance		(7,408,898	)		(6,211,788	)

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 months and nine months ended June 30, 2010 and 2009, is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009


Net loss at federal statutory rate	$	490,515		$	1,149,112		$	1,197,110		$	1,568,550
Non-deductible penalties		-			(11,982	)		-			(11,982	)
Change in valuation allowance		(490,515	)		(1,137,130	)		(1,197,110	)		(1,556,568	)

Tax provision	$	-		$	-		$	-		$	-

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 2010, the Company assessed the need for a valuation allowance against its deferred tax assets. The deferred tax asset valuation allowance was $7,408,898 as of June 30, 2010. 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.

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The Company is subject to taxation in the United States and various foreign jurisdictions. The Company’s tax years for 2005 through 2009 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, a reasonable estimate of the range of 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, have assisted ERHC in responding to the subpoenas.

In January 2010, all the documents taken by federal investigators from its corporate headquarters in May 2006 were returned. A total of 106 boxes containing original archival records from the Company’s inception until 2006 were returned.

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 came 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.

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. Parallel to the proceedings, the Company has initiated dialogue with the JDA and the governments of Nigeria and Sao Tome & Principe with a view to the amicable resolution outside of litigation and arbitration.

If the Company fails to obtain favorable rulings or otherwise resolve the matter favorably, there could be significant adverse affects on the Company’s future planned operations in JDZ Blocks 5 and 6

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 – Share based compensation

On February 26, 2010, the Board of Directors granted a total of 475,000 restricted shares to officers of the Company. Fifty percent (50%) or 237,500 restricted shares vest over a period of 2 years and for the nine months ended June 30, 2010, the Company recognized stock compensation expense of $26,283 in relation to these shares. The remaining 50% will vest based on achievement of certain performance conditions. Management has concluded that as of June 30, 2010, it is not probable that these performance conditions will be met and as such, has not recognized any stock compensation expense in relation to these shares.

Note 7 - Subsequent Events

On July 7, 2010, the Company filed a registration statement on Form S-3 with the US Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process or continuous offering process. Under this shelf registration process, the Company may, from time to time, sell up to $50,000,000 of the securities described in the prospectus in one or more offerings. Each time the Company offers securities, it will provide stockholders with a prospectus and a prospectus supplement that will describe, among other things, the specific amounts and prices of the securities being offered and the terms of the offering.

Unless otherwise provided in the applicable prospectus supplement, the Company intends to use the net proceeds from the sale of securities under the shelf registration to acquire or invest in working interests and other oil and natural gas businesses, properties, products and technologies that are complementary to the Company's operations, although the Company has no such transactions currently in place. Additionally, the Company intends to use a portion of net proceeds from time to time for general corporate purposes, including exploration and development activities, regulatory affairs expenses, capital expenditures, additions to working capital and general and administrative expenses.

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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, 2009. 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 focused 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. ERHC has worked to realize the value of the assets it has acquired in this region. The Company’s current holdings include those below, details of which can be found at the link: http://www.erhc.com

JDZ – ERHC has 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.

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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 or, if the company has a producing working interest in any Block(s) at October 1, 2024, the Company’s rights extend in such Block(s), as long as the Block(s) remains in production.

In 2009, the National Petroleum Agency of São Tomé & Príncipe (“ANP-STP”) delineated the EEZ into 19 Blocks and earlier this year ERHC exercised its preferential rights arising from prior agreements between ERHC and São Tomé & Príncipe. In February, the ANP-STP confirmed the award to ERHC of 100 percent working interests in Blocks 4 and 11, signature bonus free. The ANP-STP has indicated that it expects to invite ERHC to negotiate Production Sharing Contracts on the two Blocks in due course.

ERHC has been active in the EEZ, which is situated southeast of the JDZ, since 1997. ERHC was one of the first companies to identify the possibility of significant oil and gas reserves in the offshore of Sao Tome and Principe. The two Blocks selected and awarded to ERHC in the EEZ sit directly to the east of the islands of Sao Tome and Principe. EEZ Block 4 is directly to the east of the island of Principe, which is at the very top of an exceptional steep volcanic structure where water depths drop precipitously.

EEZ Block 11 is directly to the east of the island of Sao Tome. This Block is also situated on a volcanic structure that juts up from the floor of the Gulf of Guinea. There has been less seismic imaging conducted in this area. As we have experienced with the JDZ, oil and gas exploration can be a long process. The next step will be to open discussions with potential technical partners to farm into Blocks 4 and 11 to assume operatorship and compensate ERHC for percentage ownership in the Blocks.

In addition to the two Blocks already awarded, ERHC has rights to acquire up to a 15 percent paid working interest in two additional Blocks of its choice in the EEZ. The ANP-STP has informed the Company that selection of these other Blocks will take place at a later date.

Although ERHC is making considerable progress toward realizing the value of our oil and gas assets in the Gulf of Guinea, we are still a long way away from the point at which any of these oil and gas assets can begin to produce revenues. ERHC therefore seeks to identify and acquire assets with a shorter time horizon for revenue generation.

ERHC has identified and examined dozens of potential acquisition prospects and is holding discussions regarding a number of potential exploration and production opportunities in West Africa. Ultimately, ERHC seeks a portfolio of assets and companies from which it can derive significant strategic value. The success of potential acquisitions depends on the availability of adequate financing. ERHC’s principal assets remain its interests in the JDZ and the EEZ.

Operations in the JDZ

ERHC has interests in six of the nine Blocks in the JDZ, as follow

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

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The working interest represents ERHC’s share of all the hydrocarbon 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 until production, whereupon the operators will recover their costs from the production revenues.

Our interests in JDZ Blocks are in various stages of exploration. JDZ Blocks 2, 3 and 4 were the focus of an aggressive exploration campaign that concluded in January 2010. To date, no Production Sharing Contracts have been signed in either JDZ Block 5 or 6, and no operatorship has been awarded yet in JDZ Block 9.

Sinopec and Addax Petroleum, our technical partners and operators in Blocks 2, 3 and 4 undertook an exploratory drilling campaign across the three blocks. To make that drilling campaign possible, the following steps were taken:

•

Addax Petroleum contracted for the Deepwater Pathfinder deepwater drill ship.

•

Sinopec arranged for a semi submersible drilling rig for Block 2.

•

Addax Petroleum acquired the operatorship of JDZ Block 3, setting the stage for a coordinated campaign across all three Blocks.

•

Finally, in October 2009 Sinopec acquired Addax Petroleum, enabling the sharing of knowledge and expertise across all three Blocks as well as adequate financing of drilling. .

The drilling campaign was completed in January 2010 with five wells drilled in the following locations and order:

•

The Kina-1 well in JDZ Block 4

•

The Bomu-1 well in JDZ Block 2

•

The Lemba-1 well in JDZ Block 3

•

The Malanza-1 well and Oki East-1 well in Block 4

Currently, the analysis of the information gathered during drilling is going on. The operators were granted an extension until mid-September to indicate their plans for Exploration Phase II, contingent upon approval by the Joint Ministerial Council of the JDA. The operators are continuing to analyze the data and that process may continue for some time. .

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, even when properly interpreted, seismic data and visualization techniques are not conclusive in determining if hydrocarbons are present in economically producible amounts. On August 26, 2009, the Company announced that exploratory drilling was underway in Block 4 and that Addax Petroleum Corporation had spudded the Kina Prospect. The drilling campaign was conducted by Addax using Transocean’s Deepwater Pathfinder, a fifth generation dynamically positioned deepwater drilling rig capable of drilling in water depths up to 3,048 meters.

On November 9, 2009 the Company announced commencement of exploratory drilling at the Malanza 1X well in Block 4. It was the second well drilled in JDZ Block 4. This well was completed and on January 10, 2010 the Company announced the completion of the Oki East well. The Oki East well was drilled in 2,073 meters of water and reached a total depth of 3,873meters below sea level.

The Oki East well was the fifth and final well drilled during a comprehensive exploratory drilling campaign that began in August 2009 and was completed in January 2010.

Addax Petroleum, operator for Block 4 provided and has authorized ERHC to release the following information about drilling in Block 4. All wells were drilled on time, within budget and to planned depth. In both the Kina well and the Oki East well, gas was discovered in multiple sands. This information is preliminary and work is ongoing to integrate a potential area-wide development.

Operations in JDZ Block 3

Anadarko Petroleum was originally the operator of JDZ Block 3. In 2009, Addax acquired Anadarko’s stake in JDZ Block 3 from Anadarko and became the operator of the Block.

Following the initial drilling operation in Block 4 of the Kina Prospect, Addax moved the Deepwater Pathfinder to the Lemba 1X well location in JDZ Block 3. Exploratory drilling at Lemba 1X commenced in October 2009 and was completed in early November. A comprehensive analysis that incorporates the drilling results into relevant geologic and fluid models is being carried out. The information from these wells is helping the exploration team understand the geology and hydrocarbon potential of the various prospects being drilled and will provide valuable insight into the prospectively of the entire area.

The Lemba-1 well was drilled on time and below budget. The well was drilled to a total depth of 3,758 meters and gas was discovered in two sands. No determination has been made yet regarding commerciality.

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Operations in JDZ Block 2

On August 19, 2009, ERHC announced that its technical partner, Sinopec Corp., was taking possession of the SEDCO 702 semi-submersible drilling rig to drill the Bomu-1 Prospect in Block 2. The Bomu-1 prospect is one of several prospects in JDZ Block 2 identified from 3-D seismic analysis and interpretation

The Bomu-1 was spudded by Sinopec at the end of August and in October 2009 the Company announced that Sinopec had completed exploratory drilling at the Bomu-1 well location and that natural gas had been discovered. Sinopec indicated that the well was drilled on time and budget. The Bomu-1 well was drilled to a total depth of 3,580 meters. A comprehensive analysis that incorporates the drilling results into relevant geologic and fluid models is being carried out. The information from these wells is helping the exploration team understand the geology and hydrocarbon potential of the various prospects being drilled and will provide valuable insight into the prospectivity of the entire area. No final determination has been made by Sinopec regarding commerciality.

General Information on Current Operations in Blocks 2, 3 and 4

Exploration in the JDZ is currently being driven by our technical partners, Addax and Sinopec. In addition, ERHC has interests in more JDZ Blocks than any other company. Management believes that the start of exploratory drilling in the Blocks is the third step in a five step process towards realizing the Company’s assets in those Blocks.

The Oki East well in Block 4 was the fifth and final well drilled during a comprehensive exploratory drilling campaign that began in August 2009. A comprehensive analysis to evaluate the commercial potential of JDZ Blocks 2, 3 and 4 is underway. The exploration team is incorporating the drilling results from all five wells into relevant geologic and fluid models to assess commerciality.

Management understands that each stage in the process requires considerable expertise and any resulting production, if in commercial quantities, may considerably enhance shareholder value. No guarantees can be given at this stage that there will be production in commercial quantities.

Management also understands that analyzing drilling results and incorporating them into the relevant geologic and fluid models takes time. Further, moving from field appraisal and development onto production takes time. As has been the practice in the JDZ, accurate, material information on the progress in the JDZ Blocks will emanate from the operators or the JDA. ERHC will publish such information in a timely manner in accordance with our contractual and regulatory obligations.

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 countries established the JDZ to govern commercial activities within the disputed boundaries. The JDZ is administered by the JDA which oversees all future exploration and development activities in the JDZ. The remaining claimed territorial waters of Săo Tomé & Principe are known as the 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 government of Săo Tomé & Principe has awarded ERHC rights to participate in exploration and production activities in Săo Tomé & Principe’s 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 percent 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.

The 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 such area in the Gulf of Guinea. Ocean water depths around the two islands exceed 1,524 meters, depths that have only become feasible for oil production in 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.

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The following chart 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% (6)
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. Includes 9% distributed between Addax (7.2%) and ERHC (1.8%) reclaimed from Godsonic by ERHC on behalf of the ERHC/Addax consortium following Godsonic’s inability to fulfill financial and other conditions upon which the 9% was to have been assigned to Godsonic.

(5)	No contracts have been entered into as of the date hereof.

(6)	Includes the 9% distributed between ERHC (1.8%) and Addax (7.2%) reclaimed from Godsonic by ERHC on behalf of the ERHC/Addax consortium following Godsonic’s inability to fulfill financial and other conditions upon which the 9% was to have been assigned to Godsonic.

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Particulars of Participating Agreements

JDZ Block 2 Participation Agreement

Date of Participation Agreement	Parties	Key Terms

2 March 2006	1. Sinopec International Petroleum Exploration and Production Co. Nigeria Ltd	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.

	1b. Sinopec International Petroleum and Production Corporation	Consideration from Sinopec to ERHC for the 28.67% interest (the “SINOPEC assigned interest”) is $13.6 million.

	2a. Addax Energy Nigeria Limited (Note 2)	Consideration from Addax to ERHC for the 14.33% interest (the “Addax assigned interest”) is $6.8 million

	2b. Addax Petroleum Corporation (Note 2)	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.

	3. ERHC Energy Inc	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

Date of Participation Agreement	Parties	Key Terms

15 February 2006	1. ERHC Energy Inc	ERHC assigns 15% of participating interest to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) leaving ERHC with a 10% participating interest.

	2a.Addax Petroleum Resources Nigeria Limited (Note 2)	Consideration from Addax Sub to ERHC for the 15% acquired interest is $7.5 million.

	2b.Addax Petroleum Corporation (Note 2)	In addition, Addax to pay all of ERHC’s future costs for petroleum operations in respect of the 10% interest retained by ERHC in Block 3.

		Addax Sub 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

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Particulars of Participating Agreements

JDZ Block 4 Participation Agreement
Date	Parties	Key Terms

17 November 2005 (Note 1)	1. ERHC Energy Inc	ERHC shall assign 33.3% (Note 1) of participating interest to Addax Petroleum Nigeria (Offshore 2) Limited (“Addax”) (leaving ERHC with a 26.7% participating interest).

	2a. Addax Petroleum Nigeria (Offshore 2) Limited (Note 2)	Consideration from Addax Sub to ERHC for the interest acquired by Addax is fixed at $18 million.

	2b. Addax Petroleum NV (Note 2)	In addition, Addax 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 is entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil until Addax recovers 100% of ERHC’s carried costs.

Note 1 – 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 Oil, a third party, did not meet financial and other obligations for the transfer of 9% of ERHC’s participating interest to Godsonic Oil (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 2 - On October 2, 2009, Sinopec International Petroleum Exploration and Production Corporation acquired all of the outstanding shares of Addax Petroleum Corporation.

Current Plans for Operations

The Company is currently focused on exploiting its interests in Blocks 2, 3 and 4 but it has no current sources of income from operations other than interest income from cash generated from sale of participation interests in Blocks 2, 3 and 4 to Sinopec and Addax Ltd. The Company hopes to enter into Participation Agreements in Blocks 5, 6 and 9, but the timing or likelihood of such transactions cannot be predicted. The Company believes that the participation agreements that it has entered into will be its primary source of future cash flow; however, the Company is exploring plans to generate operating income from new sources. The Company plans to diversify its business activity by pursuing other growth opportunities possibly including acquiring revenue-producing assets in diverse geographical areas and forging new strategic business partnerships and alliances. To expand operations, ERHC is currently in negotiations for potential investments that would increase the Company’s presence in the West African oil and gas industry.

ERHC cannot currently predict the outcome of negotiations for acquisitions in West Africa, or, if successful, their impact on the Company's operations.

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Plans for Funding of Potential Acquisitions

ERHC's future plans may be dependent on the Company's ability to attract new equity funding from investors. Consequently, ERHC is planning to seek a listing on the Alternative Investment Market ("AIM") of the London Stock Exchange. The Company originally announced its intention to seek a listing on the AIM about two years ago but those plans were put on hold due to the global economic crisis that adversely affected financial markets around the world. Management now believes that circumstances have now improved enough to seek an AIM listing and has engaged an independent London based specialized corporate finance advisory firm as its principal adviser and sponsor for such Listing.

ERHC believes an AIM listing will allow the Company to access capital in a market that is enthusiastic about emerging oil and gas companies. The goal of ERHC, to become a successful West Africa-focused energy investment company, will require that the Company access capital to fund future acquisitions and the subsequent development thereof. Some acquisitions are already under consideration. A listing on AIM will allow the Company to attract institutional investors and reputable brokers that management believes may not be attracted to companies whose shares are traded solely on the OTC Bulletin Board.

We expect that ERHC’s listing on AIM will benefit shareholders will as the Company gains visibility on a market that is more accepting of emerging oil and gas companies and more likely to accurately reflect the Company’s true value. The AIM listing will also help us to accelerate our acquisition efforts and diversify our energy investment portfolio. As of August 9,2010, the AIM Listing process is in progress

Also, on July 7, 2010, the Company filed a registration statement on Form S-3 with the US Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process or continuous offering process. Under this shelf registration process, the Company may, from time to time, sell up to $50,000,000 of the securities described in the prospectus in one or more offerings. Each time the Company offers securities, it will provide stockholders with a prospectus and a prospectus supplement that will describe, among other things, the specific amounts and prices of the securities being offered and the terms of the offering.

Unless otherwise provided in the applicable prospectus supplement, the Company intends to use the net proceeds from the sale of securities under the shelf registration to acquire or invest in working interests and other oil and natural gas businesses, properties, products and technologies that are complementary to the Company's operations, although the Company has no such transactions currently in place. Additionally, the Company may use a portion of net proceeds from time to time for general corporate purposes, including exploration and development activities, regulatory affairs expenses, capital expenditures, additions to working capital and general and administrative expenses.

Results of Operations

Nine Months Ended June 30, 2010 Compared with Nine Months Ended June 30, 2009

General and administrative expenses increased from $2,889,509 in the nine months ended June 30, 2009 to $3,494,084 in the nine months ended June 30, 2010. This increase came despite an ongoing effort to reduce operating expenses and was due primarily to the following:

Expenses related to the Company's proposed listing on the Alternative Investment Market ("AIM") of the London Stock Exchange.

General increase in legal fees and expenses related to evaluation of new acquisition opportunities.

During the nine months ended June 30, 2010, the Company had a net loss of $3,520,911 compared with a net loss of $4,613,383 for the nine months ended June 30, 2009. The reduction was due to the following:

In 2009, the Company recognized a provision for loss of $2,117,158 when certain restrictions were placed on a financial institution where the Company has investments in certificate of deposit. No such provision was made during the nine months ended June 30, 2010. However the resulting reduction in loss duing the nine months ended June 30, 2010 as compared to the nine months ended June 30, 2009 was partially offset by:

An increase in legal fees and expenses related to evaluation of new acquisition opportunities during the nine months ended June 20, 2009.

And a decrease in interest income from $420,514 in the nine months ended June 30, 2009 to $477 in the nine months ended June 30, 2010, due to a loss of interest income as the Company switched from an interest bearing but not guaranteed deposit accounts.

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Three Months Ended June 30, 2010 Compared with Three Months Ended June 30, 2009

General and administrative expenses increased from $1,261,847 in the three months ended June 30, 2009 to $1,435,212 in the three months ended June 30, 2010. This increase was due to expenses related to the Company’s proposed listing on the Alternative Investment Market ("AIM") of the London Stock Exchange.

During the three months ended June 30, 2010, the Company had a net loss of $1,442,692 compared with a net loss of $3,379,743 for the three months ended June 30, 2009. The reduction was due to the following:

In 2009, the Company recognized a provision for loss of $2,117,158 when certain restrictions were placed on a financial institution where the Company has investments in certificate of deposit. No such provision was made during the three months ended June 30, 2010. However the resulting reduction in loss during the three months ended June 30, 2010 was partially offset by increase in legal fees and expenses related to evaluation of new acquisition opportunities.

An increase in legal fees and expenses related to evaluation of new acquisition opportunities.

Liquidity and Capital Resources

As of June 30, 2010, the Company had $19,152,423 in cash and cash equivalents and positive working capital of $14,197,466. 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, 2010, 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.

Short –Term Obligations

As of June 30, 2010, the Company had a total of $5,253,237 in short-term obligations; it includes $72,813 in accrued Directors’ compensation and a $4,803,750 liability to Feltang International Inc. that will be satisfied upon issuance of 5,250,000 shares of common stock.

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, 2010, 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 or communal conflict, 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, exchange rates fluctuations may adversely affect the Company's future results of operations and financial condition.

The Company holds no derivative financial or commodity instruments.

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Item 4. Controls and Procedures

The Company’s 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, 2010. Based on their participation in that evaluation, the Company’s Chief Executive Officer and Principal Accounting Officer concluded that as of June 30, 2010, 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, 2010 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, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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

If the Company fails to obtain favorable rulings or otherwise resolve the matter favorably, there could be significant adverse affects on the Company’s future planned operations in JDZ Blocks 5 and 6

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 for fiscal year 2009 for additional information concerning these and other uncertainties that could negatively impact the Company.

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

None

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 8 2010, the Company filed Form 8-K to announce its July 7, 2010, registration statement on Form S-3 that was filed with the US Securities and Exchange Commission utilizing a “shelf” registration process. Under this shelf registration process, the Company may, from time to time, sell up to $50,000,000 of the securities described in the prospectus in one or more offerings.

Item 6. Exhibits

		Signatures

31.1*		Rule 13a-14(a) Certification of the Chief Executive Officer

31.2*		Rule 13a-14(a) Certification of the Principal Accounting Officer

32.1*		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

32.2*		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.

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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	President and	August 9, 2010
Peter Ntephe	Chief Executive Officer

/s/ Sylvan Odobulu	Controller	August 9, 2010
Sylvan Odobulu	Principal Accounting Officer

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