References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Dragoneer Growth Opportunities Corp. III. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Dragoneer Growth Opportunities Holdings
III. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form
10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on September 25,
2020 formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses or entities. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our shares, debt or a
combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Recent Developments
On June 18, 2021, we entered into a Working Capital Loan with the Sponsor
pursuant to which the Sponsor agreed to loan us up to an aggregate principal
amount of $3,000,000 (the "Working Capital Loan"), which we drew in full on the
same day. The Working Capital Loan is
non-interest
bearing and due on the date on which we consummate a Business Combination. If we
do not consummate a Business Combination, we may use a portion of any funds held
outside the Trust Account to repay the Working Capital Loan; however, no
proceeds from the Trust Account may be used for such repayment. If such funds
are insufficient to repay the Working Capital Loan, the unpaid amounts would be
forgiven. Up to $3,000,000 of the Working Capital Loan may be converted into
warrants at a price of $1.00 per warrant at the option of the Sponsor. The
warrants would be identical to the Private Placement Warrants.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We may generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.

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For the three months ended September 30, 2021, we had a net income of
$12,176,383, which relates to formation and operating costs of $236,475, a
decrease in the fair value of the warrant liability of $9,995,945, a decrease in
the fair value of the conversion option liability of $2,827,922, and interest
expense related to the amortization of the debt discount of $411,009.
For the nine months ended September 30, 2021, we had a net income of $1,669,980,
which consisted primarily of formation and operating costs of $672,364, a
decrease in the fair value of the warrant liability of $7,786,801, a decrease in
the fair value of the conversion option liability of $2,827,922, a loss on the
issuance of the private Placement Warrants of $7,767,566, interest expense
related to the amortization of the debt discount of $463,622, and transaction
costs allocable to the warrant liability of $41,191.
Liquidity and Capital Resources
On March 25, 2021, we consummated the Initial Public Offering of 40,000,000
Class A Public Shares at $10.00 per Public Share, generating gross proceeds of
$400,000,000. Simultaneously with the closing of the Initial Public Offering, we
consummated the sale of 10,000,000 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant in a private placement to the Sponsor,
generating gross proceeds of $10,000,000.
On May 6, 2021, the underwriters partially exercised their over-allotment
option, resulting in an additional 3,067,606 Public Shares issued for an
aggregate amount of $30,676,060. In connection with the underwriters' partial
exercise of their over-allotment option, the Company also consummated the sale
of 613,522 Private Placement Warrants at $1.00 per Private Placement Warrant,
generating total gross proceeds of $613,522. A total of $30,676,060 was
deposited into the Trust Account, bringing the aggregate proceeds held in the
Trust Account to $430,676,060.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,404,932. Net income of $1,669,980 was affected by a decrease in the fair
value of the warrant liability of $7,786,801, a decrease in the fair value of
the conversion option of $2,827,922, a loss on the issuance of the private
Placement Warrants of $7,767,566, amortization of the debt discount of $463,622
and transaction costs allocable to the warrant liability of $41,191. Changes in
operating assets and liabilities used $732,568 of cash for operating activities.
As of September 30, 2021, we had cash held in the Trust Account of $430,676,061.
Interest income on the balance in the Trust Account may be used by us to pay
taxes. Through September 30, 2021, we have not earned any interest earned from
the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our share capital or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $3,000,000 of such loans may be convertible into warrants
at a price of $1.00 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants.
On June 18, 2021, we entered into a Working Capital Loan with the Sponsor
pursuant to which the Sponsor agreed to loan us up to an aggregate principal
amount of $3,000,000 (the "Working Capital Loan"), which we drew in full on the
same day. The Working Capital Loan is
non-interest
bearing and due on the date on which we consummate a Business Combination.

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We do not 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 a 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 Business Combination. Moreover, we may need to obtain
additional financing either to complete our Business Combination or because we
become obligated to redeem a significant number of our Public Shares upon
consummation of our Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination.
Off-Balance
Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance
sheet arrangements as of September 30, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating
off-balance
sheet arrangements. We have not entered into any
off-balance
sheet financing arrangements, established any special purpose entities,
guaranteed any debt or commitments of other entities, or purchased any
non-financial
assets.
Contractual Obligations
The underwriters are entitled to a deferred fee of $0.35 per Public Share, or
$15,073,661 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
The Company entered into a forward purchase agreement pursuant to which an
affiliate of the Sponsor agreed to purchase an aggregate of up to 5,000,000
forward purchase shares for $10.00 per share, or up to $50,000,000 in the
aggregate, in a private placement to close substantially concurrently with the
initial Business Combination. The Company will determine in its sole discretion
the specific number of forward purchase shares that it sells to the purchaser,
if any. The funds from the sale of forward purchase shares may be used as part
of the consideration to the sellers in the initial Business Combination,
expenses in connection with the initial Business Combination or for working
capital in the post transaction company. The obligations under the forward
purchase agreement do not depend on whether any public shareholders elect to
redeem their shares and provide the Company with a minimum funding level for the
initial Business Combination.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our statements of operations. The fair value of the warrants was
estimated using a Modified Black Scholes Option Pricing Model.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value on the issuance date and is
then revalued at each reporting date, with changes in the fair value reported in
the statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is evaluated at the end of each reporting period. Derivative liabilities
are classified in the balance sheet as current or
non-current
based on whether or not
net-cash
settlement or conversion of the instrument could be required within 12 months of
the balance sheet date.

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Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480,
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' (deficit) equity section of our unaudited condensed
balance sheets.
Net Loss Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share." The Company has two classes of shares, which
are referred to as Class A ordinary shares and Class B ordinary shares. Income
and losses are shared pro rata between the two classes of shares. Net income
(loss) per ordinary share is calculated by dividing the net income by the
weighted average ordinary shares outstanding for the respective period.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06,
"
Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40
)"
("ASU 2020-06") to simplify accounting for certain financial instruments. ASU
2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and
simplifies the derivative scope exception guidance pertaining to equity
classification of contracts in an entity's own equity. The new standard also
introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
We adopted ASU 2020-06 effective January 1,2021. The adoption of ASU 2020-06 did
not have a significant impact on the Company's financial statements.
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 unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our principal executive officer and principal
financial officer or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
As required by Rules
13a-15
and
15d-15
under the Exchange Act, our Chief Executive Officer and Chief Operating Officer
(Principal Financial Officer) carried out an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures as of
September 30, 2021. Based upon their evaluation, our Chief Executive Officer and
Chief Operating Officer (Principal Financial Officer) concluded that our
disclosure controls and procedures (as defined in Rules
13a-15
(e) and
15d-15
(e) under the Exchange Act) were effective.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended September 30, 2021, there has been no change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting. The material weakness previously reported was remediated during the
quarter ended September 30, 2021.

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