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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ERHC Energy Inc (CE) | USOTC:ERHE | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Colorado
|
|
88-0218499
|
(State of Incorporation)
|
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
x
|
Smaller reporting company
o
|
Part I. Financial Information
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Page
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Item 1.
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5
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5
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6
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7
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8
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10
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Item 2.
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13
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Item 3.
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26
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Item 4.
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26
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Part II. Other Information
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Item 1.
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27
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Item 6.
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29
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30
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●
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business strategy;
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●
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growth opportunities;
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●
|
future development of concessions, exploitation of assets and other business operations;
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●
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future market conditions and the effect of such conditions on the Company’s future activities or results of operations;
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●
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future uses of and requirements for financial resources;
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●
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interest rate and foreign exchange risk;
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●
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future contractual obligations;
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●
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outcomes of legal proceedings including, without limitation, the ongoing investigations of the Company;
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●
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future operations outside the United States;
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●
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competitive position;
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●
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expected financial position;
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●
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future cash flows;
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●
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future liquidity and sufficiency of capital resources;
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●
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future dividends;
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●
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financing plans;
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●
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tax planning;
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●
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budgets for capital and other expenditures;
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●
|
plans and objectives of management;
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●
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compliance with applicable laws; and,
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●
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adequacy of insurance or indemnification.
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●
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general economic and business conditions;
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●
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worldwide demand for oil and natural gas;
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●
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changes in foreign and domestic oil and gas exploration, development and production activity;
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●
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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 and the Republic of Chad;
|
●
|
casualty losses;
|
●
|
competition;
|
●
|
changes in foreign, political, social and economic conditions;
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●
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risks of international operations, compliance with foreign laws and taxation policies and expropriation or nationalization of equipment and assets;
|
●
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risks of potential contractual liabilities;
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●
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foreign exchange and currency fluctuations and regulations, and the inability to repatriate income or capital;
|
●
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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,
|
●
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various other matters, many of which are beyond the Company’s control.
|
Item 1.
|
Fin
ancial Statem
ent
s
|
March 31,
|
September 30,
|
|||||||
2013
|
2012
|
|||||||
|
||||||||
ASSETS
|
|
|||||||
|
||||||||
Current assets:
|
|
|||||||
Cash and cash equivalents
|
$ | 4,412,522 | $ | 7,665,990 | ||||
Restricted cash
|
1,645,468 | - | ||||||
Investment in Oando Energy Resources
|
570,192 | 540,912 | ||||||
Prepaid expenses and other
|
278,070 | 320,725 | ||||||
Total current assets
|
6,906,252 | 8,527,627 | ||||||
Oil and gas concessions
|
10,054,903 | 10,046,303 | ||||||
Furniture and equipment, net of accumulated depreciation of
$239,443 and $175,195 at March 31, 2013 and September 30,2012, respectively
|
286,399 | 47,783 | ||||||
Income tax receivable
|
2,018,533 | 2,018,398 | ||||||
Total assets
|
$ | 19,266,087 | $ | 20,640,111 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$ | 577,079 | $ | 610,790 | ||||
Signing bonus payable - Chad
|
4,000,000 | 5,000,000 | ||||||
Total current liabilities
|
4,577,079 | 5,610,790 | ||||||
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 950,000,000
shares; issued and outstanding 764,429,260 and 739,458,854 shares at March 31, 2013 and September 30, 2012, respectively
|
76,443 | 73,947 | ||||||
Additional paid-in capital
|
101,028,011 | 99,479,431 | ||||||
Accumulated other comprehensive loss
|
(779,807 |
)
|
(809,087 | ) | ||||
Losses accumulated in the development stage
|
(85,635,639 |
)
|
(83,714,970 | ) | ||||
Total shareholders’ equity
|
14,689,008 | 15,029,321 | ||||||
Total liabilities and shareholders' equity
|
$ | 19,266,087 | $ | 20,640,111 |
September 5,
|
||||||||||||||||||||
1995 (Inception)
|
||||||||||||||||||||
Three Months Ended March 31,
|
Six Months Ended March 31,
|
to March 31,
|
||||||||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
||||||||||||||||
Costs and expenses:
|
||||||||||||||||||||
General and administrative
|
$ | 839,723 | $ | 1,173,139 | $ | 1,857,313 | $ | 2,213,238 | $ | 88,271,340 | ||||||||||
Depreciation
|
39,215 | 3,436 | 64,248 | 7,280 | 1,587,755 | |||||||||||||||
Gain on sale of partial
|
||||||||||||||||||||
Interest in DRSTP concession
|
- | - | - | - | (30,102,250 | ) | ||||||||||||||
Write-offs and abandonments
|
- | - | - | - | 7,742,128 | |||||||||||||||
Total costs and expenses
|
(878,938 | ) | (1,176,575 | ) | (1,921,561 | ) | (2,220,518 | ) | (67, 498,973 | ) | ||||||||||
Other income and (expenses):
|
||||||||||||||||||||
Interest income
|
463 | 2,950 | 898 | 4,419 | 4,851,502 | |||||||||||||||
Gain from settlements
|
- | - | - | - | 130,178 | |||||||||||||||
Other income
|
- | - | - | - | 439,827 | |||||||||||||||
Interest expense
|
(6 | ) | - | (6 | ) | - | (12,145,342 | ) | ||||||||||||
Provision for loss on deposits
|
- | - | - | - | (5,292,896 | ) | ||||||||||||||
Loss on extinguishment of debt
|
- | - | - | - | (5,749,575 | ) | ||||||||||||||
Total other income and (expense)
|
457 | 2,950 | 892 | 4,419 | (17,766,306 | ) | ||||||||||||||
Loss before benefit (provision) for income taxes
|
(878,481 | ) | (1,173,625 | ) | (1,920,669 | ) | (2,216,099 | ) | (85,265,279 | ) | ||||||||||
Benefit (provision) for income taxes:
|
||||||||||||||||||||
Current
|
- | - | - | - | (1,330,360 | ) | ||||||||||||||
Deferred
|
- | - | - | - | 960,000 | |||||||||||||||
Total benefit (provision)for income taxes
|
- | - | - | - | (370,360 | ) | ||||||||||||||
Net loss
|
$ | (878,481 | ) | $ | (1,173,625 | ) | $ | (1,920,669 | ) | $ | (2,216,099 | ) | $ | (85, 635,639 | ) | |||||
Net 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
|
739,458,854 | 738,933,854 | 739,458,854 | 738,933,854 |
September 5,
|
||||||||||||||||||||
1995 (Inception)
|
||||||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, |
to March 31,
|
||||||||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
||||||||||||||||
Net loss
|
$ | (878,481 | ) | $ | (1,173,625 | ) | $ | (1,920,669 | ) | $ | (2,216,099 | ) | $ | (85,635,639 | ) | |||||
Other comprehensive income
(loss) on available for sale securities
|
(280,225 | ) | - | 29,280 | - | (779,807 | ) | |||||||||||||
Other comprehensive loss
|
$ | (1,158,706 | ) | $ | (1,173,625 | ) | $ | (1,891,389 | ) | $ | (2,216,099 | ) | $ | (86, 415,446 | ) |
September 5,
|
||||||||||||
1995 (Inception)
|
||||||||||||
Six Months Ended March 31,
|
to March 31,
|
|||||||||||
2013
|
2012
|
2013
|
||||||||||
Cash Flows From Operating Activities:
|
||||||||||||
Net loss
|
$ | (1,920,669 | ) | $ | (2,216,099 | ) | $ | (85, 635,639 | ) | |||
Adjustments to reconcile net loss to net cash Used in operating activities:
|
||||||||||||
Depreciation and depletion expense
|
64,248 | 7,280 | 1,587,755 | |||||||||
Provision for loss on deposits
|
- | - | 5,292,896 | |||||||||
Write-offs and abandonments
|
- | - | 7,742,128 | |||||||||
Deferred income taxes
|
- | - | (2,018,398 | ) | ||||||||
Compensatory stock options
|
10,898 | 2,179 | 1,343,030 | |||||||||
Gain from settlement
|
- | - | (617,310 | ) | ||||||||
Gain on sale of partial interest in
DRSTP concession
|
- | - | (30,102,250 | ) | ||||||||
Amortization of beneficial conversion feature associated with convertible debt
|
- | - | 2,793,929 | |||||||||
Amortization of deferred compensation
|
- | - | 1,257,863 | |||||||||
Loss on extinguishment of debt
|
- | - | 5,669,500 | |||||||||
Stock issued for services
|
- | - | 20,897,077 | |||||||||
Stock issued for settlements
|
- | - | 225,989 | |||||||||
Stock issued for officer bonuses
|
- | 28,342 | 5,221,638 | |||||||||
Stock issued for interest and penalties on convertible debt
|
- | - | 10,631,768 | |||||||||
Stock issued for board compensation
|
- | - | 2,725,949 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Prepaid expenses and other current assets
|
(88,481 | ) | (30,739 | ) | (409,204 | ) | ||||||
Accounts payable and other accrued Liabilities
|
(33,711 | ) | (19,758 | ) | (2,570,897 | ) | ||||||
Accounts payable and accrued liabilities,related party
|
- | - | 55,844 | |||||||||
Accrued retirement obligation
|
- | - | 365,000 | |||||||||
Net cash used in operating activities
|
(1,967,715 | ) | (2,228,795 | ) | (55,543,332 | ) |
September 5,
|
||||||||||||
1995 (Inception)
|
||||||||||||
Six Months Ended March 31,
|
to March 31,
|
|||||||||||
2013
|
2012
|
2013
|
||||||||||
Cash Flows From Investing Activities:
|
||||||||||||
Purchase of long-term investment
|
- | - | (5,292,896 | ) | ||||||||
Purchase of and deposits on oil and gas concessions
|
(1,008,600 | ) | (50,599 | (8,789,403 | ) | |||||||
Proceeds from sale of partial interest in DRSTP concession
|
- | - | 45,900,000 | |||||||||
Proceeds from sale of U.S. Treasury bills
|
- | - | 5,011,000 | |||||||||
Purchase of U.S. Treasury bills and accrued interest
|
- | (3,285 | ) | (5,011,000 | ) | |||||||
Purchase of investment in marketable equity securities
|
- | - | (1,350,000 | ) | ||||||||
Restricted cash
|
(1,645,468 | ) | - | (1,645,468 | ) | |||||||
Purchase of restricted certificate of deposit
|
- | - | (131,000 | ) | ||||||||
Proceeds from sale of restricted certificate of deposit
|
- | 131,000 | 131,000 | |||||||||
Purchase of furniture and equipment
|
(171,863 | ) | (2,600 | ) | (1,169,930 | ) | ||||||
Net cash provided by (used in) investing activities
|
(2,825,931 | ) | 74,516 | 27,652,303 | ||||||||
Cash Flows From Financing Activities:
|
||||||||||||
Proceeds from warrants exercised
|
- | 160,000 | ||||||||||
Proceeds from common stock, net of expenses
|
1,540,178 | - | 10,316,727 | |||||||||
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
|
- | - | (223,021 | ) | ||||||||
Net cash provided by financing activities
|
1,540,178 | - | 32,303,551 | |||||||||
Net increase (decrease) in cash and cash equivalents
|
(3,253,468 | ) | (2,154,279 | ) | 4,412,522 | |||||||
Cash and cash equivalents, beginning of period
|
7,665,990 | 7,137,151 | - | |||||||||
Cash and cash equivalents, end of period
|
$ | 4,412,522 | $ | 4,982,872 | $ | 4,412,522 | ||||||
Supplemental cash flow information – Noncash investing activities
|
||||||||||||
Unrealized gain (losses) on securities
|
29,280 | (779,807 | ) | |||||||||
Reclass of prepaid expenses to furniture and equipment
|
131,000 | 131,000 |
●
|
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.
|
March 31,
|
September 30,
|
|||||||
2013
|
2012
|
|||||||
|
||||||||
DRSTP concession
|
$ | 2,839,500 | $ | 2,839,500 | ||||
Chad concession
|
6,800,600 | 6,800,600 | ||||||
Kenya concession
|
326,073 | 326,073 | ||||||
Pending concessions in other African countries
|
88,730 | 80,130 | ||||||
$ | 10,054,903 | $ | 10,046,303 |
a.
|
$2,000,000 out of the signature bonus commitment with the balance of $4,000,000 in accrual
|
b.
|
$480,000 as legal fees and costs for the drafting and negotiation of the PSC, as provided for in the PSC
|
c.
|
$312,600 in advisers’ and ancillary costs related to the PSC
|
a.
|
Spend at least $15,000,000 over the first five years on a minimum work program and at least an additional $1,000,000 over a further period of up to three years.
|
|
b.
|
Pay surface fees of $27,000 per calendar year during the first validity period, and lasting for up to eight years. Surface fees for subsequent periods will depend on the exploration progress as well as on the acreage retained by ERHC.
|
Item 2.
|
Mana
ge
ment’s Discussion and Analysis of Financial Condition and Results of Operations
|
(A)
|
During the Initial Exploration Period of Two (2) Contract Years – Minimum Work and Expenditure Obligations:
|
|
·
|
Acquire and interpret 1,000 km2 of gravity and magnetic data (at a minimum cost of - US $ 250,000) and
|
|
·
|
Acquire and interpret 1,000 Km/line of 2D seismic data (at a minimum cost of – US $ 10,000,000)
|
|
(B)
|
During the First Additional Exploration Period of Two (2) Contract Years: Minimum Work and Expenditure Obligations to:
|
|
·
|
Acquire 750 km2 high density of 3D seismic data (at a minimum cost of US $ 30,000,000), or
|
|
·
|
Drill one (1) well to a minimum depth of 3,000 m (at a minimum cost of US $30,000,000
|
(C)
|
During the Second Additional Exploration Period of Two (2) Contract Years: Minimum Work and Expenditure Obligation to:
|
|
·
|
Drill one (1) well to a minimum depth of 3,000m (at an approximate cost of US $ 30,000,000).
|
Block
|
|
ERHC Interest
|
|
Net ERHC acreage
|
|
|
|
|
|
Manga
|
|
100%
|
|
6,477 square kilometers or 1,600,501 acres
|
|
|
|
|
|
BDS 2008
|
|
100%
|
|
16,360 square kilometers or 4,042,644 acres
|
|
|
|
|
|
Chari-OuestOust III
|
|
50%
|
|
4,500 square kilometers or 1,111,974 acres
|
|
(a)
|
As of March 31, 2013, management was pursuing the formal extension of timelines for the commencement of the work program and meeting of pecuniary obligations under the PSC with the Government of Chad. ERHC’s work program in Chad for 2013 and 2014 has subsequently been approved by the government of Chad. The work program involves a Full Tensor Gravity Gradiometry (FTG) survey to define the major structural elements of ERHC’s BDS 2008 block, which is the focus block for the approved work program. The FTG will be preceded by an Environmental Impact Assessment (EIA) of the focus area. FTG acquisition measures minute changes of the earth's gravity caused by differences in density in the local geology. When combined with known geologic information, FTG data will be used to assess geological structures. This activity will help the Company better identify potential leads and prospects and help determine where future additional 2D seismic acquisition is required
.
|
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%
|
|
·
|
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 Kina-1 well in JDZ Block 4
|
|
·
|
The Bomu-1 well in JDZ Block 2
|
|
·
|
The Lemba-1 well in JDZ Block 3
|
|
·
|
The Malanza-1 well and Oki East-1 well in Block 4
|
|
1.
|
The operators (Addax and Sinopec), the rest of the parties and the JDA could agree to enter into Phase 2 of the exploration program which requires the drilling of at least one more well in each Block.
|
|
2.
|
The operators, the rest of the parties and the JDA could agree upon a further extension of Exploration Phase 1.
|
|
3.
|
The operators could decide not to pursue future exploration of the Blocks and terminate their involvement in the Blocks, leaving the rest of the parties and the JDA to decide whether to adopt any of the two other courses of action stated before.
|
|
·
|
Issue shares of common stock through a registered direct offering
|
|
·
|
Convertible Loans and other debt instruments
|
|
·
|
Farm-outs of part of the Company’s assets in Kenya, Chad and the São Tomé and Príncipe Exclusive Economic Zone (EEZ)
|
|
·
|
Other available financing options
|
Item 3.
|
Quantit
ativ
e and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls
an
d Procedures
|
Item 1.
|
Legal Pro
cee
dings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Submission of Matters to A Vote of Security Holders
|
Item 5.
|
Other Information
|
Item 6.
|
Exh
ibit
s
|
Name
|
Title
|
Date
|
|
|
|
/s/ Peter Ntephe
|
President
|
May 14, 2013
|
Peter Ntephe
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Chief Executive Officer
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|
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|
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/s/ Sylvan Odobulu
|
Vice President (Admin) and Controller
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May 14, 2013
|
Sylvan Odobulu
|
Principal Accounting Officer
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1 Year ERHC Energy (CE) Chart |
1 Month ERHC Energy (CE) Chart |
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