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
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding our
financial position, business strategy and the plans and objectives of management
for future operations, are forward- looking statements. When used in this
Report, words such as "anticipate," "believe," "estimate," "expect," "intend"
and similar expressions, as they relate to us or our management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward- looking statements as a result of
certain factors detailed in our filings with the SEC. All subsequent written or
oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
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, 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
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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
As of December 31, 2021, we have neither engaged in any operations nor generated
any revenues. All activity for the period from May 24, 2021 (inception) through
December 31, 2021 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 period from May 24, 2021 (inception) through December 31, 2021, we had a
net loss of $164,560, which was resulted entirely from formation and operating
costs.
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 period May 24, 2021 (inception) through December 31, 2021, $523,937 of
cash was used in operating activities. Net Cash used in investing activities was
$231,150,000 and Net cash provided by financing activities was $232,866,945
mainly reflecting the proceeds of our IPO and subsequent deposit into the trust
account.
As of December 31, 2021, we had investments of $231,128,639 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 December 31, 2021, 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 December 31, 2021, we had cash of $1,193,008 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.
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
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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 Income (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 income (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 income (loss) attributable to both the Class A redeemable
common stock and non-redeemable common stock, the Company first considered the
total income (loss) allocable to both sets of stock. This is calculated using
the total net income (loss) less any dividends paid. For purposes of calculating
net income (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 income (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 period from May 24, 2021 (inception) to December 31, 2021,
reflective of the respective participation rights. As a result, diluted income
(loss) per common share is the same as basic income (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.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its 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 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 December 31,
2021, 23,000,000 shares of Ordinary shares subject to possible redemption are
presented as temporary equity, outside of the shareholders' deficit section of
the Company's balance sheet.
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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
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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.
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