T2 Biosystems(TTOO) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited condensed consolidated financial statements, detailing financial position, performance, and accounting policies Condensed Consolidated Balance Sheets The balance sheet shows decreased total assets and increased total liabilities from December 2022 to March 2023, leading to a larger stockholders' deficit, driven by warrant liabilities and notes payable Condensed Consolidated Balance Sheets (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $10,117 | $10,329 | | Total current assets | $18,925 | $19,359 | | Total assets | $32,732 | $34,327 | | Accounts payable | $3,131 | $1,296 | | Warrant liabilities | $7,972 | $39 | | Total current liabilities | $17,829 | $10,128 | | Notes payable | $50,108 | $49,651 | | Total liabilities | $82,618 | $73,982 | | Total stockholders' deficit | $(49,886) | $(39,655) | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2023 saw a higher net loss due to decreased total revenue and increased other expenses from derivative and warrant liabilities Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Product revenue | $1,655 | $3,844 | | Contribution revenue | $423 | $3,390 | | Total revenue | $2,078 | $7,234 | | Total costs and expenses | $15,765 | $22,091 | | Loss from operations | $(13,687) | $(14,857) | | Change in fair value of derivative related to Term Loan | $(770) | — | | Change in fair value of warrant liabilities | $(1,304) | — | | Net loss and comprehensive loss | $(17,965) | $(16,495) | | Net loss per share — basic and diluted | $(1.32) | $(4.86) | Condensed Consolidated Statements of Stockholders' Deficit Total stockholders' deficit significantly increased from December 2022 to March 2023, driven by net loss and common stock issuances Condensed Consolidated Statements of Stockholders' Deficit (in thousands, except share data) | Metric | Balance at December 31, 2022 | Balance at March 31, 2023 | | :---------------------------------------- | :--------------------------- | :------------------------ | | Common Stock Shares | 7,716,519 | 20,368,463 | | Common Stock Amount | $8 | $21 | | Additional Paid-In Capital | $494,556 | $502,277 | | Accumulated Deficit | $(534,219) | $(552,184) | | Total Stockholders' Deficit | $(39,655) | $(49,886) | - Issuance of common stock and Pre-Funded Warrant from public offering, net, contributed $4.031 million to additional paid-in capital[14] - Net loss of $17.965 million contributed to the increase in accumulated deficit[14] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities decreased in Q1 2023, while financing activities increased from public offerings, leading to a smaller net decrease in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(12,940) | $(14,441) | | Net cash used in investing activities | $(120) | $(29) | | Net cash provided by financing activities | $11,848 | $1,202 | | Net change in cash, cash equivalents and restricted cash | $(1,212) | $(13,268) | | Cash, cash equivalents and restricted cash at end of period | $10,668 | $10,528 | - Proceeds from public offering, net of issuance costs, totaled $10.918 million in Q1 2023[16] - Net cash used in operating activities decreased by $1.5 million, primarily due to adjustments for non-cash items and changes in operating assets and liabilities[16][227] Notes to Condensed Consolidated Financial Statements Detailed notes on business, accounting policies, financial instruments, debt, equity, and commitments, highlighting going concern issues, recent financing, and legal disputes 1. Nature of Business T2 Biosystems, an in vitro diagnostics company, faces liquidity challenges, an accumulated deficit, and strategic restructuring to address going concern doubts and Nasdaq compliance - T2 Biosystems is an in vitro diagnostics company focused on rapid detection of pathogens for critically underserved healthcare conditions like sepsis and Lyme disease[19] Financial Position (March 31, 2023) | Metric | Amount (Millions) | | :----- | :---------------- | | Cash, cash equivalents, and restricted cash | $10.7 | | Accumulated deficit | $552.2 | | Stockholders' deficit | $49.9 | - The company believes its cash of $10.7 million at March 31, 2023, is insufficient to fund operations through Q2 2023, raising substantial doubt about its ability to continue as a going concern[24][25] - Initiated a strategic restructuring program, including a nearly 30% workforce reduction on May 19, 2023, and is exploring alternative strategic options (acquisition, merger, asset sale, licensing, equity financing, debt conversion)[25] - Notified CRG of non-compliance with the minimum liquidity covenant ($5.0 million) as of May 12, 2023, but secured a waiver reducing it to $500,000 until December 31, 2023[26] - Received Nasdaq notices for non-compliance with the $35 million minimum market value rule (deadline May 22, 2023) and the $1.00 minimum bid price rule (deadline September 26, 2023), with plans to appeal and potentially undertake a reverse stock split[28][29] 2. Summary of Significant Accounting Policies Outlines GAAP-compliant accounting principles, including a retroactive restatement for a reverse stock split, policies for revenue, fair value, derivatives, leases, and stock-based compensation, and single operating segment reporting - Financial statements prepared in conformity with GAAP, including accounts of T2 Biosystems, Inc. and its wholly-owned subsidiary[32] - Effected a 50-for-1 reverse stock split on October 12, 2022, with all share and per share amounts retroactively restated[33][34] - Company operates and manages its business as a single operating segment, focused on developing and commercializing diagnostic products[38] International Sales as % of Total Revenue | Period | % of Total Revenue | | :----- | :----------------- | | Q1 2023 | 36% ($0.8 million) | | Q1 2022 | 13% ($1.0 million) | Customers Representing >10% of Total Revenue | Customer | Q1 2023 | Q1 2022 | | :------- | :------ | :------ | | Customer A (BARDA) | 20% | 47% | | Customer B (International Distributor) | 19% | 5% | - Identified warrant issued in conjunction with Series A redeemable convertible preferred stock and Common Stock Warrants as derivative instruments, measured at fair value with changes recognized in the income statement[48] Disaggregation of Revenue (Three Months Ended March 31, in thousands) | Revenue Source | 2023 | 2022 | | :------------- | :--- | :--- | | Instruments | $322 | $646 | | Consumables | $1,177 | $2,950 | | Instrument rentals | $55 | $18 | | Service | $101 | $230 | | Total Product Revenue | $1,655 | $3,844 | | Contribution revenue | $423 | $3,390 | | Total Revenue | $2,078 | $7,234 | - Adopted ASU 2022-04 on January 1, 2023, regarding supplier finance programs, with no material impact on financial statements[84] 3. Fair Value Measurements The company measures warrant liabilities and a Term Loan derivative at fair value using Level 3 unobservable inputs, with significant fair value changes observed for both in Q1 2023 Fair Value of Liabilities (in thousands) | Liability | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Warrant liabilities (Level 3) | $7,956 | $0 | | Warrant liabilities (Level 2) | $16 | $39 | | Derivative liability related to Term Loan (Level 3) | $1,858 | $1,088 | | Total Fair Value | $9,830 | $1,127 | - Fair value of Series A Warrant and Common Stock Warrants estimated using Black-Scholes Model and Monte Carlo simulation, incorporating inputs like stock price, exercise price, volatility, risk-free rate, and expected term[87][88] Roll-forward of Common Stock Warrants Fair Value (in thousands) | Item | Amount | | :------------------------------ | :----- | | Balance at December 31, 2022 | $0 | | Issuance of Common Stock Warrant | $7,568 | | Settlement due to cashless exercise | $(938) | | Change in fair value | $1,326 | | Balance at March 31, 2023 | $7,956 | Roll-forward of Derivative Liability related to Term Loan Fair Value (in thousands) | Item | Amount | | :---------------------------------------- | :----- | | Balance at December 31, 2022 | $1,088 | | Change in fair value of derivative related to Term Loan | $770 | | Balance at March 31, 2023 | $1,858 | 4. Restricted Cash Restricted cash decreased due to a landlord claiming a $1.0 million security deposit for a lease dispute, with the remaining $0.6 million at Silicon Valley Bank fully covered by the FDIC Restricted Cash (in thousands) | Date | Amount | | :--- | :----- | | March 31, 2023 | $551 | | December 31, 2022 | $1,551 | - A $1.0 million security deposit was claimed by a landlord in January 2023 due to a lease dispute[92] - Remaining $0.6 million restricted cash held at Silicon Valley Bank was fully covered by the FDIC after its takeover in March 2023, incurring no loss[92] 5. Supplemental Balance Sheet Information Details increased inventories (raw materials, work-in-process) and property and equipment (construction in progress, T2-owned instruments), while accrued expenses decreased due to lower payroll and professional services Inventories (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--------------- | :------------- | :---------------- | | Raw materials | $2,571 | $2,004 | | Work-in-process | $1,674 | $1,176 | | Finished goods | $691 | $1,105 | | Total Inventories, net | $4,936 | $4,285 | Property and Equipment, Net (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Total Property and Equipment | $19,242 | $18,790 | | Less: Accumulated Depreciation | $(14,441) | $(14,257) | | Property and Equipment, net | $4,801 | $4,533 | - Construction in progress and T2-owned instruments and components (raw materials, work-in-process, completed instruments for R&D, clinical studies, reagent rental) are significant components of property and equipment[94] Accrued Expenses (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Accrued payroll and compensation | $2,270 | $2,930 | | Accrued clinical trial and development expenses | $826 | $1,097 | | Accrued professional services | $604 | $1,626 | | Accrued interest | $996 | $1,009 | | Other accrued expenses | $466 | $607 | | Total Accrued Expenses and Other Current Liabilities | $5,162 | $7,269 | - Accrued professional services at December 31, 2022, included a $1.0 million estimated liability related to the Billerica, Massachusetts lease dispute[95] 6. Notes Payable The Term Loan Agreement with CRG, classified as non-current, was amended to extend maturity to December 2024, and a waiver was secured in May 2023 to reduce the minimum liquidity covenant to $500,000 Notes Payable (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :---------------------------------------------------- | :------------- | :---------------- | | Term Loan Agreement including PIK interest | $53,453 | $53,453 | | Less: unaccrued paid-in-kind interest | $(3,211) | $(3,647) | | Less: unamortized discount and deferred issuance costs | $(134) | $(155) | | Total Notes Payable | $50,108 | $49,651 | - Term Loan Agreement with CRG is classified as non-current, with maturity extended to December 30, 2024, and interest accruing at 11.50% per year (8% cash, 3.5% deferred)[97][101][108] - The agreement includes a subjective acceleration clause and a 4.0% default interest rate if an event of default occurs[98][103] - On May 15, 2023, the company notified CRG of non-compliance with the $5.0 million minimum liquidity covenant, but a waiver was granted on May 19, 2023, reducing the covenant to $500,000 until December 31, 2023[26][108] - Warrants to purchase 21,944 shares of common stock remain outstanding at March 31, 2023, issued in conjunction with the Term Loan Agreement[97][100][102] - Amendments in February and November 2022 were accounted for as troubled debt restructurings due to concessions granted, extending maturity dates and interest-only periods[106][108] 7. Warrants The company issued Series A Warrants and liability-classified Common Stock Warrants, with a February 2023 public offering significantly impacting capital structure through common stock, equity-classified pre-funded warrants, and additional common stock warrants - Series A Warrant to purchase 42,857 shares of common stock, exercise price adjusted to $0.54 as of February 17, 2023, remains outstanding[109][110][111] - On February 17, 2023, sold 9,018,519 shares of common stock, 2,092,592 Pre-Funded Warrants, and 22,222,222 Common Stock Warrants through a public offering, raising $12.0 million[112][113] - Pre-Funded Warrants are equity-classified; 1,740,740 were exercised in Q1 2023, with 351,852 remaining outstanding[114][115] - Common Stock Warrants are liability-classified derivative instruments, with an exercise price of $1.08 per share, and 19,878,148 remain outstanding after 2,344,074 were exercised via cashless option in Q1 2023[116][117] - Change in fair value of Common Stock Warrant liability resulted in a $1.3 million loss in Q1 2023[117] 8. Stockholders' Deficit The company has authorized preferred and common stock, with common stock holders possessing voting and dividend rights, and utilized an Equity Distribution Agreement to sell common stock, raising $0.9 million net proceeds in Q1 2023 - Authorized 10,000,000 shares of $0.001 par value preferred stock and 400,000,000 shares of $0.001 par value common stock[119][120] - Sold 653,122 shares of common stock under an Equity Distribution Agreement for net proceeds of $0.9 million during Q1 2023[121] 9. Stock-Based Compensation The company maintains several stock incentive plans and an ESPP for equity awards, with stock-based compensation expense decreasing in Q1 2023 and significant unrecognized costs remaining for non-vested options and RSUs - Operates under 2006 Stock Incentive Plan, 2014 Incentive Award Plan, and Amended and Restated Inducement Award Plan for equity grants to employees, directors, and consultants[122][123][125] Stock Options Activity (in thousands, except per share) | Metric | March 31, 2023 | | :-------------------------------- | :------------- | | Outstanding at December 31, 2022 | 179,641 | | Granted | 6,220 | | Forfeited | (3,981) | | Cancelled | (14,434) | | Outstanding at March 31, 2023 | 167,446 | | Exercisable at March 31, 2023 | 126,982 | - Weighted-average grant date fair value of stock options decreased from $16.57 per share in Q1 2022 to $1.34 per share in Q1 2023[128] - Unrecognized compensation cost for non-vested stock options was $1.2 million as of March 31, 2023, to be recognized over 1.6 years[129] Restricted Stock Units Activity (in thousands, except per share) | Metric | March 31, 2023 | | :-------------------------- | :------------- | | Nonvested at December 31, 2022 | 201,998 | | Granted | 339,950 | | Vested | (67,526) | | Forfeited | (4,470) | | Nonvested at March 31, 2023 | 469,952 | - Unrecognized compensation cost for non-vested restricted stock units was $4.9 million as of March 31, 2023, to be recognized over 1.3 years[132] Total Stock-Based Compensation Expense (in thousands) | Category | Q1 2023 | Q1 2022 | | :-------------------------- | :------ | :------ | | Cost of product revenue | $54 | $129 | | Research and development | $280 | $422 | | Selling, general and administrative | $1,462 | $1,994 | | Total | $1,796 | $2,545 | 10. Net Loss Per Share The company applies the two-class method for net loss per share due to participating securities, but as it incurred a net loss, the entire loss was allocated to common shareholders, and anti-dilutive shares were excluded from diluted EPS - Applies the two-class method for EPS due to Series A Warrants, Pre-Funded Warrants, and Common Stock Warrants being participating securities[136] - Due to net loss, the entire loss was allocated to common shareholders, as participating securities do not share in losses[136] Anti-Dilutive Shares Excluded from Diluted Net Loss Per Share Calculation | Category | March 31, 2023 | March 31, 2022 | | :-------------------------- | :------------- | :------------- | | Options to purchase common shares | 167,446 | 198,393 | | Restricted stock units | 469,952 | 257,867 | | Term Loan Warrants | 21,944 | 21,944 | | Series A Warrant | 42,857 | — | | Common Stock warrants | 19,878,148 | — | | Total | 20,580,347 | 478,204 | 11. U.S. Government Contract The company has a significant milestone-based development contract with BARDA, providing substantial funding for product development, though contribution revenue significantly decreased in Q1 2023 due to timing and available option amounts - BARDA awarded a milestone-based contract with a potential value of up to $62.0 million for next-generation diagnostic instruments and sepsis/biothreat panels[139] - BARDA exercised multiple options, providing additional funding for product development and clinical trials for T2Biothreat and T2Resistance Panels[139][140][141][142] Contribution Revenue from BARDA Contract (in thousands) | Period | Amount | | :-------------------------- | :----- | | Three months ended March 31, 2023 | $423 | | Three months ended March 31, 2022 | $3,390 | - Decrease in contribution revenue in Q1 2023 was due to timing of contract activity and less option amount available under Option 3 compared to Option 2A in Q1 2022[201] 12. Leases The company leases office, laboratory, and manufacturing spaces, but a significant dispute over a Billerica, Massachusetts lease led to the landlord terminating the lease and claiming a $1.0 million security deposit, which the company is vigorously contesting - Leases office, laboratory, and manufacturing space, with terms generally extended through amendments (e.g., Lexington HQ to Dec 2028, Wilmington to Dec 2024, another Lexington lease to Oct 2025)[145][146][147][148] - A lease for Billerica, Massachusetts space (entered Sept 2021) resulted in a dispute where the landlord terminated the lease and claimed a $1.0 million security deposit due to alleged failure to perform obligations[149][151] - The company filed a counterclaim, alleging landlord breach of contract, unlawful security deposit draw, fraudulent misrepresentations, and unfair trade practices, intending to vigorously defend itself[151] 13. Commitments and Contingencies This section details the ongoing legal dispute over the Billerica lease, where the landlord terminated the lease and claimed a $1.0 million security deposit, which the company is contesting, alongside a license agreement with royalty payments and executive retention bonuses - Ongoing legal dispute with Farley White Concord Road, LLC regarding the Billerica lease, where the landlord terminated the lease and unilaterally deducted the $1.0 million security deposit, seeking additional damages[151][250][251] - Company filed a counterclaim alleging landlord breach of contract, unlawful security deposit draw, fraudulent misrepresentations, and deceptive trade practices, and intends to vigorously contest the claims[151][252][253] - Has a license agreement with a third party for patent rights, requiring annual fees and royalties on net sales (0.5% - 3.5%)[152] - Entered into letter agreements on March 30, 2023, providing $80,000 in retention bonuses to certain executives, payable in two installments subject to continued employment[153] 14. Subsequent Events Subsequent to the reporting period, the company secured a waiver and consent for its Term Loan Agreement with CRG, reducing the minimum liquidity covenant to $500,000 until December 31, 2023, following a prior non-compliance notification - On May 19, 2023, a waiver and consent was entered into for the Term Loan Agreement with CRG, reducing the minimum liquidity covenant to $500,000 until December 31, 2023[154][259] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion covers financial performance, liquidity, and future outlook, highlighting revenue declines, net losses, and substantial doubt about going concern, driven by liquidity issues, Nasdaq compliance, and the need for financing or strategic alternatives Business Overview T2 Biosystems, an in vitro diagnostics company specializing in rapid sepsis pathogen detection, faces ongoing net losses, significant cash outflows, and substantial doubt about its going concern status, actively pursuing strategic alternatives and addressing Nasdaq compliance issues - T2 Biosystems is an in vitro diagnostics company focused on rapid detection of sepsis-causing pathogens and antibiotic resistance genes, aiming to improve patient care and reduce healthcare costs[161] - Primary commercial products include the T2Dx® Instrument, T2Candida® Panel, T2Bacteria® Panel, T2Resistance® Panel, and T2SARS-CoV-2™ Panel[162] Accumulated Deficit | Date | Amount (Millions) | | :--- | :---------------- | | March 31, 2023 | $552.2 | - Company has never been profitable and expects to incur future losses, with cash, cash equivalents, and restricted cash of $10.7 million at March 31, 2023, insufficient to fund operations through Q2 2023[163][166] - Initiated a strategic restructuring program, including a nearly 30% workforce reduction on May 19, 2023, and is exploring alternative strategic options (acquisition, merger, asset sale, licensing, equity financing, debt conversion)[167] - Facing Nasdaq delisting threats due to non-compliance with the $35 million minimum market value rule (deadline May 22, 2023) and the $1.00 minimum bid price rule (deadline September 26, 2023), with plans to appeal and potentially undertake a reverse stock split[170][171] - Filed an FDA 510(k) submission for the T2Biothreat™ Panel on May 8, 2023, and an application for Breakthrough Device Designation for the T2Cauris Panel on May 19, 2023[178][179] - COVID-19 test sales are declining, with no COVID-19 test sales forecasted for 2023; focus is shifting to sepsis test panels and expanding T2Dx Instruments installed base[165][177] Critical Accounting Policies and Use of Estimates Financial statements rely on significant estimates, assumptions, and judgments for revenue recognition, fair value measurements, and stock-based compensation, consistent with prior disclosures - Preparation of financial statements requires significant estimates, assumptions, and judgments affecting reported amounts of assets, liabilities, expenses, and revenue[196] - Critical accounting policies and estimates remained materially consistent with those in the Annual Report on Form 10-K for the year ended December 31, 2022[197] Results of Operations for the Three Months Ended March 31, 2023 and 2022 Significant decline in total revenue in Q1 2023 led to a higher net loss, despite decreased operating expenses, largely offset by increased other expenses from derivative and warrant fair value changes Consolidated Statements of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | Change | | :---------------------------------------- | :------ | :------ | :----- | | Product revenue | $1,655 | $3,844 | $(2,189) | | Contribution revenue | $423 | $3,390 | $(2,967) | | Total revenue | $2,078 | $7,234 | $(5,156) | | Cost of product revenue | $3,995 | $6,205 | $(2,210) | | Research and development | $4,471 | $6,656 | $(2,185) | | Selling, general and administrative | $7,299 | $9,230 | $(1,931) | | Total costs and expenses | $15,765 | $22,091 | $(6,326) | | Loss from operations | $(13,687) | $(14,857) | $1,170 | | Total other expense | $(4,278) | $(1,638) | $(2,640) | | Net loss | $(17,965) | $(16,495) | $(1,470) | - Product revenue decreased by $2.2 million, mainly due to lower consumables sales ($1.8 million, primarily T2SARS-CoV-2) and T2Dx sales ($0.3 million)[200] - Contribution revenue decreased by $3.0 million due to timing of BARDA contract activity and less option amount available[201] - Cost of product revenue decreased by $2.2 million, driven by lower consumable and instrument sales, and reduced service/repair costs[202] - Research and development expenses decreased by $2.2 million, primarily due to lower lab/facility expenses, reduced consulting for BARDA, and lower payroll/stock-based compensation[203] - Selling, general and administrative expenses decreased by $1.9 million, mainly from lower payroll and stock-based compensation due to reduced headcount[204] - Interest expense decreased by $0.2 million due to Term Loan Agreement amendments extending interest-only periods[206] - Significant other expenses included $0.8 million from change in fair value of derivative related to Term Loan and $1.3 million from change in fair value of warrant liabilities in Q1 2023 (none in Q1 2022)[207][208] - Other expense of $0.7 million in Q1 2023 related to issuance costs allocated to Common Stock Warrants[210] Liquidity and Capital Resources The company faces significant liquidity challenges with an accumulated deficit and insufficient cash, raising substantial doubt about its going concern status, and is actively pursuing strategic alternatives, managing Nasdaq compliance and Term Loan covenants - Incurred losses and cumulative negative cash flows since inception, with an accumulated deficit of $552.2 million at March 31, 2023[212] - Unrestricted cash and cash equivalents of $10.1 million at March 31, 2023, are insufficient to fund operations through Q2 2023, leading to substantial doubt about going concern[216][219] - Plans to finance cash needs through equity offerings, debt financings, and collaboration agreements, but may need to relinquish valuable rights or face unfavorable terms[217] - Initiated a nearly 30% workforce reduction on May 19, 2023, and is exploring strategic options like M&A, asset sales, licensing, or additional equity/debt conversion to avoid ceasing operations or bankruptcy[220] - Secured a waiver on May 19, 2023, reducing the Term Loan Agreement's minimum liquidity covenant to $500,000 until December 31, 2023, after notifying CRG of non-compliance[221] - Facing Nasdaq delisting for failing to meet the $35 million minimum market value and $1.00 minimum bid price rules, with plans to appeal and potentially implement a reverse stock split[223][224] Net Cash Flows (in thousands) | Activity | Q1 2023 | Q1 2022 | | :-------------------------- | :------ | :------ | | Operating activities | $(12,940) | $(14,441) | | Investing activities | $(120) | $(29) | | Financing activities | $11,848 | $1,202 | | Net change in cash, cash equivalents and restricted cash | $(1,212) | $(13,268) | - Net cash used in operating activities decreased due to non-cash adjustments and changes in operating assets/liabilities, while net cash provided by financing activities significantly increased due to public offerings[227][230] - Term Loan Agreement with CRG has been amended multiple times, extending maturity and interest-only periods, and was accounted for as troubled debt restructurings[232][238][239] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, T2 Biosystems is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[244] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of March 31, 2023, due to a material weakness in valuing common stock warrants, with plans to enhance evaluation considerations - Disclosure controls and procedures were not effective as of March 31, 2023, due to a material weakness[246] - The material weakness relates to the timeliness of assumptions and accounting conclusions for valuing common stock warrants sold in the February 17, 2023, public offering[246][247] - Company plans to establish enhanced evaluation considerations, including timely use of third-party experts, to prevent future occurrences[247] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in a legal dispute with its Billerica, Massachusetts landlord, who terminated a 10-year lease and unilaterally claimed a $1.0 million security deposit, seeking additional damages, which the company is contesting - Landlord terminated a 10-year lease for Billerica, Massachusetts space on January 17, 2023, alleging company's failure to perform obligations and breach of good faith[250][251] - Landlord unilaterally deducted the company's $1.0 million security deposit and is seeking damages for unpaid rent, brokerage fees, transaction costs, attorney's fees, and court costs[251] - Company filed a counterclaim on March 1, 2023, alleging landlord breach of contract, unlawful security deposit draw, fraudulent misrepresentations, and deceptive/unfair trade practices, and intends to vigorously contest the claims[252][253] Item 1A. Risk Factors Management has identified substantial doubt about the company's ability to continue as a going concern due to insufficient cash and limited equity offering capacity, with failure to secure financing potentially leading to asset sales or bankruptcy - Management has identified substantial doubt about the company's ability to continue as a going concern due to insufficient cash ($10.1 million at March 31, 2023) to meet obligations within the next twelve months[255] - Ability to finance operations through equity offerings is impaired by offering limits under General Instruction I.B.6 of Form S-3, restricting sales to one-third of public float[255] - Failure to secure new financing or strategic alternatives could force the company to sell material assets or commence Chapter 11 bankruptcy proceedings[255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for this reporting period Item 3. Defaults Upon Senior Securities This item is not applicable to the company for this reporting period Item 4. Mine Safety Disclosures This item is not applicable to the company for this reporting period Item 5. Other Information On May 19, 2023, T2 Biosystems entered into a waiver and consent with CRG Servicing LLC, reducing the minimum liquidity covenant under its Term Loan Agreement to $500,000 until December 31, 2023, with no notice of default received - On May 19, 2023, the company entered into a waiver and consent with CRG Servicing LLC, reducing the minimum liquidity covenant of the Term Loan Agreement to $500,000 until December 31, 2023[259] - No notice of default was received, and financial obligations under the Loan Agreement were not accelerated[259] Item 6. Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-Q, including corporate documents, warrant agreements, amendments to the Term Loan Agreement, and certifications, providing transparency on the company's governance and financial arrangements - Includes various corporate documents (Restated Certificate of Incorporation, Bylaws), warrant agreements (Pre-Funded Common Stock Purchase Warrant, Common Stock Purchase Warrant), and amendments to the Term Loan Agreement[261] - Contains certifications from the principal executive and financial officers as required by the Exchange Act and Sarbanes-Oxley Act[261] SIGNATURES SIGNATURES The report is duly signed on behalf of T2 Biosystems, Inc. by its President, Chief Executive Officer, and Chairman of the Board, John Sperzel, and its Chief Financial Officer, John M. Sprague, on May 22, 2023 - Report signed by John Sperzel (President, CEO, Chairman) and John M. Sprague (CFO) on May 22, 2023[265]