ERHC Energy (ERHE) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended December 31, 2008

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

For the transition period from ____________ to ________________

Commission File Number 0-17325

(Exact name of registrant as specified in its charter)

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

5444 Westheimer Road

Suite1440

Houston, Texas 77056

(Address of principal executive offices, including zip code)

(713) 626-4700

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  £   No  £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer  £ Accelerated Filer  T Non-Accelerated Filer  £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes£   No  £

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

The number of shares of common stock, par value $0.0001 per share, outstanding as of January 31, 2009 was 722,238,550

1

TABLE OF CONTENTS

ERHC ENERGY INC.

Part I. Financial Information		Page
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets at December 31, 2008 and September 30, 2008	5
	Unaudited Consolidated Statements of Operations for the Three Months Ended December 31, 2008 and 2007, and for the period from inception, September 5, 1995, to December 31, 2008	6
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended  December 31, 2008 and 2007, and for the period from inception, September 5, 1995, to December 31, 2008	7
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18
Part II. Other Information
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	20
Item 6.	Exhibits	22
	Signatures	23

2

Forward-Looking Statements

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

• business strategy;

• growth opportunities;

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

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

• future uses of and requirements for financial resources;

• interest rate and foreign exchange risk;

• future contractual obligations;

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

• future operations outside the United States;

• competitive position;

• expected financial position;

• future cash flows;

• future liquidity and sufficiency of capital resources;

• future dividends;

• financing plans;

• tax planning;

• budgets for capital and other expenditures;

• plans and objectives of management;

• compliance with applicable laws; and

• adequacy of insurance or indemnification.

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

• general economic and business conditions;

• worldwide demand for oil and natural gas;

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

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

• termination, renegotiation or modification of existing contracts;

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

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

• advances in exploration and development technology;

• the political environment of oil-producing regions;

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

• casualty losses;

• competition;

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

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

• risks of potential contractual liabilities;

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

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

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• regulatory initiatives and compliance with governmental regulations;

• compliance with environmental laws and regulations

• compliance with tax laws and regulations;

• customer preferences;

• effects of litigation and governmental proceedings;

• cost, availability and adequacy of insurance;

• adequacy of the Company’s sources of liquidity;

• labor conditions and the availability of qualified personnel; and

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

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

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31, 2008 and September 30, 2008
	December 31,				September 30,
	2008				2008
ASSETS
Current assets:
Cash		$	31,157,563		$	31,757,012
Prepaid expenses and other			137,797			199,419
Deferred tax asset - current			2,018,398			2,018,398
Total current assets			33,313,758			33,974,829
DRSTP concession fee			2,839,500			2,839,500
Furniture and equipment, net			59,804			66,093
Total assets		$	36,213,062		$	36,880,422
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	4,914,230		$	5,025,794
Accounts payable and accrued liabilities, related parties			227,784			354,934
Accrued interest			9,180			8,719
Asset retirement obligation			485,000			485,000
Current portion of convertible debt			33,513			33,513
Total current liabilities			5,669,707			5,907,960
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $0.0001; authorized 10,000,000; none issued and outstanding			-			-
Common stock, par value $0.0001; authorized 950,000,000shares; issued and outstanding 722,238,569			72,224			72,224
Additional paid-in capital			91,964,474			91,964,474
Deficit accumulated during the development stage			(61,493,343	)		(61,064,236	)
Total shareholders’ equity			30,543,355			30,972,462
Total liabilities and shareholders' equity		$	36,213,062		$	36,880,422

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

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ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2008 and 2007 and for the Period
From Inception, September 5, 1995, to December 31, 2008
	Three Months Ended December 31,						Inception to December 31,
	2007			2008			2008
Costs and expenses:
General and administrative	$	1,011,447		$	701,566		$	69,044,247
Depreciation and depletion		6,720			8,615			1,425,116
Gain on sale of partial interest in DRSTP concession		-			-			(30,102,250	)
Write-offs and abandonments		-			-			7,742,128
Total costs and expenses		(1,018,167	)		(710,181	)		(48,109,241	)
Other income and (expenses):
Interest income		431,863			281,535			4,671,062
Loss from settlements		-			-			(247,690	)
Other income		-			-			439,827
Interest expense		(461	)		(461	)		(12,127,366	)
Loss on extinguishment of debt		-			-			(5,749,575	)
Total other income		431,402			281,074			(13,013,742	)
Income (loss) before benefit (provision) for income taxes		(586,765	)		(429,107	)		(61,122,983	)
Benefit (provision) for income taxes:
Current		480,000			-			(1,330,360	)
Deferred		(480,000	)		-			960,000
Total provision for income taxes		-			-			(370,360	)
Net loss	$	(586,765	)	$	(429,107	)	$	(61,493,343	)
Net loss per common share -Basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average number of shares of common shares outstanding:Basic and diluted		722,016,830			722,238,550

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

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ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2008 and 2007 and for the Period From
Inception, September 5, 1995 to December 31, 2008
	Three Months Ended December 31,						Inception to December 31,
	2007			2008			2008
Cash Flows From Operating Activities
Net income (loss)	$	(586,765	)	$	(429,107	)	$	(61,493,343	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and depletion expense		6,721			8,616			1,425,117
Write-offs and abandonments		-			-			7,742,128
Deferred income taxes		-			-			(2,018,398	)
Compensatory stock options		48,460			-			1,308,240
Gain from settlement		-			-			(252,310	)
Gain on sale of partial interest in DRSTP concession		-			-			(30,102,250	)
Amortization of beneficial conversion feature associated with convertible debt		-			-			2,793,929
Amortization of deferred compensation		-			-			1,257,863
Loss on extinguishment of debt		-			-			5,682,368
Stock issued for services		-			-			20,897,077
Stock issued for settlements		-			-			225,989
Stock issued for officer bonuses		-			-			5,015,000
Stock issued for interest and penalties on convertible debt		-			-			10,631,768
Stock issued for board compensation		-			-			2,065,048
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		11,468			61,621			(137,797	)
Accounts payable and other accrued liabilities		(183,970	)		(111,102	)		(2,880,340	)
Accrued officers' salaries		-			-			-
Accounts payable and accrued liabilities, related party		(47,650	)		(127,150	)		227,783
Accrued interest - related party		-			-			-
Accrued retirement obligation		-			-			485,000
Net cash used by operating activities		(751,736	)		(597,122	)		(37,127,128	)

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

7

ERHC ENERGY INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2008 and 2007 and for the Period From
Inception, September 5, 1995 to December 31, 2008
	Three Months Ended December 31,						Inception to December 31,
	2007			2008			2008
Cash Flows From Investing Activities
Release of restricted cash	$	-		$	-		$	-
Purchase of DRSTP concession		-			-			(5,679,000	)
Proceeeds from sale of partial interest in DRSTP concession		-			-			45,900,000
Purchase of furniture and equipment		-			(2,327	)		(911,695	)
Net cash provided (used) by investing activities		-			(2,327	)		39,309,305
Cash Flows From Financing Activities:
Proceeds from warrants exercised		-			-			160,000
Proceeds from common stock, net of expenses		-			-			6,955,049
Proceeds from line of credit, related party		-			-			2,750,000
Proceeds from non-convertible debt,related party		-			-			158,700
Proceeds from convertible debt, related party		-			-			8,207,706
Proceeds from sale of convertible debt		-			-			9,019,937
Proceeds from bank borrowing		-			-			175,000
Proceeds from stockholder loans		-			-			1,845,809
Proceeds from stock subscription receivable		-			-			913,300
Repayment of shareholder loans		-			-			(1,020,607	)
Repayment of long-term debt		-			-			(189,508	)
Net cash provided by financing activities		-			-			28,975,386
Net increase (decrease) in cash  and cash equivalents		(751,736	)		(599,449	)		31,157,563
Cash and cash equivalents, beginning of period		34,721,933			31,757,012			-
Cash and cash equivalents, end of period	$	33,970,197		$	31,157,563		$	31,157,563

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

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ERHC ENERGY INC.

(A CORPORATION IN THE DEVELOPMENT STAGE)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Business Organization

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

Note 2 – Fair Value of Financial Instruments

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

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

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

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Interest income on cash and cash equivalents is recognized as earned on the accrual basis.

Note 3 - Sao Tome Concession

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

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

JDZ Block #	ERHC Original Participating Interest(1)	ERHC Joint Bid Participating Interest	Participating Interest(s) Sold	Current ERHC Retained Participating Interest
2	30%	35%	43% (2)	22%
3	20%	5%	15% (3)	10%
4	25%	35%	40.5% (4)(6)	19.5%(6)
5	15%	(5)	(5)	15%
6	15%	(5)	(5)	15%
9	20%	(5)	(5)	20%

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

(2) In March 2006, ERHC sold an aggregate 28.67% participating interest to Sinopec and an aggregate 14.33% participating interest to Addax Ltd.

(3) In February 2006, ERHC sold a 15% participating interest to Addax Sub.

(4) By a Participation Agreement made in November 2005 and subsequently amended, ERHC sold 40.5% participating interest to Addax. Includes 9% distributed between Addax (7.2%) and ERHC (1.8%) reclaimed from Godsonic by ERHC on behalf of the ERHC/Addax consortium following Godsonic’s inability to fulfill financial and other conditions upon which the 9% was to have been assigned to Godsonic.

(5) No contracts have been entered into as of the date hereof. ERHC’s goal is to enter into agreements to exploit its interests in Blocks 5, 6 and 9.  Additionally, the Company intends to exploit its rights in the EEZ.

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

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Particulars of Participating Agreements:

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

JDZ Block 3 Participation Agreement
February 15, 2006	1. ERHC Energy Inc 2a. Addax Petroleum Resources Nigeria Limited 2b. Addax Petroleum Corporation	ERHC assigns 15% of participating interest to Addax Petroleum Resources Nigeria Limited (“Addax Sub”) leaving ERHC with a 10% participating interest. Consideration from Addax Sub to ERHC for the 15% acquired interest is $7.5 million. In addition, Addax to pay all of ERHC’s future costs for petroleum operations as in respect of the 10% interest retained by ERHC  in Block 3. Addax is entitled to 100% of ERHC’s allocation of cost oil plus up to 50% of ERHC’s allocation of profit oil until Addax Sub recovers 100% of the carried costs.

10

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

(Note) By an Amendment to the Participation Agreement dated February 23 2006, ERHC and Addax amended the Participation Agreement so that the assigned interest to Addax would be changed to 33.3%.  By a second Amendment to the Participation Agreement, entered into on March 14 2006, ERHC and Addax amended the Participation Agreement so that the assigned interest to Addax would be 33.3% and ERHC’s participating interest would be 26.7%.  By a third Amendment to the Participation Agreement dated April 11 2006, ERHC and Addax agreed that if Godsonic, a third party, did not meet financial and other obligations for the transfer of 9% of ERHC’s participating interest to Godsonic (and was foreclosed from all claims to the 9%), ERHC would transfer 7.2% out of the 9% interest to Addax so that Addax’s participating interest would be 40.5% in aggregate and ERHC’s participating interest would be 19.5% in aggregate.  The amount of fresh consideration to accrue from Addax to ERHC for the transfer of the 7.2% is not stated in the third Amendment to the Participation Agreement.  On July 15, 2008, The London Court of International Arbitration (LCIA) confirmed that under the Participation Agreement between parties no further consideration is payable by Addax Petroleum to ERHC for Addax Petroleum’s 7.2 percent share of the 9 percent. ERHC is entitled to the remaining 1.8 percent out of the nine percent.  The combine share of JDZ Block 4 held by ERHC and Addax Petroleum under the Participation Agreement is 60 percent. Following the ruling by the LCIA, ERHC’s share of JDZ Block 4 increased from 17.7 percent to 19.5 percent and Addax Petroleum’s share increased to 40.5 percent.

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Note 4 – Income Taxes

At December 31, 2008, the Company had a consolidated net operating loss carry-forward (“NOL”) of approximately $4,500,000 expiring through 2027. The NOLs are subject to certain limitations under the Internal Revenue Code of 1986, as amended, including Section 382 of the Tax Reform Act of 1986. During the fiscal year ended September 30, 2006, the Company recognized a significant gain on the sale of various participation interests. This gain utilized a substantial portion of the Company’s NOLs and such NOLs were adjusted to remove losses limited under Section 382.

The composition of deferred tax assets and the related tax effects at December 31, 2008 and September 30, 2007 are as follows:

	December 31, 2008			September 30, 2008
Net operating losses	$	1,536,014		$	1,430,118
Deferred tax asset		2.018,398			2,018,398
Accrual for asset retirement		164,900			164,900
Total deferred tax assets		3,719,312			3,613,416
Valuation allowance		(1,740,914	)		(1,595,018	)
Net deferred tax assets	$	2,018,398		$	2,018,398

The difference between the income tax benefit (provision) in the accompanying consolidated statements of operations and the amount that would result if the U.S. federal statutory rate of 34% were applied to pre-tax income (loss) for the three months ended December 31, 2008 and 2007, is as follows:

	Three Months Ended December 31,
	2007		2008
Benefit at federal statutory rate	$	199,500	$	145,896
Non-deductible stock based compensation		(16,476)		-
Change in valuation allowance		(183,024)		(145,896)
Provision for income taxes	$	-	$	-

In preparing the Company’s consolidated financial statements, the Company assesses the likelihood that its deferred tax assets will be realized from future taxable income. The Company establishes a valuation allowance if it determines that it is more likely than not that some portion of the deferred tax assets will not be realized. Changes in the valuation allowance, when recorded, would be included in its consolidated statements of operations as a provision for (benefit from) income taxes. The Company exercise significant judgment in determining its provisions for income taxes, its deferred tax assets and liabilities and its future taxable income for purposes of assessing its ability to utilize any future tax benefit from its deferred tax assets. During 2008, the Company assessed the need for a valuation allowance against its deferred tax assets. The deferred tax asset valuation allowance was $1,740,914 at December 31, 2008. The valuation allowance relates to the net operating losses.

At December 31, 2008, the Company has a Federal net operating loss carry forward of approximately $4,500,000. The federal loss carry forward expires on various dates through 2027.

FIN 48

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

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

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

Note 5 – Commitments and Contingencies

Subpoenas:

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

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

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

JDZ Blocks 5 & 6.

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

In November 2008, the Company dispatched notices of arbitration for service on the JDA and the governments of Nigeria and Sao Tome & Principe to commence arbitration in London. ERHC wants the London Court of International Arbitration to clarify that ERHC's interests in JDZ Blocks 5 and 6 remain intact.

From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business.  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.

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

The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements (including the notes thereto) and Item 1A of Part II, “Risk Factors,” included elsewhere in this report and the Company’s audited consolidated financial statements and the notes thereto, Item 7, “Management’s Discussion and Analysis of Financial Condition and Plan of Operations” and Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007, Item 1A of Part II, “Risk Factors,” included in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 and Item 1A of Part II, “Risk Factors,” included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.  The Company’s historical results are not necessarily an indication of trends in operating results for any future period.   References to “ERHC” or the “Company” mean ERHC Energy Inc., a Colorado corporation, and, unless expressly stated or the context otherwise requires, its wholly owned subsidiary.

Overview

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

Current Business Operations

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

JDZ - ERHC has interests in six of the nine Blocks in the JDZ, a 34,548 square kilometer area approximately 200 kilometers off the coastline of Nigeria and Săo Tomé & Principe that is adjacent to several large petroleum discovery areas.

EEZ - -The government of São Tomé & Principe has awarded ERHC rights to participate in exploration and production activities in the EEZ, which encompasses an area of approximately 160,000 square kilometers. These rights were granted in a May 21, 2001 Memorandum of Agreement made between the DRSTP and the Company. The Company’s rights in the EEZ expire on October 1, 2024 or, if the company has a producing working interest in any Block(s) at October 1, 2024, the Company’s rights extend in such Block(s), as long as the Block(s) remains in production.

Operations in the JDZ

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

• JDZ Block 2:  22.0% Working interest percentage

• JDZ Block 3:  10.0% Working interest percentage

• JDZ Block 4:  19.5% Working interest percentage

• JDZ Block 5:  15.0% Working interest percentage

• JDZ Block 6:  15.0% Working interest percentage

• JDZ Block 9:  20.0% Working interest percentage

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

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

The estimate of "recoverable reserves potential" based on WesternGeco's report, which interpreted and mapped seismic data, highlighted prospectivity and calculated volumetrics, was not based on any attempt to comply with the SEC definition of reserves and, accordingly the estimate of recoverable reserves potential is not presented. ERHC Energy has access to the data compiled by WesternGeco under the terms of a data use license with WesternGeco.

Operations in JDZ Block 4

ERHC’s consortium partner Addax Petroleum is the operator of JDZ Block 4. WesternGeco’s interpretation of seismic data indicates significant recoverable reserves in JDZ Block 4.  However even when properly interpreted, seismic data and visualization techniques are not conclusive in determining if hydrocarbon are present in economically producible amounts. Addax has secured Joint Development Authority approval to explore the Kina Prospect. Drilling equipment has been ordered. Earlier in 2007, Addax and Sinopec jointly entered into an agreement with a subsidiary of Aban Offshore Limited for the provision of the  deepwater drillship, the Aban Abraham, which has recently been refurbished and upgraded in Singapore and is currently enroute to the Gulf of Guinea. At the end of its contractual obligations to another partnership, the Aban Abraham will be transferred to Addax and Sinopec, which is currently expected towards the end of 2009.

Operations in JDZ Block 3

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

Operations in JDZ Block 2 

ERHC’s consortium partner Sinopec Corp. is the operator in JDZ Block 2. WesternGeco’s interpretation of seismic data indicates significant recoverable reserves in JDZ Block 2.  However even when properly interpreted, seismic data and visualization techniques are not conclusive in determining if hydrocarbon are present in economically producible amounts. The Joint Development Authority has approved drilling at the Tome Prospect. In 2007, Sinopec and Addax jointly entered into an agreement with a subsidiary of Aban Offshore Limited for the provision of the Aban Abraham deepwater drillship, which has recently been refurbished and upgraded in Singapore and is currently enroute to the Gulf of Guinea. At the end of its contractual obligations to another partnership, the Aban Abraham will be transferred to Addax and Sinopec, which is currently expected towards the end of 2009.

Background of the JDZ

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

Background of the EEZ

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

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

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

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

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

Sale of Participation Interests

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

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JDZ Block #	ERHC Original Participating Interest(1)	ERHC Joint Bid Participating Interest	Participating Interest(s) Sold	Current ERHC Retained Participating Interest
2	30%	35%	43% (2)	22%
3	20%	5%	15% (3)	10%
4	25%	35%	40.5% (4)(6)	19.5%  (6)
5	15%	(5)	(5)	15%
6	15%	(5)	(5)	15%
9	20%	(5)	(5)	20%

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

(2) In March 2006, ERHC sold an aggregate 28.67% participating interest to Sinopec and an aggregate 14.33% participating interest to Addax Ltd.

(3) In February 2006, ERHC sold a 15% participating interest to Addax Sub.

(4) By a Participation Agreement made in November 2005 and subsequently amended, ERHC sold 40.5% participating interest to Addax. Includes 9% distributed between Addax (7.2%) and ERHC (1.8%) reclaimed from Godsonic by ERHC on behalf of the ERHC/Addax consortium following Godsonic’s inability to fulfill financial and other conditions upon which the 9% was to have been assigned to Godsonic.

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

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

With regard to drilling in the JDZ, the Joint Development Authority (JDA), which was set up by the governments of Nigeria and São Tomé & Príncipe to administer the JDZ, has approved the budgets for JDZ Blocks 2, 3 and 4 in which ERHC has interests. The JDA also has approved well locations in two of those Blocks.  The Aban Abraham deepwater drill ship has been jointly contracted by the operators in JDZ Blocks 2 and 4, Sinopec and Addax Petroleum, On December 17, 2008 ERHC received confirmation that the Aban Abraham deepwater drill ship has departed the Sembawang Shipyard in Singapore and is on its way to Cape Town, South Africa onward to West Africa.  ERHC continues to support Addax’s efforts to secure a drilling rig of opportunity to avert delay or at least mitigate its impact with respect to drilling schedules.

ERHC is continuing to assess the feasibility of acquisition prospects to diversify its asset portfolio.

Leadership Change

Effective January 1, 2009, the Company announced the appointment of Daniel Gralla to manage ERHC’s technical functions on a part-time basis as Vice President Technical. The change comes in conjunction with the expiration of Jim Ledbetter’s contract of employment.  Jim Ledbetter was ERHC's Vice President Technical from December 2006 to December 2008. 

Results of Operations

Three Months Ended December 31, 2008 Compared with Three Months Ended December 31, 2007

During the three months ended December 31, 2008, the Company had a net loss of $429,107 compared with a net loss of $586,765 for the three months ended December 31, 2007.   Interest income decreased from $431,863 in the three months ended December 31, 2007 to $281,535 in the three months ended December 31, 2008, due to a decline in the significant cash balance maintained by the Company following the sale of the participation interests in 2006 and due to a general decline in interest rates.  General and administrative expenses decreased from $1,011,447 in the three months ended December 31, 2007 to $701,566 in the three months ended December 31, 2008 due to normal changes in operating expenses. See “Legal Proceedings” in Item 1 of Part II of this report.

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Liquidity and Capital Resources

As of December 31, 2008, the Company had $31,157,563 in cash and cash equivalents and short-term investments and positive working capital of $27,644,051.  Management believes that this cash position should be sufficient to support the Company’s working capital requirements for more than 12 months.

Off-Balance Sheet Arrangements

At December 31, 2008, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition or results of operations.

Debt Financing Arrangements

At December 31, 2008, the Company had short-term debt of $33,513 bearing interest at 5.5% per year payable to an individual. The Company had other current liabilities of $5,636,194 including related party liabilities of $227,784 due to primarily, certain officers and key employees and the Company’s board of directors for directors’ fees.. Included in current liabilities is also a $4,803,750 liability to Feltang International Inc. that will be satisfied upon issuance of 5,250,000 shares of common stock.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s current focus is to exploit its primary assets, which are rights to working 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 December 31, 2008, all of the Company's operations were located outside the United States.  The Company’s primary asset are agreements with DRSTP and the JDA, which provide ERHC with rights to participate in exploration and production activities in the Gulf of Guinea off the coast of central West Africa.  This geographic area of interest is controlled by foreign governments that have historically experienced volatility, which is out of management’s control. The Company’s ability to exploit its interests in the agreements in this area may be impacted by this circumstance.

The future success of the Company’s international operations may also be adversely affected by risks associated with international activities, including 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.

Item 4. Controls and Procedures

The Company’s Chief Operating Officer and Acting Chief Executive Officer and Principal Accounting Officer participated in an evaluation by management of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31,  2008.  Based on their participation in that evaluation, the Company’s Chief Executive Officer and Principal Accounting Officer concluded that as of December 31, 2008, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure under the Exchange Act. Our officers also concluded at December 31, 2008 that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

DOJ, SEC and U.S. Senate Committee Subpoenas

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

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

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

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

JDZ Blocks 5 & 6  

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

In November 2008, the Company dispatched notices of arbitration for service on the JDA and the governments of Nigeria and Sao Tome & Principe to commence arbitration in London. ERHC wants the London Court of International Arbitration to clarify that ERHC's interests in JDZ Blocks 5 and 6 remain intact.

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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 1A. Risk Factors

The Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007 (“2007 Annual Report”), as modified by its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2007 (“First Quarterly Report”), its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008 (“Second Quarterly Report”)  and this Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008 (“Second Quarterly Report”), includes a detailed discussion of certain material risk factors facing the Company.  The information presented below describes updates and additions to such risk factors and should be read in conjunction with the risk factors and information disclosed in ERHC’s 2007 Annual Report, First Quarterly Report, Second Quarterly Report and Third Quarterly Report.  References to “ERHC,” “we,” “us” or “our” mean ERHC Energy Inc., a Colorado corporation and, unless expressly stated or the context otherwise requires, its wholly owned subsidiary.

The risk factor in the First Quarterly Report captioned “Our Operations Are Located Outside of the United States Which Subjects Us to Risks Associated with International Activities.” is amended and restated in its entirety as follows:

Our Operations Are Located Outside of the United States Which Subjects Us to Risks Associated with International Activities.

At December 31, 2008, all of our operations were located outside the United States.  Our only assets are agreements with DRSTP and the JDA, which provide ERHC with rights to participate in exploration and production activities in the Gulf of Guinea off the coast of central West Africa.  This geographic area of interest is controlled by foreign governments that have historically experienced volatility, which is out of management’s control. Our ability to exploit our interests in this area pursuant to such agreements may be adversely impacted by this circumstance.

The future success of our 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 our future results of operations and financial condition.

In addition, to the extent we engage in operations and activities outside the United States, we are subject to the Foreign Corrupt Practices Act, or FCPA, which generally 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 the transactions of the company.  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 be held liable for actions taken by strategic or local partners or representatives.

The FCPA imposes civil and criminal penalties for violations of the Act.  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, or 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 our business, prospects, operations, financial condition and cash flow.

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The risk factor in the Second Quarterly Report captioned “We are under investigation by the SEC and the DOJ, and the results of these investigations could have a material adverse effect on our business, prospects, operations, financial condition and cash flow.” is amended and restated in its entirety as follows:

We are 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 our 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 Sao Tome and Nigeria.  The search warrant cited, among other things, possible violations of the FCPA, Section 10(b) of the Exchange Act, Rule 10b-5 under the Exchange Act and criminal conspiracy and wire fraud statutes.  ERHC filed suit in federal district court in Texas in June 2006 seeking to protect our attorney-client privileged documents and to allow our 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 our former Chief Financial Officer, Franklin Ihekwoaba) and other corporate records.  We have been actively responding to both subpoenas.  

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

The investigations by the DOJ, SEC and Senate Subcommittee are continuing.  We anticipate that these investigations will be lengthy and do not expect these investigations to be concluded in the immediate future.  If violations are found, we 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 our 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.

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

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Item 6. Exhibits

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

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SIGNATURES

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

ERHC Energy Inc.

Name	Title	Date
/s/ Peter Ntephe	Chief Operating Officer , Acting President and	February 9, 2009
Peter Ntephe	Acting Chief Executive Officer
/s/ Sylvan Odobulu	Controller (Principal Accounting Officer)	February 9, 2009
Sylvan Odobulu

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EXHIBIT INDEX

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

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