NOTES PAYABLE

Notes payable consist of the following:



	December 31,
	2012		2011
Note payable to a Bank, maturing June 2021; with monthly payments of approximately $36,000 of principal and interest at prime plus .5% (3.75% at December 31, 2012); collateralized by principally all assets of the Company.	$	2,209,415	$	2,424,560
Note payable to a Bank, maturing April 2021; with monthly payments of approximately $6,200 of principal and interest at prime at variable rate (5.29% at December 31, 2012); collateralized by certain property of the Company.	499,007		545,499
A capital lease obligation, for machinery and equipment maturing in 2013, with interest at approximately 7%.	3,228		102,321
Installment notes, collateralized by certain machinery and equipment maturing at various dates, primarily through 2015, with interest at 1.0% through 6.7%.	279,107		332,177

	2,990,757		3,404,557
Less current maturities	329,529		411,561

	$	2,661,228	$	2,992,996

The Company’s note payable, with a balance of $2,209,415 at December 31, 2012, is guaranteed in part by the U.S. Department of Agriculture Rural Business - Cooperative Services (USDA). The note payable is secured by all of the assets of the Company. The loan agreement includes certain restrictive covenants, which require the Company to maintain minimum levels of tangible net worth and places limits on annual capital expenditures. At December 31, 2012, the Company was in compliance with all covenants pursuant to the loan agreement as amended except for the payment of a cash dividend on December 31, 2012, for which the Company received approval prior to payment.

The aggregate amounts of notes payable and capital leases maturing in each of the next five years and thereafter are as follows:



Year Ending December 31,

2013	$	329,528
2014	328,496
2015	317,143
2016	317,420
2017	330,819
Thereafter	1,367,351

	$	2,990,757

The remaining amount of capitalized lease payments due in 2013 are as follows:



Year ending December 31,

2013 payments	$	3,263
Less amounts representing interest (at approximately 7%)	35

	$	3,228

Fixed assets under capital leases at December 31, 2012 and 2011 were approximately $64,000 gross carrying costs, with accumulated depreciation of approximately $49,000 and $40,000, respectively.