5. Supplemental Balance Sheet Information

Inventories

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, 2018		December 31, 2017
Raw materials	$	715	$	539
Work-in-process		2,069		562
Finished goods		553		243
Total inventories, net	$	3,337	$	1,344

Property and Equipment

Property and equipment consists of the following (in thousands):

	September 30, 2018			December 31, 2017
Office and computer equipment	$	409		$	409
Software		751			743
Laboratory equipment		4,390			4,224
Furniture		200			200
Manufacturing equipment		695			910
Manufacturing tooling and molds		576			255
T2-owned instruments and components		6,758			7,370
Leasehold improvements		3,437			3,437
Construction in progress		1,701			1,591
		18,917			19,139
Less accumulated depreciation and amortization		(10,727	)		(9,124	)
Property and equipment, net	$	8,190		$	10,015

Construction in progress is primarily comprised of equipment and leasehold improvement projects that have 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 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 September 30, 2018, there were no raw materials and work-in-process inventory in T2-owned instruments and components compared to $0.8 million at December 31, 2017. Completed T2-owned instruments are placed in service once installation procedures are completed and are depreciated over five years. 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 for the three months ended September 30, 2018 and 2017 and $0.7 million for the nine months ended September 30, 2018 and 2017. 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. During the fourth quarter of 2017, the Company received communication from the FDA that suggested the approval timeline for T2Bacteria would be longer than the Company initially anticipated. The Company assessed the recoverability of T2-owned instruments based on delayed T2Bacteria cash flows and recorded an impairment charge of $2.6 million, related to T2-owned instruments and components. The fair value used in the impairment calculation was based on the best estimated selling price of the underlying T2-owned instruments, less the estimated cost to sell the instruments. During the nine months ended September 30, 2018, the Company recorded a $0.2 million impairment charge, in the cost of product revenue and selling, general and administrative, related to manufacturing equipment for the Candida 1.0 cartridge, which was replaced by the Candida 1.1 cartridge.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

	September 30, 2018		December 31, 2017
Accrued payroll and compensation	$	3,077	$	2,793
Accrued research and development expenses		189		818
Accrued professional services		566		1,018
Other accrued expenses		595		1,589
Total accrued expenses and other current liabilities	$	4,427	$	6,218

At December 31, 2017, a fee associated with the Company’s Term Loan Agreement (Note 6) of $0.6 million is included in accrued expenses and other current liabilities, to match the classification of the associated debt. At September 30, 2018, the Company’s Term Loan Agreement with CRG and the associated fee are classified as non-current liabilities.