Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one)~~:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant of Section 13(a) of the Exchange Act ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 30, 2017,~~May 9, 2022, the registrant had ~~35,824,960~~171,725,080 shares of common stock outstanding.

	September 30, 2017			December 31, 2016			March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	52,897		$	73,488		$	9,397		$	22,245
Marketable securities								9,989			9,996
Accounts receivable		442			327			4,361			5,134
Inventories								5,172			3,909
Prepaid expenses and other current assets		754			820			4,584			3,110
Inventories, net		1,254			803
Total current assets		55,347			75,438			33,503			44,394
Property and equipment, net		13,854			13,589			4,778			4,675
Operating lease right-of-use assets								9,472			9,766
Restricted cash		260			260			1,131			1,551
Other assets		218			281			155			153
Total assets	$	69,679		$	89,568		$	49,039		$	60,539
Liabilities and stockholders’ equity
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	993		$	962		$	3,385		$	2,832
Accrued expenses and other current liabilities		5,513			4,908			8,950			8,338
Current portion of notes payable		1,416			1,269
Deferred revenue		2,076			2,445			338			518
Current portion of lease incentives		247			301
Total current liabilities		10,245			9,885			12,673			11,688
Notes payable, net of current portion		40,089			39,504
Lease incentives, net of current portion		751			792
Notes payable								48,257			47,790
Operating lease liabilities, net of current portion								9,060			9,359
Deferred revenue, net of current portion								47			28
Other liabilities		467			49			4,653			4,577
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2016 and December 31, 2016		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized; 35,796,722 and 30,482,712 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		36			30
Commitments and contingencies (see Note 13)
Stockholders’ deficit
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021								—			—
Common stock, $0.001 par value; 400,000,000 shares authorized; 171,412,940 and 166,400,892 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively								171			166
Additional paid-in capital		266,014			242,997			462,900			459,151
Accumulated other comprehensive loss								(11	)		(4	)
Accumulated deficit		(247,923	)		(203,689	)		(488,711	)		(472,216	)
Total stockholders’ equity		18,127			39,338
Total liabilities and stockholders’ equity	$	69,679		$	89,568
Total stockholders’ deficit								(25,651	)		(12,903	)
Total liabilities and stockholders’ deficit							$	49,039		$	60,539

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2022			2021
Revenue:
Product revenue	$	739		$	580		$	2,105		$	1,168		$	3,844		$	4,650
Research revenue		369			504			900			2,003
Contribution revenue														3,390			2,306
Total revenue		1,108			1,084			3,005			3,171			7,234			6,956
Costs and expenses:
Cost of product revenue		2,106			1,894			5,722			4,701			6,205			5,790
Research and development		5,880			5,200			19,577			18,160			6,656			4,665
Selling, general and administrative		5,559			5,935			17,192			18,282			9,230			6,203
Total costs and expenses		13,545			13,029			42,491			41,143			22,091			16,658
Loss from operations		(12,437	)		(11,945	)		(39,486	)		(37,972	)		(14,857	)		(9,702	)
Interest expense, net		(1,718	)		(876	)		(5,008	)		(2,416	)
Other income (expense):
Interest income														3			6
Interest expense														(1,650	)		(1,013	)
Other income, net		79			38			260			133			9			49
Net loss and comprehensive loss	$	(14,076	)	$	(12,783	)	$	(44,234	)	$	(40,255	)
Total other expense														(1,638	)		(958	)
Net loss													$	(16,495	)	$	(10,660	)
Net loss per share — basic and diluted	$	(0.45	)	$	(0.51	)	$	(1.43	)	$	(1.64	)	$	(0.10	)	$	(0.07	)
Weighted-average number of common shares used in computing net loss per share — basic and diluted		31,420,726			25,027,751			30,873,930			24,524,508			169,855,170			148,231,412

Other comprehensive loss:
Net loss													$	(16,495	)	$	(10,660	)
Net unrealized gain (loss) on marketable securities arising during the period														(7	)		9
Less: net realized gain on marketable securities included in net loss														—			(2	)
Total other comprehensive (loss) income, net of taxes														(7	)		7
Comprehensive loss													$	(16,502	)	$	(10,653	)

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ DEFICIT

Nine Months Ended
September 30,

2017

2016

Cash flows from operating activities

Net loss

$
(44,234
)

$
(40,255
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,194

1,626

Stock-based compensation expense

3,806

3,659

Loss on sale of T2 owned equipment

134

—

Non-cash interest expense

1,968

459

Deferred rent

(95
)

(187
)
Changes in operating assets and liabilities:

Accounts receivable

(115
)

(10
)
Prepaid expenses and other assets

129

(118
)
Inventories, net

(451
)

(654
)
Accounts payable

31

(132
)
Accrued expenses and other liabilities

361

797

Deferred revenue

(369
)

(1,328
)
Net cash used in operating activities

(36,641
)

(36,143
)
Cash flows from investing activities

Purchases of property and equipment

(843
)

—

Purchases of T2-owned equipment

(1,758
)

(4,594
)
Net cash used in investing activities

(2,601
)

(4,594
)
Cash flows from financing activities

Payment of offering costs for issuance of common stock in public offering

(37
)

(385
)
Proceeds from issuance of common stock and stock options exercises, net

717

736

Proceeds from issuance of common stock in connection with private offering, net of
offering costs

37

—

Proceeds from private investment in public entity

—

39,723

Proceeds from confidentially marketed public offering

18,832

—

Proceeds from notes payable, net of issuance costs

—

4,593

Repayments of note payable

(898
)

(2,481
)
Net cash provided by financing activities

18,651

42,186

Net decrease in cash and cash equivalents

(20,591
)

1,449

Cash and cash equivalents at beginning of period

73,488

73,662

Cash and cash equivalents at end of period

$
52,897

$
75,111

Supplemental disclosures of cash flow information

Cash paid for interest

$
2,967

$
1,881

Supplemental disclosures of noncash investing and financing activities

Accrued property and equipment

$
90

$
133

	Common				Additional					Accumulated Other		Total
	Stock				Paid-In		Accumulated			Comprehensive		Stockholders’
	Shares		Amount		Capital		Deficit			Income (Loss)		Deficit
Balance at December 31, 2020		148,078,974	$	148	$	431,544	$	(422,975	)	$	9	$	8,726
Stock-based compensation expense		—		—		1,308		—					1,308
Issuance of common stock from vesting of restricted stock and exercise of stock options		412,699		—		53		—					53
Unrealized gain on marketable securities		—		—		—		—			7		7
Net loss		—		—		—		(10,660	)				(10,660	)
Balance at March 31, 2021		148,491,673	$	148	$	432,905	$	(433,635	)	$	16	$	(566	)

	Common						Additional						Accumulated Other			Total
	Stock						Paid-In			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Capital			Deficit			Income (Loss)			Deficit
Balance at December 31, 2021		166,400,892		$	166		$	459,151		$	(472,216	)	$	(4	)	$	(12,903	)
Stock-based compensation expense		—			—			2,552			—			—			2,552
Issuance of common stock from vesting of restricted stock		2,002,048			2			(2	)		—			—			—
Surrender of shares due to tax withholding		(539,360	)		(1	)		(229	)		—			—			(230	)
Issuance of common stock from secondary offering, net		3,549,360			4			1,428			—			—			1,432
Unrealized loss on marketable securities		—			—			—			—			(7	)		(7	)
Net loss		—			—			—			(16,495	)		—			(16,495	)
Balance at March 31, 2022		171,412,940		$	171		$	462,900		$	(488,711	)	$	(11	)	$	(25,651	)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities
Net loss	$	(16,495	)	$	(10,660	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		286			383
Amortization of bond premium		—			38
Amortization of operating lease right-of-use assets		294			428
Stock-based compensation expense		2,552			1,308
Change in fair value of derivative instrument		—			(829	)
Gain on sales of marketable securities		—			(2	)
Non-cash interest expense		543			915
Changes in operating assets and liabilities:
Accounts receivable		773			1,065
Prepaid expenses and other assets		(1,476	)		(28	)
Inventories		(1,534	)		(1,426	)
Accounts payable		553			1,798
Accrued expenses and other liabilities		502			(978	)
Deferred revenue		(161	)		27
Operating lease liabilities		(278	)		(747	)
Net cash used in operating activities		(14,441	)		(8,708	)
Cash flows from investing activities
Proceeds from maturities of marketable securities		—			2,750
Purchases and manufacture of property and equipment		(29	)		(197	)
Net cash provided by investing activities		(29	)		2,553
Cash flows from financing activities
Payment of employee restricted stock tax withholdings		(230	)		—
Proceeds from issuance of shares from employee stock purchase plan and stock option exercises		—			53
Proceeds from issuance of common stock in public offerings, net of offering costs		1,432			—
Net cash provided by financing activities		1,202			53
Net decrease in cash, cash equivalents and restricted cash		(13,268	)		(6,102	)
Cash, cash equivalents and restricted cash at beginning of period		23,796			17,344
Cash, cash equivalents and restricted cash at end of period	$	10,528		$	11,242
Supplemental disclosures of cash flow information
Cash paid for interest	$	1,106		$	928
Supplemental disclosures of noncash activities
Transfer of T2 owned instruments and components (from) to inventory	$	(271	)	$	(537	)
Purchases of property and equipment included in accounts payable and accrued expenses	$	134		$	100

T2 Biosystems, Inc. and its subsidiary (the ~~“Company”~~“Company,” “we,” or “T2”) have operations based in Lexington, Massachusetts. T2 Biosystems, Inc. was incorporated on April 27, 2006 as a Delaware ~~corporation with operations based in Lexington, Massachusetts.~~corporation. The Company is an in vitro diagnostics company that has developed an innovative and proprietary technology platform that offers a rapid, sensitive and simple alternative to existing diagnostic methodologies. The Company ~~is using its T2 Magnetic Resonance technology (“T2MR”) to develop~~has developed a broad set of applications aimed at lowering mortality rates, improving patient outcomes and reducing the cost of healthcare by helping medical professionals make targeted treatment decisions earlier. ~~T2MR~~Our technology enables rapid detection of pathogens, biomarkers and other abnormalities in a variety of unpurified patient sample types, including whole blood, plasma, serum, saliva, sputum, cerebral spinal fluid and urine, and can detect cellular targets at limits of detection as low as one colony forming unit per milliliter (“CFU/mL”). The Company’s initial development efforts target the detection of pathogens that cause sepsis, ~~and lyme disease,~~ which ~~are areas~~is an area of significant unmet medical need in which existing therapies could be more effective with improved diagnostics. ~~On September 22, 2014, the Company received market clearance from the U.S. Food~~

Liquidity and Drug Administration (“FDA”) for its first two products, the T2Dx Instrument (the “T2Dx”) and T2Candida Panel (“T2Candida”). On June 30, 2017 the Company received a CE Mark for its T2Bacteria Panel (“T2Bacteria”). On September 8, 2017 the Company filed a 510(k) premarket submission for the T2Bacteria Panel with the U.S. Food and Drug Administration (FDA).

At ~~September 30, 2017,~~March 31, 2022, the Company had cash, ~~and~~ cash equivalents, marketable securities and restricted cash of ~~$52.9~~$20.5 million, ~~and~~ an accumulated deficit of ~~$247.9 million.~~$488.7 million, stockholders’ deficit of $25.7 million, and has historically experienced cash outflows from operating activities. The future success of the Company is dependent on its ability to successfully commercialize its ~~FDA approved~~ products, obtain regulatory clearance for and successfully launch its future product candidates, ~~including T2Bacteria,~~ obtain additional capital and ultimately attain profitable operations. Historically, the Company has funded its operations primarily through its August 2014 initial public offering, its December 2015 ~~confidentially marketed~~ public offering, ~~(“CMPO”),~~ its September 2016 private investment in public equity (“PIPE”) financing, its September 2017 ~~CMPO,~~public offering, its June 2018 public offering, its July 2019 establishment of an Equity Distribution Agreement and Equity Purchase Agreement (Note 7), its March 2021 establishment of an Equity Distribution Agreement (Note 7), private placements of redeemable convertible preferred stock and through debt financing arrangements.

The Company is subject to a number of risks similar to other ~~newly~~early commercial stage life science companies, including, but not limited to commercially launching the Company’s products, development and market acceptance of the Company’s product candidates, development by its competitors of new technological innovations, protection of proprietary technology, and raising additional capital.

~~Having obtained~~The COVID-19 pandemic has impacted and may continue to impact operations. The Company has established protocols for continued manufacturing, distribution and servicing of its products with safe social distancing and personal protective equipment measures and for remote work for certain employees not essential to on-site operations. To date these measures have been mostly successful but may not continue to function should the pandemic escalate and impact personnel. In 2020, the Company’s hospital customers restricted the sales team’s access to their facilities and as a result, the Company had significantly reduced sales and general and administrative staffing levels at the beginning of the COVID-19 pandemic to reduce expenses. The Company has since hired sales, marketing and medical and clinical affairs personnel. Although the Company did not see any material impact to accounts receivable during the period ended March 31, 2022, the Company’s exposure may increase if its customers continue to be adversely affected by the COVID-19 pandemic, including as a result of the spread of variants of the virus. Customers may reduce their purchases of products, depending on their needs and cash flow, which could negatively impact revenue. The Company has a significant development contract with BARDA and should BARDA reduce, cancel or not grant additional milestone projects, the Company’s ability to continue its future product development may be impacted. The ability of the Company’s shipping carriers to deliver products to customers may be disrupted. The Company has reviewed its suppliers and quantities of key materials and believes that it has sufficient stocks and alternate sources of critical materials including personal protective equipment should the supply chains become disrupted, although raw materials and plastics for the manufacturing of reagents and consumables are in high demand, and interruptions in supply are difficult to predict. As further described in Note 5, at the onset of the pandemic, the Company believed the pandemic’s impact on its sales would affect the recoverability of the value of T2-owned instruments and components.

Since authorization from the United States Food and Drug Administration, or FDA, was obtained to market the T2Dx Instrument, T2Candida Panel, and ~~T2Candida,~~T2Bacteria Panel, and Emergency Use Authorization, or EUA, was issued for the T2SARS-CoV-2 Panel, the Company has incurred significant commercialization expenses related to product sales, marketing, manufacturing and distribution. ~~The~~If the FDA rescinds EUA, the Company ~~will continue the research and development of other product candidates and maintain, expand and protect~~would be unable to sell its ~~intellectual property portfolio.~~T2SARS-CoV-2 tests. The Company may seek to fund its operations through public equity, or private equity or debt financings, as well as other sources. However, the Company may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms, or at all. The Company’s failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on the Company’s business, results of operations, ~~and~~ financial condition and the Company’s ability to develop and commercialize T2Dx, T2Candida, T2Bacteria, T2SARS-CoV-2, and other product candidates.

~~Management~~Pursuant to the requirements of Accounting Standards Codification (“ASC”) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company believes that its ~~existing~~ cash, ~~and~~ cash equivalents, marketable securities and restricted cash of $20.5 million at ~~September 30, 2017, together with the additional remaining liquidity on the Company’s Term Loan Agreement of up to an additional $10.0 million,~~March 31, 2022 will not be sufficient ~~to allow the Company~~ to fund its current operating plan ~~through early 2019.~~ at least one year from issuance of these financial statements, as certain elements of our operating plan cannot be considered probable. Absent any reductions in current operating expenses, the Company believes it will require additional financing during the third quarter of 2022. Under ASC 205-40, the future receipt of potential funding from Co-Development partners and other resources cannot be considered probable at this time because none of the plans are entirely within the Company’s control.

The ~~borrowing on~~Term Loan Agreement with CRG Servicing LLC (“CRG”) (Note 6) has certain covenants which require the Company to achieve certain annual revenue targets, whereby the Company is required to pay double the amount of any shortfall as an acceleration of principal payments, and maintain a minimum cash balance of $5.0 million. In June 2021, the Company achieved the revenue target for the twenty-four month period ended December 31, 2021. There can be no assurances that it will continue to be in compliance with the cash covenant in future periods without additional funding. In February 2022, CRG amended the Term Loan Agreement, ~~is available at any time through July 27, 2018,~~extending the interest only period and ismaturity to December 30, 2023.

The Company’s stock has been trading under $1.00. On November 5, 2021, the Company received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1). Under Nasdaq rules, the Company has 180 days (May 4, 2022) to regain compliance by increasing the stock price to over $1.00. On May 5, 2022, the Company received a letter from Nasdaq informing the Company that its shares of common stock have failed to comply with the $1.00 minimum bid price required for continued listing and, as a result, the Company’s shares are subject to ~~certain conditions including~~delisting. The letter further stated that the Company ~~receive 510(k) clearance for~~may appeal the ~~marketing~~Nasdaq Staff delisting determination to a Nasdaq listing qualifications hearings panel (the “Panel”).

The Company has filed an appeal and hearing request to the Nasdaq Staff’s determination which will stay the delisting of ~~T2Bacteria~~the Company’s shares of common stock from Nasdaq pending the Panel’s decision. The Nasdaq Staff has informed the Company that the delisting action has been stayed, pending a final written decision by the ~~FDA by April 30, 2018 (see Note 5). Should~~Panel, and the hearing date has been set for June 2, 2022. There can be no assurance that the Panel will grant the Company’s ~~current operating~~request for continued listing; however, the Company intends to present a plan ~~not materialize as expected, including~~to regain compliance to the Panel that includes a discussion of the events that it believes will enable it to regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

These conditions raise substantial doubt regarding the Company’s ability to ~~draw~~continue as a going concern for a period of one year after the date that the financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include raising additional ~~borrowings on~~funding, earning payments pursuant to the ~~Term Loan Agreement on a timely basis, the Company would delay~~Company’s contract with BARDA, delaying certain research projects and capital expenditures and ~~reduce or eliminate~~eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern for a period of 12 months from the date the financial statements are issued.

~~For~~ Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more ~~information, refer~~of these sources or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the ~~section titled “Liquidity~~recoverability and ~~Capital Resources” in Item 2, Management’s Discussion~~classification of recorded asset amounts or the amounts and ~~Analysis~~classification of ~~Financial Condition and Results~~liabilities that might result from the outcome of ~~Operations and~~ the ~~section entitled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2016, for additional risks associated with our capital needs.~~uncertainties described above.

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as defined in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, T2 Biosystems Securities Corporation. All intercompany balances and transactions have been eliminated.

We have evaluated subsequent events from September 30, 2017 through the date of the issuance of these condensed consolidated financial statements and have determined that no material subsequent events have occurred that would have a material effect on the information presented in these consolidated financial statements.

Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

The accompanying interim condensed consolidated balance sheet as of ~~September 30, 2017,~~March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the condensed consolidated statements of stockholders’ deficit for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 and the related financial data and other information disclosed in these notes are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of ~~September 30, 2017,~~March 31, 2022, and the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017,~~2022, any other interim periods, or any future year or period.

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company views its operations and manages its business in ~~one~~1 operating segment, which is the business of developing and, upon regulatory clearance, ~~launching commercially~~commercializing its diagnostic products aimed at lowering mortality rates, improving patient outcomes and reducing the cost of healthcare by helping medical professionals make targeted treatment decisions earlier.

The Company sells its products domestically and internationally. Total international sales were approximately $1.0 million or 13% of total revenue and $0.5 million or 7% of total revenue for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022 and 2021, no international customer represented greater than 10% of total revenue.

The Company derived approximately 47% of its total revenue from one customer for the three months ended March 31, 2022 and 33% of its total revenue from the same customer for the three months ended March 31, 2021. The Company derived approximately 9% of its total revenue from a second customer for the three months ended March 31, 2022 and 19% of its total revenue from the same customer for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, the Company had outstanding receivables of $0.7 million and $0.6 million, respectively, from customers located outside of the U.S.

Basic net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average number of shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, stock options and unvested restricted stock and restricted stock contingently issuable upon achievement of certain market conditions are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share applicable to common stockholders was the same for all periods presented.

The Company’s marketable securities consist of U.S. treasury securities, which are classified as available-for-sale and included in current assets. Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported as a component of stockholders’ deficit in accumulated other comprehensive (loss) income. Realized gains and losses, if any, are included in other income in the condensed consolidated statements of operations.

Available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii) does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in earnings. Subsequent increases or decreases in fair value are reported as a component of stockholders’ deficit in accumulated other comprehensive loss (income). There were 0 other-than-temporary unrealized losses as of March 31, 2022.

The following table summarizes the Company’s marketable securities at March 31, 2022 and December 31, 2021 (in thousands):

	March 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. treasury securities	$	10,000	$	—	$	(11	)	$	9,989
Total	$	10,000	$	—	$	(11	)	$	9,989

	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. treasury securities		10,000		—		(4	)		9,996
Total	$	10,000	$	—	$	(4	)	$	9,996

The following table summarizes the maturities of the Company’s marketable securities at March 31, 2022 and December 31, 2021 (in thousands):

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while each such officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification is the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ and officers’ liability insurance coverage that limits its exposure and enables the Company to recover a portion of any future amounts paid.

The Company leases office, laboratory and manufacturing space under noncancelable operating leases. The Company has standard indemnification arrangements under the leases that require it to indemnify the landlords against all costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from any breach, violation or nonperformance of any covenant or condition of the Company’s leases.

In the ordinary course of business, the Company enters into indemnification agreements with certain suppliers and business partners where the Company has certain indemnification obligations limited to the costs, expenses, fines, suits, claims, demands, liabilities and actions directly resulting from the Company’s gross negligence or willful misconduct, and in certain instances, breaches, violations or nonperformance of covenants or conditions under the agreements.

As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, the Company had not experienced any material losses related to these indemnification obligations, and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Pursuant to Topic 842, Leases (“ASC 842”), at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

The Company made the policy election to not separate lease and non-lease components. Each lease component and the related non-lease components are accounted for together as a single component.

The Company generates revenue from ~~product sales, which includes~~ the sale of instruments, consumable diagnostic tests, ~~and~~ related services, reagent rental agreements and ~~research and development agreements~~government contributions. Pursuant to ASC 606, Revenue from Contracts with ~~third parties. The Company recognizes revenue in accordance with FASB ASC Topic 605, Revenue Recognition~~Customers (“ASC ~~605”~~606”)~~. Accordingly,~~, the Company ~~recognizes~~determines revenue ~~when all of~~recognition through the following ~~criteria have been met:~~steps:

~~If any~~The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for these goods and services.

Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the ~~above criteria have not been met,~~transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon shipment, or over time, as services are performed.

Most of the Company’s contracts with distributors in geographic regions outside the United States contain only a single performance obligation, whereas most of the Company’s contracts with direct sales customers in the United States contain multiple performance obligations. For these contracts, the Company ~~defers revenue until such time each of~~accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the ~~criteria have been satisfied.~~separate performance obligations on a relative standalone selling price basis. Excluded from the transaction price are sales tax and other similar taxes which are presented on a net basis.

Product revenue is generated by the sale of instruments and consumable diagnostic tests predominantly through the Company’s direct sales force in the United States and distributors in geographic regions outside the United States. The Company does not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to its customers, including its distributors. Payment terms granted to distributors are the same as those granted to end-user customers and payments are not dependent upon the distributors’ receipt of payment from their end-user customers.

The Company either sells instruments to customers and international distributors, or retains title and places the instrument at the customer site pursuant to a reagent rental agreement. When ~~the~~an instrument is ~~directly~~ purchased by a customer or international distributor, the Company recognizes revenue when ~~all applicable revenue recognition criteria are met.~~ the related performance obligation is satisfied (i.e. when the control of an instrument has passed to the customer; typically, at shipping point).

When the instrument is placed under a reagent rental agreement, the Company’s customers generally agree to fixed term agreements, which can be extended, ~~certain of which may include minimum purchase commitments and/or~~and incremental charges on each consumable diagnostic test ~~purchased, which varies based on the volume of test cartridges~~ purchased. Revenue from the sale of consumable diagnostic tests ~~which includes the incremental charge,~~(under a reagent rental agreement) is generally recognized upon ~~delivery or shipment~~shipment. The transaction price from consumables purchases is allocated between the lease of the instrument (under a contingent rent methodology as provided for in ASC 842, Leases), and the consumables when related performance obligations are satisfied, as a component of lease and product revenue, and is included as Instrument Rentals in the below table. Revenue associated with reagent rental consumables purchases is currently classified as variable consideration and constrained until a purchase order is received and related performance obligations have been satisfied.

Revenue from the sale of consumable diagnostic tests (under instrument purchase agreements) is generally recognized upon shipment.

Shipping and handling costs billed to customers in connection with a product sale are recorded as a component of the transaction price and allocated to product revenue in the ~~Company’s~~condensed consolidated statements of operations and comprehensive ~~loss.~~loss as they are incurred by the Company in fulfilling its performance obligations.

Direct sales of instruments include warranty, maintenance and technical support services typically for one year following the installation of the purchased instrument (“Maintenance Services”). Maintenance Services are separate performance obligations as they are service-based warranties and are recognized on a straight-line basis over the service delivery period. After the completion of the initial Maintenance Services period, customers have the option to renew or extend the Maintenance Services ~~typicallyfor~~typically for additional ~~one year~~one-year periods in exchange for additional consideration. ~~In addition, the Company may provide training to customers.~~The extended Maintenance Services are also service-based warranties that represent separate purchasing decisions. The Company ~~defers~~recognizes revenue ~~from the initial sale of the instrument equal~~allocated to the ~~relative fair value of the one year of~~extended Maintenance Services ~~and training and recognizes the amounts ratably~~performance obligation on a straight-line basis over the service delivery period.

Fees paid to member-owned group purchasing organizations (“GPOs”) are deducted from related product revenues.

The Company warrants that consumable diagnostic tests will be free from defects, when handled according to product specifications, for the stated life of the product. To fulfill valid warranty claims, the Company ~~either~~ provides ~~a credit to its customers~~replacement product free of charge. Warranty expense is recognized based on ~~future orders or provides a replacement product. Accordingly, the Company defers revenue associated with~~ the estimated defect rates of the consumable diagnostic tests.

~~The Company does not offer rights of return for instruments or consumable diagnostic tests.~~

~~Shipping and handling costs incurred associated with products sold to customers are recorded as~~Contribution Revenue

Income under the government BARDA contract is earned under a cost of product revenue in the consolidated statement of operations and comprehensive loss. Shipping and handling costs billed to customers in connection with a product sale are recorded as a component of product revenue in the consolidated statements of operations and comprehensive loss.

For multiple-element arrangements, the Company identifies the deliverables included within each agreement and evaluates which deliverables represent separate units of accounting. The determination that multiple elements in ancost-sharing arrangement meet the criteria for separate units of accounting requires the Company’s management to exercise judgment. The Company accounts for those components as separate elements when the following criteria are met: (1) the delivered items have value to the customer on a stand-alone basis; and, (2) if there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within its control.

The consideration received is allocated among the separate units of accounting based on a selling price hierarchy. The selling price hierarchy is based on: (1) vendor specific objective evidence (“VSOE”), if available; (2) third party evidence of selling price if VSOE is not available; or (3) best estimated selling price (“BESP”) if neither VSOE nor third party evidence is available. The Company generally expects that it will not be able to establish selling price using third-party evidence due to the nature of our products and the markets in which the Company ~~competes, and, as such, the Company typically will determine selling price using VSOE or BESP.~~

~~When the Company establishes selling price using BESP, consideration~~ is ~~given to both market and Company-specific factors, including the cost to produce the deliverable and the anticipated margin on that deliverable, as well~~reimbursed for direct costs incurred plus allowable indirect costs. The government contract revenue is recognized as the ~~characteristics of markets in which the deliverable is sold.~~

~~Revenue earned from activities performed pursuant to research and development agreements~~related reimbursable expenses are incurred. The cost reimbursement that is reported as ~~research~~ revenue is presented gross of the related reimbursable expenses in the Company’s consolidated statements of ~~operations and comprehensive loss, using the proportional performance method as the work is completed, limited to payments earned, and~~operations; the related ~~costs~~reimbursable expenses are expensed as incurred as research and development expense. The ~~timing~~Company accounts for these contracts as a government grant which analogizes with International Accounting Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of ~~receipt of cash from~~Government Assistance.

The Company has a significant development contract with BARDA and should BARDA reduce, cancel or not grant additional milestone projects, the Company’s ability to continue future product development may be impacted. Refer to Note 11 for further details regarding the development contract with BARDA.

The Company disaggregates revenue from contracts with customers by type of products and services, as it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following table disaggregates our revenue by major source (in thousands):

Under ASC 606, the Company is required to disclose the aggregate amount of the transaction price that is allocated to unsatisfied or partially satisfied performance obligations as of March 31, 2022. However, the guidance provides certain practical expedients that limit this requirement, and therefore, the Company has elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The nature of the excluded unsatisfied performance obligations pursuant to the practical expedient include consumable shipments, service contracts, warranties and installation services that will be performed within one year. The amount of the transaction price that is allocated to unsatisfied or partially satisfied performance obligations, that has not yet been recognized as revenue and that does not meet the elected practical expedient is $0.2 million as of March 31, 2022. The Company expects to recognize 86% of this amount as revenue within one year and the remainder within two years.

Certain contracts with customers include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once the performance obligations are determined, the Company determines the transaction price, which includes estimating the amount of variable consideration, based on the most likely amount, to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as a range of selling prices, market conditions and the expected costs and margin related to the performance obligations.

The Company did 0t record any contract assets at March 31, 2022 and December 31, 2021.

The Company’s contract liabilities consist of upfront payments for research and development ~~agreements generally differs from~~contracts and maintenance services on instrument sales. Contract liabilities are classified in deferred revenue as current or noncurrent based on the timing of when revenue is expected to be recognized.

~~In July 2016,~~Contract liabilities were $0.4 million and $0.5 million at March 31, 2022 and December 31, 2021, respectively. Revenue recognized during the ~~Company initiated a voluntary recall~~three months ended March 31, 2022 relating to contract liabilities at December 31, 2021 was $0.2 million and replacement of its T2Candida cartridges at certain customer sites because T2Candida was experiencing higher than normal invalid test rates as the T2Candida cartridges aged. As of September 30, 2016, as a result of this voluntary recall, the Company deferred revenue totaling $149,000 and recorded additional costs of product revenue of $41,000 related to ~~returned products, which~~straight-line revenue recognition associated with maintenance agreements.

The Company capitalizes commission expenses paid to sales personnel that are ~~no longer usable. As~~recoverable and incremental to obtaining capital purchase agreements within the United States. These costs are classified as prepaid expenses and other current assets and other assets, based on their current or non-current nature, respectively. The Company capitalizes only those costs that are determined to be incremental and would not have occurred absent the customer contract. These capitalized costs are amortized as selling, general and administrative costs on a straight line basis over the expected period of ~~September 30, 2017, the Company had $20,000~~benefit. These costs are reviewed periodically for impairment.

At both March 31, 2022 and December 31, 2021, capitalized costs to fulfill contracts of ~~deferred revenue~~$0.1 million was included in prepaid and ~~$2,000 of warranty reserve remaining, both related to this voluntary recall. The impact of the voluntary recall on T2Candida cartridges~~other current assets and less than $0.1 million was included in ~~inventory was not material to the condensed consolidated financial statements.~~ other non-current assets.

Cost of product revenue includes the cost of materials, direct labor and manufacturing overhead costs used in the manufacture of consumable diagnostic tests sold to customers, related warranty and ~~related~~ license and royalty fees. Cost of product revenue also includes depreciation on T2-owned revenue generating T2Dx instruments that have been placed with customers under reagent rental agreements; costs of materials, direct labor and manufacturing overhead costs on the T2Dx instruments sold to customers; and other costs such as customer support costs, royalties and license fees, warranty and repair and maintenance expense on the T2Dx instruments that have been placed with customers under reagent rental agreements.

Costs incurred in the research and development of the Company’s product candidates are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including activities associated with ~~performing~~delivering products or services ~~under research~~associated with contribution revenue, ~~arrangements,~~clinical trials to evaluate the clinical utility of our product candidates, and costs associated with the enhancements of developed products. These costs include salaries and benefits, stock compensation, ~~research-related~~research‑related facility and overhead costs, laboratory supplies, equipment and contract services.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In August 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its financial obligations as they become due within one year after the date that the financial statements are issued (or are available to be issued). ASU No. 2014-15 provides guidance to an organization’s management, with principles and definitions intended to reduce diversity in the timing and content of disclosures commonly provided by organizations in the footnotes of their financial statements. ASU No. 2014-15 was effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. This standard has been adopted and reflected in the Company’s disclosures regarding liquidity.

~~In July 2015,~~2020, the FASB issued ASU No. ~~2015-11,~~ ~~Inventory (Topic 330): Simplifying the Measurement~~2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”), which simplifies accounting for certain financial instruments with characteristics of ~~Inventory~~ ~~(“ASU 2015-11”).~~liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The standard ~~simplifies~~is effective for smaller reporting companies for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years. The Company adopted the ~~subsequent measurement~~standard as of ~~inventory~~January 1, 2022. The adoption did not have a material impact on the Company’s financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”) which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after a modification or exchange. This standard is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply this standard prospectively to modifications or exchanges occurring on or after the effective date of this standard. The Company adopted this standard as of January 1, 2022. The adoption did not have a material impact on the Company’s financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by ~~requiring inventory~~Business Entities about Government Assistance. This ASU requires certain disclosures when companies (a) have received government assistance and (b) use a grant or contribution accounting model by analogy to ~~be measured at~~other accounting guidance. A company that has received government assistance must provide disclosures related to the ~~lower~~nature of ~~cost~~the transaction, accounting policies used to account for the transaction, and ~~net realizable value for entities using~~ the ~~first-in-first out method of valuing inventory.~~amounts and line items on the financial statements that are affected by the transaction. This ASU ~~2015-11 eliminates other measures required by current guidance to determine net realizable value. ASU 2015-11~~ is effective for fiscal years beginning after December 15, ~~2016 and interim periods within those fiscal years and~~2021, with early adoption ~~is permitted.~~permitted, and can be applied either prospectively or retrospectively. The ~~Company’s adoption of~~Company adopted this standard as of January 1, 2022. The adoption did not have a material ~~effect on its condensed consolidated financial statements.~~

~~In March 2016, the FASB released ASU No. 2016-09~~ ~~Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”) which is intended to simplify income tax accounting for excess tax benefits, accounting for forfeitures, and employer statutory withholding. Under the current guidance, excess tax benefits that result from an award vesting or settling are recognized in additional paid-in capital in the period that they reduce cash taxes payable. This requires the provision to be computed on a with and without option basis and may result in net operating loss and credit carryforwards on the balance sheet being less than what is available on the tax return. Under the new guidance, the income tax effects of awards will be recognized as a component of income tax expense when the awards vest or are settled (regardless if cash taxes are reduced). For interim reporting purposes, companies will account for excess tax benefits and tax deficiencies as discrete items in the period during which they occurred. The guidance is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted, however all of the guidance included in the update must be applied when adopted. The Company must use a modified retrospective transition method for adopting and record the cumulative effect of all unrecognized benefits and any change in valuation allowances at the end of the prior tax period as an adjustment to retained earnings. The Company’s adoption of this standard did not have a material effect on its condensed consolidated financial statements and prior periods have not been adjusted. As a result, the Company established a net operating loss deferred tax asset of $1.2 million to account for prior period excess tax benefits through retained earnings, however an offsetting valuation allowance of $1.2 million will also be established through retained earnings because it is not more likely than not that the deferred tax asset will be realized due to historical and expected future losses, such that there is no impact on the Company’s ~~condensed consolidated financial statements. The Company also elected to maintain the use of estimated forfeitures in the calculation of stock based compensation.~~

~~In March 2016, the FASB issued ASU No. 2016-06,~~ ~~Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments~~ (“ASU 2016-06”), which applies to all issuers of or investors in debt instruments with embedded call or put options. ASU 2016-06 clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. Entities performing the assessment under the guidance of ASU 2016-06 are required to assess the embedded call or put options solely in accordance with the four-step decision process. In addition, ASU 2016-06 clarifies what steps are required when assessing whether the economic characteristics and risks of call or put options are clearly and closely related to the economic characteristics and risks of their debt hosts. ASU 2016-06 is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years using the modified retrospective method for existing debt instruments. The Company’s adoption of this standard did not have a material effect on its condensed consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASC 2016-15”), which provides guidance on the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. The standard requires the use of a retrospective approach to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The guidance is effective for public entities for fiscal years beginning after

December 15, 2017, and interim periods within those years, and early application is permitted. The Company is currently evaluating the impact of its pending adoption of ASU 2016-15 on the Company’s consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~ (“ASU 2016-02”), which applies to all leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, which is the year ended December 31, 2019 for the Company. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company is evaluating the new guidance and the expected effect on the Company’s consolidated financial statements.

~~In June 2014, the FASB issued amended guidance, ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”), which is applicable to revenue recognition that will now be effective for the Company for the year ending December 31, 2018, as a result of the deferral of the effective date adopted by the FASB in July 2015. The new guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. Early adoption prior to the original adoption date of ASU 2014-09 is not permitted. The new guidance applies a more principles-based approach to revenue recognition. The Company currently anticipates adoption of the new standard effective January 1, 2018 under the modified retrospective method. The Company is analyzing the potential impact that ASU 2014-09 may have on its financial position and results of operations; however, the Company anticipates significant changes to its financial statement disclosures. As of September 30, 2017, the Company has completed its revenue stream analysis and advanced its assessment of the impact of ASU 2014-09 on its revenue-generating arrangements, including its product sales made as direct sales, sales to distributors, reagent rental agreements and its research arrangements. The Company is in the process of finalizing the quantitative impact the ASUs will have on the financial statements, as well as its plan for implementation. In addition, the Company continues to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact its conclusions.

The Company measures the following financial assets at fair value on a recurring basis. There were no transfers between levels of the fair value hierarchy during any of the periods presented. The following tables set forth the Company’s financial assets and liabilities carried at fair value categorized using the lowest level of input applicable to each financial instrument as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 (in thousands):

Balance at
September 30,
2017

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Cash

$
19,644

$
19,644

$
—

$
—

Money market funds

33,253

33,253

—

—

Restricted cash

260

260

—

—

Total

$
53,157

$
53,157

$
—

$
—

	Balance at March 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
US Treasury securities	$	9,989	$	9,989	$	—	$	—
	$	9,989	$	9,989	$	—	$	—

Balance at
December 31,
2016

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Cash

$
16,887

$
16,887

$
—

$
—

Money market funds

56,601

56,601

—

—

Restricted cash

260

260

—

—

Total

$
73,748

$
73,748

$
—

$
—

	Balance at December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
US Treasury securities		9,996		9,996		—		—
	$	9,996	$	9,996	$	—	$	—

~~For certain financial instruments, including~~The Company’s cash equivalents and available-for-sale marketable securities are comprised of government securities. Securities are classified as cash equivalents when the original maturities are within 90 days of the purchase dates. The Company also maintains money market accounts ~~payable~~classified as restricted cash for $1.1 million at March 31, 2022 and ~~accrued expenses, the carrying amounts approximate their fair values as of September 30, 2017 and~~$1.6 million at December 31, 2016 because of their short-term nature. At September 30, 2017 and December 31, 2016, the carrying value of the Company’s debt approximated fair value, which was determined using Level 3 inputs, using market quotes from brokers and is based on current rates offered for similar debt2021 (Note 5)4).

The Company is required to maintain security deposits for its operating lease agreements for the duration of the lease agreements. At March 31, 2022, the Company had money market accounts for $1.1 million, which represented collateral as security deposits for its operating lease agreements for 2 facilities. At December 31, 2021, the Company had money market accounts for $1.6 million, which represented collateral as security deposits for its operating lease agreements for 3 facilities.

Inventories are stated at the lower of cost or net realizable value on a first-in, first-out basis and are comprised of the following (in thousands):

	September 30, 2017			December 31, 2016			March 31, 2022			December 31, 2021
Office and computer equipment	$	409		$	409		$	749		$	749
Software		743			708			783			783
Laboratory equipment		4,094			4,516			5,496			5,507
Furniture		200			200			197			197
Manufacturing equipment		910			897			1,445			1,445
Manufacturing tooling and molds		160			154			478			478
T2-owned instruments and components		10,878			9,119			6,939			6,668
Leasehold improvements		3,378			3,353			3,785			3,768
Construction in progress		1,557			1,299			600			512
		22,329			20,655			20,472			20,107
Less accumulated depreciation and amortization		(8,475	)		(7,066	)		(15,694	)		(15,432	)
Property and equipment, net	$	13,854		$	13,589		$	4,778		$	4,675

Construction in progress is primarily comprised of equipment ~~and leasehold improvement projects~~ that ~~have~~has not been placed in service. T2-owned instruments and components is comprised of raw materials and work-in-process inventory that are expected to be used or used to produce T2-owned instruments, based on ~~our~~the Company’s business model and forecast, and completed instruments that will be used for internal research and development, clinical studies or reagent rental agreements with customers. At March 31, 2022, there was $1.2 million of raw materials or work-in-process inventory in T2-owned instruments and components compared with $1.4 million at December 31, 2021. Completed T2-owned instruments are placed in service once installation procedures are completed and are depreciated over five years. ~~The Company has approximately $7.9 million and $5.7 million of T2-owned instruments installed and depreciating as of September 30, 2017 and December 31, 2016, respectively.~~ Depreciation expense for T2-owned instruments placed at customer sites pursuant to reagent rental agreements is recorded as a component of cost of product revenue and ~~totaled approximately $0.2 million and $0.2 million~~was immaterial for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively, and $0.7 million and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.~~ 2021.

Depreciation expense for T2-owned instruments used for internal research and development and clinical studies is recorded as a component of research and development expense.Depreciation and amortization expense of $0.3 million and $0.4 million was charged to operations for the three months ended March 31, 2022 and 2021, respectively.

The Term Loan Agreement with CRG is classified as a non-current liability at March 31, 2022 and December 31, 2021 as the Company has sufficient cash, cash equivalents and marketable securities as of the date of this filing such that the minimum liquidity covenant would not be triggered.

The Company has assessed the classification of the note payable as non-current based on facts and circumstances as of the date of this filing, specifically as it relates to achieving the minimum liquidity and revenue covenants. Management continues to reassess at each balance sheet and filing date based on facts and circumstances and can provide no assurances regarding the probability of meeting its minimum liquidity covenant in future periods.

In December 2016, the Company entered into a Term Loan Agreement (the “Term Loan Agreement”) with ~~CRG Servicing LLC (“CRG”).~~CRG. The Company initially borrowed $40.0 million pursuant to the Term Loan Agreement, and may borrow up to an additional $10.0 million at any time through and including July 27, 2018, provided that, among other conditions, the Company receives 510(k) clearance for the marketing of T2Bacteria by the FDA on or before April 30, 2018 (the “Approval Milestone”). The Term Loan Agreementwhich has a six-year term with ~~three~~four years of interest-only payments (through December 30, ~~2019) of interest-only payments, which period shall be extended to four years (through December 30,~~ 2020) ~~if the Company achieves the Approval Milestone,~~, after which quarterly principal and interest payments will be due through the ~~December 30, 2022~~ maturity date. Interest on the amounts borrowed under the Term Loan Agreement accrues at an annual fixed rate of (a) prior to the Approval Milestone, 12.5%, 4.0% of which may be deferred during the interest-only period by adding such amount to the aggregate principal loan amount and (b) following the Approval Milestone, 11.5%, 3.5% of which may be deferred during the interest-only period by adding such amount to the aggregate principal loan amount. In addition, if the Company achieves certain financial performance metrics, the loan will convert to interest-only until the ~~December 30, 2022~~ maturity date, at which time all unpaid principal and accrued unpaid interest will be due and payable. The Company is required to pay CRG a financing fee based on the loan principal amount drawn. The Company is also required to pay a final payment fee of 8.0%, subsequently amended to 10%, of the principal outstanding upon ~~repayment, which~~repayment. The Company is ~~being accreted over~~accruing the ~~term~~final payment fee as interest expense and it is included as a non-current liability at March 31, 2022 and December 31, 2021 to conform to the classification of the associated debt ~~as additional interest expenses.~~in those periods.

The Company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the Term Loan Agreement at any time upon prior notice subject to a certain prepayment fee during the first five years of the term and no prepayment fee thereafter. As security for its obligations under the Term Loan Agreement the Company entered into a security agreement with CRG whereby the Company granted a lien on substantially all of its assets, including intellectual property. The Term Loan Agreement also contains customary affirmative and negative covenants for a credit facility of this size and ~~type. The~~type, including a requirement to maintain a minimum cash balance of $5.0 million.

In 2019, the Term Loan Agreement ~~also requires the Company~~was amended to ~~achieve certain annual~~reduce minimum revenue targets, ~~whereby~~extend the interest-only period and extend the principal repayment. The final payment fee was increased from 8% to 10% of the principal amount outstanding upon repayment. The Company ~~is required~~issued to ~~pay double~~CRG warrants to purchase 568,291 shares of the ~~amount~~Company’s common stock (“New Warrants”) (Note 9) at an exercise price of $1.55, with typical provisions for termination upon a change of control or a sale of all or substantially all of the assets of the Company. The Company also reduced the exercise price for the warrants previously issued to CRG to purchase an aggregate of 528,958 shares of the Company’s common stock to $1.55. All of the New Warrants are exercisable any ~~shortfall as an acceleration~~time prior to September 9, 2029, and all of the previously issued warrants are exercisable any time prior to December 30, 2026.

In January 2021, the Term Loan Agreement was amended to extend the interest-only payment period until the December 30, 2022 maturity, to extend the initial principal ~~payments. The~~repayment until the December 30, 2022 maturity, and to significantly reduce the minimum product revenue target for ~~fiscal 2017~~the twenty-four month period beginning on January 1, 2020. The Company did not pay or provide any consideration in exchange for this amendment. The Company accounted for the January 2021 amendment as a modification to the Term Loan Agreement.

In February 2022, the Term Loan Agreement was amended to extend the interest-only payment period through December 30, 2023, and to extend the principal repayment to December 30, 2023. The Company did not pay or provide any consideration in exchange for this amendment. As the effective borrowing rate under the amended agreement is ~~$5.0 million~~less than the effective borrowing rate under the previous agreement, a concession is deemed to have been granted under ASC 470-60. As a concession has been granted, the agreement was accounted for as a troubled debt restructuring under ASC 470-60. The amendment did not result in a gain on ~~this provision.~~ restructuring as the future undiscounted cash outflows required under the amended agreement exceed the carrying value of the debt immediately prior to the amendment.

The Term Loan Agreement includes a subjective acceleration clause whereby an event of default, including a material adverse change in the business, operations, or conditions (financial or otherwise), could result in the acceleration of the obligations under the Term Loan Agreement. Under certain circumstances, a default interest rate of an additional 4.0% per annum will apply at the election of CRG on all outstanding obligations during the occurrence and continuance of an event of default. ~~CRG has not exercised its right under this clause, as there have been no such events. The Company believes the likelihood of CRG exercising this right is remote.~~

The Company assessed the terms and features of the Term Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, the Company assessed the economic characteristics and risks of the Term Loan Agreement, including put and call features. The Company determined that the features of the Term Loan Agreement are either clearly and closely associated with a debt host and do not require bifurcation as a derivative liability, or the fair value of the feature is immaterial. Included in these features are principal payment acceleration clauses triggered by a developmental milestone. Should7. Stockholders’ Deficit

In July 2021, the Company’s ~~assessment~~shareholders approved of ~~this milestone change, there could be a non-cash charge~~an increase in ~~operations. The Company will continue to reassess~~ the ~~features to determine if they require separate accounting on a quarterly basis.~~

~~In December 2016, pursuant to the Term Loan Agreement, the Company made an initial draw~~number of $39.2 million, net of financing fees. The Company used approximately $28.0 million of the initial proceeds to repay approximately $27.5 million of outstanding debt pursuant to the Loan and Security Agreement and to repay approximately $0.5 million of outstanding debt pursuant to the Promissory Note. Upon the repayment of all amounts owed by the Company under these agreements, all commitments were terminated and all security interests granted by the Company were released.

~~In connection with the Term Loan Agreement entered into in December 2016, the Company issued to CRG four separate warrants to purchase a total of 528,958~~authorized shares of the Company’s common ~~stock. The warrants are exercisable any~~stock from 200,000,000 to 400,000,000.

On March 31, 2021, the Company entered into a Sales Agreement with Canaccord (“New Sales Agreement”), as agent, pursuant to which the Company may offer and sell shares of common stock, for aggregate gross sale proceeds of up to $75.0 million from time ~~prior~~ to ~~December 30, 2026 at a price of $8.06 per share, with typical provisions for termination upon a change of control or a sale of all or substantially all~~time from the effective date of the ~~assets~~respective registration statement through Canaccord.

Under the New Sales Agreement, upon delivery of a placement notice based on the Company’s instructions and subject to the terms and conditions of the Sales Agreement, Canaccord is able to sell the shares by methods deemed to be an “at the market” offering, subject to shelf limitations if any, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to the prior written consent of the Company. The ~~warrants are classified within shareholders’ equity,~~Company is not obligated to make any sales of shares under the New Sales Agreement. The Company or Canaccord is able to suspend or terminate the offering of shares upon notice to the other party, subject to certain conditions. Canaccord acts as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the ~~proceeds were allocated between the debt and warrants based on their relative fair value.~~ rules of Nasdaq.

The ~~fair value~~Company agrees to pay Canaccord for its services of acting as agent an amount equal to 3% of the ~~warrants was determined by the Black Scholes Merton option pricing model. The fair value of the warrants at issuance on December 30, 2016 was $1.8 million.~~

In October 2015, the Company signed a $10.0 million Credit Facility with Essex Capital Corporation (the “Lessor”) to fund capital equipment needs. As one of the conditions of the Term Loan Agreement, the Credit Facility is capped at a maximum of $5.0 million. Under the Credit Facility, Essex will fund capital equipment purchases presented by the Company. The Company will repay the amounts borrowed in 36 equal monthly installmentsgross proceeds from the date of the amount funded. At the end of the 36 month lease term, the Company has the option to (a) repurchase the leased equipment at the lesser of fair market value or 10% of the original equipment value, (b) extend the applicable lease for a specified period of time, which will not be less than one year, or (c) return the leased equipment to the Lessor.

In April 2016 and June 2016, the Company completed the first two draws under the Credit Facility, of $2.1 million and $2.5 million, respectively. The Company will make monthly payments of $67,000 under the first draw and $79,000 under the second draw. The borrowings under the Credit Facility are treated as capital leases. The amortization of the assets conveyed under the Credit Facility is included as a component of depreciation expense.

On September 21, 2016, Canon U.S.A., Inc. (“Canon”) became a related party when the Company sold 6,055,341 shares of its common stock (the “Canon Shares”) to Canon at $6.56 per share, the closing price on this date, for an aggregate cash purchase price of $39.7 million. As of September 21, 2016, the Canon Shares represented 19.9% of the outstanding shares of common stock of the Company. In connection with the sale of the ~~Canon Shares,~~shares pursuant to the New Sales Agreement. The Company also agrees to provide Canaccord with customary indemnification for certain liabilities. Legal and accounting fees are charged to share capital upon issuance of shares under the New Sales Agreement.

During the three months ended March 31, 2022, the Company agreed to grant Canon certain board designation rights, including the right to initially appoint a Class I director to the Company’s board of directors. On March 20, 2017, the Company filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-3sold 3,549,360 shares for ~~purposes of registering the resale of the Canon Shares with the SEC.~~

~~On September 15, 2017, the company sold 5,031,250 shares of its common stock in a CMPO at $4.00 per share, for an aggregate gross cash purchase price of $20.1 million, or~~net proceeds of ~~$18.8~~$1.4 million ~~after underwriters discount and expenses.~~under the New Sales Agreement. The Company sold 0 shares under the New Sales Agreement during the three months ended March 31, 2021.

The Company’s 2006 ~~Employee, Director and Consultant~~ Stock Option Plan (“2006 Plan”) was established for granting stock incentive awards to directors, officers, employees and consultants of the Company. Upon closing of the Company’s IPO in August 2014, the Company ceased granting stock incentive awards under the 2006 Plan. The 2006 Plan provided for the grant of incentive and non-qualified stock options and restricted stock grants as determined by the Company’s board of directors. Under the 2006 Plan, stock options were generally granted with exercise prices equal to or greater than the fair value of the common stock as determined by the board of directors, expired no later than 10 years from the date of grant, and ~~vest~~vested over various periods not exceeding 4 years.

The Company’s 2014 Incentive Award Plan (“2014 Plan”, and together with the 2006 Plan, the “Stock Incentive Plans”), provides for the issuance of shares of common stock in the form of stock options, awards of restricted stock, awards of restricted stock units, performance awards, dividend equivalent awards, stock payment awards and stock appreciation rights to directors, officers, employees and consultants of the Company. Since the establishment of the 2014 Plan, the Company has ~~only~~primarily granted stock options and restricted stock units. Generally, stock options are granted with exercise prices equal to or greater than the fair value of the common stock on the date of grant, expire no later than 10 years from the date of grant, and vest over various periods not exceeding 4 years.

The number of shares reserved for future issuance under the 2014 Plan is the sum of (1) 823,529 shares, (2) any shares that were granted under the 2006 Plan which are forfeited, ~~lapsed~~lapse unexercised or are settled in cash subsequent to the effective date of the 2014 Plan and (3) an annual increase on the first day of each calendar year beginning January 1, 2015 and ending on January 1, ~~2024,~~2026, equal to the lesser of (A) 4% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (B) such smaller number of shares determined by the Company’s ~~Board~~board of ~~Directors.~~directors; provided, however, no more than 35,000,000 shares may be issued upon the exercise of incentive stock options. As of ~~September 30, 2017~~March 31, 2022, there were ~~979,124~~1,415,266 shares available for future grant under the 2014 Plan.

The Company’s Amended and Restated Inducement Award Plan (“Inducement Plan”), which was adopted in March 2018 and most recently amended and restated in January 2020, provides for the grant of equity awards to new employees, including options, restricted stock awards, restricted stock units, performance awards, dividend equivalent awards, stock payment awards and stock appreciation rights. The aggregate number of shares of common stock which may be issued or transferred pursuant to awards under the Inducement Plan is 9,625,000 shares. Any awards that forfeit, expire, lapse, or are settled for cash without the delivery of shares to the holder are available for the grant of an award under the Inducement Plan. Any shares repurchased by or surrendered to the Company that are returned shall be available for the grant of an award under the Inducement Plan. The payment of dividend equivalents in cash in conjunction with any outstanding award shall not be counted against the shares available for issuance under the Inducement Plan. As of March 31, 2022, there were 4,009,361 shares available for future grant under the Inducement Plan.

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the Company granted stock options with an aggregate fair value of ~~$2.5~~$0.2 million and ~~$6.6~~$0.6 million, respectively, which are being amortized into compensation expense over the vesting period of the ~~stock~~ options as the services are being provided.

The following is a summary of ~~stock~~ option activity under the Stock Incentive Plans and Inducement Plan (in thousands, except share and per share amounts):

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value		Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding at December 31,2016		4,042,627		$	8.20		7.05	$	4,091
Outstanding at December 31, 2021											9,868,947		$	2.88		7.09	$	51
Granted		807,450			5.18		6.00				578,500			0.41
Exercised		(194,783	)		2.34				502		—			—		—		—
Forfeited		(554,867	)		9.17						(81,466	)		1.01
Cancelled		(267,127	)		12.56						(426,205	)		2.29
Outstanding at September 30, 2017		3,833,300			7.42		6.67		1,040
Exercisable at September 30, 2017		2,440,070			7.24		5.57		976
Vested or expected to vest at September 30, 2017		3,600,971			7.35		5.77		1,024
Outstanding at March 31, 2022											9,939,776		$	2.77		7.25	$	118
Exercisable at March 31, 2022											5,688,369		$	4.07		6.16	$	28
Vested or expected to vest at March 31, 2022											9,321,200		$	2.89		7.14	$	102

~~Included~~There were 0 options exercised in the ~~stock~~three months ended March 31, 2022 and 42,626 options outstanding as of December 31, 2016 are 166,066 options to purchase common stock granted to certain executive officers of the Company that vest upon the achievement of certain performance conditions, which include the attainment of specified operating result and regulatory targets, by December 31, 2017, of which 20,000 options to purchase common stock upon the achievement of certain performance conditions were forfeited during the year ended December 31, 2016. There are 146,066 performance based stock options outstanding at September 30, 2017 and December 31, 2016. The Company will continually evaluate the probability of achievement of each performance condition and will commence recognition of stock-based compensation expense on these awardsexercised in the ~~period the achievement of each performance condition is deemed probable, including a catch-up adjustment from the grant date.~~

three months ended March 31, 2021. The weighted-average grant date fair values of stock options granted in the ~~nine~~three month periods ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$3.04~~$0.33 per share and ~~$4.76~~$1.33 per share, respectively, and were calculated using the following estimated assumptions:

The total fair values of ~~stock~~ options that vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$3.5~~$0.6 million and ~~$3.7~~$0.6 million, respectively.

As of ~~September 30, 2017,~~March 31, 2022, there was ~~$5.2~~$3.2 million of total unrecognized compensation cost related to ~~unvested~~non-vested stock options granted under the Stock Incentive Plans ~~including the unrecognized compensation expense of stock options with performance conditions deemed probable of vesting.~~and Inducement Plan. Total unrecognized compensation cost will be adjusted for future changes in the estimated forfeiture rate. The Company expects to recognize that cost over a remaining weighted-average period of ~~2.24~~2.4 years as of ~~September 30, 2017.~~March 31, 2022.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, the Company awarded ~~shares of~~ restricted stock units to certain employees and directors at no cost to ~~them, which cannot be sold, assigned, transferred or pledged during the restriction period.~~them. The restricted stock ~~and~~units, excluding any restricted stock units with market conditions, vest through the passage of time, assuming continued ~~employment.~~service. Restricted stock units are not included in issued and outstanding common stock until the underlying shares are vested and released. The fair value of the ~~award~~restricted stock units, at the time of the grant, is expensed on a straight line basis. The granted restricted stock units had an aggregate fair value of ~~$2.9~~$3.6 million, which are being amortized into compensation expense over the vesting period of the ~~options~~restricted stock units as the services are being provided.

The following is a summary of restricted stock unit activity under the 2014 ~~Plan (in thousands, except share and per share amounts):~~Plan:

~~There was no vesting of restricted stock units during the nine months ended September 30, 2017.~~ As of ~~September 30, 2017,~~March 31, 2022, there was ~~$2.6~~$11.5 million of total unrecognized compensation cost related to ~~unvested~~nonvested restricted stock units ~~granted under the Stock Incentive Plans.~~granted. Total unrecognized compensation cost will be adjusted for future ~~forfeitures.~~changes in the estimated forfeiture rate. The Company expects to recognize that cost over a remaining weighted-average period of ~~1.7~~2.1 years, as of ~~September 30, 2017.~~March 31, 2022.

Under the 2014 Employee Stock Purchase Plan (the “2014 ESPP”) participants may purchase the Company’s common stock during semi-annual offering periods at 85% of the lower of (i) the market value per share of common stock on the first day of the offering period or (ii) the market value per share of the common stock on the purchase date. Each participant can purchase up to a maximum of $25,000 per calendar year in fair market value as calculated in accordance with applicable tax rules. The first offering period began on August 7, 2014. Stock-based compensation expense from the 2014 ESPP for the three months ended March 31, 2022 and 2021 was approximately $0.1 million and $0.1 million, respectively.

The 2014 ESPP, which was amended and restated effective August 6, 2020, provides for the issuance of up to 4,523,944 shares of the Company’s common stock to eligible employees. At March 31, 2022, there were 2,623,655 shares available for issuance under the 2014 ESPP.

The following table summarizes the stock-based compensation expense resulting from awards granted under ~~stock incentive plans, including~~Stock Incentive Plans, the Inducement Plan and the 2014 ESPP, that was recorded in the Company’s results of operations for the periods presented (in thousands):

For the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, $33,000 and $32,000 of~~2021, stock-based compensation expenses ~~were~~ capitalized as part of inventory or T2Dx instruments and components ~~respectively. For the nine months ended September 30, 2017 and 2016, $117,000 and $99,000 of stock-based compensation expenses~~ were ~~capitalized as part of inventory or T2Dx instruments and components, respectively.~~immaterial.

In connection with the Term Loan Agreement entered into in December 2016, the Company issued to CRG ~~four separate~~ warrants to purchase a total of 528,958 shares of the Company’s common stock. The warrants are exercisable any time prior to December 30, 2026 at a price of ~~$8.06~~$1.55 per share, with typical provisions for termination upon a change of control or a sale of all or substantially all of the assets of the Company. ~~The~~These warrants ~~are classified within shareholders’ equity,~~remain outstanding as of March 31, 2022 and ~~the proceeds were allocated between the debt and warrants based on their relative fair value. The fair value~~December 31, 2021.

In connection with a 2019 amendment of the Term Loan Agreement, the Company issued to CRG warrants ~~was determined by the Black-Scholes-Merton option pricing model. The fair value~~to purchase 568,291 shares of the ~~warrants~~Company’s common stock (“New Warrants”) at ~~issuance on December 30, 2016 was $1.8 million.~~an exercise price of $1.55, with typical provisions for termination upon a change of control or a sale of all or substantially all of the assets of the Company. All of the New Warrants are exercisable any time prior to September 9, 2029. The New Warrants remain outstanding as of March 31, 2022.

The following shares were excluded from the calculation of diluted net loss per share applicable to common stockholders, prior to the application of the treasury stock method, because their effect would have been anti-dilutive for the periods presented:

~~Canon US Life Sciences~~In September 2019, the Biomedical Advanced Research and Development Authority (“BARDA”) awarded the Company a milestone-based contract, with an initial value of $6.0 million, and a potential value of up to $69.0 million, if BARDA awards all contract options (the “U.S. Government Contract”). BARDA operates within the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) at the U.S. Department of Health and Human Services (“HHS”). If BARDA awards and the Company completes all options, the Company’s management believes it will enable a significant expansion of the Company’s current portfolio of diagnostics for sepsis-causing pathogen and antibiotic resistance genes. In September 2020, BARDA exercised the first contract option valued at $10.5 million. In September 2021, BARDA exercised an option valued at approximately $6.4 million.

In April 2021, BARDA agreed to accelerate product development by modifying the contract to advance future deliverables into the currently funded Option 1 of the BARDA contract for T2NxT, T2Biothreat, T2Resistance and T2AMR. The modification does not change the overall total potential value of the BARDA contract.

On ~~September 21, 2016, Canon became a related party when~~March 31, 2022, the Company ~~sold~~announced that BARDA had exercised Option 2B under the ~~Canon Shares~~existing multiple-year cost-share contract between BARDA and the Company and is providing an additional $4.4 million in funding to the Company. The additional funding under Option 2B will be used to advance the U.S. clinical trials for ~~an aggregate cash purchase price of $39.7 million, which represented 19.9%~~the T2Biothreat^® Panel and T2Resistance^® Panel, and to advance the development of the Company’s comprehensive panel for the detection of bloodstream infections and antimicrobial resistance and next-generation instrument.

The option exercise occurred simultaneously on March 31, 2022 with a modification to the BARDA contract to make immaterial changes to, among other things, the statement of work.

The Company recorded contribution revenue of $3.4 million and $2.3 million for the three months ended March 31, 2022 and 2021, respectively, under the BARDA contract.

The Company had outstanding ~~shares~~accounts receivable of ~~common stock~~$2.2 million and $1.9 million at March 31, 2022 and December 31, 2021, respectively, under the BARDA contract.

The Company leases certain office space, laboratory space and manufacturing space. At the inception of an arrangement, the ~~Company. On February 3,~~Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. The Company does 0t recognize right-of-use assets or lease liabilities for leases determined to have a term of 12 months or less. For new and amended leases, the Company has elected to account for the lease and non-lease components as a combined lease component.

In November 2014, the Company entered into an agreement to rent additional office space in Lexington, Massachusetts. In April 2015, the Company entered into ~~a Co-Development Partnership Agreement (the “Co-Development Agreement”)~~an amendment to extend the term to December 31, 2017. In connection with ~~Canon U.S. Life Sciences, Inc. (“Canon US Life Sciences”) to develop a diagnostic test panel to rapidly detect Lyme disease. Under the terms of the Co-Development Agreement,~~this agreement, the Company ~~received an upfront payment~~paid a security deposit of $2.0 million from Canon US Life Sciences, and the agreement includes an additional $6.5 million of consideration upon achieving certain development and regulatory milestones for total aggregate payments of up to $8.5 million. In October 2015, the Company achieved a specified technical requirement and received $1.5 million related to the achievement of the milestone. The Company$50,000, which is eligible to receive an additional $5.0 million under the arrangement, in two milestone payments of $2.0 million and $3.0 million, related to the achievement of additional development and regulatory milestones. All payments under the Co-Development Agreement are non-refundable once received. The Company will retain exclusive worldwide commercialization rights of any products developed under the Co-Development Agreement, including sales, marketing and distribution and Canon US Life Sciences will not receive any commercial rights and will be entitled to only receive royalty payments on the sales of all products developed under the Co-Development Agreement. Either party may terminate the Co-Development Agreement upon the occurrence of a material breach by the other party (subject to a cure period).

The Company evaluated the deliverables under the Co-Development Agreement and determined that the Co-Development Agreement included one unit of accounting, the research and development services, as the joint research and development committee deliverable was deemed to be ~~de minimis. The Company is recognizing revenue for research and development services~~recorded as a component of ~~research revenue~~other assets in the condensed consolidated ~~financial statements as~~balance sheets. In May 2015, the ~~services are delivered using~~Company entered into an amendment to expand existing manufacturing facilities in Lexington, Massachusetts. In September 2017, the ~~proportional performance method~~Company entered into an amendment to extend the term to December 31, 2021. In June 2020, the Company vacated this office space and determined that subleasing it to a tenant was unlikely due to the impact of ~~accounting, limited to payments earned. Costs incurred to deliver~~ the ~~services under~~COVID-19 pandemic on the ~~Co-Development Agreement are recorded as research and development expense in the condensed consolidated financial statements.~~

local commercial real estate sub-lease market. The Company recorded revenue of $0.0 and $0.4 million during the three months ended September 30, 2017 and September 30, 2016, respectively, and recorded revenue of $0.3 million and $1.5 million during the nine months ended September 30, 2017 and 2016, under the Co-Development Agreement, and expects to record revenue over the next two years, provided development milestones are achieved.lease terminated on December 31, 2021.

OnIn November ~~1, 2016,~~2014, the Company entered into a ~~Co-Development, Collaboration~~lease for additional laboratory space in Lexington, Massachusetts. The lease term commenced in April 2015 and ~~Co-Marketing Agreement (the “Allergan Agreement”) with Allergan Sales, LLC (“Allergan Sales”)~~extended for six years. The rent expense, inclusive of the escalating rent payments, is recognized on a straight-line basis over the lease term. As an incentive to ~~develop (1)~~enter into the lease, the landlord paid approximately $1.4 million of the $2.2 million space build-out costs. The unamortized balance of the lease incentive as of January 1, 2019 was reclassified as a ~~direct detection diagnostic test panel that adds one additional bacteria species~~reduction to the existing T2Bacteria product candidate (the “T2Bacteria II Panel”), and (2) a direct detection diagnostic test panel for testing drug resistance directly in whole blood (the “T2GNR Panel” and, togetherinitial recognition of the right-of-use asset related to this lease. In connection with ~~the T2Bacteria II Panel, the “Developed Products”). In addition, both~~this lease agreement, the Company ~~and Allergan Sales will participate in~~paid a joint research and development committee and Allergan Sales will receive the right to cooperatively market the T2Candida, T2Bacteria, and the Developed Products under the Allergan Agreement to certain agreed-upon customers. On June 1, 2017 the Company and Allergan Sales entered into an Amendment to the Allergan Agreementsecurity deposit of $281,000, which ~~primarily modified the project plan to combine the T2Bacteria II Panel and T2GNR Panel into one test panel.~~

Under the terms of the Allergan Agreement, the Company received an upfront payment of $2.0 million from Allergan Sales and will receive additional milestone payments upon achieving certain developmental milestones for total aggregate payments of up to $4.0 million. All payments under the Allergan Agreement are non-refundable once received. The Company will retain exclusive

worldwide commercialization rights of any products developed under the Allergan Agreement, including distribution, subject to Allergan Sales’ right to co-market the Developed Products. Allergan Sales, at its election, may co-market T2Candida, T2Bacteria and the Developed Products worldwide to certain agreed-upon customers and will receive royalty based on its sales for a period of time.

The Company evaluated the deliverables under the Allergan Agreement and determined that the Allergan Agreement included two units of accounting, the research and development services for the T2Bacteria II Panel and the research and development services for the T2GNR Panel, as the joint research and development committee and right to cooperatively market deliverables were deemed to be ~~de minimus. The Company is recognizing revenue for research and development services~~was recorded as a component of ~~research revenue~~both prepaid expenses and other current assets and other assets in the condensed consolidated ~~financial statements~~balance sheets at December 31, 2019. In October 2020, the Company entered into an amendment to extend the term of the lease to October 31, 2025. In accordance with this amendment, the Company paid a replacement security deposit of $130,977, which is classified as restricted cash at March 31, 2022 and December 31, 2021 and received the ~~services~~initial $281,000 security deposit in return.

In September 2021, the Company entered into a lease for office, research, laboratory and manufacturing space in Billerica, Massachusetts. The lease has a term of 126 months from the commencement date. The commencement date is anticipated to be in fiscal year 2022; therefore, there is 0 effect on the operating lease right-of-use assets and lease liability accounts at March 31, 2022. The Company opened a money market account for $1.0 million, which represents collateral as a security deposit for this lease and is classified as restricted cash at March 31, 2022.

Operating leases are ~~delivered using~~amortized over the ~~proportional performance method~~lease term and included in costs and expenses in the condensed consolidated statement of ~~accounting, limited~~operations and comprehensive loss. Variable lease costs are recognized in costs and expenses in the condensed consolidated statement of operations and comprehensive loss as incurred.

In 2006, the Company entered into a license agreement with a third party, pursuant to ~~payments earned. Costs incurred~~which the third party granted the Company an exclusive, worldwide, sublicenseable license under certain patent rights to ~~deliver the services under the Allergan Agreement are recorded as~~make, use, import and commercialize products and processes for diagnostic, industrial and research and development ~~expense in the consolidated financial statements.~~

purposes. The Company agreed to pay an annual license fee ranging from $5,000 to $25,000 for the royalty‑bearing license to certain patents. The Company also issued a total of 84,678 shares of common stock pursuant to the agreement in 2006 and 2007, which were recorded ~~revenue~~at fair value at the date of ~~$0.4 million~~issuance. The Company is required to pay royalties on net sales of products and ~~$0.6 million~~processes that are covered by patent rights licensed under the agreement at a percentage ranging between 0.5% - 3.5%, subject to reductions and offsets in certain circumstances, as well as a royalty on net sales of products that the Company sublicenses at 10% of specified gross revenue. Royalties that became due under this agreement for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, under the Allergan Agreement~~March 31, 2022 and ~~expects to record revenue over the next two years, provided development and regulatory milestones are achieved.~~2021 were immaterial.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, and Section 21E of the Securities and Exchange Act of 1934, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products and product candidates, their expected performance and impact on healthcare costs, marketing clearance from the ~~U.S. Food and Drug Administration (“FDA”) regulatory clearance,~~FDA, reimbursement for our product candidates, research and development costs, timing of regulatory filings, timing and likelihood of success, plans and objectives of management for future operations, availability of raw materials and components for our products, availability of funding for such operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under the sections in this Quarterly Report on Form 10-Q entitled “Item 1A.—Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. These forward looking statements are subject to numerous risks, including, without limitation, the following:

These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Unless required by U.S. federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made or to conform these statements to actual results. The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q, and Part I, Item 1A and Part II, Item 7A, “Risk Factors” and “Quantitative and Qualitative Disclosures about Market Risks”, respectively, in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, as ~~supplemented or amended from time to time under “Item 1A.—~~updated by Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risks” and Part II, Item 1A—“Risk Factors” ~~in our Quarterly Reports on Form 10-Q, and elsewhere~~ in this Quarterly Report on Form 10-Q.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form ~~10-Q. Some~~10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of ~~the information contained~~Financial Condition and Results of Operations included in ~~this discussion and analysis or set forth elsewhere in this Quarterly~~our Annual Report on Form ~~10-Q, including information with respect to our plans and strategy~~10-K for ~~our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in~~ the “Item 1A.—Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.year ended December 31, 2021.

We are an in vitro diagnostics company and leader in the rapid detection of sepsis-causing pathogens and antibiotic resistance genes. We are dedicated to improving patient care and reducing the cost of care by helping clinicians effectively treat patients faster

than ever before. We have developed innovative products that ~~has developed an innovative and proprietary technology platform that offers~~offer a rapid, sensitive and simple alternative to existing diagnostic methodologies. We are ~~using our T2 Magnetic Resonance technology (“T2MR”) to develop~~developing a broad set of applications aimed at ~~lowering mortality rates,~~ improving patient outcomes, ~~and~~ reducing the cost of healthcare, and lowering mortality rates by helping medical professionals make earlier targeted treatment ~~decisions earlier. T2MR~~decisions. Our technology enables rapid detection of pathogens, biomarkers and other abnormalities in a variety of unpurified patient sample types, including whole blood, plasma, serum, saliva, sputum and urine, and can detect cellular targets at limits of detection as low as one colony forming unit per milliliter, (“or CFU/~~mL”).~~mL. We are currently targeting a range of critically underserved healthcare conditions, focusing initially on those for which a rapid diagnosis will serve an important dual role – saving lives and reducing costs. Our ~~initial~~current development efforts primarily target sepsis, ~~and Lyme disease,~~ which ~~are areas~~is an area of significant unmet medical need in which existing therapies could be more effective with improved diagnostics. ~~On September 22, 2014, we received market clearance from~~

Our primary commercial products include the ~~FDA for our first two products,~~T2Dx^® Instrument, the ~~T2Dx Instrument (the “T2Dx”)~~T2Candida^® Panel, the T2Bacteria^® Panel, the T2Resistance^® Panel, and the ~~T2Candida Panel (“T2Candida”), which have the ability to rapidly identify the five clinically relevant species of~~ ~~Candida~~, a fungal pathogen known to cause sepsis. In the United States, we have built a direct sales force that is primarily targeting the top 450 hospitals with the highest concentration of patients at risk for ~~Candida~~ infections. This target number of hospitals may be increased to an estimated over 1,200 with the introduction of T2Bacteria in the United States upon approval by the FDA. Outside of the United States, we have partnered with distributors that target large hospitals in their respective markets. Four additional diagnostic applications in various stages of development are called T2Bacteria, T2Candida auris, T2GNR and T2Lyme, which are focused on bacterial and fungal infections and Lyme disease, respectively. In late 2015, we initiated the collection of patient blood samples to support the clinical trial in the United States for T2Bacteria, and in early 2017, we initiated a multi-site clinical trial for T2Bacteria. The T2Bacteria Panel received authorization to affix a CE mark in July 2017 and is being commercially launched in Europe and other countries that accept the CE mark. The multi-site clinical study was completed in the United States in August 2017. On September 8, 2017, we filed a 510(k) premarket notification with the FDA requesting market clearance to enable commercial launch of T2Bacteria for clinical use in the United States. T2 Bacteria is currently available in the United States for Research Use Only (RUO). We believe that we may receive a determination from the FDA on our application for the T2Bacteria possibly as early as the end of 2017, although it may take longer for the FDA to reach a decision and there can be no assurance of such a determination within this timeframe or at all. We believe that T2Bacteria, if approved, may expand the number of high risk patients who could be candidates for testing with T2Candida and/or T2Bacteria. We expect that existing reimbursement codes will support our sepsis and Lyme disease products and product candidates, and that the anticipated economic savings associated with testing of hospital inpatients in the United States with our sepsis products will be realized directly by hospitals.

~~diagnostic techniques are needed. Due to the high mortality rate associated with~~ ~~Candida~~ infections, physicians often will place patients on antifungal drugs while they await blood culture diagnostic results which generally take at least five days to generate a negative test result. Antifungal drugs are toxic and may result in side effects and can cost over $50 per day. T2Candida’s speed to result coupled with its superior sensitivity as compared to blood culture may help reduce the overuse of ineffective, or even unnecessary, antimicrobial therapy which may reduce side effects for patients, lower hospital costs and potentially counteract the growing resistance to antifungal therapy. The administration of inappropriate therapy is a driving force behind the spread of antimicrobial-resistant pathogens, which the United States Centers for Disease Control and Prevention (“CDC”) recently called “one of our most serious health threats.” The T2Sepsis Solution refers to the approach of combining the standard of care for the management of sepsis patients with our products, including the T2Dx Instrument, or the T2Dx, T2Candida, and T2Bacteria, which is commercially available in Europe and other countries that accept the CE mark and available for research use only in the United States. The T2Sepsis Solution is designed to enable clinicians to potentially treat 95% of septic patients within the first twelve hours of developing the symptoms of disease. Currently, high risk patients are typically initially treated with broad spectrum antibiotic drugs that typically cover approximately 60% of patients with infections. Of the remaining 40% of patients, approximately 30% of the patients have a bacterial infection and 10% have Candida infections. T2Candida and our product candidate, T2Bacteria are designed to identify pathogens commonly not covered by broad spectrum antibiotic drugs, which we believe may enable physicians to effectively treat an additional 35% of septic patients beyond the 60% of patients covered by broad spectrum antibiotic drugs.

We compete with traditional blood culture-based diagnostic companies, including Becton Dickinson & Co. and bioMerieux, Inc., as well as companies offering post-culture species identification using both molecular and non-molecular methods, including bioMerieux, Inc. (and its affiliate, BioFire Diagnostics, Inc.), Bruker Corporation, Accelerate Diagnostics, Luminex, Genmark, Cepheid and Beckman Coulter, a Danaher company.T2SARS-CoV-2™ Panel.

We have never been profitable and have incurred net losses in each year since inception. Our accumulated deficit at ~~September 30, 2017~~March 31, 2022 was ~~$247.9 million.~~$488.7 million and we have experienced cash outflows from operating activities over the past years. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. We have incurred significant commercialization expenses related to product sales, marketing, manufacturing and distribution of our FDA-cleared products, the T2Dx Instrument, T2Candida Panel and ~~T2Candida.~~T2Bacteria Panel. In addition, we ~~expect that~~will continue to incur significant costs and expenses ~~may increase~~ as we continue to develop other product candidates, improve existing products and maintain, expand and protect our intellectual property portfolio. We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to develop, commercialize and drive adoption of the T2Dx Instrument, T2Candida, T2Bacteria, T2Resistance, T2SARS-CoV-2 and future products.

We are subject to a number of risks similar to other early commercial stage life science companies, including, but not limited to commercially launching our products, development and market acceptance of our product ~~candidate, T2Bacteria,~~candidates, development by our competitors of new technological innovations, protection of proprietary technology, and ~~future T2MR-based diagnostics.~~raising additional capital.

~~Management believes that its existing cash~~The COVID-19 pandemic has impacted and may continue to impact our operations. We have established protocols for continued manufacturing, distribution and servicing of our products with safe social distancing and personal protective equipment measures and for remote work for employees not essential to on-site operations. To date these measures have been mostly successful but may not continue to function should the pandemic escalate and further impact our personnel. In 2020, our hospital customers restricted our sales team’s access to their facilities and as a result, we had significantly reduced our commercial and general and administrative staffing levels at the beginning of the COVID-19 pandemic to reduce expenses. We have since hired sales, marketing, and medical and clinical affairs personnel. Although we did not see any material impact to accounts receivable during the year ended December 31, 2021, our exposure may increase if our customers continue to be adversely affected by the COVID-19 pandemic, including as a result of the spread of variants of the virus. Customers may reduce their purchases of products, depending on their needs and cash ~~equivalents at September 30, 2017, together~~flow, which could negatively impact revenue. Our customers may cease to comply with the terms of our sales agreements and this may impact our ability to recognize revenue and hinder receivables collections. We have a significant development contract with BARDA, as described further below, and should BARDA reduce, cancel or not grant additional ~~remaining liquidity on~~milestone projects, our ability to continue our future product development may be impacted. Our shipping carrier’s ability to deliver our products to customers may be disrupted. We have reviewed our suppliers and quantities of key materials and believe we have sufficient stocks and alternate sources of critical materials should our supply chains become disrupted, although raw materials and plastics for the ~~Company’s~~manufacturing of reagents and consumables are in high demand, and interruptions in supply are difficult to predict.

We believe that our cash, cash equivalents, marketable securities and restricted cash of $20.5 million at March 31, 2022 will not be sufficient to fund our current operating plan at least a year from issuance of these financial statements unless additional funds are raised. Absent any reductions in current operating expenses, the Company believes it will require additional financing during the third quarter of 2022. Certain elements of our operating plan cannot be considered probable.

The Term Loan Agreement with CRG Servicing LLC (“CRG”) (Note 6) has certain covenants which require us to achieve certain annual revenue targets, whereby we are required to pay double the amount of upany shortfall as an acceleration of principal payments, and maintain a minimum cash balance of $5.0 million. In June 2021, we achieved the revenue covenant for the twenty-four month period beginning January 1, 2020. There can be no assurances that we will continue to be in compliance with the cash covenant in future periods without additional funding.

In February 2022, CRG amended the Term Loan Agreement extending the interest only period and maturity to December 30, 2023.

On March 31, 2022, BARDA, part of the Office of the Assistant Secretary for Preparedness and Response at the U.S. Department of Health and Human Services exercised Option 2B under our existing multiple-year cost-share agreement with BARDA and the Company and is providing an additional ~~$10.0~~$4.4 million ~~(which~~in funding to the Company. The total potential BARDA funding if all contract options are exercised is ~~available at any time through July 27, 2018,~~$69.0 million. The additional funding under Option 2B will be used to advance the U.S. clinical trials for the T2Biothreat^® Panel and T2Resistance^® Panel, and to advance the development of the Company’s comprehensive panel for the detection of bloodstream infections and antimicrobial resistance and next-generation instrument.

The option exercise occurred simultaneously on March 31, 2022 with a modification to the BARDA Contract to make immaterial changes to, among other things, the statement of work. The modification does not change the overall total potential value of the BARDA agreement.

On November 5, 2021, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1). Under Nasdaq rules, we have 180 days (May 4, 2022) to regain compliance by increasing the stock price to over $1.00. On May 5, 2022, we received a letter from Nasdaq informing us that our shares of common stock have failed to comply with the $1.00 minimum bid price required for continued listing and, as a result, our shares are subject to ~~certain conditions including~~delisting. The letter further stated that we may appeal the Nasdaq Staff delisting determination to a Nasdaq listing qualifications hearings panel (the “Panel”).

We have filed an appeal and hearing request to the Nasdaq Staff’s determination which will stay the delisting of our shares of common stock from Nasdaq pending the Panel’s decision. The Nasdaq Staff has informed us that the ~~Company receives 510(k) clearance for the marketing of T2Bacteria~~delisting action has been stayed, pending a final written decision by the ~~FDA by April 30, 2018, see Note 5~~Panel, and the hearing date has been set for ~~details)~~June 2, 2022. There can be no assurance that the Panel will ~~be sufficient~~grant our request for continued listing; however, we intend to ~~allow the Company to fund its current operating~~present a plan to regain compliance to the ~~first half~~Panel that includes a discussion of ~~2019. Should~~ the ~~Company’s current operating plans not materialize~~events that we believe will enable us to regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

These conditions raise substantial doubt regarding our ability to continue as ~~expected, or it is unable to obtain additional capital on~~ a ~~timely basis, or on acceptable terms,~~going concern for a period of one year after the ~~Company will be required to change its current operating~~date that the financial statements are issued. Management's plans to ~~reduce its~~alleviate the conditions that raise substantial doubt include raising additional funding, earning payments pursuant to our contract with BARDA, delaying certain research projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced ~~levels.~~

~~Our initial FDA-cleared products, the T2Dx instrument and T2Candida, utilize T2MR~~levels for us to ~~detect species-specific~~ ~~Candida~~ ~~directly from whole blood in~~continue as few as three hours versus the one to six or more days typically required by blood culture-based diagnostics. This allows the patient to potentially receive the correct treatment in four to six hours versus 24 to 144 hoursa going concern for ~~blood culture. The T2Candida runs on the T2Dx and provides high sensitivity with~~ a ~~limit~~period of ~~detection as low as 1 CFU/mL, even in the presence of antimicrobial therapy.~~

Our direcT2 pivotal clinical trial was designed to evaluate the sensitivity and specificity of T2Candida on the T2Dx. The direcT2 trial consisted of two patient arms: a prospective arm with 1,501 samples from patients with a possible infection and a seeded arm with 300 samples, also obtained from patients with a possible infection. T2Candida and the T2Dx demonstrated a sensitivity of 91.1 percent and a specificity of 99.4 percent. In addition, the speed to a species-specific positive result with T2Candida was 4.4 hours versus 129 hours with blood culture. A negative result from T2Candida was obtained in just 4.2 hours versus greater than 120 hours with blood culture. The data and other information12 months from the ~~direcT2 pivotal clinical trial was published in January 2015 in Clinical Infectious Diseases.~~

~~Sepsis is one of~~date the ~~leading causes of death in~~financial statements are issued. Management has concluded the United States, claiming more lives annually than breast cancer, prostate cancer and AIDS combined, and it is the most expensive hospital-treated condition. Most commonly afflicting immunocompromised, critical care and elderly patients, sepsis is a severe inflammatory responselikelihood that its plan to a bacterial or fungal infection with a mortality rate of approximately 30%. According to data published by the U.S. Department of Health and Human Services for 2016, the cost of sepsis was over $23 billion in the United States, or approximately 5% of the total aggregate costs associated with domestic hospital stays. Sepsis is typically caused bysuccessfully obtain sufficient funding from one or more of ~~five~~ ~~Candida~~ ~~species~~these sources or ~~over 25 bacterial pathogens, and effective treatment requires~~adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the ~~early detection and identification~~date of issuance of these specific target pathogens in a patient’s bloodstream. Today, sepsis is typically diagnosed through a series of blood cultures followed by post-blood culture species identification. These methods have substantial diagnostic limitations that lead to a high rate of false negative test results, a delay of up to several days in administration of targeted treatment and the incurrence of unnecessary hospital expense. In addition, the Survey of Physicians’ Perspectives and Knowledge About Diagnostic Tests for Bloodstream Infections in 2015 reported that negative blood culture results are only trusted by 36% of those physicians. Without the ability to rapidly identify pathogens, physicians typically start treatment of at-risk patients with broad-spectrum antibiotics, which can be ineffective and unnecessary and have contributed to the spread of antimicrobial resistance. According to a study published by Critical Care Medicine in 2006, in sepsis patients with documented hypotension, administration of effective antimicrobial therapy within the first hour of detection was associated with a survival rate of 79.9% and, over the ensuing six hours, each hour of delay in initiation of treatment was associated with an average decrease in survival of 7.6%.

We believe our sepsis products, which include T2Candida and our product candidate, T2Bacteria, will redefine the standard of care in sepsis management while lowering healthcare costs by improving both the precision and the speed of detection of sepsis-causing pathogens. According to a study published in the Journal of Clinical Microbiology in 2010, targeted therapy for patients with bloodstream infections can be delayed up to 72 hours due to the wait time for blood culture results. In another study published in Clinical Infectious Diseases in 2012, the delayed administration of appropriate antifungal therapy was associated with higher mortality among patients with septic shock attributed to ~~Candida~~ infection and, on that basis, the study concluded that more rapid and accurate diagnostic techniques are needed. Our pivotal clinical trial demonstrated that T2Candida can deliver actionable results in as few as three hours, with an average time to result during the trial of 4.2 hours, compared to the average time to result of one to six or more days typically required for blood-culture-based diagnostics, which we believe will potentially enable physicians to make treatment decisions and administer targeted treatment to patients in four to six hours versus 24 to 144 hours for blood culture. We believe that T2Bacteria will also deliver actionable results in similar timeframes because this diagnostic panel operates similarly to T2Candida and is designed to run on the same instrument as T2Candida.

~~Candida~~ is the fourth leading hospital-acquired bloodstream infection, afflicting more than 135,000 patients per year in the United States, and the most lethal form of common bloodstream infections that cause sepsis, with an average mortality rate of approximately 40%. This high mortality rate is largely due to a delay in providing targeted therapy to the patient due to the elapsed time from ~~Candida~~ ~~infection to positive diagnosis. According to a study published in Antimicrobial Agents and Chemotherapy, the~~ ~~Candida~~ ~~mortality rate can be reduced to 11% with the initiation of targeted therapy within 12 hours of presentation of symptoms. Additionally, a typical patient with a~~ ~~Candida~~ infection averages 40 days in the hospital, including nine days in intensive care, resulting in an average cost per hospital stay of more than $130,000 per patient. In a study published in the American Journal of Respiratory and Critical Care Medicine, providing targeted antifungal therapy within 24 hours of the presentation of symptoms decreased the length of hospital stay by approximately ten days and decreased the average cost of care by approximately $30,000 per patient. Furthermore, in April 2015, Future Microbiology published the results of an economic study regarding the use of T2Candida conducted by IMS Health, a healthcare economics agency. In that economic study, IMS demonstrated that an average hospital admitting 5,100 patients at risk for ~~Candida~~ infections could save approximately $5.8 million annually due to decreased hospital stays for patients, reduction in use of antifungal drugs, and other associated savings. The economic study further showed T2Candida can potentially reduce the costs of care by $26,887 per Candida patient and that rapid detection of ~~Candida~~ ~~reduces patient deaths by 60.6%. Results from a data analysis of T2Candida for the detection and monitoring of~~ ~~Candida~~ infection and sepsis were published comparing aggregated results from the use of T2Candida to blood culture-based diagnostics for the detection of invasive candidiasis and candidemia. The analysis included samples acquired from more than 1,900 patients. Out of 55 prospective patient cases that were tested with T2Candida and blood culture and determined to be positive or likely to be positive for a ~~Candida~~ infection, T2Candida detected 96.4% of the patients (53 cases) compared to detection of 60% of the patients (33 cases) with blood culture. During 2016, a number of T2Candida users presented data on their experiences with the T2Candida Panel which demonstrated both the clinical and economic benefits of use of the T2Candida Panel in the diagnostic regimen. The Henry Ford Health System in Detroit, Michigan reported data on a pre- and post-T2Candida implementation analysis that covered 6 months of clinical experience. The data showed a statistically significant (p = 0.009) seven day reduction in median Intensive Care Unit (“ICU”) length of stay per positive patient that was identified as positive for ~~Candida~~ after implementation of the T2Candida test panel and a trend (p = 0.164) of total hospital length of stay reduction of four days. The data also showed significant reductions in use of antifungal drugs for negative patients tested with T2Candida. The overall economic savings resulting from these clinical benefits was projected to be approximately $2.3 million on an annualized basis. The Lee Health System in Fort Myers, Florida compared patient and economic experience before and after T2Candida implementation. The data demonstrated that in the post-T2Candida cohort, median length of stay for patients with ~~Candida~~ ~~infections was reduced by 7 days when detected by T2Candida while unnecessary antifungal therapy was avoided in 41% of patients~~

tested and was discontinued after one dose in another 15% of patients tested. The average economic savings derived solely from reduction in antifungal drug use was $195 per patient tested, net of the cost of the T2Candida test panel. Huntsville Hospital in Huntsville, Alabama, reported that the use of the T2Candida test panel resulted in a reduction in the duration of therapy and time to de-escalation in patients that tested negative for ~~Candida~~ on the T2Candida test panel, yielding net pharmacy savings of approximately $280 per patient tested. T2Candida also detected 56% more positive patients than blood culture. Finally, Riverside Community Hospital in Riverside, California, demonstrated improvements in time to appropriate therapy, increased sensitivity, and rapid discontinuation of antifungal therapy when using T2Candida. Specifically, 83% of patients who tested positive with T2Candida received appropriate therapy within six hours of the blood draw and 100% of patients received appropriate therapy in under nine hours. None of the patients who tested positive had been identified to have been treated with antifungals prior to T2Candida testing. In addition, antifungal therapy was discontinued for 100% of the patients who tested negative with T2Candida.

~~Due to the high mortality rate associated with~~ ~~Candida~~ infections, physicians often will place patients on antifungal drugs while they await blood culture diagnostic results which generally take at least five days to generate a negative test result. Antifungal drugs are toxic and may result in side effects and can cost over $50 per day. T2Candida’s speed to result coupled with its superior sensitivity as compared to blood culture may help reduce the overuse of ineffective, or even unnecessary, antimicrobial therapy which may reduce side effects for patients, hospital costs and potentially, the growing resistance to antifungal therapy. This inappropriate therapy is a driving force behind the spread of antimicrobial-resistant pathogens, which the CDC recently called “one of our most serious health threats.”

On September 6, 2017, we announced that the Centers for Disease Control and Prevention (CDC) has agreed to utilize the T2Dx Instrument and the T2Candida auris investigational use only panel in their laboratory for testing and monitoring the emergence and outbreaks of the superbug ~~Candida auris~~ ~~in hospitals around the country.~~ ~~Candida auris~~ is a multi-drug resistant pathogen recognized by the CDC as a “serious global health threat” because it can be resistant to “all three major classes of antifungal drugs” and difficult to identify. The CDC has also reported that more than one in three patients with ~~Candida auris~~ ~~infections have died. Unlike most other species of Candida,~~ ~~Candida auris~~ ~~can spread quickly in a hospital making rapid identification and hospital environment surveillance a critical component of containing these outbreaks. Existing laboratory methods that detect~~ ~~Candida auris~~, including blood culture, suffer from prolonged detection times and low accuracy, which exacerbates the challenge in the fight to contain the superbug. Recently, reported cases have surged internationally, and the CDC has reported a significant increase in infected patients in the United States. According to the European Centre for Disease Prevention and Control, hospital outbreaks have occurred in the United Kingdom and Spain. Because ~~Candida auris~~ can be resistant to most treatment options and can spread so quickly, these hospital outbreaks have been difficult to contain by even the most enhanced control measures. We are also conducting a study in Europe that has demonstrated the ability to detect ~~Candida auris~~ ~~directly in patient blood specimens.~~

We have also developed a product candidate named T2Bacteria, a multiplex diagnostic panel that detects six major bacterial pathogens associated with sepsis and, in conjunction with T2Candida and standard empiric therapy regimens, may enable the early, appropriate treatment of 95% of sepsis patients. T2Bacteria, which will also run on the T2Dx, is expected to address the same approximately 6.75 million symptomatic high-risk patients as T2Candida and also a new population of patients who are at increased risk for bacterial infections, including an additional two million patients presenting with symptoms of infection in the emergency room setting. The T2Bacteria Panel received authorization to affix a CE mark in July 2017 and is being commercially launched in Europe and other countries that accept the CE mark.

On August 4, 2017 we completed a pivotal clinical study of the T2Bacteria® Panel, run on the T2Dx® Instrument (T2Dx), which is a qualitative T2 Magnetic Resonance (T2MR®) assay designed for the direct detection of bacterial species in EDTA human whole blood specimens from patients with suspected bacteremia. The T2Bacteria Panel is designed to identify six species of bacteria directly from human whole blood specimens: ~~Acinetobacter baumannii, Enterococcus faecium, Escherichia coli, Klebsiella pneumoniae, Pseudomonas aeruginosa,~~ ~~and~~ ~~Staphylococcus aureus.~~

The performance characteristics of the T2Bacteria Panel were evaluated through a series of analytical studies as well as a multi-center clinical study. The clinical study evaluated the performance of the T2Bacteria Panel in comparison to the current standard of care, blood culture. All of the data generated in the analytical studies and the clinical study were submitted to the United States Food and Drug Administration, or FDA, in a 510(k) premarket notification on September 8, 2017.

The clinical study consisted of two arms, a prospective arm and a seeded arm. In the prospective arm, a total of 1,427 subjects were tested at eleven geographically dispersed and demographically diverse sites in the United States. In the seeded arm, 300 specimens of known bacterial composition were evaluated at three sites. Seeded specimens were prepared by spiking whole blood

with multiple strains of the bacterial species detected by the T2Bacteria Panel at defined concentrations (CFU/mL). Fifty negative blood samples also were evaluated as part of the seeded arm of the study. In total, 1,777 (1,427 prospective specimens and 350 seeded and negative) clinical samples were tested to evaluate the clinical performance of T2Bacteria Panel.

~~T2Bacteria is currently available in the United States for Research Use Only (RUO).~~

We believe our T2 Magnetic Resonance technology, or T2MR, delivers what no conventional technology currently available can: a rapid, sensitive and simple diagnostic platform to enable sepsis applications that can identify specific sepsis pathogens directly from an unpurified blood sample in hours instead of days at a level of accuracy equal to or better than blood culture-based diagnostics. The T2Sepsis Solution refers to the approach of combining the standard of care for the management of sepsis patients with our products, including the T2Dx Instrument, or the T2Dx, T2Candida, and T2Bacteria, which is commercially available in Europe and other countries that accept the CE mark and available for research use only in the United States. The T2Sepsis Solution is designed to enable clinicians to potentially treat 95% of septic patients within the first twelve hours of developing the symptoms of disease. Currently, high risk patients are typically initially treated with broad spectrum antibiotic drugs that typically cover approximately 60% of patients with infections. Of the remaining 40% of patients, approximately 30% of the patients have a bacterial infection and 10% have Candida infections. T2Candida and product candidate, T2Bacteria are designed to identify pathogens commonly not covered by broad spectrum antibiotic drugs, which we believe may enable physicians to effectively treat an additional 35% of septic patients beyond the 60% of patients covered by broad spectrum antibiotic drugs.

We believe the T2Sepsis Solution provides a pathway for more rapid and targeted treatment of infections, potentially reducing the mortality rate by as much as 75% if a patient is treated within 12 hours of suspicion of infection and significantly reducing the cost burden of sepsis. Each year, approximately 500,000 patients in the United States die from sepsis. According to a study published by ~~Critical Care Medicine~~ in 2006, in sepsis patients with documented hypotension, administration of effective antimicrobial therapy within the first hour of detection was associated with a survival rate of 79.9% and, over the ensuing six hours, each hour of delay in initiation of treatment was associated with an average decrease in survival of 7.6%. According to such study, the survival rate for septic patients who remained untreated for greater than 36 hours was approximately 5%. The toll of sepsis on a patient’s health can be severe: more than one-in-five patients die within two years as a consequence of sepsis. Sepsis is also the most prevalent and costly cause of hospital readmissions.

~~We believe the T2Sepsis Solution addresses a significant unmet need in~~ ~~in vitro~~ ~~diagnostics by providing:~~

Our FDA-cleared T2Dx instrument is an easy-to-use, fully-automated, benchtop instrument utilizing T2MR for use in hospitals and labs for a broad range of diagnostic tests. To operate the system, a patient’s sample tube is snapped onto a disposable test cartridge, which is pre-loaded with all necessary reagents. The cartridge is then inserted into the T2Dx instrument, which automatically processes the sample and then delivers a diagnostic test result. Test results are displayed on screen or directly through the lab information system.

By utilizing our proprietary T2MR technology for direct detection, the T2Dx eliminates the need for sample purification and analyte extraction, which are necessary for other optical-detection devices. Eliminating these sample processing steps increases diagnostic sensitivity and accuracy, enables a broad menu of tests to be run on a single platform, and greatly reduces the complexity of the consumables. The T2Dx incorporates a simple user interface and is designed to efficiently process up to seven specimens simultaneously.

T2MR is a miniaturized, magnetic resonance-based approach that measures how water molecules react in the presence of magnetic fields. For molecular and immunodiagnostics targets, T2MR utilizes advances in the field of magnetic resonance by deploying particles with magnetic properties that enhance the magnetic resonance signals of specific targets. When particles coated with target-specific binding agents are added to a sample containing the target, the particles bind to and cluster around the target. This clustering changes the microscopic environment of water in that sample, which in turn alters the magnetic resonance signal, or the T2 relaxation signal that we measure, indicating the presence of the target.

We believe that T2MR can also address the significant unmet need associated with Lyme disease, a tick-borne illness that can cause prolonged neurological disease and musculoskeletal disease. For patients with Lyme disease, early diagnosis and appropriate treatment significantly reduces both the likelihood of developing neurological and musculoskeletal disorders, as well as the significant costs associated with treating these complications. Our product candidate, T2Lyme, will identify the bacteria that cause Lyme disease directly from the patient’s blood, without the need for blood culture which, for the bacteria associated with Lyme disease, can take several weeks. Our Lyme product candidate is currently in pre-clinical development and we expect to initiate a T2Lyme clinical trial in 2018.

Another significant unmet clinical need is the diagnosis and management of impaired hemostasis, which is a life-threatening condition in which a patient is unable to promote the formation of blood clots to stabilize excessive bleeding. Within the broader population of patients with symptoms of impaired hemostasis, there are over ten million trauma patients in the United States annually. These trauma patients typically face life-threatening injuries or invasive surgical procedures. Approximately 25% of trauma patients have impaired hemostasis, which frequently goes undetected during the initial hospitalization. According to a study in the Journal of the American College of Surgeons, for trauma patients with symptoms of impaired hemostasis, mortality rates were reduced from 45% to 19% with more rapid delivery of therapy. The T2Plex and T2HemoStat are being designed to utilize T2MR and are designed to provide hemostasis measurements in less than 45 minutes. Our product candidate, T2HemoStat, is a comprehensive panel of diagnostic tests that can provide data across the hemostasis spectrum, including measurements of fibrinogen, platelet activity, and clot lysis. We believe that T2HemoStat may be the first panel capable of rapidly identifying key coagulation, platelet and other hematologic factors directly from whole blood on a single, easy-to-operate, compact instrument. We are exploring partnership opportunities to complete the development and commercialization of these products.

We believe T2MR is the first technology with the ability to detect directly from a clinical sample of whole blood, plasma, serum, saliva, sputum or urine, saving time and potentially improving sensitivity by eliminating the need for purification or the extraction of target pathogens. T2MR has been demonstrated to detect cellular targets at limits of detection as low as one colony-forming unit per milliliter (CFU/mL). More than 100 studies published in peer reviewed journals have featured T2MR in a breadth of applications.consolidated financial statements.

We generate revenue from the sale of our products, related services, reagent rental agreements and ~~from activities performed pursuant~~government contributions.

Grants received, including cost reimbursement agreements, are assessed to ~~research and development agreements.~~

~~Revenue earned from activities performed pursuant to research and development agreements~~determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is ~~reported~~accounted for as ~~research revenue using~~a contribution if the ~~proportional performance method as~~resource provider does not receive commensurate value in return for the ~~work is completed, limited to payments earned, and the related costs are expensed as incurred as research and development expense.~~assets transferred.

Product revenue is ~~derived from~~generated by the sale of ~~our~~ instruments and ~~related~~ consumable diagnostic tests predominantly through our direct sales force in the United States and distributors in geographic regions outside the United States. We do not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to our customers, including ~~our~~its distributors. Payment terms granted to distributors are the same as those granted to end-user customers and payments are not dependent upon the distributors’ receipt of payment from their end-user customers. We ~~recognize product revenue from~~either sell instruments to customers and international distributors, or retain title and place the ~~sale of our instruments as soon as all applicable revenue recognition criteria have been met. In~~instrument at the ~~majority of cases, we expect~~customer site pursuant to ~~place our instruments, under~~a reagent rental agreement. When the instrument is placed under a reagent rental agreement, our customers generally agree to fixed term agreements, ~~in hospitals, certain of~~ which ~~may include minimum commitments and/or an~~can be extended, and incremental ~~charge~~charges on ~~the purchase of our~~each consumable diagnostic ~~tests. Under this business model, we believe we will recover~~test purchased. Shipping and handling costs are billed to customers in connection with a product sale.

Fees paid to member-owned group purchasing organizations (“GPOs”) are deducted from related product revenues.

Direct sales of instruments include warranty, maintenance and technical support services typically for one year following the ~~cost~~installation of ~~placing our instruments~~the purchased instrument (“Maintenance Services”). Maintenance Services are separate performance obligations as they are service-based warranties and are recognized on a straight-line basis over the service delivery period. After the completion of the initial Maintenance Services period, customers have the option to renew or extend the Maintenance Services typically for additional one-year periods in ~~hospitals through the margins realized from our consumable diagnostic tests. Our~~exchange for additional consideration. The extended Maintenance Services are also service-based warranties that represent separate purchasing decisions.

We warrant that consumable diagnostic tests ~~can only~~will be ~~used with~~free from defects, when handled according to product specifications, for the stated life of the product. To fulfill valid warranty claims, we provide replacement product free of charge.

Our current sales strategy is to drive adoption of our ~~instruments, and accordingly, as the~~test platform installed base ofin hospitals, to increase test use by our ~~instruments grows,~~existing hospital customers, and to expand T2SARS-CoV-2 customers to sepsis testing. Accordingly, we expect the following to occur:

~~Revenue from consumables is based on the volume of tests sold~~this may impact our ability to recognize revenue and ~~the price of each consumable unit.~~hinder receivables collections. We have a significant development contract with BARDA and should BARDA reduce, cancel or not grant additional milestone projects, our ability to continue our future product development may be impacted.

Cost of product revenue includes the cost of materials, direct labor and manufacturing overhead costs used in the manufacture of our consumable diagnostic tests sold to customers and related license and royalty fees. Cost of product revenue also includes depreciation on the revenue-generating T2Dx ~~Instruments~~instruments that have been placed with our customers under reagent rental agreements; costs of materials, direct labor and manufacturing overhead costs on the T2Dx ~~Instruments~~instruments sold to customers; and other costs such as customer support costs, warranty and repair and maintenance expense on the T2Dx ~~Instruments~~instruments that have been placed with our customers under reagent rental agreements. We manufacture the T2Dx ~~Instruments~~instruments and part of our consumable diagnostic tests in our facilities. We outsource the manufacturing of components of our consumable diagnostic tests to contract manufacturers.

We expect cost of product revenue to continue to represent a high percentage of our product revenue as we continue to invest in our manufacturing capabilities, infrastructure and customer service organization and grow our installed customer base. We plan to continue to expand our capacity to support our growth, which will result in higher cost of revenue in absolute dollars. However, we expect cost of product revenue, as a percentage of revenue, to decline as revenue grows in the future.

Our research and development expenses consist primarily of costs incurred for the development of our technology and product candidates, technology improvements and enhancements, clinical trials to evaluate the clinical utility of our product candidates, and laboratory development and expansion, and include salaries and benefits, including stock-based compensation, research-related facility and overhead costs, laboratory supplies, equipment and contract services. Research and development expenses also include costs of delivering products or services associated with ~~research~~contribution revenue. We expense all research and development costs as incurred.

We anticipate our overall research and development expenses ~~to continue to be flat to down over~~remain consistent or increase in support of increased activity under the next several quarters in part due to the completion of our T2Bacteria clinical trial. Research and development costs include costs to support research partnerships, clinical trials and new product development.BARDA agreement. We ~~have committed, and~~ expect to ~~commit, significant resources toward~~continue developing additional product candidates, improving existing products, and conducting ongoing and new clinical ~~trials~~trials. We have a significant development contract with BARDA and ~~expanding~~should BARDA reduce, cancel or not grant additional milestone projects, our ~~laboratory capabilities.~~ability to continue our future product development may be impacted.

Selling, general and administrative expenses consist primarily of costs for our sales and marketing, finance, legal, human resources, business development and general management functions, as well as professional services, such as legal, consulting and accounting services. We expect selling, general and administrative expenses to increase in future periods as we commercialize products and future product candidates and as our needs for sales, marketing and administrative personnel grow. Other selling, general and administrative expenses include facility-related costs, fees and expenses associated with obtaining and maintaining patents, clinical and economic studies and publications, marketing expenses, and travel expenses. We expense ~~all~~the majority of selling, general and administrative expenses as incurred.

Interest expense consists primarily of interest expense on our notes payable, changes in fair value of our derivative liability and the amortization of deferred financing costs ~~partially offset by interest earned on our cash~~ and ~~cash equivalents.~~debt discount.

Other income, net, consists of dividend and other investment ~~income, government grant income and the gain or loss associated with the change in the fair value of our liability for warrants to purchase redeemable securities.~~income.

We have prepared our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States. Our preparation of these condensed consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures at the date of the condensed consolidated financial statements, as well as revenue and expenses recorded during those periods. We evaluated our estimates and judgments on an ongoing basis. We based our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

The items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, ~~2016 remain~~2021 remained materially consistent. For a description of those critical accounting policies, please refer to our Annual Report on Form 10-K filing for the year ended December 31, ~~2016.~~2021.

Results of Operations for the Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021

	Three Months Ended September 30,									Three Months Ended March 31,
	2017			2016			Change			2022			2021			Change
	(in thousands)									(in thousands)
Revenue:
Product revenue	$	739		$	580		$	159		$	3,844		$	4,650		$	(806	)
Research revenue		369			504			(135	)
Contribution revenue											3,390			2,306			1,084
Total revenue		1,108			1,084			24			7,234			6,956			278
Costs and expenses:
Cost of product revenue		2,106			1,894			212			6,205			5,790			415
Research and development		5,880			5,200			680			6,656			4,665			1,991
Selling, general and administrative		5,559			5,935			(376	)		9,230			6,203			3,027
Total costs and expenses		13,545			13,029			516			22,091			16,658			5,433
Loss from operations		(12,437	)		(11,945	)		492			(14,857	)		(9,702	)		(5,155	)
Interest expense, net		(1,718	)		(876	)		(842	)
Other income (expense):
Interest income											3			6			(3	)
Interest expense											(1,650	)		(1,013	)		(637	)
Other income, net		79			38			41			9			49			(40	)
Total other expense											(1,638	)		(958	)		(680	)
Net loss	$	(14,076	)	$	(12,783	)	$	(1,293	)	$	(16,495	)	$	(10,660	)	$	(5,835	)

Product revenue was ~~$0.7~~$3.8 million for the three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$0.6~~$4.6 million for the three months ended ~~September 30, 2016, an increase~~March 31, 2021, a decrease of ~~$0.1~~$0.8 million, ~~or 27.4%. The increase~~which was driven ~~primarily~~by lower consumables sales of $1.0 million mostly due to a decrease in sales of T2SARS-CoV-2, offset by higher ~~comparable~~T2Dx sales of ~~T2Candida consumables of~~ $0.2 ~~million and slightly higher support contract revenue plus sales of the new T2Bacteria consumables product in Europe. The increases were partially offset by lower instrument sales of $0.1~~ million.

~~Research~~Contribution revenue relates to our BARDA agreement and was ~~$0.4~~$3.4 million for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$0.5~~$2.3 million for the three months ended ~~September 30, 2016, a decrease~~March 31, 2021. The increase of ~~$0.1~~$1.1 million ~~or 26.8%. The decrease~~ was ~~primarily the result of lower revenue recognized under our Co-Development Agreement with Canon US Life Sciences, which decreased $0.4 million over the prior year~~

comparable period, as well as a decrease in revenue from research and development agreements utilizing T2MR technology with other third parties of $0.1 million. These decreases were offset by an increase in revenue from services delivered under our Co-Development Agreement with Allergan Sales, LLC of $0.4 million.due to increased contract activity.

Cost of product revenue was ~~$2.1~~$6.2 million for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$1.9~~$5.8 million for the three months ended ~~September 30, 2016,~~March 31, 2021, an increase of ~~$0.2~~$0.4 million. The increase in cost ~~primarily correlated~~was driven by a $1.2 million increase related to ~~increased product revenue and continued expansion~~a higher number of ~~manufacturing activities and certain manufacturing costs of $0.4 million over the prior year comparable period. The increases were~~instrument sales, offset by a decrease in $0.5 million related to consumables, a $0.2 million decrease due to lower cycle count costs ~~for consumables~~ and ~~instruments of~~ $0.1 million ~~and lower service related and miscellaneous costs of $0.1 million.~~in reduced royalties.

Research and development expenses were ~~$5.9~~$6.7 million for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$5.2~~$4.7 million for the three months ended ~~September 30, 2016,~~March 31, 2021, an increase of $2.0 million. The increase was driven by an increase of $0.7 million ~~over the prior year comparable period. Clinical trial and related~~in payroll expenses due to increased byheadcount, a $0.5 million increase in consulting expenses, a $0.4 million increase in lab expenses, a $0.3 million ~~primarily from the T2Bacteria clinical trial. Facilities related~~increase in clinical-related expenses, and ~~other research and development expenses increased by $0.2~~a $0.1 million ~~which includes increased depreciation, lab related and engineering prototype~~increase in project expenses. Outside service and travel expenses increased by $0.3 million, primarily from increased work on the T2Bacteria clinical trial. Payroll and related expenses increased by $0.2 million. Partially offsetting these increases is a decrease in preclinical related expenses of $0.3 million.

Selling, general and administrative expenses were ~~$5.6~~$9.2 million for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$5.9~~$6.2 million for the three months ended ~~September 30, 2016,~~March 31, 2021, an increase of $3.0 million. The increase was driven by a ~~decrease of $0.3~~$2.1 million ~~over the prior year comparable period. The decrease was~~increase in payroll expenses due ~~primarily~~ to ~~decreased payroll and related~~increased headcount, a $0.5 million increase in consulting expenses, ~~of approximately~~a $0.2 million ~~due to~~increase in marketing expenses, and a ~~reduction~~$0.2 million increase in ~~headcount, decreased~~ travel ~~expenses of $0.1 million~~expenses.

Interest income was immaterial for the three months ended March 31, 2022 and ~~decreased outside services of $0.1 million. The decreases were partially offset by increased legal expenses of $0.1 million.~~2021.

~~Interest expense, net,~~ was ~~$1.7~~$1.6 million for the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$0.9~~$1.0 million for the three months ended ~~September 30, 2016.~~March 31, 2021, an increase of $0.6 million. Interest expense ~~net,~~ increased ~~by $0.8 million~~ primarily ~~from~~due to the ~~refinancing~~amortization of the debt discount associated with ~~CRG.~~the CRG Term Loan Agreement.

Other income, net, was ~~$79,000 of net income~~immaterial for the three months ended ~~September 30, 2017, compared to $38,000 for the three months ended September 30, 2016. Other income, net, increased by $41,000 due primarily to increased dividend~~March 31, 2022 and ~~other investment income earned on higher average levels of invested cash over the prior comparable period.~~

Nine Months Ended
September 30,

2017

2016

Change

(in thousands)

Revenue:

Product revenue

$
2,105

$
1,168

$
937

Research revenue

900

2,003

(1,103
)
Total revenue

3,005

3,171

(166
)
Costs and expenses:

Cost of product revenue

5,722

4,701

1,021

Research and development

19,577

18,160

1,417

Selling, general and administrative

17,192

18,282

(1,090
)
Total costs and expenses

42,491

41,143

1,348

Loss from operations

(39,486
)

(37,972
)

(1,514
)
Interest expense, net

(5,008
)

(2,416
)

2,592

Other income, net

260

133

127

Net loss

$
(44,234
)

$
(40,255
)

$
(3,979
)

Product revenue was $2.1 million for the nine months ended September 30, 2017 compared to $1.2 million for the nine months ended September 30, 2016, an increase of $0.9 million or 80.2%. The increase was driven by an increase in sales volume of our products, primarily the sale of T2Candida and T2Bacteria (in Europe) consumable diagnostic tests of $0.6 million plus higher instrument sales of $0.1 million and an increase in service contract revenue.

Research revenue was $0.9 million for the nine months ended September 30, 2017, compared to $2.0 million for the nine months ended September 30, 2016, a decrease of $1.1 million or 55.0%. This decrease was primarily the result of lower revenue recognized under our Co-Development Agreement with Canon of $1.2 million as well as a decrease in revenue from research and development agreements utilizing our T2MR technology with other third parties over the prior year comparable period. These decreases were offset by revenue recognized under our Co-Development Agreement with Allergan Sales, LLC.

Cost of product revenue was $5.7 million for the nine months ended September 30, 2017, compared to $4.7 million for the nine months ended September 30, 2016, an increase of $1.0 million. $0.3 million of the increase in cost correlates to increased product revenue. In addition, other cost increases relate to continued expansion of manufacturing activities and certain manufacturing costs of $0.2 million, depreciation of $0.2 million and increase in reserves of $0.3 million over the prior year comparable period.

Research and development expenses were $19.6 million for the nine months ended September 30, 2017, compared to $18.2 million for the nine months ended September 30, 2016, an increase of $1.4 million over the prior year comparable period. Clinical trial and related expenses increased by $1.1 million primarily from the T2Bacteria clinical trial. Facilities related and other expenses increased by $0.4 million which includes higher depreciation, lab related and engineering prototype expenses. Outside service and travel expenses increased by $0.4 million, primarily from increased work on the T2Bacteria clinical trial. Partially offsetting these increases is a decrease in preclinical related expenses of $0.3 million, a decrease in payroll and related expenses of $0.1 million.

Selling, general and administrative expenses were $17.2 million for the nine months ended September 30, 2017, compared to $18.3 million for the nine months ended September 30, 2016, a decrease of $1.1 million. The decrease was due primarily to decreased payroll and related expenses of approximately $1.1 million, due to a reduction in headcount, decreased travel expenses of $0.3 million related to headcount reduction, and decreased legal expenses of $0.1 million. These decreases were partially offset by increased

~~outside services expenditures of $0.2 million and increased facility and other selling, general and administrative expenses of $0.2 million.~~

Interest expense, net, was $5.0 million for the nine months ended September 30, 2017, compared to $2.4 million for the nine months ended September 30, 2016. Interest expense, net, increased by $2.6 million primarily from the refinancing of debt with CRG.

Other income, net, was $260,000 for the nine months ended September 30, 2017, compared to $133,000 for the nine months ended September 30, 2016. Other income, net, increased by $127,000 due primarily to increased dividend and other investment income earned on higher average levels of invested cash over the prior comparable period.2021.

We have incurred losses and cumulative negative cash flows from operations since our inception, and as of ~~September 30, 2017,~~March 31, 2022 and December 31, ~~2016~~2021 we had an accumulated deficit of ~~$247.9~~$488.7 million and ~~$203.7~~$472.2 million, respectively. Having obtained clearance from the FDA and a CE mark in Europe to market the T2Dx Instrument, T2Candida Panel, and T2Bacteria Panel, we have incurred significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We ~~anticipate that we will~~may seek to continue ~~to incur losses for at least the next few years. We expect that our operating expenses will continue to increase and, as a result, we will need additional capital~~ to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to develop and commercialize T2Dx, T2Candida, T2Bacteria, T2SARS-CoV-2 and other product candidates.

Historically, we have funded our operations primarily through our August 2014 initial public offering, our December 2015 public offering, our September 2016 private investment in public equity (“PIPE”) financing, our September 2017 public offering, our June 2018 public offering, our July 2019 establishment of an Equity Distribution Agreement and Equity Purchase Agreement (Note

7), our March 2021 establishment of an Equity Distribution Agreement (Note 7), private placements of redeemable convertible preferred stock and debt financing arrangements.

In July 2021, our shareholders approved of an increase in the number of authorized shares of our common stock from 200,000,000 to 400,000,000.

On March 31, 2021, we entered into a Sales Agreement with Canaccord (“New Sales Agreement”), as agent, pursuant to which we may ~~raise~~offer and sell shares of common stock, for aggregate gross sale proceeds of up to $75.0 million from time to time from the effective date of the respective registration statement through ~~a combination~~Canaccord. In the second quarter of ~~equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.~~2021, we had sold 16,809,424 shares of common stock for net proceeds of $20.0 million. During the three months ended March 31, 2022, the Company sold 3,549,360 shares for net proceeds of $1.4 million under the New Sales Agreement. We sold no shares under the New Sales Agreement during the three months ended March 31, 2021.

We ~~have historically funded our operations principally~~agreed to pay Canaccord for its services of acting as agent 3% of the gross proceeds from the sale of ~~common stock~~the shares pursuant to the New Sales Agreement. Legal and ~~preferred stock,~~accounting fees are reclassified to share capital upon issuance of shares under the incurrence of indebtedness, and revenue from research and development agreements. In September 2017 we raised net proceeds of $18.8 million through our confidentially marketed public offering (“CMPO”).New Sales Agreements.

As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 we had unrestricted cash and cash equivalents of approximately ~~$52.9~~$9.4 million and ~~$73.5~~$22.2 million, respectively. ~~Currently, our funds~~We also have marketable securities of $10.0 million, which are ~~primarily~~ held in ~~money market funds invested in~~ U.S. ~~government agency~~treasury securities. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, costs related to our products, clinical trials, laboratory and related supplies, supplies and materials used in manufacturing, legal and other regulatory expenses and general overhead costs.

Management believes that the existing cash and cash equivalents at September 30, 2017, together with the additional remaining liquidity on our Term Loan Agreement of up to an additional $10.0 million, will be sufficient to fund our current operating plan into the first half of 2019. The borrowing on the Term Loan Agreement is available at any time through July 27, 2018, and is subject to certain conditions including that we receive 510(k) clearance for the marketing of T2Bacteria^TM by the FDA by April 30, 2018 (see Note 5 to our unaudited condensed consolidated financial statements for details). Should our current operating plan not materialize as expected, including our ability to draw additional borrowings on the Term Loan Agreement on a timely basis, we would delay certain research projects and capital expenditures and reduce or eliminate certain future operating expenses in order to fund operations at reduced levels to continue as a going concern for a period of 12 months from the date the financial statements are issued. The Term Loan Agreement also requires us to achieve certain annual revenue targets, whereby we are required to pay double the amount of any shortfall as an acceleration of principal payments. The revenue target for fiscal 2017 is $5.0 million. Should we fall short of the revenue target we would seek a waiver of this provision. There can be no assurances that we would be successful in obtaining a waiver.

Until such time as we can generate substantial product revenue, we expect to finance our cash needs, beyond what is currently available or on hand, through a combination of equity offerings, debt financings and revenue from existing and potential research and development and other collaboration agreements. If we raise additional funds in the future, we may need to relinquish valuable rights to our technologies, future revenue streams or grant licenses on terms that may not be favorable to ~~us.~~us.

The COVID-19 pandemic has impacted and may continue to impact our operations. We have established protocols for continued manufacturing, distribution and servicing of our products with safe social distancing and personal protective equipment measures and for remote work for employees not essential to on-site operations. To date these measures have been mostly successful but may not continue to function should the pandemic escalate and further impact our personnel. In 2020, our hospital customers restricted our sales team’s access to their facilities and as a result, we had significantly reduced our commercial and general and administrative staffing levels at the beginning of the COVID-19 pandemic to reduce expenses. We have since hired sales and marketing personnel. Although we did not see any material impact to accounts receivable during the three months ended March 31, 2022, our exposure may increase if our customers continue to be adversely affected by the COVID-19 pandemic, including as a result of the spread of variants of the virus. Customers may reduce their purchases of products, depending on their needs and cash flow, which could negatively impact revenue. Our customers may cease to comply with the terms of our sales agreements and this may impact our ability to recognize revenue and hinder receivables collections. We have a significant development contract with BARDA and should BARDA reduce, cancel or not grant additional milestone projects, our ability to continue our future product development may be impacted. Our shipping carrier’s ability to deliver our products to customers may be disrupted. We have reviewed our suppliers and quantities of key materials and believe we have sufficient stocks and alternate sources of critical materials should our supply chains become disrupted, although raw materials and plastics for the manufacturing of reagents and consumables are in high demand, and interruptions in supply are difficult to predict.

We believe that our cash, cash equivalents, marketable securities and restricted cash of $20.5 million at March 31, 2022 will not be sufficient to fund our current operating plan at least a year from issuance of these financial statements. Absent any reductions in current operating expenses, the Company believes it will require additional financing during the third quarter of 2022. Certain elements of our operating plan cannot be considered probable.

The Term Loan Agreement with CRG Servicing LLC (“CRG”) (Note 6) has certain covenants which require us to achieve certain annual revenue targets, whereby we are required to pay double the amount of any shortfall as an acceleration of principal payments, and maintain a minimum cash balance of $5.0 million. In June 2021, we achieved the revenue covenant for the twenty-four month period beginning January 1, 2020. There can be no assurances that we will continue to be in compliance with the cash covenant in future periods without additional funding. In February 2022 CRG amended the Term Loan Agreement extending the interest only period and maturity to December 30, 2023.

We have filed an appeal and hearing request to the Nasdaq Staff’s determination which will stay the delisting of our shares of common stock from Nasdaq pending the Panel’s decision. The Nasdaq Staff has informed us that the delisting action has been stayed, pending a final written decision by the Panel, and the hearing date has been set for June 2, 2022. There can be no assurance that the Panel will grant our request for continued listing; however, we intend to present a plan to regain compliance to the Panel that includes a discussion of the events that we believe will enable us to regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that the financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include raising additional funding, earning payments pursuant to our contract with BARDA, delaying certain research projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for us to continue as a going concern for a period of 12 months from the date the financial statements are issued. Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more of these sources or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The following is a summary of cash flows for each of the periods set forth below:

Net cash used in operating activities was approximately ~~$36.7~~$14.5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, and consisted ~~primarily~~ of a net loss of ~~$44.2~~$16.5 million adjusted for non-cash items including stock-based compensation expense of ~~$3.8~~$2.6 million, non-cash interest expense of $0.5 million, non-cash lease expense of $0.3 million, and depreciation and amortization expense of $0.3 million. The net change in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $0.8 million, an increase in prepaid expenses and other assets of $1.5 million due to timing of payments, an increase in inventory of $1.5 million due to bulk materials purchases for favorable pricing, an increase in accounts payable of $0.6 million due to increased spend on inventory and lab

supplies, an increase in accrued expenses of $0.5 million due to increased employee costs, a decrease in deferred revenue of $0.2 million, and a decrease in operating lease liabilities of $0.3 million.

Net cash used in operating activities was approximately $8.7 million for the three months ended March 31, 2021, and consisted of a net loss of $10.7 million adjusted for non-cash items including stock-based compensation expense of $1.3 million, non-cash interest expense of $0.9 million, non-cash lease expense of $0.4 million, depreciation and amortization expense of ~~$2.2~~$0.4 million, ~~non-cash interest expense~~a change in fair value of ~~$2.0 million, loss on sale~~the derivative of ~~T2 owned equipment of $0.2 million, offset by deferred rent of $0.1~~$0.8 million, and a net change in operating assets and liabilities of $0.4 million, primarily related to an increase in accrued expenses and accounts payable of $0.4 million, an increase in accounts receivable of $0.1 million, an increase in inventory of $0.5 million to support our commercial demand, an increase in deferred revenue of $0.4 million, and a decrease in prepaid expenses and other assets of $0.1$0.3 million.

Net cash used in operating activities was approximately $36.1 million for the nine months ended September 30, 2016, and consisted primarily of a net loss of $40.3 million adjusted for non-cash items including depreciation and amortization expense of $1.6 million, stock-based compensation expense of $3.7 million, non-cash interest expense of $0.5 million, deferred rent of $0.2 million, and a The net change in operating assets and liabilities ~~(use~~was primarily driven by a decrease in operating lease liabilities of ~~cash)~~$0.7 million, a decrease in accrued expenses of $1.0 million primarily from bonus and commission payments as well as payments under an employment agreement with a former executive officer, and an increase of $1.4 million ~~primarily related to an increase~~ in inventory ~~of $0.7 million~~ to support ~~our commercial demand, prepaid expenses of $0.1 million related to~~ the amortization of insurance premiums and a decrease in deferred revenue of approximately $1.3 million primarily related to the recognition of revenue from our Co-Development Agreement with Canon US Life Sciences,2021 build plan, partially offset by an increase in accounts payable of $1.8 million due to timing of payments and ~~accrued expenses of $0.7 million~~increased spend related to ~~increased audit, clinical study~~T2SARS-CoV-2 and ~~payroll accruals.~~a decrease in accounts receivable of $1.1 million primarily due to the timing of instrument and consumable sales shipped near quarter end.

Net cash used in investing activities was immaterial for the three months ended March 31, 2022.

Net cash provided by investing activities was approximately $2.6 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021, and primarily consisted of ~~costs to acquire property and~~proceeds from maturities of marketable securities of $2.8 million, partially offset by equipment ~~and~~ purchases of ~~T2-owned instruments of $0.9 and $1.8 million, respectively, which are classified as property and equipment, less $0.1 million cash received from sale of T2-owned instruments.~~

Net cash used in investing activities was approximately $4.6 million for the nine months ended September 30, 2016 and consisted of costs to acquire components of and manufacture Company-owned instruments of $3.7 million, which are classified as property and equipment, $0.7 million of purchases of laboratory and manufacturing equipment incurred to support commercialization efforts and research and development programs and $0.2 ~~million of other equipment and software purchases to support internal functions.~~million.

Net cash provided by financing activities was approximately ~~$18.7~~$1.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, and consisted primarily of ~~$18.8 million in net~~ proceeds from ~~our September 2017 CMPO and by $0.7 million~~sales of ~~proceeds from the exercise of stock options and sale of~~our common stock under ~~our 2014 Employee Stock Purchase Plan partially~~the Sales Agreement, net of issuance costs, of $1.4 million, offset by ~~$0.9 million~~payment of ~~repayments~~employee restricted stock tax withholdings of ~~notes payable.~~$0.2 million.

Net cash provided by financing activities was approximately ~~$42.2~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021, and consisted primarily of proceeds from our September 21, 2016 PIPE financing with Canon of $39.7 million, in which we sold 6,055,341 shares of common stock at the closing price of $6.56 per share. Net cash provided by financing activities also consisted of $0.7 million of proceeds from the exercise of stock options and sale of common stock under our 2014 Employee Stock Purchase Plan and $4.6 million of proceeds from the Credit Facility. Partially offsetting these sources of cash were $2.5 million of repayments of notes payable and $0.3 million of payments of issuance costs from our December 2015 secondary offering. option exercises.

In December 2016, we entered into a Term Loan Agreement ~~(the “Term Loan Agreement”)~~ with CRG. We borrowed $40.0 million pursuant to the Term Loan Agreement and may borrow up to an additional $10.0 million at any time through and including July 27, 2018, provided that, among other conditions, we receive 510(k) clearance for the marketing of T2Bacteria by the FDA on or before April 30, 2018, or the Approval Milestone. The Term Loan Agreement has a six-year term with three years (through December 30, 2019) of interest-only payments, which period shall be extended to four years (through December 30, 2020) if we achieve the Approval Milestone, after which quarterly principal and interest payments will be due through the December 30, 2022 maturity date.Agreement. Interest on the amounts borrowed under the Term Loan Agreement accrues at an annual fixed rate of (a) prior to the Approval Milestone, ~~12.5%~~12.50%, 4.0% of which may be deferred during the interest-only period by adding such amount to the aggregate principal loan amount and (b) following the Approval Milestone, ~~11.5%~~11.50%, 3.5% of which may be deferred during the interest-only period by adding such amount to the aggregate principal loan amount. In addition, if we achieve certain financial performance metrics, the loan will convert to interest-only until the ~~December 30, 2022~~ maturity date, at which time all unpaid principal and accrued unpaid interest will be due and payable. We are required to pay CRG a financing fee based on the loan principal amount drawn. We are also required to pay a final payment fee of ~~8.0%~~8%, subsequently amended to 10%, of the principal outstanding upon repayment. We are accruing the final payment fee as interest expense and it is included as a non-current liability at March 31, 2022 and December 31, 2021 on the balance sheet.

The Term Loan Agreement with CRG is classified as a non-current liability at March 31, 2022 and December 31, 2021 as we have sufficient cash, cash equivalents and marketable securities as of the date of this filing that the minimum liquidity covenant would not be triggered. We have assessed the classification of the note payable as non-current based on facts and circumstances as of the date of this filing, specifically as it relates to achieving the minimum liquidity and revenue covenants. In June 2021, we achieved the twenty-four month revenue covenant for the period beginning January 1, 2020 and have no derivative liability. Management continues to reassess at each balance sheet and filing date based on facts and circumstances and can provide no assurances regarding the probability of meeting its minimum liquidity covenant in future periods.

We may prepay all or a portion of the outstanding principal and accrued unpaid interest under the Term Loan Agreement at any time upon prior notice subject to a certain prepayment fee during the first five years of the term and no prepayment fee thereafter. As security for our obligations under the Term Loan Agreement, we entered into a security agreement with CRG whereby we granted a lien on substantially all of its assets, including intellectual property. The Term Loan Agreement also contains customary affirmative and negative covenants for a credit facility of this size and ~~type.~~type, including a requirement to maintain a minimum cash balance of $5.0 million. The Term Loan Agreement also requires us to achieve certain revenue targets, whereby we are required to pay double the amount of any shortfall as an acceleration of principal payments.

In 2019, the Term Loan Agreement was amended to reduce minimum revenue targets, extend the interest-only period and extend the principal repayment. The final payment fee was increased from 8% to 10% of the principal amount outstanding upon repayment. We issued to CRG warrants to purchase 568,291 shares of the Company’s common stock (“New Warrants”) (Note 9) at an exercise price of $1.55, with typical provisions for termination upon a change of control or a sale of all or substantially all of the assets of the Company. We also reduced the exercise price for the warrants previously issued to CRG to purchase an aggregate of 528,958 shares of our common stock to $1.55. All of the New Warrants are exercisable any time prior to September 9, 2029, and all of the previously issued warrants are exercisable any time prior to December 30, 2026.

In January 2021, the Term Loan Agreement was amended to extend the interest-only payment period through December 30, 2022, to extend the initial principal repayment to December 30, 2022, and to significantly reduce the revenue covenant for the 24-month period beginning on January 1, 2020. We did not pay or provide any consideration in exchange for this amendment. We accounted for the January 2021 amendment as a modification to the Term Loan Agreement.

In February 2022, the Term Loan Agreement was amended to extend the interest-only payment period through December 30, 2023, and to extend the initial principal repayment to December 30, 2023. We did not pay or provide any consideration in exchange for this amendment. As the effective borrowing rate under the amended agreement is less than the effective borrowing rate under the previous agreement, a concession is deemed to have been granted under ASC 470-60. As a concession has been granted, the agreement was accounted for as a troubled debt restructuring under ASC 470-60. The amendment did not result in a gain on restructuring as the future undiscounted cash outflows required under the amended agreement exceed the carrying value of the debt immediately prior to the amendment.

The Term Loan Agreement includes a subjective acceleration clause whereby an event of default, including a material adverse change in the business, operations, or conditions (financial or otherwise), could result in the acceleration of the obligations under the Term Loan Agreement. Under certain circumstances, a default interest rate of an additional 4.0% per annum will apply at the election of CRG on all outstanding obligations during the occurrence and continuance of an event of default. CRG has not exercised its right under this ~~clause, as there have been no such events. We believe the likelihood of CRG exercising this right is remote.~~clause.

We assessed the terms and features of the Term Loan Agreement, including the interest-only period dependent on the achievement of the Approval Milestone and the acceleration of the obligations under the Term Loan Agreement under an event of default, of the Term Loan Agreement in order to identify any potential embedded features that would require ~~bifurcation or any beneficial conversion features. As part~~bifurcation. In addition, under certain circumstances, a default interest rate of ~~this analysis,~~an additional 4.0% per annum will apply at the election of CRG on all outstanding obligations during the occurrence and continuance of an event of default, we ~~assessed the economic characteristics and risks of the Term Loan Agreement, including put and call features. We determined~~concluded that the features of the Term Loan Agreement are ~~either~~not clearly and closely ~~associated with~~related to the host instrument, and represent a ~~debt host and do not require bifurcation as a~~single compound derivative ~~liability, or the~~that is required to be re-measured at fair value of the feature is immaterial. Included in these features are principal payment acceleration clauses triggered by a developmental milestone. Should our assessment of this milestone change, there could be a non-cash charge in operations. We will continue to reassess the features to determine if they require separate accounting on a quarterly basis.

In December 2016, pursuant to the Term Loan Agreement, we made an initial draw of $39.2 million, net of financing fees. We used approximately $28.0 million of the initial proceeds to repay approximately $27.5 million of outstanding debt pursuant to the Loan and Security Agreement and to repay approximately $0.5 million of outstanding debt pursuant to the Promissory Note. Upon the repayment of all amounts owed by us under these agreements, all commitments were terminated and all security interests granted by us were released.

In May 2011, the Company entered into a promissory agreement (the “Promissory Note”) with a separate lender to borrow up to $1.7 million for the purchase of laboratory equipment and office equipment through December 2013. The Company borrowed a total of $1.4 million under the Promissory Note. The Company paid interest only on the borrowings through December 2013 and was required to make equal monthly payments of principal and interest through the maturity date. In December 2016, the Company used approximately $0.5 million of the proceeds from the Term Loan agreement to repay the outstanding debt pursuant to the Promissory Note. Upon the repayment of all amounts owed by the Company under the Promissory Note, all commitments were terminated and all security interests granted by the Company were released.

The amounts borrowed were collateralized by the associated equipment and bear interest at 6.5%. The Promissory Note included financial covenants that required the Company to maintain a minimum cash balance of $0.3 million. In addition, the Promissory Note contained a subjective acceleration clause whereby an event of default and immediate acceleration of the borrowing occurs if there was a material adverse change in the business, operations, or condition of the Company or a material impairment of the prospect of repayment of any portion of the obligations. In the event of default, the lender had first priority on the laboratory equipment and office equipment purchased with the proceeds.

In October 2015, we signed a $10.0 million Equipment Lease Credit Facility, or the Credit Facility, with Essex Capital Corporation (the “Lessor”) to fund capital equipment needs. As one of the conditions of the Term Loan Agreement, the Credit Facility is capped at a maximum of $5.0 million. Under the Credit Facility, Essex will fund capital equipment purchases presented by us. We will repay the amounts borrowed in 36 equal monthly installments from the date of the amount funded. At the end of the 36 month lease term, we have the option to (a) repurchase the leased equipment at the lesser of fair market value or 10% of the original equipment value, (b) extend the applicable lease for a specified period of time, which will not be less than one year, or (c) return the leased equipment to the Lessor.

In April 2016 and June 2016, we completed the first two draws under the Credit Facility, of $2.1 million and $2.5 million, respectively. We will make monthly payments of $67,000 under the first draw and $79,000 under the second draw. The borrowings under the Credit Facility are treated as capital leases. The amortization of the assets conveyed under the Credit Facility is included as a component of depreciation expense.

There were no other material changes to our contractual obligations and commitments from those described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report on Form 10-K for the year ended December 31, 2016. During the quarter ended September 30, 2017 we entered into a new Lease Indenture Agreement (the “Lease”) relating to office space we currently lease at 91 Hartwell Ave, Lexington, MA, pursuant to which we reduced the square footage of leased space from 13,233 square feet to 10,900 square feet. Under the terms of the Lease, beginning on January 1, 2018 and ending on December 31, 2021, the Company is obligated to pay the landlord monthly rent of $29,066. 2021.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

WeAs a smaller reporting company, we are ~~exposed~~not required to market risk related to changes in interest rates. As of September 30, 2017 and December 31, 2016, we had cash and cash equivalents of $52.9 million and $73.5 million, respectively, held primarily in money market funds consisting of U.S. government agency securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate one percent change in interest rates would not have a material effect on the fair market value of our portfolio. As of September 30, 2017 and December 31, 2016, we had no outstanding debt exposed to variable market interest rates.provide this information.

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2017.~~March 31, 2022. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Based ~~upon this~~on the evaluation ~~the~~of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and ~~the~~ Chief Financial Officer ~~have~~ concluded that, as of such date, the Company’s disclosure controls and procedures were ~~effective as of September 30, 2017.~~effective.

There have been no ~~material~~ changes to the Company’s internal control over financial reporting ~~during the most recent fiscal quarter~~(as defined in Rules 13a-15(f) and 15d-15(f)) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We may be from time to time subject to various claims and legal actions during the ordinary course of our business. There are currently no claims or legal actions, individually or in the aggregate, that would have a material adverse effect on our results of operations or financial condition.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016, which could materially affect our business, financial condition or future results. There~~2021. Aside from the risk factors below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Our failure to meet the continued listing requirements of The Nasdaq Global Market could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of The Nasdaq Global Market, such as the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Under Nasdaq rules, the closing bid price for our common stock must remain at or above $1.00 per share to comply with Nasdaq’s minimum bid requirement for continued listing.

On November 5, 2021, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Global Market. We were provided an initial period of 180 calendar days, or until May 4, 2022, to regain compliance. On May 5, 2022 we received a letter from Nasdaq informing us that our shares have failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Global Market and, as a result, our shares are subject to delisting. We filed an appeal and hearing request with Nasdaq, which has stayed the delisting of our common stock from The Nasdaq Global Market pending a Nasdaq listing qualifications hearings panel’s (the “Panel”) decision. The hearing date has been set for June 2, 2022. There can be no assurance that the Panel will grant our request for continued listing; however, we intend to present a plan to regain compliance to the Panel that includes a discussion of the events that we believe will enable us regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

The delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from Nasdaq, our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities. Moreover, there is no assurance that any actions that we take to restore our compliance with the minimum bid price requirement would stabilize the market price or improve the liquidity of our common stock, prevent our common stock from falling below the minimum bid price required for continued listing again, or prevent future non-compliance with Nasdaq’s listing requirements.

We may be adversely affected by fluctuations in demand for, and prices of, raw materials and other supplies.

We use various raw materials and other supplies in our business. Although there are currently multiple suppliers for these materials and supplies, changes in demand for, and the market price of, these raw materials and supplies could significantly affect our ability to manufacture our diagnostic instruments and, consequently, our profitability. The prices of these raw materials and supplies may fluctuate and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, global and regional supply and demand, and the political and economic conditions of countries that produce rare earth minerals and products.

In addition, our agreements with our third party suppliers are non-exclusive. Our suppliers may dedicate more resources to other companies. We may in the future experience shortages and price fluctuations of certain key components and raw materials required in the manufacturing of our products, and the predictability of the availability and pricing of these components and raw materials may be limited. Current or future supply chain interruptions that could be exacerbated by global political tensions, such as the situation in Ukraine, or the COVID-19 pandemic and government responses could negatively impact our ability to acquire such key components or materials. Component and raw material shortages or pricing fluctuations could be material in the future. In the event of a component or raw material shortage, supply interruption or material pricing change from suppliers of these components or raw materials, we may not be able to develop alternate sources in a timely manner or at all in the case of sole or limited sources.

Developing alternate sources of supply for these components or raw materials may be time consuming, difficult, and costly and we may not be able to source these components or raw materials on terms that are acceptable to us, or at all, which may undermine our ability to meet our requirements or to fill user orders in a timely manner. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these components or raw materials from alternate sources at acceptable prices and within a reasonable amount of time, would adversely affect our ability to meet scheduled product deliveries to users. This could adversely affect our relationships with our users and could cause delays in our ability to expand our operations. Even where we are able to pass increased component or raw material costs along to our users, there may be a lapse of time before we are able to do so such that we must absorb the increased cost initially. If we are unable to buy these components or raw materials in quantities sufficient to meet our requirements on a timely basis, we will not be able to have sufficient ability to meet user demand, which may have a negative impact on our operations and financial results.

We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our cash, cash equivalents, marketable securities and restricted cash at December 31, 2021 was $33.8 million, which will not be sufficient to fund our current operating plan at least a year from issuance of these financial statements. Absent any reductions in current operating expenses, the Company believes it will require additional financing during the third quarter of 2022. While we plan to raise capital there can be no assurance that any financing by us can be realized, or if realized, what the terms of any such financing may be, or that any amount that we are able to raise will be adequate.

The Term Loan Agreement with CRG Servicing LLC (“CRG”) (Note 6) has certain covenants which require us to maintain a minimum cash balance of $5.0 million. As security for its obligations under the Term Loan Agreement the Company entered into a security agreement with CRG whereby the Company granted a lien on substantially all of its assets, including intellectual property. We intend to continue to evaluate options to refinance the Term Loan Agreement, which becomes due on December 30, 2023. There can be no assurances that we will be able to refinance on terms favorable or at all. The amounts involved in any such transactions, individually or in the aggregate, may be material.

On November 5, 2021, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Global Market. We were provided an initial period of 180 calendar days, or until May 4, 2022, to regain compliance. On May 5, 2022 we received a letter from Nasdaq informing us that our shares have failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Global Market and, as a result, our shares are subject to delisting. We filed an appeal and hearing request with Nasdaq, which has stayed the delisting of our common stock from The Nasdaq Global Market pending a Nasdaq listing qualifications hearings panel’s (the “Panel”) decision. The hearing date has been set for June 2, 2022. There can be no assurance that the Panel will grant our request for continued listing; however, we intend to present a plan to regain compliance to the Panel that includes a discussion of the events that we believe will enable us regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

Approval, clearance and certification by the FDA and foreign regulatory authorities or notified bodies for our diagnostic tests takes significant time and requires significant research, development and clinical study expenditures and ultimately may not succeed.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA, other U.S. governmental agencies and foreign regulatory bodies regulate numerous elements of our business, including:

Before we begin to label and market our product candidates for use as clinical diagnostics in the United States, we are required to obtain clearance from the FDA under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or FDCA, approval of a de novo classification request for our product, or approval of pre-market approval, or PMA, application from the FDA, unless an exemption from pre-market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. However, some devices are automatically subject to the PMA pathway regardless of the level of risk they pose because they have not previously been classified into a lower risk class by the FDA. Manufacturers of these devices may request that FDA review such devices in accordance with the de novo classification procedure, which allows a manufacturer whose novel device would otherwise require the submission and approval of a PMA prior to marketing to request down-classification of the device on the basis that the device presents low or moderate risk. If the FDA agrees with the down-classification, the applicant will then receive approval to market the device. This device type can then be used as a predicate device for future 510(k) submissions. The process of obtaining regulatory clearances or approvals, or completing the de novo classification process, to market a medical device can be costly and time consuming, and we may not be able to successfully obtain pre-market reviews on a timely basis, if at all.

The FDA and other regulators or bodies can delay, limit or deny authorization or certification of a device for many reasons, including:

Any delay in, or failure to receive or maintain, clearance or approval for our product candidates could prevent us from generating revenue from these product candidates and adversely affect our business operations and financial results.

Obtaining FDA clearance, de novo classification, or approval for diagnostics can be expensive and uncertain, and generally takes from several months to several years, and may require detailed and comprehensive scientific and clinical data. Notwithstanding the expense, these efforts may never result in the receipt of FDA marketing authorization. Even if we were to obtain such marketing authorizations for our products, it may not be for the uses we believe are important or commercially attractive, in which case we would not be permitted to market our product for those uses. Any delay in, or failure to receive or maintain, marketing authorization

for our products could prevent us from generating revenue from these products and adversely affect our business operations and financial results.

In order to sell our products in member states of the EU, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation (Regulation (EU) No 2017/745), which repeals and replaces the EU Medical Devices Directive (Council Directive 93/42/EEC) and the Active Implantable Medical Devices Directive (Council Directive 90/385/EEC). Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed in the EU. All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation including the requirement that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art. The European Commission has adopted various standards applicable to medical devices. These include standards governing common requirements, such as sterilization and safety of medical electrical equipment and product standards for certain types of medical devices. There are also harmonized standards relating to design and manufacture. While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the general safety and performance requirements as a practical matter, as it creates a rebuttable presumption that the device satisfies the general safety and performance requirements.

To demonstrate compliance with the general safety and performance requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification. As a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. Except for low-risk medical devices (Class I), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of an organization accredited or designated by a member state of the EU to conduct conformity assessments, or a notified body. Depending on the relevant conformity assessment procedure, the notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU. If we fail to comply with applicable EU laws and regulations, and corresponding EU member state laws, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU.

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Non-compliance with the above requirements would also prevent us from selling our products in these three countries.

From January 1, 2021 onwards, the Medicines and Healthcare Products Regulatory Agency, or MHRA becomes the sovereign regulatory authority responsible for Great Britain (i.e. England, Wales and Scotland) medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol. Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA (but manufacturers will be given a grace period of four to 12 months to comply with the new registration process) before being placed on Great Britain market. The MHRA will only register devices where the manufacturer or their United Kingdom Responsible Person has a registered place of business in the United Kingdom. Manufacturers based outside the United Kingdom will need to appoint a U.K. Responsible Person that has a registered place of business in the United Kingdom to register devices with the MHRA in line with the grace periods. By July 1, 2023, in Great Britain, all medical devices will require a UKCA (UK Conformity Assessed) mark but CE marks issued by EU notified bodies will remain valid until this time. Manufacturers may choose to use the UKCA mark on a voluntary basis until June 30, 2023. However, UKCA marking will not be recognized in the EU. The rules for placing medical devices on the market in Northern Ireland, which is part of the United Kingdom, differ from those in the rest of the United Kingdom. Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain. Under the terms of the Northern Ireland Protocol, Northern Ireland will follow EU rules on medical devices and devices marketed in Northern Ireland will require assessment according to the EU regulatory regime. Such assessment may be

conducted by an EU notified body, in which case a CE mark will be required before placing the device on the market in the EU or Northern Ireland. Alternatively, if a UK notified body conducts such assessment, a ‘UKNI’ mark will be applied and the device may only be placed on the market in Northern Ireland and not the EU.

Even if granted, a 510(k) clearance, de novo classification, PMA approval, or similar authorization or certification from other regulators for any future product would likely place substantial restrictions on how our device is marketed or sold, and the FDA and other regulatory authorities or bodies will continue to place considerable restrictions on our products and operations. For example, the manufacture of medical devices in the United States must comply with the FDA’s Quality System Regulation, or QSR. In addition, manufacturers must register their manufacturing facilities, list the products with the FDA, and comply with requirements relating to labeling, marketing, complaint handling, adverse event and medical device reporting, reporting of corrections and removals, and import and export. The FDA monitors compliance with the QSR and these other requirements through periodic inspections. If our facilities or those of our manufacturers or suppliers are found to be in violation of applicable laws and regulations, or if we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the FDA and other regulatory authorities could take enforcement action, including any of the following sanctions:

Any of these sanctions could impair our ability to produce our products and product candidates in a cost-effective and timely manner in order to meet our customers’ demands, and could have a material adverse effect on our reputation, business, results of operations and financial condition. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

Moreover, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products. For example, in November 2018, FDA officials announced steps that the FDA intended to take to modernize the 510(k) premarket notification pathway, including plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway. In September 2019, the FDA also issued revised final guidance establishing a “Safety and Performance Based Pathway” for “manufacturers of certain well-understood device types” allowing manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. The FDA has developed and maintains a list of device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria and recommended testing methodologies for each such device type, where feasible. Some of these proposals have not yet been finalized or adopted, and the FDA announced that it would seek public feedback prior to publication of any such proposals, and may work with Congress to implement such proposals through legislation.

In addition, the EU regulatory landscape concerning medical devices is evolving and a new regulation governing in vitro diagnostic medical devices will become applicable on May 26, 2022 (See – International Regulation - Regulation of Medical Devices in the European Union) and these modifications may have an effect on the way we conduct our business in the EU and the EEA. The EU IVDR will fully apply on May 26, 2022 but to prevent disruption in the supply of in vitro diagnostic medical devices there will be a tiered system extending the grace period for many devices (depending on their risk classification) before they have to be fully compliant with the regulation. If any of our devices are not classified correctly, or if we cannot comply with the IVDR by the applicable deadline, our business could be adversely affected.

In addition, FDA and foreign regulations and guidance are often revised or reinterpreted by the FDA and foreign regulatory authorities in ways that may significantly affect our business and our products. Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain clearance or approval for, manufacture, market or distribute our products. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require: additional testing prior to obtaining clearance or approval; changes to manufacturing methods; recall, replacement or discontinuance of our products; or additional record keeping. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance as a result of a changing regulatory landscape, we may lose any marketing authorizations that we have already obtained or fail to obtain new marketing approvals or clearances, and we may not be able to achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

~~None~~On November 5, 2021, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Global Market. We were provided an initial period of 180 calendar days, or until May 4, 2022, to regain compliance. On May 5, 2022 we received a letter from Nasdaq informing us that our shares have failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Global Market and, as a result, our shares are subject to delisting. We filed an appeal and hearing request with Nasdaq, which has stayed the delisting of our common stock from The Nasdaq Global Market pending a Nasdaq listing qualifications hearings panel’s (the “Panel”) decision. The hearing date has been set for June 2, 2022. There can be no assurance that the Panel will grant our request for continued listing; however, we intend to present a plan to regain compliance to the Panel that includes a discussion of the events that we believes will enable us regain compliance in this timeframe and a commitment to effect a reverse stock split, if necessary.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	20-4827488
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

101 Hartwell Avenue Lexington, Massachusetts	02421
(Address of principal executive offices)	(Zip Code)

Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company	☐☒

Emerging growth company	☒☐

		Page

	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~2021	2

	Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Deficit for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~2021	3

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	4

	Notes to Condensed Consolidated Financial Statements	46

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1622

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3032

Item 4.	Controls and Procedures	3033

	PART II OTHER INFORMATION	34

Item 1.	Legal Proceedings	3134

Item 1A.	Risk Factors	3134

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3139

Item 3.	Defaults Upon Senior Securities	3139

Item 4.	Mine Safety Disclosures	3139

Item 5.	Other Information	3139

Item 6.	Exhibits, Financial Statement Schedules	3240

SIGNATURES		3341

	September 30, 2017		December 31, 2016		March 31, 2022		December 31, 2021
Accrued payroll and compensation	$	2,875	$	2,479	$	4,320	$	3,687
Accrued research and development expenses		1,038		846		914		1,250
Accrued professional services		987		884		421		384
Accrued interest						1,106		974
Operating lease liabilities						1,195		1,174
Other accrued expenses		613		699		994		869
Total accrued expenses	$	5,513	$	4,908
Total accrued expenses and other current liabilities					$	8,950	$	8,338

	September 30, 2017			December 31, 2016
Term loan agreement, net of deferred issuance costs of $2.5 million and $3.0 million, respectively	$	38,695		$	37,031
Equipment lease credit facility, net of deferred issuance cost of $29 thousand and $45 thousand, respectively		2,810			3,742
Total notes payable		41,505			40,773
Less: current portion of notes payable		(1,416	)		(1,269	)
Notes payable, net of current portion	$	40,089		$	39,504

	March 31, 2022		March 31, 2021
Reconciliation of cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents	$	9,397	$	10,691
Restricted cash		1,131		551
Total cash, cash equivalents and restricted cash	$	10,528	$	11,242

	March 31, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than 1 year	$	10,000	$	9,989	$	10,000	$	9,996
Due in 1-2 years		—		—		—		—
Total	$	10,000	$	9,989	$	10,000	$	9,996

	Three Months Ended, March 31,
	2022		2021
Product revenue
Instruments	$	876	$	425
Consumables		2,950		4,206
Instrument rentals		18		19
Total product revenue		3,844		4,650
Contribution revenue		3,390		2,306
Total revenue	$	7,234	$	6,956

	Balance at September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash	$	19,644	$	19,644	$	—	$	—
Money market funds		33,253		33,253		—		—
Restricted cash		260		260		—		—
Total	$	53,157	$	53,157	$	—	$	—

	Balance at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash	$	16,887	$	16,887	$	—	$	—
Money market funds		56,601		56,601		—		—
Restricted cash		260		260		—		—
Total	$	73,748	$	73,748	$	—	$	—

	March 31, 2022			December 31, 2021
Term loan agreement including PIK interest, before unamortized discount and issuance costs	$	51,140		$	49,364
Less: unaccrued paid-in-kind interest		(2,642	)		(1,287	)
Less: unamortized discount and deferred issuance costs		(241	)		(287	)
Total notes payable	$	48,257		$	47,790

	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2017			2016			2022			2021
Weighted-average risk-free interest rate		1.98	%		1.42	%		1.67	%		0.95	%
Expected dividend yield		—	%		—	%		—	%		—	%
Expected volatility		63	%		61	%		105	%		104	%
Expected terms	6.0 years			6.0 years			6.0 years			6.0 years

	Number of Shares			Weighted-Average Grant Date Fair Value		Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Nonvested at December 31, 2016		272,195			5.83
Nonvested at December 31, 2021							7,120,475		$	1.84
Granted		552,925			5.17		7,883,807			0.46
Vested		—			—		(2,002,048	)		2.02
Forfeited		(74,800	)		5.87		(106,849	)		1.50
Canceled		—			—
Nonvested at September 30, 2017		750,320			5.34
Nonvested at March 31, 2022							12,895,385		$	0.97


	•	product safety;
	•	establishment registration and product listing;


	•	labeling and storage;
	•	marketing, manufacturing, sales and distribution;


	•	pre-market clearance, approval or certification;
	•	servicing and post-market surveillance;
	•	advertising and promotion; and
	•	recalls and field safety corrective actions.


	•	our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our products are substantially equivalent to a predicate device or are safe and effective for their intended uses;
	•	the disagreement of the FDA or the applicable foreign regulatory body with the design or implementation of our clinical studies or the interpretation of data from preclinical studies or clinical studies;


	•	the data from our preclinical studies and clinical studies may be insufficient to support clearance, de novo classification, approval or certification, where required;
	•	our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;


	•	the manufacturing process or facilities we use may not meet applicable requirements; and
	•	the potential for marketing authorization or certification policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for marketing authorization or certification


	•	adverse publicity, untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
	•	customer notifications or repair, replacement, refunds, detention or seizure of our products;


	•	operating restrictions or partial suspension or total shutdown of production;
	•	refusing or delaying requests for 510(k) clearance or PMA approvals or foreign regulatory authorizations or certifications of new products or modified products;


	•	withdrawing 510(k) clearances, PMA approvals or foreign regulatory authorizations or certifications that have already been granted;
	•	refusing to issue certificates to foreign governments needed to export products for sale in other countries;
	•	refusing to grant export approval for our products; or
	•	pursuing criminal prosecution.

Exhibit Number		Exhibit Description

3.1		Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (File No. 001-36571) filed on August 12, 2014)

3.2		Certificate of Amendment of Restated Certificate of Incorporation of the Company dated July 23, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (File No. 001-36751) filed on July 23, 2021)

3.3		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K (File No. 001-36571) filed on August 12, 2014)

~~10.1~~10.1*		~~Lease Indenture~~Amendment No. 7 to Term Loan Agreement, dated ~~September 21, 2017,~~February 15, 2022 between ~~91 Hartwell Ave. Trust~~T2 Biosystems, Inc. and CRG Servicing LLC (incorporated by reference to Exhibit 10.60 of the Company’s Form 10-K (File No. 001-36571) filed on March 23, 2022)

10.2*		Amendment of Solicitation/Modification of Contract, dated as of March 31, 2022 by and between the Company ~~relating to office space located for property at 91 Harwell Avenue, Lexington, MA, Massachusetts~~and Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services

10.3*		Amendment of Solicitation/Modification of Contract, dated as of April 22, 2022 by and between the Company and Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services

31.1*		Certification of ~~principle~~principal executive officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of principal financial officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.1*101.INS		~~The following financial statements from~~Inline XBRL Instance Document – the ~~Company’s Quarterly Report on Form 10-Q for~~instance document does not appear in the quarter ended September 30, 2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited), (iii) Condensed Consolidated Statements of Cash Flows (unaudited), and (v) Notes of Condensed Consolidated Financial Statements.Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	T2 BIOSYSTEMS, INC.

Date: ~~November 3, 2017~~May 12, 2022	By:	/s/ JOHN ~~MCDONOUGH~~SPERZEL
		John ~~McDonough~~Sperzel
		President, Chief Executive Officer and ~~Director~~Chairman of the Board
		(principal executive officer)

Date: ~~November 3, 2017~~May 12, 2022	By:	/s/ ~~DARLENE DEPTULA-HICKS~~JOHN M. SPRAGUE
		~~Darlene Deptula-Hicks~~John M. Sprague
		~~SVP and~~ Chief Financial Officer
		(principal financial and accounting officer)