Blue Water Acquisition Corp III Unit(BLUWU) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents Blue Water Acquisition Corp. III's unaudited condensed financial statements and accounting notes for June 30, 2025 Condensed Balance Sheets ASSETS | ASSETS | | | | | :--- | :--- | :--- | :--- | | June 30, 2025 (unaudited) | December 31, 2024 | | Current Assets: | | Cash | $1,039,666 | $— | | Prepaid expenses | $14,100 | $— | | Due from related party | $28,715 | $— | | Total Current Assets | $1,082,481 | $— | | Non-current Assets: | | Cash and marketable securities held in Trust Account | $253,556,881 | $— | | Deferred offering costs | $— | $25,000 | | Total Non-current Assets | $253,556,881 | $25,000 | | TOTAL ASSETS | $254,639,362 | $25,000 | | LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS' DEFICIT | | Current Liabilities: | | Accounts payable | $9,932 | $7,036 | | Accrued expenses | $4,252 | $15,000 | | Accrued offering costs | $— | $25,000 | | Due to related party | $8,905 | $— | | Administrative services fee – related party | $6,333 | $— | | Promissory note – related party | $— | $1,505 | | Total Current Liabilities | $29,422 | $48,541 | | Non-current Liabilities: | | Deferred underwriter fee liability | $8,855,000 | $— | | Total Non-current Liabilities | $8,855,000 | $— | | TOTAL LIABILITIES | $8,884,422 | $48,541 | | Class A ordinary shares subject to possible redemption | $253,556,881 | $— | | Shareholders' Deficit: | | Preference shares | $— | $— | | Class A ordinary shares | $68 | $— | | Class B ordinary shares | $633 | $575 | | Additional paid-in capital | $— | $24,425 | | Accumulated deficit | $(7,802,642) | $(48,541) | | Total Shareholders' Deficit | $(7,801,941) | $(23,541) | | TOTAL LIABILITIES, ORDINARY SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS' DEFICIT | $254,639,362 | $25,000 | Condensed Statements of Operations Operating expenses: | Operating expenses: | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Formation, general and administrative expenses | $89,301 | $165,123 | | Legal and accounting expenses | $12,723 | $12,723 | | Administrative services fee – related party | $6,333 | $6,333 | | Insurance expense | $4,132 | $4,132 | | Total operating expenses | $112,489 | $188,311 | | Loss from operations | $(112,489) | $(188,311) | | Other income: | | Interest income on marketable securities held in Trust Account | $556,881 | $556,881 | | Other income | $556,881 | $556,881 | | Net income | $444,392 | $368,570 | | Weighted average shares outstanding of redeemable Class A ordinary shares | 5,282,418 | 2,655,801 | | Basic and diluted net income per share, redeemable Class A ordinary shares | $0.83 | $1.64 | | Weighted average shares outstanding of non-redeemable Class A and Class B ordinary shares | 6,025,297 | 5,888,409 | | Basic and diluted net loss per share, non-redeemable Class A and Class B ordinary shares | $(0.65) | $(0.68) | Condensed Statements of Changes in Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit - The company's shareholders' deficit increased significantly from $(23,541) at January 1, 2025, to $(7,801,941) at June 30, 2025, primarily due to the remeasurement of Class A ordinary shares subject to possible redemption and net income/loss allocations[15] - The issuance of Class A ordinary shares in the IPO and the sale of private placement units contributed to the increase in shares subject to possible redemption and Class A/B ordinary shares outstanding[15] Condensed Statements of Cash Flows Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | Six Months Ended June 30, 2025 | | :--- | :--- | | Net income | $368,570 | | Adjustments to reconcile net loss to net cash used in operating activities: | | Formation, general and administrative costs paid by Sponsor under promissory note – related party | $101,708 | | Interest and dividend income on cash and marketable securities held in Trust Account | $(556,881) | | Changes in operating assets and liabilities: | | Prepaid expenses | $(8,267) | | Accounts payable | $2,896 | | Accrued expenses | $(10,748) | | Administrative support fee – related party | $6,333 | | Due to related party | $8,905 | | Net cash used in operating activities | $(87,484) | | Cash Flows from Investing Activities: | | Investment in Trust Account | $(253,000,000) | | Net cash used in investing activities | $(253,000,000) | | Cash Flows from Financing Activities: | | Proceeds from issuance of Class A ordinary shares | $253,000,000 | | Proceeds from sale of private placement units | $6,830,000 | | Payment of underwriting fees and reimbursements | $(5,135,000) | | Payment of promissory note – related party | $(242,397) | | Due from related party, net | $(28,715) | | Payment of deferred offering costs | $(296,738) | | Net cash provided by financing activities | $254,127,150 | | Net Change in Cash | $1,039,666 | | Cash – Beginning of period | $— | | Cash – End of period | $1,039,666 | | Supplemental Non-Cash Investing and Financing Activities: | | Remeasurement of Class A ordinary shares subject to possible redemption | $18,317,089 | | Deferred offering costs paid by Sponsor under promissory note – related party | $93,450 | | Prepaid expenses paid by Sponsor under promissory note – related party | $5,833 | Notes to Unaudited Condensed Financial Statements Note 1 — Organization and Business Operations - Blue Water Acquisition Corp. III is a blank check company incorporated on November 1, 2024, for the purpose of effecting a business combination[21] - The company consummated its Initial Public Offering (IPO) on June 11, 2025, selling 25,300,000 units at $10.00 per unit, generating gross proceeds of $253,000,000[23] - Simultaneously with the IPO, 683,000 private placement units were sold to the Sponsor and underwriters for $6,830,000[24] - Transaction costs totaled $14,420,089, including cash underwriting fees, deferred underwriting fees, and other offering costs[25] - Substantially all net proceeds from the IPO and private placement, totaling $253,000,000, were placed in a Trust Account to be used for a Business Combination or redemption of public shares[28] Note 2 — Significant Accounting Policies - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[38][39] - Assets held in the Trust Account, amounting to $253,556,881 as of June 30, 2025, are held in cash in a demand deposit account[42] - Offering costs are allocated between Class A ordinary shares (charged to temporary equity) and Warrants (charged to shareholders' deficit) using the residual method[43] - The company classifies Public Shares subject to possible redemption outside of permanent equity and recognizes changes in redemption value immediately, adjusting the carrying value to equal redemption value at each reporting period end[55] Class A ordinary shares subject to possible redemption at June 30, 2025 | Class A ordinary shares subject to possible redemption at June 30, 2025 | | | :--- | :--- | | Gross proceeds from Initial Public Offering | $253,000,000 | | Less: Proceeds allocated to public warrants | $(3,340,119) | | Less: Offering costs allocated to Class A ordinary shares subject to possible redemption | $(14,420,089) | | Plus: Accretion of Class A ordinary shares subject to possible redemption | $18,317,089 | | Class A ordinary shares subject to possible redemption at June 30, 2025 | $253,556,881 | Note 3 — Initial Public Offering - On June 11, 2025, the Company sold 25,300,000 Units at $10.00 per Unit, including the full exercise of the underwriters' over-allotment option[59] - Each Unit consists of one Class A ordinary share and one-half of one redeemable Public Warrant. As of June 30, 2025, there were 12,991,500 Warrants outstanding (12,650,000 Public Warrants and 341,500 Private Placement Warrants)[59][60] - Warrants become exercisable at the later of 12 months from IPO closing and 30 days after business combination, expiring five years after business combination or earlier upon redemption/liquidation[59][60] - The Company may redeem outstanding Warrants at $0.01 per Warrant if the Class A ordinary share closing price equals or exceeds $18.00 for 20 trading days within a 30-trading day period, commencing at least 30 days after the business combination[64] Note 4 — Private Placement - The Sponsor and BTIG, LLC purchased 683,000 Private Placement Units for $6,830,000 simultaneously with the IPO closing[66] - Private Placement Warrants are identical to Public Warrants but have transfer restrictions and specific registration rights for the Sponsor, BTIG, LLC, or their permitted transferees[67] - The Sponsor, officers, and directors waived redemption rights for their shares and rights to liquidating distributions from the Trust Account for founder shares and Private Placement Shares if a business combination is not completed within the Completion Window[68] Note 5 — Segment Information - The Company operates as a single reporting segment, with the Chief Financial Officer identified as the Chief Operating Decision Maker (CODM)[69][70] - The CODM assesses performance and allocates resources based on net income or loss and reviews key metrics including cash, cash and marketable securities in the Trust Account, and net loss from operations[71][72] Assets (June 30, 2025) | Assets (June 30, 2025) | | | :--- | :--- | | Cash | $1,039,666 | | Cash and marketable securities held in Trust Account | $253,556,881 | | Total Assets | $254,639,362 | Net Income | Net Income | | | | :--- | :--- | :--- | | | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | Net loss from operations | $(112,489) | $(188,311) | | Interest income on Trust Account | $556,881 | $556,881 | | Net income | $444,392 | $368,570 | Note 6 — Related Party Transactions - The Sponsor initially purchased 5,750,000 founder shares for $25,000 on December 3, 2024, and received an additional 575,000 founder shares through a share capitalization on June 9, 2025, totaling 6,325,000 founder shares[73] - The Sponsor loaned the Company up to $300,000 for IPO expenses via a non-interest bearing promissory note, which was repaid in full on June 11, 2025, with an overpayment of $41,075 recorded as a related party receivable[75][76] - The Company entered into an administrative services agreement with an affiliate of the Sponsor, incurring $6,333 per month for office space, utilities, and administrative support, commencing June 11, 2025[77] - The Sponsor or affiliates may provide non-interest bearing Working Capital Loans up to $1,500,000 to finance business combination transaction costs, convertible into private placement units if a business combination is completed[78] Note 7 — Commitments and Contingencies - The Company faces risks from global social and political circumstances (e.g., U.S.-China trade tensions, conflicts in Ukraine/Middle East) that could materially affect its ability to consummate a Business Combination or the operations of a target business[79][80] - Holders of founder shares, Private Placement Units, and units from Working Capital Loans have registration rights, allowing them to demand the Company register their securities for sale[81][82] - The underwriters were paid a cash underwriting discount of $5,060,000 and are entitled to a deferred underwriting discount of $8,855,000, payable upon completion of an initial Business Combination[85] Note 8 — Shareholders' Deficit - As of June 30, 2025, the Company had 683,000 Class A ordinary shares issued and outstanding (excluding 25,300,000 shares subject to possible redemption) and 6,325,000 Class B ordinary shares issued and outstanding[87][88] - Class B ordinary shares (founder shares) automatically convert into Class A ordinary shares on a one-for-one basis upon or immediately following a business combination, subject to certain adjustments[89] - Prior to a business combination, only Class B ordinary shareholders have the right to vote on the appointment and removal of directors and on continuing the Company in a jurisdiction outside the Cayman Islands[90] Note 9 – Fair Value Measurements - The fair value of Public Warrants was determined to be $3,340,119, or $0.26 per Public Warrant, as of July 11, 2025, using the Black-Scholes Simulation Model[92] Public Warrants Valuation (June 11, 2025) | Public Warrants Valuation (June 11, 2025) | | | :--- | :--- | | Implied ordinary share price | $9.87 | | Exercise price | $11.50 | | Simulation term (years) | 6.50 | | Risk-free rate | 4.16% | | Selected volatility | 2.70% | | Calculated value per warrant | $0.26 | | Market adjustment | 23.53% | Note 10 — Subsequent Events - On July 28, 2025, the Company announced that holders of its Units may elect to separately trade the Class A ordinary shares and warrants included in the Units on or about July 31, 2025[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, IPO impact, and liquidity strategy as a blank check company Overview - Blue Water Acquisition Corp. III is a blank check company formed on November 1, 2024, with no material operations, aiming to effect a business combination, primarily focusing on biotechnology, healthcare, and technology companies[98] - The company plans to use cash from its IPO and private placement, proceeds from share sales, debt, or other securities issuances for its initial business combination[98] - Issuing additional shares for a business combination could significantly dilute existing equity interests, subordinate rights if preference shares are issued, cause a change in control, delay changes of control, and adversely affect market prices for Class A ordinary shares and warrants[99] Results of Operations and Known Trends or Future Events - The company has not generated operating revenues to date, with activities focused on organizational efforts, the IPO, and pursuing a business combination[100] - Net income for the three months ended June 30, 2025, was $444,392, primarily from $556,881 in interest income on the trust account, offset by operating expenses[101] - Net income for the six months ended June 30, 2025, was $368,570, also driven by interest income on the trust account[102] Liquidity and Capital Resources Financial Position | Financial Position | | | | :--- | :--- | :--- | | | June 30, 2025 | December 31, 2024 | | Cash | $1,039,666 | $0 | | Working Capital (Deficit) | $1,053,059 | $(48,541) | - Net cash used in operating activities for the six months ended June 30, 2025, was $87,484[104] - Liquidity needs have been met through founder share purchases ($25,000), Sponsor loans ($300,000), and gross proceeds of $259,830,000 from the IPO and private placement[105] - A total of $253,000,000 from the IPO and private placement proceeds was placed in the trust account, to be invested in U.S. government treasury obligations or money market funds[107] - The company has $1,039,666 of proceeds outside the trust account, intended for identifying and evaluating target businesses, due diligence, and negotiation[109] Off-Balance Sheet Arrangements - As of June 30, 2025, the Company did not have any off-balance sheet arrangements or commitments/contractual obligations[112][113] Contractual Obligations - The Company has a deferred underwriting discount of $8,855,000 payable to BTIG, LLC upon completion of an initial business combination[114] - An administrative services agreement requires a payment of $10,000 per month to an affiliate of the Sponsor for office space and support, commencing June 11, 2025, until a business combination or liquidation[115] Commitments and Contingencies - Holders of founder shares, Private Placement Units, and units from Working Capital Loans possess registration rights, allowing them to demand the Company register their securities for sale[116][117] - The underwriters were paid a cash underwriting discount of $5,060,000 and are entitled to a deferred underwriting discount of $8,855,000, payable upon completion of an initial business combination[118] Critical Accounting Estimates - The Company has not identified any critical accounting estimates as of June 30, 2025[119] Recent Accounting Pronouncements - Refer to Note 2, 'Summary of Significant Accounting Policies,' for details on recent accounting pronouncements[120] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Blue Water Acquisition Corp. III is exempt from market risk disclosures - The Company is not required to make disclosures under this Item as it is a smaller reporting company[121] Item 4. Controls and Procedures Disclosure controls were ineffective as of June 30, 2025, due to a material weakness in internal controls - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal controls over financial reporting[122][123] - The material weakness is attributed to a lack of properly designed, implemented, and effectively operating controls[123] - Management plans to remediate this by designing a formal control environment, accounting policies, procedures, and controls, and enhancing processes to apply complex accounting standards, including using third-party professionals[123] PART II – OTHER INFORMATION Item 1. Legal Proceedings. No material legal or governmental proceedings are pending against the company or its officers and directors - No material litigation, arbitration, or governmental proceedings are currently pending against the Company, its officers, or directors[127] Item 1A. Risk Factors. As a smaller reporting company, Blue Water Acquisition Corp. III is exempt from risk factor disclosures - The Company is not required to make disclosures under this Item as it is a smaller reporting company[128] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Details unregistered equity sales and IPO proceeds use for the trust account and offering expenses Recent Sales of Unregistered Securities - On December 3, 2024, the Sponsor purchased 5,750,000 founder shares for $25,000. An additional 575,000 founder shares were issued to the Sponsor on June 9, 2025, via a share capitalization, totaling 6,325,000 founder shares[129] - Simultaneously with the IPO, 683,000 private placement units were sold to the Sponsor and BTIG, LLC for $6,830,000, each consisting of one Class A Ordinary Share and one-half of one redeemable warrant[130] - These private placement units were issued under Section 4(a)(2) of the Securities Act, as the transaction did not involve a public offering[132] Use of Proceeds from our Initial Public Offering - The IPO, consummated on June 11, 2025, involved the sale of 25,300,000 units at $10.00 per unit, generating gross proceeds of $253,000,000[133] - Underwriting fees paid at IPO closing totaled $5,060,000, with an additional $8,855,000 in underwriting fees deferred[134] - A total of $253,000,000 from the net proceeds of the IPO and private placement was deposited into the trust account, to be invested in U.S. government securities or money market funds[135] - Other IPO-related costs and expenses incurred through June 11, 2025, amounted to $505,089[136] Item 3. Defaults Upon Senior Securities. The company reported no defaults upon senior securities during the quarter ended June 30, 2025 - The Company reported no defaults upon senior securities[136] Item 4. Mine Safety Disclosures. Mine Safety Disclosures are not applicable to Blue Water Acquisition Corp. III - Mine Safety Disclosures are not applicable to the Company[137] Item 5. Other Information. The Company reported no other information - The Company reported no other information[138] Item 6. Exhibits. Lists all exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certifications, and XBRL - The report includes various exhibits such as the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, Warrant Agreement, Letter Agreement, Investment Management Trust Agreement, Registration Rights Agreement, Private Units Subscription Agreements, Indemnity Agreement, Administrative Services Agreement, and certifications[140] - XBRL Instance Document and Taxonomy Extension Documents are also filed as exhibits[140]