U.S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-K/A








x
            Annual Report under Section 13
      or 15(d) of the Securities Exchange Act of
  1934





For the
fiscal year ended September 30, 2008





OR





 ̈
            Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934





For the
transition period ended: __________________





Commission
file number: 000-17325





(Exact
name of registrant as specified in its charter)





Colorado
            
            88-0218499(State
      or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
      Employer Identification No.)5444 Westheimer Road, Suite 1440, Houston,
      Texas
            
            77056(Address
      of Principal Executive Office)
            
            (Zip
      Code)





713-626-4700


(Registrant’s
Telephone Number, Including Area Code)





Securities
registered pursuant to Section 12(b) of the Exchange
Act:  None





Securities
registered pursuant to Section 12(g) of the Exchange Act: common
stock





Check if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.   Yes  ̈No x





Check if
the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Act.  Yes  ̈No x





Check if
the registrant:  (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 xNo
 ̈





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ̈





Check if
the registrant is a large accelerated filer, an accelerated filer or a
non-accelerated filer.


Large
Accelerated Filer  ̈Accelerated Filer xNon-Accelerated Filer ̈





Check if
the registrant is a shell company.  Yes  ̈No x





The
aggregate market value of the voting stock held by non-affiliates of the
registrant on March 31, 2008 was $225,609,843.





On
November 28, 2008, the registrant had 722,238,550 shares of common stock issued
and outstanding.








DOCUMENTS
INCORPORATED BY REFERENCE


Portions
of the Definitive Proxy Statement to be delivered to shareholders in connection
with the Annual Meeting of Shareholders to be held in 2009 are incorporated by
reference into Part III.












EXPLANATORY
NOTE
  We
filed our Annual Report on Form 10-K for the year ended September 30, 2008
on December 15,  2008 (the “Original Report”). We are filing this
Amendment No. 1 on Form 10-K/A (this “Amendment”) solely to disclose
Part III Information which was incorporated by reference to the Original
Report.  No other changes to the Original Report are included in this
Amendment other than to disclose the Part III Information.
  We
have made no attempt in this Amendment to modify or update the disclosures
presented in the Original Report other than as noted in the previous paragraph.
Also, this Amendment does not reflect events occurring after the filing of the
Original Report. Accordingly, this Amendment should be read in conjunction with
the Original Report and our other filings with the SEC subsequent to the filing
of the Original Report.





TABLEOF CONTENTS








PART
      I
            
            PAGEItem
      1.
            
            Business
            
            6Item
      1A.
            
            Risk
    Factors
            
            12Item
      1B.
            
            Unresolved Staff
      Comments
            
            16Item
      2.
            
            Properties
            
            16Item
      3.
            
            Legal
      Proceedings
            
            17Item
      4.
            
            Submission of Matters to a Vote of
      Security Holders
            
            18PART
      IIItem
      5.
            
            Market for Registrant’s Common
      Equity, Related Shareholder Matters, and Issuer Purchases ofEquity Securities
            
            19Item
      6.
            
            Selected Financial
      Data
            
            20Item
      7.
            
            Management’s Discussion and Analysis
      of Financial Condition and Plan of Operations
            
            21Item
      7A.
            
            Quantitative and Qualitative
      Disclosures about Market Risk
            
            28Item
      8.
            
            Financial Statements and
      Supplementary Data
            
            29Item
      9.
            
            Changes in and Disagreements with
      Accountants on Accounting and Financial
    Disclosures
            
            61Item
      9A.
            
            Controls and
      Procedures
            
            61Item
      9B.
            
            Other
      Information
            
            61PART
      IIIItem
      10.
            
            Directors and Executive Officers
      of the Registrant
            
            62Item
      11.
            
            Executive
      Compensation
            
            65Item
      12.
            
            Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters
            
            70Item
      13.
            
            Certain Relationships and
      Related Transactions
            
            71Item
      14.
            
            Principal Accounting Fees and
      Services
            
            71PART
      IVItem
      15.
            
            Exhibits and Financial Statement
      Schedules
            
            72Signatures
            
            73





2
 Table of Contents





Forward-Looking
Statements





ERHC
Energy Inc. (the “Company”) or its representatives may, from time to time, make
or incorporate by reference certain written or oral statements  which
include, but are not limited to, information concerning the Company’s possible
or assumed future business activities and results of operations and statements
about the following subjects:





·
            business
      strategy;





·
            growth
      opportunities;





·
            future
      development of concessions, exploitation of assets and other business
      operations;





·
            future
      market conditions and the effect of such conditions on the Company’s
      future activities or results of
operations;





·
            future
      uses of and requirements for financial
  resources;





·
            interest
      rate and foreign exchange risk;





·
            future
      contractual obligations;





·
            outcomes
      of legal proceedings including, without limitation, the ongoing
      investigations of the Company;





·
            future
      operations outside the United
States;





·
            competitive
      position;





·
            expected
      financial position;





·
            future
      cash flows;





·
            future
      liquidity and sufficiency of capital
resources;





·
            future
      dividends;





·
            financing
      plans;





·
            tax
      planning;





·
            budgets
      for capital and other expenditures;





·
            plans
      and objectives of management;





·
            compliance
      with applicable laws; and





·
            adequacy
      of insurance or indemnification.




3
 Table of Contents





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





·
            general
      economic and business conditions;





·
            worldwide
      demand for oil and natural gas;





·
            changes
      in foreign and domestic oil and gas exploration, development and
      production activity;





·
            oil
      and natural gas price fluctuations and related market
      expectations;





·
            termination,
      renegotiation or modification of existing
  contracts;





·
            the
      ability of the Organization of Petroleum Exporting Countries, commonly
      called OPEC, to set and maintain production levels and pricing, and the
      level of production in non-OPEC
countries;





·
            policies
      of the various governments regarding exploration and development of oil
      and gas reserves;





·
            advances
      in exploration and development
technology;





·
            the
      political environment of oil-producing
regions;





·
            political
      instability in the Democratic Republic of Sao Tome and Principe and the
      Federal Republic of Nigeria;





casualty
      losses;





·
            competition;





·
            changes
      in foreign, political, social and economic
  conditions;





·
            risks
      of international operations, compliance with foreign laws and taxation
      policies and expropriation or nationalization of equipment and
      assets;





·
            risks
      of potential contractual
liabilities;





·
            foreign
      exchange and currency fluctuations and regulations, and the inability to
      repatriate income or capital;





·
            risks
      of war, military operations, other armed hostilities, terrorist acts and
      embargoes;





·
            regulatory
      initiatives and compliance with governmental
  regulations;





·
            compliance
      with environmental laws and
regulations;





·
            compliance
      with tax laws and regulations;





·
            customer
      preferences;





·
            effects
      of litigation and governmental
proceedings;




4
 Table of Contents








·
            cost,
      availability and adequacy of
insurance;





·
            adequacy
      of the Company’s sources of
liquidity;





·
            labor
      conditions and the availability of qualified personnel;
  and





·
            various
      other matters, many of which are beyond the Company’s
    control.




The risks
and uncertainties included here are not exhaustive.  Other sections of
this report and the Company’s other filings with the U.S. Securities and
Exchange Commission (“SEC”) include additional factors that could adversely
affect the Company’s business, results of operations and financial
performance.  Given these risks and uncertainties, investors should
not place undue reliance on our statements concerning future
intent.   Our statements included in this report speak only as of
the date of this report.  The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any of
our statements to reflect any change in its expectations with regard to the
statement or any change in events, conditions or circumstances on which any
forward-looking statement is based.





5
 Table of Contents





PART
I





Item1 – Business





Overview





ERHC
Energy Inc., a Colorado corporation, (“ERHC” or the “Company”) was incorporated
in 1986 and was engaged in a variety of businesses until 1996, when it began its
current operations.  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 including its 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. The Company currently has no other operations but is
exploring opportunities in other areas of the Oil and Gas industry, including
supply and trading.





Our
business strategy is to farm out our rights to working interests in the JDZ and
EEZ to entities which we believe are established, well capitalized drilling
operators for upfront cash payments and negotiate contracts with them to carry
our share of the capital costs.  This has been done successfully on
Blocks 2, 3 and 4 and resulted in cash proceeds of $45.9 million.  We
will continue this approach for JDZ Blocks 5, 6 and 9 as well as the EEZ. We are
also pursuing other business development activities in the broad petroleum and
related industries.





General
Development of the Business





In April
2003, the Company and the DRSTP entered into an Option Agreement (the “2003
Option Agreement”) in which the Company relinquished certain financial interests
in the JDZ in exchange for exploration 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.  However, ERHC retained the following rights to
participate in exploration and production activities in the 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.





This
exercise of ERHC’s rights was subject to the condition that if no license is
awarded or a license is awarded and subsequently withdrawn by the JDA prior to
the commencement of operations, ERHC be entitled to receive its working interest
in that block in a future license awarded for that block.





On April
28, 2005, ERHC and its then consortium partner Noble Energy International, Ltd.
(“Noble”) entered into a Memorandum of Understanding with Godsonic Oil Company
Limited (“Godsonic”), an independent bidder for interest in Block 4. The
Memorandum of Understanding stated that if ERHC and Noble (“ERHC/Noble”)
received less than a 26% bid-interest award in Block 4 in the JDZ, Godsonic
would transfer its entire bid interest award in Block 4 to ERHC/Noble; on the
other hand, if ERHC/Noble received more than a 26% bid-interest award in Block 4
from the JDA, ERHC/Noble would transfer the excess over 26% to Godsonic. In June
2005, the JDA awarded ERHC and its then consortium partner Noble a 35% bid
interest in Block 4 of the JDZ, in addition to the option interest of 25% which
ERHC had exercised in the Block.  In October 2005, Noble withdrew from
participation in Block 4 and Addax Petroleum (Nigeria Offshore 2) Limited
(“Addax”) replaced Noble as ERHC’s consortium partner. By a Letter Agreement
dated October 24, 2005 (the “Letter Agreement”), ERHC and Addax undertook to
transfer a 9% interest of the 35% bid interest to Godsonic subject to Godsonic
meeting financial and other conditions.





ERHC and
Addax entered into a Participation Agreement dated November 17, 2005 (the
“Participation Agreement”) whereby ERHC undertook to assign a 42.3% interest
(the “Assigned Interest”) in Block 4 to Addax and retained an interest of
17.7%   (the “Retained Interest”) .  The Participation
Agreement stated Addax’s cash payment obligations to ERHC would be $18 million,
which was paid in February and March 2006.  Pursuant to the
Participation Agreement between ERHC and Addax, as amended, Addax will serve as
operator and pay all of ERHC’s future costs in respect of all petroleum
operations in Block 4 subject to reimbursement upon production. Addax is
entitled to 100% of ERHC’s allocation of cost plus up to 50% of ERHC’s
allocation of profit until Addax recovers all costs advanced on behalf of
ERHC.





In an
amendment to the Participation Agreement dated February 23, 2006, Addax’s
amended interest in Block 4 was changed to 33.3% while ERHC’s retained interest
remained at 17.7%. On March 24, 2006, the Participation Agreement was further
amended to change ERHC’s interest to 26.7%.





6
 Table of Contents





On March
15, 2006, Godsonic and ERHC (on behalf of the ERHC/Addax consortium) entered
into an agreement wherein ERHC agreed to assign 9% of its interest in Block 4 to
Godsonic subject to certain stipulated financial and other conditions to be
fulfilled by Godsonic. On April 11, 2006, ERHC and Addax entered by agreement to
the Participation Agreement, agreed that Addax would acquire 7.2% of the 9%
interest in the event that Godsonic failed to meet agreed upon conditions and
foreclosed from the claims to the 9% interest. This would give Addax a total of
40.5% interest and ERHC 19% in Block 4.





In July
2007, Godsonic failed to meet the stipulated conditions and ERHC reclaimed the
9% interest. Addax claimed entitlement under the existing agreements to 7.2% out
of the recovered 9%, without payment of any further consideration to
ERHC.  In July 2008, the London Court of International Arbitration
(LCIA) confirmed that under the Participation Agreement between the parties no
further consideration was payable by Addax Petroleum to ERHC for Addax
Petroleum’s 7.2% share of the 9%.





In
February 2006, ERHC sold 15% of its 25% participating interest in Block 3 of the
JDZ to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) for $7.5 million
which was paid in the second quarter of fiscal 2006. Under the participation
agreement between ERHC and Addax Sub, Addax Sub agreed to “carry” all of ERHC’s
future costs in respect of petroleum operations in Block 3. Upon production
Addax Sub is entitled to 100% of ERHC’s allocation of cost plus up to 50% of
ERHC’s allocation of profit until Addax Sub recovers 100% of the costs advanced
on behalf of ERHC.





In March
2006, ERHC sold a 28.67% participating interest in Block 2 of the JDZ to Sinopec
International Petroleum Exploration and Production Corporation Nigeria
(“Sinopec”), and a 14.33% participating interest in Block 2 of the JDZ to Addax
Energy Nigeria Limited (“Addax Ltd.”) leaving a 22% participating interest in
Block 2 to the Company. In exchange, Sinopec paid ERHC $13.6 million and Addax
Ltd. paid ERHC $6.8 million in the second quarter of fiscal 2006. Under the
participation agreement among ERHC, Sinopec and Addax Ltd., Sinopec will serve
as operator, and Sinopec and Addax Ltd. will pay all of ERHC’s future costs in
respect of petroleum operations in Block 2. Sinopec and Addax Ltd. are entitled
to 100% of ERHC’s allocation of cost plus up to 50% of ERHC’s allocation of
profit until they recover 100% of the cost they advanced on behalf of ERHC and
Sinopec is to receive 6% interest on its future costs, up to $35 million, but
only to the extent that those interest costs are recoupable out of
production.





Related
to the sale of the participating interest in Block 2 to Sinopec, ERHC agreed to
pay a $3 million cash success fee ($1.5 million was paid in March 2006 and the
remaining $1.5 million was paid in March 2007) to Feltang International Inc., a
British Virgin Island company (“Feltang”) that was responsible for obtaining
Sinopec’s participation in Block 2. ERHC will issue to Feltang 5,250,000 shares
of common stock and warrants to purchase 6,500,000 shares at a fixed exercise
price of $0.355 per share. The common stock was valued at $4,803,750 based on
the quoted market value of the common stock on the date Sinopec signed the
production sharing agreement.





Current
Business Operations





ERHC’s
operations are currently focused on the Gulf of Guinea, off the coast of central
West Africa. ERHC believes this region has the possibility of significant oil
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/en/cms/?169









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 São Tomé & Principe that is
adjacent to several large petroleum discovery areas.




EEZ –The government of São
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.




7
 Table of Contents





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





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





In early
2008, Addax Petroleum, an experienced exploration and production company that
has participation agreements with ERHC in JDZ Blocks 2, 3 and 4, and is the
operator of JDZ Block 4 publicly disclosed seismic images and maps showcasing
the prospectivity of its JDZ interests.  This seismic was compiled by
Geco-Prakla (now WesternGeco) in 1999 when WesternGeco shot a 2D seismic survey
of approximately 5,900km covering the major part of the JDZ. Interpretation
carried out by WesternGeco has led to the identification of 56 prospective
structures within Blocks 1 to 9 in the JDZ, of which 17 were defined as
prospects and 39 as leads. WesternGeco used reservoir parameters similar to
those known from nearby fields in Nigeria and Equatorial Guinea. Combined
recoverable reserves potential of the 17 prospects was estimated by WesternGeco.
The scope of the WesternGeco report was to interpret and map seismic data,
highlight prospectivity, and calculate volumetrics.





The
estimate of “recoverable reserves potential” based on WesternGeco’s report,
which interpreted and mapped seismic data, highlighted prospectivity and
calculated volumetrics, was not based on any attempt to comply with the SEC
definition of reserves and, accordingly the estimate of recoverable reserves
potential is not presented. ERHC Energy has access to the data compiled by
WesternGeco under the terms of a data use license with WesternGeco, and even
when properly interpreted, seismic data and visualization techniques are not
conclusive in determining if hydrocarbons are present in economically producible
amounts.





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. Addax has secured Joint Development Authority approval to explore the
Kina Prospect. Drilling equipment has been ordered. Earlier in 2007, Addax and
Sinopec jointly entered into an agreement with a subsidiary of Aban Offshore
Limited for the provision of the Aban Abraham, which continues being refurbished
and upgraded in Singapore. At the end of its contractual obligations to another
partnership, the Aban Abraham will be transferred to Addax and
Sinopec.





Operations
in JDZ Block 3





Anadarko
Petroleum is the operator of JDZ Block 3. WesternGeco’s interpretation of
seismic data indicates significant recoverable reserves in JDZ Block 3, however
even when properly interpreted, seismic data and visualization techniques are
not conclusive in determining if hydrocarbon are present in economically
producible amounts. On August 8, 2007, Anadarko presented the initial proposals
for exploration well locations for the Block. The Joint Development Authority
has approved drilling at the Lemba Prospect and Anadarko has ordered drilling
equipment.





8
 Table of Contents





Operations
in JDZ Block 2





ERHC’s
consortium partner Sinopec Corp. is the operator in JDZ Block 2. WesternGeco’s
interpretation of seismic data indicates significant recoverable reserves in JDZ
Block 2, however even when properly interpreted, seismic data and visualization
techniques are not conclusive in determining if hydrocarbon are present in
economically producible amounts. The Joint Development Authority has approved
drilling at the Tome
Prospect. In 2007, Sinopec and Addax jointly entered into an agreement
with a subsidiary of Aban Offshore Limited for the provision of the Aban Abraham
deepwater drillship, which continues being refurbished and upgraded in
Singapore. At the end of its contractual obligations to another partnership, the
Aban Abraham will be transferred to Addax and Sinopec.





Background
of the JDZ





In the
spring of 2001, the governments of São Tomé & Principe and Nigeria reached
an agreement over a long-standing maritime border dispute. Under the terms of
the agreement, the two established the Joint Development Zone to govern
commercial activities within the disputed boundaries. The JDZ is administered by
a Joint Development Authority (JDA) which oversees all future exploration and
development activities in the JDZ. The remaining claimed territorial waters of
São Tomé & Principe are known as the Exclusive Economic Zone (EEZ). Revenues
derived from the JDZ will be shared 60/40 between the governments of Nigeria and
São Tomé & Principe, respectively.





Background
of the EEZ





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





The
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
              Interest2
            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.





(1)
            Original
      Participating Interest granted pursuant to the Option Agreement, dated
      April 2, 2003, between DRSTP and ERHC (the “2003 Option
      Agreement”).





9
 Table of Contents





(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.





(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.





Particulars
of Participating Agreements





JDZ Block
2 Participation Agreement





Date
      of Participation Agreement
            
            Parties
            
            Key
      Terms2
      March 2006
            
            1.
      Sinopec International Petroleum Exploration and Production Co. Nigeria
      Ltd
            
            ERHC
      assigns 28.6% of participating interest to Sinopec International Petroleum
      Exploration and Production Co Nigeria Ltd (“Sinopec”) and a 14.3%
      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
            
            Consideration
      from Addax to ERHC for the 14.33% interest (the “Addax assigned interest”)
      is $6.8 million2b.
      Addax Petroleum Corporation
            
            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 costsJDZ
      Block 3 Participation AgreementDate
      of Participation Agreement
            
            Parties
            
            Key
      Terms15
      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
            
            Consideration
      from Addax Sub to ERHC for the 15% acquired interest is $7.5 
      million.2b.Addax
      Petroleum Corporation
            
            In
      addition, Addax to pay all of ERHC’s future costs for petroleum operations
      as in respect of the 10% interest retained by ERHC in Block
    3.Addax
      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





10
 Table of Contents





Particulars
of Participating Agreements





JDZ
      Block 4 Participation AgreementDate
            
            Parties
            
            Key
      Terms17
      November 2005 (Note)
            
            1.
      ERHC Energy Inc
            
            ERHC
      shall assign 33.3% (Note) 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
            
            Consideration
      from Addax Sub to ERHC for the interest to be acquired by Addax is fixed
      at $18  million.2b.
      Addax Petroleum NV
            
            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 – By an Amendment to the
Participation Agreement dated February 23 2006, ERHC and Addax amended the
Participation Agreement so that the assigned interest to Addax would be changed
to 33.3%.  By a second Amendment to the Participation Agreement,
entered into on March 14 2006, ERHC and Addax amended the Participation
Agreement so that the assigned interest to Addax 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 agreed that if
Godsonic, a third party, did not meet financial and other obligations for the
transfer of 9% of ERHC’s participating interest to Godsonic (and was foreclosed
from all claims to the 9%), ERHC would transfer 7.2% out of the 9% interest to
Addax so that Addax’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 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 percent share of the 9 percent. ERHC is entitled to the
remaining 1.8 percent out of the nine percent.  The combine share of
JDZ Block 4 held by ERHC and Addax Petroleum under the Participation Agreement
is 60 percent. Following the ruling by the LCIA, ERHC’s share of JDZ Block 4
increased from 17.7 percent to 19.5 percent and Addax Petroleum’s share
increased to 40.5 percent.





Current
Plans for Operations





The
Company is currently focused on exploiting its interests in Blocks 5, 6 and 9
but 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.





Government
Regulation





Currently,
the Company has no operations requiring it to comply with any governmental
regulations related to operations. In the event the Company begins exploration
and exploitation of hydrocarbons, it will be required to make necessary
expenditures to comply with applicable health and safety, environmental and
other regulations.





The oil
and gas industry is subject to various types of regulation throughout the world.
Legislation affecting the oil and gas industry has been pervasive and is under
constant review for amendment or expansion. Pursuant to such legislation,
numerous government agencies have issued extensive laws and regulations binding
on the oil and gas industry and companies engaged in this industry, some of
which carry substantial penalties for failure to comply. Such laws and
regulations have a significant impact on oil and gas exploration, production and
marketing and midstream activities. These laws and regulations increase the cost
of doing business and, consequently, will affect results of operations. In as
much as new legislation affecting the oil and gas industry is commonplace and
existing laws and regulations are frequently amended or reinterpreted, the
Company is unable to predict the future cost or impact of complying with such
laws and regulations. However, the Company does not expect that any of these
laws and regulations will affect its operations in a manner materially different
than they would affect other oil and gas companies of similar size and scope of
operations.





Having
interest outside the United States requires the Company to comply with United
States laws and other foreign jurisdiction laws related to pursuing, owing, and
exploiting foreign investments, agreements and other relationships. The Company
is subject to all such laws, including, but not limited to, the Foreign Corrupt
Practices Act of 1977 (“FCPA”.





11
 Table of Contents





Competition





Significant
competition exists in all sectors of the oil and gas industry. ERHC competes
with other oil and gas companies for equipment and personnel required to
explore, develop and operate properties as well as marketing of oil, gas and
natural gas liquids. Commodity price increases have raised the costs of
potential acquisition properties and we compete with a number of companies to
pursue acquisition opportunities. Many of the Company’s competitors have
substantially larger financial and other resources than ours, and they have also
established strategic long-term positions and maintain strong governmental
relationships in countries in which the Company may seek new entry. As a
consequence, ERHC may be at a competitive disadvantage in bidding for drilling
rights. In addition, many of the Company’s larger competitors have a competitive
advantage when responding to factors that affect demand for oil and natural gas
production, such as changing worldwide prices and levels of production, the cost
and availability of alternative fuels and the application of government
regulations.





Employees





As of
September 30, 2008, the Company had five (5) employees and a consultant who
carries our functions of the Corporate Secretary.





Availability
of Information





We file
annual, quarterly and current reports, proxy statements and other documents with
the Securities and Exchange Commission (“SEC”) under the Securities Act of 1934.
The public may read and copy any materials that we file with the SEC at the
SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that
contains reports, proxy and information statements, and other information
regarding issuers, including us, that file electronically with the SEC. The
public can obtain any documents that we file with the SEC athttp://www.sec.gov.





We also
make available, free of charge on or through our Internet website (http://www.erhc.com),
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and if applicable, amendments to those reports filed or furnished
pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the
SEC.





Item1A.  Risk Factors





You
should carefully consider the risks described below before making any investment
decision related to the Company’s securities.  The risks and
uncertainties described below are not the only ones facing the
Company.   Additional risks and uncertainties not presently known
or that the Company currently deems immaterial also may impair its business
operations.  If any of the following risks actually occur, the
Company’s business could be affected.





The
Company has no sources of revenue and a history of losses from
operations





The
Company’s business is in an early stage of development.  The Company
has not generated any operating revenue since its entry into the oil and gas
industry and has incurred significant operating losses.  The Company
has incurred losses from operations of $4,280,143 in fiscal 2008 and $47,399,060
since inception.  The Company had net losses of $3,071,757 and
$1,756,904 in fiscal 2008 and 2007, respectively. The Company had net income of
$23,171,536 in fiscal 2006, primarily as a result of entering into production
sharing agreements under which it sold various participatory
interests.  The Company expects to incur additional operating losses
for the foreseeable future.





The
Company has a limited operating history in the oil and gas industry





The
Company’s operations have consisted solely of acquiring rights to working
interests in the JDZ and EEZ and entering into production sharing
contracts.  The Company will not be the operator with respect to these
contracts.  The Company’s future financial results depend primarily on
(1) the ability of the Company’s venture partners to provide or obtain
sufficient financing to meet their financial commitments in the production
sharing contracts, (2) the ability to discover commercial quantities of oil and
gas, and (3) the market price for oil and gas. Management cannot predict that
the production sharing contracts will result in wells being drilled or if
drilled, whether oil and/or gas will be discovered in commercial
quantities.





Financing
will be needed to fund the financial commitments of the production sharing
contracts





While the
Company is not required to fund any financial commitments pursuant to the
production sharing contracts, project financing will be required to fund
exploration activities.  Failure of our venture partners to provide or
obtain the necessary financing will preclude the commencement of exploration
activities.





12
 Table of Contents





The
Company may not discover commercially productive reserves in the JDZ or
EEZ





The
Company’s future success depends on its ability to economically discover oil and
gas reserves in commercial quantities in the JDZ and EEZ. There can be no
assurance that the Company’s planned projects in the JDZ or EEZ will result in
significant, if any, reserves or that the Company will have future success in
drilling productive wells.





The
Company’s non-operator status limits its control over its oil and gas projects
in the JDZ and EEZ





The
Company will focus primarily on creating exploration opportunities and forming
relationships with oil and gas companies to develop those opportunities in the
JDZ and EEZ.  As a result, the Company will have only a limited
ability to exercise control over a significant portion of a project’s operations
or the associated costs of those operations in the JDZ or EEZ.  The
success of a future project is dependent upon a number of factors that are
outside the Company’s control. These factors include:





•
            the
      availability of future capital resources to the Company and the other
      participants for drilling wells;





•
            the
      approval of other participants for determining well locations and drilling
      time-tables ;





•
            the
      economic conditions at the time of drilling, including the prevailing and
      anticipated price of  oil and gas;
and





•
            the
      availability and cost of deep water drilling rigs and the availability
      of  operating personnel





•
            the
      availability of future capital resources to the Company and the other
      participants for drilling wells;




The
Company’s reliance on its consortium partners and its limited ability to
directly control future project costs could have a material adverse effect on
its future expected rates of return.





The
Company’s success depends on its ability to exploit its limited
assets





The
Company’s primary assets are rights to working interests in exploration acreage
in the JDZ and EEZ under agreements with the JDA and DRSTP.  The
Company’s operations have been limited to managing and sustaining its rights
under these agreements.  The Company’s viability depends on its
ability to exploit these assets, of which there is no assurance that it will be
successful.





The
Company’s competition includes oil and gas conglomerates that have significant
advantages over it




The oil
and gas industry is highly competitive. Many companies are engaged in exploring
for crude oil and natural gas and acquiring crude oil and natural gas
properties, resulting in a high degree of competition for desirable exploratory
and producing properties.  The companies with which the Company
competes are much larger and have greater financial resources than the
Company.





Various
factors beyond the Company’s control will affect prices of oil and
gas





The
availability of a ready market for the Company’s future crude oil and natural
gas production depends on numerous factors beyond its control, including the
level of consumer demand, the extent of worldwide crude oil and natural gas
production, the costs and availability of alternative fuels, the costs and
proximity of transportation facilities, regulation by authorities and the costs
of complying with applicable environmental regulations.





The
Company’s business interests are located outside of the United States which
subjects it to risks associated with international activities.





As of
September 30, 2008, the Company’s major assets were located outside the United
States.  Apart from cash maintained in American’ financial
institutions, the Company’s primary assets are agreements with DRSTP and the
JDA, which provide the ERHC with rights to participate in exploration and
production activities in the Gulf of Guinea off the coast of central West
Africa.  Production is subject to political risks which is inherent in
all foreign operations. The Company’s ability to exploit its interests in this
area pursuant to such agreements may be adversely impacted by this
circumstance.





13
 Table of Contents





The
future success of the Company’s international operations may also be adversely
affected by risks associated with international activities, including economic
and labor conditions, political instability, risk of war, expropriation,
termination, 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.  Changes in
exchange rates may also adversely affect the Company’s future results of
operations and financial condition.





In
addition, to the extent the Company engages in operations and activities outside
the United States, it is subject to the Foreign Corrupt Practices Act (the
“FCPA”) which, among other restrictions, prohibits U.S. companies and their
intermediaries from making payments to foreign officials for the purpose of
obtaining or keeping business or otherwise obtaining favorable treatment, and
requires companies to maintain adequate record-keeping and internal accounting
practices to accurately reflect their financial and other transactions with
foreign officials.  The FCPA applies to companies, individual
directors, officers, employees and agents.  The FCPA also applies to
foreign companies and persons taking any act in furtherance of such payments
while in the United States.  Under the FCPA, U.S. companies may also
be held liable for actions taken by strategic or local partners or
representatives.





The FCPA
imposes civil and criminal penalties for violations of its
provisions.  Civil penalties may include fines of up to $500,000 per
violation, and equitable remedies such as disgorgement of profits causally
connected to the violation (including prejudgment interest on such profits) and
injunctive relief.  Criminal penalties for violations of the payments
provisions could range up to the greater of $2 million per violation or twice
the gross pecuniary gain sought by making the payment, and/or incarceration for
up to 5 years per violation.  Moreover, if a director, officer or
employee of a company is found to have willfully violated the FCPA books and
records provisions, the maximum penalty would be imprisonment for 20 years per
violation.  Maximum fines of up to $25 million also may be imposed for
willful violations of the books and records provisions by a
company.





The SEC
and/or the Department of Justice (“DOJ”) could assert that there have been
multiple violations of the FCPA, which could lead to multiple
fines.  The amount of any fines or monetary penalties which could be
assessed would depend on, among other factors, findings regarding the amount,
timing, nature and scope of any improper payments, whether any such payments
were authorized by or made with knowledge of ERHC or its affiliates, the amount
of gross pecuniary gain or loss involved, and the level of cooperation provided
to the government authorities during the investigations.  Negotiated
dispositions of these types of violations also frequently result in an
acknowledgement of wrongdoing by the entity and the appointment of a monitor on
terms agreed upon with the SEC and DOJ to review and monitor current and future
business practices, including the retention of agents, with the goal of assuring
future FCPA compliance.  Other potential consequences could be
significant and include suspension or debarment of ERHC’s ability to contract
with governmental agencies of the United States and of foreign
countries.  Any determination that ERHC has violated the FCPA could
result in sanctions that could have a material adverse effect on the Company’s
business, prospects, operations, financial condition and cash flow.





The
Company is under investigation by the SEC, the DOJ and a U.S. Senate
Subcommittee, and the results of these investigations could have a material
adverse effect on its business, prospects, operations, financial condition and
cash flow.




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 Săo Tomé 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 requested 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 the subpoena.   Please see “Legal
Proceedings” for more information.





The
investigations by the DOJ, SEC and Senate Subcommittee are
continuing.  The Company anticipates that these investigations will be
lengthy and does not expect these investigations to be concluded in the
immediate future.  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 ERHC’s business, prospects, operations, financial condition and cash
flow.





14
 Table of Contents





These
investigations could also result in:





·
            third
      party claims against us, which may include claims for special, indirect,
      derivative or consequential
damages;





·
            damage
      to our  business, operations and
  reputation;





·
            loss
      of, or adverse effect on, cash flow, assets, goodwill, operations and
      financial condition, business, prospects, profits or
      commercial  value;





·
            adverse
      consequences on our  ability to obtain or continue financing for
      current or future projects; and/or





·
            claims
      by directors, officers, employees, affiliates, advisors, attorneys,
      agents, debt holders or other interest holders or constituents of
      ERHC.





·
            third
      party claims against us, which may include claims for special, indirect,
      derivative or consequential
damages;





Continuing
negative publicity arising from these investigations could also adversely affect
our business and prospects in the commercial market.  In addition,
these investigations have resulted in significant expenses to ERHC, including
substantial legal fees and the diversion of management’s attention from its
operations and other activities.  If the Company incurs costs or
losses as a result of these matters, it may not have the liquidity or funds to
address those costs or losses, in which case such costs or losses could have a
material adverse effect on its business, prospects, operations, financial
condition and cash flow.





Through
September 30, 2008, ERHC has incurred substantial costs in responding to the
investigations by the DOJ, SEC and Senate Subcommittee. Those costs consist
primarily of legal fees paid to the Company’s legal counsel, Akin Gump Strauss
Hauer & Feld LLP and document reproduction costs. These costs have had a
significant negative impact on the Company’s cash flows from
operations.  ERHC anticipates the use of even more of its cash
reserves to address these ongoing investigations. If continued at current levels
this could have a serious negative impact on the Company’s liquidity. Neither
management nor and its legal counsel can assess the magnitude of future cash
requirements that could result from prolonged investigations or any negative
findings that might arise from the investigations. In a worst case scenario, the
Company’s cash resources could be exhausted and the Company’s status as a going
concern could be brought into question.





The
Company’s results of operations are susceptible to general economic
conditions





The
Company’s revenues and results of operations will be subject to fluctuations
based upon the general economic conditions both in the United States and
internationally.  If there were to be a general economic downturn or a
recession in the oil and gas industry, the Company’s future revenues, the value
of its oil and natural gas exploration concession, as well as its ability to
exploit its assets could be materially adversely affected.





One
shareholder controls approximately 43% of the Company’s outstanding common
stock





Chrome
Oil Services (“Chrome”) beneficially owns approximately 43% of the Company’s
outstanding common stock.  As a result, Chrome has the ability to
substantially influence, and may effectively control the outcome of corporate
actions that require stockholder approval, including the election of
directors.  This concentration of ownership may have the effect of
delaying or preventing a future change in control of the Company or a liquidity
event.





The
Company’s stock price is highly volatile





The
Company’s common stock is currently traded on the Over-the-Counter Bulletin
Board. The market price of the Company’s common stock has experienced
fluctuations that are unrelated to its operating performance.  The
market price of the common stock has been highly volatile over the last several
years.  The Company can provide no assurance regarding the stock
price.





The
Company does not currently pay dividends on its common stock and do not
anticipate doing so in the future





The
Company has paid no cash dividends on its common stock, and there is no
assurance that the Company will achieve sufficient earnings to pay cash
dividends on its common stock in the foreseeable future. The Company intends to
retain any earnings to fund its operations.





15
 Table of Contents





The
Company’s stock is considered a “penny stock”





The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in “penny stocks.”  Penny stocks generally are equity
securities with a share price of less than $5.00.  The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market.  These
disclosure requirements may have the effect of reducing the level of trading
activity in any secondary market for a stock that becomes subject to the penny
stock rules.  The Company’s common stock may be subject to the penny
stock rules, and accordingly, investors in the common stock may find it
difficult to sell their shares in the future, if at all.





The
Internal Revenue Service is currently conducting an examination of the Company’s
tax returns.





The
Internal Revenue Service is currently examining the tax returns for the
Company’s 2005 and 2006 tax years.The Company
anticipates that this examination will conclude in the next few
months.  If adjustments are required, the Company may be subject to
taxes, penalties and interest and these could have a material adverse effect on
ERHC’s operations, financial condition and cash flow.





Item1B.  Unresolved Staff Comments





At
September 30, 2008, the Company has outstanding unresolved Securities and
Exchange Commission (the “SEC”) staff comments that relate to a comment letter
that was originally issued on February 27, 2008 and was followed up with
additional comments on May 9, 2008, August 29, 2008 and November 6, 2008. The
comment letter relates to the Company’s September 30, 2007 Form 10K and
subsequent Forms 10-Q. Company management has responded to all comments and
is  seeking approval of its  responses. The remaining
unresolved comments relate to:





·
            general
      business disclosures


·
            disclosure
      controls and procedures


·
            managements
      annual report on internal control over financial reporting and related
      quarterly disclosures in our quarterly reports for the quarters ended
      March 31, 2008 and June 30, 2008


·
            compensation
      of directors


·
            disclosures
      related to grants of plan-based
awards


·
            outstanding
      equity awards at fiscal-year end


·
            potential
      payments upon termination or change of
control





The
Company does not contest the “SEC” comments and expects that all such comments
will be resolved through additional disclosures.





Item2.  Properties





Substantially
all of the Company’s properties are in the form of working interest which
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 production revenues. ERHC has working
interests in Blocks 2, 3, 4, 5, 6, and 9 in the offshore Joint Development Zone
(JDZ) of Nigeria and the island nation of Sao Tome and Principe and in addition
has interests in the territorial waters of Sao Tome and Principe, known as the
Exclusive Economic Zone (EEZ).





16
 Table of Contents





Joint
Development Zone


ERHC
      has interests in six of the nine Blocks in the Joint Development Zone
      (JDZ), a 34,548 sq km area approximately 200 km off the coast of Nigeria
      and Sao Tome and Principe that is adjacent to several large petroleum
      discovery areas. ERHC’s rights in the JDZ include:
            graphic




·
            JDZ
      Block 2:  22.0% Working
interest





·
            JDZ
      Block 3:  10.0% Working
interest





·
            JDZ
      Block 4:  19.5% Working
interest





·
            JDZ
      Block 5:  15.0% Working
interest





·
            JDZ
      Block 6:  15.0% Working
interest





·
            JDZ
      Block 9:  20.0% Working
interest





·
            JDZ
      Block 2:  22.0% Working
interest




Sao
Tome and Principe Exclusive Economic Zone




The
government of Sao Tome and Principe awarded ERHC rights to participate in
exploration and production activities in Sao Tome and Principe’s Exclusive
Economic Zone (EEZ). ERHC’s rights include the following:




·
            The
      right to receive up to two blocks of ERHC’s choice;
  and





·
            The
      option to acquire up to a 15% paid working interest in another two blocks
      of ERHC’s choice.





·
            The right
      to receive up to two blocks of ERHC’s choice;
  and


ERHC
would be responsible for its proportionate share of exploration and exploitation
costs in the EEZ blocks.





The EEZ
describes territorial waters of Sao Tome that encompasses an area of
approximately 160,000 square km. It is measured from claimed archipelagic
baselines — territorial sea: 12 nautical miles, exclusive economic zone: 200
nautical miles. It is the largest in the Gulf of Guinea.





Corporate
Office





The
Company’s corporate office is located at 5444 Westheimer Road, Suite 1440,
Houston, Texas 77056 pursuant to a lease that expires in December
2011.





Item3.  Legal Proceedings





Subpoenas.  On
May 4, 2006, a Federal court search warrant initiated by 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 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.  ERHC’s attorneys, Akin Gump Strauss Hauer & Feld LLP, are
assisting ERHC in responding to the subpoena





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





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 ERHC business, prospects, operations, financial
condition and cash flows.





17
 Table of Contents





Godsonic
Negotiations.  In July 2007, ERHC and Godsonic commenced negotiations
to have Godsonic relinquish all of its claims to a 9% interest in Block
4.  The parties reached a settlement in August 2007 which resulted in
Godsonic’s relinquishment of all claims to the 9% interest in Block
4.





ERHC/Addax
Arbitration.  Addax, our consortium partner in JDZ Block 4, claimed
entitlement under our existing agreements to 7.2% out of the recovered 9%
without the payment of any further consideration to ERHC.   In
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 percent share of
the 9 percent. The LCIA also confirmed that ERHC was entitled to the remaining
1.8 percent out of the nine percent.  The combine share of JDZ Block 4
held by ERHC and Addax Petroleum under the Participation Agreement is 60
percent. Following the ruling by the LCIA, ERHC’s share of JDZ Block 4 increased
from 17.7 percent to 19.5 percent and Addax Petroleum’s share increased to 40.5
percent.





Lakeshore
Arbitration.  In October 2006, Lakeshore Capital Limited (“Lakeshore”)
filed an arbitration claim against ERHC seeking $4,400,000 for the alleged value
of 4,500,000 shares of ERHC common stock and for a warrant to purchase an
additional 1,500,000 shares of common stock at an exercise price of $.20 per
share, including interest and costs, as compensation for financial consultancy
and related services rendered under a contract with ERHC dated May 20,
2002.  The claim was resolved in mediation conducted by the American
Arbitration Association by the payment by ERHC of $250,000 to
Lakeshore.  Pursuant to the Settlement Agreement dated May 16, 2007,
the arbitration was discontinued with prejudice.





On
November 3, 2008, the Company filed a suit at the Federal High Court in Nigeria
to prevent any tampering with its rights in JDZ Blocks 5 and 6. The suit comes
after the JDA and Joint Ministerial Counsel (JMC) of the Nigeria-Sao Tome and
Principe JDZ failed to give a satisfactory response to the Company’s letters
seeking clarification on the Company’s rights in JDZ Blocks 5 and 6 following
media reports stating that the JMC had approved of the Company’s removal from
the Blocks. The Company was awarded a 15 percent working interest in each of the
Blocks in a 2005 bid/licensing round conducted by the JDA following the exercise
by ERHC of preferential rights in the Blocks as guaranteed by contract and
treaty. If the Company fails to prevail in its lawsuit, there could be
significant adverse affects on the Company’s future planned operations in JDZ
Blocks 5 and 6.








From time
to time, ERHC may be subject to routine litigation, claims, or disputes in the
ordinary course of business.  In the opinion of management, no pending
or known threatened claims, actions or proceedings against the Company are
expected to have a material adverse effect on ERHC’s consolidated financial
position, results of operations or cash flows.  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.





Item4.  Submission of Matters to a Vote of Security
Holders





None.





18
 Table of Contents





PART
II





Item5.  Market for Registrant’s Common Equity, Related
Shareholder Matters and Issuer Purchases of Equity Securities





Market
and Related Information





ERHC’s
common stock is currently traded on the OTC Bulletin Board under the symbol
“ERHE.”  The market for the Company’s common stock is unpredictable
and highly volatile.  The following table sets forth the closing sales
price per share of the common stock for the past three fiscal
years.  These prices reflect inter-dealer prices, without retail
mark-ups, markdowns or commissions, and may not necessarily represent actual
transactions.





Stock Price Highs &
Lows





High
            
            
            Low(per
      share)Fiscal Year 2006First
      Quarter
            
            $
            0.41
            
            
            $
            0.30Second
      Quarter
            
            $
            0.95
            
            
            $
            0.30Third
      Quarter
            
            $
            0.92
            
            
            $
            0.40Fourth
      Quarter
            
            $
            0.54
            
            
            $
            0.37Fiscal Year 2007First
      Quarter
            
            $
            0.51
            
            
            $
            0.31Second
      Quarter
            
            $
            0.48
            
            
            $
            0.33Third
      Quarter
            
            $
            0.42
            
            
            $
            0.24Fourth
      Quarter
            
            $
            0.34
            
            
            $
            0.20Fiscal Year 2008First
      Quarter
            
            $
            0.30
            
            
            $
            0.19Second
      Quarter
            
            $
            0.54
            
            
            $
            0.18Third
      Quarter
            
            $
            0.60
            
            
            $
            0.40Fourth
      Quarter
            
            $
            0.42
            
            
            $
            0.28





As of
November 28, 2008, there were approximately _____ stockholders of
record.  The closing price of the common stock as reported on the OTC
Bulletin Board on November 28, 2008 was $0.15.  The Company has not
paid any dividends during the last two fiscal years and does not anticipate
paying any cash dividends in the foreseeable future.





Securities
Authorized for Issuance Under Equity Compensation Plans





In
November 2004, the Board of Directors adopted a 2004 Compensatory Stock Option
Plan pursuant to which it reserved 20,000,000 shares for
issuance.  This plan was approved at a special meeting of the
stockholders of the Company in February 2005.  Under this plan,
7,576,756 shares have been issued.





Plan
      Category
            
            Number
      of securities to be
              issued
      upon exercise of
              outstanding
      options,
              warrants
      and rights
            
            
            Weighted-average
      exercise
              price
      of outstanding
              options,
      warrants and
              rights
            
            
            Number
      of securities
              remaining
      available for
              future
      issuance under
              equity
      compensation plans
              (excluding
      securities
              reflected
      in column (a))(a)
            
            
            (b)
            
            
            ©Equity
      compensation plans approved by security holders
            
            
            1,000,000
            
            
            $
            0.43
            
            
            
            11,423,244Equity
      compensation plans not approved by security holders
            
            
            -
            
            
            
            -
            
            
            
            -





Recent
Sales of Unregistered Securities





The
Company has sold the following unregistered securities:





19
 Table of Contents





·
            During
      the second quarter of fiscal 2007, warrants issued in 2003, with an
      exercise price of $0.20, were exercised on a cashless basis, which
      exercise resulted in the issuance of an aggregate of 2,949,587 shares of
      common stock.





·
            During
      the first quarter of fiscal 2008, we issued an aggregate of 300,000 shares
      of common stock to the Company’s directors for services rendered in
      2007.





·
            During
      the fourth quarter of fiscal   2008, an aggregate of
      210,000 shares of common stock were due to the Company’s directors for
      services rendered as more fully disclosed in Item 10, Directors and
      Executive Officers of the
Registrant.





·
            During
      the second quarter of fiscal 2007, warrants issued in 2003, with an
      exercise price of $0.20, were exercised on a cashless basis, which
      exercise resulted in the issuance of an aggregate of 2,949,587 shares of
      common stock.





With
respect to the sale of the unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.  No sales commissions were paid in
connection with these transactions.





Issuer
Purchases of Equity Securities





The
Company has not repurchased any of its Common Stock.





Item6. Selected Financial Data





The
selected financial data of the Company presented below as of and for each of the
five years in the period ended September 30, 2008, has been derived from the
audited financial statements of the Company.  The financial statements
as of and for the years ended September 30, 2008, 2007, 2006 and 2005 have been
audited by Malone & Bailey, PC, an independent registered public accounting
firm.  The financial statements as of and for the year ended September
30, 2004 were audited by another independent registered public accounting firms.
The data set forth below should be read in conjunction with the Company’s
financial statements, related notes thereto and Management’s Discussion and
Analysis of Financial Condition and Plan of Operations, contained elsewhere
herein.





For
      the Years Ended September 30,Statements
      of Operations Data
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Operating
      expenses
            
            $
            4280143
            
            
            $
            4,976,765
            
            
            $
            (24,113,494
            )
            
            $
            4,652,459
            
            
            $
            2,085,426Interest
      expense
            
            
            (1,843)
            
            
            
            (1,843
            )
            
            
            (2,099
            )
            
            
            (1,147,248
            )
            
            
            (1,671,759
            )Other
      Income (expense)
            
            
            1,241,189
            
            
            
            1,498,704
            
            
            
            1,123,141
            
            
            
            278,804
            
            
            
            163,797Loss
      on extinguishment of debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,749,575
            
            
            
            -Provision
      for taxes
            
            
            (30,360)
            
            
            
            (1,723,000
            )
            
            
            2,063,000
            
            
            
            -
            
            
            
            -Net
      income (loss)
            
            
            (3,071,157)
            
            
            
            (1,756,904
            )
            
            
            23,171,536
            
            
            
            (11,270,478
            )
            
            
            (3,593,388
            )Net
      income (loss) per share – basic and diluted
            
            
            (0.00)
            
            
            
            (0.00)
            
            
            
            0.03
            
            
            
            (0.02
            )
            
            
            (0.01
            )Weighted
      average shares of common stock outstanding
            
            
            722,182,831
            
            
            
            720,966,165
            
            
            
            712,063,980
            
            
            
            671,164,058
            
            
            
            592,603,441As
      of September 30,Balance
      Sheets Data
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004DRSTP
      Concession fee
            
            $
            2,839,500
            
            
            $
            2,839,500
            
            
            $
            2,839,500
            
            
            $
            5,679,000
            
            
            $
            5,679,000Total
      assets
            
            
            36,880,422
            
            
            
            39,854,641
            
            
            
            45,878,249
            
            
            
            6,720,210
            
            
            
            5,728,556Total
      liabilities
            
            
            5,907,960
            
            
            
            5,947,982
            
            
            
            10,390,126
            
            
            
            2,799,011
            
            
            
            14,757,208Shareholders’
      equity (deficit)
            
            
            30,972,462
            
            
            
            33,906,659
            
            
            
            35,488,123
            
            
            
            3,921,199
            
            
            
            (9,028,652
            )





20
 Table of Contents





Item 7.  Management’s Discussion and Analysis of Financial
Condition and Plan of Operations





Introduction




The
following discussion and analysis presents management’s perspective of ours
business and, financial condition and its overall performance. This information
is intended to provide investors with an understanding of our past performance,
current financial condition and outlook for the future. 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
thereto 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.





Reference
is made to “Item 6. Selected Financial Data” and “Item 8. Financial Statements
and Supplementary Data.”





Overview
of Business





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 incorporated 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 primary assets, which are rights to working interests in exploration
acreage in the JDZ and the EEZ.  The Company has entered into
production sharing contracts with upstream oil and gas companies in these JDZ
Blocks to assist the Company in exploring and developing its assets in the
JDZ.  The technical and operational expertise in conducting
exploration and development of these JDZ Blocks will be provided by partner oil
and gas companies in exchange for participating in the Company’s interest oil
and gas companies.  The Company is also exploring opportunities in
other areas of the oil and gas industry





State of Participation
Interests





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
              Interest2
            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.




21
 Table of Contents





Particulars
of Participating Agreements





JDZ Block
2 Participation Agreement





Date
      of Participation Agreement
            
            Parties
            
            Key
      Terms2
      March 2006
            
            1.
      Sinopec International Petroleum Exploration and Production Co. Nigeria
      Ltd
            
            ERHC
      assigns 28.6% 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 is $13.6 
      million.2a.
      Addax Energy Nigeria Limited
            
            Consideration
      from Addax to ERHC for the 14.33% interest  is $6.8
      million2b.
      Addax Petroleum Corporation
            
            In
      addition, Sinopec and Addax to pay all of ERHC’s future costs for
      petroleum operations in respect of the 22% interest retained by ERHC in
      Block 2.3.
      ERHC Energy Inc
            
            Sinopec
      and Addax are entitled to 100% of ERHC’s allocation of cost
      reimbursement  plus up to 50% of ERHC’s allocation of profit oil
      from revenue generated by the retained interest on Block 2 until Sinopec
      and Addax recover 100% of the carried costsJDZ
      Block 3 Participation AgreementDate
      of Participation Agreement
            
            Parties
            
            Key
      Terms15
      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.Consideration
      from Addax Sub to ERHC for the 15% interest is $7.5 
      million.2a.
      Addax Petroleum Resources Nigeria Limited
            
            In
      addition, Addax Sub to pay all of ERHC’s future costs  for
      petroleum operations (“the carried costs”) in respect of the 10% interest
      retained by ERHC (the “retained interest”) in Block 3.2b.
      Addax Petroleum Corporation
            
            Addax
      Sub is entitled to 100% of ERHC’s future costs in respect of petroleum
      operations.Addax
      is entitled to 100% of ERHC’s allocation of cost
      reimbursement  plus up to 50% of ERHC’s allocation of profit oil
      until Addax Sub recovers 100% of the carried
  costs





22
 Table of Contents





JDZ
      Block 4 Participation AgreementDate
            
            Parties
            
            Key
      Terms17
      November 2005 (Note)
            
            1.
      ERHC Energy Inc
            
            ERHC
      shall assign 33.3% (Note) 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
            
            Consideration
      from Addax Sub to ERHC for the interest to be acquired by Addax (the
      “acquired interest”) is fixed at $18  million.2b.
      Addax Petroleum NV
            
            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
      the carried costs





Note – By an Amendment to the
Participation Agreement dated February 23 2006, ERHC and Addax amended the
Participation Agreement so that the assigned interest to Addax would be changed
to 33.3%.  By a second Amendment to the Participation Agreement,
entered into on March 14 2006, ERHC and Addax amended the Participation
Agreement so that the assigned interest to Addax 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 agreed that if
Godsonic, a third party, did not meet financial and other obligations for the
transfer of 9% of ERHC’s participating interest to Godsonic (and was foreclosed
from all claims to the 9%), ERHC would transfer 7.2% out of the 9% interest to
Addax so that Addax’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 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 percent share of the 9
percent. ERHC is entitled to the remaining 1.8 percent out of the nine
percent.  The combine share of JDZ Block 4 held by ERHC and Addax
Petroleum under the Participation Agreement is 60 percent. Following the ruling
by the LCIA, ERHC’s share of JDZ Block 4 increased from 17.7 percent to 19.5
percent and Addax Petroleum’s share increased to 40.5 percent.





Current
Plans for Income Generation





The
Company is currently focused on exploiting its interests in Blocks 2, 3, 4, 5, 6
and 9. However, it has no current income other than interest income from cash
investments generated from the 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 revenue however, we are looking for other investment
opportunities.





Critical
Accounting Policies





The
Company has identified the policies below as critical to its business operations
and the understanding of its results of operations.  The impact and
any associated risks related to these policies on the Company’s business
operations are discussed throughout this section where such policies affect the
Company’s reported and expected financial results.  Management’s
preparation of this Annual Report on Form 10-K requires it to make estimates and
assumptions that affect the reported amount of assets and liabilities, and the
disclosure of contingent assets and liabilities.  There is no
assurance that actual results will not differ from those estimates and
assumptions.





Concentration
of Risks





The
Company’s current focus is to exploit assets consisting of agreements with the
DRSTP concerning oil and gas exploration in EEZ and with the JDA concerning oil
and gas exploration in the JDZ.  The Company has formed relationships
with other oil and gas companies with the 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.





23
 Table of Contents





Asset
Retirement Obligation





ERHC’s
asset retirement obligation relates to the plugging and abandonment of certain
oil and gas properties in Wichita Falls, Texas. The provisions of SFAS No. 143
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 accreted 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
current liability is fully accreted and represents management’s best estimate of
the fair value of the outstanding obligation.





Impairment
of Long-lived Assets





ERHC
evaluates the recoverability of long-lived assets when events and circumstances
indicate that such assets might be impaired.  ERHC 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.  ERHC has evaluated its investment in its DRSTP concession
fee in light of its 2003 Option Agreement (see Note 4) and there have been no
events or circumstances that would indicate that such asset might be
impaired.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. This
statement was effective for and adopted by ERHC beginning the first quarter of
fiscal 2008. Its adoption had no significant impact on our financial
statements.





In June
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—An Interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN
No. 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with Statement No. 109,
“Accounting for Income Taxes.” FIN No. 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
classification, accounting for interest and penalties and accounting in interim
periods and disclosure. The provisions of FIN No. 48 are effective for fiscal
years beginning after December 15, 2006.   This statement was
effective for and adopted by ERHC beginning the first quarter of fiscal 2008.
Its adoption had no significant impact on our financial statements.





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
158 (SFAS 158), “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132
(c).”  SFAS 158 requires recognition of the overfunded or underfunded
status of pension and other postretirement benefit plans on the balance sheet.
The Company has no defined benefit pension or other post retirement plans and
the adoption of SFAS 158 will not have a material impact on our financial
statements.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159 (SFAS 159), “The Fair Value Option for Financial Assets & Financial
Liabilities – including an amendment of SFAS No. 115.” SFAS 159 will create a
fair value option under which an entity may irrevocably elect fair value as the
initial and subsequent measurement attribute for certain financial assets and
liabilities on a contract by contract basis, with changes in fair values
recognized in earnings as these changes occur. SFAS 159 will become effective
for fiscal years beginning after November 15, 2007. We will adopt this new
accounting standard on January 1, 2008.  This statement is effective
for ERHC beginning the first quarter of fiscal 2009, but the Company does not
expect the adoption to have a material impact on our financial
statements.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007) (SFAS 141R), “Business Combinations,” and No. 160 (SFAS 160),
“Noncontrolling Interests in Consolidated Financial Statements, an amendment of
ARB No. 51”. SFAS 141R requires the acquiring entity in a business combination
to recognize the assets acquired and liabilities assumed. Further, SFAS 141R
also changes the accounting for acquired in-process research and development
assets, contingent consideration, partial acquisitions and transaction
costs.  Under SFAS 160, all entities are required to report
noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. In addition, transactions between an entity
and noncontrolling interests will be treated as equity transactions. SFAS 141R
and SFAS 160 will become effective for fiscal years beginning after December 15,
2008. ERHC will adopt these new accounting standards on October 1, 2009, but the
Company does not expect the adoption to have a material impact on our financial
statements.





24
 Table of Contents





Former
Operations – Asset Retirement Obligation





The
Company has accrued $485,000 as a liability on the balance sheet relating to the
estimated costs on plugging and abandonment of certain oil and gas properties in
Wichita Falls, Texas.  The Company acquired a lease in oil fields
located in Wichita County, Texas, which was subsequently assigned to a former
shareholder.  However, in connection with the lease in Wichita County,
the Company may remain liable for certain plugging and abandonment costs,
estimated to be approximately $485,000.  The Company uses SFAS No. 143
to account for this obligation.  These properties were abandoned and
written off during the year ended September 30, 1999 and the Company believes
the current liability is fully accrued and represents management’s best estimate
of the fair value of the outstanding obligation.





Management
reviews this accrual quarterly for any adjustments necessary.  There
has been no activity related to this liability in several years however,
management believes that the accrual is appropriately conservative at this
time.





Results
of Operations





Year
ended September 30, 2008 Compared to Year Ended September 30, 2007





During
fiscal 2008, the Company had general and administrative expenses totaling
$4,249,572 compared with $4,954,848 in fiscal 2007. The primary reason for the
decrease in general and administrative expenses is a reduction in
legal and professional fees due to lower legal expenses in connection with all
the governmental agencies investigations of the Company. (See Item 3, Legal
Proceedings).





During
2008, the Company had a net loss of $3,071,157, compared to a net loss of
$1,756,904 for fiscal 2007.  The primary reason for the increase in
net loss is due to the fact that the Company has no remaining tax benefits from
utilization of tax losses in 2008 because the Company is in a loss carry forward
position. In 2007, the Company generated tax benefits of $1,723,000 from
utilization of net operating losses.





25
 Table of Contents





During
fiscal 2008 and 2007, the Company had no revenues from which cash flows could be
generated to support operations.  In fiscal 2008 and 2007, the Company
relied primarily upon cash generated from the 2006 sale of interests to fund
operations.





Year
ended September 30, 2007 Compared to Year Ended September 30, 2006





During
fiscal 2007, the Company had general and administrative expenses of $4,954,848
compared with $5,979,609 in fiscal 2006.  The decrease results
primarily from the grant of stock warrants for our outside consultants valued at
$1,145,000 in fiscal 2006 versus employee compensatory stock option expense of
$175,440 in fiscal 2007.





During
2007, the Company had a net loss of $1,756,904, compared to a net income of
$23,171,536 for fiscal 2006.  The primary reason for the $24,928,440
decrease in net income for the year ended September 30, 2007 was due to a
$30,102,250 net gain in fiscal 2006 from the sale of participation interests in
the three JDZ Blocks under production sharing contracts with various joint
venture partners.





During
fiscal 2007 and 2006, the Company had no revenues from which cash flows could be
generated to support operations.  In fiscal 2007 and 2006, the Company
relied primarily upon cash generated from the 2006 sale of interests to fund
operations.





Year
ended September 30, 2006 Compared to Year Ended September 30, 2005





During
fiscal 2006, the Company had general and administrative expenses of $5,979,609
compared with $4,645,783 in fiscal 2005.  This increase was primarily
attributed to increased legal fees as a result of the Department of Justice and
SEC investigations.





During
2006, the Company had net income of $23,171,536, compared to a net loss of
$11,270,478 for fiscal 2005.  The three primary reasons for the
$34,442,014 improvement in net income for the year ended September 30, 2006
were: (i) a $30,102,250 net gain from the sale of participation interests in the
three JDZ Blocks under production sharing contracts with various joint venture
partners; (ii) a $5,749,575 non-cash loss on extinguishment of debt during
fiscal 2005 as the result of the issuance of shares in conjunction with a
conversion of debt to common stock; and (iii) fiscal 2006 income tax expense of
$2,063,000.





During
fiscal 2006, the Company entered into production sharing agreements in Blocks 2,
3 and 4 under which they sold various participating interests for total cash
proceeds of $45,900,000 which resulted in net cash provided by investing
activities of $45,896,876, compared with net cash used by investing activities
of $24,277 for fiscal 2005.





During
fiscal 2006 and 2005, the Company had no revenues from which cash flows could be
generated to support operations.  In fiscal 2006, the Company relied
primarily upon cash generated from the sale of interests to fund operations and
in fiscal 2005 the Company relied on borrowings funded from its line of credit
as well as the sale of common stock.





Liquidity
and Capital Resources





As of
September 30, 2008, the Company had working capital of
$28,066,869.  The Company believes that it has sufficient liquidity to
meet working capital requirements for fiscal 2008.  .





Through
September 30, 2008, ERHC has incurred substantial costs in responding to the
investigations by the DOJ, SEC and Senate Subcommittee. Those costs consist
primarily of legal fees paid to the Company’s legal counsel, Akin Gump Strauss
Hauer & Feld LLP and document reproduction costs. These costs have had a
significant negative impact on the Company’s cash flows from
operations.  ERHC anticipates the use of even more of its cash
reserves to address these ongoing investigations. If continued at current levels
this could have a serious negative impact on the Company’s liquidity. Neither
management nor and its legal counsel can assess the magnitude of future cash
requirements that could result from prolonged investigations or any negative
findings that might arise from the investigations. In a worst case scenario, the
Company’s cash resources could be exhausted and the Company’s status as a going
concern could be brought into question.





Off-Balance
Sheet Arrangements





As of
September 30, 2008, the Company does not have any off-balance sheet
arrangements.





Contractual
Obligations and Commercial Commitments





The
following table provides information at September 30, 2008, about the Company’s
contractual obligations and commercial commitments.  The table
presents contractual obligation by due dates and related contractual commitments
by expiration dates.





26
 Table of Contents








Contractual
      Obligations
            
            Total
            
            
            Less
      than
              1
      year
            
            
            1
      – 3 Years
            
            
            3
      – 5 Years
            
            
            More
      than
              5
      YearsConvertible
      debt (1)
            
            $
            33,513
            
            
            $
            33,513
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Operating
      lease   (2)
            
            
            347,880
            
            
            
            107,040
            
            
            
            240,840
            
            
            
            -
            
            
            
            -Total
            
            $
            381,393
            
            
            $
            140,553
            
            
            $
            240,840
            
            
            $
            -
            
            
            $
            -





(1)
            This
      represents a convertible note to Joseph Charles and Associates. However,
      the Company has been unable to locate the
payee.





(2)
            Lease
      obligations consist of operating lease for office space. Office lease
      represent non-cancelable leases for office space used in our daily
      operations.




Contingencies
and Legal Matters




For a
detailed discussion of contingencies and legal matters, see “Item 3. Legal
Proceedings”.





27
 Table of Contents





Item7A.  Quantitative and Qualitative Disclosures about
Market Risk





The
Company’s current focus is to exploit its primary assets, which are rights to
working interest 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 operational, 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.





At
September 30, 2008, all of the Company’s operations were located outside the
United States.  The Company’s primary asset 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 financial,
economic and labor conditions, political instability, risk of war,
expropriation, renegotiation or modification of existing contracts, tax laws
(including host-country import-export, excise and income taxes and United States
taxes on foreign subsidiaries) and changes in the value of the U.S. dollar
versus the local currencies in which future oil and gas producing activities may
be denominated.  Furthermore, changes in exchange rates may adversely
affect the Company’s future results of operations and financial
condition.





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.





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





28
 Table of Contents





Item8.  Financial Statements and Supplementary
Data





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGEINDEX
      TO CONSOLIDATED FINANCIAL STATEMENTSPage(s)Reports
      of Independent Public Accounting Firm:Report
      of Independent Registered Public Accounting Firm on Internal Control Over
      Financial Reporting as of September 30, 2008
            
            30Report
      of Independent Registered Public Accounting Firm on the Financial
      Statements for the Years ended September 30, 2008 and 2007
            
            31Consolidated
      Financial Statements:Consolidated
      Balance Sheets as of September 30, 2008 and 2007
            
            32Consolidated
      Statements of Operations for the Years Ended September 30, 2008, 2007 and
      2006, and for the period from inception, September 5, 1995, to September
      30, 2008
            
            33Consolidated
      Statements of Shareholders’ Equity (Deficit) for the period from
      inception, September 5, 1995, to September 30, 2008
            
            34Consolidated
      Statements of Cash Flows for the Years Ended September 30, 2008, 2007 and
      2006, and for the period from inception, September 5, 1995, to September
      30, 2008
            
            46Notes
      to Consolidated Financial Statements
            
            48Financial
      Statement Schedules:None








All
schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are not required under instructions or
are inapplicable and therefore have been omitted.





29
 Table of Contents





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Stockholders of


ERHC
Energy Inc.


Houston,
Texas








We have
audited the internal control of ERHC Energy Inc. over its financial reporting as
of September 30, 2008, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying “Management’s Annual Report on Internal Control
over Financial Reporting.” Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our
audit.





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





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





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





In our
opinion, ERHC Energy Inc. maintained, in all material respects, effective
internal control over financial reporting as of September 30, 2008, based on
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ERHC Energy
Inc. as of September 30, 2008 and 2007, and the related consolidated statements
of operations, shareholders’ equity and cash flows for the three years ended
September 30, 2008, and our reports dated December 12, 2008 expressed an
unqualified opinion on those consolidated financial statements.








Malone
& Bailey, PC


www.malone-bailey.com


Houston,
Texas





December
12, 2008





30
 Table of Contents





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Stockholders of


ERHC
Energy Inc.


Houston,
Texas








We have
audited the accompanying consolidated balance sheets of ERHC Energy Inc., a
corporation in the development stage, as of September 30, 2008 and 2007 and the
related consolidated statements of operations, shareholders’ equity (deficit)
and cash flows for the three years ended September 30, 2008, 2007 and
2006.  These financial statements are the responsibility of ERHC’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of ERHC as of September 30,
2008 and 2007, and the results of its operations and its cash flows for the
three years ended September 30, 2008, in conformity with accounting principles
generally accepted in the United States of America.





We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of ERHC’s internal control
over financial reporting as of September 30, 2008, based on criteria established
inInternal Control –
Integrated Framework  issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated December
12, 2008 expressed an unqualified opinion on management’s assessment of internal
control over financial reporting and an unqualified opinion on the effectiveness
of internal control over financial reporting.








Malone
& Bailey, PC


www.malone-bailey.com


Houston,
Texas





December
12, 2008





31
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      BALANCE SHEETSSeptember
      30, 2008 and 20072008
            
            
            2007ASSETSCurrent
      assets:Cash
            
            $
            31,757,012
            
            
            $
            34,721,933Prepaid
      expenses and other
            
            
            199,419
            
            
            
            179,955Deferred
      tax asset - current
            
            
            2,018,398
            
            
            
            2,048,758Total
      current assets
            
            
            33,974,829
            
            
            
            36,950,646DRSTP
      concession fee
            
            
            2,839,500
            
            
            
            2,839,500Furniture
      and equipment, net
            
            
            66,093
            
            
            
            64,495Total
      assets
            
            $
            36,880,422
            
            
            $
            39,854,641LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued liabilities
            
            $
            5,025,794
            
            
            $
            5,183,979Accounts
      payable and accrued liabilities, related parties
            
            
            354,934
            
            
            
            238,614Accrued
      interest
            
            
            8,719
            
            
            
            6,876Asset
      retirement obligation
            
            
            485,000
            
            
            
            485,000Current
      portion of convertible debt
            
            
            33,513
            
            
            
            33,513Total
      current liabilities
            
            
            5,907,960
            
            
            
            5,947,982Commitments
      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 950,000,000shares; issued and
      outstanding 722,238,569 and 721,938,569 at September 30, 2008 and
      September 30, 2007, respectively
            
            
            72,224
            
            
            
            72,193Additional
      paid-in capital
            
            
            91,964,474
            
            
            
            91,827,545Accumulated
      deficit
            
            
            (61,064,236
            )
            
            
            (57,993,079
            )Total
      shareholders’ equity
            
            
            30,972,462
            
            
            
            33,906,659Total
      liabilities and shareholders’ equity
            
            $
            36,880,422
            
            
            $
            39,854,641








The
accompanying notes are an integral part of these financial
statements





32
 Table of Contents


ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the Years Ended September 30, 2008, 2007 and 2006 and for the
      PeriodFrom
      Inception, September 5, 1995, to September 30, 2008Inception
      toSeptember
      30,2006
              
              
              2007
              
              
              2008
              
              
              2008Costs
      and expenses:General
      and administrative
              
              $
              5,979,609
              
              
              $
              4,954,848
              
              
              $
              4,249,572
              
              
              $
              68,342,681Depreciation
      and depletion
              
              
              9,147
              
              
              
              21,917
              
              
              
              30,571
              
              
              
              1,416,501Gain
      on sale of partial interest in DRSTP concession
              
              
              (30,102,250
              )
              
              
              -
              
              
              
              -
              
              
              
              (30,102,250
              )Write-offs
      and abandonments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,742,128Total
      costs and expenses
              
              
              24,113,494
              
              
              
              (4,976,765
              )
              
              
              (4,280,143
              )
              
              
              (47,399,060
              )Other
      income and (expenses):Interest
      income
              
              
              1,123,141
              
              
              
              1,998,704
              
              
              
              1,241,189
              
              
              
              4,389,528Gain
      (loss) from settlements
              
              
              
              
              
              
              (500,000
              )
              
              
              -
              
              
              
              (247,690
              )Other
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              439,827Interest
      expense
              
              
              (2,099
              )
              
              
              (1,843
              )
              
              
              (1,843
              )
              
              
              (12,126,905
              )Loss
      on extinguishment of debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,749,575
              )Total
      other income and (expenses), net
              
              
              1,121,042
              
              
              
              1,496,861
              
              
              
              1,239,346
              
              
              
              (13,294,816
              )Income
      (loss) before benefit (provision) for income taxes
              
              
              25,234,536
              
              
              
              (3,479,904
              )
              
              
              (3,040,797
              )
              
              
              (60,693.876
              )Benefit
      (provision) for income taxes:Current
              
              
              (3,023,000
              )
              
              
              1,243,000
              
              
              
              449,640
              
              
              
              (1,330,360
              )Deferred
              
              
              960,000
              
              
              
              480,000
              
              
              
              (480,000
              )
              
              
              960,000Total
      benefit (provision) for income taxes
              
              
              (2,063,000
              )
              
              
              1,723,000
              
              
              
              (30,360
              )
              
              
              (370,360
              )Net
      income (loss)
              
              $
              23,171,536
              
              
              $
              (1,756,904
              )
              
              $
              (3,071,157
              )
              
              $
              (61,064,236
              )Net
      loss per common share -basic and diluted
              
              $
              0.03
              
              
              $
              (0.00
              )
              
              $
              (0.00
              )Weighted
      average number of shares of common shares outstanding:Basic
              
              
              712,063,980
              
              
              
              720,966,165
              
              
              
              722,182,831Diluted
              
              
              717,410,403
              
              
              
              720,966,165
              
              
              
              722,182,831





The
accompanying notes are an integral part of these financial
statements


33
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            Subscription
            
            
            DeferredShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Receivable
            
            
            Compensation
            
            
            TotalBalance
      at September 5, 1995
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Common
      stock issued for cash
            
            
            884,407
            
            
            
            88
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            88Common
      stock issued for services
            
            
            755,043
            
            
            
            76
            
            
            
            499,924
            
            
            
            -
            
            
            
            -
            
            
            
            (500,000
            )
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,404
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,404
            )Balance
      at September 30, 1995
            
            
            1,639,450
            
            
            
            164
            
            
            
            499,924
            
            
            
            (3,404
            )
            
            
            -
            
            
            
            (500,000
            )
            
            
            (3,316
            )Common
      stock issued for cash, net of expenses
            
            
            361,330
            
            
            
            36
            
            
            
            124,851
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            124,887Common
      stock issued for services
            
            
            138,277
            
            
            
            14
            
            
            
            528,263
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            528,277Common
      stock issued for equipment
            
            
            744,000
            
            
            
            74
            
            
            
            3,719,926
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,720,000Effect
      of reverse merger
            
            
            1,578,470
            
            
            
            158
            
            
            
            (243,488
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (243,330
            )Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            72,500
            
            
            
            72,500Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (728,748
            )
            
            
            -
            
            
            
            -
            
            
            
            (728,748
            )Balance
      at September 30, 1996
            
            
            4,461,527
            
            
            $
            446
            
            
            $
            4,629,476
            
            
            $
            (732,152
            )
            
            $
            -
            
            
            $
            (427,500
            )
            
            $
            3,470,270








The
accompanying notes are an integral part of these financial
statements


34
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 1996
            
            
            4,461,527
            
            
            $
            446
            
            
            $
            4,629,476
            
            
            $
            (732,152
            )
            
            $
            -
            
            
            $
            (427,500
            )
            
            $
            3,470,270Common
      stock issued for cash
            
            
            2,222,171
            
            
            
            222
            
            
            
            1,977,357
            
            
            
            -
            
            
            
            (913,300
            )
            
            
            -
            
            
            
            1,064,279Common
      stock issued for services
            
            
            9,127,981
            
            
            
            913
            
            
            
            12,430,725
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            12,431,638Common
      stock issued for oil and gas leases and properties
            
            
            500,000
            
            
            
            50
            
            
            
            515,575
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            515,625Common
      stock issued for Chevron contract
            
            
            3,000,000
            
            
            
            300
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            300Common
      stock issued for BAPCO acquisition
            
            
            4,000,000
            
            
            
            400
            
            
            
            499,600
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            500,000Contributed
            
            
            (100,000
            )
            
            
            (10
            )
            
            
            (99,990
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (100,000
            )Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            177,500
            
            
            
            177,500Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (16,913,052
            )
            
            
            -
            
            
            
            -
            
            
            
            (16,913,052
            )Balance
      at September 30, 1997
            
            
            23,211,679
            
            
            $
            2,321
            
            
            $
            19,952,743
            
            
            $
            (17,645,204
            )
            
            $
            (913,300
            )
            
            $
            (250,000
            )
            
            $
            1,146,560








The
accompanying notes are an integral part of these financial
statements


35
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 1997
            
            
            23,211,679
            
            
            $
            2,321
            
            
            $
            19,952,743
            
            
            $
            (17,645,204
            )
            
            $
            (913,300
            )
            
            $
            (250,000
            )
            
            $
            1,146,560Common
      stock and warrants issued for cash
            
            
            1,124,872
            
            
            
            113
            
            
            
            972,682
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            972,795Common
      stock issued for services
            
            
            1,020,320
            
            
            
            102
            
            
            
            1,526,878
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,526,980Common
      stock issued for Uinta acquisition
            
            
            1,000,000
            
            
            
            100
            
            
            
            1,999,900
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,000,000Common
      stock issued for Nueces acquisition
            
            
            50,000
            
            
            
            5
            
            
            
            148,745
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            148,750Common
      stock issued for accounts payable
            
            
            491,646
            
            
            
            49
            
            
            
            337,958
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            338,007Beneficial
      conversion feature associated with convertible debt
            
            
            -
            
            
            
            -
            
            
            
            1,387,500
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,387,500Receipt
      of subscription receivable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            913,300
            
            
            
            -
            
            
            
            913,300Option
      fee and penalty
            
            
            299,536
            
            
            
            30
            
            
            
            219,193
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            219,223Common
      stock issued for building equity
            
            
            24,000
            
            
            
            2
            
            
            
            69,998
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            70,000Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            125,000
            
            
            
            125,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (11,579,024
            )
            
            
            -
            
            
            
            -
            
            
            
            (11,579,024
            )Balance
      at September 30, 1998
            
            
            27,222,053
            
            
            $
            2,722
            
            
            $
            26,615,597
            
            
            $
            (29,224,228
            )
            
            $
            -
            
            
            $
            (125,000
            )
            
            $
            (2,730,909
            )








The
accompanying notes are an integral part of these financial
statements


36
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            Subscription
            
            
            DeferredShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Receivable
            
            
            Compensation
            
            
            TotalBalance
      at September 30, 1998
            
            
            27,222,053
            
            
            $
            2,722
            
            
            $
            26,615,597
            
            
            $
            (29,224,228
            )
            
            $
            -
            
            
            $
            (125,000
            )
            
            $
            (2,730,909
            )Common
      stock issued for cash
            
            
            397,040,000
            
            
            
            39,704
            
            
            
            2,062,296
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,102,000Common
      stock issued for services
            
            
            7,169,000
            
            
            
            717
            
            
            
            1,034,185
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,034,902Common
      stock issued for Uinta settlement
            
            
            7,780,653
            
            
            
            778
            
            
            
            2,541,161
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,541,939Common
      stock surrendered in BAPCO settlement
            
            
            (7,744,000
            )
            
            
            (774
            )
            
            
            (2,709,626
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,710,400
            )Common
      stock issued for accounts payable
            
            
            10,843,917
            
            
            
            1,084
            
            
            
            769,139
            
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            770,223Common
      stock issued for conversion of debt and payment of accruedinterest
      and penalties
            
            
            31,490,850
            
            
            
            3,149
            
            
            
            5,998,915
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,002,064Common
      stock issued for officers’salary and bonuses
            
            
            10,580,000
            
            
            
            1,058
            
            
            
            4,723,942
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,725,000Common
      stock issued for shareholder loans and
              accrued
      interest payable
            
            
            3,939,505
            
            
            
            394
            
            
            
            771,318
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            771,712Reclassification
      of common stock previously presented
              as
      a liability
            
            
            750,000
            
            
            
            75
            
            
            
            1,499,925
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,500,000Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            125,000
            
            
            
            125,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (19,727,835
            )
            
            
            -
            
            
            
            -
            
            
            
            (19,727,835
            )Balance
      at September 30, 1999
            
            
            489,071,978
            
            
            $
            48,907
            
            
            $
            43,306,852
            
            
            $
            (48,952,063
            )
            
            
            -
            
            
            $
            -
            
            
            $
            (5,596,304
            )








The
accompanying notes are an integral part of these financial
statements


37
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 1999
            
            
            489,071,978
            
            
            $
            48,907
            
            
            $
            43,306,852
            
            
            $
            (48,952,063
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (5,596,304
            )Common
      stock issued for conversion of debt and payment of accrued interest and
      penalties
            
            
            7,607,092
            
            
            
            761
            
            
            
            295,120
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            295,881Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,958,880
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,958,880
            )Balance
      at September 30, 2000
            
            
            496,679,070
            
            
            
            49,668
            
            
            
            43,601,972
            
            
            
            (50,910,943
            )
            
            
            -
            
            
            
            -
            
            
            
            (7,259,303
            )Common
      stock issued for services
            
            
            37,000,000
            
            
            
            3,700
            
            
            
            1,846,300
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,850,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,394,810
            )
            
            
            -
            
            
            
            -
            
            
            
            (6,394,810
            )Balance
      at September 30, 2001
            
            
            533,679,070
            
            
            $
            53,368
            
            
            $
            45,448,272
            
            
            $
            (57,305,753
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (11,804,113
            )








The
accompanying notes are an integral part of these financial
statements


38
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2001
            
            
            533,679,070
            
            
            $
            53,368
            
            
            $
            45,448,272
            
            
            $
            (57,305,753
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (11,804,113
            )Common
      stock issued for cash net of expenses
            
            
            4,000,000
            
            
            
            400
            
            
            
            643,100
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            643,500Common
      stock issued for services
            
            
            3,475,000
            
            
            
            348
            
            
            
            527,652
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            528,000Common
      stock issued for accounts payable
            
            
            4,407,495
            
            
            
            440
            
            
            
            817,757
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            818,197Common
      stock issued for con -version of debt and payment of accrued interest and
      penalties
            
            
            7,707,456
            
            
            
            771
            
            
            
            1,540,721
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,541,492Common
      stock issued for officer’s salary and bonuses
            
            
            2,700,000
            
            
            
            270
            
            
            
            289,730
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            290,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (4,084,210
            )
            
            
            -
            
            
            
            -
            
            
            
            (4,084,210
            )Balance
      at September 30, 2002
            
            
            555,969,021
            
            
            $
            55,597
            
            
            $
            49,267,232
            
            
            $
            (61,389,963
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (12,067,134
            )








The
accompanying notes are an integral part of these financial
statements


39
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2002
            
            
            555,969,021
            
            
            $
            55,597
            
            
            $
            49,267,232
            
            
            $
            (61,389,963
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (12,067,134
            )Common
      stock issued for cash, net of expenses
            
            
            9,440,000
            
            
            
            944
            
            
            
            1,071,556
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,072,500Common
      stock issued for accounts payable
            
            
            1,527,986
            
            
            
            153
            
            
            
            177,663
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            177,816Common
      stock issued for con -version of debt and payment of accrued
      interest
            
            
            17,114,740
            
            
            
            1,711
            
            
            
            3,421,227
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,422,938Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,153,882
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,153,882
            )Balance
      at September 30, 2003
            
            
            584,051,747
            
            
            $
            58,405
            
            
            $
            53,937,678
            
            
            $
            (64,543,845
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (10,547,762
            )








The
accompanying notes are an integral part of these financial
statements


40
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2003
            
            
            584,051,747
            
            
            $
            58,405
            
            
            $
            53,937,678
            
            
            $
            (64,543,845
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (10,547,762
            )Common
      stock issued for cash, net of expenses
            
            
            3,231,940
            
            
            
            323
            
            
            
            974,677
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            975,000Common
      stock issued for accounts payable
            
            
            1,458,514
            
            
            
            146
            
            
            
            533,102
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            533,248Common
      stock issued for con -version of debt and payment of accrued
      interest
            
            
            11,185,052
            
            
            
            1,119
            
            
            
            2,236,093
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,237,212Common
      stock issued for proceeds received in 2003
            
            
            1,000,000
            
            
            
            100
            
            
            
            (100
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Beneficial
      conversion feature associated with the con-vertible line of
      credit
            
            
            -
            
            
            
            -
            
            
            
            1,058,912
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,058,912Options
      issued to employee
            
            
            -
            
            
            
            -
            
            
            
            765,000
            
            
            
            -
            
            
            
            -
            
            
            
            (765,000
            )
            
            
            -Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            308,126
            
            
            
            308,126Common
      stock issued for cash-less exercise of options and/or
    warrants
            
            
            247,882
            
            
            
            25
            
            
            
            (25
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,593,388
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,593,388
            )Balance
      at September 30, 2004
            
            
            601,175,135
            
            
            $
            60,118
            
            
            $
            59,505,337
            
            
            $
            (68,137,233
            )
            
            $
            -
            
            
            $
            (456,874
            )
            
            $
            (9,028,652
            )








The
accompanying notes are an integral part of these financial
statements


41
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2004
            
            
            601,175,135
            
            
            $
            60,118
            
            
            $
            59,505,337
            
            
            $
            (68,137,233
            )
            
            $
            -
            
            
            $
            (456,874
            )
            
            $
            (9,028,652
            )Common
      stock issued for accounts payable
            
            
            735,000
            
            
            
            73
            
            
            
            359,716
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            359,789Common
      stock issued for con -version of debt and payment of accrued
      interest
            
            
            107,819,727
            
            
            
            10,782
            
            
            
            22,678,054
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            22,688,836Common
      stock issued in settle-ment of lawsuits
            
            
            595,000
            
            
            
            59
            
            
            
            394,391
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            394,450Variable
      accounting for repriced employee stock options
            
            
            -
            
            
            
            -
            
            
            
            300,000
            
            
            
            -
            
            
            
            -
            
            
            
            (300,000
            )
            
            
            -Beneficial
      conversion feature associated with the con-vertible line of
      credit
            
            
            
            
            
            
            
            
            
            
            347,517
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            347,517Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            449,737
            
            
            
            449,737Common
      stock issued for cash-less exercise of options and/or
    warrants
            
            
            587,364
            
            
            
            59
            
            
            
            (59
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (11,270,478
            )
            
            
            -
            
            
            
            
            
            
            
            (11,270,478
            )Balance
      at September 30, 2005
            
            
            710,912,226
            
            
            $
            71,091
            
            
            $
            83,584,956
            
            
            $
            (79,407,711
            )
            
            $
            -
            
            
            $
            (307,137
            )
            
            $
            3,941,199








The
accompanying notes are an integral part of these financial
statements


42
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2005
            
            
            710,912,226
            
            
            $
            71,091
            
            
            $
            83,584,956
            
            
            $
            (79,407,711
            )
            
            $
            -
            
            
            $
            (307,137
            )
            
            $
            3,941,199Common
      stock issued for services
            
            
            4,665,000
            
            
            
            467
            
            
            
            1,976,081
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,976,548Variable
      accounting for repriced employee stock options
            
            
            -
            
            
            
            -
            
            
            
            (60,660
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (60,660
            )Issuance
      of warrants for success fee
            
            
            -
            
            
            
            -
            
            
            
            5,154,500
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,154,500Issuance
      of options as comp-ensation to consultants
            
            
            -
            
            
            
            -
            
            
            
            1,145,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,145,000Common
      stock issued upon exercise of warrants
            
            
            800,000
            
            
            
            80
            
            
            
            159,920
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            160,000Amortization
      of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            (307,137
            )
            
            
            -
            
            
            
            -
            
            
            
            307,137
            
            
            
            -Common
      stock issued for cash-less exercise of options and/or
    warrants
            
            
            2,611,756
            
            
            
            261
            
            
            
            (261
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            23,171,536
            
            
            
            -
            
            
            
            -
            
            
            
            23,171,536Balance
      at September 30, 2006
            
            
            718,988,982
            
            
            $
            71,899
            
            
            $
            91,652,399
            
            
            $
            (56,236,175
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            35,488,123








The
accompanying notes are an integral part of these financial
statements


43
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2006
            
            
            718,988,982
            
            
            $
            71,899
            
            
            $
            91,652,399
            
            
            $
            (56,236,175
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            35,488,123Accounting
      for employee stock options
            
            
            -
            
            
            
            -
            
            
            
            175,440
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            175,440Common
      stock issued upon exercise of warrants
            
            
            2,949,587
            
            
            
            294
            
            
            
            (294
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,756,904
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,756,904
            )Balance
      at September 30, 2007
            
            
            721,938,569
            
            
            $
            72,193
            
            
            $
            91,827,545
            
            
            $
            (57,993,079
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            33,906,659








The
accompanying notes are an integral part of these financial
statements


44
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor
      the Period from Inception, September 5, 1995, to September 30, 2008,
      (Unaudited for the Period fromInception
      to September 30, 1998)AdditionalCommon
      Stock
            
            Paid-In
            
            Accumulated
            
            Subscription
            
            DeferredShares
            
            Amount
            
            Capital
            
            Deficit
            
            Receivable
            
            Compensation
            
            TotalBalance
      at September 30, 2007
            
            
            721,938,569
            
            
            $
            72,193
            
            
            $
            91,827,545
            
            
            $
            (57,993,079
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            33,906,659Common
      stock issued for director compensation
            
            
            300,000
            
            
            
            31
            
            
            
            88,469
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            88,500Accounting
      for employee stock options
            
            
            -
            
            
            
            -
            
            
            
            48,460
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            48,460Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,071,157
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,071,157
            )Balance
      at September 30, 2008
            
            
            722,238,569
            
            
            $
            72,224
            
            
            $
            91,964,474
            
            
            $
            (61,064,236
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            30,972,462








The
accompanying notes are an integral part of these financial
statements


45
 Table of Contents




ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years Ended September 30, 2008, 2007 and 2006 and for the Period
      FromInception,
      September 5, 1995 to September 30, 2008“Unaudited”Inception
      toSeptember
      30,2006
              
              
              2007
              
              
              2008
              
              
              2008Cash
      Flows From Operating ActivitiesNet
      income (loss)
              
              $
              23,171,536
              
              
              $
              (1,756,904
              )
              
              $
              (3,071,157
              )
              
              $
              (61,064,236
              )Adjustments
      to reconcile net income (loss) to net cash used by operating
      activities:Depreciation
      and depletion expense
              
              
              9,147
              
              
              
              21,917
              
              
              
              30,571
              
              
              
              1,416,501Write-offs
      and abandonments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,742,128Deferred
      income taxes
              
              
              (960,000
              )
              
              
              (1,088,758
              )
              
              
              30,360
              
              
              
              (2,018,398
              )Compensatory
      stock options
              
              
              1,084,340
              
              
              
              175,440
              
              
              
              48,460
              
              
              
              1,308,240Gain
      from settlement
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (252,310
              )Gain
      on sale of partial interest in DRSTP concession
              
              
              (30,102,250
              )
              
              
              -
              
              
              
              -
              
              
              
              (30,102,250
              )Amortization
      of beneficial conversion feature associated withconvertible
      debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,793,929Amortization
      of deferred compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,257,863Loss
      on extinguishment of debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,682,368Stock
      issued for services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,897,077Stock
      issued for settlements
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              225,989Stock
      issued for officer bonuses
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,015,000Stock
      issued for interest and penalties on convertible debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,631,768Stock
      issued for board compensation
              
              
              1,976,548
              
              
              
              -
              
              
              
              88,500
              
              
              
              2,065,048Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
              
              
              (1,040,938
              )
              
              
              893,077
              
              
              
              (19,464
              )
              
              
              (199,418
              )Accounts
      payable and other accrued liabilities
              
              
              (1,210,546
              )
              
              
              (1,598,173
              )
              
              
              (156,342
              )
              
              
              (2,769,238
              )Current
      tax liability
              
              
              3,013,147
              
              
              
              (3,013,147
              )
              
              
              -
              
              
              
              -Accrued
      officers’ salaries
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Accounts
      payable and accrued liabilities, related party
              
              
              (1,995,236
              )
              
              
              169,175
              
              
              
              116,319
              
              
              
              354,933Accrued
      interest – related party
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Accrued
      retirement obligation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              485,000Net
      cash used by operating activities
              
              $
              (6,054,252
              )
              
              $
              (6,197,373
              )
              
              $
              (2,932,753
              )
              
              $
              (36,530,006
              )





The
accompanying notes are an integral part of these financial
statements


46
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGECONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years Ended September 30, 2008, 2007 and 2006 and for the Period
      FromInception,
      September 5, 1995 to September 30, 2008“Unaudited”Inception
      toSeptember
      30,2006
            
            
            2007
            
            
            2008
            
            
            2008Cash
      Flows From Investing ActivitiesRelease
      of restricted cash
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Purchase
      of DRSTP concession
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,679,000
            )Proceeds
      from sale of partial interest in DRSTP concession
            
            
            45,900,000
            
            
            
            -
            
            
            
            -
            
            
            
            45,900,000Purchase
      of furniture and equipment
            
            
            (3,124
            )
            
            
            (71,808
            )
            
            
            (32,168
            )
            
            
            (909,368
            )Net
      cash provided (used) by investing activities
            
            
            45,896,876
            
            
            
            (71,808
            )
            
            
            (32,168
            )
            
            
            39,311,632Cash
      Flows From Financing Activities:Proceeds
      from warrants exercised
            
            
            160,000
            
            
            
            -
            
            
            
            -
            
            
            
            160,000Proceeds
      from common stock, net of expensesProceeds
      from line of credit, related party
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,750,000Proceeds
      from non-convertible debt,related party
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            158,700Proceeds
      from convertible debt, related party
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,207,706Proceeds
      from sale of convertible debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            9,019,937Proceeds
      from bank borrowing
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            175,000Proceeds
      from stockholder loans
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,845,809Proceeds
      from stock subscription receivable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            913,300Repayment
      of shareholder loans
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,020,607
            )Repayment
      of long-term debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (189,508
            )Net
      cash provided by financing activities
            
            
            160,000
            
            
            
            -
            
            
            
            -
            
            
            
            28,975,386Net
      increase (decrease) in cash  and cash
equivalents
            
            
            40,002,624
            
            
            
            (6,269,181
            )
            
            
            (2,964,921
            )
            
            
            31,757,012Cash
      and cash equivalents, beginning of period
            
            
            988,490
            
            
            
            40,991,114
            
            
            
            34,721,933
            
            
            
            -Cash
      and cash equivalents, end of period
            
            $
            40,991,114
            
            
            $
            34,721,933
            
            
            $
            31,757,012
            
            
            $
            31,757,012








The
accompanying notes are an integral part of these financial
statements


47
 Table of Contents





ERHC
      ENERGY INC.A
      CORPORATION IN THE DEVELOPMENT STAGENOTES
      TO CONSOLIDATED FINANCIAL STATEMENTSFor
      the Years Ended September 30, 2008, 2007 and 2006 and for the Period
      FromInception,
      September 5, 1995 to September 30,
2008





Note
1 – Summary of Significant Accounting Policies





General Business and Nature
of Operations





ERHC
Energy Inc. is independent oil and gas company that reports as a development
stage enterprise because there are currently no significant operations and no
revenue has been generated from business activities.  ERHC 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.  ERHC’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 primary
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”) and the Federal Republic of Nigeria (“FRN”) and in the
exclusive territorial waters of Sao Tome (the “Exclusive Economic Zone” or
“EEZ”).  The Company has formed relationships with upstream oil and
gas companies to assist the Company in exploiting its assets in the JDZ as
further described in Note 4.  ERHC currently has no other
operations.





Consolidated Financial
Statements





The
consolidated financial statements include the accounts of ERHC and its wholly
owned subsidiaries, after elimination of all significant inter-company accounts
and transactions.





Use of
estimates





The
consolidated financial statements have been prepared in conformity with U. S.
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period for the years then ended.
Actual results could differ significantly from those estimates.





Reclassification





Certain
prior year amounts have been reclassified to confirm with the current year
presentation.





Cash
equivalents





ERHC
considers all highly liquid short-term investments with an original maturity of
three months or less, when purchased, to be cash equivalents.





Concentration of
risks





ERHC
primarily transacts its business with four financial institutions. From time to
time the amount on deposit in either one of these institutions may exceed the
$250,000 federally insured limit.  The balances are maintained in
demand accounts to minimize risk.





ERHC’s
focus is to exploit its assets which are agreements with the DRSTP concerning
oil and gas exploration in EEZ and with the JDA concerning oil and gas
exploration in the JDZ.  ERHC has formed relationships with Sinopec
International Petroleum Exploration and Production Corporation Nigeria
(“Sinopec”), and Addax Energy Nigeria Limited (“Addax Ltd.”) to assist ERHC in
leveraging its interests in the EEZ and the JDZ. ERHC currently has no other
operations.


48
 Table of Contents


Successful
efforts





ERHC uses
the successful efforts method of accounting for oil and gas producing
activities.  Under this method, acquisition costs for proved and
unproved properties are capitalized when incurred.  Exploration costs,
including geological and geophysical costs, the costs of carrying and retaining
unproved properties and exploratory dry hole drilling costs, are
expensed.  Development costs, including the costs to drill and equip
development wells and successful exploratory drilling costs to locate proved
reserves are capitalized. Exploratory drilling costs are capitalized when
incurred pending the determination of whether a well has found proved
reserves.  A determination of whether a well has found proved reserves
is made shortly after drilling is completed. The determination is based on a
process that relies on interpretations of available geologic, geophysic, and
engineering data.  If a well is determined to be successful, the
capitalized drilling costs will be reclassified as part of the cost of the
well.  If a well is determined to be unsuccessful, the capitalized
drilling costs will be charged to expense in the period the determination is
made.  If an exploratory well requires a major capital expenditure
before production can begin, the cost of drilling the exploratory well will
continue to be carried as an asset pending determination of whether proved
reserves have been found only as long as: i) the well has found a sufficient
quantity of reserves to justify its completion as a producing well if the
required capital expenditure is made and ii) drilling of the additional
exploratory wells is under way or firmly planned for the near
future.  If drilling in the area is not under way or firmly planned,
or if the well has not found a commercially producible quantity of reserves, the
exploratory well is assumed to be impaired, and its costs are charged to
expense.





In the
absence of a determination as to whether the reserves that have been found can
be classified as proved, the costs of drilling such an exploratory well is not
carried as an asset for more than one year following completion of
drilling.  If, after that year has passed, a determination that proved
reserves exist cannot be made, the well is assumed to be impaired, and its costs
are charged to expense.  Its costs can, however, continue to be
capitalized if sufficient quantities of reserves are discovered in the well to
justify its completion as a producing well and sufficient progress is made in
assessing the reserves and the well’s economic and operating
feasibility.





The
impairment of unamortized capital costs is measured at a lease level and is
reduced to fair value if it is determined that the sum of expected future net
cash flows is less than the net book value. ERHC determines if impairment has
occurred through either adverse changes or as a result of the annual review of
all fields.





Development
costs of proved oil and gas properties, including estimated dismantlement,
restoration and abandonment costs and acquisition costs, are depreciated and
depleted on a field basis by the units-of-production method using proved
developed and proved reserves, respectively. The costs of unproved oil and gas
properties are generally combined and impaired over a period that is based on
the average holding period for such properties and the Company’s experience of
successful drilling.





Asset Retirement
Obligation





ERHC’s
asset retirement obligation relates to the plugging and abandonment of certain
oil and gas properties in Wichita Falls, Texas. The provisions of SFAS No. 143
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 accreted 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
current liability is fully accreted and represents management’s best estimate of
the fair value of the outstanding obligation.





Impairment of long-lived
assets





ERHC
evaluates the recoverability of long-lived assets when events and circumstances
indicate that such assets might be impaired.  ERHC 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.  ERHC has evaluated its investment in its DRSTP concession
fee in light of its 2003 Option Agreement (see Note 4) and there have been no
events or circumstances that would indicate that such asset might be
impaired.


49
 Table of Contents


Income
taxes




Income
taxes are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, “Accounting for Income Taxes.” Under this method,
the deferred tax assets and liabilities are estimated based upon the difference
between the financial statement and tax bases of assets and liabilities using
tax rates in effect for the year in which the Company expects the differences to
affect taxable income. The tax consequences of most events recognized in the
current year’s financial statements are included in determining income taxes
currently payable. However, because tax laws and financial accounting standards
differ in their recognition and measurement of assets, liabilities, equity,
revenues, expenses, gains and losses, differences arise between the amount of
taxable income and pretax financial income for a year and between the tax bases
of assets or liabilities and their reported amounts in the financial statements.
Because the Company assumes that the reported amounts of assets and liabilities
will be recovered and settled, respectively, a difference between the tax basis
of an asset or a liability and its reported amount in the balance sheet will
result in a taxable or a deductible amount in some future years when the related
liabilities are settled or the reported amounts of the assets are recovered,
which gives rise to a deferred tax asset. The Company must then assess the
likelihood that the deferred tax assets will be recovered from future taxable
income and to the extent the Company believes that recovery is not likely, the
Company must establish a valuation allowance.




The
Company estimates the provision for income taxes based on income before income
taxes for each tax jurisdiction in which the Company has established operations.
The Company does not provide incremental U.S. income taxes on un-remitted
foreign earnings taxed at rates less than the U.S. tax rates as such earnings
are considered permanently invested.




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 on 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.





Net income (loss) per
share





Basic net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding during the
period.  Diluted income (loss) per share is computed by dividing net
income (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 income (loss) per share if they are
anti-dilutive.  Diluted income (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.  For the year ended September 30, 2006, the potentially
dilutive common shares from stock options and warrants were
5,346,423.  If all convertible debt instruments, including accrued
interest were to be considered, an additional 192,680 common shares for the year
ended September 30, 2006 may have been dilutive depending on the results of
operations. For the year ended September 30, 2008 and 2007, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation
of diluted net loss per common share.





Stock-based
compensation





On
October 1, 2005, ERHC began recording compensation expense associated with stock
options and other forms of equity compensation in accordance with Statement of
Financial Accounting Standards No. 123R, Share-Based Payment, as interpreted by
SEC Staff Accounting Bulletin No. 107. Prior to October 1, 2005, ERHC had
accounted for stock options according to the provisions of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, and therefore no related compensation expense was recorded for
awards granted with no intrinsic value. ERHC adopted the modified prospective
transition method provided for under SFAS No. 123R, and consequently, has not
retroactively adjusted results from prior periods. Under this transition method,
compensation cost associated with stock options recognized in the first quarter
of Fiscal 2006 includes: 1) quarterly amortization related to the remaining
unvested portion of all stock option awards granted prior to October 1, 2005,
based on the grant date fair value estimated in accordance with the original
provisions of SFAS No. 123; and 2) quarterly amortization related to all stock
option awards granted subsequent to July 1, 2005, based on the grant-date fair
value estimated in accordance with the provisions of SFAS No.
123R.


50
 Table of Contents


New accounting
pronouncements





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007) (SFAS 141R), “Business Combinations,” and No. 160 (SFAS 160),
“Noncontrolling Interests in Consolidated Financial Statements, an amendment of
ARB No. 51”. SFAS 141R requires the acquiring entity in a business combination
to recognize the assets acquired and liabilities assumed. Further, SFAS 141R
also changes the accounting for acquired in-process research and development
assets, contingent consideration, partial acquisitions and transaction
costs.  Under SFAS 160, all entities are required to report
noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. In addition, transactions between an entity
and noncontrolling interests will be treated as equity transactions. SFAS 141R
and SFAS 160 will become effective for fiscal years beginning after December 15,
2008. ERHC will adopt these new accounting standards on October 1, 2009, but the
Company does not expect the adoption to have a material impact on our financial
statements.








Note
2 – Accounts Payable and Accrued Liabilities





Accounts
payable and accrued liabilities consisted of the following as of September 30,
2008 and 2007:





2008
            
            
            2007Accounts
      payable
            
            $
            222,044
            
            
            $
            380,228Accrued
      stock payable – success fee
            
            
            4,803,750
            
            
            
            4,803,750Amount
      outstanding
            
            $
            5,025,794
            
            
            $
            5,183,978


51
 Table of Contents


Note
3 – Revision to Financial Statements





ERHC
revised its financial statements to report as a development stage company for
the year ended September 30, 2006.  Accordingly, the statements of
operations, stockholders’ equity and cash flows include inception to date
amounts.  The consolidated statements of stockholders’ equity of the
Company for the years ended from inception (September 5, 1995) through September
30, 1998 were audited by other auditors who are no longer members of the Public
Company Accounting Oversight Board and whose reports for each of the years ended
from inception (September 5, 1995) through September 30, 1998 expressed an
unqualified opinion on those statements.








Note
4 – Sao Tome Concession





In April
2003, the Company and the DRSTP entered into an Option Agreement (the “2003
Option Agreement”) in which the Company relinquished certain financial interests
in the JDZ in exchange for exploration 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.  However, ERHC retained under a previous agreement
the following rights to participate in exploration and production activities in
the 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
              Interest2
            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.




52
 Table of Contents




This
exercise of the Company’s rights was subject to the condition that if no license
is awarded or a license is awarded and subsequently withdrawn by the JDA prior
to the commencement of operations, ERHC will be entitled to receive its working
interest in that block in a future license awarded for the block.





On
March 15, 2006, Godsonic and ERHC (on behalf of the ERHC/Addax consortium)
entered into an agreement wherein ERHC agreed to assign 9% of its interest in
Block 4 to Godsonic subject to certain stipulated financial and other conditions
to be fulfilled by Godsonic. On April 11, 2006, ERHC and Addax by an
amendment to the Participation Agreement, agreed that Addax would acquire 7.2%
of the 9% interest in the event that Godsonic failed to meet agreed upon
conditions and foreclosed from the claims to the 9% interest. This would give
Addax a total of 40.5% interest and ERHC 19% in Block 4.





In July
2007, Godsonic failed to meet the stipulated conditions and ERHC reclaimed the
9% interest. Addax claimed entitlement under the existing agreements to 7.2% out
of the recovered 9%, without payment of any further consideration to
ERHC.  In July 2008, the London Court of International Arbitration
(LCIA) confirmed that under the Participation Agreement between the parties no
further consideration was payable by Addax Petroleum to ERHC for Addax
Petroleum’s 7.2 percent share of the 9 percent.





In
February 2006, ERHC sold 15% of its 25% participating interest in Block 3 of the
JDZ to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) for $7.5 million
which was paid in the second quarter of fiscal 2006. Under the participation
agreement between ERHC and Addax Sub, Addax Sub agreed to “carry” all of ERHC’s
future costs in respect of petroleum operations in Block 3. Upon production
Addax Sub is entitled to 100% of ERHC’s allocation of cost plus up to 50% of
ERHC’s allocation of profit until Addax Sub recovers 100% of the costs advanced
on behalf of ERHC.





In March
2006, ERHC sold a 28.67% participating interest in Block 2 of the JDZ to Sinopec
International Petroleum Exploration and Production Corporation Nigeria
(“Sinopec”), and a 14.33% participating interest in Block 2 of the JDZ to Addax
Energy Nigeria Limited (“Addax Ltd.”) leaving a 22% participating interest in
Block 2 to the Company. In exchange, Sinopec paid ERHC $13.6 million and Addax
Ltd. paid ERHC $6.8 million in the second quarter of fiscal 2006. Under the
participation agreement among ERHC, Sinopec and Addax Ltd., Sinopec will serve
as operator, and Sinopec and Addax Ltd. will pay all of ERHC’s future costs in
respect of petroleum operations in Block 2. Sinopec and Addax Ltd. are entitled
to 100% of ERHC’s allocation of cost plus up to 50% of ERHC’s allocation of
profit until they recover 100% of the costs they advanced on behalf of ERHC and
Sinopec is to receive 6% interest on its future costs, up to $35 million, but
only to the extent that those interest costs are recoupable out
of   production.





ERHC sold
various participating interests in Blocks 2, 3 and 4 (as noted above) during
2006 for total cash proceeds of $45,900,000.  Following is an analysis
of the sale of the participating interests in blocks 2, 3 and 4.





Cost
            
            
            Cash
            
            
            Success
            
            
            GainBasis
            
            
            Proceeds
            
            
            Fees
      (1)
            
            
            LossBlock
      2
            
            $
            946,500
            
            
            $
            20,400,000
            
            
            $
            12,958,250
            
            
            $
            6,495,250Block
      3
            
            
            946,500
            
            
            
            7,500,000
            
            
            
            -
            
            
            
            6,553,500Block
      4
            
            
            946,500
            
            
            
            18,000,000
            
            
            
            -
            
            
            
            17,053,500Total
            
            $
            2,839,500
            
            
            $
            45,900,000
            
            
            $
            12,958,250
            
            
            $
            30,102,250





(1) See
Note 5





ERHC’s
goal is to enter into agreements to exploit its interests in Blocks 5, 6 and 9
also.  Additionally, the Company intends to exploit its rights in the
EEZ.


53
 Table of Contents


Note
5 – DRSTP Success Fee





ERHC
agreed to pay a $3 million cash success fee ($1.5 million was paid in March 2006
and the remaining $1.5 million was paid in March 2007) to Feltang International
Inc., a British Virgin Island company that was responsible for obtaining
Sinopec’s participation in Block 2.  ERHC will also issue to Feltang
5,250,000 shares of common stock and warrants to purchase 6,500,000 shares at an
exercise price of $0.355 per share.  The common stock was valued at
$4,803,750 (included in accounts payable at September 30, 2008, 2007 and 2006)
based on the quoted market value of the common stock on the date Sinopec signed
the production sharing agreement. The warrants were valued at $5,154,500 based
on a valuation using the Black-Scholes Option Pricing Model and the following
assumptions; market price of $0.915, strike price of $0.355, volatility of 115%,
interest rate of 4.42%, dividend yield of 0% and expected life of 4
years.





Upon sale
of the participation interests, ERHC removed the entire cost of the related
blocks due to the uncertainty surrounding their unproved interests.




Note
6 – Convertible Debt





At
September 30, 2008 and 2007, ERHC had $33,513 and $33,513 of nonaffiliated
convertible debt, respectively, and $8,719 and $6,876 accrued but unpaid
interest outstanding, respectively.  At September 30, 2008 and 2007,
this note was in default and ERHC was unable to locate the
investor.  If the outstanding convertible debt were converted using
the conversion price of $0.20 per share, ERHC would be required to issue 201,945
shares of common stock based on an outstanding principal amount of $33,513 and
accrued interest of $8,719.




Note
7 – Income Taxes





At
September 30, 2008, ERHC had a consolidated net operating loss carry-forward
(“NOL”) of approximately $2.7 million.





The
composition of deferred tax assets and the related tax effects at September 30,
2008 and 2007 are as follows:




2008
            
            
            2007Net
      operating losses
            
            $
            1,430,118
            
            
            $
            931,241Income
      tax receivable
            
            
            2,018,398
            
            
            
            1,568,758Accrual
      for asset retirement
            
            
            164,900
            
            
            
            164,900Total
      deferred tax assets
            
            
            3,613,416
            
            
            
            2,664,899Valuation
      allowance
            
            
            (1,595,018
            )
            
            
            (616,141
            )Net
      deferred tax asset
            
            $
            2,018,398
            
            
            $
            2,048,758


54
 Table of Contents


The
$2,018,398 deferred tax asset at September 30, 2008, represents a refundable
amount of $2,018,398 to be claimed by ERHC because of overpayment made in its
2006 tax return.





The
$2,048,758 deferred tax asset at September 30, 2007, represents $480,000 of the
minimum NOL carry back claim from losses in 2008 against September 30, 2006
taxable income and a refundable amount of $1,568,758 to be claimed by ERHC
because of overpayment made in its 2006 tax return.





The
difference between the income tax benefit (provision) in the accompanying
statement 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 years ended
September 30, 2008, 2007 and 2006, is as follows:





Years
      Ended September 30,2008
            
            
            2007
            
            
            2006Income
      tax benefit (provision) at federal statutory rate
            
            $
            1,033,870
            
            
            $
            1,183,167
            
            
            $
            (8,579,742
            )Gain
      on sale of assets
            
            
            -
            
            
            
            -
            
            
            
            59,243Change
      in valuation allowance
            
            
            (978,877
            )
            
            
            1,998,759
            
            
            
            19,179,493Expiration
      and adjustment of NOL’s
            
            
            -
            
            
            
            (1,364,518
            )
            
            
            (12,266,000
            )Director’s
      stock compensation
            
            
            (24,633
            )
            
            
            (30,090
            )
            
            
            (44,896
            )Consultants
      stock option expense
            
            
            -
            
            
            
            (59,650
            )
            
            
            (368,676
            )State
      income tax
            
            
            -
            
            
            
            -
            
            
            
            (9,853
            )Penalties
            
            
            -
            
            
            
            (3,621
            )
            
            
            (31,771
            )Other
            
            
            -
            
            
            
            (1,047
            )
            
            
            (798
            )Income
      tax benefit (provision)
            
            $
            30,360
            
            
            $
            1,723,000
            
            
            $
            (2,063,000
            )


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 exercise 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 2007, the Company
assessed the need for a valuation allowance against its deferred tax assets. The
deferred tax asset valuation allowance was $1,595,018 as of September 30, 2008.
The valuation allowance relates to the net operating losses.





At
September 30, 2008, the Company has Federal net operating loss carry forward of
approximately $4,200,000. The federal loss carry forward expires on various
dates through 2028.





FIN
48




On
October 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes—an interpretation of
FASB Statement No. 109”,which provides a financial statement recognition threshold and
measurement attribute for a tax position taken or expected to be taken in a tax
return. Under FIN 48, the Company may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained upon examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon ultimate
settlement. FIN 48 also provides guidance on derecognition of income tax assets
and liabilities, classification of current and deferred income tax assets and
liabilities, accounting for interest and penalties associated with tax
positions, and income tax disclosures.





The
Company’s tax return for the year ended September 30, 2006 is currently under
audit by the United States Internal Revenue Service (the “IRS”).





The
Company is subject to taxation in the United States and various foreign
jurisdictions. The Company’s tax years for 2005 through 2008 are subject to
examination by the tax authorities. The Company is currently under examination
by the Internal Revenue Service for the 2006 tax year. As of September 30, 2008
no audit adjustments have been made. Currently, an estimate of the range of the
reasonably possible change in unrecognized tax benefits in the next 12 months
cannot be made.


55
 Table of Contents


Note
8 – Shareholders’ Equity





Common Stock Issued Upon
Exercise of Warrants





During
2007, 5,625,000 warrants were exercised on a cashless basis for 2,949,587 shares
of common stock.





During
2006, 3,750,000 warrants were exercised on a cashless basis for 2,611,756 shares
of common stock. Also during 2006, 800,000 warrants were exercised at $0.20 per
share. ERHC received $160,000.





Common Stock Issued For
Services





During
the years ended September 30, 2008, 2007 and 2006, ERHC issued 4,965,000 shares
of common stock for payment of director services as follows:  (i)
210,000 shares for 2008 services rendered (these shares were not yet issued by
the Company as of the year end and fair value of $72,450 has been accrued in
accounts payable and accrued liabilities, related parties); (ii) 300,000 shares
for 2007 services rendered (these shares were not yet issued by the Company as
of the year end and fair value of $88,500 was accrued in accounts payable and
accrued liabilities, related parties and reclassified to stockholders’ equity in
2008 upon issuance); and (iii) 325,000 shares for 2006 services rendered (these
shares had a fair value of $132,048).





Stock Options Issued and
Re-Priced





On
January 1, 2005, ERHC issued options to purchase a total of 1,750,000 shares of
common stock, upon completion of a full year of service to three consultants as
part of their initial compensation packages.  These options have an
exercise price of $0.20 per share and vested on December 31,
2005.  Fair value of $816,550 was calculated using the Black-Scholes
Model. Variables used in the Black-Scholes option-pricing model during the year
ended September 30, 2006, include (1) 4.57% discount rate, (2) warrant life is
the expected remaining life of the options as of each year end, (3) expected
volatility of 115%, and (4) zero expected dividends. These options were
exercised, on a cashless basis, during the year ended September 30, 2006, for a
total of 1,339,030 shares.





During
the year ended September 30, 2005, ERHC modified the exercise price of 3,000,000
options granted to one employee from $0.30 per share to $0.20 per share, which
made those options subject to variable plan accounting.  Under
variable plan accounting, compensation expense is adjusted for increases or
decreases in the fair market value of ERHC’s common stock to the extent that the
market value exceeds the new exercise price of the option.  Variable
plan accounting is applied to the re-priced options until the options are
exercised, forfeited, or expire unexercised.  For the year ended
September 30, 2005, ERHC incurred additional expense of $194,737 as a result of
an upward change in the fair market value on the underlying common
stock.  In January 2006, 1,000,000 of these options were cancelled
upon the resignation of the employee and a reduction to expense of $60,660 was
recognized in fiscal 2006.  The remaining 2,000,000 options were
exercised, on a cashless basis, in June 2006 and 1,272,727 shares were
issued.





During
the year ended September 30, 2007, the Company issued 1,000,000 options to
purchase common stock of the Company to an employee. These options are for a
term of three years, have an exercise price of $0.43 and vest over one year.
Fair value of $223,900 was calculated using the Black-Scholes Model. Variables
used in the Black-Scholes option-pricing model during the year ended September
30, 2007, include (1) 4.90% discount rate, (2) warrant life is the expected
remaining life of the options as of each year end, (3) expected volatility of
75.00%, and (4) zero expected dividends. Option expense of $48,460 and $175,440
was recorded during the years ended September 30, 2008 and 2007, respectively,
related to these options.





Warrants/Options





Information
regarding warrants/options, their respective changes and their weighted average
exercise prices as of and for the fiscal years ended September 30, 2008, 2007
and 2006 are as follows:


56
 Table of Contents




Weighted
            
            Market
            
            
            
            Weighted
            
            ExerciseAverage
            
            Price
            
            
            
            Average
            
            PriceExercise
            
            Intrinc
            
            
            
            Exercise
            
            IntrincDescription
            
            Warrants
            
            Price
            
            Value
            
            Options
            
            Price
            
            ValueBalance
      at September 30, 2005
            
            
            15,166,940
            
            $
            0.37
            
            0
            
            
            3,000,000
            
            $
            0.30
            
            0.03Granted
            
            
            6,500,000
            
            
            0.36
            
            
            
            
            -Exercised
            
            (b)
            (800,000
            )
            
            0.20
            
            
            
            (c)
            (2,000,000
            )
            
            0.30Expired
      or cancelled.
            
            
            -
            
            
            -
            
            
            
            
            (1,000,000
            )
            
            0.300
            
            
            
            
            
            
            
            0Balance
      at September 30, 2006
            
            
            20,866,940
            
            
            0.37
            
            
            
            
            -
            
            
            0.03Granted
            
            
            -
            
            
            -
            
            
            
            
            1,000,000
            
            
            0.43Exercised
            
            (a)
            (5,625,000
            )
            
            0.20
            
            
            
            
            -
            
            
            -Expired
      or cancelled.
            
            
            (1,840,000
            )
            
            0.50
            
            
            
            
            -
            
            
            -Balance
      at September 30, 2007
            
            
            13,401,940
            
            
            0.43
            
            0
            
            
            1,000,000
            
            
            0.43
            
            0Granted
            
            
            -
            
            
            -
            
            
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -
            
            
            
            
            -
            
            
            -Expired
      or cancelled.
            
            
            (1,050,000
            )
            
            0.75
            
            
            
            
            -
            
            
            -Balance
      at September 30, 2008
            
            
            12,351,940
            
            
            0.40
            
            0
            
            
            1,000,000
            
            
            0.43
            
            0Exercisable
            
            
            12,351,940
            
            
            0.40
            
            
            
            
            1,000,000
            
            
            0.43





(a)
During 2007, 5,625,000 warrants were exercised on a cashless basis for 2,949,587
shares of common stock.


(b)
During 2006, 800,000 warrants were exercised at $0.20 per share and proceeds of
$160,000 were received.


(c)
During 2006, 2,000,000 options were exercised on a cashless basis for 1,272,727
shares of common stock.





Significant
warrant groups outstanding at September 30, 2008, and related weighted average
exercise price, exercise price range and weighted average remaining contractual
life information are as follows:





WeightedWeighted
            
            Exercise
            
            AverageWarrants
            
            Average
            
            Price
            
            ContractualGrant
      Grouping
            Outstanding
            
            Exercise
      Price
            
            Range
            
            YearsChrome
            
            
            2,500,000
            
            
            $
            0.25
            
            
            $
            0.25
            
            
            
            0.27Common
      stock purchase
            
            
            9,731,940
            
            
            
            0.41
            
            
            
            0.20-0.55
            
            
            
            0.13Other
            
            
            120,000
            
            
            
            3.00
            
            
            
            3.00
            
            
            
            0.25Total
            
            
            12,351,940




Note
9 – Commitments and Contingencies





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.


57
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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, 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 do 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.





ERHC/Addax
Arbitration.Addax, our consortium partner in JDZ Block 4,
claimed entitlement under our existing agreements to 7.2% out of the recovered
9% interest in Block 4, leaving 1.8% remaining with ERHC. In July 2008, the
London Court of International Arbitration (LCIA) confirmed that under the
Participation Agreement between the parties in respect of JDZ Block 4, no
further consideration is payable by Addax Petroleum to ERHC for Addax
Petroleum’s 7.2 percent share of the 9 percent recovered by the ERHC/Addax
consortium from Godsonic upon the failure of Godsonic to meet certain financial
obligations under which the 9 percent was to have been transferred to
Godsonic.





Lakeshore
Arbitration.In October 2006, Lakeshore Capital Limited
(“Lakeshore”) filed an arbitration claim against ERHC seeking $4,400,000 for the
alleged value of 4,500,000 shares of ERHC common stock and for a warrant to
purchase 1,500,000 shares at an exercise price of $.20 per share, including
interest and costs, as compensation for financial consultancy and related
services rendered under a contract with ERHC dated May 20, 2002 and mediation
conducted by the American Arbitration Association which resulted in the payment
of $250,000 to Lakeshore.  Pursuant to the Settlement Agreement dated
May 16, 2007, the arbitration was discontinued with prejudice.





Godsonic
Negotiations.  In July 2007, ERHC and Godsonic commenced
negotiations over relinquishment by Godsonic of any claims by Godsonic to
entitlement to a 9% from the ERHC/Addax bid interest in JDZ Block 4. The parties
reached a settlement in August 2007 which resulted in Godsonic’s relinquishment
of all claims to the 9% interest in Block 4.





JDZ Blocks 5 &
6.  On November 3, 2008, the Company filed a suit in Nigeria to
prevent any tampering with its rights in JDZ Blocks 5 and 6. The lawsuit comes
after the JDA and the Joint Ministerial Counsel (JMC) of the Nigeria-São Tomé
and Príncipe JDZ failed to give a satisfactory response to the Company’s letters
seeking clarification on the Company’s rights in JDZ Blocks 5 and 6 following
media reports stating that the JMC had approved of the Company’s removal from
the Blocks. The Company was awarded a 15 percent working interest in each of the
Blocks in a 2005 bid/licensing round conducted by the JDA, following the
exercise by ERHC of preferential rights in the Blocks as guaranteed by contract
and treaty.  If the Company fails to prevail in its lawsuit, there
could be significant adverse affects on the Company’s future planned operations
in JDZ Blocks 5 & 6.








From time
to time, ERHC may be subject to routine litigation, claims, or disputes in the
ordinary course of business.  In the opinion of management, no pending
or known threatened claims, actions or proceedings against the Company are
expected to have a material adverse effect on ERHC’s consolidated financial
position, results of operations or cash flows.  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.


58
 Table of Contents


Operating
Lease





ERHC
leases office space at 5444 Westheimer Road, Houston, Texas.  The
lease for office space expires December 2011.  The monthly base rent
payment is $8,920 for approximately 5,200 square feet.  During the
years ended September 30, 2008, 2007 and 2006, ERHC incurred lease expenses of
$104,330, $107,124 and $43,992, respectively.  The future remaining
annual lease payments under this lease are as follows:





Year
      Ending September 30,
            
            Amount2009
            
            $
            107,0402010
            
            
            107,0402011
            
            
            107,0402012
            
            
            26,760








Note
10 – Related Party Transactions





Mr. Emeka
Offor resigned, effective August 12, 2007, as ERHC’s non-executive Chairman of
the Board.  As of September 30, 2007, Mr. Offor, through Chrome Oil
Services, Ltd. (“Chrome”) and Chrome Energy, LLC (“Chrome Energy”), beneficially
owns approximately 43% of the common stock of ERHC.  He has been
compensated as a director of the Company as follows:





Year
            
            Cash
              Compensation
            
            
            Common
              Stock
              Issuances
            
            
            Value
      of
              Common
      Stock
              Issuances
            
            
            Total
              Compensation2008
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -2007
            
            
            38,100
            
            
            
            60,000
            
            
            
            17,700
            
            
            
            55,8002006
            
            
            48,900
            
            
            
            60,000
            
            
            
            24,378
            
            
            
            73,278





At
September 30, 2007, ERHC owed Chrome Energy, the entity controlled by Mr. Offor,
$62,314. This liability was fully paid during the year ended September 30,
2008.


59
 Table of Contents


Note
11 – Quarterly Financial Information (Unaudited)





For
      the Year Ended September 30, 2008First
            
            Second
            
            Third
            
            FourthQuarter
            
            Quarter
            
            Quarter
            
            QuarterGeneral
      and administrative expenses
            
            $
            1,018,167
            
            
            $
            1,170,240
            
            
            $
            828,692
            
            
            $
            1,263,044Interest
      expense
            
            
            461
            
            
            
            461
            
            
            
            460
            
            
            
            461Other
      income
            
            
            431,863
            
            
            
            322,962
            
            
            
            225,079
            
            
            
            261,285Benefit
      (provision) for income tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (30,360
            )Net
      loss attributable to common stockholders
            
            
            (586,765
            )
            
            
            (847,739
            )
            
            
            (604,073
            )
            
            
            (1,032,580
            )Basic
      and diluted earnings per share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )





For
      the Year Ended September 30, 2007First
            
            
            Second
            
            
            Third
            
            
            FourthQuarter
            
            
            Quarter
            
            
            Quarter
            
            
            QuarterGeneral
      and administrative expenses
            
            $
            1,334,313
            
            
            $
            1,181,541
            
            
            $
            1,083,539
            
            
            $
            1,377,372Interest
      expense
            
            
            461
            
            
            
            461
            
            
            
            461
            
            
            
            460Other
      income
            
            
            543,632
            
            
            
            540,495
            
            
            
            457,541
            
            
            
            457,036Gain
      (loss) on settlements
            
            
            -
            
            
            
            -
            
            
            
            (500,000
            
            
            
            -Benefit
      (provision) for income tax
            
            
            269,000
            
            
            
            197,000
            
            
            
            539,241
            
            
            
            717,759Net
      loss attributable to common stockholders
            
            
            (522,142
            )
            
            
            (444,507
            )
            
            
            (587,218
            )
            
            
            (203,037
            )Basic
      and diluted earnings per share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )





For
      the Year Ended September 30, 2006First
            
            
            Second
            
            
            Third
            
            
            FourthQuarter
            
            
            Quarter
            
            
            Quarter
            
            
            QuarterGeneral
      and administrative expenses
            
            $
            1,232,792
            
            
            $
            1,727,524
            
            
            $
            1,459,282
            
            
            $
            1,569,158Gain
      on sale of partial interest in DRSTP concession fee
            
            
            -
            
            
            
            30,102,250
            
            
            
            -
            
            
            
            -Interest
      expense
            
            
            461
            
            
            
            461
            
            
            
            461
            
            
            
            716Other
      income
            
            
            4,269
            
            
            
            27,399
            
            
            
            583,269
            
            
            
            508,204Benefit
      (provision) for income tax
            
            
            -
            
            
            
            (2,340,000
            )
            
            
            300,000
            
            
            
            (23,000Net
      income ( loss) attributable to common stockholders
            
            
            (1,228,984
            )
            
            
            26,061,664
            
            
            
            (621,474
            )
            
            
            (1,039,670
            )Basic
      and diluted earnings per share
            
            $
            (0.00
            )
            
            $
            0.04
            
            
            $
            (0.00
            )
            
            $
            (0.00
            )





The sum
of the individual quarterly basic and diluted loss per share amounts may not
agree with year-to-date basis and diluted loss per share amounts as a result of
each period’s computation being based on the weighted average number of common
shares outstanding during that period.


60
 Table of Contents


Item9.  Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures





None.





Item 9A.  Controls and Procedures




Disclosure Controls andProcedures





We have
established disclosure controls and procedures to ensure that material
information relating to ERHC Energy, including its consolidated subsidiaries, is
made known to the officers who certify ERHC’s financial reports and to other
members of senior management and the Board of Directors.




Based on
their evaluation, ERHC’s principal executive and principal financial officers
have concluded that ERHC’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were
effective as of September 30, 2008 to ensure that the information required to be
disclosed by ERHC in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC rules and forms.





Management’s
Annual Report on Internal Control Over Financial Reporting




ERHC’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of our financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes maintaining records that in
reasonable detail accurately and fairly reflect our transactions; providing
reasonable assurance that transactions are recorded as necessary for preparation
of our financial statements; providing reasonable assurance that receipts and
expenditures of company assets are made in accordance with management
authorization; and providing reasonable assurance that unauthorized acquisition,
use, or disposition of company assets that could have a material effect on our
financial statements would be prevented or detected on a timely basis. Because
of its inherent limitations, internal control over financial reporting is not
intended to provide absolute assurance that a misstatement of our financial
statements would be prevented or detected.





Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, which was completed on November
15, 2008, management concluded that the company’s internal control over
financial reporting was effective as of September 30, 2008to ensure that
information required to be disclosed in the reports that we file or submit 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.





The
effectiveness of ERHC’s internal control over financial reporting as of
September 30, 2008 has been audited by Malone & Bailey PC,  an
independent registered public accounting firm who audited ERHC’s consolidated
financial statements as of and for the year ended September 30, 2008, as stated
in their report, which is included under “Item 8. Financial Statements and
Supplementary Data.”





Changes
in Internal Control Over Financial Reporting




There was
no change in ERHC’s internal control over financial reporting during our most
recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially affect, ERHC’s internal control over financial
reporting.





Item9B.  Other Information




None.


61
 Table of Contents




PART
III
 
 Item
10.  Directors and Executive Officers of the Registrant; and C orporate Governance
 
 
 The
following are the Directors and Principal Executive Officer of the Company as of
November 30, 2008 (1):
 
 Name
                  
                  Age
                  
                  PositionHoward
      Jeter
                  
                  61
                  
                  DirectorAndrew
      Uzoigwe
                  
                  66
                  
                  DirectorClement
      Nwizubo
                  
                  56
                  
                  DirectorPeter
      C. Ntephe
                  
                  42
                  
                  Chief
      Operating Officer and acting Chief Executive
  Officer
 
 (1)NicolaeLuca served as Interim Chief
Executive Officer from July 2006 to April 2008, when he resigned from the board
and from the position of interim Chief Executive Officer.. He served as a
Director from February 2001 to April 2008.
 
 Ambassador
(rtd.) Howard F. Jeter has served as a Director since April
2005.  Ambassador Jeter retired from the State Department in 2003
after a distinguished 27 year career in the Foreign Service.  He
retired with the rank of Career Minister.
 
 Ambassador
Jeter served as the United States Ambassador to Nigeria,
2000-2003.  He also served as Deputy Assistant Secretary of State for
African Affairs, State Department Director for West Africa, President Clinton's
Special Envoy for Liberia, and Ambassador to Botswana,
respectively.   Ambassador Jeter was Deputy Chief of Mission and
later Charge d’Affaires, ad interim, in Lesotho and Namibia.  He also
had multi-year assignments in Tanzania and Mozambique. Ambassador Jeter has
lived and worked in Africa for more than 18 years.
 
 Ambassador
Jeter was the recipient of numerous awards and commendations, including the
Presidential Meritorious Service Award, Superior Honor Awards, and several
Performance Awards.  He received the prestigious Bennie Trailblazer
Award from Morehouse College and the International Peace and Justice Award from
the Rainbow-Push Coalition, led by Reverend Jesse Jackson. Ambassador Jeter is a
member of the Council on Foreign Relations, the American Foreign Service
Association, and Phi Beta Kappa. He earned his Bachelor of Arts Degree, with
Honors, from Morehouse College and Master's Degrees in International
Relations/Comparative Politics and African Studies from Columbia University and
UCLA respectively.
 
 Following
his retirement from the State Department, Ambassador Jeter began a career as an
international business consultant, with a special focus on investment and trade
promotion with Africa.  In 2006, he was named President and CEO of the
Leon H. Sullivan Foundation, a non-governmental organization dedicated to
preserving the work and legacy of Reverend Leon H.
Sullivan.  Ambassador Jeter retired from the Sullivan Foundation in
June, 2008.
 
 Ambassador
Jeter chaired the Africa Advisory Group of the U.S. Export-Import Bank, 2006-
2007, and currently serves on the Board of Directors of Africare and the Center
for International Affairs at Morehouse College.  In Nigeria, he is an
Honorary Board Member of the Anyiam-Osigwe Foundation, the Outreach Foundation,
and was recently named to the International Advisory Board of the Ken Nnamani
Centre for Leadership and Development. In May 2008, Ambassador Jeter moderated a
plenary session at the U.S.-China Forum on Sustainable Energy and Environment in
Beijing, co-sponsored by the U.S. Chamber of Commerce Institute for 21st Century
Energy.  He also was a member of the New York-based East West
Institute’s (EWI) delegation to the second round of the U.S.-China High Level
Security Dialogue, co-hosted by the EWI and the China Institute of International
Studies.
 
 Andrew Uzoigwe has served as
a Director since April 2005.  Dr. Uzoigwe started his career with Dow
Chemical Company where he held various senior positions in its Walnut
Creek Research Center and in its Specialty Chemicals Facility in
Pittsburgh, California. He joined the Nigerian National Petroleum Corporation
(NNPC) in 1981. During his tenure at NNPC, Dr. Uzoigwe held several senior
technical and management positions including Chief Engineer and Project
Coordinator (Petrochemicals), Group General Manager (R&D Division), Managing
Director of NNPC’s Refining and Petrochemicals subsidiaries. In 1999 he was
appointed the Group Executive Director (Exploration & Production) a position
he held until he retired from NNPC in 2002. Dr. Uzoigwe has also served in the
Governing Boards of Raw Material Research and Development Council, National
Management Agency. He has traveled extensively on numerous professional and
official assignments on behalf of NNPC and the Nigerian Government. Dr. Uzoigwe
is a Registered Professional Mechanical Engineer and a Registered Professional
Chemical Engineer in the State of California. He is a fellow of the Nigerian
Society of Chemical Engineers and a Fellow of the Polymer Institute of Nigeria.
He has a BSc (Mechanical Engineering) and a Master of Business Administration
from University of California at Berkley. He also holds Msc and PhD degrees in
Petroleum and Chemical Engineering from Stanford
University California.
 
 Clement Nwizubo has served as
Director and Audit Committee Chairman since March 2006.  Mr. Nwizubo
is currently President of Clement E. Nwizubo, CPA, PC, a New-York based
accounting and management consulting firm, which he founded in
1987.  From 1985 to 1987, he was the Manager of Accounting and
Financial Reporting at Primerica Corporation. From 1983 to 1985 he was the Audit
Manager of Watson Rice and Company.  Between 1980 and 1983 he worked
as a Senior Accountant with Stewart Benjamin and Brown.   Mr.
Nwizubo is a Certified Public Accountant, and member of America Institute of
Certified Public Accountants (AICPA). He received his BS in Accounting and
Business Administration in 1977 from Oneonta State College and an MBA in 1980
from Fordham University.
 62
 Table of Contents
  PeterC.Ntephe served as Secretary
from February 2001.  In April 2008, he was appointed Chief Operating
Officer and acting Chief Executive Officer. From 1987 to 1992, Mr. Ntephe worked
with Serena David Dokubo and Company, rising to the Head of the Corporate Legal
Services Department.  From 1992 to 1999, he was a partner in the law
firm of NSW Law and oversaw the firm’s provision of company secretarial services
to corporate clients.  From 1999 to 2001, he was Chief Legislative
Aide to the Chairman of the Senate Committee for Judiciary and Legal Matters,
National Assembly of Nigeria.  Mr. Ntephe has a Bachelors’ and two
Masters Degrees in law, the second Masters being a specialization in regulatory
issues from the University of London.  He also has a Master of Science
degree from the University of Oxford.  Since 2006, Mr. Ntephe has
taught Business Law as part of adjunct faculty in the Business School of
the American Intercontinental University, London.
 
 Mr.
Ntephe, like all officers, serves at the discretion of the Board of Directors,
subject to contract.  There are no family relationships between or among
any Executive Officers and Directors.  There are no arrangements or
understandings between any Executive Officer or Director and any other person
pursuant to which he was or is to be selected as an Executive Officer or
Director.
 
 Compensation
of Directors
 
 The
Company's Directors’ compensation program is designed to enhance the Company's
ability to attract and retain highly qualified Directors and to align their
interests with the long-term interests of the Company's shareholders. The
program consists of both a cash component, designed to compensate independent
Directors for their service on the Board and its Committees, and an equity
component, designed to align the interests of independent Directors and
shareholders.
 
 The
number of stock awards granted to each director during the 2008 fiscal year was
determined by reference to the director’s cash awards in an equal amount that
would yield thirty to fifty percent of total annual compensation to all
directors. The Company believes that stock awards will be included as a
component of director compensation in future years in total share value similar
to awards in fiscal 2008. Stock awards to directors are restricted shares but
they include no conditions for vesting.
 
 Cash
Compensation - During 2008, the basic annual cash retainer paid to each
Director (other than the Board Chairman) was $16,000.   Each
Board member is paid a meeting fee of $1,500 per Board meeting
attended.
 
 The
Chairman of the Audit Committee is paid an annual retainer of
$7,500.  The Chairman of the Compensation Committee is paid an annual
retainer of $4,250.  The Chairman of the Governance and Nominating
Committee is paid an annual retainer of $4,250.  Each member of the
Audit Committee is paid an annual retainer of $2,500.  Each member of
the Compensation Committee is paid an annual retainer of $2,000.  Each
member of the Governance and Nominating Committee is paid an annual retainer of
$2,000.  In addition, each Chairman and member of a Committee is paid
a meeting fee of $750 per Committee meeting attended.
 
 The
following table sets forth information concerning total director compensation
during the 2008 fiscal year for each non-employee
director:
 
 Name
                    
                    Fees
      Earned or Paid in Cash
                    
                    
                    Stock
      Awards (1)
                    
                    
                    Option
      Awards (2)
                    
                    
                    Non-Equity
      Incentive Plan Compensation
                    
                    
                    Change
      in Pension Value Value and Nonqualified Deferred Compensation
      Earnings
                    
                    
                    All
      Other Compensation
                    
                    
                    TotalNicolae Luca
                    
                    $
                    9,500
                    
                    
                    $
                    10,350
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    19,850Howard Jeter
                    
                    
                    53,250
                    
                    
                    
                    20,700
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    73,950Andrew Uzoigwe
                    
                    
                    51,000
                    
                    
                    
                    20,700
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    71,700Clement
      Nwizubo
                    
                    
                    54,500
                    
                    
                    
                    20,700
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    75,200
  (1)
                The
      amounts included in the “Stock Awards” column represent the compensation
      cost recognized by the Company in 2008 related to non-option awards to
      directors, computed in accordance with Statement of Financial Accounting
      Standards No. 123(R), or SFAS No. 123(R). As of September 30, 2008, no
      non-employee directors had any aggregate outstanding deferred
      shares.
 
 (2)
              The
      amounts included in the “Option Awards” column represent the compensation
      cost recognized by the Company in related to stock option awards to
      directors, computed in accordance with SFAS No. 123(R). There were no
      stock option awards to directors in
2008.
 63
 Table of Contents
  No
table of the grant date fair value of stock option and deferred share awards
made to each non-employee director has been included because no stock option or
deferred share awards occurred during 2008.
 
 It is
expected that the directors will receive compensation in fiscal
2009.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires the Company’s Directors and Executive
Officers, and persons who own beneficially more than ten percent (10%) of the
common stock, to file reports of ownership and changes of ownership with the
Securities and Exchange Commission.  Copies of all filed reports are
required to be furnished to the Company.  Based solely on the reports
received and the representations of the reporting person, the Company believes
that these persons have complied with all applicable filing requirements during
the fiscal year ended September 30, 2008.
 
 Corporate
Governance
 
 The
Board of Directors has adopted a Code of Ethics to govern the conduct of all of
the Officers, Directors and employees of the Company.  In addition,
the Board has adopted Charters for its Governance and Nominating Committee,
Audit Committee and Compensation Committee.  The Code of Ethics and
Committee Charters, along with ERHC’s FCPA Policy and Whistleblower Protection
Policy, can be accessed on the Company’s website www.erhc.com
 
 Director
Independence
 
 The
Company’s Board of Directors is required to have a majority of independent
directors and has adopted director independence guidelines based upon and as
defined in the NASDAQ listing standards. The Company is not listed on NASDAQ and
is not subject to the rules of NASDAQ but applies the rules established by
NASDAQ to establish director independence.  The Company’s Board of
Directors periodically analyzes the independence of each director and has
determined that the following directors meet the standards of independence under
our Corporate Governance Guidelines and director independence guidelines,
including that each member is free of any relationship that would interfere with
his or her individual exercise of independent judgment: Messrs. Nwizubo, Jeter
and Uzoigwe. No Director is deemed independent unless the Board
affirmatively established his/her independence.
 
 Audit
Committee
 
 The
Company’s Audit Committee is constituted of Messrs. Nwizubo (Chairman), Jeter
and Uzoigwe.  The ultimate responsibility for good corporate
governance rests with the Board, whose primary role is oversight, counseling and
direction to the Company's management in the best long-term interests of the
Company and its stockholders. The Audit Committee, in accordance with its
charter, has been established for the purpose of overseeing the accounting and
financial reporting processes of the Company and audits of the Company's annual
financial statements. As described more fully in its charter, the purpose of the
Audit Committee is to assist the Board in its general oversight of the Company's
financial reporting, internal controls and audit
functions.  Management is responsible for the preparation,
presentation and integrity of the Company's financial statements; establishing
and applying accounting and financial reporting principles; designing and
implementing systems of internal controls; and establishing procedures designed
to reasonably assure compliance with accounting standards, applicable laws and
regulations. The Company's independent auditing firm is responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards. In accordance with law,
the Audit Committee has ultimate authority and responsibility to select,
compensate, evaluate and, when appropriate, replace the Company's independent
auditors. The Audit Committee has the authority to engage its own outside
advisers, including experts in particular areas of accounting, as it determines
appropriate, apart from counsel or advisers hired by management. All of the
members of the Audit Committee meet the independence and experience requirements
of the SEC. The Board of Directors has determined that Mr. Nwizubo
qualifies as an “Audit Committee Financial Expert” as defined by the
SEC.
  64
 Table of Contents
  The
Audit Committee members are not professional accountants or auditors, and their
functions are not intended to duplicate or to certify the activities of
management and the independent auditors, nor can the Audit Committee certify
that the independent auditors are “independent” under applicable rules. The
Audit Committee serves a Board-level oversight role, in which it provides
advice, counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors, and the
experience of the Audit Committee's members in business, financial and
accounting matters. Stockholders should understand that the designation of “an
Audit Committee Financial Expert” is an SEC disclosure requirement related to
Mr. Nwizubo’s experience and understanding with respect to certain accounting
and auditing matters.  The designation does not impose on Mr.
Nwizubo’s any duties, obligations or liability greater than generally imposed on
them as members of the Audit Committee and the Board, and this designation as an
Audit Committee Financial Expert pursuant to this SEC requirement does not
affect the duties, obligations or liability of any other member of the Audit
Committee or the Board.
 
 Item
11.  Executive Comp ensation
 
 Compensation
Discussion and Analysis
 
 The
following discussion and analysis of compensation arrangements of our named
executive officers should be read together with the compensation tables and
related disclosures set forth below. This discussion contains forward-looking
statements that are based on our current plans, as well as considerations,
expectations and determinations regarding future compensation programs. Actual
compensation programs that we adopt may differ materially from currently planned
programs as summarized in this discussion.
 
 Overview
 
 ERHC’s
current business activity is to exploit its assets, which are rights to working
interests in exploration acreage in the JDZ between the DRSTP and the FRN and in
the EEZ.  Our current business plan is based on attracting and retaining a
limited group of highly qualified professionals. ERHC had 5 employees
at September 30, 2008 and 4 employees at the end of financial
year September 30, 2007.
 
 At
this time in our development, it is critical to retain and motivate our current
employees, as well as attract new talented personnel to the Company, in order to
continue to work on the implementation of our business plan. The Company offers
a competitive compensation and benefits package to enable us to recruit new
employees and retain our current employees. The same benefits are generally
available to each of our employees regardless of position.
  Compensation
Philosophy and Objectives
 
 Our
executive compensation program and objectives are based on our need to attract
and retain executives with the talent and experience necessary for ERHC to
achieve its goal of fully developing its assets. ERHC competes
with  large energy companies that have substantially greater
resources.  Therefore, the Company  must provide a total
compensation package that is sufficiently competitive  to attract and
retain the required executive personnel. In determining a total compensation
package, the Company does not rely on benchmarking to determine total
compensation or any material element of compensation. Because we are a
developing company, we sometimes use a combination of equity and cash as a
compensation incentive. Our compensation and benefits include:
 
 •
              a
      base salary rate typically targeted at a level that is competitive in our
      market as determined by the Compensation
  Committee,
 •
              other
      equity awards, including equity grants to new hires to attract talented
      personnel and occasional grants of options/restricted shares to retain our
      talented employees, and
 •
              a
      comprehensive benefits package.
 
  Since
2004, the equity portion of annual incentives has been paid primarily in
restricted Company common stock. The incentive amount is generally converted to
shares based on the closing price of the Company’s common stock on the date of
grant.
  65
 Table of Contents
  Compensation
Consultant
 
 Each
year, the Compensation Committee, working with independent compensation experts,
evaluates the compensation earned by executive officers to assess if it is
reasonable and adequate to retain the services of those executive officers and
recommends to the Board of Directors appropriate compensation for the Named
Executive Officers.  The Board reviews such recommendations and then
adopts compensation for the upcoming year.  As the Company grows, it
intends to explore more complex procedures for evaluating and fixing
compensation for its executive officers.
 
 Role
of Compensation Committee and Executive Officers in Compensation
Decisions
 
 The
Compensation Committee has the responsibility to review and approve annual
compensation, including the competitiveness of the total compensation package,
for the Chief Executive Officer, the Technical Vice President and the Chief
Financial Officer (collectively, the “Executive Officers”). The Compensation
Committee endeavors to provide a compensation package for the Executive Officers
that they believe is reasonable and competitive. Generally, the components of
compensation provided to our Executive Officers are similar to those provided to
our general employee population.
  Base
salaries, annual incentives and other equity awards for the Executive Officers
are based on comparative industry salary produced by compensation consultant
hired by the Committee. The Compensation Committee makes the final determination
as to base salaries, annual incentives and equity awards for each of the
Executive Officers based on Company performance and executive performance and
their understanding of the employment market.
 
 2008
Executive Compensation
 
 Base
Salaries
 
 Base
salaries for our Executive Officers and other employees are designed to be
comparable to like positions in the marketplace from where we recruit. These
competitive salaries are proposed by the Compensation Committee based on their
familiarity with the current market for employees with similar
qualifications.
  Equity
Awards
 
 Overview
 
 We may
grant restricted stock, stock options and other equity-based awards to
employees, consultants and non-employee directors under our 2004 Plan. As
previously mentioned, our annual grants of equity awards are tied to the
achievement of our annual performance objectives. Equity awards are also used
for new hire incentives. We do not have a formal policy for the timing of
granting equity awards but do not time equity awards to increase the economic
value of the award to plan participants.
 
 The
Board has authorized the Compensation Committee to act on behalf of the Board in
granting equity-based awards, including restricted stock and stock options, to
eligible employees and consultants (other than Executive
Officers).
 
 We do
not currently intend to grant stock or stock options except under limited
circumstances, including stock awards granted to a director upon his or her
initial election to the Board. Under the provisions of the 2004 Plan, stock
awards or stock options cannot be granted at an exercise price of less than the
closing price of a share of the Company’s common stock as reported on NASDAQ on
the date of grant of such stock options. All equity grants to Executive Officers
must be approved by the Compensation Committee or a subcommittee thereof. Stock
options or stocks granted to members of the Board must be approved by the
Compensation Committee.
 
 Retention
Plan
 
 In
2006, the Compensation Committee granted stock options to the Technical Vice
President in an effort to provide an employment incentive and encourage
retention through this crucial stage in our operations. The options vest upon
completion of one year of service from the grant date. The exercise price of
each of the grants was set at the closing price of the Company’s common stock on
the date of grant. The Technical Vice President’s grant consisted of 1,000,000
stock options with an exercise price of $0.43 per share. The closing price of
the Company’s common stock on December 18, 2006, the date of this grant, was
$0.43.
  66
 Table of Contents
  Perquisites
 
 Perquisites
are not provided to our officers.
 
 Benefits
 
 We
provide the same level of benefits to all of our employees and Executive
Officers.
 
 Accounting
and Tax Implications
 
 Our
2004 Plan is designed to grant stock awards that are performance-based
compensation expense that is fully deductible for federal income tax purposes.
When the awards vest or are otherwise includible in the taxable compensation of
the affected executives, we may not be able to recognize current or future tax
benefits that may otherwise be available to the Company related to such awards.
We began expensing equity awards in 2006 in accordance with FAS 123(R). In
general, the accounting rules did not impact the types of equity awards granted
to plan participants.
 
 COMPENSATION
COMMITTEE REPORT
 
 The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to
the Board that the Compensation Discussion and Analysis be included in this
Annual Report on Form 10-K.
 
 THE
COMPENSATION COMMITTEE
 
 Dr.
Andrew Uzoigwe-Chairman
 Clement
Nwizubo
 Ambassador
Howard Jeter
  SUMMARY
COMPENSATION TABLE
 
 The
following table sets forth the aggregate compensation awarded to, earned by or
paid to the Company’s named executive officers for 2008 and
2007.
  Name
      and Principal Position
                                              
                                              
                                              Year
                                              
                                              Salary
                                                ($)
                                              
                                              
                                              Bonus
                                                ($)
                                              
                                              
                                              Stock
                                                Awards
                                                ($) (1)
                                              
                                              
                                              ption
                                                Awards
                                                ($) (3)
                                              
                                              
                                              Non-Equity
                                                Incentive
      Plan
                                                Compensation
                                                ($)
                                              
                                              
                                              Change
                                                in
      Pension
                                                Value and
                                                Nonqualified
                                                Deferred
                                                Compensation
                                                Earnings
                                                ($)
      (2)
                                              
                                              
                                              All
      Other
                                                Compensation
                                                ($)
                                              
                                              
                                              Total
                                                ($)Nicolae LucaInterim
      Chief Executive Officer
                                              
                                              
                                              2008
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —2007
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —James LedbetterTechnical
      Vice President
                                              
                                              
                                              2008
                                              
                                              
                                              230,000
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              48,460
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              278,4602007
                                              
                                              
                                              191,083
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              175,440
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              366,523Sylvan
      OdobuluControlle
                                              
                                              
                                              2008
                                              
                                              
                                              138,900
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              138,9002007
                                              
                                              
                                              111,018
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              111,018Peter NtepheChief
      Operating Officer and Chief Executive
                                              
                                              
                                              2008
                                              
                                              
                                              131,733
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              131,733Officer
      (4)
                                              
                                              
                                              2007
                                              
                                              
                                              60,000
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              60,000David
      Bovell
                                              
                                              
                                              2008
                                              
                                              
                                              95,000
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              95,000Vice
      President - Corporate Development (5)
                                              
                                              
                                              2007
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
  (1)
              In
      connection with service rendered as a member of our board of directors,
      Mr. Luca was issued 30,000 and 60,000 shares in the years ended
      September 30, 2008 and 2007, respectively. These shares were valued at
      $10,350 and $17,700 for the years ended September 30, 2008 and 2007,
      respectively. These values reflect the dollar amounts recognized for
      financial statement reporting purposes for the fiscal years ended
      September 30, 2008 and 2007, in accordance with FAS123(R) of awards made
      pursuant to the 2004 Plan excluding any reduction in value due to
      potential service-based forfeitures, and thus may include amounts from
      awards granted in and prior to 2008. Assumptions used in the calculation
      of these amounts are included in footnote 8 to the Company's audited
      financial statements for the fiscal year ended September 30, 2008 included
      in this Annual Report on Form 10-K. Mr. Luca also received cash
      compensation of $9,500 and $17,500 for service rendered as a member of our
      board of directors for the years ended September 30, 2008 and 2007,
      respectively. Mr. Luca received no additional compensation in his role as
      interim Chief Executive Officer and his compensation is described in
      “Compensation of Directors”. Mr. Luca resigned from the board in
      April 2008.
 
 (2)
              ERHC
      does not provide either a pension plan or a nonqualified deferred
      compensation plan for any of its
employees.
 67
 Table of Contents
  (3)
              Mr.
      Ledbetter was issued 1,000,000 stock options at an exercise price of $0.43
      per share on December 18, 2006. The option exercise price is $0.43 per
      share, the closing price of the Company's common stock on the date of
      grant. The options vest over a one-year period beginning on the date of
      grant. Fair value of $22.39 per share or a total of $223,900 was
      calculated using the Black-Scholes option pricing model. Variables used in
      this option-pricing model for the year ended September 30, 2007 were (1)
      4.90% discount rate, (2) option life is the expected remaining life of the
      options as of each year end, (3) expected volatility of 75.00%, and (4)
      zero expected dividends. Option expense of $48,460 and $175,440 was
      recorded during the years ended September 30, 2008 and 2007, respectively,
      in accordance with FAS123(R). .
 
 (4)
              Mr.
      Ntephe became COO (and began acting as interim CEO) upon Mr. Luca’s
      resignation in April 2008. Mr. Ntephe is contracted through
      ERHC’s  holding company, ERHC Energy Cayman Limited
      and  will be paid a salary of $236,000 per year for his services
      as a COO and Interim CEO.
 
 (5)
              Mr.
      Bovell was became VP of Corporate Development on May 1, 2008 and receives
      a salary of $235,000 per year.  Mr. Bovell is contracted
      through ERHC’s holding company, ERHC Energy Cayman
      Limited.
  
 GRANTS
OF PLAN-BASED AWARDS
 
 The
following table sets forth the information about grants made to the Company’s
named executive officers in 2008 pursuant to the 2004
Plan.
 
 Name
                                      
                                      Grant Date
                                      
                                      
                                      Estimated Future Payouts
                                        Under
      Non-Equity Incentive
                                        Plan Awards
                                      
                                      
                                      Estimated Future Payouts
                                        Under Equity Incentive
                                        Plan Awards
                                      
                                      
                                      All Other
                                        Stock
      Awards:
                                        Number
      of
                                        Shares
      of
                                        Stock or Units
                                        (#) (1)
                                      
                                      
                                      All Other
                                        Option
                                        Awards:
                                        Number of
                                        Securities
                                        Underlying
                                        Options
                                        (#)
      (2)
                                      
                                      
                                      Exercise
                                        or
      Base
                                        Price
      of
                                        Option
                                        Awards
                                        ($ / Sh)
                                      
                                      
                                      Grant
                                        Date
      Fair
                                        Value
      of
                                        Stock
      and
                                        Option
                                        Awards
                                        ($)Threshold
                                        ($)
                                      
                                      
                                      Target
                                        ($)
                                      
                                      
                                      Maximum
                                        ($)
                                      
                                      
                                      Threshold
                                        (#)
                                      
                                      
                                      Target
                                        (#)
                                      
                                      
                                      Maximum
                                        (#)Nicolae
      Luca  (3)
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —James
      Ledbetter
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Sylvan
      Odobulu
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Peter
      Ntephe
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —David
      Bovell
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
  (1)
              The
      number in this column reflects the rule 144 restricted stock awarded in
      2008 pursuant to the 2004 Plan.
 
 (2)
              Reflects
      the dollar amounts recognized for financial statement reporting purposes
      for the fiscal year ended September 30, 2008 in accordance with FAS123R of
      awards made pursuant to the 2005 Plan excluding any reduction in value due
      to potential service-based
forfeitures.
 
 (3)
              Mr.
      Lucas was a director serving on an interim basis as Chief Executive
      Officer. He received no compensation associated with the position of
      Interim Chief Executive officer and the grant of common stock associated
      with his service as a director is described in “Compensation of
      Directors”.
 
 OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
 
 The
following table reflects all outstanding equity awards held by the Company’s
named executive officers as of September 30, 2008.
  Option
      Awards
                                                  
                                                  
                                                  Stock
      AwardsName
                                                  
                                                  Number
      ofSecurities
                                                    Underlying
      Unexercised Options
                                                  
                                                  
                                                  Equity
                                                    Incentive
                                                    Plan
      Awards:
                                                    Number of
                                                    Securities
                                                    Underlying
                                                    Unexercised
                                                    Unearned
                                                    Options
                                                    
                                                    (#)
                                                  
                                                  
                                                  Option
                                                    Exercise
                                                    Price
                                                    ($)
                                                  
                                                  
                                                  Option
                                                    Expiration
                                                    Date
                                                  
                                                  
                                                  Number of
                                                    Shares or
                                                    Units
      of
                                                    Stock That
                                                    Have Not
                                                    Vested
                                                    (#)
                                                  
                                                  
                                                  Market Value
                                                    of
      Shares or
                                                    Units
      of
                                                    Stock That
                                                    Have Not
                                                    Vested
                                                    ($)
                                                  
                                                  
                                                  Equity
                                                    Incentive
                                                    Plan Awards:
                                                    Number
      of
                                                    Unearned
                                                    Shares,
      Units
                                                    or
      Other
                                                    Rights
      That
                                                    Have
      Not
                                                    Vested
                                                    (#)
                                                  
                                                  
                                                  Equity
                                                    Incentive
                                                    Plan Awards:
                                                    Market
      or
                                                    Payout
      Value
                                                    of
      Unearned
                                                    Shares,
      Units
                                                    or
      Other
                                                    Rights
      That
                                                    Have
      Not
                                                    Vested
                                                    ($)Exercisable
                                                  
                                                  
                                                  UnexercisableNicolae
      Luca
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —James
      Ledbetter
                                                  
                                                  
                                                  1,000,000
                                                  (1
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  $
                                                  0.43
                                                  
                                                  
                                                  12/18/2008
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —Sylvan
      Odobulu
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —Peter
      Ntephe
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —David
      Bovell
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  
                                                  —
  (1)
              The
      options were granted on December 18, 2006 and vested upon the completion
      of one year of service.
  68
 Table of Contents
 OPTION
EXERCISES AND STOCK VESTED
 
 The
following table reflects the stock options exercised by the Company’s named
executive officers during 2008 and their restricted stock that vested during
2008.
  Option
      Awards
                            
                            
                            Stock
      AwardsName
                            
                            Number of Shares
                              Acquired on Exercise
                              (#)
                            
                            
                            Value Realized on
                              Exercise
                              ($)
                            
                            
                            Number of Shares
                              Acquired on Vesting
                              (#)
                            
                            
                            Value Realized on
                              Vesting
                              ($)Nicolae
      Luca
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —James
      Ledbetter
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Sylvan
      Odobulu
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Peter
      Ntephe
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —David
      Bovell
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
  POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
 
 As of
September 30, 2008, Company has entered into only one employment or other
agreement that includes a change of control severance provisions with an
executive officer, including the named executive officers. The Company’s
employment agreement with its technical vice president, Mr. Ledbetter, provides
that Mr. Ledbetter would be eligible for payments upon any termination without
cause prior to expiration of the contract as described below under
Employment Contracts.
 
 Employment
Contracts
 
 The
Company neither had an employment agreement with Mr. Luca nor does it pay him a
salary for his services as Interim Chief Executive Officer. The Company has
a twenty-four month employment agreement with its Technical Vice President, Mr.
Jim Ledbetter with a term that expires on December 18, 2008 but includes an
extension provision that at any time before the expiration of the primary term
the agreement that it may be renewed upon mutual agreement on the same terms and
conditions contained in the current agreement herein or on such other terms and
conditions as the Company and Mr. Ledbetter mutually agree. The agreement
provides that Mr. Ledbetter’s status as an employee of the Company terminates
immediately and automatically upon the earliest to occur of: (i) his death or
"Disability", (ii) his discharge by the Company "For Cause", (iii) his
termination by the Company by notice or, (iv) the expiration, without renewal,
of the employment term.  Termination of Mr. Ledbetter’s employment
agreement with cause results in the Company having no further responsibility
under the agreement. For termination without cause for reasons of bankruptcy,
insolvency, dissolution or liquidation of the Company, the Company is obligated
to Mr. Ledbetter for payment of all amounts due during the remaining term of his
agreement in either a lump sum or in the current monthly amounts for the
remaining term together with all unpaid benefits awarded or accrued up to the
date of termination. If Mr. Ledbetter is terminated without cause for other
reasons, he is entitled to one to six months compensation depending on the time
he has spent with the Company.
 
 Mr.
Ledbetter’s agreement provides for a base salary of $19,167 per month, a
reasonable monthly vehicle allowance as, approved by the Board at the Board's
discretion, reimbursement of authorized general business and travel expenses, a
relocation allowance of up to $10,000, five weeks of paid vacation annually and
incentive compensation in the form of an option to purchase 1,000,000 shares at
an exercise price of $0.43 per share.
 
 Mr. Ntephe, was paid annual compensation of $60,000,
in the form of consultancy fees for his services as Secretary until April
2008.   Mr. Ntephe became COO (and began acting as interim CEO)
upon Mr. Luca’s resignation in April 2008. Mr. Ntephe is contracted in that
capacity through ERHC’s holding company, ERHC Energy Cayman Limited and will be
paid a salary of $236,000 per year for his
services.
 
 Mr.
David Bovell became Vice President Corporate Development from May 1
2008.  Mr. Bovell is contracted in that capacity through EHRC’s
holding company, ERHC Energy Cayman Limited and will be paid a salary of
$235,000 per year for his services.
 
 Securities
Authorized for Issuance Under Equity Compensation Plans
 
 In
November 2004, the Board of Directors adopted a 2004 Compensatory Stock Option
Plan pursuant to which it reserved 20,000,000 shares for
issuance.  This plan was approved at a special meeting of the
stockholders of the Company in February 2005.  Under this plan,
7,576,756 shares have been issued.
  69
 Table of Contents
  Plan
      Category
                        
                        Number
      of securities to be
                          issued
      upon exercise of
                          outstanding
      options,
                          warrants
      and rights
                        
                        
                        Weighted-average
      exercise
                          price
      of outstanding
                          options,
      warrants and
                          rights
                        
                        
                        Number
      of securities
                          remaining
      available for
                          future
      issuance under
                          equity
      compensation plans
                          (excluding
      securities
                          reflected
      in column (a))(a)
                        
                        
                        (b)
                        
                        
                        IEquity
      compensation plans approved by security holders
                        
                        
                        1,000,000
                        
                        
                        $
                        0.43
                        
                        
                        
                        11,423,244Equity
      compensation plans not approved by security holders
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
 
 Compensation
Committee Interlocks Insider Participation
 
 The
Company’s Compensation Committee is comprised Messrs. Jeter, Uzoigwe and
Nwizubo. None of the members of the Compensation Committee has been or is an
officer or employee of the Company, or is involved with a related transaction or
a relationship as defined by Item 404 of Regulation S-K.  None of the
Company’s Executive Officers serves on the Board of Directors or compensation
committee of a company that has an Executive Officer that serves on the
Company’s Board or Compensation Committee.  No member of the Company’s
Board is an Executive Officer of a company in which one of the Company’s
Executive Officers serves as a member of the Board of Directors or compensation
committee of that company.
 
 Item
12.  Security Ownership of Certain Beneficial Owners and Mana gement and Related Stockholder Matters
 
 The
following table and notes thereto set forth certain information regarding
beneficial ownership of the common stock as of November 30, 2008 by (i) each
person known by the Company to beneficially own more than five percent of the
common stock, (ii) each Director, (iii) each named Executive Officer and (iv)
all Directors and Officers of the Company as a group.  As of November 30,
2008, there were 722,238,550 shares of common stock issued and
outstanding.   Beneficial ownership is determined in accordance
with rules of the SEC and generally includes voting or dispositive power with
respect to such shares.
 
 Name
      and Address
                                                        
                                                        Shares
      of common stock
                                                          Beneficially
      Owned
                                                        
                                                        
                                                        Percentage
                                                          Of
      Voting PowerPrincipal
      ShareholdersChrome
      Oil Services LTD
                                                        
                                                        
                                                        202,785,727
                                                        (1)
                                                        
                                                        
                                                        28.1
                                                        %c/o
      No 22 Lobito, Wuse IIAbuja,
      NigeriaChrome
      Energy, LLC
                                                        
                                                        
                                                        103,305,706
                                                        (2)
                                                        
                                                        
                                                        14.3
                                                        %c/o
      No 22 Lobito Crescent, Wuse II,Abuja,
      Nigeria.First
      Atlantic Bank
                                                        
                                                        
                                                        60,641,821
                                                        
                                                        
                                                        
                                                        8.4
                                                        %4/6
      Adetokunboh Ademola StreetVictoria
      Island, LagosSir
      Emeka Offor
                                                        
                                                        
                                                        310,296,433
                                                        (1)(2)
                                                        
                                                        
                                                        43.0
                                                        %Directors
      and Named Executive OfficerNicolae
      Luca(3)
                                                        
                                                        
                                                        235,000
                                                        
                                                        
                                                        
                                                        *Andrew
      Uzoigwe(3)
                                                        
                                                        
                                                        265,000
                                                        
                                                        
                                                        
                                                        *Howard
      Jeter(3)
                                                        
                                                        
                                                        265,000
                                                        
                                                        
                                                        
                                                        *Clement
      Nwizubo(3)
                                                        
                                                        
                                                        205,000
                                                        
                                                        
                                                        
                                                        *Peter
      Ntephe(3)
                                                        
                                                        
                                                        388,889
                                                        
                                                        
                                                        
                                                        *All
      directors and named exectuvie officer as a group (5
      persons)
                                                        
                                                        
                                                        1,358,889
                                                        
                                                        
                                                        
                                                        .1
                                                        %
 70
 Table of Contents
  (1)
              Includes
      warrants to purchase 2,500,000 shares of the Company’s common stock, of
      which 1,500,000 expire in October 2008 and have a $0.25 per share exercise
      price, and 1,000,000 expire in April 2009 and have a $0.25 per share
      exercise price.
 
  (2)
              Sir
      Emeka Offor is the beneficial owner of the shares held of record by
      Chrome Oil Services, Ltd., and Chrome Energy, LLC as the sole voting and
      investment power over these
shares.
 
 (3)
              c/o
      Suite 1440, 5444 Westheimer Road, Houston,
    TX 77056
 
 
 Item 13. Certain Relationships and Related
Transactions
 
 Review,
Approval Or Ratification Of Transactions With Related Persons
 
 The
Audit Committee of the Company is responsible for review, approving or ratifying
related party transactions, including any related-party transaction that the
Company would be required to disclose pursuant to Item 404 of Regulation S-K
promulgated pursuant to the rules and regulations of the SEC.
 
 Policy
 
 The
Audit Committee, which consists solely of independent Directors, must review all
“Related Person Transactions” as defined by Item 404 of Regulation S-K of the
rules promulgated by the SEC. The Audit Committee will approve a Related Person
Transaction only if it determines that the Related Person Transaction is
consistent with the business interests of the Company. In considering the
Related Person Transaction, the Committee will consider all relevant factors,
including as applicable: (i) the Company’s business rationale for entering into
the Related Person Transaction; (ii) whether the Related Person Transaction is
on terms comparable to those available to third parties, or in the case of
employment relationships, to employees generally; (iii) the potential for the
Related Person Transaction to lead to an actual or apparent conflict of interest
and any safeguards imposed to prevent such actual or apparent conflicts; and
(iv) the overall fairness of the Related Person Transaction to the
Company.
 
 Procedure
 
 Directors
and executive officers are responsible for bringing a potential Related Person
Transaction to the attention of the Chair of the Audit
Committee.
 
 Transactions
in 2008
 
 None
 
 Item
14.  Principal Accounting Fees and Services
 
 Aggregate
fees for professional services rendered by Malone & Bailey, PC for the
fiscal years ended September 30, 2008 and 2007, were as
follows:
 
 2007
                              
                              2008Audit
      fee
                              
                              $
                              92,125
                              
                              
                              $
                              109,303Audit-related
      fees
                              
                              $
                              5,200
                              
                              
                              $
                              3,750Tax
      fees
                              
                              $
                              8,341
                              
                              
                              $
                              29,328All
      other fees
                              
                              
                              
                              
                              
                              $
                              -______________
  71
  Audit fees for the fiscal
years ended September 30, 2008 and 2007 represent the aggregate fees billed for
professional services rendered for the audit of the Company’s annual financial
statements and review of financial statements included in its quarterly reports
on Form 10-Q or services that are normally provided in connection with statutory
and regulatory filings or engagements for those fiscal years.
 
 Tax fees for the fiscal year
ended September 30, 2008 and 2007, represents the aggregate fees billed for
professional services rendered for tax compliance, tax advice, and tax
planning.
 
 All other fees for the fiscal
year ended September 30, 2008 and 2007, represents the aggregate fees billed for
products and services provided by the Company’s audit professionals other than
the services reported in the other categories.  All other fees generally
relate to fees assessed for corporate tax restructuring and other general
corporate tax related matters.
 
 Audit
Committee Pre-Approval Policies and Procedures
 
 The
Audit Committee on an annual basis reviews audit and non-audit services
performed by the independent auditor.  All audit and non-audit services are
pre-approved by the Audit Committee, which considers, among other things, the
possible effect of the performance of such services on the auditors’
independence.  The Audit Committee has considered the role of Malone &
Bailey in providing services to us for the fiscal year ended September 30, 2008
and has concluded that such services are compatible with Malone & Bailey’s
independence as the Company’s auditors.
  72
 Table of Contents




PART
IV





Item 15. Exhibits
and Financial Statement Schedules and Reports on Form 8-K





(32)
            Consolidated
      Financial Statements and Schedules:





1.
            Consolidated
      Financial Statements:  See Index to Consolidated Financial
      Statements immediately following the signature pages of this
      report.





2.
            Consolidated
      Financial Statement Schedule: See Index to Consolidated Financial
      Statements immediately following the signature pages of this
      report.





3.
            The
      following documents are filed as exhibits to this
  report:





1.
            Consolidated
      Financial Statements:  See Index to Consolidated Financial Statements
      immediately following the signature pages of this
  report.





EXHIBIT
      NO.
            
            IDENTIFICATION
      OF EXHIBITExhibit
      3.1*
            
            Articles
      of IncorporationExhibit
      3.2*
            
            BylawsExhibit
      4.1*
            
            Specimen
      Common Stock Certificate.Exhibit
      4.2*
            
            Form
      of Amended and Restated 12% Convertible Promissory Note, dated effective
      January 2001.Exhibit
      4.3*
            
            Form
      of Amended and Restated 5.5% Convertible Promissory Note, dated effective
      January 2001.Exhibit
      4.4*
            
            20%
      Convertible Promissory Note, dated January 31, 2001, in favor of
      Chrome.Exhibit
      4.5*
            
            Term
      Loan Agreement, dated February 15, 2001, by and between Chrome and
      ERHC.Exhibit
      4.6*
            
            Senior
      Secured 10% Exchangeable 10% Convertible Promissory Note, dated January
      31, 2001, in favor of Chrome.Exhibit
      4.7*
            
            Form
      of Warrant entitling Chrome to purchase common stock of the Company,
      exercise price of $0.40 per share.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)Exhibit
      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).Exhibit
      10.4*
            
            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).Exhibit
      10.5*
            
            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).Exhibit
      10.6*
            
            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).Exhibit
      10.7*
            
            Employment
      Agreement with Ali Memon.Exhibit
      10.8*
            
            Audit
      committee charterExhibit
      10.9
            
            Employment
      Agreement with James LedbetterExhibit
      10.10
            
            May
      21, 2001 Memorandum of Agreement made b/w DRSTP and
ERHCExhibit
      10.11
            
            March
      15,  2003 Memorandum of Agreement made b/w DRSTP and
      ERHCExhibit
      10.12
            
            April
      2, 2003 Option Agreement b/w DRSTP and ERHCExhibit
      10.13
            
            Administrative
      Agreement b/w Nigeria/DRSTP and ERHCExhibit
      10.14
            
            Block
      2 Participation Agreement March 2, 2006 b/w ERHC, Addax and
      SinopecExhibit
      10.15
            
            Block
      2 Participation Agreement August 11, 2004 b/w ERHC and
    PioneerExhibit
      10.16
            
            Block
      3 Participation Agreement  February 16, 2006 b/w ERHC and
      AddaxExhibit
      10.17
            
            Block
      4 Participation Agreement November 17, 2005 b/w ERHC and
    AddaxExhibit
      10.18
            
            Block
      4 2nd Amendment to Participation Agreement March 14,
  2006Exhibit
      10.19
            
            Block
      4 3rd Amendment to Participation Agreement July 14,
2006Exhibit
      10.20
            
            September
      2003 WesternGeco Report on the Seismic Interpretation of blocks
      1-9Exhibit
      31.1
            
            Certification
      Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002Exhibit
      31.2
            
            Certification
      Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002Exhibit
      32.1
            
            Certification
      Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002Exhibit
      32.2
            
            Certification
      Pursuant to 18 U.S.C Section 1350, as adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002





*
Previously filed


73
 Table of Contents


SIGNATURES





In
accordance with the Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on December 15, 2008 on its behalf by the
undersigned, thereunto duly authorized.




ERHC
      Energy Inc.By:
            //s//Peter
      NtephePeter
      NtepheChief
      Operating Officer & Acting Chief Executive Officer//s//Sylvan
      OdobuluSylvan
      OdobuluPrincipal
      Accounting Officer








In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.




Signature
            
            Title
            
            Date//s//  Howard
      Jeter
            
            Director
            
            December
      15, 2008Howard
      Jeter
            
            Member
      Audit Committee//s//  Andrew
      Uzoigwe
            
            Director
            
            December
      15, 2008Andrew
      Uzoigwe
            
            Member
      Audit Committee//s//  Clement
      Nwizubo
            
            Director
            
            December
      15, 2008Clement
      Nwizubo
            
            Chairman
      Audit Committee