Debt

Debt consists of the following (in thousands):



	December 31, 2017		December 31, 2016
Line of credit with FGI	$	—	$	1,458
$2.0 million, 8% shareholder note due 2017 (1)	—		1,803
Total debt	—		3,261
Less current portion	—		(3,261		)
Long-term portion	$	—	$	—

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(1)	Debt discount related to extinguishment and amendment of previous outstanding debt. The aggregate amount of unamortized debt discount was $0.2 million at December 31, 2016. For additional information, refer to the respective discussions below.

Line of Credit with FGI

The Company maintained a $7.5 million secured demand facility with FGI backed by the Company's receivables and inventory. The Company also granted FGI a first lien collateral interest in substantially all of the Company's assets. On September 8, 2017, concurrent with the sale of the DuraFit business (see Note 4), the Company repaid all outstanding balances under this demand facility and terminated the loan agreements and all commitments thereunder. In connection with termination of the loan agreements, FGI terminated and released all of its security interests in and liens on all of the assets of the Company and its subsidiaries.

The interest rate on advances or borrowings under the FGI facility was the greater of (i) 6.50% per annum and (ii) 2.50% per annum above the prime rate, as defined in the FGI facility and was 6.50% at December 31, 2016.

Kanis S. A. Indebtedness

On April 1, 2016, the Company executed a Promissory Note (the “Kanis Note”) and entered into an amendment of existing loan agreements (the “Kanis Agreement”) with Kanis S.A. Pursuant to the terms of the Kanis Note, Kanis S.A. agreed to lend the Company $2.0 million at 8% per annum with a maturity date of September 30, 2017. Pursuant to the terms of the Kanis Agreement, the Company and Kanis S.A. agreed to amend prior loans with an aggregate outstanding principal balance of $7.5 million (collectively, the “Loan Agreements”), such that: (i) Kanis S.A. had the right to convert the principal balance of the Loan Agreements and any accrued interest thereon into common stock of the Company at any time prior to maturity at a conversion price equal to the lower of the closing price of CDTi’s common stock on the date before the date of the Kanis Agreement or as of the date when Kanis S.A. exercises its conversion right; and (ii) the Company had the right to mandatorily convert the $7.5 million principal balance and any accrued interest thereon into its common stock upon maturity of the Loan Agreements or earlier upon the occurrence of a Liquidity Event at a conversion price equal to the lower of the closing price of CDTI as of the date immediately before the date of the Kanis Agreement or at a 25% discount to the Liquidity Event price. A Liquidity Event is defined as a strategic investment in CDTi or a public stock offering by CDTi. The Company could prepay the principal and any interest due on the Loan Agreements at any time before their maturity date without penalty.

Certain features of the Kanis Note resulting from the Kanis Agreement required bifurcation and were determined to be an embedded derivative comprised of a conversion feature and a call option. The embedded derivative was separated from the Kanis Note and carried as a derivative liability on the balance sheet at fair value, with changes in fair value reported through earnings. The conversion feature could have been exercised at either $3.60, which is the closing stock price the day prior to the original agreement or at the market price when the conversion was exercised. The call option could have been executed by the Company in the event the Company completes a Liquidity Event. The call option would be settled at a 25% discount to the Liquidity Event pricing. In addition, the Kanis Agreement was considered to trigger an extinguishment of the debt. As a result the Company recorded a loss of approximately $1.6 million for the three and six months ended June 30, 2016 in connection with the Kanis agreement. For additional information on the bifurcated derivative liability, please see Note 14, “Fair Value Measurements”.

On June 30, 2016, the Company entered into a Letter Agreement (the “Kanis Exchange Agreement”) with Kanis S.A. The Company agreed to an exchange with Kanis of an aggregate of $7.5 million in principal amount of promissory notes and other indebtedness (collectively, the “Kanis Notes”) held by Kanis, plus accrued interest, for a number of shares of the Company’s common stock equal to (a) the principal amount of the Kanis Notes plus the accrued interest thereon through and including the date of the settlement of the exchange contemplated by the Kanis Exchange Agreement, divided by (b) $1.6215.

At a special meeting of stockholders held on August 25, 2016, the Company's stockholders approved the transactions contemplated by the Kanis Exchange Agreement. On August 30, 2016, the Company consummated the Kanis Exchange Agreement, pursuant to which an aggregate of 4,872,032 shares of common stock was issued to Kanis in exchange for the delivery to the Company of the Kanis Notes and the extinguishment of $7.9 million of indebtedness, including $0.4 million of accrued interest and the bifurcated derivative liability. The exchange resulted in a loss on extinguishment of $10.2 million. Subsequent to the August 30, 2016 conversion, the Company’s sole remaining debt with Kanis S.A. was the loan agreement for $2.0 million, at 8% interest per annum with a maturity date of September 30, 2017, entered into on April 1, 2016.

In January 2017, the Company repaid the entire $2.0 million balance.

Director note

On April 11, 2016, the Company executed a Convertible Promissory Note (the “Director Note”) with Lon E. Bell, Ph.D., one of the Company’s Directors. Pursuant to the terms of the Director Note, Dr. Bell agreed to lend the Company $0.5 million at 8% per annum and a maturity date of September 30, 2017. Dr. Bell had the right to convert the principal balance of the Director Note and any accrued interest thereon into common stock of the Company at any time prior to maturity at a conversion price equal to the lower of the closing price of CDTi on the date before the date of the Director Note or as of the date when Dr. Bell exercises his conversion right. The Company had the right to mandatorily convert the principal balance of the Director Note and any accrued interest thereon into its common stock upon maturity at a conversion price equal to the lower of the closing price of CDTi on the date before the date of the Director Note or on the maturity date. The Company also had the right to mandatorily convert the principal amount of the Director Note plus accrued interest thereon into its common stock concurrently with the closing of a Liquidity Event, as defined, at a conversion price equal to the lower of the closing price of CDTi as of the date immediately before the date of this Director Note or at a 25% discount to the Liquidity Event price. A Liquidity Event is defined as a strategic investment in CDTi or a public stock offering by CDTi.

Effective May 12, 2016, the Director Note was amended and restated to amend the conversion features contained therein. The Director Note, which originally had a floating conversion price, allowed Dr. Bell to convert the principal balance of the note and any accrued interest thereon at any time before payment into shares of the Company’s common stock at a fixed conversion price of $3.55 per share (subject to adjustment for stock splits, reverse stock splits, and similar events) (the “Conversion Price”), which was the closing consolidated bid price of the Company’s common stock on the trading day immediately prior to the date of issuance. In addition, the Company had the right to mandatorily convert the principal balance of the Director Note plus any accrued interest into shares of the Company’s common stock at the Conversion Price upon the earlier of the Maturity Date and the closing of a Liquidity Event if, and only if, the Conversion Price was less than the average closing price of the Company’s common stock for the five consecutive trading days ending on the trading day immediately preceding the date the Company exercises its conversion rights.

On June 30, 2016, the Company entered into a Letter Agreement (the “Bell Exchange Agreement”) with Dr. Bell. The Company agreed to an exchange with Dr. Bell of the Director Note for a number of shares of the Company’s common stock equal to (a) the principal amount of the Bell Note plus the accrued interest thereon through and including the date of the settlement of the exchange contemplated by the Bell Exchange Agreement, divided by (b) $1.6215.

At a special meeting of stockholders held on August 25, 2016, the stockholders approved the transactions contemplated by the Bell Exchange Agreement. On August 30, 2016, the Company consummated the Bell Exchange Agreement transaction, pursuant to which an aggregate of 317,950 shares of common stock was issued to Dr. Bell in exchange for the delivery to the Company of the Bell Note and the extinguishment of $0.5 million of indebtedness, including accrued interest. The exchange resulted in a loss on extinguishment of $0.6 million.

Note Purchase Agreement and Convertible Notes

On June 30, 2016, the Company also entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Haldor Topsøe A/S, a company organized under the laws of Denmark (“Haldor Topsøe”). The Company agreed to sell and issue (i) a Senior Convertible Promissory Note (the “Senior Note”) in the principal amount of $0.75 million and (ii) a Convertible Promissory Note (the “Note”, and with the Senior Note, the “Convertible Notes”) in the principal amount of $0.5 million, each of which is convertible into the Company’s equity securities.

The Convertible Notes provided for interest at a rate of 8% per annum, were to mature on December 31, 2017 and bore no prepayment penalty. The Convertible Notes provided that they shall at no time be convertible into more than 779,350 shares (subject to adjustment for stock splits, reverse stock splits, and similar events) of the Company’s common stock and/or other securities convertible or exercisable for such number of shares of the Company’s common stock.

The Convertible Notes permitted Haldor Topsøe to convert the principal balance of the Convertible Notes into shares of the Company’s common stock at a fixed conversion price of $1.6215 per share at any time. In addition, the Senior Note permitted Haldor Topsøe to convert the principal balance of the Senior Note into equity securities that the Company may issue in a future financing including any instruments or securities exchangeable for or convertible into equity securities, at the same price and on the same terms at which the Company sells equity securities in such future financing. The Company had the right to mandatorily convert the Convertible Notes. As long as the Company’s common stock continued to be listed on The NASDAQ Stock Market, LLC (“NASDAQ”) and the Company was not in default under the Note, the Company had the right to mandatorily convert the principal balance of the Note into shares of its common stock at the conversion price of $1.6215 per share at any time before payment and following the date of conversion of the Kanis Notes into the Company’s common stock. The Company has the right to mandatorily convert the Senior Note, subject to satisfaction of the same conditions to conversion of the Note, upon consummation of a Qualified Financing into the equity securities the Company issues in the Qualified Financing at the same price and on the same terms at which it sells such equity securities in the Qualified Financing. A “Qualified Financing” is defined as an equity or equity-linked financing in which the Company received aggregate gross proceeds of at least $5.0 million (including the principal amount of the Senior Note converted in such financing).

Accrued interest under the Convertible Notes is not convertible into the Company’s equity securities and any interest that has accrued on principal amount converted into equity securities will be paid in cash at the time of such conversion.

Pursuant to the Note Purchase Agreement, the Company agreed, if requested by Haldor Topsøe, to expand the size of its board of directors by one member and appoint one person designated by Haldor Topsøe. Thereafter, until the later of (i) the date that the Convertible Notes have been paid in full or (ii) if 100% of the principal amount of the Convertible Notes have been converted into the Company’s common stock and/or other equity securities, the date Haldor Topsøe no longer owns at least eighty percent (80%) of such securities, the Company’s board shall include one person designated by Haldor Topsøe in the board’s slate of nominees to be submitted to stockholders at each meeting of stockholders of the Company where directors are to be elected.

On August 30, 2016, Haldor Topsøe elected to convert the Note for which the Company issued to Haldor Topsøe an aggregate of 308,357 shares of common stock in conversion of $0.5 million in principal amount of indebtedness. On December 16, 2016, Haldor Topsøe elected to convert the Senior Note, and issued to Haldor Topsøe and aggregate of 462,535 shares of common stock in conversion of $0.75 million in principal amount of indebtedness.

For additional information on the warrants discussed within this Note, refer to Note 12, "Stockholders' Equity" and Note 13 "Warrants", respectively.