(7) Notes Receivable
On May 3, 2011, the Company made a $500,000 loan to AxoGen Corporation (“AxoGen”) and was
given a note in return that bears interest at an annual rate of 8%, has a maturity date of June 30,
2013, is secured by AxoGen assets and is subordinated to the interests of AxoGen’s senior lenders.
On May 31, 2011, AxoGen issued a Subordinated Secured Convertible Promissory Note in the
principal amount of $2,000,000 (the “Note”) to LecTec. The Note bears interest at an annual rate
of 8%, has a maturity date of June 30, 2013 and is secured by a pledge of all of the assets of
AxoGen, which pledge is subordinated to a prior security interest in all of AxoGen’s assets held by
AxoGen’s senior lenders. There is no penalty for AxoGen’s prepayment of the Note. At any time
prior to the Note being paid in full and the closing of a business combination transaction between
LecTec and AxoGen, LecTec can convert all principal and accrued interest into shares of AxoGen’s
common stock at a conversion price based on a set valuation of AxoGen.