9. DEBT AND INTEREST EXPENSE

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

9. DEBT AND INTEREST EXPENSE

	March 31,			December 31,
	2016			2015
Variable rate revolving credit agreement payable to Société Générale,
CIT Bank, NAC, and LegacyTexas Bank, maturing May 20, 2017,
secured by the stock of Exploration and its interest in POL, and
guaranteed by The Yuma Companies, Inc.	$	29,800,000		$	29,800,000
Installment loan due February 29, 2016, originating from the
financing of insurance premiums at 3.74% interest rate.		-			108,894
Installment loan due June 11, 2016, originating from the
financing of insurance premiums at 3.76% interest rate.		62,186			154,741
		29,862,186			30,063,635
Less:  current portion		(29,862,186	)		(30,063,635	)
Total long-term debt	$	-		$	-

On December 30, 2015, the Company’s wholly owned subsidiary, Yuma Exploration and Production Company, Inc. (“Exploration”) entered into the Waiver, Borrowing Base Redetermination and Ninth Amendment (“Ninth Amendment”) to the credit agreement dated August 10, 2011 with SocGen as Administrative Agent and Issuing Banks, and each of the lenders and guarantors.  Pursuant to the Ninth Amendment, the borrowing base was reduced to $29.8 million and will automatically be reduced to $20.0 million on May 31, 2016 unless otherwise reduced by or to a different amount by the lenders under the credit agreement.  The Ninth Amendment also provided a waiver of the financial covenant related to the maximum permitted ratio of funded debt to EBITDA for the fiscal quarter ended September 30, 2015 and any failure to comply with that financial covenant and certain other financial covenants for the fiscal quarter ended December 31, 2015.  Pursuant to the Ninth Amendment, Exploration agreed that on or before February 6, 2016, it would engage an investment bank to explore strategic options for its finances and, on or before March 31, 2016, would either enter into an underwritten commitment for additional capital in an aggregate amount sufficient to pay any borrowing base deficiency then existing or enter into a definitive agreement for the acquisition by a third party of all or substantially all of the assets of Exploration and its subsidiaries by merger, asset purchase, equity purchase or other structure acceptable to the Administrative Agent and the lenders.  On February 10, 2016, the Company entered into the merger agreement with Davis (see Note 14 – Agreement and Plan of Merger and Reorganization), and expects to enter into another amendment to the credit agreement to account for the contemplated merger with Davis.

Costs and fees paid to the banks in connection with the revolving credit facility are amortized through May 31, 2016, due to the possible accelerated maturity date pursuant to the Ninth Amendment.  SocGen, as Agent Bank, is also paid an annual administrative fee of $25,000 that is usually amortized over the year, but will also be amortized through May 31, 2016.

The terms of the credit agreement require Exploration to meet a specific current ratio, interest coverage ratio, and a funded debt to EBITDA ratio.  The credit agreement also contains a covenant requiring ten percent availability under the current borrowing line in order to pay dividends on the Series A Preferred Stock.  In addition, the credit agreement requires the guarantee of the Company.  Exploration was not in compliance with all of the loan covenants as of March 31, 2016; however, it is in discussion with the lenders under the credit facility to obtain a waiver of those violations.

The following summarizes interest expense for the three months ended March 31, 2016 and 2015.

	Three Months Ended
	March 31,
	2016			2015
Credit agreement	$	257,728		$	241,294
Credit agreement commitment fees		-			15,828
Amortization of credit agreement loan costs		262,474			65,144
Insurance installment loan		1,670			1,726
Other interest charges		4,940			837
Capitalized interest		(124,164	)		(232,822	)
Total interest expense	$	402,648		$	92,007