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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 691 added, 488 removed, 20 unchanged (98% of the section changed)

FINANCIAL STATEMENTS (UNAUDITED)

DYNAMICS SPECIAL PURPOSE CORP.

SENTI BIOSCIENCES, INC.

Condensed Consolidated Balance Sheets

Current assets:

(in thousands, except share and per share data)

June 30, December 31,

Cash and cash equivalents $ 139,800 $ 56,034

Trade and other receivables 573 483

Prepaid expenses and other current assets 3,546 3,676

Total current assets 143,919 60,193

Prepaid expenses - noncurrent

Investments held in Trust Account

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable and other current liabilities

Accrued professional fees and other expenses

Franchise tax payable

Restricted cash 3,257 3,257

Property and equipment, net 35,505 12,368

Operating lease right-of-use assets 19,474 20,708

Other long-term assets 207 176

Total assets $ 202,362 $ 96,702

Liabilities and Stockholders’ Equity (Deficit)

Accounts payable $ 5,755 $ 5,187

Early exercise liability, current portion 297 626

Deferred revenue 833 1,656

Accrued expenses and other current liabilities 9,056 5,331

Operating lease liabilities 1,857 1,743

Total current liabilities 17,798 14,543

Deferred underwriting fee payable

Operating lease liabilities, net of current portion 29,018 20,988

Contingent earnout liability 810 —

Early exercise liability, net of current portion 470 619

Deferred revenue, net of current portion — 176

Total liabilities 48,096 36,326

Commitments and contingencies (Note 13)

Class A common stock subject to possible redemption, 23,000,000 shares at redemption value

(assumed to be $ 10.00 per share)

Stockholders’ Deficit

Redeemable convertible preferred stock (A and B), $ 0.0001 par value;

zero and 19,517,990 shares authorized at June 30, 2022 and December 31, 2021;

zero and 19,517,988 shares issued and outstanding at June 30, 2022 and December 31, 2021;

aggregate liquidation preference of zero and $ 163.8 million at June 30, 2022 and December 31, 2021, respectively

Stockholders’ equity (deficit):

Preferred stock, $ 0.0001 par value;

1,000,000 shares authorized;

none issued and outstanding

Class A common stock, $ 0.0001 par value;

100,000,000 shares authorized;

23,715,500 shares issued;

715,500 shares outstanding (excluding 23,000,000 shares subject to possible redemption)

Class B common stock, $ 0.0001 par value;

10,000,000 shares authorized;

5,750,000 shares issued and outstanding

Additional paid-in

10,000,000 and zero shares authorized at June 30, 2022 and December 31, 2021;

zero and zero shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value;

500,000,000 and 27,006,600 shares authorized at June 30, 2022 and December 31, 2021;

43,368,270 and 2,972,409 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 292,698 3,619

Accumulated deficit ( 138,436 ) ( 115,076 )

Total Stockholders’ Deficit

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

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

DYNAMICS SPECIAL PURPOSE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Ended March 31,

For the Period

from March 1,

2021 (Inception)

Through March 31,

Professional fees and other expenses

Franchise tax expense

Operating and formation costs

Total stockholders’ equity (deficit) 154,266 ( 111,457 )

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 202,362 $ 96,702

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

SENTI BIOSCIENCES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Contract revenue $ 1,108 $ 778 $ 1,962 $ 822

Grant income 250 15 500 43

Total revenue 1,358 793 2,462 865

Operating expenses

Research and development 9,247 5,235 16,849 10,138

General and administrative 13,882 4,554 19,141 8,865

Total operating expenses 23,129 9,789 35,990 19,003

Loss from operations ( 21,771 ) ( 8,996 ) ( 33,528 ) ( 18,138 )

Interest and dividend income on investments held in Trust Account

Basic and diluted weighted average shares outstanding, Class A common stock

Basic and diluted net loss per share, Class A common stock

Basic and diluted weighted average shares outstanding, Class B common stock (1)

Basic and diluted net loss per share, Class B common stock

The period from March 1, 2021 (inception) through March 31, 2021 excludes up to 750,000 shares of Class B common stock which were subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriter.

The over-allotment option was exercised in full on May 28, 2021;

thus, these shares are no longer subject to forfeiture (see Notes 5 and 7).

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

DYNAMICS SPECIAL PURPOSE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

THREE MONTHS ENDED MARCH 31, 2022

Class A Common Stock

Class B Common Stock

Paid-in Capital

Other income (expense)

Interest income, net 27 2 31 2

Change in fair value of contingent earnout liability 8,878 — 8,878 —

Gain on extinguishment of convertible notes 1,289 — 1,289 —

Change in preferred stock tranche liability — ( 2,918 ) — ( 14,742 )

Other income (expense) 25 ( 95 ) ( 30 ) ( 131 )

Total other income (expense), net 10,219 ( 3,011 ) 10,168 ( 14,871 )

Net loss and comprehensive loss $ ( 11,552 ) $ ( 12,007 ) $ ( 23,360 ) $ ( 33,009 )

Net loss per share, basic and diluted $ ( 0.86 ) $ ( 4.13 ) $ ( 2.80 ) $ ( 11.45 )

Weighted-average shares outstanding, basic and diluted 13,446,622 2,909,105 8,336,451 2,883,582

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

SENTI BIOSCIENCES, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-in Capital Accumulated

Deficit Total

Stockholders’

Balance - December 31, 2021

Balance - March 31, 2022

FOR THE PERIOD FROM MARCH 1, 2021 (INCEPTION) THROUGH MARCH 31, 2021

Class A Common Stock

Class B Common Stock (1)

Paid-in Capital

Equity (Deficit)

Shares Amount Shares Amount

Balance as of December 31, 2020

11,536,136 $ 89,662 2,838,376 $ — $ 1,044 $ ( 59,757 ) $ ( 58,713 )

Issuance of Series B redeemable convertible preferred stock, net of preferred stock tranche liability of $ 33 thousand and issuance costs of $ 6 thousand

277,977 2,294 — — — — —

Issuance of common stock — — 563,460 — 1,432 — 1,432

Early exercise of common stock options — — ( 512,670 ) — ( 1,329 ) — ( 1,329 )

Stock-based compensation — — — — 372 — 372

Net loss — — — — — ( 21,002 ) ( 21,002 )

Balance as of March 31, 2021

11,814,113 91,956 2,889,166 — 1,519 ( 80,759 ) ( 79,240 )

Issuance of Series B redeemable convertible preferred stock, including extinguishment of preferred stock tranche liability of $ 15.2 million

7,703,875 79,877 — — — — —

Issuance of common stock — — 12,891 — 21 — 21

Vesting of early exercise of common stock options — — 13,099 — 28 — 28

Stock-based compensation — — — — 562 — 562

Net loss — — — — — ( 12,007 ) ( 12,007 )

Balance as of June 30, 2021

19,517,988 $ 171,833 2,915,156 $ — $ 2,130 $ ( 92,766 ) $ ( 90,636 )

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

SENTI BIOSCIENCES, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-in Capital Accumulated

Deficit Total

Stockholders’

Balance - March 1, 2021 (Inception)

Issuance of Class B common stock to Sponsor (1)

Balance - March 31, 2021

The period from March 1, 2021 (inception) through March 31, 2021 includes up to 750,000 shares of Class B common stock which were subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriter.

The over-allotment option was exercised in full on May 28, 2021;

thus, these shares are no longer subject to forfeiture (see Notes 5 and 7).

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

DYNAMICS SPECIAL PURPOSE CORP.

Equity (Deficit)

Shares Amount Shares Amount

Balance as of December 31, 2021

19,517,988 $ 171,833 2,972,409 $ — $ 3,619 $ ( 115,076 ) $ ( 111,457 )

Issuance of common stock — — 172,606 — 422 — 422

Vesting of early exercise of common stock options — — 143,524 — 375 — 375

Stock-based compensation — — — — 661 — 661

Net loss — — — — — ( 11,808 ) ( 11,808 )

Balance as of March 31, 2022

19,517,988 171,833 3,288,539 — 5,077 ( 126,884 ) ( 121,807 )

Conversion of redeemable convertible preferred stock into common stock in connection with the Reverse Recapitalization, net of transaction costs ( 19,517,988 ) ( 171,833 ) 19,517,988 2 171,833 — 171,835

Issuance of common stock upon Reverse Recapitalization, net of transaction costs — — 19,975,963 2 112,180 — 112,182

Contingent earnout liability recognized upon closing of the Reverse Recapitalization — — — — ( 9,688 ) — ( 9,688 )

Cancellation and exchange of convertible note in connection with Reverse Capitalization — — 517,500 — 5,184 — 5,184

Gain recognized on fair value of embedded derivative after cancellation and exchange of convertible note — — — — ( 1,289 ) — ( 1,289 )

Vesting of early exercised options — — 41,047 — 102 — 102

Stock-based compensation — — — — 9,225 — 9,225

Exercise of options of common stock — — 27,233 — 74 — 74

Net loss — — — — — ( 11,552 ) ( 11,552 )

Balance as of June 30, 2022

— $ — 43,368,270 $ 4 $ 292,698 $ ( 138,436 ) $ 154,266

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

SENTI BIOSCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

Ended March 31,

For the Period

from March 1,

2021 (Inception)

Through March 31,

(in thousands)

Six Months Ended June 30,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Interest and dividend income on investments held in Trust Account

Payment of operating and formation costs by related party

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable and other current liabilities

Accrued professional fees and other expenses

Franchise tax payable

Net cash used in operating activities

Net Change in Cash

Cash - Beginning of period

Cash - End of period

Supplemental disclosures of non-cash

investing and financing activities:

Deferred offering costs included in accrued offering costs

Deferred offering costs included in due to related party

Offering costs paid in exchange for issuance of Class B common stock to Sponsor

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

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN

Special Purpose Corp.

(the “Company”) is a blank check company incorporated in Delaware on March 1, 2021 .

As used herein, “the Company” refers to Dynamics Special Purpose Corp.

and its wholly-owned and controlled subsidiary, Explore Merger Sub, Inc.

(“Merger Sub”), unless the context indicates otherwise.

The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”).

The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination.

The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of March 31, 2022, the Company had not commenced any operations.

All activity for the period from March 1, 2021 (inception) through March 31, 2022 related to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination and negotiating and entering into binding agreements in respect of such Business Combination.

The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest.

The Company generates non-operating

income in the form of interest income on the proceeds derived from the Initial Public Offering.

The Company has selected December 31 as its fiscal year end.

The registration statement for the Initial Public Offering was declared effective on May 25, 2021.

On May 28, 2021, the Company consummated the Initial Public Offering of 23,000,000 shares of Class A common stock (the “Public Shares”), including 3,000,000 shares of Class A common stock that were issued pursuant to the underwriter’s exercise of its over-allotment option in full, at $ 10.00 per Public Share, generating gross proceeds of $ 230,000,000 , which is discussed in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 715,500 shares of Class A common stock (the “Private Placement Shares”) at a price of $ 10.00 per Private Placement Share in a private placement to Dynamics Sponsor LLC (the “Sponsor”), generating gross proceeds of $ 7,155,000 , which is described in Note 4.

Transaction costs amounted to $ 13,198,430 consisting of $ 4,600,000 of underwriting fees, $ 8,050,000 of deferred underwriting fees, and $ 548,430 of other offering costs.

Subsequent to the Initial Public Offering, the underwriter agreed on December 17, 2021 to waive $ 1,000,000 of its deferred underwriting fees of $ 8,050,000 , thereby reducing those fees to $ 7,050,000 ;

thus, the transaction costs related to the Company’s Initial Public Offering amounted to $12,198,430.

Following the closing of the Initial Public Offering on May 28, 2021, an amount of $ 230,000,000 ($ 10.00 per Public Share) from the net proceeds of the sale of the Public Shares in the Initial Public Offering and the sale of the Private Placement Shares was placed in a trust account (the “Trust Account”), and is invested only in U.S.

government securities with maturities of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7

under the Investment Company Act which invest only in direct U.S.

government treasury obligations, as determined by the Company, until the earlier of:

(i) the completion of a Business Combination, and (ii) the distribution of the funds held in the Trust Account, as described below.

The Company’s management

has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

There is no assurance that the Company will be able to complete a Business Combination, including the proposed Business Combination with Senti (as defined and discussed below) successfully.

The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80 % of the value of the Trust Account (excluding the deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination.

The Company will only complete a Business Combination if the post-transaction company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer.

The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, subject to applicable law and stock exchange listing requirements.

The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount held in the Trust Account, calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations.

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 upon consummation of such Business Combination and a majority of the shares voted are voted in favor of the Business Combination.

If a stockholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination.

If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares (as defined in Note 5) have agreed to vote their Founder Shares, Private Placement Shares and any Public Shares purchased in or after the Initial Public Offering in favor of approving a Business Combination and to waive their redemption rights with respect to any such shares in connection with a stockholder vote to approve a Business Combination.

Additionally, each public stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination.

Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15 % of the Public Shares without the Company’s prior written consent.

The initial stockholders have agreed to waive (a) their redemption rights with respect to any Founder Shares, Private Placement Shares and Public Shares they hold in connection with the completion of an initial Business Combination, (b) their redemption rights with respect to any Founder Shares, Private Placement Shares and Public Shares they hold in connection with a stockholder vote to approve an amendment to the Amended and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to allow redemption in connection with an initial Business Combination or to redeem 100 % of the Public Shares if the Company has not consummated an initial Business Combination within 24 months from the closing of the Initial Public Offering or with respect to any material provision relating to the rights of holders of Public Shares, and (c) their rights to liquidating distributions from the Trust Account with respect to any Founder Shares and Private Placement Shares they hold if the Company fails to complete an initial Business Combination within 24 months from the closing of the Initial Public Offering.

However, if the initial stockholders acquired Public Shares in or after the Initial Public Offering, such Public Shares would be entitled to liquidating distributions from the Trust Account if the Company failed to complete a Business Combination within the Combination Period (as defined below).

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company will have until May 28, 2023 to complete a Business Combination (the “Combination Period”).

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, subject to lawfully available funds therefor, redeem the Public Shares at a per-share

price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes (less up to $ 100,000 of interest to pay dissolution expenses), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

The underwriter has agreed to waive its rights to its deferred underwriting fees (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares.

In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Public Share ($10.00).

In order to protect the amounts in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share, or (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $ 10.00 per Public Share due to reductions in the value of the Trust Account assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable), nor will it apply to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Business Combination Agreement

On December 19, 2021, we entered into a business combination agreement (as amended from time to time, the “Business Combination Agreement”) with Merger Sub and Senti Biosciences, Inc., a Delaware corporation (“Senti”).

The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Senti, with Senti surviving as a wholly-owned subsidiary of the Company (the “Merger”).

Upon the closing of the Merger (the “Closing”), the Company will change its name to “Senti Biosciences, Inc.” The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.”

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Business Combination Agreement and the transactions contemplated thereby (and contemplated in the Ancillary Documents, as defined in the Business Combination Agreement) are referred to in these Notes to unaudited condensed consolidated financial statements as the “Senti Business Combination.” The Senti Business Combination was approved by the boards of directors of each of the Company and Senti.

Under the Business Combination Agreement, the Company will acquire all of the outstanding equity interests of Senti in exchange for shares of the Company’s Class A common stock, par value $ 0.0001 per share (the “Class A Common Stock”), based on an implied Senti equity value of $ 240,000,000 , to be paid to Senti stockholders at the effective time of the Merger (the “Effective Time”).

In addition, Senti stockholders will have the right to receive (i) an aggregate of 1,000,000 shares of Class A Common Stock if, after Closing, the volume weighted average price of the Class A Common Stock on the Nasdaq Capital Market (“Nasdaq”), or any other national securities exchange on which the shares of Class A Common Stock are then traded (“VWAP”), is greater than or equal to $ 15.00 over any 20 trading days within any consecutive 30 trading day period, in the period that ends on the second anniversary of the Closing Date, and (ii) an additional 1,000,000 shares of Class A Common Stock in the aggregate if, after Closing, the VWAP of Class A Common Stock is greater than or equal to $ 20.00 over any 20 trading days within any consecutive 30 trading day period, in the period that ends on the third anniversary of the Closing Date.

Pursuant to the Business Combination Agreement, at or prior to the Effective Time, each option exercisable for Senti equity that is outstanding immediately prior to the Effective Time shall be converted into an option to purchase a number of shares of Class A Common Stock equal to the number of shares of Senti common stock subject to such option immediately prior to the Effective time multiplied by the exchange ratio derived under the Business Combination Agreement.

The parties to the Business Combination Agreement have agreed to customary representations and warranties for transactions of this type.

In addition, the parties to the Business Combination Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of Senti, the Company and their respective subsidiaries during the period between execution of the Business Combination Agreement and Closing.

The representations, warranties, agreements and covenants of the parties set forth in the Business Combination Agreement will terminate at Closing, except for a limited number of representations and warranties and those covenants and agreements that, by their terms, contemplate performance after Closing.

Each of the parties to the Business Combination Agreement has agreed to use its reasonable best efforts to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary to consummate and expeditiously implement the Merger.

Under the Business Combination Agreement, the obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of certain customary closing conditions of the respective parties, including, without limitation:

(i) the approval and adoption of the Business Combination Agreement and transactions contemplated thereby by requisite vote of the Company’s stockholders (the “Company Stockholder Approval”) and Senti’s stockholders (the “Senti Stockholder Approval”);

(ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

(iii) the absence of a Company Material Adverse Effect or DYNS Material Adverse Effect (each, as defined in the Business Combination Agreement) since the date of the Business Combination Agreement that is continuing;

(iv) after giving effect to the transactions contemplated by the Business Combination Agreement, the Company has net tangible assets of at least $ 5,000,001 upon consummation of the Merger;

(v) the Company’s initial listing application with Nasdaq in connection with the Merger has been approved and, immediately following the Effective Time, the Company has satisfied any applicable initial and continuing listing requirements of Nasdaq and the shares of the Company’s Class A Common Stock have been approved for listing on Nasdaq, subject only to official notice of the issuance thereof;

and (vi) the registration statement filed with the SEC on Form S-4

(the “Registration Statement”) has become effective, no stop order has been issued by the SEC and remains in effect with respect to the Registration Statement, and no proceeding seeking such a stop order has been threatened or initiated by the SEC and remains pending.

In addition, Senti’s obligation to consummate the Merger is subject to the condition that the Available Closing Cash (as defined in the Business Combination Agreement) shall be greater than or equal to $ 150,000,000 (after reduction for the aggregate amount of payments made or required to be made in connection with the DYNS Stockholder Redemption (as defined in the Business Combination Agreement)).

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On February 12, 2022, the Business Combination Agreement was amended by the parties thereto to reflect, among other things, (i) corrections to certain aspects section 5.7 of the Business Combination Agreement, and (ii) changes to certain terms of the options Senti granted to certain persons at the time the Business Combination Agreement was signed.

Other Agreements

The Business Combination Agreement contemplates the execution of various additional agreements and instruments, on or before the Closing, including, among others, the following:

Sponsor Support Agreement

In connection with the execution of the Business Combination Agreement, the Sponsor, as the sole holder of the Company’s Class B common stock, par value $ 0.0001 per share (the “Class B Common Stock”, and also referred to herein as the Founder Shares (as defined in Note 5)) and other persons party thereto (“Other Company Insiders,” and together with the Sponsor, collectively, the “Company Insiders”), entered into a support agreement with the Company and Senti (the “Sponsor Support Agreement”).

Under the Sponsor Support Agreement, the Sponsor agreed to vote, at any meeting of the stockholders of the Company and in any action by written consent of the stockholders of the Company, all of such Sponsor’s Class A Common Stock and Class B Common Stock (i) in favor of (a) the Business Combination Agreement and the transactions contemplated thereby, and (b) the other proposals that the Company and Senti agreed in the Business Combination Agreement shall be submitted at such meeting for approval by the Company’s stockholders together with the proposal to obtain the Company Stockholder Approval (together with the Company Stockholder Approval, these proposals are the Required Transaction Proposals (as defined in the Business Combination Agreement)), and (ii) against any proposal that conflicts with, or materially impedes or interferes with, any such proposal or that would adversely affect or delay the Merger.

The Sponsor Support Agreement also prohibits the Sponsor from, among other things and subject to certain exceptions, selling, assigning or transferring any Class A Common Stock or Class B Common Stock held by the Sponsor prior to the Closing or taking any action that would have the effect of preventing or materially delaying the Sponsor from performing its obligations under the Sponsor Support Agreement.

In addition, in the Sponsor Support Agreement, the Sponsor agreed to waive, and not to assert or perfect, among other things, any rights to adjustment or other anti-dilution protections with respect to the rate at which the shares of Class B Common Stock held by the Sponsor convert into shares of Class A Common Stock in connection with the transactions contemplated by the Business Combination Agreement.

Sponsor Support Agreement also includes a

in respect of the Sponsor’s equity interests in the Company.

Pursuant to the Sponsor Support Agreement, the Sponsor agreed that, subject to limited exceptions, it would not sell, assign or transfer any Class A Common Stock or Class B Common Stock until the earlier of (i) the

one year anniversary of the Closing, and (ii) subsequent to the Closing, (x) if the last reported sale price of the Class A Common Stock equals or exceeds $

12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any

20 trading days within any

30 consecutive trading day period commencing at least

150 days after the Closing, or (y) the date upon completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the public stockholders having the right to exchange their common stock for cash, securities or other property.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Senti Support Agreement

In connection with the execution of the Business Combination Agreement, certain Senti stockholders (the “Senti Supporting Stockholders”) entered into support agreements with the Company (the “Senti Support Agreements”).

Under the Senti Support Agreements, each Senti Supporting Stockholder agreed, within forty-eight hours following the effectiveness of the Registration Statement, to execute and deliver a written consent with respect to all outstanding shares of Senti common stock and preferred stock held by such Senti Supporting Stockholder (the “Subject Senti Shares”) approving the Business Combination Agreement and the transactions contemplated thereby.

In addition to the foregoing, each Senti Supporting Stockholder agreed that, at any meeting of the holders of Senti capital stock, each such Senti Supporting Stockholder will appear at the meeting, in person or by proxy, and cause its Subject Senti Shares to be voted (i) to approve and adopt the Business Combination Agreement, the transactions contemplated thereby, and any other matters necessary or reasonably requested by Senti for consummation of the Merger, and (ii) against any proposal that conflicts or materially impedes or interferes with, or would adversely affect or delay, the consummation of the transactions contemplated by the Business Combination Agreement.

The Senti Support Agreements also prohibit the Senti Supporting Stockholders from, among other things, (i) transferring any of the Subject Senti Shares prior to the Closing, (ii) entering into (a) any option, commitment or other arrangement that would require the Senti Supporting Stockholders to transfer the Subject Senti Shares, or (b) any voting trust, proxy or other contract with respect to the voting of the Subject Senti Shares, or (iii) taking any action in furtherance of the foregoing.

In addition, under the Senti Support Agreement, each Senti Supporting Stockholder agreed (i) not to exercise any rights of appraisal or dissenter’s rights relating to the Business Combination Agreement and the transactions contemplated thereby, and (ii) not to commence or participate in any claim or action against Senti, the Company or any of their affiliates relating to the negotiation, execution or delivery of the Senti Support Agreement or the Business Combination Agreement or the consummation of the Merger.

Additionally, (i) certain Senti Support Agreements prohibit the applicable Senti Supporting Stockholders from transferring the shares of Class A Common Stock which they will receive in the Merger for, subject to certain permitted transfers, up to 18 months following the Closing, which may be reduced to 12 months upon the meeting of certain criteria (such period, the “Extended Lock-Up”),

and (ii) certain other Senti Support Agreements prohibit the applicable Senti Supporting Stockholders from transferring the shares of Class A Common Stock which they will receive in the Merger for, subject to certain permitted transfers, 12 months following the Closing (such period, the “General Lock-Up”);

provided that, (a) with respect to the Extended Lock-Up,

if the last reported sale price of the Class A Common Stock on Nasdaq, or any other national securities exchange on which the Class A Common Stock is then traded, is greater than or equal to $ 12.00 per share over any 20 trading days within any consecutive 30 trading day period commencing at least 330 days after the Closing Date, then the Extended Lock-Up

shall be deemed to have expired with respect to each stockholder’s Class A Common Stock subject to that lock-up,

and (b) with respect to the General Lock-Up,

if the last reported sale price of the Class A Common Stock on Nasdaq, or any other national securities exchange on which the Class A Common Stock is then traded, is greater than or equal to $ 12.00 per share over any 20 trading days within any consecutive 30 trading day period commencing at least 150 days after the Closing Date, then the General Lock-Up

shall be deemed to have expired with respect to each stockholder’s Class A Common Stock subject to that lock-up.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On February 12, 2022, the Company entered into amendments to certain Senti Support Agreements to amend those agreements such that, among other things, the shares of Class A Common Stock of the relevant Senti Supporting Stockholders may not be transferred, subject to certain permitted transfers, for three years following the Closing (such period, “the Three Year Lock-Up”).

Unlike the Extended Lock-Up

and the General Lock-Up

described above, the Three Year Lock-Up

does not terminate early based on the share price performance of Class A Common Stock.

PIPE Subscription Agreements

In connection with the execution of the Business Combination Agreement, the Company entered into subscription agreements with certain private investors (the “Subscription Agreements”), pursuant to which, among other things, such investors have subscribed to purchase an aggregate of 6,680,000 shares of Class A Common Stock (together, the “Subscriptions”) for a purchase price of $ 10.00 per share, or an aggregate purchase price of $ 66,800,000 , which shares are to be issued at the Closing;

provided that the Subscription Agreements permit the Company to accept additional subscriptions for a purchase price of $ 10.00 per share to be issued at the Closing, following the execution of the Business Combination Agreement.

The obligations of each party to consummate the Subscriptions are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Business Combination Agreement.

Non-Redemption

In connection with the execution of the Business Combination Agreement, the Sponsor, as the holder of 5,750,000 shares of Class B Common Stock (the Founder Shares (as defined in Note 5)), the Company and each of certain funds and accounts managed by Morgan Stanley Investment Management Inc., T.

Rowe Price Group, Inc., The Invus Group, LLC and ARK Investment Management LLC and/or their respective investment funds (each, an “Investor”, and collectively, the “Investors”) entered into non-redemption

agreements in respect of the Public Shares held by the Investors (the “Non-Redemption

Agreements”).

Pursuant to the Non-Redemption

Agreements, each Investor agreed for the benefit of the Company (a) to not redeem the shares of Class A Common Stock beneficially owned by it, or any other shares, capital stock or other equity interests, as applicable, of the Company, which it held on the date of the Non-Redemption

Agreement (the “Investor Shares”), and (b) to not, among other things, sell, encumber or otherwise transfer the Investor Shares other than in connection with non-discretionary

ETF or mutual fund pro rata rebalancing transfers.

In connection with these commitments from the Investors, the Sponsor agreed to forfeit

965,728 shares of its Class B Common Stock and the Company agreed to cancel such shares and concurrently issue to the Investors an equivalent number of shares of Class A Common Stock, in each case, at or promptly following the consummation of the Merger.

The shares of Class A Common Stock to which the Investors were entitled as at the date the Non-Redemption Agreements were signed represented approximately 11.111 % of the Investors’ aggregate holdings of Public Shares as at such date.

On May 9, 2022, the Company, the Sponsor and the Investors agreed to amend the Non-Redemption Agreements such that the number of shares of Class A Common Stock to which each Investor may be entitled equals 11.111 % of the number of Public Shares held by the Investor at the time the Merger is consummated (as opposed to when the Non-Redemption Agreement was signed).

As at April 29, 2022, 7,968,483 shares of Class A Common Stock, in the aggregate, were subject to Non-Redemption

Accordingly, as at April 29, 2022, it is anticipated that 885,377 shares of Class A Common Stock will be issued to Investors

and an equivalent number of shares of Class B Common Stock will be forfeited by the Sponsor and canceled by the Company

(as opposed to 965,728 shares, as was the case prior to such amendments to the Non-Redemption Agreements).

Investor Rights Agreement

In connection with the Closing, the Company, certain stockholders of the Company (including the Sponsor) and certain stockholders of Senti will enter into an investor rights and lock-up

agreement (the “Investor Rights Agreement”).

Pursuant to the Investor Rights Agreement, each signatory thereto (other than the Company) will be granted certain registration rights with respect to their respective shares of Class A Common Stock.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Investor Rights Agreement will also restrict the ability of each stockholder who is a party thereto (other than the Company) to transfer its shares of Class A Common Stock (or any securities convertible into or exercisable or exchangeable for shares of Class A Common Stock) for, subject to certain permitted transfers and depending on the stockholder, a period of one year following the Closing Date (the “12 Month Lock-Up”)

or a period of 18 months following the Closing Date (the “18 Month Lock-Up”);

provided that (i) the foregoing restrictions shall not apply to any shares of Class A Common Stock purchased pursuant to the Subscription Agreements and (ii)(A) in respect of the 12 Month Lock-Up,

if the last reported sale price of the Class A Common Stock on Nasdaq, or any other national securities exchange on which the Class A Common Stock is then traded, is greater than or equal to $ 12.00 per share over any 20 trading days within any consecutive 30 trading day period commencing at least 150 days after the Closing Date, then the 12 Month Lock-Up

shall be deemed to have expired with respect to each stockholder’s Class A Common Stock subject to that lock-up;

and (B) in respect of the 18 Month Lock-Up,

shall be deemed to have expired with respect to each stockholder’s Class A Common Stock subject to that lock-up.

Going Concern

As of March 31, 2022, the Company had $ 396,693 in cash held outside of the Trust Account and a working capital deficit of $ 3,224,077 .

The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans (including in respect of the Senti Business Combination).

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the unaudited condensed consolidated financial statements are issued.

Management plans to address this uncertainty through the Senti Business Combination, as discussed above.

There is no assurance that the Company’s plans to consummate the Senti Business Combination (or any other Business Combination) will be successful or successful within the Combination Period.

The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19

pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements.

The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected.

In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all.

The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net loss $ ( 23,360 ) $ ( 33,009 )

Adjustments to reconcile net loss to net cash from operating activities:

Depreciation 512 347

Amortization of operating lease right-of-use assets 1,433 757

Gain on extinguishment of convertible notes ( 1,289 ) —

Change in fair value of contingent earnout liability ( 8,878 ) —

Change in preferred stock tranche liability — 14,742

Stock-based compensation expense 9,886 934

Loss on write-off of fixed assets 13 —

Other non-cash charges 8 —

Changes in assets and liabilities:

Accounts receivable ( 90 ) ( 345 )

Prepaid expenses and other assets ( 1,372 ) ( 779 )

Accounts payable 234 910

Accrued expenses and other current liabilities 203 649

Deferred revenue ( 999 ) 2,663

Operating lease liabilities 7,945 ( 728 )

Net cash from operating activities ( 15,754 ) ( 13,859 )

Cash flows from investing activities

Purchases of property and equipment ( 18,640 ) ( 626 )

Net cash from investing activities ( 18,640 ) ( 626 )

Cash flows from financing activities

Proceeds from Merger and related Pipe financing, net of transaction costs 112,464 —

Proceeds from issuance of common stock upon exercise of stock options 521 1,453

Proceeds from issuance of convertible notes 5,175 —

Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs — 66,952

Payment of deferred offering costs — ( 480 )

Net cash from financing activities 118,160 67,925

Net change in cash and cash equivalents 83,766 53,440

Cash, cash equivalents, and restricted cash, beginning of the year 59,291 31,034

Cash, cash equivalents, and restricted cash, end of the year $ 143,057 $ 84,474

Reconciliation of cash, cash equivalents and restricted cash

Cash and cash equivalents 139,800 82,942

Restricted Cash 3,257 1,532

Total cash, cash equivalents and restricted cash 143,057 84,474

Supplemental disclosures of noncash financing and investing items

Purchase of property and equipment in accounts payable and accrued expenses 9,371 427

Recognition of Series B preferred stock tranche liability — 33

Extinguishment of Series B preferred stock tranche liability — 15,210

Six Months Ended June 30,

Merger and related PIPE financing costs included in accounts payable and accrued expenses 263 —

Deferred transaction costs related to pending business combination in accounts payable and accrued expenses — 1,161

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

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Organization and Description of Business

Senti Biosciences, Inc.

and its subsidiaries, (the “Company” or “Senti”), is a biotechnology company that was founded to create a new generation of smarter medicines that outmaneuver complex diseases using novel and unprecedented approaches.

Senti Bio has built a synthetic biology platform that enables it to program next-generation cell and gene therapies with what we refer to as “gene circuits.” These gene circuits, which are created from novel and proprietary combinations of DNA sequences, reprogram cells with biological logic to sense inputs, compute decisions and respond to their cellular environments.

The Company is headquartered in South San Francisco, California.

On June 8, 2022 (the “Closing Date”), Dynamics Special Purpose Acquisition Corp.

(“Dynamics”or “DYNS”) consummated a merger pursuant to which Explore Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and wholly owned subsidiary of Dynamics, merged with and into Senti Sub I, Inc.

(formerly named Senti Biosciences, Inc.

(“Legacy Senti”), with Legacy Senti surviving as a wholly-owned subsidiary of Dynamics (such transactions, the “Merger,” and, collectively with the other transactions described in the merger agreement (as defined below, the “Reverse Recapitalization”).

As a result of the Merger, Dynamics was renamed Senti Biosciences, Inc.

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Liquidity and Going Concern

The Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, and conducting preclinical studies and has not realized substantial revenues from its planned principal operations.

To date, the Company has financed its operations primarily through a Reverse Recapitalization, the sale of equity securities and convertible debt and, to a lesser extent, through collaboration agreements and governmental grants.

At June 30, 2022 and December 31, 2021, the Company had an accumulated deficit of 138.4 million and 115.1 million, respectively.

The Company’s net losses were $ 23.4 million and $ 33.0 million for the six months ended June 30, 2022 and 2021, respectively.

Substantially all of the Company’s net losses resulted from costs incurred in connection with the Company’s research and development programs and from general and administrative costs associated with the Company’s operations.

The Company expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future as the Company advances its preclinical activities and clinical trials for its product candidates in development .

As of June 30, 2022, the Company had cash, cash equivalents and restricted cash of $ 143.1 million.

Based on the cash and cash equivalents on hand, the Company believes its combined cash and cash equivalents will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the issuance date of these interim financial statements.

The Company’s continued existence is dependent upon management’s ability to develop profitable op erations.

Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful.

No assurance can be given that management’s actions will result in profitable operations or the meeting of ongoing liquidity needs.

Summary of Significant Accounting Policies

Principles of Consolidation and Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and controlled subsidiary, Merger Sub, after elimination of any intercompany transactions and balances as of March 31, 2022 and December 31, 2021.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.

Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K

as filed with the SEC on March 7, 2022.

The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging

growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S.

GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The condensed consolidated financial statements include the accounts of Senti Biosciences, Inc., and its

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

We have one business activity and operate in one reportable segment.

Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related price information to give effect to the exchange ratio established in the Merger Agreement.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.

Accordingly, the actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Company did no t have any cash equivalents as of March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, the Company had operating cash (i.e.

cash held outside the Trust Account) of $ 396,693 and $ 889,323 , respectively.

Investments Held in Trust Account

As of March 31, 2022 and December 31, 2021, the assets held in the Trust Account were comprised of U.S.

government securities, within the meaning set forth in Section 2(a) (16) of the Investment Company Act, with maturities of 185 days or less, or investments in money market funds that invest in U.S.

government securities and generally have a readily determinable fair value, or a combination thereof.

When the Company’s investments held in the Trust Account are comprised of U.S.

government securities, the investments are classified as trading securities.

When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value.

Trading securities and investments in money market funds are presented on the unaudited condensed consolidated balance sheet at fair value at the end of each reporting period.

Gains and losses resulting from the change in fair value of these securities are reported in the statements of operations.

The estimated fair values of investments held in the Trust Account are determined using available market information.

Class A Common Stock Subject to Possible Redemption

The Public Shares sold in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s Amended and Restated Certificate of Incorporation.

In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.

Therefore, all Class A Common Stock has been classified outside of permanent equity.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period.

Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.

As of March 31, 2022 and December 31, 2021, the Investor Shares (see Note 1) are classified as temporary equity within Class A Common Stock subject to redemption in the Company’s unaudited condensed consolidated balance sheet.

The Non-Redemption

Agreements are terminated in the event that the Business Combination Agreement as described above is terminated.

As such, the Company determined that the Non-Redemption

Agreements are contingent upon the successful completion of the Senti Business Combination.

In the event that the Senti Business Combination is not successful, the Non-Redemption

Agreements are terminated, and the Investors would again have the right to redeem the Investor Shares.

As such, the Company

determined that the Non-Redemption

Agreements would not change the nature of the underlying shares as redeemable.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2022 and December 31, 2021, the Class A common stock subject to redemption reflected in the balance sheet are reconciled in the following table:

Gross proceeds

Issuance costs allocated to Class A common stock

Accretion of carrying value to redemption value

Class A common stock subject to possible redemption

Offering Costs Associated with the Initial Public Offering

The Company complies with the requirements of ASC 340-10-S99-1

and SEC Staff Accounting Bulletin Topic 5A - Expenses

Offering costs consist principally of professional and registration fees incurred related to the Initial Public Offering.

Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity.

Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately.

The Company incurred offering costs amounting to $ 13,198,430 as a result of the Initial Public Offering (consisting of a $ 4,600,000 underwriting fee, $ 8,050,000 of deferred underwriting fees, and $ 548,430 of other offering costs).

The Company recorded $ 13,181,867 of offering costs as a reduction of temporary equity in connection with the issuance of the Public Shares.

The Company recorded $ 16,563 of offering costs as a reduction of permanent equity in connection with the issuance of the Private Placement Shares.

As noted in Note 1, subsequent to the Initial Public Offering, the underwriter agreed on December 17, 2021 to waive $ 1,000,000 of its deferred underwriting fees of $ 8,050,000 , thereby reducing those fees to $ 7,050,000 ;

thus, the offering costs related to the Company’s Initial Public Offering amounted to $ 12,198,430 .

The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company is subject to income tax examinations by major taxing authorities since incep tion.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net Loss Per Share of Common Stock

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.

As of March 31, 2022 and December 31, 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.

The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):

For the three months ended

March 31, 2022

For the period from March 1,

2021 (inception) through

March 31, 2021

Basic and diluted net income (loss) per share:

Basic and diluted weighted average shares outstanding

Basic and diluted net loss per share

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $ 250,000 .

The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The Company applies ASC Topic 820, Fair Value Measurement

(“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework.

ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity.

Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts reflected in the unaudited condensed consolidated balance sheet for current assets and current liabilities approximate fair value due to their short-term nature.

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges.

Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

See Note 8 for additional information on assets and liabilities measured at fair value.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

INITIAL PUBLIC OFFERING

The registration statement for the Company’s Initial Public Offering was declared effective on May 25, 2021.

On May 28, 2021, the Company completed its Initial Public Offering of 23,000,000 shares of Class A common stock, including 3,000,000 shares of Class A common stock that were issued pursuant to the underwriter’s exercise of its over-allotment option in full, at $ 10.00 per Public Share, generating gross proceeds of $ 230,000,000 .

PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 715,500 Private Placement Shares at a price of $ 10.00 per Private Placement Share, generating gross proceeds of $ 7,155,000 .

A portion of the proceeds from the sale of the Private Placement Shares was added to the net proceeds from the Initial Public Offering held in the Trust Account.

If the Company does not complete a Business Combination within the Combination Period, 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).

RELATED PARTY TRANSACTIONS

Founder Shares

On March 8, 2021, the Sponsor was issued 5,750,000 shares (the “Founder Shares”) of Class B Common Stock for an aggregate price of $ 25,000 .

The Founder Shares included an aggregate of up to 750,000 shares of Class B Common Stock subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the Sponsor would own, on an as-converted

basis, 20 % of the Company’s issued and outstanding shares after the Initial Public Offering (excluding the Private Placement Shares) (assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering, which it did not).

The underwriter fully exercised the over-allotment option on May 28, 2021;

thus, these 750,000 Founder Shares are no longer subject to forfeiture.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the Non-Redemption

Agreements (see Note 1), it is anticipated that the Sponsor will forfeit

885,377 Founder Shares and the Company will cancel such Founder Shares and concurrently issue to the Investors an equivalent number of shares of Class A Common Stock, in each case, at or promptly following the consummation of the Merger.

The Company evaluated the forfeiture and cancellation of the Founder Shares by the Sponsor and concurrent issuance of an equivalent number of shares of Class A Common Stock to the Investors in accordance with Staff Accounting Bulletin Topic 5A.

The forfeiture and cancellation of the Founder Shares by the Sponsor and concurrent issuance of an equivalent number of shares of Class A Common Stock to the Investors has no t been transacted as of March 31, 2022 and will not occur until at or promptly following the consummation of the Merger.

As such, any expense associated with the issuance of the shares of Class A Common Stock to the Investors would be recognized at the date of issuance (i.e., upon consummation of the Merger).

Promissory Note - Related Party

On March 8, 2021, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow an aggregate of up to $ 300,000 to cover expenses related to the Initial Public Offering.

The Promissory Note was non-interest

bearing and was payable on the earlier of December 31, 2021 or the consummation of the Initial Public Offering.

In April 2021, the Company borrowed $ 250,000 under the Promissory Note which was repaid in full on May 26, 2021.

Related Party Loans

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the Company.

Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account.

In the event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.

Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.

Up to $ 2,000,000 of such Working Capital Loans may be convertible into shares at a price of $ 10.00 per share at the option of the lender.

The shares would be identical to the Private Placement Shares.

There was no outstanding balance of Working Capital Loans as of March 31, 2022 and December 31, 2021.

Administrative Support Agreement

The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to pay the Sponsor up to a total of $ 10,000 per month for office space, administrative and support services.

Upon the completion of an initial Business Combination, the Company will cease paying these monthly fees (if any).

To date, the Company has not exercised its option to use such services.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

Registration Rights

The holders of the Founder Shares, Private Placement Shares and any Class A Common Stock issuable upon conversion of any Working Capital Loans have registration rights pursuant to a registration and stockholder rights agreement signed in connection with the Company’s Initial Public Offering.

The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of an initial Business Combination.

The Company will bear the expenses incurred in connection with the filing of any such registration statements.

In addition, it is anticipated that each signatory to the Investor Rights Agreement (see Note 1), other than the Company, will be granted certain registration rights with respect to their respective shares of Class A Common Stock when that agreement is signed (which is expected to occur at Closing).

Further, shares of Class A Common Stock issued to the private investors making Subscriptions will have registration rights pursuant to the Subscription Agreements following the consummation of the Business Combination.

Underwriters Agreement

The Company granted the underwriter of its Initial Public Offering 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 underwriter 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 was payable to the underwriter for deferred underwriting commissions.

On December 17, 2021, the underwriter agreed to waive its right to $ 1,000,000 of the fee payable by the Company for deferred underwriting commissions.

The waived fee was recorded to accumulated deficit.

The revised deferred underwriting fee of $ 7,050,000 will become payable to the underwriter from the amount held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Financial Advisor Agreement

On December 16, 2021, the Company entered into an agreement (the “Financial Advisor Agreement”) with Morgan Stanley & Co.

LLC (“Morgan Stanley”) for financial advisory services in connection with the Senti Business Combination, which services Morgan Stanley had been engaged to provide, and which services Morgan Stanley had provided, since August 4, 2021.

The Financial Advisor Agreement shall terminate automatically on December 16, 2022 unless terminated earlier, with or without cause, by either the Company or Morgan Stanley.

The Company will pay Morgan Stanley a fee of $ 1,000,000 upon the consummation of the Company’s proposed initial business combination with Senti.

Placement Agent Agreement

On September 21, 2021, the Company entered into an agreement (the “Placement Agent Agreement”) with Morgan Stanley, J.P.

Morgan Securities LLC and BofA Securities, Inc.

(together, the “Placement Agents”) for services in connection with the placement of shares of the Company’s Class A Common Stock to certain private investors which is anticipated to occur concurrently with the completion the Senti Business Combination (i.e.

the Subscriptions – see Note 1).

The Placement Agent Agreement shall terminate automatically on August 28, 2022 unless terminated earlier, with or without cause, by either the Company or any Placement Agent (as to itself only).

The Company will pay to the Placement Agents a total fee equal to 4.0 % of the aggregate price at which the shares of the Company’s Class A Common Stock are sold to the private investors in the Subscriptions, which fee shall be payable upon the consummation of the placement of the shares.

Each of the Placement Agents will receive 33.3 % of the fee.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Business Combination Agreement

As set forth in Note 1, the Company has entered into the Business Combination Agreement with Merger Sub and Senti pursuant to which, among other things, Merger Sub will merge with and into Senti, with Senti surviving as a wholly-owned subsidiary of the Company.

The Company has also entered into various ancillary transaction documents to give effect to the Merger, which are described throughout this Quarterly Report.

STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred stock

— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.

As of March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

A common stock

— The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $ 0.0001 per share.

Holders of Class A common stock are entitled to one vote for each share.

As of March 31, 2022 and December 31, 2021, there were 23,715,500 shares of Class A common stock issued and outstanding, including 23,000,000 shares of Class A common stock subject to possible redemption.

Despite the Non-Redemption Agreements discussed in Note 1, it is possible, in certain limited circumstances, for the Investors to transfer their Public Shares, and a transfer of such shares to a third party who is not bound by a Non-Redemption

Agreement would render such shares subject to possible redemption.

B common stock

— The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $ 0.0001 per share.

Holders of Class B common stock are entitled to one vote for each share.

As of March 31, 2022 and December 31, 2021, there were 5,750,000 shares of Class B common stock issued and outstanding.

Of the 5,750,000 shares of Class B common stock originally issued, up to 750,000 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the initial stockholders would collectively own 20 % of the Company’s issued and outstanding common stock after the Initial Public Offering (excluding the Private Placement Shares).

The over-allotment option was exercised in full on May 28, 2021;

thus, these shares are no longer subject to forfeiture.

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders.

Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, including any vote in connection with an initial Business Combination, except where a vote of each class is required by law.

DYNAMICS SPECIAL PURPOSE CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The shares of Class B common stock are convertible into shares of Class A common stock at the option of the holder and will automatically convert into shares of Class A common stock at the time of an initial Business Combination on a one-for-one

basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like).

In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of an initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, as is the case for the proposed Senti Business Combination) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted

basis, 20% of the sum of (i) the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering (excluding the Private Placement Shares), plus (ii) all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with an initial Business Combination (excluding any shares of Class A common stock or equity-linked securities issued, or to be issued, to any seller in an initial Business Combination and any Private Placement Shares issued to the Sponsor or its affiliates upon conversion of any Working Capital Loans).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of stock-based awards, the accrual for research and development expenses, the valuation of contingent earnout, the valuation of convertible notes, the valuation of common and redeemable convertible preferred stock, the valuation of preferred stock tranche liability, standalone selling price (“SSP”) and the determination of the incremental borrowing rate.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

Actual results could differ from those estimates.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying interim condensed consolidated financial statements and the related footnote disclosures are unaudited.

These unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2022 and its results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or any other period.

The December 31, 2021 year-end condensed consolidated balance sheet was derived from audited annual financial statements but does not include all disclosures from the annual financial statements.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 and the related notes included in the Company’s Registration Statement on Form S-1, filed with the SEC on June 28, 2022, and amended on July 29, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information.

There have been no material changes to the Company’s significant accounting policies as of and for the three and six months ended June 30, 2022, as compared to the significant accounting policies described in the Company’s audited annual consolidated financial statements as of and for the year ended December 31, 2021, except as discussed below.

Contingent Earnout Equity

In connection with the Reverse Recapitalization and pursuant to the Merger dated as of June 8, 2022 by and among the Merger Sub and Legacy Senti, former holder of the Legacy Senti common stock and Legacy Senti preferred stock are entitled to receive as additional consideration of up to 2,000,000 shares of the Company’s Common Stock (the “Contingent Earnout Shares”), comprised of two separate tranches of 1,000,000 shares per tranche, for no consideration upon the achievement of certain share price milestones within a period of two and three years .

If there is a change of control within the three-year period following the closing of the Merger that results in a per share price equal to or in excess of certain share price milestones not previously met, then the Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock.

In accordance with ASC 815-40, Derivatives and Hedging , as certain terms of the contingent earnout shares were not indexed to the common stock, equity treatment is precluded and liability classification is required at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

the earnout shares were granted to holders of Legacy Senti common stock that are subject to repurchase so was accounted for as stock-based compensation and as of the date of the Merger and expensed as there was no remaining service period.

The estimated fair value of the Contingent Earnout Shares was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over a three-year period prioritizing the most reliable information available.

The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the current Company common stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

Reverse Recapitalization

On June 8, 2022, Merger Sub, a wholly-owned subsidiary of Dynamics, merged with Legacy Senti, with Legacy Senti surviving as a wholly-owned subsidiary of Dynamics.

At the effective time of the Merger:

• each outstanding share of Legacy Senti common stock was converted into approximately 0.1957 shares of the Company’s common stock;

• each outstanding share of preferred stock of Legacy Senti was cancelled and converted into the aggregate number of shares of the Company’s common stock that would be issued upon conversion of the shares of Legacy Senti preferred stock based on the applicable conversion ratio immediately prior to the effective time, multiplied by approximately 0.1957 ;

• each outstanding option to purchase Legacy Senti’s common stock was converted into an option to purchase a number of shares of the Company’s common stock equal to the number of shares of Legacy Senti common stock subject to such option multiplied by approximately 0.1957 , rounded down to the nearest whole share, at an exercise price per share equal to the current exercise price per share for such option divided by approximately 0.1957 , rounded up to the nearest whole cent;

• all shares of Dynamics Class A common stock were redesignated as common stock, par value $ 0.0001 per share, of the Company.

Former holders of the Legacy Senti common stock and preferred stock are eligible to receive up to an aggregate of 2.0 million additional shares of the Company’s common stock in the aggregate in two equal tranches of 1.0 million shares if the volume-weighted average closing sale price of the common stock is greater than or equal to $ 15.00 and $ 20.00 , respectively, for any 20 trading days within any 30 consecutive trading day period.

The first and second tranche term is two and three years , respectively, from the closing of the Merger.

If there is a change of control within the three-year period following the closing of the Merger that results in a per share price equal to or in excess of the $ 15.00 and $ 20.00 share price milestones not previously met, then the Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock.

Refer to Note 8, Stockholders’ Equity (Deficit) , for further details of the contingent earnout liability.

In association with the Merger, Dynamics entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”).

Pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 5,060,000 shares of the Company’s common stock (the “PIPE Shares”) in a private placement at a price of $ 10.00 per share for an aggregate purchase price of $ 50.6 million (the “PIPE Financing”).

The PIPE Financing was consummated in connection with the Merger.

Concurrently with the closing of the Merger, the unsecured convertible promissory note (the “May 2022 Note”) in the principal amount of $ 5.2 million that was previously issued by Legacy Senti to Bayer Healthcare LLC (“Bayer”) on May 19, 2022 was automatically cancelled and exchanged for 517,500 shares of Class A Common Stock (the “Note Exchange”) at a price of $ 10.00 per share.

The shares of Class A Common Stock issued in the Note Exchange are entitled to the same registration rights granted to the PIPE Investors with respect to the PIPE Shares.

Refer to Note 7, Convertible Note , for further details of the convertible note.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The number of shares of the Company’s common stock outstanding immediately following the consummation of the Merger was:

Owned by Dynamics’ stockholders 14,915,963

Issued to PIPE Investors 5,060,000

Issued to Bayer in connection with convertible note cancellation and exchange 517,500

Issued to Legacy Senti stockholders 23,163,614 (1)

Early exercised shares subject to repurchase ( 288,807 )

Total shares of common stock immediately after Merger 43,368,270

________________

(1) Includes 19,517,988 shares of common stock issued upon conversion of Legacy Senti’s redeemable convertible preferred stock.

The Merger is accounted for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, Dynamics is treated as the acquired company for financial reporting purposes and Legacy Senti is treated as the acquiror.

This determination is primarily based on the fact that subsequent to the Merger, the Legacy Senti stockholders hold a majority of the voting rights of the combined company, Legacy Senti comprises all of the ongoing operations of the combined company, Legacy Senti comprises a majority of the carryover governing body of the combined company, and Legacy Senti’s senior management comprises all of the senior management of the combined company.

Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Senti issuing shares for the net assets of Dynamics, accompanied by a recapitalization.

The net assets of Dynamics were stated at historical costs.

No goodwill or other intangible assets were recorded.

Operations prior to the Merger are those of Legacy Senti.

In connection with the Merger, the Company received $ 140.7 million in proceeds from the Merger and related PIPE Financing, including the Bayer convertible note cancellation and exchange.

The Company incurred $ 23.3 million of transaction costs, consisting of banking, legal, and other professional fees, which was recorded as a reduction of proceeds to additional paid-in capital.

In addition, there were $ 0.3 million of unpaid transaction costs included in accounts payable and accrued expenses as of June 30, 2022.

Fair Value Measurements

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Amount at Fair

The following tables summarize the estimated value of cash equivalents and restricted cash (in thousands):

June 30, 2022

Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value

Cash equivalents:

Money market fund $ 139,800 $ — $ — $ 139,800

Restricted cash:

Money market fund 3,257 — — 3,257

Total $ 143,057 $ — $ — $ 143,057

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2021

Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value

Cash equivalents:

Money market fund $ 56,034 $ — $ — $ 56,034

Restricted cash:

Money market fund 3,257 — — 3,257

Total $ 59,291 $ — $ — $ 59,291

Financial assets and liabilities measured and recognized at fair value are as follows (in thousands):

June 30, 2022

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market fund $ 139,800 $ — $ — $ 139,800

Restricted cash:

Money market fund 3,257 — — 3,257

Total Assets $ 143,057 $ — $ — $ 143,057

Contingent earnout liability $ — $ — $ 810 $ 810

Total Liabilities $ — $ — $ 810 $ 810

December 31, 2021

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market fund $ 56,034 $ — $ — $ 56,034

Restricted cash:

Money market fund 3,257 — — 3,257

Total Assets $ 59,291 $ — $ — $ 59,291

No securities have contractual maturities of longer than one year.

There were no transfers between Levels 1, 2, or 3 for any of the periods presented.

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):

Contingent Earnout Liability

Fair value as of December 31, 2021

Contingent earnout liability recognized upon the closing of the reverse recapitalization ( 9,688 )

Change in fair value included in other income (expense) 8,878

Fair value as of June 30, 2022

The fair value of the Contingent Earnout Liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

In determining the fair value of the Contingent Earnout Liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes.

Preferred Stock Tranche Liability

The subsequent fair values of the preferred stock tranche liability recognized in connection with the issuance of Series B redeemable convertible preferred stock financing were determined with the assistance of a third-party valuation specialist using significant inputs not observable in the market which constitute Level 3 measurements within the fair value hierarchy.

The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of December 31, 2020 using a Monte Carlo valuation model and/or Black-Scholes option pricing model:

December 31, 2020

Subsequent Measurement Dates

Tranche Features 2 and 3 Call Option Tranche 2 and 3 Forward Contracts

Estimated fair value of Series B redeemable convertible preferred stock (1)

$ 1.62 $ 1.62

Discount rate 0.11 % 0.11 %

Time to liquidity (years) 0.5 0.5

Expected volatility 73.8 % N/A

Probability of call option and forward contract 10 % 90 %

Strike Price $ 1.6427 $ 1.6427

Value of each tranche feature $ 0.326 $( 0.023 )

_______________

(1) Fair value of the Series B redeemable convertible preferred stock was estimated using the Backsolve method.

The weighted-average fair value of the tranche features on a per share basis was $ 0.012 as of December 31, 2020 for a preferred stock tranche liability of $ 0.4 million as of December 31, 2020.

In January 2021, the Company issued additional Series B redeemable convertible preferred stock and recorded an addition to the tranche liability of $ 33 thousand in recognition of the obligation to sell additional shares at a fixed price in the event that certain agreed-upon milestones are achieved or at the election of investors.

The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of March 31, 2021 using a Black-Scholes pricing model and a scenario analysis:

March 31, 2021

Investments held in Trust Account:

Treasury Securities

Tranche 2 Tranche 3 (Public) Tranche 3 (Staying Private)

Forward Call No Value Call Forward No Value

Estimated fair value of Series B redeemable convertible preferred stock (1)

$ 2.0796 $ 2.3386 N/A $ 1.3023 $ 1.3023 N/A

Discount rate 0.03 % 0.05 % N/A 0.06 % 0.06 % N/A

Time to liquidity (years) 0.08 0.5 N/A 0.75 0.75 N/A

Probability of call option and forward contract 100.0 % 25.0 % 75.0 % 45.0 % 5.0 % 50.0 %

Strike price $ 1.6427 $ 1.6427 N/A $ 1.6427 $ 1.6427 N/A

Expected volatility N/A 80.00 % N/A 80.00 % N/A N/A

Value of each tranche feature $ 0.437 $ 0.873 $ — $ 0.251 $( 0.340 ) $ —

Total value of tranche feature (in millions) $ 8.6 $ 4.3 $ 1.9

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

_______________

(1) Fair value of the Series B redeemable convertible preferred stock for Tranche 3 was estimated using guideline IPO transactions for the public scenario and the Black-Scholes based option pricing model for the staying-private scenario, and for Tranche 2 was based on a weighting of the public and staying-private scenarios used for Tranche 3.

The total value of Tranche 2 was determined as a forward contract for a total of $ 8.6 million.

The value of Tranche 3 was determined using public company and staying-private scenarios for a total value of $ 4.3 million and $ 1.9 million, respectively.

The Company applied a 75 % weighting to the public scenario and a 25 % weighting to the staying-private scenario, resulting in a value of Tranche 3 rights of $ 3.7 million.

The weighted average fair value of the tranche feature on a per share basis was $ 0.312 as of March 31, 2021 for a total preferred stock tranche liability of $ 12.3 million resulting in a change in fair value of the preferred stock tranche liability of $ 11.8 million for the three months ended March 31, 2021.

In April 2021, the Company’s Board of Directors determined that certain technical milestones within the Series B agreements had been achieved and approved the notice to call tranches 2 and 3, subject to requisite stockholders’ written election and related waivers.

The second and third closings occurred on May 14, 2021 and all shares of the Series B redeemable convertible preferred stock were acquired thereby extinguishing the preferred stock tranche liability.

The value of the tranche rights acquired on May 14, 2021 was determined using the current value method as both tranches were called by the Company on the valuation date.

The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of May 14, 2021 using a weighted comparable guideline IPO (high and low) and special purpose acquisition company (“SPAC”) transactions for the public scenario and the Black-Scholes pricing model for the staying private scenario:

Tranches 2 and 3

Public Scenario Staying Private Scenario

Estimated fair value of Series B redeemable convertible preferred stock $ 2.18 $ 1.58

Scenario weighting 75.0 % 25.0 %

Value of each tranche feature $ 1.637 $ 0.395

Weighted-average value of Series B redeemable convertible preferred stock $ 2.032

The difference between the weighted-average value of Series B redeemable convertible preferred stock of $ 2.032 and the strike price of $ 1.6427 is the $ 0.3893 weighted-average fair value of the tranche feature on a per share basis as of May 14, 2021 for a total fair value of $ 15.2 million resulting in a change in fair value of the preferred stock tranche liability of $ 2.9 million for the three months ended June 30, 2021.

The following table provides a roll-forward of the change in the preferred stock tranche liability (in thousands):

Preferred Stock Tranche Liability

Balance as of December 31, 2020 435

Recognition of tranche rights from January 2021 issuance 33

Change in fair value 14,742

Tranche liability extinguishment ( 15,210 )

Balance as of December 31, 2021 $ —

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Other Financial Statement information

Prepaid Expenses and Other Current Assets

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

June 30, December 31,

Prepaid expenses (including prepaid rent) 2,535 798

Deposits 983 1,157

Reverse Recapitalization deferred offering costs — 1,446

Total prepaid expenses and other current assets $ 3,546 $ 3,676

Property and Equipment, Net

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

June 30, December 31,

Lab equipment $ 6,395 $ 4,988

Leasehold improvements 1,830 431

Computer equipment and software 342 262

Furniture and fixtures 294 294

Construction in progress 28,762 8,048

Property and equipment at cost 37,623 14,023

accumulated depreciation ( 2,118 ) ( 1,655 )

Property and equipment, net $ 35,505 $ 12,368

Depreciation totaled $ 0.5 million and $ 0.3 million for the six months ended June 30, 2022 and 2021, respectively and $ 0.3 million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively.

Accrued Expenses and Other Liabilities

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

June 30, December 31,

Accrued professional and service fees $ 7,234 $ 2,555

Accrued employee-related expenses 1,799 2,665

Other accrued expenses 23 111

Total accrued expenses and other current liabilities $ 9,056 $ 5,331

Operating Leases

The Company’s operating leases are primarily for its corporate headquarters located in South San Francisco, California and for additional office and laboratory space located in Alameda, California (“Alameda lease”) that commenced on July 30, 2021.

The corporate headquarters lease has an initial term of eight years expiring in 2027, with an option to renew for an additional eight years unless canceled by either party thereafter.

The Alameda lease has an initial term of eleven years expiring in 2032, with an option to renew the lease for up to two additional terms of five years .

The exercise of these renewal options is not recognized as part of the ROU assets and lease liabilities, as the Company did not conclude, at the commencement date of the leases, that the exercise of renewal options or

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

termination options was reasonably certain.

The Alameda lease provides for a tenant improvement allowance of up to $ 17.5 million for the costs relating to the design, permitting and construction of the improvements, to be disbursed by the landlord no later than December 31, 2023.

The Company was deemed to be the accounting owner of the tenant improvements primarily because the Company is the principal in the construction and design of the assets, is responsible for costs overruns and retains substantially all economic benefits from the leasehold improvements over their economic lives .

Accordingly, the tenant improvement allowance is considered an incentive and was deducted from the initial measurement of the ROU asset and lease liability.

The Company estimated the timing of tenant improvement reimbursements at the lease commencement date and upon receipt of the cash incentives, the Company recognized the cash received as an increase in the lease liability.

A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Operating lease cost $ 1,325 $ 679 $ 2,650 $ 1,359

Short-term lease cost 27 — 30 —

Variable lease cost 182 161 353 404

Total lease cost $ 1,534 $ 840 $ 3,033 $ 1,763

Six Months Ended June 30,

Other information:

Operating cash flows net inflows and (outflows) from operating lease $ 6,740 $ ( 1,320 )

Remeasurement of ROU and lease liabilities due to changes in the timing of receipt of lease incentives 199 —

Weighted-average remaining lease term 8.2 years 5.8 years

Weighted-average discount rate 9.1 % 8.9 %

As of June 30, 2022, the Company had received $ 8.1 million of the $ 17.5 million tenant improvements allowance.

As of June 30, 2022 and 2021, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

Maturities of the Company’s lease liabilities as of June 30, 2022, were as follows (in thousands):

2022, for the remainder of the year $ 1,394

Thereafter 30,230

Total undiscounted lease payments 60,373

Less imputed interest ( 20,137 )

Tenant improvement reimbursements ( 9,361 )

Total lease liabilities $ 30,875

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Convertible Note

On May 19, 2022, in connection with the Merger, Legacy Senti issued $ 5.2 million in unsecured convertible promissory notes for the purchase price of $ 5.2 million.

The May 2022 Note was due May 2024 and interest accrued at an annual rate of 3.0 %.

The May 2022 Note was cancellable and exchangeable or convertible under any of the following circumstances:

• Automatic conversion upon the closing of the Business Combination Agreement with Dynamics.

The outstanding principal under this note shall be cancelled and exchanged automatically into that number of shares of Dynamics common stock as is equal to (a) the entire principal amount under this note divided by (b) $ 10.00 .

Upon conversion of this note, any and all accrued interest under this note shall immediately and automatically be cancelled and forgiven.

The shares issued upon conversion of this note shall have the same rights and entitlements as the shares issued in connection with the PIPE by Dynamics.

• Automatic conversion upon closing of a qualified Initial Public Offering (“IPO”).

The note and any accrued unpaid interest shall be automatically converted into shares of the equity securities issued in the qualified IPO at a conversion price equal to the product of (a) 80 %, and (b) the price per share of the Company’s common stock issued to the public in the qualified IPO.

• Automatic conversion upon closing of non-qualified financing.

The note and any accrued unpaid interest shall be automatically converted into shares of the Company’s equity securities issued in such non-qualified financing at a conversion price per share equal to the product of (a) 80 %, and (b) the lowest per-share selling price of the equity securities issued to other investors in the non-qualified financing.

• If the note has not been repaid or previously converted, on or after the maturity date, at the election of the holder, the outstanding balance shall either (a) be repaid in cash in an amount equal to the outstanding principal, or (b) be converted into that number of shares of Legacy Senti’s Series B Preferred Stock equal to the outstanding balance divided by the original issuance price of the Series B Preferred Stock.

On June 8, 2022, concurrently with the closing of the Merger, the May 2022 Note was automatically cancelled and exchanged for 517,500 shares of Class A Common Stock at a price of $ 10.00 per share.

In accordance with the accounting guidance for an extinguishment of convertible debt instruments with a conversion feature that is separately accounted for as a derivative, the Company determined that the cancellation and exchange should be accounted for as an extinguishment of the May 2022 Note and a gain on extinguishment of $ 1.3 million was recorded at the closing of the Merger and all accrued interest at the time of the Merger was reversed and recorded to additional paid in capital.

Stockholders’ Equity (Deficit)

Redeemable Convertible Preferred Stock

The Company’s redeemable convertible preferred stock consisted of the following as of December 31, 2021 (in thousands, except per share amounts):

December 31, 2021

Investments held in Trust Account:

Treasury Securities

Issue Price Shares Authorized Shares Issued and Outstanding

Net Carrying Value

Aggregate Liquidation Preference

Series A $ 1.6427 6,888,563 6,888,563 $ 57,408 $ 57,822

Series B $ 1.6427 12,629,427 12,629,425 $ 114,425 $ 106,012

Total 19,517,990 19,517,988 $ 171,833 $ 163,834

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

In connection with the Merger, all previously issued and outstanding redeemable convertible preferred stock was converted into an equivalent number of shares of common stock of the Company on a one -to-one basis, then multiplied by the Exchange Ratio pursuant to the Merger Agreement.

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Holders of common stock are entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders.

The holders have no preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares.

Common stock is subordinate to the redeemable convertible preferred stock with respect to dividend rights and rights upon liquidation, winding up, and dissolution of the Company.

Through June 30, 2022, no cash dividends have been declared or paid.

At June 30, 2022 and December 31, 2021, the Company was authorized to issue 500,000,000 and 27,006,600 shares of common stock, respectively all at a par value of $ 0.0001 per share, and had reserved the following shares for future issuance:

June 30, December 31,

Series A and B redeemable convertible preferred stock — 19,517,988

Unvested early exercised common stock 288,807 473,373

Stock options to purchase common stock 8,779,368 2,291,838

Common stock options available for future grant under stock option plan 2,492,735 717,617

Total 11,560,910 23,000,816

On June 8, 2022, upon the Closing, all of the outstanding redeemable convertible preferred stock was converted to Common Stock pursuant to the conversion rate effective immediately prior to the Merger and the Exchange Ratio and the remaining amount was reclassified to additional paid-in capital.

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Preferred Stock

In connection with the close of the Merger, the Company’s Amended and Restated Certificate of Incorporation provides the Company’s board of directors with the authority to issue $ 0.0001 par value preferred stock in one more series and to establish from time to time the number of shares to be included in each such series, by adopting a resolution and filing a certification of designations.

Voting powers, designations, powers, preferences and relative, participating, optional, special and other rights shall be stated and expressed in such resolutions.

There were 10,000,000 shares designated as preferred stock and none were outstanding as of June 30, 2022.

Contingent Earnout Equity

Following the Closing, former holders of Legacy Senti common stock and preferred stock may receive up to 2,000,000 additional shares of the Company’s common stock in the aggregate, in two equal tranches of 1,000,000 shares of common stock per tranche.

The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of common stock quoted on the Nasdaq (or the exchange on which the shares of common stock are then listed) is greater or equal to $ 15.00 and $ 20.00 , respectively over any twenty trading days within any thirty-day trading period.

The first and second tranche term is two and three years , respectively, from the closing of the Merger.

If there is a change of control within the three-year following the closing of the Merger that results in a per share price equal to or in excess of the $ 15.00 and $ 20.00 share price milestones not previously met, then Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock.

The estimated fair value of the total Contingent Earnout Shares at the Closing on June 8, 2022, was $ 9.8 million based on a Monte Carlo simulation valuation model.

Of this amount, $ 9.7 million was accounted for as a Contingent Earnout Liability because the triggering events that determine the number of Contingent Earnout Shares required to

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

be issued include events that are not solely indexed to the common stock of the Company.

The remaining balance of $ 0.1 million relates to holders of Legacy Senti common stock that are subject to repurchase were accounted for as stock-based compensation and recorded as an expense, as there was no remaining service period.

The Contingent Earnout Liability was remeasured to fair value as of June 30, 2022, resulting in the recording of a non-cash gain of $ 8.9 million for the three and six months ended June 30, 2022, classified within change in fair value of contingent earnout liability in the condensed consolidated statements of operations and comprehensive loss.

Assumptions used in the valuation are described below:

June 08, 2022 June 30, 2022

Current stock price $ 7.51 $ 1.97

Expected share price volatility 81.0 % 85.0 %

Risk-free interest rate 2.94 % 2.99 %

Estimated dividend yield 0.0 % 0.0 %

Expected term (years) 3.0 3.0

The Company’s revenue consists of amounts received related to research services provided to customers.

Contract Revenue

In May 2019, the Company entered into a collaborative development agreement.

The Company determined that the agreement contained three distinct promises;

research and development, design services, and intellectual property, which will be accounted for as a single combined performance obligation of research and development services recognized over time.

The development agreement included $ 0.3 million of fixed consideration allocated to a single performance obligation and an additional $ 0.3 million of variable consideration.

At the inception of the development agreement, it was not probable that a significant reversal of revenue would not occur and therefore the variable consideration was fully constrained.

Throughout the development agreement period, several parameters of the research and development services were changed, which increased the uncertainty of achieving the remaining performance obligations.

Therefore, in December 2021, the contract asset of $ 0.3 million was reversed due to this increased uncertainty.

In April 2021, the Company entered into a research collaboration and license agreement with Spark Therapeutics, Inc.

Under the agreement, the Company will be responsible for a research program, which includes designing, building and testing five cell type specific-synthetic promoters for use in developing certain gene therapies using the Company’s proprietary technology.

The Company received an upfront payment from Spark of $ 3.0 million and Spark is obligated to reimburse the Company for costs and expenses incurred for the research program.

The Company expects to complete the research program over a two-year period.

The Company assessed this agreement in accordance with ASC 606, Revenue Recognition (“ASC 606”) and concluded that the contract counterparty, Spark, is a customer.

The Company identified only one combined performance obligation in the agreement, which is to perform research services, the related joint research plan and committees for the five specified promoters.

The Company determined that the research activities for each of the five promoters are not distinct given there is one single research plan that is performed by the same research team and research results for one promoter may provide insights for other promoters.

Pursuant to the agreement, once the research program is completed and the Company delivers a data package to Spark, Spark has 24 months (the “evaluation period”) to determine whether Spark will exercise its options to obtain field-limited, royalty-bearing licenses to develop, manufacture and commercialize promoters corresponding to each of the five specified promoters being researched.

For each licensed promoter option that is exercised, the Company is eligible to receive a license fee, potential research, development and commercial milestone payments and royalties on product sales.

Spark may generally terminate the agreement upon 90 days prior written notice or 180 days prior written notice if the licensed promoter is in clinical trials or is being commercialized at the time of termination.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The Company evaluated Spark’s optional rights to license, develop, manufacture and commercialize each of the promoter profiles to determine whether they provide Spark with any material rights to purchase the promoter licenses at an incremental discount.

The Company’s proprietary technology used to develop the promoters is in the early stages of development, so technological feasibility and probability of developing a product is highly uncertain.

As a result, determining the SSP for the optional rights is subject to significant judgment.

Given the subjectivity associated with determining the SSP for the right to a future license related to unproven technology at contract inception, the Company also evaluated whether the contract consideration associated with the research services represents the SSP for those services.

The Company determined the transaction price, inclusive of the upfront payment and reimbursement of costs and expenses incurred for the research program, is commensurate with SSP for the research being conducted given the specialized nature and reliance on proprietary technology.

Based on the Company’s assessment of the optional consideration and the qualitative factors of feasibility and probability of development combined with the quantitative assessment that research services are priced at their SSP, the Company concluded that the license option does not provide Spark with an incremental discount and therefore does not constitute a material right.

The transaction price associated with the research services in this agreement consists of the fixed upfront amount of $ 3.0 million and variable consideration.

For both collaboration agreements, the Company will recognize the transaction price as research and development services are provided, using a cost-based input method to measure the progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period.

The Company believes that the cost-based input method is the best measure of progress because other measurements would not reflect how the Company transfers the control related to the performance obligation to our customers.

For the three months ended June 30, 2022 and 2021, the Company recorded revenue, which was previously included in deferred revenue at the beginning of each period, of $ 0.5 million and $ 0.3 million, respectively, and for the six months ended June 30, 2022 and 2021, the Company recorded revenue, which was previously included in the deferred revenue at the beginning of each period, of $ 1.0 million and $ 0.3 million, respectively.

Contract asset balances related to unbilled revenue for our collaboration agreements were zero as of June 30, 2022 and 2021, and are presented within prepaid expenses and other current assets on the condensed consolidated balance sheets.

In 2021, the Small Business Innovation Research (“SBIR”) awarded the Company a grant in the amount of $ 2.0 million over two years subject to meeting certain terms and conditions.

The purpose of the grant is to support the further development of SENTI-202 for acute myeloid leukemia towards clinical development.

Grant income was recognized when qualified research and development costs were incurred and the Company obtained reasonable assurance that the terms and conditions of the grant were met.

Entity-wide information

During the three months ended June 30, 2022, Customers A and B accounted for 82 % and 18 %, respectively, of revenue.

During the three months ended June 30, 2021, Customers A, B and C accounted for 86 %, 2 % and 12 %, respectively, of revenue.

During the six months ended June 30, 2022, Customers A and B accounted for 80 % and 20 %, respectively, of revenue.

During the six months ended June 30, 2021, Customer A, B and C accounted for 79 %, 5 % and 16 %, respectively, of revenue.

All revenues were generated in the United States for the three and six months ended June 30, 2022 and 2021.

Stock-Based Compensation

On June 8, 2022, upon the Merger, the Company adopted a 2022 Stock Incentive Plan (the “2022 Plan”) authorizing the grant of incentive stock options (“ISOs”), to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of the Company’s affiliates.

As of June 30, 2022, the Company is authorized to issue up to 2,492,735 , of shares of common stock under the 2022 Plan in which the exercise price of an

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

ISO and NSO shall not be less than 100 % of the fair market value of a common stock share on the date of grant.

The exercise price of an ISO granted to a 10 % stockholder shall not be less than 110 % of the fair value of the common stock share on the date of grant.

Stock options awarded under the Plan expire ten years after the grant date.

On January 1 of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 5 % of the outstanding number of shares of common stock of the Company on December 31 or such lesser number of shares as approved by the Company’s board of directors.

The 2022 Plan replaced the Legacy Senti 2016 Stock Incentive Plan (the “2016 Plan”).

As of June 30, 2022 and December 31, 2021, Legacy Senti was authorized to issue up to 12,828,363 of shares of common stock under the 2016 Plan.

Following the Merger, no additional stock awards will be granted under the 2016 Plan.

All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect the impact of the Merger as described in Note 3, Reverse Recapitalization, but otherwise remain in effect pursuant to their original terms.

The shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan.

The following table summarizes the Company’s stock option activity, excluding performance and market awards:

Number of Options Weighted-Average Exercise Price Weighted-Average

Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2021

2,291,838 $ 4.39 9.1 $ 11,304

Exercised ( 199,807 ) $ 2.49 — $ —

Forfeited ( 424,485 ) $ 2.77 — $ —

Outstanding at June 30, 2022

1,667,546 $ 5.02 8.5 $ 9

Vested and exercisable at June 30, 2022

421,763 $ 3.60 7.8 $ 9

Early Exercise of Stock Options into Restricted Stock

For the six months ended June 30, 2022 and 2021, the Company issued zero and 512,670 shares of common stock upon exercise of unvested stock options, respectively.

As of June 30, 2022 and December 31, 2021, 288,807 and 473,373 shares were held by employees subject to repurchase at an aggregate price of $ 0.8 million and $ 1.2 million, respectively.

Performance Awards

In connection with the Merger, on December 19, 2021, the Legacy Senti approved 8,400,892 performance awards to existing employees that vest contingent upon the satisfaction of both a four -year service condition and a performance condition tied to the consummation of the Merger.

The awards and the associated recognition of stock-based compensation were contingent on the Merger being consummated.

As of the approval date of the performance awards, Legacy Senti did not have sufficient common stock available for issuance.

Upon the Merger, the Company increased number of shares authorized and 6,796,074 awards were granted on June 8, 2022.

Refer to Note 8, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.

Number of Options Weighted-Average Exercise Price Weighted-Average

Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2021

Granted 6,796,074 $ 9.92 — $ —

Outstanding at June 30, 2022

6,796,074 $ 9.92 9.4 $ —

Vested and exercisable at June 30, 2022

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Market Awards

In connection with the Business Combination Agreement with DYNS, on December 19, 2021, Legacy Senti approved 605,451 market awards to its co-founder and Chief Executive Officer, Dr.

Timothy Lu that vest contingent upon the satisfaction of all three of the following conditions:

a service condition, a performance condition tied to the consummation of the Merger, and market conditions.

The market condition is achieved in four tranches, where 25 % of the options will vest when the trading price of the Company’s stock is above various thresholds of price per share.

The award and the associated recognition of stock-based compensation are contingent on the Merger being consummated.

As of the approval date, the Legacy Senti did not have sufficient common stock available for issuance to allow for exercise of the stock options.

Upon the Merger, the Company increased number of shares authorized and 315,748 awards were granted on June 8, 2022.

Refer to Note 8, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.

Stock-Based Compensation Expense

In determining the fair value of the stock-based awards, the Company uses the assumptions below for the Black-Scholes option pricing model, which are subjective and generally require significant judgment.

Fair Value of Common Stock — The fair value of the shares of common stock has historically been determined by the Company’s board of directors as there was no public market for the common stock.

The board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including:

third-party valuations of the Company’s common stock, the valuation of comparable companies, the Company’s operating and financial performance, and general and industry-specific economic outlook, amongst other factors.

As of the closing of the Merger and going forward, the fair value of common stock will be based on the publicly traded market value.

Expected Term —The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Volatility —The expected volatility is based on the average historical volatility of comparable publicly-traded peer companies, over a period equal to the expected term of the stock option grants, as the Company was not publicly traded prior to the Merger and does not have a trading history for its common stock for a sufficient period of time subsequent to the Merger.

Risk-free Rate —The risk-free rate assumption is based on the U.S.

Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividends —The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock.

Therefore, the Company uses an expected dividend yield of zero.

The assumptions used to determine the grant date fair value of non-market based, stock options granted were as follows, presented on a weighted-average basis:

Six Months Ended June 30,

Expected term (in years) 5.8 6.0

Expected volatility 78 % 83 %

Risk-free interest rate 3.0 % 0.7 %

Dividend yield — —

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Total stock-based compensation expense was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

General and administrative $ 7,863 $ 498 $ 8,322 $ 818

Research and development 1,362 64 1,564 116

Total stock-based compensation expense $ 9,225 $ 562 $ 9,886 $ 934

As of June 30, 2022, the total unrecognized stock-based compensation was approximately $ 32.1 million, expected to be recognized over a weighted-average period of 2.26 years.

As of December 31, 2021, the total unrecognized stock-based compensation was approximately $ 9.2 million, expected to be recognized over a weighted-average period of 3.1 years.

No provision for income taxes was recorded for the three and six months ended June 30, 2022 and 2021, respectively.

Deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is not more likely than not that the benefit will be realized due to the Company’s net operating losses generated to date.

Effective January 1, 2022, under the Tax Cuts and Jobs Act, for tax purposes the Company is required to capitalize and subsequently amortize all R&D expenditures over five years for research activities conducted in the U.S.

and over fifteen years for research activities conducted outside of the U.S.

Given the significant loss and credit carryforwards in the U.S., the Company does not anticipate to have a change in valuation allowance assertion.

Net Loss Per Share

A reconciliation of net loss available to common stockholders and the number of shares in the calculation of basic and diluted loss per share is as follows:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net loss $ ( 11,552 ) $ ( 12,007 ) $ ( 23,360 ) $ ( 33,009 )

Weighted-average shares used in computing net loss per share, basic and diluted 13,446,622 2,909,105 8,336,451 2,883,582

Net loss per share attributable to common stockholders, basic and diluted

$ ( 0.86 ) $ ( 4.13 ) $ ( 2.80 ) $ ( 11.45 )

The following potential common stock securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (on an as-converted basis):

Three and Six Months Ended June 30,

Series A and B redeemable convertible preferred stock — 19,517,988

Stock options to purchase common stock 8,779,368 1,815,431

Unvested early exercised options 288,807 499,571

Contingent earnout common stock 2,000,000 —

Total 11,068,175 21,832,990

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Commitments and Contingencies

In the ordinary course of business, we enter into contractual agreements with third parties that include non-cancelable payment obligations, for which we are liable in future periods.

On June 3, 2021, the Company entered into a lease agreement for a new cGMP facility in Alameda, California to support planned initial clinical trials for our product candidates (Note 6).

The lease will expire in 2032 with future undiscounted operating lease payments of $ 46.0 million over an initial lease period of eleven years .

In 2021, the Company began construction of the cGMP facility.

As of June 30, 2022 the Company paid $ 17.9 million in construction costs of the $ 35.5 million purchase commitment.

The agreements with the construction company provide for termination following a certain period after notice.

Upon termination, the Company will be responsible for payment for work performed to date.

In 2021, the Company entered into a three-year collaboration and option agreement with BlueRock Therapeutics LP (“BlueRock”) under which the Company granted BlueRock an option to acquire an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products (Note 14).

In consideration for the option, the Company is responsible for up to $ 10.0 million in costs and expenses incurred over the three-year term.

As of June 30, 2022, purchase commitments related to sponsored research agreements amounted to approximately $ 1.7 million.

The Company has entered into license agreements under which they are obligated to make annual maintenance payments of $ 0.1 million and specified milestone and royalty payments.

Future milestone and royalty payments under these agreements are not considered contractual obligations since the payments under these agreements are contingent upon future events, such as the Company’s achievement of specified development, regulatory, and sales milestones, or generating product sales.

As of June 30, 2022, the Company is unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

Refer to Note 3, Stockholders’ Equity (Deficit), for further details of the contingent earnout liability.

Legal Proceedings

The Company is subject to claims and assessments from time to time in the ordinary course of business but does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.

Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party.

Some of the provisions will limit losses to those arising from third-party actions.

In some cases, the indemnification will continue after the termination of the agreement.

The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable.

The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions and has never accrued any liabilities related to such obligations in its condensed consolidated financial statements.

The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law.

The Company currently has directors’ and officers’ insurance.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Related Parties

Preferred Stockholders

The Company issued Series A convertible redeemable preferred stock and Series B redeemable convertible preferred stock in February 2018 and October 2020, respectively, to certain related parties, including New Enterprise Associates 15, L.P.

and its affiliates (“NEA”) and 8VC and its affiliates (“8VC”).

In February 2018, the outstanding convertible notes held by NEA and 8VC, as well as Dr.

Timothy Lu, our Chief Executive Officer, converted into additional shares of Series A redeemable convertible preferred stock while in October 2020, the outstanding convertible notes held by NEA and 8VC converted into additional shares of Series B redeemable convertible preferred stock, both in accordance with the terms of the note agreements.

On June 8, 2022, in conjunction with the Merger, each outstanding share of preferred stock of Legacy Senti was cancelled and converted into the aggregate number of shares of the Company’s common stock that would be issued upon conversion of the shares of Legacy Senti preferred stock based on the applicable conversion ratio immediately prior to the effective time, multiplied by the Exchange Ratio, rounded down to the nearest whole share.

As of June 30, 2022, no shares of preferred stock remain outstanding.

NEA held 4,429,725 and zero shares of common stock as of June 30, 2022 and December 31, 2021, respectively.

NEA held zero and 2,642,934 shares of outstanding Series A redeemable convertible preferred stock as of June 30, 2022 and December 31, 2021, respectively, as well as zero and 536,791 shares of outstanding Series B redeemable convertible preferred stock, respectively.

NEA held one of the seven seats on the Company’s Board of Directors as of June 30, 2022 and December 31, 2021.

Bayer Healthcare LLC

On May 19, 2022, Legacy Senti issued to Bayer a $ 5.2 million unsecured convertible promissory note.

On June 8, 2022, the May 2022 Note was automatically cancelled and exchanged for 517,500 shares of Class A Common Stock at a price of $ 10.00 per share.

Refer to Note 7, Convertible Note , for further details of the convertible note.

On May 21, 2021, the Company entered into a collaboration and option agreement (“BlueRock Agreement”) with BlueRock Therapeutics LP (“BlueRock”), a wholly-owned subsidiary of Bayer, pursuant to which the Company granted to BlueRock an option (“BlueRock Option”), on a collaboration program-by-collaboration program basis, to obtain an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products that contain cells of specified types and which incorporate an option gene circuit from such collaboration program or a closely related derivative gene circuit.

The Company is responsible for up to $ 10 million in costs and expenses incurred in connection with the research plan and related activities to be conducted over a term of three years as specified in the collaboration and option agreement.

If the Company and BlueRock agree to add new research activities to the research plan, then BlueRock will be obligated to reimburse the Company for the costs and expenses incurred that, together with costs and expenses incurred under the initial research plan, exceed $ 10 million.

The Company concluded that the Agreement is not within the scope of ASC 808, Collaborative Arrangements , because the Company did not receive any consideration and therefore, is not exposed to both significant risks and rewards for the arrangement.

The Company also determined that the agreement is also not currently within the scope of ASC 606 because the BlueRock Agreement does not currently meet the criteria of a contract with a customer, and will not be within the scope of ASC 606 until any consideration is paid.

Potential future milestone payments and royalties are subject to BlueRock’s exercise of the BlueRock Option and execution of a commercial license agreement by both parties.

Under the BlueRock Agreement, the specific financial terms for milestone payments and royalties will be negotiated and agreed to only after the option is exercised.

As of June 30, 2022, Bayer held 5,878,488 shares of the Company’s common stock.

As of December 31, 2021, Bayer held 5,360,988 shares of Series B redeemable convertible preferred stock and held one of the seven seats on

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

the Board of Directors of Legacy Senti.

Bayer’s parent company is Bayer AG, which served as the lead investor in our Series B financing through its Leaps by Bayer unit.

Accordingly, Bayer is considered a related party.

Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

Based upon this review, other than the amendments to the Non-Redemption Agreements discussed in Note 1, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

The Company evaluated subsequent events and transactions that occurred up to the date the unaudited condensed financial statements were issued.

Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements