Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the applicable period. In computing diluted net income (loss) per share, only potential shares of common stock that are dilutive are included. The Company considered each issue or series of issues of potential shares of common stock separately when determining whether potential shares of common stock are dilutive or antidilutive. The Company made such determination in sequence from the most dilutive to the least dilutive and concluded that its Convertible Notes are dilutive to net income per share for the nine months ended September 30, 2024. Pursuant to FASB ASC Topic 260, Earnings Per Share, the Company applied the if-converted method to determine the effect of its Convertible Notes on the diluted earnings per share calculations. Pursuant to such method, the Company adjusted the numerator for the gains or losses recognized during the period in net income from the Convertible Notes and the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the Convertible Notes were converted as of the beginning the period.


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2024			2023			2024			2023
Numerator:
Net income (loss)-basic	$	(17,595	)	$	(14,031	)	$	(33,544	)	$	(26,676	)
Net income (loss)-diluted	$	(17,595	)	$	(14,031	)	$	(49,344	)	$	(26,676	)
Denominator:
Weighted-average common shares outstanding-basic		12,076,412			346,288			8,360,652			347,292
Dilutive securities		—			—			449,903			—
Weighted-average common shares outstanding-diluted		12,076,412			346,288			8,810,555			347,292

Net income (loss) per share-basic	$	(1.46	)	$	(40.52	)	$	(4.01	)	$	(76.81	)
Net income (loss) per share-diluted	$	(1.46	)	$	(40.52	)	$	(5.60	)	$	(76.81	)

For the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2023, the Company’s potentially dilutive securities, which include convertible preferred stock, convertible notes, stock options and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Series A convertible preferred stock		—		2,286,873		—		2,286,873
Series A-1 convertible preferred stock		—		312,094		—		312,094
Series B convertible preferred stock		—		2,625,896		—		2,625,896
Options to purchase common stock		2,003,466		1,120,014		2,003,466		1,120,014
Warrants to purchase common stock		18,144		—		18,144		—

In addition, during the year ended December 31, 2022, Legacy Q32 issued the Convertible Notes with a principal balance of $30.0 million. As described in Note 11, the Convertible Notes contained conversion features whereby the Convertible Notes and any accrued interest may have converted into either a variable number of shares of common stock or into shares of Series B preferred stock based on a fixed exchange ratio. Any shares of Series B preferred stock issued to settle the Convertible Notes would then be convertible into shares of common stock. The Convertible Notes were excluded from the computation of diluted net loss per share attributable to common stockholders for the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2023, because including them would have had an anti-dilutive effect. Per the Merger further discussed in Note 1, the Convertible Notes converted into 1,433,410 shares of common stock at the effective date of the Merger.