ERHC Energy Inc (ERHE)

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Thanks Mabenn!

Anyone know of tax implications for switching over to AIM shares?

Would we lose the long term capital gains status on our stock and have to hold the new stock for another year?

Would we be required to report it as a sale and declare gains or losses?

Would we have to pay additional taxes on sales of AIM shares (when sold)?

I have owned Canadian stocks in the past and had to pay Canadian taxes in addition to us taxes. (for oil trusts)

Plan is to list on the AIM by the end of 2009. The plan is to form ERHC Energy
plc, listed on the AIM. The current ERHE Energy, Inc will remain listed on the OTC. Shareholders will have the option of keeping their shares on the OTC in ERHE Inc, or trading
them for Shares on the AIM in ERHE plc. ERHE plc will own ERHC Energy (BVI) ltd - which owns the EEZ rights, and the plc would also own ERHC Energy (Cayman) ltd - which owns the JDZ rights. So, say there are 700,000 shares outstanding the day before the AIM conversion. Further say that shareholders convert 560,000 shares over to the AIM in ERHC plc and 140,000 shares remain on the OTC in ERHC Inc. The day after the transition there will be the same number of shares outstanding as the day before. So on day one in this example, ERHC Inc would own 20% of ERHC plc, and the remaining 80% of ERHC plc will be owned by direct shareholders on the AIM.

Peter was also careful to explain that the plan will be published to all shareholders and a special general meeting will be held for shareholders to vote on the plan before it is implemented. The plan must be approved by shareholders, but I think we all know it is a foregone conclusion that any plan presented will be approved. Assuming it is approved, there would then be an open "enrollment period" in which shareholders could elect to convert their shares or not.

The question was asked how this plan adds shareholder value. Peter explained that companies on the OTC are not taken seriously. He stated anecdotal evidence where they had with interested parties who after hearing the ERHC story would be very interested in getting involved, but then quickly stated that they do not get involved with OTC companies. Management believes that the AIM values emerging oil companies like ERHC much more fairly that the OTC, and that this fact alone will add shareholder value. Management feels they will be able to attract lines of financing if they are listed on the AIM.

Your next question will be how would the split ownership between ERHC Inc and ERHC plc be impacted by any future dilution. Say the company has 700M shares outstanding at a current market cap of $350M at a pps of $0.50, with 80% owned thru the plc (AIM) and 20% owned thru the Inc. (OTC). Say the company makes a secondary offering on the AIM and raises $100M by selling 200M shares. There are now 900M shares outstanding and a market cap of $450M. The 140,000 Inc (OTC) shares previously owned 20% of a $350M market cap ($70M). After the offering they would still own 140,000 shares which would nor represent 15.5% of a $450M market cap ($70M). Of course the foregoing presumes on change in share price, but you get the idea.