7. Notes and advances payable

Notes payable consist of the following as of December 31, 2012 and September 30, 2013:


	2012		2013
Officers, directors and affiliates:
Notes and advances payable, interest at 8.0%, due on demand	$	12,882	$	14,234
Notes and advances payable, interest at 9.7%, due on demand		85,000		85,000
Note payable, interest at 7.5%, due March 2015		150,000		150,000
Collateralized note payable (see below)		261,109		827,404

Total officers, directors and affiliates		508,991		1,076,638
Less: Current portion of officers, directors, and affiliates		508,991		926,638

Long-term portion of officers, directors, and affiliates	$	—	$	150,000

Unrelated parties:
Notes payable, interest at 7.5%, due March 2015		250,000		225,000
Notes payable, interest at 7.0%, due July 2014		—		44,000
Notes payable, interest at 7.0%, due July 2014		—		506,000

Total unrelated parties		250,000		775,000
Less: Current portion of unrelated parties		250,000		625,000

Long-term portion of unrelated parties	$	—	$	150,000

On September 29, 2012, the Company borrowed $425,000 from an affiliate of a 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 March 31, 2013 was $261,109 and was paid in full April 29, 2013.

On April 29, 2013, the Company executed a promissory note under which the Company agreed to pay Apex Financial Services Corp, a Colorado corporation, (“Apex”) the principal sum of $1,000,000, with interest accruing at an annual rate of 7.5%, with principal and interest due on May 31, 2014. 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 assets sales to Apex to secure the debt. Apex is 100% owned by the CEO, director, and shareholder of the Company, Nicholas L. Scheidt. The Company borrowed the full amount of principal on the note, and also paid a loan fee of $10,000. In the event of default on the note and failure to cure the default in ten days, Apex may accelerate payment and the annual interest rate on the note will accrue at 18%. Default includes failure to pay the note when due or if the Company borrows any other monies or offers security in the Company or in the collateral securing the note prior to the note being paid in full. The outstanding principal balance as of September 30, 2013 was $827,404.

All of the notes payable shown above are unsecured, except the Apex note. Accrued interest on notes and advances payable amounted to $48,359 as of December 31, 2012 and $52,261 as of September 30, 2013.