What changed in Q32 Bio Inc.'s 10-K — 2023 vs 2024

CONSOLIDATED BAL ANCE SHEETS (amounts in thousands, except share and per share data) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 77,965 $ 25,617 Prepaid expenses and other current assets 3,912 3,099 Total current assets 81,877 28,716 Equity investment 2,600 — Property and equipment, net 1,370 1,782 Right-of-use asset, operating leases 5,722 6,301 Restricted cash and restricted cash equivalents 647 5,647 Other noncurrent assets 116 4,611 Total assets $ 92,332 $ 47,057 Liabilities, convertible preferred stock and stockholders’ equity (deficit) Current liabilities: Accounts payable $ 2,989 $ 3,468 Accrued expenses and other current liabilities 7,479 9,763 CVR liability 2,900 — Venture debt, current portion 3,097 878 Total current liabilities 16,465 14,109 Lease liability, net of current portion 5,636 6,248 Venture debt, net of current portion 9,556 4,581 Convertible notes — 38,595 Other noncurrent liabilities 55,000 55,000 Total liabilities 86,657 118,533 Commitments and contingencies (Note 10) Series A convertible preferred stock, $ 0.0001 par value, no shares and 2,286,873 shares authorized, issued and outstanding as of December 31, 2024 and 2023, respectively (liquidation preference of $ 47,629 at December 31, 2023) — 47,458 Series A-1 convertible preferred stock, $ 0.0001 par value, no shares and 312,094 shares authorized, issued and outstanding at December 31, 2024 and 2023, respectively (liquidation preference of $ 5,753 as of December 31, 2023) — 4,132 Series B convertible preferred stock, $ 0.0001 par value, no shares and 2,625,896 shares authorized, issued and outstanding at December 31, 2024 and 2023, respectively (liquidation preference of $ 60,000 as of December 31, 2023) — 59,855 Total convertible preferred stock — 111,445 Stockholders’ equity (deficit): Common stock, $ 0.0001 par value; 400,000,000 shares authorized, 12,197,615 and 359,569 shares issued and outstanding at December 31, 2024 2023, respectively 2 1 Additional paid-in capital 240,487 4,159 Accumulated other comprehensive loss — — Accumulated deficit ( 234,814 ) ( 187,081 ) Total stockholders’ equity (deficit) 5,675 ( 182,921 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 92,332 $ 47,057 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS O F OPERATIONS (amounts in thousands, except share and per share data) Years Ended December 31, 2024 2023 Collaboration arrangement revenue $ — $ ( 6,651 ) Operating expenses: Research and development 48,143 31,729 General and administrative 17,959 9,875 Total operating expenses 66,102 41,604 Loss from operations ( 66,102 ) ( 48,255 ) Change in fair value of convertible notes 15,890 ( 6,193 ) Other income (expense), net 4,125 1,023 Total other income (expense), net 20,015 ( 5,170 ) Loss before provision for income taxes and loss from equity method investment ( 46,087 ) ( 53,425 ) Provision for income taxes ( 21 ) ( 318 ) Loss from equity method investment ( 1,625 ) — Net loss $ ( 47,733 ) $ ( 53,743 ) Net loss per share—basic $ ( 5.12 ) $ ( 153.96 ) Net loss per share—diluted $ ( 6.58 ) $ ( 153.96 ) Weighted-average common shares—basic 9,320,884 349,060 Weighted-average common shares—diluted 9,657,696 349,060 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEME NTS OF COMPREHENSIVE LOSS (amounts in thousands, except share and per share data) Years Ended December 31, 2024 2023 Net loss $ ( 47,733 ) $ ( 53,743 ) Other comprehensive income (loss): Change in unrealized gain (loss) on available for sale securities, net — — Total other comprehensive gain (loss) — — Comprehensive loss $ ( 47,733 ) $ ( 53,743 ) The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED S TOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (amounts in thousands, except share data) Series A Convertible Preferred Stock Series A-1 Convertible Preferred Stock Series B Convertible Preferred Stock Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount Shares Amount Capital Gain (Loss) Deficit (Deficit) Balance as of December 31, 2022 2,286,873 $ 47,458 312,094 $ 4,132 2,625,896 $ 59,855 343,550 $ 1 $ 2,625 $ — $ ( 133,338 ) $ ( 130,712 ) Issuance of common stock from option exercises — — — — — — 16,019 — 106 — — 106 Stock-based compensation expense — — — — — — — — 1,428 — — 1,428 Net loss — — — — — — — — — — ( 53,743 ) ( 53,743 ) Balance as of December 31, 2023 2,286,873 $ 47,458 312,094 $ 4,132 2,625,896 $ 59,855 359,569 $ 1 $ 4,159 $ — $ ( 187,081 ) $ ( 182,921 ) Conversion of convertible preferred stock to common stock in connection with the Merger ( 2,286,873 ) ( 47,458 ) ( 312,094 ) ( 4,132 ) ( 2,625,896 ) ( 59,855 ) 5,224,863 1 111,444 — — 111,445 Issuance of common stock in the pre- closing financing — — — — — — 1,682,045 — 42,000 — — 42,000 Issuance of common stock for conversion of convertible notes — — — — — — 1,433,410 — 22,705 — — 22,705 Issuance of common stock to Homology shareholders in reverse recapitalization — — — — — — 3,229,633 — 64,292 — — 64,292 Issuance of common stock from option exercises — — — — — — 255,486 — 1,694 — — 1,694 Issuance of common stock from RSU vesting — — — — — — 12,609 — — — — — Reverse recapitalization transaction costs — — — — — — — — ( 10,013 ) — — ( 10,013 ) Issuance of CVR at fair value — — — — — — — — ( 180 ) — — ( 180 ) Stock-based compensation expense — — — — — — — — 4,386 — — 4,386 Other comprehensive loss — — — — — — — — — — — — Net loss — — — — — — — — — — ( 47,733 ) ( 47,733 ) Balance as of December 31, 2024 — $ — — $ — — $ — 12,197,615 $ 2 $ 240,487 $ — $ ( 234,814 ) $ 5,675 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CA SH FLOWS (amounts in thousands) Years Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 47,733 ) $ ( 53,743 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of debt discount and issuance costs 194 87 Amortization of premium on short-term investments ( 221 ) — Depreciation expense 487 499 Stock-based compensation expense 4,386 1,428 Non-cash lease expense 579 544 Loss from equity method investment 1,625 — Loss on impairment of equity investment 675 — Change in fair value of CVR liability ( 2,180 ) — Change in fair value of convertible notes ( 15,890 ) 6,193 Changes in operating assets and liabilities: Prepaid expenses and other current assets 276 ( 94 ) Other noncurrent assets 386 ( 4,503 ) Accounts payable ( 1,043 ) 2,033 Operating lease liability ( 1,542 ) ( 471 ) Accrued expenses and other current liabilities ( 7,714 ) 199 Contingent liability — 55,000 Deferred revenue — ( 25,849 ) Net cash used in operating activities ( 67,715 ) ( 18,677 ) Cash flows from investing activities: Purchases of property and equipment ( 75 ) ( 5 ) Maturities of short-term investments 20,000 — Net cash provided by (used in) investing activities 19,925 ( 5 ) Cash flows from financing activities: Proceeds from borrowings under loan and security agreement 7,000 5,500 Payments on borrowings under loan and security agreement — ( 5,200 ) Proceeds from issuance of common stock in pre-closing financing 42,000 — Cash acquired in connection with reverse recapitalization 53,158 — Payment of reverse recapitalization transaction costs ( 8,714 ) — Proceeds from exercise of common stock options 1,694 106 Net cash provided by financing activities 95,138 406 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 47,348 ( 18,276 ) Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 31,264 49,540 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 78,612 $ 31,264 Supplemental disclosure of non-cash operating, investing and financing activities: Interest payments on venture debt $ 856 $ 422 Short-term investments acquired in connection with reverse recapitalization $ 19,905 $ — Issuance of CVR at fair value $ 180 $ — The accompanying notes are an integral part of these consolidated financial statements.

F- 9 Q32 BIO INC. NOTES TO CONS OLIDATED FINANCIAL STATEMENTS 1. Nature of the Business Q32 Bio Inc. (“Q32” or the “Company”) is a clinical stage biotechnology company focused on developing novel biologics to effectively and safely restore healthy immune balance in patients with autoimmune and inflammatory diseases driven by pathological immune dysfunction.

Q32 has multiple product candidates across a variety of autoimmune and inflammatory diseases. The Company was formed in 2017 as Admirx, Inc. under the laws of the state of Delaware and is headquartered in Waltham, Massachusetts. On March 20, 2020, the Company changed its name to Q32 Bio Inc. Merger with Homology On March 25, 2024, Kenobi Merger Sub, Inc.

(“Merger Sub”), a wholly-owned subsidiary of Homology Medicines, Inc. (“Homology”), completed its merger with and into Q32 Bio Operations Inc. (previously named Q32 Bio Inc. and referred to herein as “Legacy Q32”), with Legacy Q32 continuing as the surviving entity as a wholly-owned subsidiary of Homology.

This transaction is referred to as the “Merger.” Homology changed its name to Q32 Bio Inc., and Legacy Q32, which remains as a wholly-owned subsidiary of the Company, changed its name to Q32 Bio Operations, Inc.

The Merger was effected pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 16, 2023, by and among Homology, Legacy Q32, and Merger Sub.

In connection with the Merger Agreement, certain parties entered into a subscription agreement with the Company to purchase shares of Legacy Q32’ s common stock for an aggregate purchase price of $ 42.0 million (the “Pre-Closing Financing”). On March 25, 2024 (the “Closing Date”), the Pre-Closing Financing closed immediately prior to the consummation of the Merger.

Shares of Legacy Q32’s common stock issued pursuant to the Pre-Closing Financing were converted into the right to receive 1,682,045 shares of Homology common stock after taking into account the Reverse Stock Split.

On March 25, 2024, Homology effected a one-for-eighteen reverse stock split of its then outstanding common stock (the “Reverse Stock Split”) where all issued and outstanding shares of Legacy Q32’s common stock (including common stock issued upon the conversion of all Legacy Q32’s Series A, Series A-1 and Series B preferred stock, conversion of Legacy Q32 convertible notes, but excluding the common stock issued in Pre-Closing Financing) converted into the right to receive an aggregate of 7,017,842 shares of Homology’s common stock based on the final exchange ratio of 0.0480 (the “Exchange Ratio”).

Lastly, each option to purchase the Legacy Q32’s shares that was outstanding and unexercised immediately prior to the Merger was converted into an option to purchase shares of Homology based on the Exchange Ratio. Immediately following the Merger, Legacy Q32 stockholders owned approximately 74.4 % of the outstanding common stock of the combined company.

The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

For accounting purposes, Legacy Q32 is considered the accounting acquirer and Homology is the acquired company based on the terms of the Merger Agreement and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management.

Accordingly, the Merger was treated as the equivalent of Legacy Q32’s issuing stock to acquire the net assets of Homology. As a result of the Merger, the net assets of Homology were recorded at their acquisition-date fair value in the financial statements of the combined company and the reported operating results prior to the Merger are those of Legacy Q32.

Legacy Q32’s historical financial statements became the historical consolidated financial statements of the combined company. All issued and outstanding Legacy Q32 common stock, convertible preferred stock and options prior to the effective date of the Merger have been retroactively adjusted to reflect the Exchange Ratio, which reflects the impact of the reverse stock split, for all periods presented.

At the effective time of the Merger, each person who as of immediately prior to the effective time of the Merger was a stockholder of record of Homology or had the right to receive Homology’s common stock received a contractual contingent value right (“CVR”) issued by Homology representing the contractual right to receive cash payments from the combined company upon the receipt of certain proceeds from a disposition of Homology’s pre-merger assets (see Note 3 for more details surrounding the accounting for the Merger and the CVRs).

Risks and Uncertainties The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, obtaining regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

Programs currently under development will require significant additional research and development efforts, including preclinical F- 10 and clinical testing, and will need to obtain regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. Since its inception, the Company’s operations have been focused on organizing and staffing, business planning, raising capital, establishing the Company’s intellectual property portfolio and performing research and development of its product candidates, programs and platform.

The Company has primarily funded its operations with proceeds from the sale of convertible preferred stock, convertible notes, venture debt, the Merger with Homology and accompanying Pre-Closing Financing and its collaboration arrangement with Horizon.

Liquidity and Going Concern In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether they are conditions and 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 consolidated financial statements are issued.

As of December 31, 2024, the Company had an accumulated deficit of $ 234.8 million and cash and cash equivalents of $ 78.0 million.

The Company expects that its cash and cash equivalents will be sufficient to fund its operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these consolidated financial statements. The Company has incurred recurring operating losses since its inception.

During the year ended December 31, 2024, the Company incurred a net loss of $ 47.7 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. 2.

Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Principles of Consolidation The accompanying consolidated financial statements include those of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates.

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgment in this process.

In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends.

The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the fair value of the common stock and convertible notes prior to the effective date of the Merger, the fair value of CVR liability, and the prepaid and accrued research and development expenses.

The Company utilizes certain estimates to record expenses relating to research and development contracts. These contract estimates, which are primarily related to the length of service of each contract and the amount of service provided as of each measurement date, are determined by the Company based on input from internal project management, as well as from service providers.

Estimates are periodically reviewed considering changes in circumstances, facts and historical experience. Actual results may differ from the Company’s estimates.

F- 11 Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in determining how to allocate resources and in assessing performance. The Company has one reporting segment (see Note 20).