**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C.  20549**




**FORM
      10-K**







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





For
      the fiscal year ended September 30,
      2007





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 x  No  ̈





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 x          Non-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, 2007 was $144,547,630.





On
      November 30, 2007, the registrant had 721,938,550 shares of common stock issued
      and outstanding.









**TABLE
      OF CONTENTS**








**PART
                I**
            **PAGE**Item
                1.
            
            Business
            5Item
                1A.
            
            Risk
                Factors
            8Item
                1B.
            
            Unresolved
                Staff Comments
            12Item
                2.
            
            Properties
            12Item
                3.
            
            Legal
                Proceedings
            13Item
                4.
            
            Submission
                of Matters to a Vote of Security
                Holders
            13**PART
                II**Item
                5.
            
            Market
                for Registrant’s Common Equity, Related Shareholder
                Matters, and Issuer Purchases of Equity Securities
            14Item
                6.
            
            Selected
                Financial Data
            15Item
                7.
            
            Management’s
                Discussion and Analysis of Financial Condition and
                Plan of Operations
            16Item
                7A.
            
            Quantitative
                and Qualitative Disclosures about Market
                Risk
            19Item
                8.
            
            Financial
                Statements and Supplementary Data
            20Item
                9.
            
            Changes
                in and Disagreements with Accountants on Accounting
                and
                Financial Disclosures
            51Item
                9A.
            
            Controls
                and Procedures
            51Item
                9B.
            
            Other
                Information
            51**PART
                III**Item
                10.
            
            Directors
                and Executive Officers of the
                Registrant
            52Item
                11.
            
            Executive
                Compensation
            54Item
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management
                and Related Stockholder Matters
            57Item
                13.
            
            Certain
                Relationships and Related
                Transactions
            57Item
                14.
            
            Principal
                Accounting Fees and Services
            58**PART
                IV**Item
                15.
            
            Exhibits
                and Financial Statement Schedules
            59Signatures
            60


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 that are
“forward-looking statements” within the meaning of Section 27A of the Securities
      Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”).  All statements
      other than statements of historical fact are, or may be deemed to be,
      forward-looking statements.  Forward-looking statements include,
      without limitation, any statement that may project, indicate or imply future
      results, events, performance or achievements, and may contain or be identified
      by the words “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,”
“believe,” “should,” “could,” “may,” “might,” “will,” “will be,” “will
      continue,” “will likely result,” “project,” “forecast,” “budget” and similar
      expressions.  Statements made by the Company in this report that
      contain forward-looking statements include, but are not limited to, information
      concerning the Company’s possible or assumed future business activities and
      results of operations and statements about the following subjects:





·
            business
                strategy;


·
            growth
                opportunities;


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


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


·
            future
                uses of and requirements
                for financial resources;


·
            interest
                rate and foreign
                exchange risk;


·
            future
                contractual
                obligations;


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


·
            future
                operations outside the
                United States;


·
            competitive
                position;


·
            expected
                financial
                position;


·
            future
                cash
                flows;


·
            future
                liquidity and sufficiency
                of capital resources;


·
            future
                dividends;


·
            financing
                plans;


·
            tax
                planning;


·
            budgets
                for capital and other
                expenditures;


·
            plans
                and objectives of
                management;


·
            compliance
                with applicable laws;
                and


·
            adequacy
                of insurance or
                indemnification.





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





·
            general
                economic and business
                conditions;


·
            worldwide
                demand for oil and
                natural gas;


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


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


·
            termination,
                renegotiation or
                modification of existing
                contracts;


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


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


·
            advances
                in exploration and
                development technology;


·
            the
                political environment of
                oil-producing regions;


·
            political
                instability in theDemocratic
                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;


3
 *Table
          of Contents*


·
            compliance
                with environmental
                laws and regulations;


·
            compliance
                with tax laws and
                regulations;


·
            customer
                preferences;


·
            effects
                of litigation and
                governmental proceedings;


·
            cost,
                availability and adequacy
                of insurance;


·
            adequacy
                of the Company’s sources
                of liquidity;


·
            labor
                conditions and the
                availability of qualified personnel;
                and


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





The
      risks
      and uncertainties included here are not exhaustive.  Other sections of
      this report and the Company’s other filings with the U.S. Securities and
      Exchange Commission (“SEC”) include additional factors that could adversely
      affect the Company’s business, results of operations and financial
      performance.  Given these risks and uncertainties, investors should
      not place undue reliance on forward-looking
      statements.  Forward-looking 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 forward-looking statement 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.


4
 *Table
          of Contents*


**PART
      I**





**Item
      1. Business**





***Overview***





ERHC
      Energy Inc., a Colorado corporation, (“ERHC” or the “Company”) is an independent
      oil and gas company formed in 1986.  The Company 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.  The Company’s current focus is to
      exploit its assets, which are rights to working interests in exploration acreage
      in the Joint Development Zone (“JDZ”) between the Democratic Republic of Sao
      Tome and Principe (“DRSTP or “Tome”) and the Federal Republic of Nigeria (“FRN
      or “Nigeria”) and in the exclusive territorial waters of Sao Tome (the
“Exclusive Economic Zone” or “EEZ”).  The Company has formed relationships
      with 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 energy industry with emphasis
      on
      supply and trading.








***Current
      Business Operations***





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.





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 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 Nigeria and Sao
      Tome and Principe JDZ from the JDA established pursuant to the Treaty between
      FRN and the DRSTP, Godsonic would transfer whatever Godsonic received 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.





In
      November 2005, 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.  Under the Participation Agreement, ERHC’s “Retained Interest”
would be 17.7% in Block 4.  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.
      Addax is entitled to 100% of ERHC’s share of oil production until Addax recovers
      ERHC’s costs.


5
 *Table
          of Contents*


Pursuant
      to 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% while ERHC’s Retained Interest would remain at 17.7%.
      By a second Amendment to the Participation Agreement, entered into on March
      14,
      2006, ERHC and Addax further amended the Participation Agreement so that the
      “Assigned Interest” would be 33.3% and ERHC’s “participating interest” would be
      26.7%.





On
      March
      15, 2006, an agreement to assign 9% in Block 4 from ERHC to Godsonic was entered
      into between ERHC/Addax and Godsonic subject to Godsonic meeting stipulated
      financial and other conditions. Pursuant to a third Amendment to the
      Participation Agreement entered into on April 11, 2006, ERHC and Addax
      provisionally agreed that if Godsonic did not meet the financial and other
      conditions as stipulated in the Letter Agreement on the 9% interest to be
      transferred to Godsonic and was foreclosed from all claims to the 9% interest,
      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.





In
      July
      2007, ERHC acted on behalf of the ERHC/Addax consortium in JDZ Block 4 to
      reclaim Godsonic’s 9% share because Godsonic failed to meet certain obligations.
      Addax claims entitlement under the existing agreements to 7.2% out of the
      recovered 9%, leaving 1.8% remaining with ERHC.  If finalized, this
      would increase ERHC’s share of JDZ Block 4 from 17.7% to 19.5%. ERHC and Addax
      are currently in arbitration, under amicable conditions, to resolve whether
      or
      not additional consideration is due to ERHC from Addax for the 7.2% claim by
      Addax under the terms of the existing agreements. The parties are also exploring
      mediation as an alternative to seeing arbitration to conclusion.




In
      February 2006, ERHC sold a 15% participating interest in Block 3 of the JDZ
      to
      Addax Petroleum Resources Nigeria Limited ("Addax Sub") leaving a 10%
      participating interest in Block 3 to ERHC. In exchange, Addax Sub paid ERHC
      $7.5
      million in the second quarter of fiscal 2006. Under the participation agreement
      between ERHC and Addax Sub, Addax Sub agreed to pay all of ERHC's future costs
      in respect of petroleum operations in Block 3. 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 ERHC's costs.





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 ERHC's costs 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 covered by 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 to ERHC for
      obtaining Sinopec’s participation in Block 2. ERHC also 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.





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


6
 *Table
          of Contents*


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




**JDZ
                Block #**
            **ERHC**
              **Original**
              **Participating**
              **Interest**
                (1)
            **ERHC**
              **Joint
                Bid**
              **Participating**
              **Interest**
            **Participating**
              **Interest(s)
                Sold**
            **Current
                ERHC**
              **Retained**
              **Participating**
              **Interest**2
            30%
            35%
            43% (2)
            22%3
            20%
            5%
            15%
                (3)
            10%4
            25%
            35%
            33.3%
                (4)
            26.7%  (6)5
            15%
            (5)
            (5)
            (5)6
            15%
            (5)
            (5)
            (5)9
            20%
            (5)
            (5)
            (5)





(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 33.3% participating interest to Addax.


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


(6)
            Includes
                the 9% 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.
                Pursuant to the Amendment to the Participation Agreement made on
                April 11,
                2006, the 9% is subject to distribution between Addax (7.2%) and
                ERHC
                (1.8%), if agreement is reached between the parties on the amount
                payable
                by Addax to ERHC for said interest.





***Government
      Regulation***





In
      the
      event the Company begins activities relating to the exploration and exploitation
      of hydrocarbons, it will be required to make the necessary expenditures to
      comply with the 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. Inasmuch
        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.





***Competition***





Strong
        competition exists in all sectors of the oil and gas industry. ERHC competes
        with other independent oil and gas companies for equipment and personnel
        required to explore, develop and operate properties. Competition is also
        prevalent in the marketing of oil, gas and natural gas liquids. Higher recent
        commodity prices have increased the costs of properties available for
        acquisition, and there are a greater number of companies with the financial
        resources to pursue acquisition opportunities. Certain of the Company’s
        competitors have financial and other resources substantially larger 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 may 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.


7
 *Table
          of Contents*


***Employees***





As
      of
      September 30, 2007, the Company had five (5) full-time employees and a
      consultant who serves as 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 at
http://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.





**Item
      1A.  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 harmed.





***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
      business and has incurred significant operating losses.  The Company
      has incurred net operating losses of $4,976,765 in fiscal 2007 and $43,118,918
      since inception.  The Company had net losses of $1,756,904 in fiscal
      2007. 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 had net losses of
      $11,270,478 in fiscal 2005, and $57,993,079 since inception.  The
      Company expects to incur additional operating losses for the foreseeable
      future.





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





The
      Company’s operations to date 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.


8
 *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 locate 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 or 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 or 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 areas of control. These factors include:





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





**•**
            the
                approval of other participants for the drilling of wells on the
                projects;





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





**•**
            the
                availability of deep water
                drilling rigs.






The
      Company’s reliance on other project participants 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 sustaining and managing its rights under these
      agreements.  The Company’s success 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 and individuals 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.***





At
      September 30, 2007, the Company’s major assets were located outside the United
      States.  Apart from cash maintained in United States’ financial
      institutions, the Company’s primary assets are agreements with DRSTP and the
      JDA, which provide the Company 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 this
      area pursuant to such agreements may be adversely impacted by this
      circumstance.


9
 *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 corrupt 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
      corrupt 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 corrupt
      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 São 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 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.


10
 *Table
          of Contents*


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 do 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 its business, prospects, operations, financial condition and cash
      flow.





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 business
                  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.





***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 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 that its current price will be
      maintained.


11
 *Table
          of Contents*


***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 future. The Company intends to retain
      any
      earnings to fund its operations.  Therefore, the Company does not
      anticipate paying any cash dividends on the common stock in the foreseeable
      future.





***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
      Company is currently under examination by the Internal Revenue
      Service***





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 should conclude in the next few
      months.  If adjustments are found, the Company may be subject to
      taxes, penalties and interest and these could have a material adverse effect
      on
      its operations, financial condition and cash flow.





**Item
      1B.  Unresolved Staff Comments**





None.





**Item
      2.  Properties**





Substantially
      all of the Company’s
      properties are in the form of working interest.  Today, ERHC has
      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.  ERHC has
      additional interests in the territorial waters of Sao Tome and Principe, known
      as the Exclusive Economic Zone (EEZ).




**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 coastline of
              Nigeria and Sao Tome and  Principe that is adjacent to several
              large petroleum discovery areas. ERHC's rights in the JDZ
              include:




·
            JDZ
                Block 2:  22.0%


·
            JDZ
                Block 3:  10.0%


·
            JDZ
                Block 4:  26.7%


·
            JDZ
                Block 5:  15.0%


·
            JDZ
                Block 6:  15.0%


·
            JDZ
                Block 9: 
                20.0%




**Sao
      Tome and  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:




12
 *Table
          of Contents*




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


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




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





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.





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.





**Item
      3.  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.





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, claims
      entitlement under our existing agreements to 7.2% out of the recovered 9%
      interest in Block 4, leaving 1.8% remaining with ERHC.  ERHC disputes
      the consideration that Addax should pay to ERHC for the 7.2%.  If
      Addax’s claims are successful, ERHC’s share of JDZ Block 4 will increase from
      17.7% to 19.5% and Addax’s share of the JDZ Block 4 will increase from 33.3% to
      40.5% for no additional consideration paid to ERHC.  ERHC and Addax
      are currently in arbitration to resolve the issue.  The parties are
      also exploring mediation as a potential alternative.





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.





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.





**Item
      4.  Submission of Matters to a Vote of Security Holders**





None.


13
 *Table
          of Contents*


**PART
      II**





**Item
      5.  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 sporadic and highly
      volatile.  The following table sets forth the closing sales price per share
      of the common stock for the past two 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 2006**First
                Quarter
            
            $
            0.41
            
            
            $
            0.30Second
                Quarter
            
            $
            0.95
            
            
            $
            0.30Third
                Quarter
            
            $
            0.92
            
            
            $
            0.40Fourth
                Quarter
            
            $
            0.54
            
            
            $
            0.37**Fiscal
                Year 2007**First
                Quarter
            
            $
            0.51
            
            
            $
            0.31Second
                Quarter
            
            $
            0.48
            
            
            $
            0.33Third
                Quarter
            
            $
            0.42
            
            
            $
            0.24Fourth
                Quarter
            
            $
            0.34
            
            
            $
            0.20





As
      of
      November 30, 2007, there were approximately 2,243 stockholders of
      record.  The closing price of the common stock as reported on the OTC
      Bulletin Board on November 30, 2007 was $0.23.  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)**
            
            
            **(c)****Equity
                compensation plans approved by security holders**
            
            
            1,000,000
            
            
            $
            0.43
            
            
            
            11,423,244**Equity
                compensation plans not approved by security
                holders**
            
            
            -
            
            
            
            -
            
            
            
            -





***Recent
      Sales of Unregistered Securities***





The
      Company has sold the following unregistered securities:


14
 *Table
          of Contents*


·
            During
                the second fiscal quarter of 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 fourth fiscal quarter of 2007, there were an aggregate of 300,000
                shares of common stock due to the Company’s directors for services
                rendered as more fully disclosed in Item 10, Directors and Executive
                Officers of the Registrant.





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.





**Item
      6. 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, 2007, has been derived from the
      audited financial statements of the Company.  The financial statements as
      of and for the years ended September 30, 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 years ended
      September 30, 2003 and 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**
            
            **2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**Operating
                expenses
            
            $
            4,976,765
            
            
            $
            (24,113,494
            )
            
            $
            4,652,459
            
            
            $
            2,085,426
            
            
            $
            1,944,655Interest
                expense
            
            
            (1,843
            )
            
            
            (2,099
            )
            
            
            (1,147,248
            )
            
            
            (1,671,759
            )
            
            
            (1,209227
            )Other
                Income (expense)
            
            
            1,498,704
            
            
            
            1,123,141
            
            
            
            278,804
            
            
            
            163,797
            
            
            
            -Loss
                on extinguishment of debt
            
            
            -
            
            
            
            -
            
            
            
            (5,749,575
            )
            
            
            -
            
            
            
            -Provision
                for taxes
            
            
            (1,723,000
            )
            
            
            2,063,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
                income (loss)
            
            
            (1,756,904
            )
            
            
            23,171,536
            
            
            
            (11,270,478
            )
            
            
            (3,593,388
            )
            
            
            (3153882
            )Net
                income (loss) per share – basic and diluted
            
            
            0.00
            
            
            
            0.03
            
            
            
            (0.02
            )
            
            
            (0.01
            )
            
            
            (0.01
            )Weighted
                average shares of common stock outstanding
            
            
            720,966,165
            
            
            
            712,063,980
            
            
            
            671,164,058
            
            
            
            592,603,441
            
            
            
            567,788,483**As
                of September 30,****Balance
                Sheets Data**
            
            **2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**DRSTP
                Concession fee
            
            $
            2,839,500
            
            
            $
            2,839,500
            
            
            $
            5,679,000
            
            
            $
            5,679,000
            
            
            $
            5,679,000Total
                assets
            
            
            39,854,641
            
            
            
            45,878,249
            
            
            
            6,720,210
            
            
            
            5,728,556
            
            
            
            5,735,744Total
                liabilities
            
            
            5,947,982
            
            
            
            10,390,126
            
            
            
            2,799,011
            
            
            
            14,757,208
            
            
            
            16,283,506Shareholders'
                equity (deficit)
            
            
            33,906,659
            
            
            
            35,488,123
            
            
            
            3,941,199
            
            
            
            (9,028,652
            )
            
            
            (10,547,762
            )


15
 *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 our
      business, financial condition and 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 agreements with
      upstream oil and gas companies in these JDZ Blocks to assist the Company in
      exploring its assets in the JDZ.  The technical and operation
      expertise in conducting exploration operations will be provided by participating
      in the Company’s interest oil and gas companies.  The Company is also
      exploring opportunities in other areas of the energy 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**
              **Interest**2
            30%
            35%
            43% (2)
            22%3
            20%
            5%
            15%
                (3)
            10%4
            25%
            35%
            33.3%
                (4)
            26.7%  (6)5
            15%
            (5)
            (5)
            (5)6
            15%
            (5)
            (5)
            (5)9
            20%
            (5)
            (5)
            (5)





(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 33.3% participating interest to Addax.


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


(6)
            Includes
                the 9% 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.
                Pursuant to the Amendment to the Participation Agreement made on
                April 11,
                2006, the 9% is subject to distribution between Addax (7.2%) and
                ERHC
                (1.8%), if agreement is reached between the parties on the amount
                payable
                by Addax to ERHC for said
                interest.


16
 *Table
          of Contents*


***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 that effect 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.





***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 is effective for us beginning the first quarter
      of
      fiscal 2008. The Company is currently assessing the potential impact that
      adoption of SFAS No. 157 would have on its 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.  The Company is currently assessing the
      potential impact that adoption of FIN No. 48 would have on its financial
      statements.


17
 *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 accreted 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 appropriate and conservative at this
      time.





***Results
      of 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
      investigation.





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, 2007, the Company had working capital of
      $31,002,664.  The Company believes that it has sufficient liquidity to
      meet working capital requirements for fiscal 2008.  The Company has no
      material commitments for capital resources.


18
 *Table
          of Contents*


***Off-Balance
      Sheet Arrangements***





As
      of
      September 30, 2007, the Company does not have any off-balance sheet
      arrangements.





***Contractual
      Obligations and Commercial Commitments***





The
      following table provides information at September 30, 2007, about the Company’s
      contractual obligations and commercial commitments.  The table
      presents contractual obligation by due dates and related contractual commitments
      by expiration dates.








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)
            
            
            454,920
            
            
            
            107,040
            
            
            
            321,120
            
            
            
            26,760
            
            
            
            -Total
            
            $
            488,433
            
            
            $
            140,553
            
            
            $
            321,120
            
            
            $
            26,760
            
            
            $
            -





(1)
            This
                represents a convertible note to Joseph Charles and Associates, for
                which
                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”.




**Item
      7A.  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 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, 2007, 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 economic
      and labor conditions, political instability, risk of war, expropriation,
      renegotiation or modification of existing contracts, tax laws (including
      host-country import-export, excise and income taxes and United States taxes
      on
      foreign subsidiaries) and changes in the value of the U.S. dollar versus the
      local currencies in which future oil and gas producing activities may be
      denominated.  As well, changes in exchange rates may adversely affect
      the Company's future results of operations and financial condition.





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.


19
 *Table
          of Contents*


**Item
      8.  Financial Statements and Supplementary
      Data**





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****INDEX
                TO CONSOLIDATED FINANCIAL STATEMENTS****Page(s)**Reports
                of Independent Public Accounting Firm:Report
                of Independent Registered Public Accounting Firm on Internal Control
                Over
                Financial Reporting as of September 30, 2007
            21Report
                of Independent Registered Public Accounting Firm on the Financial
                Statements for the Years ended September 30, 2007 and 2006
            22Consolidated
                Financial Statements:Consolidated
                Balance Sheets as of September 30, 2007 and 2006
            23Consolidated
                Statements of Operations for the Years Ended September 30, 2007,
                2006 and
                2005, and for the period from inception, September 5, 1995, to September
                30, 2007
            24Consolidated
                Statements of Shareholders' Equity (Deficit) for the period from
                inception, September 5, 1995, to September 30, 2007
            25Consolidated
                Statements of Cash Flows for the Years Ended September 30, 2007,
                2006 and
                2005, and for the period from inception, September 5, 1995, to September
                30, 2007
            36Notes
                to Consolidated Financial Statements
            38Financial
                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.




20
 *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, 2007, 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, 2007, 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, 2007 and 2006, and the related consolidated statements
      of operations, shareholders’ equity and cash flows for the three years then
      ended, and our reports dated December 7, 2007 expressed an unqualified opinion
      on those consolidated financial statements.







Malone
      & Bailey, PC


www.malone-bailey.com


Houston,
      Texas





December
      7, 2007


21
 *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, 2007 and 2006 and
      the
      related consolidated statements of operations, shareholders’ equity (deficit)
      and cash flows for the three years then ended.  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,
      2007 and 2006, and the results of its operations and its cash flows for the
      three years then ended 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, 2007, based on criteria established
      in *Internal Control – Integrated Framework* issued by the Committee of
      Sponsoring Organizations of the Treadway Commission (COSO), and our report
      dated
      December 7, 2007 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
      7, 2007


22
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                BALANCE SHEETS****September
                30, 2007 and 2006****2007**
            
            
            **2006****ASSETS**Current
                assets:Cash
            
            $
            34,721,933
            
            
            $
            40,991,114Prepaid
                expenses and other current assets
            
            
            179,955
            
            
            
            1,073,031Income
                tax refundable
            
            
            1,568,758
            
            
            
            -Deferred
                tax asset – current
            
            
            480,000
            
            
            
            480,000Total
                current assets
            
            
            36,950,646
            
            
            
            42,544,145DRSTP
                concession fee
            
            
            2,839,500
            
            
            
            2,839,500Furniture
                and equipment, net
            
            
            64,495
            
            
            
            14,604Deferred
                tax asset
            
            
            -
            
            
            
            480,000Total
                assets
            
            $
            39,854,641
            
            
            $
            45,878,249**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                Liabilities:Accounts
                payable and accrued liabilities
            
            $
            5,183,979
            
            
            $
            6,784,004Accounts
                payable and accrued liabilities, related parties
            
            
            238,614
            
            
            
            69,439Accrued
                interest
            
            
            6,876
            
            
            
            5,023Federal
                income taxes payable
            
            
            -
            
            
            
            3,013,147Asset
                retirement obligation
            
            
            485,000
            
            
            
            485,000Convertible
                debt
            
            
            33,513
            
            
            
            33,513Total
                current liabilities
            
            
            5,947,982
            
            
            
            10,390,126Commitments
                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
                721,938,550 and 718,988,982 at September 30, 2007 and 2006,
                respectively
            
            
            72,193
            
            
            
            71,899Additional
                paid-in capital
            
            
            91,827,545
            
            
            
            91,652,399Deficits
                accumulated in the development stage
            
            
            (57,993,079
            )
            
            
            (56,236,175
            )Total
                shareholders’ equity
            
            
            33,906,659
            
            
            
            35,488,123Total
                liabilities and shareholders' equity
            
            $
            39,854,641
            
            
            $
            45,878,249








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


23
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF OPERATIONS****For
                the Years Ended September 30, 2005, 2006 and 2007 and for the Period
                from
                Inception,****September
                5, 1995, to September 30, 2007****Inception
                to****September
                30,****2005**
            
            
            **2006**
            
            
            **2007**
            
            
            **2007****(Unaudited)**Operating
                costs and expenses:General
                and administrative Expenses
            
            $
            4,645,783
            
            
            $
            5,979,609
            
            
            $
            4,954,848
            
            
            $
            64,093,110Depreciation,
                depletion and amortization
            
            
            6,676
            
            
            
            9,147
            
            
            
            21,917
            
            
            
            1,385,930Gain
                from sale of partial interest in DRSTP Concession
            
            
            -
            
            
            
            (30,102,250
            )
            
            
            -
            
            
            
            (30,102,250
            )Write-offs
                and abandonments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,742,128(Loss)
                gain from operations
            
            
            (4,652,459
            )
            
            
            24,113,494
            
            
            
            (4,976,765
            )
            
            
            (43,118,918
            )Other
                income and (expenses):Interest
                income
            
            
            26,494
            
            
            
            1,123,141
            
            
            
            1,998,704
            
            
            
            3,148,339Gain
                (loss) from settlements
            
            
            252,310
            
            
            
            -
            
            
            
            (500,000
            )
            
            
            (247,690
            )Other
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            439,827Interest
                expense
            
            
            (1,147,248
            )
            
            
            (2,099
            )
            
            
            (1,843
            )
            
            
            (12,125,062
            )Loss
                on extinguishment of debt
            
            
            (5,749,575
            )
            
            
            -
            
            
            
            -
            
            
            
            (5,749,575
            )Total
                other income and expenses, net
            
            
            (6,618,019
            )
            
            
            1,121,042
            
            
            
            1,496,861
            
            
            
            (14,534,161
            )Income
                (loss) before benefit (provision) for income taxes
            
            
            (11,270,478
            )
            
            
            25,234,536
            
            
            
            (3,479,904
            )
            
            
            (57,653,079
            )Benefit
                (provision) for income taxesCurrent
            
            
            -
            
            
            
            (3,023,000
            )
            
            
            1,243,000
            
            
            
            (1,780,000
            )Deferred
            
            
            -
            
            
            
            960,000
            
            
            
            480,000
            
            
            
            1,440,000Total
                benefit (provision) for income taxes
            
            
            -
            
            
            
            (2,063,000
            )
            
            
            1,723,000
            
            
            
            (340,000
            )Net
                income (loss)
            
            $
            (11,270,478
            )
            
            $
            23,171,536
            
            
            $
            (1,756,904
            )
            
            $
            (57,993,079
            )Net
                income (loss) per common shares Basic and diluted
            
            $
            (0.02
            )
            
            $
            0.03
            
            
            $
            0.00Weighted
                average number of common shares outstanding -Basic
            
            
            671,164,058
            
            
            
            712,063,980
            
            
            
            720,966,165Diluted
            
            
            671,164,058
            
            
            
            717,410,403
            
            
            
            720,966,165





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




24
 *Table
          of Contents*


**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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 forServices
            
            
            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.


25
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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.


26
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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.




27
 *Table
          of Contents*




**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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, debt,accrued interest and
                penalties
            
            
            42,334,767
            
            
            
            4,233
            
            
            
            6,768,054
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,772,287Common
                stock issued for  officer's 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.


28
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                at September 30, 1999
            
            
            489,071,978
            
            
            $
            48,907
            
            
            $
            43,306,852
            
            
            $
            (48,952,063
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (5,596,304
            )Common
                stock issued for con -version 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.


29
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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 pay-ment 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.


30
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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.


31
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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.




32
 *Table
          of Contents*




**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS’ EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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.




33
 *Table
          of Contents*




**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                at September 30, 2005
            
            
            710,912,226
            
            
            $
            71,091
            
            
            $
            83,584,956
            
            
            $
            (79,407,711
            )
            
            $
            -
            
            
            $
            (307,137
            )
            
            $
            3,941,199Variable
                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  board compensation
            
            
            4,665,000
            
            
            
            467
            
            
            
            1,976,081
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,976,548Common
                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.




34
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS' EQUITY****For
                the Period from Inception, September 5, 1995, to September 30, 2007,
                (Unaudited for the Period from Inception to September 30,
                1998)****Additional****Common
                Stock**
            
            
            
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Subscription**
            
            
            **Deferred****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Receivable**
            
            
            **Compensation**
            
            
            **Total**Balance
                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 for cash Less exercise of options And/or
                warrants
            
            
            2,949,568
            
            
            
            294
            
            
            
            (294
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,756,904
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,756,904
            )Balance
                at September 30, 2007
            
            
            721,938,550
            
            
            $
            72,193
            
            
            $
            91,827,545
            
            
            $
            (57,993,079
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            33,906,659








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


35
 *Table
          of Contents*


**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****For
                the Years Ended September 30, 2005, 2006 and 2007 and for the Period
                from
                Inception,****September
                5, 1995, to September 30, 2007****Inception
                to****September
                30,****2005**
            
            
            **2006**
            
            
            **2007**
            
            
            **2007****(Unaudited)**Cash
                Flows from Operating ActivitiesNet
                income (loss)
            
            $
            (11,270,478
            )
            
            $
            23,171,536
            
            
            $
            (1,756,904
            )
            
            $
            (57,993,079
            )Adjustments
                to reconcile net income (loss) to net cash used by operating
                activitiesDepreciation,
                depletion and amortization expenses
            
            
            6,676
            
            
            
            9,147
            
            
            
            21,917
            
            
            
            1,385,930Write-offs
                and abandonments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,742,128Deferred
                income taxes
            
            
            -
            
            
            
            (960,000
            )
            
            
            480,000
            
            
            
            (480,000
            )Compensatory
                stock options
            
            
            -
            
            
            
            1,084,340
            
            
            
            175,440
            
            
            
            1,259,780Gain
                from settlement
            
            
            (252,310
            )
            
            
            -
            
            
            
            -
            
            
            
            (252,310
            )Gain
                on sale of partial interest in DRSTP concession
            
            
            -
            
            
            
            (30,102,250
            )
            
            
            -
            
            
            
            (30,102,250
            )Amortization
                of beneficial conversion feature associated with convertible
                debt
            
            
            784,348
            
            
            
            -
            
            
            
            -
            
            
            
            2,793,929Amortization
                of deferred Compensation
            
            
            449,737
            
            
            
            -
            
            
            
            -
            
            
            
            1,257,863Common
                stock issued for services
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            20,897,077Common
                stock issued for settlements
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            225,989Common
                stock issued for officer Bonuses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,015,000Common
                stock issued for interest  and penalties on convertible
                debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            10,631,768Common
                stock issued for board compensation
            
            
            -
            
            
            
            1,976,548
            
            
            
            -
            
            
            
            1,976,548Gain
                (loss) on extinguishment of debt
            
            
            5,749,575
            
            
            
            -
            
            
            
            -
            
            
            
            5,682,368Changes
                in operating assets and liabilities:Prepaid
                expenses and other current assets
            
            
            (5,835
            )
            
            
            (1,040,938
            )
            
            
            893,077
            
            
            
            (179,954
            )Income
                tax refundable
            
            
            -
            
            
            
            -
            
            
            
            (1,568,758
            )
            
            
            (1,568,758
            )Accounts
                payable and other  accrued liabilities
            
            
            324,454
            
            
            
            (1,210,546
            )
            
            
            (1,598,173
            )
            
            
            (2,612,896
            )Accrued
                federal income taxes
            
            
            -
            
            
            
            3,013,147
            
            
            
            (3,013,147
            )
            
            
            -Accrued
                officers' salaries
            
            
            (76,275
            )
            
            
            -
            
            
            
            -
            
            
            
            -Accounts
                payable, and accrued liabilities, related party
            
            
            2,146,375
            
            
            
            (1,995,236
            )
            
            
            169,175
            
            
            
            238,614Accrued
                interest - related party
            
            
            386,228
            
            
            
            -
            
            
            
            -
            
            
            
            -Accrued
                retirement obligation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            485,000Net
                cash used by operating activities
            
            $
            (1,757,505
            )
            
            $
            (6,054,252
            )
            
            $
            (6,197,373
            )
            
            $
            (33,597,253
            )




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




36
 *Table
          of Contents*





**ERHC
                ENERGY INC.****A
                CORPORATION IN THE DEVELOPMENT STAGE****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****For
                the Years Ended September 30, 2005, 2006 and 2007 and for the Period
                from
                Inception,****September
                5, 1995, to September 30, 2007****Inception
                to****September
                30,****2005**
            
            
            **2006**
            
            
            **2007**
            
            
            **2007****(Unaudited)**Cash
                Flows from Investing ActivitiesRelease
                of restricted cash
            
            $
            3,026
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -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
            
            
            (27,303
            )
            
            
            (3,124
            )
            
            
            (71,808
            )
            
            
            (877,200
            )Net
                cash provided (used) by investing Activities
            
            
            (24,277
            )
            
            
            45,896,876
            
            
            
            (71,808
            )
            
            
            39,343,800Cash
                Flows from Financing Activities:Proceeds
                from warrants exercised
            
            
            -
            
            
            
            160,000
            
            
            
            -
            
            
            
            160,000Proceeds
                from common stock, net of expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,955,049Proceeds
                from related party line of credit
            
            
            2,750,000
            
            
            
            -
            
            
            
            -
            
            
            
            2,750,000Proceeds
                from related party debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            158,700Proceeds
                from related partyconvertible debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,207,706Proceeds
                from convertible debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            9,019,937Proceeds
                from note payable to bank
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            175,000Proceeds
                from shareholder loans
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,845,809Collection
                of stock subscription receivable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            913,300Repayment
                of shareholder loans
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,020,607
            )Repayment
                of long-term debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (189,508
            )Net
                cash provided by investing activities
            
            
            2,750,000
            
            
            
            160,000
            
            
            
            -
            
            
            
            28,975,386Net
                increase (decrease) in cash and cash equivalents
            
            
            968,218
            
            
            
            40,002,624
            
            
            
            (6,269,181
            )
            
            
            34,721,933Cash
                and cash equivalents, beginning of period
            
            
            20,272
            
            
            
            988,490
            
            
            
            40,991,114
            
            
            
            -Cash
                and cash equivalents, end of period
            
            $
            988,490
            
            
            $
            40,991,114
            
            
            $
            34,721,933
            
            
            $
            34,721,933Supplemental
                Disclosure of Cash Flow InformationCash
                paid for interest expense
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Cash
                paid for income taxes
            
            
            -
            
            
            
            -
            
            
            
            2,378,905
            
            
            
            -








The
      accompanying notes are an integral part of these financial
      statements


37
 *Table
          of Contents*


**ERHC
      ENERGY INC.**


**A
      CORPORATION IN THE DEVELOPMENT STAGE**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**For
      the Years Ended September 30, 2007, 2006 and 2005 and for the Period from
      Inception,**


**September
      5, 1995, to September 30, 2007**





**Note
      1 – Summary of Significant Accounting Policies**





General
      Business and Nature of Operations





ERHC
      Energy Inc. is an 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 itsprimaryassets, which are rights to working
      interests in exploration acreage in the Joint Development Zone (“JDZ”) between
      the Democratic Republic ofSaoTomeandPrincipe (“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 subsidiary, 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.





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 three financial institutions. From time
      to
      time the amount on deposit in either one of these institutions may exceed the
      $100,000 federally insured limit.  The balances are maintained in demand
      accounts to minimize risk.





ERHC’s
      current 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.


38
 *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.


39
 *Table
          of Contents*


Income
      taxes





ERHC
      accounts for income taxes under the provisions of Statement of Financial
      Accounting Standards No. 109 - “*Accounting for Income Taxes,*” which
      provides for an asset and liability approach in accounting for income
      taxes.  Under this approach, deferred tax assets and liabilities are
      recognized based on anticipated future tax consequences, using currently enacted
      tax laws, attributable to differences between financial statement carrying
      amounts of assets and liabilities and their respective tax bases.





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, 2007 and 2005, 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.





New
      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 is effective for ERHC beginning the first quarter
      of
      fiscal 2008. The Company is currently assessing the potential impact that
      adoption of SFAS No. 157 would have 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.  The Company is currently assessing the
      potential impact that adoption of FIN No. 48 would have on its financial
      statements.


40
 *Table
          of Contents*


Reclassifications





During
      the year ended September 30, 2005, ERHC corrected a 1,222,153 understatement
      in
      the number of shares of common stock outstanding that has consistently existed
      for many years. The shares were issued at a time when the stock had no
      significant value and, accordingly, the correction of outstanding shares
      resulted in a $122 increase in common stock and a corresponding decrease in
      additional paid-in capital. All periods presented have been corrected to include
      these additional shares.





Certain
      prior year amounts have been reclassified to conform to the current year
      presentation








**Note
      2 – Accounts Payable and Accrued Liabilities**





Accounts
      payable and accrued liabilities consisted of the following as of September
      30,
      2007 and 2006:





**2007**
            
            
            **2006**Accrued
                success fee
            
            $
            -
            
            
            $
            1,500,000Accrued
                stock payable – success fee
            
            
            4,803,750
            
            
            
            4,803,750Accrued
                settlement payable
            
            
            -
            
            
            
            175,000Accounts
                payable
            
            
            380,228
            
            
            
            305,254$
            5,183,978
            
            
            $
            6,784,004





**Note
      3 – Revision to Financial Statements**





ERHC
      had
      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**
              **Interest**2
            30%
            35%
            43% (2)
            22%3
            20%
            5%
            15%
                (3)
            10%4
            25%
            35%
            33.3%
                (4)
            26.7%  (6)5
            15%
            (5)
            (5)
            (5)6
            15%
            (5)
            (5)
            (5)9
            20%
            (5)
            (5)
            (5)


41
 *Table
          of Contents*


(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 33.3% participating interest to Addax.


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


(6)
            Includes
                the 9% reclaimed by ERHC 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.
                Pursuant to the Amendment to the Participation Agreement made on
                April 11,
                2006, the 9% is subject to distribution between Addax (7.2%) and
                ERHC
                (1.8%), if agreement is reached between the parties on the amount
                payable
                by Addax to ERHC for said interest.





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
      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/Noble received less than a
      26%
      bid-interest award in Block 4. Godsonic would transfer whatever Godsonic
      received in the Block 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 of
      October 24, 2005, ERHC and Addax undertook to transfer a 9% interest, out of
      the
      35% bid interest, to Godsonic subject to Godsonic meeting financial and other
      conditions. In November 2005, 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.  Under the Participation Agreement, ERHC’s “Retained
      Interest” would be 17.7% in Block 4.  The Participation Agreement
      stated Addax’s cash payment obligations to ERHC to be $18 million, which was
      paid in February and March 2006.





By
      an
      Amendment made on February 23, 2006, ERHC and Addax amended the Participation
      Agreement so that the Assigned Interest to Addax would be changed to 33.3%
      while
      ERHC’s Retained Interest would remain at 17.7%. By another Amendment made on
      March 14, 2006, ERHC and Addax further amended the Participation Agreement
      so
      that the “Assigned Interest” would be 33.3% and ERHC’s “participating interest”
would be 26.7%.





On
      March
      15, 2006, an agreement to assign 9% in Block 4 to Godsonic was entered into
      between ERHC and Godsonic subject to Godsonic meeting stipulated financial
      and
      other conditions. By a further Amendment made on April 11, 2006 to the
      Participation Agreement, ERHC and Addax provisionally agreed that if Godsonic
      did not meet the obligations on the 9% interest to be transferred to Godsonic
      and was foreclosed from all claims to the 9% interest, 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.  See Note 10.


42
 *Table
          of Contents*


In
      July
      2007, ERHC acted on behalf of the Addax/ERHC consortium to reclaim Godsonic’s 9%
      share of JDZ Block 4 because Godsonic failed to meet certain
      obligations.  Addax claims entitlement under the existing agreements
      to 7.2% out of the recovered 9%, leaving 1.8% remaining with ERHC.  If
      finalized, this would increase ERHC’s share of JDZ Block 4 from 17.7% to
      19.5%.  ERHC and Addax are amicably exchanging statements in
      arbitration, to resolve whether or not additional consideration is due to ERHC
      from Addax for the 7.2% claimed by Addax under the terms of the existing
      agreements. The parties are also exploring mediation as an alternative to seeing
      arbitration to conclusion.





Under
      the
      Participation Agreement between ERHC and Addax, as variously amended,
      Addax will serve as operator and pay all of ERHC’s future costs in respect
      of all petroleum operations in Block 4. Addax is entitled to up to 100% of
      ERHC’s share of cost oil and 50% of ERHC’s share of profit oil until Addax
      recovers ERHC’s costs.





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 oil plus up to 50% of ERHC’s allocation of
      profit oil until they recover ERHC's costs and Sinopec is to receive 6% interest
      on its future costs, up to $35 million, but only to the extent that those costs
      are covered by 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**
            
            
            **Gain****Basis**
            
            
            **Proceeds**
            
            
            **Fees
                (1)**
            
            
            **Loss**Block
                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.





**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 also will 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, 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.


43
 *Table
          of Contents*


**Note
      6 - Convertible Debt**





At
      September 30, 2007 and 2006, ERHC had $33,513 of nonaffiliated convertible
      debt
      and $6,876 accrued but unpaid interest outstanding.  At September 30,
      2007 and 2006, 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 $6,876.








**Note
      7 - Income Taxes**





At
      September 30, 2007, 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,
      2007 and September 30, 2006 are as follows:




**2007**
            
            
            **2006**Net
                operating losses
            
            $
            931,241
            
            
            $
            3,410,000Accrual
                for asset retirement
            
            
            164,900
            
            
            
            164,900Total
                deferred tax assets
            
            
            1,096,141
            
            
            
            3,574,900Valuation
                allowance
            
            
            (616,141
            )
            
            
            (2,614,900
            )Net
                deferred tax asset
            
            $
            480,000
            
            
            $
            960,000





The
      $480,000 deferred tax asset represents the minimum NOL carryback claim from
      losses in the next year against the year ended September 30, 2006 taxable income
      should no income be produced in future years.





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, 2007, 2006 and 2005, is as follows:





**Years
                Ended September 30,****2007**
            
            
            **2006**
            
            
            **2005**Income
                tax benefit (provision) at federal statutory rate
            
            $
            1,183,167
            
            
            $
            (8,579,742
            )
            
            $
            3,831,962Gain
                on sale of assets
            
            
            -
            
            
            
            59,243
            
            
            
            -Change
                in valuation allowance
            
            
            1,998,759
            
            
            
            19,179,493
            
            
            
            340,989Expiration
                and adjustment of NOL’s
            
            
            (1,364,518
            )
            
            
            (12,266,000
            )
            
            
            (1,022,244
            )Director’s
                stock compensation
            
            
            (30,090
            )
            
            
            (44,896
            )
            
            
            (627,130
            )Consultants
                stock option expense
            
            
            (59,650
            )
            
            
            (368,676
            )
            
            
            -Accrued
                interest not paid
            
            
            -
            
            
            
            -
            
            
            
            (390,064
            )Amortization
                of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            (152,910
            )Loss
                on extinguishment of debt
            
            
            -
            
            
            
            -
            
            
            
            (1,954,856
            )State
                income tax
            
            
            -
            
            
            
            (9,853
            )
            
            
            -Penalties
            
            
            (3,621
            )
            
            
            (31,771
            )
            
            
            -Other
            
            
            (1,047
            )
            
            
            (798
            )
            
            
            (25,747
            )Income
                tax benefit (provision)
            
            $
            1,723,000
            
            
            $
            (2,063,000
            )
            
            $
            -




44
 *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.





During
      2005, 3,375,000 warrants were exercised on a cashless basis for 587,364 shares
      of common stock.





Common
      Stock Issued For Settlement of Accounts Payable





In
      2005
      and prior years, ERHC issued shares of common stock for settlement of
      outstanding accounts payable to various creditors. During the year ended
      September 30, 2005, ERHC issued 735,000 shares of common stock with an aggregate
      value of $359,789 for payment of accounts payable balances.





Common
      Stock Issued For Services





During
      the years ended September 30, 2007, 2006 and 2005, ERHC issued 4,965,000 shares
      of common stock for payment of director services as follows:  (i)
      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 has been accrued in
      accounts payable and accrued liabilities, related parties); (ii) 325,000 shares
      for 2006 services rendered (these shares had a fair value of $132,048); (iii)
      340,000 shares for 2005 services (these shares had a fair value of $144,500);
      and (iv) 4,000,000 rendered to the chairman of the board for his long-term
      history of services to ERHC (these shares had a fair value of
      $1,700,000).





Common
      Stock Issued For Conversion of Debt and Payment of Accrued
      Interest





ERHC
      has
      issued shares of common stock for the conversion of convertible debt notes
      and
      accrued interest on convertible debt notes.  During the year ended
      September 30, 2005, non-affiliated note holders converted $1,677,371 of
      convertible debt and accrued interest into 8,387,062 shares of common
      stock.  The conversion price was $0.20 per share.  ERHC
      issued Chrome Energy, an entity controlled by the majority shareholder
      14,023,352 shares of common stock, 12,465,202 issued immediately, 623,260 shares
      issued on the advance of $1,000,000 and the remaining 934,890 shares upon
      receipt of an additional $1,500,000 available under the working capital
      line.  In addition, ERHC issued 12,308,359 shares of common stock to
      satisfy current interest accrued but not paid of $2,461,712.  The
      shares of common stock to Chrome for entering into the debt restructuring had
      a
      fair value of $5,749,575 and have been recorded as a loss on extinguishment
      of
      debt in the September 2005 statement of operations.





During
      the year ended September 30, 2005, ERHC issued 73,100,954 shares of common
      stock
      to Chrome for conversion of all of its debt representing $12,634,084 of
      principal and $158,583 of accrued interest.





During
      the year ended September 30, 2007 and 2006 there were no shares issued for
      the
      conversion of convertible debt.





Common
      Stock Issued for Settlement of Lawsuits





During
      the year ended September 30, 2005, ERHC issued 595,000 shares of common stock
      to
      settle its lawsuits. The shares issued  had a fair value of
      $394,450.





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.


45
 *Table
          of Contents*


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 $175,440 was recorded
      during the year ended September 30, 2007.





Warrants/Options





Information
      regarding warrants/options and their respective changes as of and for the fiscal
      years ended September 30, 2007, 2006 and 2005 are as follows:





**Warrants**
            
            
            **Options****2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2007**
            
            
            **2006**
            
            
            **2005**Outstanding,
                beginning of year
            
            
            20,866,940
            
            
            
            15,166,940
            
            
            
            16,166,940
            
            
            
            -
            
            
            
            3,000,000
            
            
            
            3,000,000Granted
            
            
            -
            
            
            
            6,500,000
            
            
            
            -
            
            
            
            1,000,000
            
            
            
            -
            
            
            
            -Exercised
            
            (a)
                (5,625,000
            )
            
            (b)(800,000)
            
            
            (c)
                (1,000,000)
            
            
            
            -
            
            
            (d)
                (2,000,000
            )
            
            
            -Expired/cancelled
            
            
            (1,840,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,000,000
            )
            
            
            -Outstanding,
                end of year
            
            
            13,401,940
            
            
            
            20,866,940
            
            
            
            15,166,940
            
            
            
            1,000,000
            
            
            
            -
            
            
            
            3,000,000Exercisable
            
            
            13,401,940
            
            
            
            20,866,940
            
            
            
            15,166,940
            
            
            
            -
            
            
            
            -
            
            
            
            2,000,000





(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 2005, 1,000,000 warrants were exercised on a cashless basis for 587,364
      shares of common stock.


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





The
      weighted average option and warrant exercise price information as of and for
      the
      fiscal years ended September 30, 2007, 2006 and 2005 is as follows:





**Warrants**
            
            
            **Options****2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2007**
            
            
            **2006**
            
            
            **2005**Outstanding,
                beginning of year
            
            $
            0.37
            
            
            $
            0.37
            
            
            $
            0.36
            
            
            $
            -
            
            
            $
            -
            
            
            $
            0.30Granted
            
            
            -
            
            
            
            0.36
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Exercised
            
            
            0.20
            
            
            
            0.20
            
            
            
            0.20
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired/cancelled
            
            
            (0.50
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding,
                end of year
            
            $
            0.43
            
            
            $
            0.37
            
            
            $
            0.37
            
            
            $
            -
            
            
            $
            -
            
            
            $
            0.30Exercisable
            
            $
            0.43
            
            
            $
            0.37
            
            
            $
            0.37
            
            
            $
            -
            
            
            $
            -
            
            
            $
            0.30


46
 *Table
          of Contents*


Significant
      warrant groups outstanding at September 30, 2007, and related weighted average
      exercise price, exercise price range and weighted average remaining contractual
      life information are as follows:





**Grant
                Grouping**
            
            **Warrants**
              **Outstanding**
            
            
            **Weighted**
              **Average
                Exercise Price**
            
            
            **Exercise
                Price Range**
            
            
            **Weighted**
              **Average**
              **Contractual**
              **Years**Chrome
            
            
            2,500,000
            
            
            $
            0.25
            
            
            $
            0.25
            
            
            
            1.27Common
                stock purchase
            
            
            9,731,940
            
            
            
            0.41
            
            
            
            0.20-0.55
            
            
            
            1.13S-1/S-3
                contingent
            
            
            1,050,000
            
            
            
            0.75
            
            
            
            0.75
            
            
            (a)Other
            
            
            120,000
            
            
            
            3.00
            
            
            
            3.00
            
            
            
            1.25




(a) These
      warrants expire 14 months after ERHC files an effective S-1 or S-3 registration
      statement.








**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 São 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 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
      investigations by the DOJ, SEC and Senate Subcommittee are
      continuing.  The Company anticipates that these investigations will be
      lengthy and do 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 its business, prospects, operations, financial condition and cash
      flows.





ERHC/Addax
      Arbitration.  Addax, our consortium partner in JDZ Block 4, claims
      entitlement under our existing agreements to 7.2% out of the recovered 9%
      interest in Block 4, leaving 1.8% remaining with ERHC.  The parties
      are currently in arbitration to determine whether additional consideration
      is
      payable to ERHC under the existing agreements for the 7.2% claimed by
      Addax.  If Addax’s claims are successful, ERHC’s share of JDZ Block 4
      will increase from 17.7% to 19.5% and Addax’s share of the JDZ Block 4 will
      increase from 33.3% to 40.5% for no additional consideration paid to
      ERHC.  The parties are also exploring mediation as a potential
      alternative to arbitration.


47
 *Table
          of Contents*


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.




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.





Employment
      and Consulting Agreements





At
      September 30, 2004, ERHC had accrued salaries of $723,035, owed to former
      officers. The amounts and rights claimed by these officers were subject to
      lawsuits in which ERHC negotiated final settlements in 2005. During 2005, ERHC
      paid $76,275 and issued 595,000 shares of common stock valued at $394,450 to
      fully settle these claims and recognized a $252,310 gain in connection with
      the
      settlement.





In
      December 2006, ERHC hired an employee who receives a monthly salary and may
      receive options for a total of 1,000,000 shares of common stock upon completing
      one full year of service and attaining management set performance
      targets.  These options have a cashless exercise
      provision.





From
      August 1, 2004 until January 20, 2006, Ali Memon was ERHC’s President and Chief
      Executive Officer.  Mr. Memon had a three-year employment agreement
      that originally included a base salary of $150,000 per year. On January 20,
      2006, by mutual agreement with the Board of Directors, Ali Memon resigned both
      positions.   Under Mr. Memon’s employment agreement, ERHC
      expensed the remaining net salary to be paid with the final payment made in
      August 2007.





On
      January 21, 2006, the Board of Directors appointed Walter Brandhuber as Director
      and Chief Executive Officer. On March 20, 2006, the Board of Directors appointed
      Franklin Ihekwoaba as Director and Vice President Finance.  On July
      24, 2006, both resigned by mutual agreement with the Board of
      Directors.  The Board of Directors appointed Board Member Nicolae Luca
      as Interim Chief Executive Officer until a successor is named. Mr. Luca had
      served as a Non-Executive Director from February 2001.  Mr. Luca
      currently receives no cash compensation but is reimbursed for related travel
      and
      business expenses.





On
      January 1, 2005, ERHC hired an individual who requires monthly payment of cash
      and the issuance of options for a total of 500,000 shares of common stock upon
      a
      full year of service.  The options issued under this consulting
      agreement vested on December 31, 2005 and included provisions for cashless
      exercise.  These options were exercised in April 2006, on a cashless
      basis, for 388,889 shares.  Either party may terminate this consulting
      agreement with 30 days notice.





On
      January 1, 2005, ERHC hired an individual who requires monthly payment of cash
      and the issuance of options for a total of 500,000 shares of common stock upon
      a
      full year of service.    The options issued under this
      consulting agreement vested on December 31, 2005 and included provisions for
      cashless exercise.  These options were exercised in March 2006, on a
      cashless basis, for 387,640 shares.  This agreement was terminated in
      March 2006.





On
      January 1, 2005, ERHC hired an individual who requires monthly payment of cash
      and the issuance of options for a total of 750,000 shares of common stock upon
      a
      full year of service.  The options issued under this consulting
      agreement vested on December 31, 2005 and included provisions for cashless
      exercise.  These options were exercised in February 2006, on a
      cashless basis, for 562,500 shares.  This agreement was terminated on
      January 1, 2006.


48
 *Table
          of Contents*


During
      May 2003, ERHC hired an individual for general consulting services, including
      transaction support and evaluation of geological and seismic
      data.  The agreement has been revised several times.  The
      most recent revision became effective on April 1, 2006 and terminated on
      September 30, 2006.  The consultant’s compensation was $2,000 per
      month revised from $10,000 per month effective April 2005.  During the
      years ended September 30, 2006 and 2005 total expense incurred under this
      consulting agreement was $26,500 and $84,970, respectively.





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, 2007, 2006 and 2005, ERHC incurred lease expense
      of
      $107,124, $43,992 and $31,697, respectively.  The future remaining
      annual lease payments under this lease are as follows:





Year
                Ending September 30,
            
            Amount2008
            
            $
            107,0402009
            
            
            107,0402010
            
            
            107,0402011
            
            
            107,0402012
            
            
            26,760








**Note
      10 – Related Party Transaction**





Mr.
      Emeka
      Offor resigned, effective August 12, 2007, as the Company’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 the
      Company.  He has been compensated as a director of the Company as
      follows:


**Year**
            
            **Cash**
              **Compensation**
            
            
            **Common**
              **Stock**
              **Issuances**
            
            
            **Value
                of**
              **Common**
              **Stock**
              **Issuances**
            
            
            **Total**
              **Compensation**2007
            
            $
            38,100
            
            
            
            60,000
            
            
            $
            17,700
            
            
            $
            55,8002006
            
            $
            48,900
            
            
            
            60,000
            
            
            $
            24,378
            
            
            $
            73,2782005
            
            $
            33,300
            
            
            
            4,085,000
            
            
            $
            1,736,125
            
            
            $
            1,769,425





As
      of
      September 30, 2007, the Company owes Chrome Energy, an entity controlled by
      Mr.Offor, $62,314.








**Note
      11 – Supplemental Disclosure of Cash Flows Information**





Following
      is an analysis of non-cash operating and financing activities and non-cash
      investing and financing activities for the years ended September 30, 2007,
      2006
      and 2005.





**2007**
            
            
            **2006**
            
            
            **2005**Non-cash
                operating and financing activities:Stock
                issued in exchange for:Accounts
                payable and accrued liabilities
            
            $
            -
            
            
            $
            -
            
            
            $
            359,790Accrued
                salaries
            
            
            -
            
            
            
            -
            
            
            
            394,450Accrued
                interest
            
            
            -
            
            
            
            -
            
            
            
            84,852Accrued
                interest, related party
            
            
            -
            
            
            
            -
            
            
            
            2,620,295Non-cash
                investing and financing activities:Stock
                issued for conversion of non-related party debt to
                equity
            
            
            -
            
            
            
            -
            
            
            
            1,592,521Beneficial
                conversion feature associated with convertible debt
            
            
            -
            
            
            
            -
            
            
            
            347,517Exchange
                of convertible and non convertible Debt, related party
            
            
            -
            
            
            
            -
            
            
            
            10,134,084Stock
                issued for conversion of related party Debt to equity
            
            
            -
            
            
            
            -
            
            
            
            12,634,084




49
 *Table
          of Contents*




**Note
      12 - Quarterly Financial Information (Unaudited)**





**For
                the Year Ended September 30, 2007****First**
            
            
            **Second**
            
            
            **Third**
            
            
            **Fourth****Quarter**
            
            
            **Quarter**
            
            
            **Quarter**
            
            
            **Quarter**General
                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
                income (loss) attributable to common Stockholders
            
            
            (522,142
            )
            
            
            (444,507
            )
            
            
            (587,218
            )
            
            
            (203,037
            )Basic
                and diluted earnings per share
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





**For
                the Year Ended September 30, 2006****First**
            
            
            **Second**
            
            
            **Third**
            
            
            **Fourth****Quarter**
            
            
            **Quarter**
            
            
            **Quarter**
            
            
            **Quarter**General
                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
            
            
            
            (23,000
            )Net
                loss attributable to common stockholders
            
            
            (1,228,984
            )
            
            
            26,061,664
            
            
            
            (621,474
            )
            
            
            (1,039,670
            )Basic
                and diluted earnings per share
            
            $
            -
            
            
            $
            0.04
            
            
            $
            -
            
            
            $
            -





**For
                the Year Ended September 30, 2005****First**
            
            
            **Second**
            
            
            **Third**
            
            
            **Fourth****Quarter**
            
            
            **Quarter**
            
            
            **Quarter**
            
            
            **Quarter**General
                and administrative expenses
            
            $
            643,235
            
            
            $
            980,821
            
            
            $
            233,704
            
            
            $
            2,794,699Interest
                expense
            
            
            1,045,775
            
            
            
            100,551
            
            
            
            461
            
            
            
            461Other
                income
            
            
            -
            
            
            
            260,013
            
            
            
            10,537
            
            
            
            8,254Loss
                on extinguishments of debt
            
            
            5,749,575
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
                loss attributable to common stockholders
            
            
            (7,438,585
            )
            
            
            (821,359
            )
            
            
            (223,628
            )
            
            
            (2,786,906
            )Basic
                and diluted earnings per share
            
            $
            (0.01
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            -





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.


50
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          of Contents*


**Item
      9.  Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosures**





None.





**Item
      9A.  Controls and Procedures**




**Disclosure
      Controls and Procedures**





The
      Company has established disclosure controls and procedures to ensure that
      material information relating to ERHC 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, 2007 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 ERHC, as such term is defined in Rules 13a-15(f) and 15d-15(f) under
      the Securities Exchange Act of 1934. Under the supervision and with the
      participation of ERHC’s management, including our principal executive and
      principal financial officers, ERHC conducted an evaluation of the effectiveness
      of its 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 (the “COSO Framework”).
      Based on this evaluation under the COSO Framework management concluded that
      its
      internal control over financial reporting was effective as of September 30,
      2007.  ERHC’s internal control over financial reporting as of
      September 30, 2007, 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, 2007, as stated in their
      report which is included herein.




**Changes
      in Internal Control Over Financial Reporting**




There
      was no change in ERHC’s internal
      control over financial reporting that has materially affected, or is reasonably
      likely to materially affect, ERHC’s internal control over financial
      reporting.





**Item
      9B.  Other Information**




None.




51
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          of Contents*


**PART
      III**





**Item
      10.  Directors and Executive Officers of the Registrant; and Corporate Governance**





The
      following are Directors and Executive Officers of the Company as of November
      30,
      2007 (1):





**Name**
            
            **Age**
            
            **Position**Nicolae
                Luca
            
            48
            
            Interim
                Chief Executive Officer, and DirectorHoward
                Jeter
            
            60
            
            DirectorAndrew
                Uzoigwe
            
            65
            
            DirectorClement
                Nwizubo
            
            55
            
            DirectorPeter
                C. Ntephe
            
            41
            
            Corporate
                Secretary





(1)
      *Sir Emeka Offor*served as the non-executive Chairman of the Board and
      Directors of ERHC from February 2001 but resigned effective August 12,
      2007.





*Nicolae
      Luca* has served as Interim Chief Executive Officer since July 2006 and has
      served as a Director since February 2001.  For over five years Mr. Luca
      also served as the Technical Director for the Nigeria-incorporated entity Chrome
      Oil Services Limited, (a separate and distinct entity from the
      Bahamas-incorporated Chrome Oil Services Limited which is the Company’s
      controlling shareholder).  Mr. Luca has a Bachelor of Science in
      Mechanical Engineering.





*Ambassador
      (rtd.) Howard F.*Jeter, a former US State Department Career Minister, is
      the President and CEO of the Leo H. Sullivan Foundation. For the past two years,
      he has served as Executive Vice President of GoodWorks International, LLC,
      an
      international consulting firm focused on business facilitation and investment
      promotion for Africa and the Caribbean. A former career diplomat, Ambassador
      Jeter served for 27 years in the American Foreign Service and retired from
      the
      State Department with the rank of career Minister.  Ambassador Jeter
      was U.S. Ambassador to Nigeria and to the Republic of Botswana, and also served
      as Deputy Assistant Secretary of State for African Affairs, Director of West
      African Affairs, and Special Presidential Envoy to Liberia. Other diplomatic
      postings included Namibia, Lesotho, Tanzania, and Mozambique. Ambassador Jeter
      holds a BA Degree in Political Science from Morehouse College, a MA in
      International Relations and Comparative Politics from Columbia University,
      and a
      MA in African Studies from UCLA. He is a member of Phi Beta Kappa, the American
      Foreign Service Association, and the Council on Foreign Relations. Ambassador
      Jeter is currently Chairman of the U.S. Export-Import Bank’s Advisory Committee
      on Africa and a member of the Board of Directors of Africare and Africa Action
      respectively.  Ambassador Jeter has received numerous awards and
      recognitions for his work and service, including a Presidential Meritorious
      Award, State Department Superior Honor Awards, Senior Foreign Service
      Performance Awards, the Rainbow/Push Coalition International Peace and Justice
      Award, and the prestigious Bennie Trailblazer Award from Morehouse
      College.





*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 BSc (Mechanical Engineering) and Master of Business Administration Degree
      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.


52
 *Table
          of Contents*


*Peter
      C. Ntephe*has served as Secretary since February 2001.  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 2005, Mr. Ntephe has taught Business Law as part of
      adjunct faculty in the Business School of the American Intercontinental
      University, London.





All
      Officers serve at the discretion of the Board of Directors.  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***





Compensation
      for fiscal 2007 and 2006, as recommended by the Compensation Committee and
      approved by the Board, was as follows:


**Name**
            
            **2007
                Cash**
              **Compensation**
            
            
            **2007**
              **Common**
              **Stock**
              **Issuances**
            
            
            **Value
                of**
              **2007**
              **Common**
              **Stock**
              **Issuances**
            
            
            **2007
                Total**
              **Compensation**Sir
                Emeka Offor
            
            $
            38,100
            
            
            
            60,000
            
            
            $
            17,700
            
            
            $
            55,800Nicolae
                Luca
            
            
            17,500
            
            
            
            60,000
            
            
            
            17,700
            
            
            
            35,200Howard
                Jeter
            
            
            39,000
            
            
            
            60,000
            
            
            
            17,700
            
            
            
            56,700Andrew
                Uzoigwe
            
            
            36,750
            
            
            
            60,000
            
            
            
            17,700
            
            
            
            54,450Clement
                Nwizubo
            
            
            39,500
            
            
            
            60,000
            
            
            
            17,700
            
            
            
            57,200Total
            
            $
            170,850
            
            
            
            300,000
            
            
            $
            88,500
            
            
            $
            259,350








**Name**
            
            **2006
                Cash**
              **Compensation**
            
            
            **2006**
              **Common**
              **Stock**
              **Issuances**
            
            
            **Value
                of**
              **2006**
              **Common**
              **Stock**
              **Issuances**
            
            
            **2006
                Total**
              **Compensation**Sir
                Emeka Offor
            
            $
            48,900
            
            
            
            60,000
            
            
            $
            24,378
            
            
            $
            73,278Nicolae
                Luca
            
            
            26,250
            
            
            
            60,000
            
            
            
            24,378
            
            
            
            50,628Howard
                Jeter
            
            
            40,750
            
            
            
            60,000
            
            
            
            24,378
            
            
            
            65,128Andrew
                Uzoigwe
            
            
            39,250
            
            
            
            60,000
            
            
            
            24,378
            
            
            
            63,628Clement
                Nwizubo
            
            
            22,833
            
            
            
            85,000
            
            
            
            34,536
            
            
            
            57,369Total
            
            $
            177,983
            
            
            
            325,000
            
            
            $
            132,048
            
            
            $
            310,031





It
      is
      expected that the directors will receive compensation in fiscal
      2008.





***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 us.  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, 2007.


53
 *Table
          of Contents*


***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 at
www.erhc.com.





***Director
      Independence***





The
      Board
      of Directors has determined that Messrs. Nwizubo, Jeter and Uzoigwe are
“Independent” as defined by the Securities and Exchange Commission (“SEC”) and
      for purposes of Section 162(m) of the Internal Code of 1986, as amended (the
      “Code”).  No Director is deemed independent unless the Board
      affirmatively determines that the Director has no material relationship with
      the
      Company, either directly or as an Officer, stockholder or partner of an
      organization that has a relationship with the Company.  In making its
      determination, the Board observes all criteria for independence established
      by
      the rules of the SEC.





***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.





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 Compensation**





***Summary
      Compensation Table***





The
      following table sets forth certain information regarding compensation paid
      by
      the Company to its Chief Executive Officer and other Executive Officers who
      received total annual salary and bonus that exceeded $100,000 during the periods
      involved.


54
 *Table
          of Contents*




**Long-term
                Compensation Awards****Name
                and Principal Positions**
            
            **Fiscal**
              **Year**
            
            **Annual**
              **Compensation**
              **Salary
                ($)**
            
            
            **Bonus**
              **($)**
            
            
            **Restricted
                Stock**
              **Awards(s)
                ($)**
            
            
            **Securities**
              **Underlying**
              **Options/SARs**Nicolae
                Luca
            
            2007
            
            
            -
            
            
            
            -
            
            
            
            (1
            )
            
            
            -Interim
                Chief Executive Officer
            
            2006
            
            
            -
            
            
            
            -
            
            
            
            (1
            )
            
            
            -James
                Ledbetter
            
            2007
            
            
            191,083
            
            
            
            -
            
            
            
            -
            
            
            
            (2
            )Technical
                Vice PresidentWalter
                Brandhuber
            
            2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Former
                chief executive officer
            
            2006
            
            
            125,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Ali
                Memon
            
            2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Former
                chief executive officer
            
            2006
            
            
            58,333
            
            
            
            -
            
            
            
            -
            
            
            
            (3
            )2005
            
            
            187,500
            
            
            
            -
            
            
            
            -
            
            
            
            -Sylvan
                Odobulu
            
            2007
            
            
            115,518
            
            
            
            -
            
            
            
            -
            
            
            
            -Controller
            
            2006
            
            
            18,000
            
            
            
            -
            
            
            
            -
            
            
            
            -




(1)  Mr.
      Luca was issued 85,000 shares in fiscal 2005 and 60,000 shares in each fiscal
      2006 and 2007, respectively for services rendered in his capacity as a
      Director.


(2)  Mr.
      Ledbetter was issued 1,000,000 options at an exercise price of $0.43 per
      share.


(3)
      Pursuant to Mr. Memon’s employment agreement, Mr. Memon exercised on a cashless
      basis an option to purchase up to 2,000,000 shares of Company common stock
      in
      June 2006 and acquired 1,272,727 shares.




***Option
      Grants in Fiscal Year Ending September 30, 2007***





The
      following table sets forth information concerning individual grants of options
      made during the fiscal year ended September 30, 2007, to our named Executive
      Officers.





**Individual
                Grants**
            
            **Potential
                Realizable Value at**
              **Assumed
                Annual Rates of Stock**
              **Price
                Appreciation for Options**
              **Term
                (1)****Name**
              **(a)**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Option/SARs**
              **Granted
                (#)**
              **(b)**
            
            
            **Percent
                Of**
              **Total**
              **Options/SARs**
              **Granted
                to**
              **Employees
                In**
              **Fiscal
                Year (c)**
            
            
            **Exercise**
              **Of
                Base**
              **Price**
              **($/Sh)
                (d)**
            
            
            **Market**
              **Price
                at**
              **Date
                of**
              **Grant**
            
            **Expiration**
              **Date**
              **(e)**
            
            **5%**
              **(f)**
            
            
            **10%**
              **(g)**
            
            
            **0%**James
                Ledbetter
            
            
            1,000,000
            
            
            
            100
            %
            
            $
            0.43
            
            
            $
            0.43
            
            12/18/2008
            
            
            -
            
            
            
            -
            
            
            
            -







***Aggregated
      Option Exercises in Last Fiscal Year and FY-End Option
      Values***





The
      following table sets forth information concerning options exercised during
      the
      fiscal year ended September 30, 2007 and option holdings as of September 30,
      2007, with respect to our named Executive Officers.


55
 *Table
          of Contents*


**Aggregated
      Option Exercises in 2007**


**and
      Year-End Option Values**





**Name**
              **(a)**
            
            **Shares**
              **Acquired**
              **on**
              **Exercise
                (#)**
              **(b)**
            
            
            **Value**
              **Realized
                ($)**
              **(c)**
            
            
            **Number
                of Unexercised**
              **Options
                at FY-end**
              **(d)**
            
            
            **Value
                of Unexercised**
              **in-the-Money
                Options**
              **(e)****Exercisable**
            
            
            **Unexercisable**
            
            
            **Exercisable**
            
            
            **Unexercisable****James
                Ledbetter**
            
            ****
            **-**
            
            
            ****
            **-**
            
            
            ****
            **-**
            
            
            ****
            **1,000,000**
            
            
            ****
            **-**
            
            
            ****
            **-**





***Employment
      Contracts***





The
      Company neither has an employment agreement with Mr. Luca nor does it pay him
      a
      salary for his services as Interim Chief Executive Officer.  Mr.
      Memon’s employment agreement with the Company terminated in January 2006 when,
      by mutual agreement with the Board on his disengagement from the Company, Mr.
      Memon resigned his employment with the Company.  The Company was
      obligated to pay Mr. Memon $16,667 a month through August 2007. That obligation
      has been discharged. Mr. Brandhuber’s employment agreement with the Company
      commenced in January 2006 and terminated in July 2006 when, by mutual agreement
      with the Board on his disengagement from the Company, Mr. Brandhuber resigned
      his employment with the Company and there is no continuing obligation of the
      Company in connection with Mr. Brandhuber’s terminated employment
      agreement.  The Company has an employment agreement with its Technical
      Vice President, Mr. Jim Ledbetter, for a base salary of $19,167 per month 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, a consultant, is
      paid annual compensation of $60,000 for his services as
      Secretary.  Mr. Ntephe was issued an option, for services rendered, to
      purchase 500,000 shares at an exercise price of $0.20 per share that he
      exercised on a cashless basis in April 2006, for the acquisition of 388,889
      shares of common stock, for value received of $350,000.





***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)**
            
            
            **(c)****Equity
                compensation plans approved by security holders**
            
            
            1,000,000
            
            
            $
            0.43
            
            
            
            11,423,244**Equity
                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.


56
 *Table
          of Contents*


**Item
      12.  Security Ownership of Certain Beneficial Owners and Management 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, 2007 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,
      2007, there were 721,938,550 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 Power****Principal
                Shareholders**Chrome
                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, Lagos**Directors
                and Named Executive Officers**Sir
                Emeka Offor
            
            
            310,296,433
            (1)(2)
            
            
            43.0
            %Nicolae
                Luca(3)
            
            
            205,000
            
            
            
            *Andrew
                Uzoigwe(3)
            
            
            205,000
            
            
            
            *Howard
                Jeter(3)
            
            
            205,000
            
            
            
            *Clement
                Nwizubo(3)
            
            
            145,000
            
            
            
            *Peter
                Ntephe(3)
            
            
            388,889
            
            
            
            *All
                executive officers and directorsas
                a group (6 persons)
            
            
            311,445,322
            
            
            
            43.1
            %_______________
              *Less
                than 1%.


(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**





None.


57
 *Table
          of Contents*


**Item
      14.  Principal Accounting Fees and Services**





Aggregate
      fees for professional services rendered by Malone & Bailey, PC for the
      fiscal years ended September 30, 2007 and 2006, were as follows:





**2007**
            
            
            **2006**Audit
                fee
            
            $
            92,125
            
            
            $
            96,982
            (1)Audit-related
                fees
            
            $
            5,200
            
            
            $
            -Tax
                fees
            
            $
            8,341
            
            
            $
            18,434All
                other fees
            
            $
            -
            
            
            $
            20,140______________(1)
                Includes
                $12,409 paid to PKF.







*Audit
      fees*for the fiscal years ended September 30, 2007 and 2006 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, 2007 and 2006, 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, 2007 and 2006,
      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, 2007 and has concluded
      that such services are compatible with Malone & Bailey’s independence as the
      Company’s auditors.


58
 *Table
          of Contents*


**PART
      IV**





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





(a)  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:





**EXHIBIT
                NO.**
            
            **IDENTIFICATION
                OF EXHIBIT**Exhibit
                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
                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


59
 *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 14, 2007 on its behalf by the
      undersigned, thereunto duly authorized.








ERHC
                Energy Inc.By:
            //s//Nicolae
                LucaNicolae
                Luca,Interim
                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
                14, 2007Howard Jeter
            
            Member
                Audit Committee//s// 
                Andrew Uzoigwe
            
            Director
            
            December
                14, 2007Andrew Uzoigwe
            
            Member
                Audit Committee//s// 
                Clement Nwizubo
            
            Director
            
            December
                14, 2007Clement Nwizubo
            
            Chairman
                Audit Committee






60