CRYPTO 1 ACQUISITION CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

References to the “Company,” “us,” “our” or “we” refer to Crypto 1 Acquisition
Corp The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our audited financial
statements and related notes included herein.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,” “would,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations, including our proposed Wag! Business
Combination, and the financing thereof, and related matters, as well as all
other statements other than statements of historical fact included in this Form
10-Q. Factors that might cause or contribute to such a discrepancy include, but
are not limited to, those described in the “Risk Factors” section of our Annual
Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”), in
the Registration Statement on Form S-4 that the Company has filed with the U.S.
Securities and Exchange Commission (the “SEC”) relating to our proposed business
combination with Wag!, and in our other filings with the SEC. Our filings with
the SEC can be accessed on the EDGAR section of the SEC’s website at sec.report.
Except as expressly required by applicable securities law, we disclaim any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.

Overview

We are a blank check company incorporated on May 24, 2021, as a Cayman Islands
exempted company and for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, or reorganization or engaging in any other
similar business combination with one or more businesses or entities, which we
refer to throughout this prospectus as our “initial business combination.” We
intend to effectuate our initial business combination using cash from the
proceeds of our initial public offering and our private placement of Private
Warrants.

Our Sponsor is Crypto 1 Sponsor LLC, a Delaware limited liability company. The
registration statement for our initial public offering was declared effective on
December 6, 2021. On December 9, 2021, we consummated our initial public
offering of 23,000,000 units at $10.00 per unit, with each unit consisting of
one Class A ordinary share and three-quarters of one warrant, with each whole
warrant entitling the holder thereof to purchase one Class A ordinary share at a
price of $11.50 per share.

Simultaneously with the consummation of the initial public offering, we
consummated the private placement of 8,150,000 warrants at a price of $1.00 per
warrant in a private placement, generating gross proceeds of $8,150,000.

Following the closing of the initial public offering on December 9, 2021,
$231,150,000 ($10.05 per unit) from the net proceeds of the sale of the units in
the initial public offering and the private placement was deposited into a trust
account, invested in United States “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or
less. Except with respect to interest earned on the funds held in the Trust
Account that may be released to us to pay our income or other tax obligations as
described in the initial public offering, the proceeds will not be released from
the trust account until the earlier of the completion of a business combination
or the redemption of 100% of the outstanding public shares if we have not
completed a business combination within the time required time period.

We have until December 9, 2022 (or until June 9, 2023 if we extend the period of
time to consummate a business combination) to complete the initial business
combination. If we do not consummate an initial business combination by such
date, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter,

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redeem 100% of the outstanding public shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the trust account,
including any interest not previously released to us but net of taxes payable
(and less up to $50,000 of interest to pay liquidation expenses), divided by the
number of then outstanding public shares, which redemption will completely
extinguish public shareholders’ rights as shareholders (including the right to
receive further liquidation distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the remaining shareholders and the board of directors,
dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.

We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial business combination will be successful.

Results of Operations

March 31, 2022 we have neither engaged in any operations nor generated any
revenues. All activity for the period from May 24, 2021 (inception) through
March 31, 2022 relates to our formation and the initial public offering. We will
not generate any operating revenues until after the completion of our initial
business combination, at the earliest. We will generate non-operating income in
the form of interest income on cash and cash equivalents from the proceeds
derived from the initial public offering.

For the three months ended March 31, 2022, we had a net loss of $406,449, which
primarily consists of operating expenses of $342,163, interest income on
investments of $85,746 and unrealized loss on investments of $150,082.

Liquidity and Capital Resources

On December 9, 2021, we consummated our initial public offering of 23,000,000
units at a price of $10.00 per unit, at $10.00 per unit, generating gross
proceeds of $23,000,000. Simultaneously with the closing of our initial public
offering, we consummated the sale of 8,150,000 Private Warrants to the Sponsor
at a price of $1.00 per warrant, generating gross proceeds of $8,150,000.

For the three months ended March 31, 2022 $597,961 of cash was used in operating
activities.

As of March 31, 2022, we had investments of $231,064,303 held in the Trust
Accounts. We intend to use substantially all of the funds held in the Trust
Accounts, including any amounts representing interest earned on the Trust
Accounts (less taxes paid and deferred underwriting commissions) to complete our
initial business combination. We may withdraw interest to pay taxes. During the
period ended March 31, 2022, we did not withdraw any interest earned on the
Trust Accounts. To the extent that our capital stock or debt is used, in whole
or in part, as consideration to complete our initial business combination, the
remaining proceeds held in the Trust Accounts will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.

As of March 31, 2022, we had cash of $595,047 outside of the Trust Accounts. We
intend to use the funds held outside the Trust Accounts primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial business combination.

In order to fund working capital deficiencies or finance transaction costs in
connection with our initial business combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete our initial business
combination, we will repay such loaned amounts. In the event that our initial
business combination does not close, we may use a portion of the working capital
held outside the Trust Accounts to repay such loaned amounts but no proceeds
from our Trust Accounts would be used for such repayment. Up to $1,500,000 of
such loans may be convertible into warrants identical to the Private Warrants,
at a price of $1.00 per warrant at the option of the lender.

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We do not currently believe we will need to raise additional funds in order to
meet the expenditures required for operating our business. However, if our
estimate of the costs of identifying a target business, undertaking in-depth due
diligence and negotiating our initial business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our initial business combination. Moreover, we may
need to obtain additional financing either to complete our initial business
combination or because we become obligated to redeem a significant number of our
Public Shares upon consummation of our initial business combination, in which
case we may issue additional securities or incur debt in connection with such
business combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
initial business combination. If we are unable to complete our initial business
combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Accounts. In addition,
following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies.

Net loss Per Ordinary Share

The Company complies with accounting and disclosure requirements of ASC Topic
260, “Earnings Per Share”. The statement of operations includes a presentation
of loss per Class A redeemable common stock and loss per non-redeemable common
stock following the two-class method of income per common stock. In order to
determine the net loss attributable to both the Class A redeemable common stock
and non-redeemable common stock, the Company first considered the total loss
allocable to both sets of stock. This is calculated using the total net loss
less any dividends paid. For purposes of calculating net loss per share, any
remeasurement of the Class A common stock subject to possible redemption was
treated as dividends paid to the public stockholders. Subsequent to calculating
the total loss allocable to both sets of stock, the Company split the amount to
be allocated using a ratio of 80% for the Class A redeemable common stock and
20% for the non-redeemable common stock for the three month ended March 31, 2022
reflective of the respective participation rights. As a result, diluted loss per
common share is the same as basic loss per common share for the period
presented.

Accounting for Warrants

The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments’
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480,
Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and
Hedging (“ASC 815”). The assessment considers whether the instruments are free
standing financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the instruments meet all of the
requirements for equity classification under ASC 815, including whether the
instruments are indexed to the Company’s own common shares and whether the
instrument holders could potentially require “net cash settlement” in a
circumstance outside of the Company’s control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, was conducted at the time of warrant issuance and as of each
subsequent quarterly period end date while the instruments are outstanding.
Management has concluded that the Public Warrants and Private Warrants issued
pursuant to the warrant agreement qualify for equity accounting treatment.

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Class A Ordinary Shares Subject to Possible Redemption

The Company accounts for its Class A Ordinary Shares subject to possible
redemption in accordance with the guidance in ASC Topic 480, “Distinguishing
Liabilities from Equity”. Ordinary shares subject to mandatory redemption, if
any, are classified as a liability instrument and is measured at fair value.
Conditionally redeemable Class A Ordinary Shares (including Ordinary Shares that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) are classified as temporary equity. At all other times,
Ordinary Shares are classified as shareholders’ equity. The Company’s Public
Shares features certain redemption rights that are considered to be outside of
the Company’s control and subject to occurrence of uncertain future events.
Accordingly, at March 31, 2022, 23,000,000 shares of Class A Ordinary shares
subject to possible redemption are presented as temporary equity, outside of the
shareholders’ deficit section of the Company’s balance sheet.

Recent Accounting Standards

In August 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-06,
Debt -Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging -Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity’s Own Equity, which
simplifies accounting for convertible instruments by removing major separation
models required under current GAAP. The ASU removes certain settlement
conditions that are required for equity contracts to qualify for the derivative
scope exception, and it also simplifies the diluted earnings per share
calculation in certain areas. The Company adopted ASU 2020-06 on May 24, 2021,
with no impact upon adoption.

Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.

The underwriters are entitled to a deferred fee of $8,050,000. The deferred fee
will become payable to the underwriters from the amounts held in the trust
account solely in the event that we complete a business combination, subject to
the terms of the underwriting agreement.

JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an “emerging growth company” and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an “emerging growth
company,” we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor’s attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor’s report providing additional information about the
audit and the financial statements (auditor discussion and analysis) and (iv)
disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of executive
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no
longer an “emerging growth company,” whichever is earlier.

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