RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2017

NOTE 12—RELATED PARTY TRANSACTIONS

In May 2015, the Company entered into a participation agreement with Providence (the "Participation Agreement"). As discussed elsewhere in this report, Providence is also the Company's primary lender through which the Company currently maintains the $5,000,000 initial line of credit (Note 7). The Participation Agreement grants Providence the option to acquire up to a 50% interest and participate in any oil and gas development on acreage the Company obtains through its Kingdom services agreement and any other leases acquired by the Company within an area of mutual interest ("AMI"). The AMI covers an area in Adams County, Colorado containing all of Township 1 South, Range 67 West, consisting of approximately 23,100 gross acres, with an additional one-mile border around the township, plus any other mutually agreeable areas. Providence currently holds 13.3% of the Company's outstanding common stock.

At March 31, 2017, the Company had drawn $5,000,000 on the initial line of credit and recorded related accrued interest of $401,107. Interest expense related to the line of credit for the three months ended March 31, 2017 and 2016 amounted to $98,630 and $21,185, respectively.

Private Placement

During December 2016 and January 2017, the Company completed a private placement of 200 units at an offering price of $50,000 per unit (Note 7). Certain of the units were purchased by the Company's directors and officers in the following amounts and on the following dates on the same terms and conditions as independent third parties:

Name of Beneficial Owner	Number of Units Purchased		Issuance Date
Bill M. Conrad		2.0	December 30, 2016
Stephen J. Foley		2.0	December 30, 2016
Frederick J. Witsell		1.7	January 20, 2017
Paul D. Maniscalco		1.0	December 30, 2016
William B. Lloyd		2.0	December 30, 2016
William R. Givan		1.0	December 30, 2016
Jon B. Kruljac		2.2	January 20, 2017
Scott C. Chandler		0.5	January 20, 2017
Douglas R. Harris		2.0	December 30, 2016
James H. Sinclair		2.0	December 30, 2016

On April 1, 2017 the Company entered into an employment agreement with Jon B. Kruljac (Note 13). Prior to joining the Company as an employee, Mr. Kruljac served as a broker for an agent participating in the private placement of units (Note 7). Mr. Kruljac was paid a commission totaling $209,988 for his services, which was paid in accordance with a placement agent agreement and arrangements the placement agent had with certain subagents. As additional sales compensation, Mr. Kruljac was allocated a portion of the placement agent warrant to purchase up to 154,358 shares of the Company's common stock at an exercise price of $1.50 per share.