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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-38433

Q32 Bio Inc.

(Exact name of Registrant as specified in its Charter)


Delaware	47-3468154
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
830 Winter Street Waltham, MA	02451
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 999-0232

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     Common stock, par value $0.0001 per share

     QTTB

     The Nasdaq Capital Market

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 every Interactive Data File required to be submitted 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 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.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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 to 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 November 1, 2025, the registrant had 12,304,352 shares of common stock, $0.0001 par value per share, outstanding.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks include the following, among others:

•

We have incurred significant losses since inception, expect to incur significant losses for the foreseeable future and may not be able to achieve or sustain profitability in the future. We have no products for sale, have not generated any product revenue and may never generate product revenue or become profitable.

•

We will require substantial additional capital to finance our operations in the future. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce or eliminate clinical trials, product development programs or future commercialization efforts.

•

We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and likelihood of success and viability.

•

We face competition from entities that have developed or may develop programs for the diseases we plan to address with bempikibart or other product candidates.

•

Bempikibart and the rest of our pipeline are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability. If we or our current or future collaborators are unable to complete development of, or commercialize, our product candidates, or experience significant delays in doing so, our business will be materially harmed.

•

We are substantially dependent on the success of our most advanced product candidate, bempikibart, and our clinical trials of our lead candidate may not be successful.

•

Our rights to develop and commercialize our product candidates are, and in the future may be, subject to the terms and conditions of licenses granted to us by others. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties, or these agreements are terminated, or we otherwise experience disruption to our business relationships with our licensors, we could lose license rights that are important to our business.

•

Our ability to protect our patents and other proprietary rights is uncertain, exposing us to the possible loss of competitive advantage.

•

Our business could be adversely affected by economic downturns, inflation, changes in interest rates, natural disasters, public health crises, political crises, government shutdowns, geopolitical events, such as the conflict between Russia and Ukraine and the conflict in Israel and Gaza, or other macroeconomic conditions, which could have a material and adverse effect on our results of operations and financial condition.

•

We rely on third parties in the supply and manufacture of our product candidates for our research, preclinical and clinical activities, and may do the same for commercial supplies of our product candidates.

•

Our quarterly and annual operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline and negatively impact our financing or funding ability, as well as negatively impact our ability to exist as a standalone company.

•

If we are unable to attract and retain qualified key management and scientists, staff, consultants and advisors, our ability to implement our business plan may be adversely affected.

•

Our failure to meet the continued listing requirements of the Nasdaq Capital Market (“Nasdaq”) could result in a delisting of our securities.

The summary risk factors described above should be read together with the text of the full risk factors below in the section titled “Risk Factors” and the other information set forth in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”). The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations, and future growth prospects.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

•

our ability to achieve and sustain profitability in the future;

•

our strategies, prospects, plans, expectations or objectives of management for our future operations;

•

estimates of our future expenses, revenues, capital requirements, cash runway, and our needs for additional financing;

•

our estimates of and anticipated use of our existing cash, cash equivalents and marketable securities;

•

the progress, scope or timing of the development of our product candidates;

•

our expectations surrounding the potential safety, efficacy, and regulatory and clinical progress of our product candidates, including bempikibart, and our anticipated milestones and timing therefor;

•

our ability to obtain and maintain regulatory approval of our product candidates;

•

our ability to achieve and maintain market acceptance and adoption of our product candidates;

•

the benefits that may be derived from any of our future products or the commercial or market opportunity with respect to any of our future products;

•

our ability to maintain patent protection for our product candidates and protect our intellectual property rights;

•

our ability to successfully compete against other companies developing similar products to ours;

•

our anticipated operations, financial position, ability to raise capital to fund our operations, revenues, costs or expenses;

•

our ability to evaluate and execute on strategic options for our tissue-targeted complement inhibitor platform, inclusive of ADX-097 and early-stage assets;

•

our ability to achieve anticipated benefits and improvements in connection with the strategic restructuring plan, including the reduction in force;

•

our ability to retain our key executives and to attract and retain highly qualified personnel;

•

our ability to successfully protect against cyber-attacks, security breaches and other disruptions to our information technology systems;

•

our ability to establish and maintain an effective system of internal controls over financial reporting;

•

the effect of unfavorable macroeconomic conditions or market volatility resulting from global economic conditions or geopolitical developments, including fluctuating interest rates and inflation and capital market disruptions, changes in governmental agencies, government shutdowns, international tariffs, trade protection measures, public health crises, economic sanctions and potential economic slowdowns or recessions, or similar events;

•

our reliance on third parties in the supply and manufacture of our product candidates;

•

the impact of applicable laws and regulations, whether in the U.S. or foreign jurisdictions, and any changes thereto;

•

the statements regarding our future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing; and

•

other risks and uncertainties, including those listed under the caption “Risk Factors.”

These forward-looking statements are based on information available to us at the time of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly,

forward-looking statements should not be relied upon as representing our views as of any subsequent date, and except as otherwise required by applicable law, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements, including those set forth in this Quarterly Report on Form 10-Q in the section titled “Risk Factors” and in our periodic filings with the SEC. Our SEC filings are available publicly on the SEC’s website at www.sec.gov. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Should one or more of the risks or uncertainties described in this Quarterly Report on Form 10-Q, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this Quarterly Report on Form 10-Q, and we believe these industry publications and third-party research, surveys and studies are reliable.

iii

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024	2
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2025 and 2024	3
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II.	OTHER INFORMATION	43

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89
Signatures		90

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Q32 BIO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(UNAUDITED)


	September 30, 2025			December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	49,039		$	77,965
Prepaid expenses and other current assets		1,771			3,912
Total current assets		50,810			81,877
Equity investment		—			2,600
Property and equipment, net		1,069			1,370
Right-of-use asset, operating leases		5,258			5,722
Restricted cash and restricted cash equivalents		647			647
Other noncurrent assets		—			116
Total assets	$	57,784		$	92,332
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	973		$	2,989
Accrued expenses and other current liabilities		3,905			7,479
CVR liability		—			2,900
Venture debt, current portion		6,232			3,097
Total current liabilities		11,110			16,465
Lease liability, net of current portion		5,121			5,636
Venture debt, net of current portion		5,001			9,556
Other noncurrent liabilities		55,000			55,000
Total liabilities		76,232			86,657
Commitments and contingencies (Note 10)
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2025 and December 31, 2024		—			—
Common stock, $0.0001 par value; 400,000,000 shares authorized, 12,304,352 and 12,197,615 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively		2			2
Additional paid-in capital		244,273			240,487
Accumulated other comprehensive gain (loss)		—			—
Accumulated deficit		(262,723	)		(234,814	)
Total stockholders’ equity (deficit)		(18,448	)		5,675
Total liabilities and stockholders’ equity (deficit)	$	57,784		$	92,332

The accompanying notes are an integral part of these condensed consolidated financial statements.

Q32 BIO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Operating expenses:
Research and development	$	3,555		$	14,346		$	15,841		$	37,598
General and administrative		4,022			4,468			13,136			13,978
Total operating expenses		7,577			18,814			28,977			51,576
Loss from operations		(7,577	)		(18,814	)		(28,977	)		(51,576	)
Change in fair value of convertible notes		—			—			—			15,890
Other income		188			1,219			1,068			3,767
Total other income		188			1,219			1,068			19,657
Loss before loss from equity method investment		(7,389	)		(17,595	)		(27,909	)		(31,919	)
Loss from equity method investment		—			—			—			(1,625	)
Net loss	$	(7,389	)	$	(17,595	)	$	(27,909	)	$	(33,544	)
Net loss per share—basic	$	(0.60	)	$	(1.46	)	$	(2.29	)	$	(4.01	)
Net loss per share—diluted	$	(0.60	)	$	(1.46	)	$	(2.29	)	$	(5.60	)
Weighted-average common shares—basic		12,240,542			12,076,412			12,212,081			8,360,652
Weighted-average common shares—diluted		12,240,542			12,076,412			12,212,081			8,810,555

The accompanying notes are an integral part of these condensed consolidated financial statements.

Q32 BIO INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands, except share and per share data)

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Net loss	$	(7,389	)	$	(17,595	)	$	(27,909	)	$	(33,544	)
Other comprehensive loss:
Change in unrealized gain (loss) on available for sale securities, net		—			—			—			(1	)
Total other comprehensive loss		—			—			—			(1	)
Comprehensive loss	$	(7,389	)	$	(17,595	)	$	(27,909	)	$	(33,545	)

Q32 BIO INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands, except share data)

(UNAUDITED)


	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, 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
Reverse recapitalization transaction costs		—			—			—			—			—			—			—		—		(10,013	)		—			—			(10,013	)
Issuance of CVR at fair value		—			—			—			—			—			—			—		—		(180	)		—			—			(180	)
Stock-based compensation expense		—			—			—			—			—			—			—		—		417			—			—			417
Other comprehensive loss		—			—			—			—			—			—			—		—		—			(5	)		—			(5	)
Net income		—			—			—			—			—			—			—		—		—			—			1,029			1,029
Balance as of March 31, 2024		—		$	—			—		$	—			—		$	—			11,929,520	$	2	$	234,824		$	(5	)	$	(186,052	)	$	48,769
Issuance of common stock from option exercises		—			—			—			—			—			—			53,077		—		380			—			—			380
Issuance of common stock from RSU vesting		—			—			—			—			—			—			12,609		—		—			—			—			—
Stock-based compensation expense		—			—			—			—			—			—			—		—		1,336			—			—			1,336
Other comprehensive gain		—			—			—			—			—			—			—		—		—			4			—			4
Net loss		—			—			—			—			—			—			—		—		—			—			(16,978	)		(16,978	)
Balance as of June 30, 2024		—		$	—			—		$	—			—		$	—			11,995,206	$	2	$	236,540		$	(1	)	$	(203,030	)	$	33,511
Issuance of common stock from option exercises		—			—			—			—			—			—			143,663		—		997			—			—			997
Stock-based compensation expense		—			—			—			—			—			—			—		—		1,382			—			—			1,382
Other comprehensive gain		—			—			—			—			—						—		—		—			—			—			—
Net loss		—			—			—			—			—			—			—		—		—			—			(17,595	)		(17,595	)
Balance as of September 30, 2024		—		$	—			—		$	—			—		$	—			12,138,869	$	2	$	238,919		$	(1	)	$	(220,625	)	$	18,295


	Common Stock				Additional Paid in		Accumulated Other Comprehensive		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Gain (Loss)		Deficit			(Deficit)
Balance as of December 31, 2024		12,197,615	$	2	$	240,487	$	—	$	(234,814	)	$	5,675
Stock-based compensation expense		—		—		1,342		—		—			1,342
Net loss		—		—		—		—		(11,031	)		(11,031	)
Balance as of March 31, 2025		12,197,615	$	2	$	241,829	$	—	$	(245,845	)	$	(4,014	)
Stock-based compensation expense		—		—		1,268		—		—			1,268
Net loss		—		—		—		—		(9,489	)		(9,489	)
Balance as of June 30, 2025		12,197,615	$	2	$	243,097	$	—	$	(255,334	)	$	(12,235	)
Issuance of common stock from RSU vesting		106,737		—		—		—		—			—
Stock-based compensation expense		—		—		1,176		—		—			1,176
Net loss		—		—		—		—		(7,389	)		(7,389	)
Balance as of September 30, 2025		12,304,352	$	2	$	244,273	$	—	$	(262,723	)	$	(18,448	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Q32 BIO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(UNAUDITED)


	Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net loss	$	(27,909	)	$	(33,544	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and issuance costs		143			145
Amortization of premium on short-term investments		—			(221	)
Depreciation expense		301			367
Stock-based compensation expense		3,786			3,135
Non-cash lease expense		464			432
Loss from equity method investment		—			1,625
Loss on impairment of equity investment		74			675
Change in fair value of CVR liability		(374	)		(2,400	)
Change in fair value of convertible notes		—			(15,890	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		2,141			(632	)
Other noncurrent assets		116			461
Accounts payable		(2,016	)		(2,774	)
Operating lease liability		(455	)		(970	)
Accrued expenses and other current liabilities		(3,634	)		(6,696	)
Net cash used in operating activities		(27,363	)		(56,287	)
Cash flows from investing activities:
Purchases of property and equipment		—			(73	)
Maturities of short-term investments		—			20,000
Net cash provided by investing activities		—			19,927
Cash flows from financing activities:
Proceeds from borrowings under loan and security agreement		—			7,000
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	)
Principal payments on venture debt		(1,563	)		—
Proceeds from exercise of common stock options		—			1,377
Net cash (used in) provided by financing activities		(1,563	)		94,821
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents		(28,926	)		58,461
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period		78,612			31,264
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	49,686		$	89,725
Supplemental disclosure of non-cash operating, investing and financing activities:
Interest payments on venture debt	$	750		$	602
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 condensed consolidated financial statements.

Q32 BIO INC.

NOTES TO CONDENSED CONSOLIDATED 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 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 there 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 condensed consolidated financial statements are issued.

As of September 30, 2025, the Company had an accumulated deficit of $262.7 million and cash and cash equivalents of $49.0 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 unaudited condensed consolidated financial statements.

The Company has incurred recurring operating losses since its inception. During the nine months ended September 30, 2025, the Company incurred a net loss of $27.9 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 unaudited condensed consolidated financial statements have been prepared by the Company in conformity with GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2025.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including those adjustments that are normal and recurring in nature, which are necessary for a fair statement of the Company’s financial position as of September 30, 2025, and consolidated results of operations for the three and nine months ended September 30, 2025 and 2024, and cash flows for the nine months ended September 30, 2025 and 2024. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025 or for any future period.

Principles of Consolidation

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

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 unaudited condensed 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 unaudited condensed 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.

Concentrations of Credit Risk and Significant Suppliers

Financial instruments that potentially expose the Company to credit risk primarily consist of cash, cash equivalents, restricted cash and restricted cash equivalents. The Company maintains its cash, cash equivalents, restricted cash and restricted cash equivalents balances with accredited financial institutions and, consequently, the Company does not believe it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company’s cash management limits investment to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations. The Company maintains its cash in bank deposit accounts that are Federal Deposit Insurance Corporation (“FDIC”) insured up to $250,000. At times, the Company’s bank accounts may exceed the federal insurance limit.

The Company is dependent on contract development and manufacturing organizations (“CDMOs”) to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients, other raw materials and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients, other raw materials and formulated drugs. The Company is also dependent on contract research organizations (“CROs”) which provide services related to the research and development activities in its programs.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale investments.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The Company considers all highly liquid investments that are readily convertible into cash with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents are comprised of money market accounts invested in U.S. Treasury securities.

Restricted cash and restricted cash equivalents are comprised of deposits held by financial institutions as collateral for the company’s venture debt and used to collateralize letters of credit related to the Company’s lease arrangements.

The Company includes the restricted cash and restricted cash equivalents balance together with its cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows.

Cash, cash equivalents, restricted cash and restricted cash equivalents consisted of the following (in thousands):


	September 30,
	2025		2024
Cash and cash equivalents	$	49,039	$	89,078
Restricted cash and cash equivalents		647		647
Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	49,686	$	89,725

Deferred Transaction Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred transaction costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the transaction, either as a reduction of the carrying value of the preferred stock or in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the transaction. Should the in-process equity financing be abandoned, the deferred transaction costs would be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Investments in Equity Securities

The Company uses the equity method of accounting to account for an investment in an entity that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. The Company's proportionate share of the net income or loss of the entity is included in consolidated net income (loss). Judgments regarding the level of influence over the equity method investment include consideration of key factors such as the Company's ownership interest, representation on the board of directors or other management body and participation in policy-making decisions.

Under the equity method of accounting, the Company’s investment is initially recorded at fair value on the consolidated balance sheets. Upon initial investment, the Company evaluates whether there are basis differences between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets. Typically, the Company amortizes basis differences identified on a straight-line basis over the underlying assets’ estimated useful lives when calculating the attributable earnings or losses, excluding the basis differences attributable to in-process research and development that has no alternative future use. If the Company is unable to attribute all of the basis differences to specific assets or liabilities of the investee, the residual excess of the cost of the investment over the proportional fair value of the investee’s assets and liabilities is considered to be equity method goodwill and is recognized within the equity investment balance, which is tracked separately within the Company’s memo accounts. The Company subsequently records in the statements of operations its share of income or loss of the other entity within other income/expense, which results in an increase or decrease to the carrying value of the investment. If the share of losses exceeds the carrying value of the Company’s investment, the Company will suspend recognizing additional losses and will continue to do so unless it commits to providing additional funding; however, if there are intra-entity profits this can cause the investment balance to go negative.

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that a decline in value has occurred that is other than temporary. Evidence considered in this evaluation includes, but would not necessarily be limited to, the financial condition and near-term prospects of the investee, recent operating trends and forecasted performance of the investee, market conditions in the geographic area or industry in which the investee operates and the Company’s strategic plans for holding the investment in relation to the period of time expected for an anticipated recovery of its carrying value. If the investment is determined to have a decline in value deemed to be other than temporary it is written down to estimated fair value.

The Company uses the cost method to account for an investment in an entity in which it does not have the ability to exercise significant influence over operating and financial policies. Investments recorded using the cost method will be assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value shall be recognized.

As and when circumstances and facts change, the Company will evaluate the Company’s ability to significantly influence operational and financial policy to establish a basis for converting the investment accounted for using the cost method to the equity method of accounting and vice versa.

Leases

The Company evaluates whether an arrangement is or contains a lease at contract inception. If a contract is or contains a lease, lease classification is determined at lease commencement, which represents the date at which the underlying asset is made available for use by the Company. The Company’s lease terms are generally measured at the respective lease’s noncancelable term and exclude any optional extension terms as the Company is not reasonably certain to exercise such options. The Company elected the short-term lease exemption and therefore does not recognize lease liabilities and right of use assets for lease arrangements with original lease terms of twelve months or less.

Lease liabilities represent the Company’s obligation to make lease payments under a lease arrangement. Lease liabilities are measured as the present value of fixed lease payments, discounted using an incremental borrowing rate, as interest rates implicit in the Company’s lease arrangements are generally not readily determinable. The Company elected the practical expedient to not separate lease and non-lease components for its real estate leases and therefore both are considered when determining the lease payments in a lease arrangement. Variable lease costs are expensed as incurred.

The incremental borrowing rate represents the interest rate at which the Company could borrow a fully collateralized amount equal to the lease payments, over a similar term, in a similar economic environment. The Company determines the incremental borrowing rate at lease commencement, generally using a synthetic credit rating based on the Company’s financial position and negative cash flows, factoring in adjustments for additional risks based on the Company’s economic condition, a survey of comparable companies with similar credit and financial profiles, as well as additional market risks, as may be applicable.

Right-of-use assets represent the Company’s right to use an underlying asset over its lease term. Right-of-use assets are initially measured as the associated lease liability, adjusted for prepaid rent and tenant incentives. The Company remeasures right-of-use assets and lease liabilities when a lease is modified, and the modification is not accounted for as a separate contract. A modification is accounted for as a separate contract if the modification grants the Company an additional right of use not included in the original lease agreement and the increase in lease payments is commensurate with the additional right of use. The Company assesses its right-of-use assets for impairment consistent with its policy for impairment of long-lived assets held and used in operations.

Subsequent Event Considerations

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has evaluated events occurring after the date of its consolidated balance sheet through the date these condensed consolidated financial statements were issued (see Note 20).

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are 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 November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280: Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in this update improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. All disclosure requirements of the update are required for entities with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. The Company adopted this standard as of January 1, 2024. The Company determined that adopting the amendments in ASU 2023-07 had no impact on the Company’s reportable segment identified and additional required disclosures have been included.

Recently Issued Accounting Standards Not Yet Adopted

On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and incomes taxes paid information. For public companies, the amendments are effective for annual periods beginning after December 15, 2024 and should be applied prospectively. The Company has determined that the effects of adopting the amendments in ASU 2023-09 will only impact its disclosures and not have a material impact on its consolidated financial position and the results of its operations when such amendment is adopted.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation Disclosures (Subtopic 220-40)—Disaggregation of Income Statement Expenses (“ASU 2024-03”) which is intended to improve disclosures about a public business entity's expenses,

primarily through additional disaggregation of income statement expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The amendments in ASU 2024-03 should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating ASU 2024-03 to determine the impact on the Company's disclosures.

3. Accounting for the Merger

As described in Note 1, Merger Sub merged with and into Legacy Q32, with Legacy Q32 surviving as a wholly-owned subsidiary of the Company on March 25, 2024. The Merger was accounted for as a reverse recapitalization in accordance with GAAP with Legacy Q32 as the accounting acquirer of Homology. Legacy Q32 was determined to be the accounting acquirer based on the terms of the Merger Agreement and other factors, including: (i) Legacy Q32’s shareholders own a majority of the voting rights in the combined company; (ii) Legacy Q32 designated a majority (seven of nine) of the initial members of the board of directors of the combined company; (iii) Legacy Q32’s executive management team became the management team of the combined company; (iv) the pre-combination assets of Homology were primarily cash and cash equivalents, short-term investments, and other non-operating assets; and (v) the combined company was named Q32 Bio Inc. and is headquartered in Legacy Q32’s office in Waltham, Massachusetts.

At the effective time of the Merger, substantially all of the assets of Homology consisted of cash and cash equivalents, short-term investments, as well as other non-operating assets. Under such reverse recapitalization accounting, the assets and liabilities of Homology were recorded at their fair value in the Company’s financial statements at the effective time of the Merger, which approximated book value due to the short-term nature, except for the equity method investment as described below. Homology’s development programs had ceased prior to the Merger and were deemed to be de minimis in value at the transaction date. No goodwill or intangible assets were recognized.

Consequently, the unaudited condensed consolidated financial statements of the Company reflect the operations of Legacy Q32 for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders Homology, the legal acquirer, and a recapitalization of the equity of Legacy Q32, the accounting acquirer.

As part of the recapitalization, the Company obtained the assets and liabilities listed below:


Cash and cash equivalents	$	53,158
Short-term investments		19,905
Prepaid expenses		964
Equity method investment		4,900
Accounts payable and accrued liabilities		(7,903	)
CVR liability		(5,080	)
Net assets acquired	$	65,944

In addition, the Company recognized $2.1 million in personnel cost related to severance payments and retention bonuses to Homology employees and this amount was recorded in general and administrative expense in the accompanying unaudited condensed consolidated statement of operations for the year ended December 31, 2024. The Company also incurred transaction costs of $10.0 million and this amount is recorded in additional paid-in capital in the accompanying unaudited condensed consolidated statements of stockholders’ equity (deficit) for the nine months ended September 30, 2024.

With respect to the CVRs issued in connection with the Merger, each CVR represents the contractual right to receive payments from the Company upon the actual receipt by the Company or its subsidiaries of certain contingent proceeds derived from any cash consideration that is paid to the Company or its subsidiaries as a result of the sale, transfer, license, assignment or other divestiture, disposition or commercialization of any of the Company’s assets, rights and interests relating to the following pre-merger assets of Homology: HMI-103, HMI-204, capsids and human hematopoietic stem cell-derived adeno-associated virus vector (“AAVHSC”) platform, including any equity interests held directly or indirectly by the Company in OXB (US) LLC.

The Company believes that the achievement of the milestones outlined in the CVR agreement related to Homology’s HMI-103, HMI-204, capsids and AAVHSC platform are highly susceptible to factors outside the Company's influence that are not expected to be resolved for a long period of time, if at all. In particular, these amounts are primarily influenced by the actions and judgments of third parties and the licensors of such assets and are based on the licensors of such assets progressing the in-process research and development assets, and in the case of one of the draft agreements, to certain milestones. As of March 25, 2024, the date of the Merger, the Company recorded a CVR liability of $0.2 million on the balance sheet relating to such contingent payments.

For the portion of the CVR agreement that is related to Homology's equity interest in OXB (US) LLC, the Company recorded a CVR liability of $4.9 million representing its estimated fair value as of the date of the Merger. Pursuant to the Amended and Restated Limited Liability Company Agreement of OXB (US) LLC, at any time following the three-year anniversary of the closing of the transaction between OXB (US) LLC, Oxford Biomedica (US), Inc. and the Company (formerly known as Homology Medicines, Inc.) on March 10, 2022, (i) Oxford Biomedica (US), Inc. had an option to cause the Company to sell and transfer to Oxford Biomedica (US), Inc., and (ii) the Company had an option to cause Oxford Biomedica (US), Inc. to purchase from the Company, in each case, all of the Company’s equity ownership interest in OXB (US) LLC based on the Company's pro rata share of OXB (US) LLC (10%) times a predetermined multiple of revenue for the immediately preceding 12-month period increased by OXB (US) LLC's cash balance and decreased by OXB (US) LLC's debt balance as of the exercise date (together, the “Options”), subject to a maximum amount of $74.1 million. The Company utilized a monte carlo simulation model, also known as a probability simulation, to estimate the fair value of the CVR liability. For each simulated path of future revenue, a market approach using the predetermined revenue multiple was employed to determine the future value of the equity interest, which was then discounted to present value using OXB (US) LLC's estimated cost of debt.

Pursuant to a change in control provision in the Amended and Restated Limited Liability Company Agreement of OXB (US) LLC, on March 1, 2025, Oxford Biomedica (US), Inc. exercised its option to cause the Company to sell and transfer to Oxford Biomedica (US), Inc. all of the Company’s equity ownership interest in OXB (US) LLC. The sale price was based on a formula using the Company's pro rata share of OXB (US) LLC (10%), times a predetermined multiple of revenue for the immediately preceding 12-month period increased by OXB (US) LLC's cash balance and decreased by OXB (US) LLC's debt balance as of the exercise date. The Company and Oxford Biomedica (US), Inc. finalized the transaction and paid the CVR holders during the second quarter of 2025. See Notes 4 and 5 for more details surrounding this transaction.

4. Fair Value Measurements

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities approximate their fair value due to their short-term nature. The carrying value of the Company’s term loan as of September 30, 2025 (see Note 11) approximated fair value based on interest rates currently available to the Company.

The tables below present information about the Company’s assets and liabilities that are regularly measured and carried at fair value on a recurring basis at September 30, 2025 and December 31, 2024 and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2, Summary of Significant Accounting Policies.

Financial assets measured at fair value on a recurring basis as of September 30, 2025 are summarized as follows (in thousands):


Description	Balance as of September 30, 2025		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets
Cash equivalents:
Money market funds	$	47,670	$	47,670	$	—	$	—
Total cash equivalents	$	47,670	$	47,670	$	—	$	—
Total financial assets	$	47,670	$	47,670	$	—	$	—

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 are summarized as follows (in thousands):


Description	Balance as of December 31, 2024		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets
Cash equivalents:
Money market funds	$	76,089	$	76,089	$	—	$	—
Total cash equivalents	$	76,089	$	76,089	$	—	$	—
Total financial assets	$	76,089	$	76,089	$	—	$	—
Liabilities
CVR liability	$	2,900	$	—	$	—	$	2,900
Total financial liabilities	$	2,900	$	—	$	—	$	2,900

Money market funds

Money market funds were valued by the Company using quoted prices in active markets for identical securities, which represent a Level 1 measurement within the fair value hierarchy.

CVR liability

As discussed in Notes 1 and 3, 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 CVR, issued by Homology subject to and in accordance with the terms and conditions of a CVR Agreement, 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, calculated in accordance with the CVR Agreement. The Company concluded that the CVR liability was a derivative liability accounted for at fair value. The fair value of the CVR liability was based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. For the portion of the CVR liability that was related to Homology's equity interest in OXB (US) LLC, the Company utilized a monte carlo simulation model, also known as a probability simulation, to estimate the fair value of the CVR liability at December 31, 2024. This model requires the use of estimates and assumptions including estimated future revenues and discount rates. Upon Oxford Biomedica (US), Inc.'s exercise of its option to cause the Company to sell and transfer to Oxford Biomedica (US), Inc. all of the Company’s equity ownership interest in OXB (US) LLC in June 2025, the Company received proceeds from Oxford Biomedica (US), Inc. and then remitted those proceeds to the CVR holders, and subsequently removed the associated CVR liability and recorded $0.4 million for the change in estimated fair value during the nine months ended September 30, 2025 in other income (expense), net.

For the portion of the CVR liability related to Homology's HMI-103, HMI-204, capsids and AAVHSC platform, the Company's fair value assessment includes judgments around the probability of progressing the in-process research and development assets. As of September 30, 2025, the Company's assessment resulted in a CVR liability of zero.

Convertible Notes

Legacy Q32 issued convertible notes (the “Convertible Notes”) totaling $30.0 million during the year ended December 31, 2022. Legacy Q32 concluded that the Convertible Notes and its related features are within the scope of FASB Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments (“ASC 825”), as a combined financial instrument, and Legacy Q32 elected the fair value option where changes in fair value of the Convertible Notes are measured through the accompanying condensed consolidated statement of operations until settlement. The Convertible Notes liability represents a Level 3 measurement within the fair value hierarchy as it was valued using certain unobservable inputs.

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in the fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2024 (see Note 11).

During the three and nine months ended September 30, 2025 and 2024, there were no transfers between Level 1, Level 2 and Level 3 measurements. There have been no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2025 and 2024.

5. Investment in Equity Securities

As part of the Merger, the Company obtained Homology's 20% equity interest in OXB (US) LLC, an AAV vector process development and manufacturing services company. At that time, the Company had significant influence over, but did not control, OXB (US) LLC through its noncontrolling representation on OXB (US) LLC’s board of directors and the Company’s equity interest in OXB (US) LLC. Accordingly, the Company did not consolidate the financial statements of OXB (US) LLC and accounted for its investment using the equity method of accounting.

The Company recorded its equity method investment in OXB (US) LLC at fair value upon the effective date of the Merger. The fair value of the equity method investment was determined based on the market approach. This approach estimated the fair value of OXB (US) LLC based on the implied value for the entity, including the Options (as defined in Note 3 above), for a controlling interest in OXB (US) LLC at the entity’s formation. As part of its fair value analysis, the Company determined that the Options were embedded in the Company’s ownership units of OXB (US) LLC because the Options were not legally detachable or separately exercisable. Accordingly, the equity method investment and the Options represented one unit of account and the fair value recorded reflected the value of the equity interest and the Options (refer to Note 3 for more information for how the fair value was determined).

As a result of transactions by OXB (US) LLC, the Company’s investment was diluted to a 10% equity interest in OXB (US) LLC on May 22, 2024, and the Company no longer had the ability to exert significant influence over the operating and financial policies of OXB (US) LLC. The Company discontinued the equity method of accounting for the investment in OXB (US) LLC on May 22, 2024 and determined the remaining investment to be an equity security accounted for in accordance with FASB ASC Topic 321, Investments—Equity Securities (“ASC 321”) at the date the investment no longer qualified for the equity method of accounting. The Company recorded the equity instrument at fair value and applied the measurement alternative under ASC 321 such that the Company would not change the amount recorded for the equity instrument unless the Company identified observable price changes in orderly transactions for the identical or similar investment of the same issuer or the equity instrument was otherwise deemed to be impaired. At each reporting period, the Company was required to make a qualitative assessment considering impairment indicators to evaluate whether the investment was impaired. If deemed impaired, the Company was required to estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value of the investment and its carry amount.

On March 1, 2025, Oxford Biomedica (US), Inc. exercised its option to cause the Company to sell and transfer to Oxford Biomedica (US), Inc. all of the Company’s equity ownership interest in OXB (US) LLC. In June 2025, the Company finalized the sale of its 10% equity interest in OXB (US) LLC to Oxford Biomedica (US), Inc. and received $2.5 million from Oxford Biomedica (US), Inc., calculated using the Company's pro rata share of OXB (US) LLC (10%), times a predetermined multiple of revenue for the immediately preceding 12-month period increased by OXB (US) LLC's cash balance and decreased by OXB (US) LLC's debt balance as of the exercise date, and reduced the associated equity investment on its condensed consolidated balance sheet to zero.

6. Property and Equipment, Net

Property and equipment, net consisted of the following as of (in thousands):


	September 30, 2025			December 31, 2024
Lab equipment	$	1,382		$	1,382
Furniture and fixtures		351			351
Computer equipment		89			89
Leasehold improvements		1,001			1,001
Total property and equipment		2,823			2,823
Less accumulated depreciation		(1,754	)		(1,453	)
Property and equipment, net	$	1,069		$	1,370

Depreciation expense was approximately $0.1 million and $0.3 million, respectively, for the three and nine months ended September 30, 2025 and $0.1 million and $0.4 million, respectively, for the three and nine months ended September 30, 2024. No impairment losses occurred in the three and nine months ended September 30, 2025 and 2024. The Company had no losses on disposal of fixed assets for the three and nine months ended September 30, 2025 and 2024.

7. Prepaid Expenses, Other Current Assets and Other Noncurrent Assets

Prepaid expenses and other current assets consisted of the following as of (in thousands):


	September 30, 2025		December 31, 2024
Prepaid external research and development	$	195	$	2,076
Prepaid expenses		996		885
Payroll tax credit		556		555
Other		24		396
Total prepaid expenses and other current assets	$	1,771	$	3,912

Other noncurrent assets consisted of the following as of (in thousands):


	September 30, 2025		December 31, 2024
Prepaid external research and development - long term	$	—	$	116
Total other noncurrent assets	$	—	$	116

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of (in thousands):


	September 30, 2025		December 31, 2024
Accrued external research and development	$	617	$	2,611
Accrued compensation and related expenses		1,922		2,782
Accrued professional services and other		695		1,474
Operating lease liability, current		671		612
Total accrued expenses and other current liabilities	$	3,905	$	7,479

9. Restructuring Charges

On February 10, 2025, the Company notified its employees of a strategic restructuring plan adopted by the Company’s board of directors to focus its resources on the advancement of bempikibart in patients with AA (the “Restructuring Plan”). In connection with the Restructuring Plan, the Company discontinued its Phase 2 renal basket clinical trial of ADX-097 and is evaluating strategic options for its tissue-targeted complement inhibitor platform, inclusive of ADX-097 and early-stage assets, in combination with other cost-saving measures. The Restructuring Plan included a reduction in force, which the Company has completed as of September 30, 2025. As part of this Restructuring Plan, the Company recorded a restructuring charge for severance and related costs of approximately $0.9 million in the Company's condensed consolidated statements of operations during the nine months ended September 30, 2025.

The Company’s restructuring liability related to the Restructuring Plan, which is included in accrued compensation and related expenses, consisted of the following (in thousands):


	Employee-Related Costs
Accrued restructuring balance at January 1, 2025	$	—
Expenses incurred		924
Payments		(924	)
Accrued restructuring balance at September 30, 2025	$	—

10. Commitments and Contingencies

As of September 30, 2025, the Company had ongoing clinical studies in various clinical trial stages. Its most significant contracts relate to agreements with CROs for clinical trials and preclinical studies and CDMOs for manufacturing which the Company enters into in the normal course of business. The contracts with CROs and CDMOs are generally cancellable, with notice, at the Company’s option.

Operating lease

In 2021 the Company entered into a long-term operating lease agreement for its current corporate headquarters in Waltham, Massachusetts (“headquarters lease”). The headquarters lease provides approximately 15,000 square feet for general office use and research lab facilities. The headquarters lease commencement date was January 1, 2022 and the Company did not take control or have the right to use the leased property until this time. The lease term ends in December 2031. The Company has an option to extend the lease term for an additional five years. The initial rent for the office space is approximately $1.0 million per year, increasing every year by 3% for total aggregate payment of $11.1 million. Upon the commencement date, the Company established a right-of-use asset and lease liability on the condensed consolidated balance sheet. As part of the agreement, the Company arranged for a letter of credit for $0.6 million as a security for the headquarters lease, which is considered restricted cash and included as restricted cash and restricted cash equivalents in the condensed consolidated balance sheet. The Company received $0.4 million in a tenant improvement allowance that was applied against the right-of-use asset.

As of September 30, 2025, the Company’s headquarters lease had a weighted-average remaining lease term of 6.25 years and weighted average incremental borrowing rate of 7.5%.

Amounts reported in the unaudited condensed consolidated balance sheet for leases where the Company is the lessee as of September 30, 2025 and December 31, 2024 were as follows (in thousands):


	September 30, 2025		December 31, 2024
Assets:
Operating lease right-of-use assets	$	5,258	$	5,722
Total operating lease right-of-use assets	$	5,258	$	5,722
Liabilities:
Current:
Operating lease liabilities	$	671	$	612
Noncurrent:
Operating lease liabilities, net of current portion		5,121		5,636
Total operating lease liabilities	$	5,792	$	6,248

The following table summarizes operating lease costs for the nine months ended September 30, 2025 and 2024 (in thousands):


	September 30,
	2025		2024
Fixed lease costs	$	795	$	772
Variable lease costs		544		298
Total lease costs	$	1,339	$	1,070

Variable lease costs were primarily related to operating expenses, taxes and insurances associated with the operating lease, which were assessed based on the Company’s proportionate share of such costs for the leased premises. As these costs are generally variable in nature, they were not included in the measurement of the operating lease right-of-use asset and related lease liability. Total lease costs are included as operating expenses in the Company’s unaudited condensed consolidated statements of operations. Future minimum lease payments under non-cancelable lease agreement as of September 30, 2025 and a reconciliation to the carrying amount of the lease liabilities presented in the consolidated balance sheet are as follows (in thousands):


	Minimum Rental Payments
2025	$	265
2026		1,092
2027		1,124
2028		1,158
2029		1,193
Thereafter		2,494
Total minimum lease payments		7,326
Less imputed interest		(1,534	)
Total lease liability	$	5,792
Lease liability, current portion		671
Lease liability, net of current portion		5,121
Total	$	5,792

Prior to the Merger, Homology was subleasing office and research and development laboratory space in Bedford, Massachusetts, under a sublease agreement with OXB (US) LLC that expired in December 2024. At the effective time of the Merger, the Company recorded a liability of approximately $1.0 million representing the present value of the future minimum lease payments due under this sublease. As of September 30, 2025, all amounts under the sublease agreement have been paid and there are no accrued expenses or liabilities on the Company's condensed consolidated balance sheet related to the sublease.

License Agreements

License Agreement with the University of Colorado

In August 2017, the Company entered into an exclusive license agreement, as amended in February 2018, September 2018, and April 2019 (the “Colorado License Agreement”), with The Regents of the University of Colorado (“Colorado”), pursuant to which the Company obtained worldwide, royalty-bearing, sublicensable licenses under certain patents and know-how owned by Colorado and Medical University of South Carolina (“MUSC”) relating to the research, development and commercialization of ADX-097. The licenses granted to the Company are exclusive with respect to certain patent families and know-how and non-exclusive with certain other patent families and know-how. The licenses granted to the Company are also subject to certain customary retained rights of Colorado and MUSC and rights of the United States government owing to federal funding giving rise to inventions covered by the licensed patents. The Company agreed to use commercially reasonable efforts to develop, manufacture and commercialize ADX-097, including by using commercially reasonable efforts to achieve specified development and regulatory milestones by specified dates.

In addition, the Company agreed to pay Colorado (i) development and sales milestone payments in an aggregate amount of up to $2.2 million per licensed product for the first three products, (ii) tiered royalty rates on cumulative net sales of licensed products in the low single digit percentages, (iii) 15% of sublicense income and (iv) ongoing fees associated with the prosecution, maintenance, or filing of the licensed patents. The Company’s obligation to pay royalties to Colorado commences, on a licensed product-by-licensed product and country-by-country basis, from the first commercial sale of a licensed product in any country and expires on the later of (a) the last to expire valid claim within the licensed patents covering such licensed product in such country, and (b) 20 years following the effective date of the Colorado License Agreement, or April 2037 (the “Royalty Term”).

Unless earlier terminated by either party pursuant to its terms, the Colorado License Agreement will expire upon the expiration of the Royalty Term in all countries. The Company may terminate the Colorado License Agreement for convenience upon providing prior written notice to Colorado. Colorado may terminate the Colorado License Agreement or convert the Company’s exclusive license to a non-exclusive license if the Company breaches certain obligations under the Colorado License Agreement and fails to cure such breach. The Colorado License Agreement will terminate automatically upon the Company’s dissolution, insolvency, or bankruptcy.

During the three and nine months ended September 30, 2025 and 2024, the Company had zero research and development expense for any milestone related to the Colorado License Agreement. The financial statements as of September 30, 2025 and December 31, 2024 do not include liabilities with respect to royalty fees on the license agreement as the Company has not yet generated revenue and the achievement of certain milestones is not yet probable.

License Agreement with Bristol-Myers Squibb Company

In September 2019, the Company entered into a license agreement, as amended in August 2021 and July 2022 (the “BMS License Agreement”), with Bristol-Myers Squibb Company (“BMS”), pursuant to which the Company obtained sublicensable licenses from BMS to research, develop and commercialize licensed products, including bempikibart, for any and all uses worldwide. The licenses granted to the Company are exclusive with respect to BMS’s patent rights and know-how relating to certain antibody fragments (including certain fragments of bempikibart) and non-exclusive with respect to BMS’s patent rights and know-how relating to the composition of matter and use of a specific region of bempikibart. BMS retained the right for it and its affiliates to use the exclusively licensed patents and know-how for internal, preclinical research purposes. Under the BMS License Agreement, the Company is prohibited from engaging in certain clinical development or commercialization of any antibody other than a licensed compound with the same mechanism of action until the earlier of the expiration of Q32’s obligation to pay BMS royalties or September 2029.

In consideration for the license, the Company made an upfront payment to BMS of $8 million, issued 318,278 Series A preferred shares to BMS and agreed to use commercially reasonable efforts to develop and commercialize at least one licensed product in key geographic markets. In addition, the Company agreed to pay BMS (i) development and regulatory milestone payments in aggregate amounts ranging from $32 million to $49 million per indication for the first three indications and commercial milestone payments in an aggregate amount of up to $215 million on net sales of licensed products, (ii) tiered royalties ranging from rates in the mid-single digit percentages to up to 10% of net sales, with increasing rates depending on the cumulative net sales, (iii) up to 60% of sublicense income, which percentage decreases based on the development stage of bempikibart at the time of the sublicensing event, and (iv) ongoing fees associated with the prosecution, maintenance, or filing of the licensed patents.

The Company’s obligation to pay BMS royalties under subsection (ii) above commences, on a licensed product-by-licensed product and country-by-country basis on the first commercial sale of a licensed product in a country and expires on the later of (x) 12 years from the first commercial sale of such Licensed Product in such country, (y) the last to expire licensed patent right covering bempikibart or such licensed product in such country, and (z) the expiration or regulatory or marketing exclusivity for such licensed product in such country (Royalty Term). If the Company undergoes a change of control prior to certain specified phase of development, the development and milestone payments are subject to increase by a low double digit percentage and the royalty rates are subject to increase by a low sub single digit percentage.

Unless terminated earlier by either party pursuant to its terms, the BMS License Agreement will expire on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last to expire Royalty Term with respect to such licensed product in such country. Either party may terminate the BMS License Agreement for the other party’s material breach, subject to a specified notice and cure period. BMS may terminate the BMS License Agreement if the Company fails to meet its diligence obligations under the BMS License Agreement, for the Company’s insolvency, or if the Company or its affiliates challenges the validity, scope, enforceability, or patentability of any of the licensed patents. The Company may terminate the BMS License Agreement for any reason upon prior written notice to BMS, with a longer notice period if a licensed product has received regulatory approval. If the BMS Agreement is terminated for the Company’s material breach, BMS will regain rights to bempikibart and the Company must grant BMS an exclusive license under the Company’s patent rights covering bempikibart, subject to a low single digit percentage royalty on net sales of bempikibart payable to the Company by BMS

In July 2024, the Company made a $4.0 million development milestone payment to BMS and recorded it as research and development expenses. As of September 30, 2025, no further events have occurred that would require payment of milestones, royalties or sublicense fees.

Legal Proceedings

The Company is not currently party to any material legal proceedings. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and reasonably estimable. Legal costs associated with these matters are expensed when incurred.

Indemnification Arrangements

As permitted under Delaware law, the Company has agreements whereby it indemnifies certain of its investors, stockholders, employees, officers, and directors (collectively, the “Indemnified Parties”) for certain events or occurrences while the Indemnified Parties are, or were serving, at its request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has an Executive Liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid up to $5.0 million. The Company believes the estimated fair value of these indemnification agreements is minimal. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the Indemnified Parties for losses suffered or incurred by the Indemnified Parties, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

11. Debt

Venture Debt

In December 2020, the Company entered into a Loan and Security Agreement, as amended in June 2022, August 2022, December 2022, April 2023, July 2023, November 2023, March 2024 and July 2024, with Silicon Valley Bank, a California corporation (the “Loan Agreement”) for a lending facility of up to $25.0 million. The Company received $5.0 million upon execution of the Loan Agreement which it repaid in July 2023, a $5.5 million term loan advance in July 2023 and a $7.0 million term loan advance in March 2024, for a total of $12.5 million principal amount outstanding at September 30, 2025. The Company no longer has the ability to draw down any additional loan advances. The term loan bears interest at an annual rate equal to the greater of the prime rate minus 0.25% or 8.00%. The Loan Agreement provided for interest-only payments until July 1, 2025, followed by 24 equal monthly payments of principal plus interest. The loan matures on July 1, 2027. In addition, the Company paid a fee of $0.1 million upon closing and is required to pay a fee of 3.5% of the aggregate amount of advances under the Loan Agreement at maturity. At its option, the Company may elect to prepay all or a portion of the outstanding advances by paying the principal balance, and all accrued and unpaid interest, and a prepayment premium. In connection with the Loan Agreement, the Company granted the lender a security interest in all of its personal property now owned or hereafter acquired, excluding intellectual property (but including the rights to payment and proceeds from the sale, licensing or disposition of intellectual property), and a negative pledge on intellectual property. The Loan Agreement also contains certain events of default, representations, warranties and non-financial covenants of the Company. If the Company fails to make payments when due or breaches any operational covenant or has any event of default, this could have a material adverse effect on its business and financial condition. The Company was in compliance with all covenants at September 30, 2025.

In conjunction with the Loan Agreement, in December 2020, the Company issued warrants to purchase 7,988 shares of common stock to the lender at a per share price of $6.87 with a maximum contractual term of 10 years and in July 2023, warrants to purchase 10,156 shares of common stock to the lender at a per share price of $7.50 with a maximum contractual term of 10 years. The warrants had a de minimis total relative fair value at the time of issuance. Pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity and FASB ASC Topic 815, Derivatives and Hedging, the warrants were classified as equity and were initially measured at fair value. Subsequent changes to fair value will not be recognized so long as the instrument continues to be equity classified.

Interest expense was $0.3 million and $0.9 million for the three and nine months ended September 30, 2025, respectively, and $0.3 million and $0.7 million for the three and nine months ended September 30, 2024, respectively. The effective rate on the Loan Agreement, including the amortization of the debt discount and issuance costs was 9.52% and 9.55%, respectively, at each of September 30, 2025 and December 31, 2024. The components of the long-term debt balance are as follows (in thousands):


	September 30, 2025			December 31, 2024
Principal amount of term loans	$	10,938		$	12,500
Unamortized debt discount and issuance costs		295			153
Carrying amount		11,233			12,653
Less current portion		(6,232	)		(3,097	)
Long-term debt, net	$	5,001		$	9,556

Convertible Notes

In May 2022, the Company entered into an agreement with the existing investors of the Company to issue, and for the existing investors to purchase, the Convertible Notes for up to an aggregate of $30.0 million. The Convertible Notes bore interest at 5.0% per annum. The Convertible Notes become due on demand of the Convertible Noteholders one year from the date of issuance. On April 27, 2023, the Company amended the maturity dates for the Convertible Notes. On May 20, August 5 and December 23, 2022, the Company received $8.3 million, $5.0 million, and $16.7 million, respectively, in exchange for issuance of the Convertible Notes. Interest expense was $0.3 million for the nine months ended September 30, 2024. There was no interest expense recorded for the three and nine months ended September 30, 2025, as the Convertible Notes converted into shares of common stock in March 2024 per the Merger (see discussion below and in Note 1).

The Convertible Notes contained mandatory conversion features whereby the total outstanding amount of principal and accrued and unpaid interest of the Convertible Notes automatically converted into shares of common stock upon certain qualified financings. The total outstanding amount of principal and accrued and unpaid interest of the Convertible Notes convert into shares of common stock at 90% of the purchase price of the mandatory conversion events.

The Company elected to account for the Convertible Notes at fair value where changes in fair value of the notes are measured through the condensed consolidated statements of operations until settlement. Subsequent to December 31, 2023 and per the Merger further discussed in Note 1, the Convertibles Notes converted into 1,433,410 shares of common stock. The Company recorded a gain on the change in fair value prior to the conversion of the Convertible Notes of $15.9 million in other income (expense), net during the nine months ended September 30, 2024.

12. Convertible Preferred Stock

On March 25, 2024, immediately prior to completing the Merger, all classes of convertible preferred stock of Legacy Q32 were converted to Legacy Q32 common stock, and then exchanged in the Merger for shares of the Company’s common stock using the Exchange Ratio. The Series A convertible preferred stock converted into an aggregate of 2,286,873 shares of Legacy Q32 common stock, the Series A-1 convertible preferred stock converted into an aggregate of 312,094

Q32 Bio Inc. 10-Q