Notes and Advances Payable

12 Months Ended

Dec. 31, 2012

Notes and Advances Payable

5. Notes and Advances Payable

Notes and advances payable consist of the following as of December 31, 2011 and 2012:

	2011		2012
Officers, directors and affiliates:
Notes and advances payable, interest at 8.0%, due on demand	$	24,319	$	12,882
Notes and advances payable, interest at 9.7%, due on demand		85,000		85,000
Note payable, interest at 12.0%, due March 2013		—		150,000
Collateralized note payable (see below)		—		261,109
Total officers, directors and affiliates		109,319		508,991
Unrelated parties:
Note payable, interest at 12.0%, due March 2012		250,000		—
Notes payable, interest at 12.0%, due March 2013		—		250,000
Total unrelated parties		250,000		250,000
Total notes and advance payable	$	359,319	$	758,991

In May 2011, the Company received proceeds from a bridge loan of $250,000 from two unrelated individuals at 12% annual interest. The loan was secured by shares of common stock owned by the CEO of the Company and due on August 31, 2011 and verbally extended to March 2012 when it was repaid. In July 2011, the Company received proceeds from a second bridge loan of $340,000 from three unrelated individuals at 10% annual interest. The loan was unsecured and paid in full in December 2011.

During 2011, the Company obtained a note for a maximum $850,000 from a stockholder who was subsequently appointed to the Company’s board of directors in November 2012. The annual interest rate was 12% plus processing and loan fees to be determined by the usage of the line and length of the outstanding balance. The note was paid in full at December 31, 2011.

On September 29, 2012, the Company borrowed $425,000 from an affiliate of this stockholder and director under a note agreement that provides for interest at the stated annual rate of 12% (and an effective annual rate of 17.8%) with unpaid principal and interest due on March 29, 2013. The outstanding principal balance as of December 31, 2012 was $261,109. The Company also agreed to assign 75% of its operating income from its oil and gas operations and any lease or well sale or any other asset sales to the note holder to secure the debt.

All of the other notes payable shown above are unsecured. Accrued interest on notes and advances payable amounted to $88,303 as of December 31, 2011 and $48,359 as of December 31, 2012.