ERHC Energy (ERHE) 10-Q 2015 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2015

☐ 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 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and, (2) has been subject to such filing requirements for the past 90 days.  Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o    No x

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

The number of shares of common stock, par value $0.0001 per share, outstanding as of April 30, 2015, was 1,339,487,881.

TABLE OF CONTENTS

ERHC ENERGY INC.

Part I.    Financial Information		Page
Item 1.	Financial Statements	5
	Unaudited Consolidated Balance Sheets at March 31, 2015 and September 30, 2014	5
	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2015 and 2014	6
	Unaudited Consolidated Statements of Other Comprehensive Loss for the Three and Six Months Ended March 31, 2015 and 2014	7
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2015 and 2014	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
Part II. Other Information
Item 1.	Legal Proceedings	32
Item 6.	Exhibits	34
	Signatures	35

2

Forward-Looking Statements

ERHC Energy Inc. (also referred to as "ERHC" or the "Company" and denoted by the use of the pronouns "we," "our" and "us" as the case may be in this Report) 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;

● 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;

3

● 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 referred to as "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 Săo Tomé and Príncipe ("DRSTP"), the Federal Republic of Nigeria, Republic of Kenya, and the Republic of Chad;

● casualty losses;

● competition;

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

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

● risks of potential contractual liabilities;

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

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

● regulatory initiatives and compliance with governmental regulations;

● compliance with 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 statements or any change in events, conditions or circumstances on which any forward-looking statements are based.

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ERHC ENERGY INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	March 31, 2015			September 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	1,496,658		$	2,182,406
Investment in Oando Energy Resources		430,656			671,402
Deferred debt origination cost – short term		141,905			147,079
Prepaid expenses and other		248,306			246,922
Total current assets		2,317,525			3,247,809
Oil and gas concession fees		6,052,528			6,006,235
Furniture and equipment, net of accumulated depreciation of $407,303 and $368,587 at March 31, 2015 and September 30, 2014		170,178			206,273
Deferred debt origination cost – long term		26,373			43,755
Income tax receivable		2,018,533			2,018,533
Prepaid expenses – long term		57,000			172,433
Total assets	$	10,642,137		$	11,695,038
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	95,827		$	379,639
Convertible note payable, net of discount – short term		473,979			625,533
Derivative liability – short term		589,595			751,404
Total current liabilities		1,159,401			1,756,576
Convertible note payable, net of discount – long term		35,554			38,076
Derivative liability – long term		125,710			270,538
Total liabilities		1,320,665			2,065,190
Commitments and contingencies:
Shareholders' equity:
Preferred stock, par value $0.0001; authorized 10,000,000 shares; none issued and outstanding		-			-
Common stock, par value $0.0001; authorized 3,000,000,000 shares; issued and outstanding 1,339,487,881 and 765,194,088 shares at March 31, 2015 and September 30, 2014		133,948			76,520
Additional paid-in capital		104,602,010			101,080,306
Accumulated other comprehensive loss		(919,344	)		(678,598	)
Accumulated deficits		(94,495,142	)		(90,848,380	)
Total shareholders' equity		9,321,472			9,629,848
Total liabilities and shareholders' equity	$	10,642,137		$	11,695,038

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

5

ERHC ENERGY INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,						Six Months Ended March 31,
	2015			2014			2015			2014
Costs and expenses:
General and administrative	$	520,695		$	940,909		$	1,349,168		$	1,914,487
Exploration expenses		1,926			45,935			447,914			219,754
Depreciation		19,380			15,102			38,716			38,559
Gain on sale of partial interest in concessions		-			(2,724,793	)		(239,515	)		(2,724,793	)
Total costs and expenses		(542,001	)		1,722,847			(1,596,283	)		551,993
Other income and (expenses):
Interest income		208			708			913			2,212
Gain (loss) on mark to market of derivative liabilities		(48,925	)		-			65,749			-
Loss on embedded derivative		(727,072	)		-			(1,259,260	)		-
Gain from class-action settlement		291,280			-			291,280			-
Interest expense		(931,037	)		-			(1,149,161	)		-
Total other income and (expense)		(1,415,546	)		708			(2,050,479	)		2,212
Income (loss) before benefit (provision) for income taxes		(1,957,547	)		1,723,555			(3,646,762	)		554,205
Benefit (provision) for income taxes:
Current		-			-			-			-
Deferred		-			-			-			-
Total benefit (provision) for income taxes		-			-			-			-
Net income (loss)	$	(1,957,547	)	$	1,723,555		$	(3,646,762	)	$	554,205
Net income (loss) per common share - basic and diluted	$	0.00		$	0.00		$	0.00		$	0.00
Weighted average number of common shares outstanding basic and diluted		984,102,537			764,849,260			883,034,607			764,849,260

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

6

ERHC ENERGY INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

	Three Months Ended March 31,					Six Months Ended March 31,
	2015			2014		2015			2014
Net income (loss)	$	(1,957,547	)	$	1,723,555	$	(3,646,762	)	$	554,205
Other comprehensive income (loss) on available for sale securities		(21,383	)		26,172		(240,746	)		(54,834	)
Other comprehensive loss	$	(1,978,930	)	$	1,749,727	$	(3,887,508	)	$	499,371

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

7

ERHC ENERGY INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended March 31,
	2015			2014
Cash Flows From Operating Activities:
Net income (loss)	$	(3,646,762	)	$	554,205
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and depletion expense		38,716			38,559
Compensatory stock options		-			6,957
Loss on embedded derivative		1,259,260			-
Gain on change in fair value of derivative		(65,749	)		-
Gain on sale of partial interest in Kenya concession		(239,515	)		(2,724,793	)
Amortization of convertible debt discount		932,345			-
Amortization of debt issuance cost		71,082			-
Stock issued for board compensation		8,400			-
Prepaid expenses and other current assets		114,049			(242,040	)
Accounts payable and other accrued liabilities		(283,812	)		(2,360,857	)
Net cash used in operating activities		(1,811,986	)		(4,727,969	)
Cash Flows From Investing Activities:
Purchase of oil and gas concessions		(46,293	)		-
Proceeds from sale of partial interest in Kenya concession		239,515			4,731,608
Proceeds from sale of restricted certificate of deposit		-			2,186,182
Purchase of furniture and equipment		(2,621	)		-
Net cash provided by (used in) investing activities		190,601			6,917,790
Cash Flows From Financing Activities:
Proceeds from convertible debt		935,637			-
Net cash provided by financing activities		935,637			-
Net increase (decrease) in cash and cash equivalents		(685,748	)		2,189,821
Cash and cash equivalents, beginning of period		2,182,406			1,184,204
Cash and cash equivalents, end of period	$	1,496,658		$	3,374,025
Non-cash investing and financing activities:
Unrealized loss on investment in Exile Resources	$	240,746		$	54,834
Discount from derivative	$	592,860		$	-
Conversion of note payable to common stock	$	1,477,724		$	-
Derivative liabilities extinguished on conversion	$	2,093,008		$	-

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

8

ERHC ENERGY INC.

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, 2014.

Recent accounting pronouncements

There have been no recently issued accounting pronouncements that have had or are expected to have a material impact on the Company's consolidated financial statements.

NOTE 2 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted new guidance as of October 1, 2008, related to the measurement of the fair value of certain of its financial assets required to be measured on a recurring basis. Under the new guidance, based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

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

● 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.

Investments are accounted for as available for sale securities and reported at fair value, determined based on the quoted prices in an active market for identical assets and classified as Level 1 under the ASC 820.

During the six months ended March 31, 2015, the Company's investment in the common stock and warrants of OER, a Canadian oil and gas company that trades on the Toronto Stock Exchange (TSX) decreased in value by $240,746. This decrease in value is included as a decrease in stockholders' equity in accumulated other comprehensive income.

During the six months ended March 31, 2015, the Company issued a number of convertible notes payable, and identified derivatives related to these notes. ERHC classifies its derivative liabilities as Level 3 and values them using the methods discussed in Note 5. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 5 are that of volatility and market price of the underlying common stock of the Company.

As of March 31, 2015, the Company did not have any derivative instruments that were designated as hedges.

The derivative liability as of March 31, 2015, in the amount of $715,305 has a level 3 classification.

9

The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of March 31, 2015:

	Derivative Liability
Balance at September 30, 2014	$	1,021,942
Increase in derivative value due to issuances of convertible promissory notes		592,860
Decrease in derivative value due to convertible promissory notes converted to common stocks		(2,093,008	)
Day 1 loss on derivative liabilities		1,259,260
Change in fair market value of derivative liabilities on convertible notes due to the mark to market adjustment		(59,851	)
Change in fair market value of derivative liabilities on tainted warrants due to the mark to market adjustment		(5,898	)
Balance at March 31, 2015	$	715,305

NOTE 3 – OIL AND GAS CONCESSIONS

The following is an analysis of the cost of oil and gas concessions at March 31, 2015 and September 30, 2014:

	March 31, 2015		September 30, 2014
DRSTP concession	$	3,113,795	$	3,113,795
Chad concession		2,827,615		2,800,600
Pending concessions in other African countries		111,118		91,840
	$	6,052,528	$	6,006,235

In October, 2013, the Company entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., an international oil and gas company ("CEPSA"). Under the terms of this agreement, the Company assigned and transferred 55% of its participating interest in Kenya Block 11A to CEPSA. In connection with this farm-out, the Company recognized a gain of $239,515 of reimbursement of exploration costs incurred during the six months ended March 31, 2015.

In exchange for the transferred rights, CEPSA will carry the Company's proportionate share of obligations and financial costs under the terms and conditions outlined in the farm-out agreement. The agreement was approved in January 2014 by the Kenyan Government and from February 2014, CEPSA took over from ERHC as operator under the production sharing contract ("PSC") for Kenya Block 11A.

10

NOTE 4 – CONVERTIBLE DEBT

The Company had the following convertible debt outstanding at March 31, 2015:

Lender	Date of Agreement	Term (Months)	Annual Interest Rate			Face Value		Accrued Interest		Discount		Deferred Debt Origination Costs Due at Maturity		Net Convertible Note Payable		Note Derivative Liability
Redwood Fund III	5/15/2014	18		7.85	%	$	40,000	$	5,918	$	15,867	$	-	$	30,051	$	81,312
Iconic Holding, LLC	7/16/2014	12		10.00	%		3,456		5,014		5,034		-		3,436		2,473
Vista Capital Investments #2	8/26/2014	24		5.83	%		527		324		511		2,777		3,117		486
JMJ Financial #2	9/3/2014	24		5.83	%		9,020		583		13,305		5,556		1,854		14,788
JSJ Investments #2	9/8/2014	6		12.00	%		70,000		10,637		-		-		80,637		143,306
Macallan Partners, LLC	9/9/2014	12		10.00	%		48,000		4,405		36,635		-		15,770		43,162
Tonaquint, Inc #2	10/7/2014	12		12.00	%		55,000		3,914		45,142		-		13,772		79,567
Tonaquint, Inc #3	10/7/2014	12		12.00	%		55,000		3,914		45,142		-		13,772		79,567
JMJ Financial #3	10/22/2014	24		5.83	%		50,000		6,195		52,323		-		3,872		54,962
LG Capital #2	10/23/2014	12		8.00	%		52,500		1,036		47,844		-		5,692		81,543
KBM Worldwide #5	10/23/2014	9		8.00	%		78,500		3,648		-		-		82,148		-
Cardinal Capital Group	11/6/2014	24		12.00	%		50,000		6,192		51,760		-		4,432		55,474
KBM Worldwide #6	12/8/2014	9		8.00	%		53,500		1,767		-		-		55,267		-
KBM Worldwide #7	1/13/2015	9		8.00	%		54,000		1,215		-		-		55,215		-
Rock Capital	2/6/2015	12		10.00	%		34,500		501		-		-		35,001		-
Union Capital #3	2/17/2015	12		8.00	%		34,500		318		-		-		34,818		-
Adar Bay #2	2/19/2015	12		8.00	%		42,000		368		-		-		42,368		-
Vista Capital Investments #3	3/3/2015	24		5.83	%		25,000		56		-		-		25,056		-
LG Capital #3	3/10/2015	12		8.00	%		52,500		242		49,487		-		3,255		78,666
						$	808,003	$	56,247	$	363,050	$	8,333	$	509,533	$	715,305

During the six months ended March 31, 2015, the Company issued an aggregate of 574,083,793 shares of common stock for conversion of convertible debts of $1,477,724 and decrease in derivative value due to conversion of $2,093,008.

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The Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities once the note becomes convertible on the 180 days after the effective date.

The following table summarizes conversion terms of the notes outstanding at March 31, 2015:

Lender	Date of Agreement	Conversion Rate	Calculation Period	Eligible for Conversion
JMJ Financial	September 3 and October 27, 2014	Lesser of $0.06 or 60%	25 trading days prior to conversion	180 after the effective dates
KBM Worldwide	October 23 and December 8, 2014, January 13, 2015	61%	10 trading days prior to conversion	180 after the effective dates
Adar Bay	19-Feb-15	50%	20 trading days prior to conversion	180 after the effective date
Redwood Fund III	15-May-14	55%	20 trading days prior to conversion	180 after the effective date
Vista Capital Investments	August 26, 2014, March 2, 2015	Lesser of $0.075 or 60%	25 trading days prior to conversion	180 after the effective dates
Tonaquint, Inc	7-Oct-14	65%	25 trading days prior to conversion	180 after the effective date
Union Capital	17-Feb-15	55%	20 trading days prior to conversion	180 after the effective date
Iconic Holding, LLC	16-Jul-14	Lesser of $0.085 or 60%	20 trading days prior to conversion	180 after the effective date
JSJ Investments	8-Sep-14	60%	20 trading days prior to conversion	180 after the effective date
Macallan Partners, LLC	9-Sep-14	55%	20 trading days prior to conversion	180 after the effective date
LG Capital #2	23-Oct-14	60%	20 trading days prior to conversion	180 after the effective date
Cardinal Capital Group	6-Nov-14	Lesser of $0.05 or 60%	25 trading days prior to conversion	180 after the effective dates
Rock Capital	6-Feb-15	55%	20 trading days prior to conversion	180 after the effective date
LG Capital #3	10-Mar-15	60%	20 trading days prior to conversion	180 after the effective date

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As of March 31, 2015 Company recorded the following deferred origination costs related to the convertible notes:

Lender	Date of Agreement	Transaction Costs		Deferred Debt Origination Costs Due at Maturity		Legal and Other Debt Origination Costs		Initial Deferred Origination Costs		Amortization		Net Deferred Debt Origination Costs
Redwood Fund III	5/15/2014	$	10,000	$	-	$	-	$	10,000	$	5,104	$	4,896
Various	Various		-		-		52,500		52,500		11,809		40,691
Iconic Holding, LLC	7/16/2014		6,750		-		7,500		14,250		-		14,250
Vista Capital Investments	8/26/2014		2,500		2,777		-		5,277		-		5,277
JMJ Financial	9/3/2014		5,000		5,556		-		10,556		4,348		6,208
JSJ Investments	9/8/2014		10,000		-		2,000		12,000		1,256		10,744
Macallan Partners, LLC	9/9/2014		-		-		12,000		12,000		-		12,000
Tonaquint, Inc #2	10/7/2014		5,000		-		5,000		10,000		573		9,427
Tonaquint, Inc #3	10/7/2014		5,000		-		5,000		10,000		573		9,427
JMJ Financial #3	10/22/2014		5,000		-		-		5,000		-		5,000
LG Capital #2	10/23/2014		5,000		-		2,500		7,500		1,323		6,177
KBM Worldwide #5	10/23/2014		7,500		-		3,500		11,000		1,890		9,110
Cardinal Capital Group	11/6/2014		5,000		-		5,000		10,000		112		9,888
KBM Worldwide #6	12/8/2014		5,000		-		3,500		8,500		2,064		6,436
KBM Worldwide #7	1/13/2015		3,000		-		1,500		4,500		506		3,994
Rock Capital	2/6/2015		4,500		-		1,000		5,500		189		5,311
Union Capital #3	2/17/2015		4,500		-		1,500		6,000		849		5,151
Adar Bay #2	2/19/2015		2,000		-		1,500		3,500		197		3,303
LG Capital #3	3/10/2015		2,500		-		1,500		4,000		3,012		988
		$	88,250	$	8,333	$	105,500	$	202,083	$	33,805	$	168,278

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NOTE 5 – DERIVATIVE LIABILITIES

As described in Notes 4 and 6, the Company has identified embedded derivatives in notes payables and outstanding warrants.

The fair value of the embedded derivatives related to the convertible notes payable, comprising conversion feature with the reset provisions and the default provisions, at issuance and March 31, 2015 was determined using the multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model.  These models are based on future projections of the various potential outcomes and utilize the following assumptions:

· The stock price would fluctuate with the Company projected volatility;

· The Derivative Convertible Notes (held by JMJ Financial, LG Capital, Adar Bay, Vista Capital Investment, Tonaquint Inc., KBM Worldwide, JSJ Investments, Iconic Holding LLC, Macallan Partners LLC, Union Capital, Auctus Private, Redwood Fund III, Cardinal Capital Group, Inc. and Chrome Oil Service Limited ) convert at  40%  to  60%  of the market prices;

· An event of default would occur initially 0% of the time, increasing 1.00% per month until it reaches 10%;

· The projected volatility curve for each valuation period was based on the historical volatility of the Company, ranging between 101% and 108%;

· The Company would redeem the notes initially 0% of the time, and increase monthly by 1.00% to a maximum of 5.00%;

· The holders of the notes would automatically convert the notes at the maximum of two times the conversion price if the Company is not in default, with the target conversion price dropping as maturity approaches; and

· The Holder would convert the note early after 0-90-180 days and at maturity if the registration was effective and the Company was not in default.

As discussed in Note 3, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company's common stock. The number of shares of common stock to be issued is based on the future price of the Company's common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company's authorized share limit, all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

The fair value of the embedded derivatives related to the tainted outstanding warrants, comprising exercise feature with the full ratchet reset, at March 31, 2015 was determined using the lattice models that value the derivative liability based on a probability weighted discounted cash flow model.  These models are based on future projections of the various potential outcomes and utilize the following assumptions:

· The stock price would fluctuate with the Company projected volatility;

· The stock price would fluctuate with an annual volatility. The projected volatility curve for each valuation period was based on the historical volatility of the Company, ranging between 101% and 103%;

· The Holder would exercise the warrant as they become exercisable at target prices of two timesthe higher of the projected reset price or stock price;

· The Warrants with the $0.355; $0.28; and $0.275 exercise prices are fixed and not projected to adjust; and

· The Feltang Warrants have expired in the period ending December 31, 2014 without being exercised.

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date which at March 31, 2014 was an aggregate of $715,305.

During six months ended March 31, 2015, the Company recorded an aggregate $65,749 gain on change in fair value of derivative liabilities and a $1,259,260 day 1 loss upon recognition of these derivatives. See Note 3 for more information.

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NOTE 6 - STOCKHOLDERS' EQUITY

During the six months ended March 31, 2015, the Company recognized compensation expense of $8,400 related to service granted to the Board of Directors in fiscal year 2014.

During the six months ended March 31, 2015, the Company issued an aggregate of 574,083,793 shares of common stock for conversion of convertible debt with total valued at $3,570,732.

As of March 31, 2015, there are 4,150,000 options outstanding; none of which are exercisable.  These options have a weighted average remaining term of six days and an intrinsic value of zero. Unamortized compensation cost related to these options amounted to $0.

During the six months ended March 31, 2015, there were no new warrants granted and none were exercised, cancelled or expired.  As of March 31, 2015, the Company has 7,277,729 outstanding and exercisable warrants with a weighted average exercise price and remaining term of $0.32 per share and 1.0 years, respectively.  As of March 31, 2015, these warrants have an intrinsic value of zero.

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NOTE 7 – COMMITMENTS AND CONTINGENCIES

COMMITMENTS UNDER PRODUCTION SHARE CONTRACTS

Republic of Kenya Concession Fees and Other Financial Commitments

On June 28, 2012, ERHC entered into a production sharing contract ("PSC") with the Government of the Republic of Kenya for certain land based hydrocarbon exploration and production of Block 11A located in northwestern Kenya.

In October, 2013, the Company entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., an international oil and gas company ("CEPSA"). Under the terms of this agreement, the Company assigned and transferred 55% of its participating interest in Kenya Block 11A to CEPSA. In exchange for the transferred rights, CEPSA will carry the Company's proportionate share of obligations and financial costs under the terms and conditions outlined in the farm-out agreement. The agreement was approved in January 2014 by the Kenyan Government and from February 2014, CEPSA took over from ERHC as operator under the production sharing contract ("PSC") for Kenya Block 11A.

Republic of Chad Concession Fees and Other Financial Commitments

On June 30, 2011, ERHC entered into a production sharing contract ("PSC") with Chad for certain onshore hydrocarbon exploration and development.  In September 2013, the Ministry of Energy and Petroleum of Chad approved ERHC's application to voluntarily relinquish two of the three Blocks covered by the PSC.

As of March  31, 2015, ERHC has paid or incurred:

a. $2,000,000 as the entire signature bonus

b. $320,600 in advisers' and ancillary costs related to the PSC

c. $480,000 as legal fees and costs for the drafting and negotiation of the PSC, as provided for in the PSC

d. $190,872 as costs of Environmental Impact Study, as provided for in the PSC

e. $448,000 on Aeromagnetic data acquisition survey, in fulfilment of work program obligations under the PSC

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LEGAL PROCEEDINGS

JDZ Blocks 5 and 6

Lawsuit

The Company's rights in JDZ Blocks 5 and 6 are currently the subject of legal proceedings at the London Court of International Arbitration and the Federal High Court in Abuja, Nigeria. The Company instituted both proceedings in November 2008 against the JDA and the Governments of Nigeria and Săo Tomé and Príncipe.  The Company seeks legal clarification that its rights in the two Blocks remain intact.

The issue in contention is contractual. The Company was awarded a 15 percent working interest in each of the Blocks in a 2004/5 bid/licensing round conducted by the JDA following the Company's exercise of preferential rights in the Blocks as guaranteed by contract and treaty.  The JDA and the Government of STP contend that certain correspondence issued by a previous CEO/President of the Company in 2006 amount to a relinquishment of the Company's rights in Blocks 5 and 6 under the Company's contracts with STP which provide for the rights.  The Company contends that no such relinquishment has occurred and has sought recourse to arbitration accordingly. It also filed the suit to prevent any tampering with its said rights in JDZ Blocks 5 and 6 pending the outcome of arbitration.

Proceedings on the suit and the arbitration are currently suspended while the Company pursues amicable settlement with the Governments of Nigeria and Săo Tomé & Príncipe.

Routine Claims

From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business.  ERHC intends to defend these matters vigorously.  The Company cannot predict with certainty, however, the outcome or effect of any of the arbitration or litigation specifically described above or any other pending litigation or claims.

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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; and  "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, 2014.  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.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

We are including the following cautionary statement to make applicable and take advantage of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by us, or on our behalf.  This Quarterly Report on Form 10-Q contains forward-looking statements.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, future events or performance and underlying assumptions and other statements which are other than statements of historical facts.  Certain statements contained herein are forward-looking statements and, accordingly, involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including without limitations, management's examination of historical operating trends, data contained in our records and other data available from third parties, but there can be no assurance that management's expectations, beliefs or projections will result or be achieved or accomplished.  In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: geopolitical instability where we operate; our ability to meet our capital needs; our ability to raise sufficient capital and/or enter into one or more strategic relationships with one or more industry partners to execute our business plan; our ability and success in finding, developing and acquiring oil and gas reserves; our ability to respond to changes in the oil exploration and production environment, competition, and the availability of personnel in the future to support our activities.

Overview

ERHC Energy Inc., a Colorado corporation, ("ERHC" or the "Company") was incorporated in 1986. The Company is in the business of exploration for oil and gas resources in Africa. The Company's business includes working interests in exploration acreage in the Republic of Kenya ("Kenya"), the Republic of Chad ("Chad"), the Joint Development Zone ("JDZ") between the Democratic Republic of Săo Tomé and Príncipe ("STP"), the Federal Republic of Nigeria ("FRN" or "Nigeria"), and the exclusive economic zone of Săo Tomé and Príncipe (the "Exclusive Economic Zone" or "EEZ").

ERHC's strategy in Kenya and Chad is to perform exploration work and further establish the prospectivity of assets acquired through Production Sharing Contracts (PSCs) with the governments of both countries.  ERHC found a farm-out partner for its interests in Kenya, and is currently seeking for a partner for its interests in Chad.  ERHC expects that such farm-in arrangements, if entered into, might lower the risk and cost of the exploration programs to ERHC.

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The Company's strategy in the JDZ and EEZ is to farm out its working interests to well established oil and gas operators for valuable consideration including upfront cash payments and being carried for ERHC's share of the exploration costs.  This has already been done successfully on Blocks 2, 3 and 4 of the JDZ where ERHC has benefited from partnerships with Addax Petroleum and Sinopec Corporation, which have operated some of the license areas on behalf of ERHC.

Apart from its oil and gas exploration activities in Kenya, Chad, the JDZ and the EEZ, ERHC continues to pursue other oil and gas opportunities on the African continent. These opportunities also include the possible acquisition of significant equity stakes in other oil and gas exploration and production companies and the resulting indirect interest in the underlying exploration and production assets of such other companies.

REPUBLIC OF KENYA

ERHC Kenya Acreage

In June 2012, after months of negotiations between ERHC and the Government of Kenya, the Government awarded Block 11A for oil and gas exploration and development in Kenya to the Company. On June 28, 2012, the Company announced that it had signed a Production Sharing Contract (PSC) on Block 11A with the Government of Kenya.  A PSC is an agreement that governs the relationship between ERHC (and any future joint-venture partners) and the Government of Kenya in respect of exploration and production in the Block awarded to the Company.  The PSC details, among other things, the work commitments (including acquisition of data, drilling of wells, social projects, etc.), the time frame for completion of the work commitments, production sharing between the parties and the Government, and how the costs of exploration, development and production will be recovered.

By virtue of the PSC, the Company acquired a 90% interest in Block 11A, which encompasses 11,950.06 square kilometers or 2.95 million square acres.  The Government of Kenya has a 10% carried participating interest up to the declaration of commerciality and may thereafter acquire an additional 10% interest in the PSC in which case the total Government participation would rise to 20%.

Circle Oil Limited (www.circleoilandgas.com) ("Circle") acted as finder in ERHC's acquisition of the Block by facilitating ERHC's entry into Kenya, including the introduction of Dr. Peter Thuo, ERHC's Kenya-based geoscientist and technical adviser who provided liaison services in the pursuit of ERHC's application. Circle's involvement provided significant efficiencies, including substantial cost savings, in ERHC's application process.  By virtue of the terms of the business finder's agreement reached between Circle and ERHC, Circle is entitled to receive a 5% payment on the value of the acquisition accruing resulting to ERHC from the application.  Circle has opted to receive this fee in the form of a carried 5% of ERHC's total interest in Block 11A.

In October, 2013, ERHC entered into a farm-out agreement with CEPSA Kenya Limited, an affiliate of Compañía Española de Petróleos, S.A.U., an international oil and gas company ("CEPSA"). The farm-out agreement was approved by the Government of the Republic of Kenya during the quarter ended March 31, 2014. Under terms of the agreement, ERHC transferred a majority of its interest in Kenya Block 11A as well as operatorship to CEPSA. The farm-out agreement includes a carry and other considerations.

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Key Provisions of the ERHC's PSC on Block 11A

KENYA BLOCK 11A
LICENSE:	PSC with the Government of Kenya (effective September 2012)
PARTIES:	ERHC (35%); CEPSA (55%); Government of Kenya (10%)1

WORK PROGRAM:

Phase 1 (2 years – September 2012 to September 2014)

Minimum Work	Minimum Expenditure	Status
Acquire and interpret 1,000 square kilometers of gravity and magnetic data	$250,000	Completed: 12,714 square kilometers of FTG data acquired by January 2014 at a total cost of $2,070,780.
Acquire and interpret 1,000 kilometers of 2D seismic data	$10,000,000	Completed: 1,086.6 line kilometers of 2D seismic data acquired by August 2014 at an estimated total cost of $28,300,000

Phase 2 (2 years – September 2014 to September 2016)

Minimum Work	Minimum Expenditure	Status
Acquire 750 square kilometers of 3D seismic data	$30,000,000	Decision taken not to acquire 3D seismic but to proceed to drilling based on FTG and 2D seismic
OR	OR
Drill one (1) well to a minimum depth of 3,000m	$30,000,000	Preparation underway for drilling exploration well in  Q1 2016

Phase 3 (2 years – September 2016 to September 2018)

Minimum Work	Minimum Expenditure	Status
Drill one (1) well to a minimum depth of 3,000m	$30,000,000	Not yet arisen

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OTHER FINANCIAL OBLIGATIONS:

Ministry Training Fund	$175,000 per annum during the exploration period
	$200,000 per annum (minimum) from adoption of first development plan
Social Projects:	$50,000 per annum (minimum)
Surface Rentals:	$5/km2 per annum (exploration phase 1); $10/km2 per annum (exploration phase 2); $15/km2 per annum (exploration phase 3)
	$100/km2 per annum (development and production period)

Cost Recovery:
Cost Oil	Up to 60% of Cost Oil each fiscal year

Profit Oil

Incremental Production Tranches	Government Share	Contractor Share
0-30,000 barrels per day	50%	50%
Next 25,000 barrels per day	60%	40%
Next 25,000 barrels per day	65%	35%
Next 20,000 barrels per day	70%	30%
Above 100,000 barrels per day	78%	22%

¹ CEPSA is carrying ERHC's proportionate share of exploration costs except for the first exploration well where ERHC is expected to contribute 25% of its proportionate (35%) share of costs..

As of March 31, 2015, the exploration team is making steady progress toward drilling during the current phase of exploration. 2D seismic mapping has been completed. To date, two basins, Tarach and Anam, in the eastern and western parts of the block respectively, have been identified. 12 drillable prospects have been mapped in the Tarach Basin alone. Volumetric calculations and risk analyses have been completed leading to a total mean resource estimate  of 640 MMBO. The technical team agreed on drilling Tarach-1 as the first exploratory well with a mean resource estimate  of 65.78 MMBO during the first quarter  of 2016 if all conditions precedent are met.   Seismic interpretation of the Anam Basin  will start later in 2015.

The Company continues to work with Deloitte Corporate Finance LLC (DCF) on a further farm-down of our interest in the Block to help raise funds for the company.

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REPUBLIC OF CHAD

ERHC's Chad Acreage

On July 6, 2011, the Company announced that it had signed a Production Sharing Contract (PSC) on the three oil blocks with the Government of Chad.  A PSC is an agreement that governs the relationship between ERHC (and any future joint-venture partners) and the Government of Chad in respect of exploration and production in the Blocks awarded to the Company.  The initial period of exploration commenced on July 12, 2012 with the publication, in Chadian Government's Gazette Principal, of the Exclusive Exploration Authorization, granted to ERHC by the Government of Chad.

During the quarter ended March 31, 2014, the Company received the arrêté (decree) of the President of Chad giving presidential seal of approval to the Company's request to obtain oil exploration Block BDS 2008 and its voluntary relinquishment of the Manga and Chari-Ouest III Blocks.

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Focus Areas

Block BDS 2008 measures 41,800 square kilometers or 10,329,000 acres. ERHC's technical team has identified two focus areas within the Block:

- North of Esso's Tega and Maku discoveries in the Doseo basin; and

- East of and on trend with OPIC's Benoy-1 margin discovery in the Doba basin.

Key Provisions of ERHC's Production Sharing Contract (PSC) in Chad

CHAD BLOCK BDS 2008

LICENSE:	PSC with the Government of Chad signed June 20112
PARTIES:	ERHC (100%)

WORK PROGRAM:

Phase 1 (5 years – June 2012 to June 2017)³

Minimum Work	Minimum Expenditure	Status
Unspecified: annual work program to be proposed yearly by contractor	$15,000,000 in total for the exploration phase	EIA completed;
		Aero gravity and magnetic survey completed;
		·	4,720 line kilometers of high precision gravity and magnetic data acquired  by November 2014; Processing and interpretation of the data were completed in January 2015.
		·	Three leads identified;
		Seismic in preparation;
		·	2D seismic on focus areas planned for 2015-16

² PSC originally covered thee Blocks; ERHC voluntarily relinquished two Blocks in 2013, retaining only BDS 2008.  Relinquishment and retention approved by Presidential Decree as provided for in PSC.

³ PSC provides for exploration period to run from date of grant of Exclusive Exploration Authorization ("EEA").  EEA granted to ERHC in June 2012.

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Phase 2 (3 years)

Minimum Work	Minimum Expenditure	Status
Unspecified: annual work program to be proposed yearly by contractor	$1,000,000	Not yet arisen; ERHC proposes an exploration well in this period if Phase 1 G&G studies justify

OTHER FINANCIAL OBLIGATIONS:
Ministry Training Fund	$250,000 per annum during the exploration period
	$500,000 per annum during the exploitation period
Social Projects:	None specified in the PSC
Surface Rentals	$1/km2 per annum (Exploration Phase 1); $5/ km2 per annum (Exploration Phase 2); $10// km2 per annum (Extension)
	$100/ km2 per annum (Exploitation Phase 1); $150/ km2 per annum (Exploitation Phase 1)

COST RECOVERY AND PRODUCTION SHARING:
Royalty	14.25% for crude oil
	5% for natural gas
Cost Oil	Up to 70% of net production after deduction of royalty

Profit Oil

R-Factor, as defined by the PSC4	Less than or equal to 2.25	Between 2.25 and 3	Greater than 3
Contractor's share of profit oil	60%	50%	40%
State's share of profit oil	40%	50%	60%

⁴ R-factor is based on a formula defined in the PSC.

As the Company did with the JDZ and Kenya Block 11A, ERHC continues to explore a farm-out to spread risk. The Chad acreage is also within the scope of Deloitte Corporation Finance LLC (DCF)'s engagement and ERHC continues to work with DCF to find suitable farm-out or joint venture partners.

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NIGERIA – SAO TOME AND PRINCIPE JOINT DEVELOPMENT ZONE ("JDZ")

Background of the JDZ

In the spring of 2001, Sao Tome & Principe and Nigeria signed a treaty establishing a JDZ for the joint development of petroleum and other resources in the overlapping area of their respective maritime boundaries.  The treaty also established an administrative body, the Joint Development Authority ("JDA"), to administer the treaty and all activities in the JDZ.  Revenues derived from the JDZ will be shared 60:40 between the governments of Nigeria and Săo Tomé & Príncipe, respectively. The JDZ lies approximately 180 kilometers south of Nigeria, in the Gulf of Guinea, one of the most prolific hydrocarbon regions of the world.

ERHC's Rights in the JDZ

In April 2003, the Company and STP entered into an Option Agreement (the "2003 Option Agreement") in which the Company relinquished significant prior legal rights and financial interests in the Joint Development Zone ("JDZ") in exchange for preferential exploration rights in the JDZ.  Following the exercise of ERHC's rights as set forth in the 2003 Option Agreement, the JDA confirmed the award in 2004 of participating interests ("Original Participating Interest") in each of JDZ Blocks 2, 3, 4, 5, 6 and 9 of the JDZ during the 2004/5 licensing round conducted by the JDA.  ERHC also jointly bid with internationally recognized technical partners for additional participating interests in the JDZ during the 2004/5 licensing round.  As a result of the joint bid, ERHC won additional participating interests ("Joint Bid Participating Interest") in Blocks 2, 3 and 4.  The following is a tabulation of ERHC's participating interests in the JDZ.

JDZ Block	ERHC Original Participating Interest	ERHC Joint Bid Participating Interest	Participating Interest(s) Assigned	Current ERHC Retained Participating Interest
2	30.00%	35.00%	43.00%	22.00%
3	20.00%	5.00%	15.00%	10.00%
4	25.00%	35.00%	40.50%	19.50%
5	15.00%	-	-	15.00% (in arbitration)
6	15.00%	-	-	15.00% (in arbitration)
9	20.00%	-	-	20.00%

ERHC's Participating Agreements in the JDZ

The following are the particulars of the Participating Agreements by which ERHC assigned some of its participating interests in JDZ Blocks 2, 3 and 4 to technical partners so that the technical partners would operate the Blocks and carry ERHC's proportionate share of costs in the Blocks until production, if any, commenced from the Blocks:

Date of Participation Agreement	Party(ies) to the Participation Agreement	Participating Interest(s) Assigned			Participating Interest Assigned Price
JDZ Block 2 - Participation Agreement - ERHC Retained Interest of 22.00%
March 2, 2006	Sinopec International Petroleum Exploration Production Co. Nigeria Ltd - a subsidiary of Sinopec International Petroleum and Production Corporation		28.67	%	$	13,600,000
	Addax Energy Nigeria Limited - an Addax Petroleum Corporation subsidiary		14.33	%	$	6,800,000
JDZ Block 3 - Participation Agreement - ERHC Retained Interest of 10.00%
February 15, 2006	Addax Petroleum Resources Nigeria Limited - a subsidiary of Addax Petroleum Corporation		15.00	%	$	7,500,000
JDZ Block 4 - Participation Agreement - ERHC Retained Interest of 19.50%
November 15, 2005	Addax Petroleum Nigeria (Offshore 2) Limited - a subsidiary of Addax Petroleum Corporation		40.50	%	$	18,000,000

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Under the terms of the Participation Agreements Sinopec and Addax agreed to pay all of ERHC's future costs for petroleum operations ("the carried costs") in respect of ERHC's retained interests in the blocks.  Additionally, 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 interests on individual blocks until Sinopec and Addax Sub recover 100% of ERHC's carried costs.

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

ERHC's JDZ Acreage

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

● JDZ Block 2:  22.0%

● JDZ Block 3:  10.0%

● JDZ Block 4:  19.5%

● JDZ Block 5:  15.0% (in arbitration)

● JDZ Block 6:  15.0% (in arbitration)

● JDZ Block 9:  20.0%

The working interest percentages represent ERHC's share of all the hydrocarbon production from the blocks and obligates ERHC to pay a corresponding percentage of the costs of drilling, production and operating the blocks.  Through Exploration Phase 1 in blocks 2, 3 and 4, these costs have been carried by the operators.  The operators can only recover their costs by carrying ERHC until production whereupon the operators will recover their costs from production revenues.

In 2009, Sinopec and Addax, ERHC's technical partners and operators in Blocks 2, 3 and 4 undertook an exploratory drilling campaign across the three blocks that was completed in January 2010.

Biogenic gas was discovered in each block and discussions continue between the Joint Development Authority and the parties, including ERHC, that hold interests in JDZ Blocks 2, 3 and 4, regarding drilling results. The meetings with the JDA are aimed at reaching a definitive agreement on how to proceed with the next stage of exploration in the Blocks following the expiration of Exploration Phase I in March 2012.

JDZ Operations Update

The JDZ partnership is currently assessing the data for possible new exploration play concepts in this area.

SAO TOME AND PRINCIPE EXCLUSIVE ECONOMIC ZONE ("EEZ")

Overview of ERHC's EEZ Blocks

The Săo Tomé and Príncipe EEZ is delineated over an expanse of waters offshore Sao Tome and Principe that covers approximately 160,000 square kilometers. In terms of hydrocarbon exploration and exploitation, the EEZ is a frontier region that sits south of the Niger Delta and west of the Gabon salt basin, retaining similarities with each of those prolific hydrocarbon regions.  The regional seismic database comprises approximately 12,000 kilometers of seismic data. Interpretation of that seismic data shows numerous structures in the EEZ that have similar characteristics to known hydrocarbon accumulations in the area.

ERHC's Rights in the EEZ

Under a 2001 agreement with the Government of Sao Tome and Principe ("STP"), ERHC was vested with the rights to participate in exploration and production activities in the EEZ.  These rights included (a) the right to receive up to 100% of two blocks of ERHC's choice and (b) the option to acquire up to a 15% paid working interest in each of two additional blocks of ERHC's choice in the EEZ.  In 2010, ERHC exercised its rights to receive up to 100% of two blocks of ERHC's choice in the EEZ and was duly awarded Blocks 4 and 11 of the EEZ by the Government of STP.

EEZ Block 4 is 5,808 square kilometers, situated directly east of the island of Príncipe.

EEZ Block 11 totals 8,941 square kilometers, situated directly east of the island of Săo Tomé and abuts the territorial waters of Gabon. The southern area of the EEZ, where EEZ Block 11 is situated, contains parts of the Ascension and Fang Fracture Zones.

ERHC will decide whether to take up the option to acquire up to a 15% paid working interest in each of two additional blocks of the EEZ when called upon to exercise the option by the Government of STP in accordance with the agreements which provide for the rights and option.

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PSC for the EEZ

In July 2014, ERHC and the National Petroleum Agency of São Tomé and Príncipe (ANP-STP) announced the conclusion of final terms for the Production Sharing Contract for EEZ Block 11.

A PSC is an agreement that governs the relationship between the Company (and its joint venture partners) and the Government of Săo Tomé and Príncipe in respect of exploration and production in any Block awarded to the Company.  The PSC spells out, among other things, the work commitments (including acquisition of data, drilling of wells, social projects, etc.), the time frames for accomplishing the work commitments, how production will be shared between the parties and the government, and how the costs of exploration, development and production will be recovered.

EEZ Operations Update

SAO TOME & PRINCIPE EEZ BLOCK 11
LICENSE	PSC with the Government of STP signed July 2014
PARTIES	ERHC (85%); Government of STP (15%)5

WORK PROGRAM

Phase 1 (4 years)

Minimum Work	Minimum Expenditure	Status
Purchase and reprocess all existing 2D seismic on the Block	$2,500,000 for the entire exploration phase	Not yet commenced; budgeting for first year being discussed with ANP-STP
Geological and Geophysical studies (including AVO, geochemical studies and sequence stratigraphy)
EIA
Magnetic and gravity surveys
Acquire, process and interpret 2,500km 2D seismic
Handover all data and an evaluation report to ANP-STP at least 3 months to end of phase

⁵ Contractor to carry the Government's 15% to production and be entitled to 100% of Cost Oil to recover the carry

Phase 2 (2 years)

Minimum Work	Minimum Expenditure	Status
EIA	$40,000,000	Not yet arisen
Acquire, process and interpret 1,100 square kilometers 3D seismic
Drill one exploration well
Evaluate discoveries and remaining prospectivity

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Phase 3 (2 years)

Minimum Work	Minimum Expenditure	Status
EIA	$40,000,000	Not yet arisen
Drill one exploration well
Evaluate discoveries

OTHER FINANCIAL OBLIGATIONS
Signature Bonus	None payable
Training	Between $100,000 (min) and $250,000 (max) per calendar year during the exploration period
	$550,000 per annum during the production period
Social Projects	Exploration Phase 1: $300,000 per annum (minimum)
	Exploration Phase 2: $500,000 per annum (minimum)
	Exploration Phase 3: $400,000 per annum (minimum)
	On production, $2million worth of projects if cumulative production is 20mmboe, $4million if 40mmboe and $6m if 60mmboe

COST RECOVERY AND PRODUCTION SHARING
Royalty	2% (first charge on production)
Cost Oil	Up to 80% of available crude after deduction of royalty oil in any accounting period

Profit Oil

Contractor's Rate of Return6 for Contract Area (% per annum)	Government Share	Contractor Share
<16%	0%	100%
>=16%<19%	10%	90%
>=19%<23%	20%	80%
>=23%<26%	40%	60%
>=26%	50%	50%

As was the case in Kenya and earlier in the Joint Development Zone, management's intention is to bring a technically and financially capable operating partner onboard. The Company's discussions continue with several international oil companies about partnerships in EEZ Block 11. Some of those discussions are on the possibility of a 'right-to-earn' partnership where the operator commits to carrying only one aspect of the work program in return for a pre-determined interest in the PSC if the results of that aspect convince the operator to commit to the rest of the work program.

ERHC is currently working with the National Petroleum Agency of São Tomé and Príncipe (ANP-STP) to complete the budget for the first year of its exploration work program. A preliminary examination of available 2D seismic data indicates the possibility of commercially sizeable Cretaceous deep water tubidite fan existing in Block 11. While further investigation is in process, ERHC's exploration team believes that the Block has the potential for holding enormous hydrocarbon resources.

⁶ PSC provides for rate of return to be determined at the end of each quarter on the basis of accumulated compounded net cash flow for the contract area using a prescribed procedure.

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INVESTMENT IN OANDO ENERGY RESOURCES (FORMERLY EXILE RESOURCES)

During the year ended September 30, 2011, ERHC invested $1,350,000 in Exile Resources Inc, a company listed on the Toronto Stock Exchange (Ventures Exchange) stock in open market purchases.  ERHC's intention was to gain an indirect interest in Exile's underlying oil and gas exploration and production assets as well as the ability to participate in Exile's decision making in respect of those assets.  ERHC was particularly interested in Exile's carried interest in the proven Akepo field in the Niger Delta.

In July 2011, Oando Petroleum and Exploration Company ("Oando Petroleum") commenced a reverse takeover ("RTO") of Exile Resources.  In July 2012, Exile announced the completion of the RTO by Oando Petroleum and the change of name of the resultant company to Oando Energy Resources Inc, ("Oando Energy"). It also announced the listing of the company's shares under the symbol "OER" on the Toronto Stock Exchange (TSX) and commencement of trading in the shares on the TSX from July 30, 2012.

As a result of the RTO, ERHC now holds 418,889 shares in the common stock of Oando Energy.  ERHC also holds warrants for 418,889 common shares exercisable within 24 months of the closing of the RTO at Cdn$2.00 per share.

CURRENT PLANS FOR OPERATIONS

ERHC's principal assets are its interests in rights for exploration for hydrocarbons in Kenya, Chad, the JDZ and the EEZ. ERHC has no current sources of income from its operations. The Company plans to develop its business by the acquisition of other assets which may include revenue-producing assets in diverse geographical areas and the forging of strategic, new business partnerships and alliances.  ERHC cannot currently predict the outcome of negotiations for acquisitions, or, if successful, their impact on the Company's operations.

PLANS FOR FUNDING OF POTENTIAL ACQUISITIONS

ERHC's future plans will depend on the Company's ability to attract new funding. The Company is implementing a series of steps to fund the geophysical work, including magnetic/gravity and seismic surveys, prior to securing potential farm-out on Chad acreage. The fund raising might include:

· Farm-outs of part of the Company's assets in Kenya, Chad and the Săo Tomé and Príncipe Exclusive Economic Zone

· Issue shares of common stock through a registered direct offering

· Convertible loans and other debt instruments

· Other available financing options

During the quarter ended December 31, 2014, the Company retained the services of Deloitte Corporate Finance LLC (DCF) to advise on the Company's oil assets in the Republics of Chad and Kenya.

About Deloitte Corporate Finance LLC

Deloitte Corporate Finance LLC (DCF) provides strategic advisory services and M&A advice that help corporate, entrepreneurial and private equity clients create and act upon opportunities for liquidity, growth and long-term advantage. With an in-depth understanding of the marketplace and access to a global network of investment bankers, DCF help clients confidently pursue strategic transactions in both domestic and global markets. DCF, together with the Corporate Finance Advisory practices within the Deloitte Touche Tohmatsu Limited network of member firms, include in excess of 1,900 professionals, who work collaboratively across 150 international locations. With significant experience providing investment banking services across key industries, DCF are able to offer clients solutions that help them to achieve their strategic objectives.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The process of preparing financial statements requires that the Company make estimates and assumptions that affect the reported amounts of liabilities and stockholders' equity at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to realization of oil and gas concession assets and the valuation allowance related to deferred tax assets as of the date of the financial statements; accordingly, actual results may differ from estimated amounts. ERHC's estimates and assumptions are based on current facts, historical experience and various other factors we believe to be reasonable under the circumstances. The most significant estimates with regard to the financial statements included with this report relate to realization of oil and gas concession assets and the valuation allowance related to deferred tax assets.

These estimates and assumptions are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

RECENT ACCOUNTING PRONOUNCEMENTS

In preparing its financial statements and filings, the company considers recent guidance issued related to accounting principles generally accepted in the United States. The Company believes that there has been no new guidance since its most recent annual report on Form 10-K that have a significant impact on its financial statements.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2015 Compared with the Three Months Ended March 31, 2014

General and administrative expenses decreased from $940,909 in the three months ended March 31, 2014 to $520,695 in the three months ended March 31, 2015.  The decrease was primarily due to decrease in general and administrative expenses as part of our cost savings plan.

During the three months ended March 31, 2015, the Company had a net loss of $1,957,547 compared with a net gain of $1,723,555 for the three months ended March 31, 2014.  The increase in net loss was primarily due loss on embedded derivative of $727,072 and interest expenses of $931,037 related to our convertible debts compared with no convertible debt during the same period in 2014.

Six Months Ended March 31, 2015 Compared with the Six Months Ended March 31, 2014

General and administrative expenses decreased from $1,914,487 in the six months ended March 31, 2014 to $1,349,168 in the six months ended March 31, 2015.  The decrease was primarily due to a decrease in general and administrative expenses as part of our cost savings plan.

During the six months ended March 31, 2015, the Company had a net loss of $3,646,762 compared with a net gain of $554,205 for the six months ended March 31, 2014. The increase in net loss was primarily due to loss on embedded derivative of $1,259,260 and interest expenses of $1,149,161 related to our convertible compared with no convertible debt during the same period in 2014.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2015, the Company had $1,496,658 in cash and cash equivalents, and a working capital of $1,158,124.  The Company is currently raising more funds through convertible debentures.

OFF-BALANCE SHEET ARRANGEMENTS

At March 31, 2015, the Company had no off-balance sheet arrangements.

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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 interests oil and gas exploration blocks in Kenya, Chad, the JDZ and EEZ under agreements with the  governments of Kenya, Chad, the JDA and the government of STP respectively.  The Company intends to continue to form relationships with other oil and gas companies with operational, technical and financial capabilities, to partner with the Company in leveraging its interests.  The Company currently has no other operations.

As of March 31, 2015, all the Company's exploration and production acreages were located outside the United States.  The Company's primary assets are agreements with Kenya, Chad, STP and the JDA which provide ERHC with rights to participate in exploration and production activities in Kenya, Chad, the EEZ and the JDZ in Africa.  This geographic area of interest is controlled by foreign governments that have historically experienced volatility of which is out of management's control. The Company's operations and its 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 that include financial, economic and labor conditions, political instability, risk of war, expropriation, renegotiation or modification of existing contracts, tax laws (including host-country import-export, excise and income taxes and United States taxes on foreign subsidiaries) and changes in the value of the U.S. dollar relative to the local currencies in which future oil and gas producing activities may be denominated.  Furthermore, changes in exchange rates may adversely affect the Company's future results of operations and financial condition.

Market risks relating to the Company's operations result primarily from changes in interest rates as well as credit risk concentrations.  The Company's interest expense is generally not sensitive to changes in the general level of interest rates in the United States, particularly because a substantial majority of its indebtedness is at fixed rates.

Item 4. Controls and Procedures

The Company's  Chief Executive Officer and Principal Accounting Officer participated in an evaluation by management regarding 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 March 31, 2015.  Based on their participation in that evaluation, the Company's Chief Executive Officer and Principal Accounting Officer concluded that as of March 31, 2015, our disclosure controls and procedures are effective and ensure that the information required to be disclosed in the reports that ERHC files or submits under the Exchange Act, is accumulated and communicated to our management; including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure under the Exchange Act. ERHC officers also concluded on March 31, 2015 that our disclosure controls and procedures are effective in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.

There was no change in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended March 31, 2015 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

LEGAL PROCEEDINGS

JDZ BLOCKS 5 AND 6

Arbitration and Lawsuit

The Company's rights in JDZ Blocks 5 and 6 are currently the subject of legal proceedings at the London Court of International Arbitration and the Federal High Court in Abuja, Nigeria.  The Company instituted both proceedings in November 2008 against the JDA and the Governments of Nigeria and Săo Tomé and Príncipe.  The Company seeks legal clarification that its rights in the two Blocks remain intact.

The issue in contention is contractual. The Company was awarded a 15 percent working interest in each of the Blocks in a 2004/5 bid/licensing round conducted by the JDA following the Company's exercise of preferential rights in the Blocks as guaranteed by contract and treaty.  The JDA and the Government of STP contend that certain correspondence issued by a previous CEO/President of the Company in 2006 amount to a relinquishment of the Company's rights in Blocks 5 and 6 under the Company's contracts with STP which provide for the rights.  The Company contends that no such relinquishment has occurred and has sought recourse to arbitration accordingly. It also filed the suit to prevent any tampering with its said rights in JDZ Blocks 5 and 6 pending the outcome of arbitration.

Suspension of Proceedings on the Arbitration and Lawsuit

Proceedings on the suit and the arbitration are currently suspended while the Company pursues amicable settlement with the Governments of Nigeria and Săo Tomé Príncipe.

ROUTINE CLAIMS AND OTHER MATTERS

From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business.  ERHC intends to defend these matters vigorously.  The Company cannot predict with certainty, however, the outcome or effect of any of the arbitration or litigation specifically described above or any other pending litigation or claims.

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Item 1A. Risk Factors

Our operation and financial results are subject to various risks and uncertainties that could affect our business, financial condition, results of operations, and trading price of our common stock, including but not limited to, failing financial institutions.  Please refer to our annual report on Form 10-K for fiscal year 2014 for additional information concerning these and other uncertainties that could negatively impact the Company.

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

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to A Vote of Security Holders

None.

Item 5. Other Information

None

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Item 6. Exhibits

	Signatures
10.1*	Kenya Farm-out agreement, related to Block 11A, Kenya, dated October 7, 2013, by and between ERHC Energy Kenya Limited and CEPSA Kenya Limited (incorporated herein by reference to Exhibit 10.1 of Form 10-Q/A filed May 14, 2014)
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
101.INS*	Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
	* Filed or furnished herewith.

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SIGNATURES

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

ERHC Energy Inc.

Name	Title	Date
/s/ Peter Ntephe	President	May 15, 2015
Peter Ntephe	Chief Executive Officer
/s/ Sylvan Odobulu	Vice President (Admin) and Controller	May 15, 2015
Sylvan Odobulu	Principal Accounting Officer

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