References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Dynamics Special Purpose Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to Dynamics Sponsor LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the unaudited condensed financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering (as defined below) filed with the U.S. Securities and Exchange
Commission (the "SEC"). The Company's securities filings can be accessed on the
EDGAR section of the SEC's website at www.sec.gov. Except as expressly required
by applicable securities law, the Company disclaims any intention or obligation
to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated on March 1, 2021 as a Delaware
corporation and formed for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses, which we refer to throughout this
Quarterly Report as our "initial business combination". We intend to effectuate
our initial business combination using cash from the proceeds of our initial
public offering (the "Initial Public Offering") and the private placement of the
Private Placement Shares (as defined below), the proceeds of the sale of our
shares in connection with our initial business combination (pursuant to forward
purchase agreements or backstop agreements we may enter into following the
consummation of the Initial Public Offering or otherwise), shares issued to the
owners of the target, debt issued to bank or other lenders or the owners of the
target, or a combination of the foregoing.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities for the period from March 1, 2021 (inception)
through September 30, 2021 were organizational activities, those necessary to
prepare for the Initial Public Offering, described below, and, after the Initial
Public Offering, identifying a target company for a business combination. We do
not expect to generate any operating revenues until after the completion of our
initial business combination. We will generate
non-operating
income in the form of interest income on cash and cash equivalents held after
the Initial Public Offering. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence.

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For the period from March 1, 2021 (inception) through September 30, 2021, we had
a net loss of $498,924, which resulted from operating and formation costs of
$407,500 and franchise tax expense of $95,349 partially offset by interest and
dividend income on investments in Trust Account of $3,925.
For the three months ended September 30, 2021, we had a net loss of $291,680,
which resulted from operating and formation costs of $253,456 and franchise tax
expense of $41,184 partially offset by interest and dividend income on
investments in Trust Account of $2,960.
Liquidity and Capital Resources
On May 28, 2021, we consummated the Initial Public Offering of 23,000,000 shares
of Class A common stock (the "Public Shares"), including 3,000,000 Public Shares
that were issued pursuant to the underwriters' exercise of their over-allotment
option in full, at $10.00 per Public Share, generating gross proceeds of
$230,000,000.
Simultaneously with the closing of the Initial Public Offering, the Sponsor
purchased an aggregate of 715,500 shares of Class A common stock at a price of
$10.00 per share (the "Private Placement Shares"), generating gross proceeds of
$7,155,000. A portion of the proceeds from the sale of the Private Placement
Shares has been added to the net proceeds from the Initial Public Offering held
in the trust account. If we do not complete our initial business combination
within 24 months of the closing of the Initial Public Offering, the proceeds
from the sale of the Private Placement Shares held in the trust account will be
used to fund the redemption of the Public Shares (subject to the requirements of
applicable law).
For the period from March 1, 2021 (inception) through September 30, 2021, net
cash used in operating activities was $1,047,026, which was primarily due to
changes in working capital of $544,177, our net loss of $498,924, and
non-cash
interest and dividend income on investments held in the trust account.
For the period from March 1, 2021 (inception) through September 30, 2021, net
cash used in investing activities of $230,000,000 was the result of the amount
of net proceeds from the Initial Public Offering and the private placement sale
of shares being deposited to the Trust Account.
Net cash provided by financing activities for the period from March 1, 2021
(inception) through September 30, 2021 of $232,031,570 was comprised of
$225,400,000 in proceeds from the issuance of shares in the Initial Public
Offering net of underwriter's discount paid, $7,155,000 in proceeds from the
issuance of shares in a private placement to our sponsor, and proceeds from the
issuance of a promissory note to our sponsor of $250,000, offset by the payment
of $523,430 for offering costs associated with the Initial Public Offering and
repayment of the outstanding balance on the promissory note to our sponsor of
$250,000.
As of September 30, 2021, we had cash of $984,544 held outside the trust
account. We intend to use the funds held outside the trust account primarily to
identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a business combination.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account (less
taxes payable and deferred underwriting commissions), to complete our initial
business combination. We may withdraw interest income (if any) to pay income
taxes, if any. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the trust account. We
expect the interest income earned on the amount in the trust account (if any)
will be sufficient to pay our income taxes. To the extent that our equity or
debt is used, in whole or in part, as consideration to complete our initial
business combination, the remaining proceeds held in the trust account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.

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We do not believe we will need to raise additional funds following this offering
in order to meet the expenditures required for operating our business. However,
if our estimates of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our initial business combination. In order to fund
working capital deficiencies or finance transaction costs in connection with an
intended initial business combination, our sponsor or an affiliate of our
sponsor, or certain of our officers or directors may, but are not obligated to,
loan us funds as may be required. If we complete our initial business
combination, we would repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts, but no proceeds
from our trust account would be used for such repayment. Up to $2,000,000 of
such loans may be convertible into shares of the post-business combination
entity at a price of $10.00 per share at the option of the lender. The shares
would be identical to the Private Placement Shares. The terms of such loans, if
any, have not been determined and no written agreements exist with respect to
such loans. We do not expect to seek loans from parties other than our sponsor
or an affiliate of our sponsor, or certain of our officers or directors as we do
not believe third parties will be willing to loan such funds and provide a
waiver against any and all rights to seek access to funds in our trust account.
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of September 30, 2021.
Contractual Obligations
Underwriters Agreement
The Company granted the underwriter a
45-day
option to purchase up to 3,000,000 additional shares of Class A common stock to
cover over-allotments at the Initial Public Offering price, less the
underwriting discounts and commissions. The underwriters exercised the
over-allotment option in full on May 28, 2021.
The underwriter was paid a cash underwriting fee of $0.20 per share, or
$4,600,000 in the aggregate, upon the closing of the Initial Public Offering. In
addition, $0.35 per share, or $8,050,000 in the aggregate will be payable to the
underwriter for deferred underwriting commissions. The deferred fee will become
payable to the underwriter from the amounts held in the Trust Account solely in
the event that the Company completes a Business Combination, subject to the
terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies
:

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Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the
weighted-average number of shares of common stock outstanding during the period.
As the Public Shares are considered to be redeemable at fair value, and a
redemption at fair value does not amount to a distribution different than other
stockholders, Class A and Class B common stock are presented as one class of
stock in calculating net loss per share. As a result, the calculated net loss
per share is the same for Class A and Class B shares of common stock. At
September 30, 2021, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into shares of
common stock and then share in the earnings of the Company. As a result, diluted
loss per share is the same as basic loss per share for the periods presented.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") 480,
Distinguishing Liabilities from Equity
. Shares of Class A common stock subject to mandatory redemption is classified
as a liability instrument and measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders' equity. Our Class A common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount value. The
change in the carrying value of the redeemable Class A common stock subject to
possible redemption resulted in charges against additional paid-in capital and
accumulated deficit.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06,
Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)
("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be
applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company is currently assessing the impact, if
any, that ASU 2020-06 would have on its financial position, results of
operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This item is not applicable as we are a smaller reporting company.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under Securities Exchange Act of 1934, as amended (the
"Exchange Act") is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules
13a-15
and
15d-15
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of September 30, 2021. Based upon
their evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures (as defined in Rules
13a-15
(e) and
15d-15
(e) under the Exchange Act) were effective.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in
our internal control over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

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