Blue Water Acquisition Corp. III

Previous wording

Unless otherwise stated or the context otherwise requires, references in this quarterly report to (i) the “Company,” “us,” or “we” are to Blue Water Acquisition Corp. III, a Cayman Islands exempted company; (ii) “founder shares” are to shares of our Class B ordinary shares initially purchased by our Sponsor in a private placement prior to our initial public offering, and the shares of our Class A ordinary shares issued upon the conversion thereof; and (iii) “Sponsor” are to Blue Water Acquisition III LLC, a Delaware limited liability company. 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 report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Current wording

Unless otherwise stated or the context otherwise requires, references in this Quarterly Report to (i) the “Company,” “us,” or “we” are to Blue Water Acquisition Corp. III, a Cayman Islands exempted company; (ii) “Founder Shares” are to shares of our Class B ordinary shares initially purchased by our Sponsor in a private placement prior to our initial public offering, and the shares of our Class A ordinary shares issued upon the conversion thereof; and (iii) “Sponsor” are to Blue Water Acquisition III LLC, a Delaware limited liability company. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed 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.

Previous wording

We are a blank check company incorporated on November 1, 2024 as a Cayman Islands exempted company with no material operations of our own. We were formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We may pursue an initial business combination in any business or industry but expect to focus on biotechnology, healthcare and technology companies. Our units include shares of a Cayman Islands blank check company instead of the shares of the operating entities with whom we may combine. We intend to effectuate our initial business combination using cash from the proceeds of the initial public offering and the private placement of the private placement units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, other securities issuances, or a combination of the foregoing.

Current wording

We are a blank check company incorporated on November 1, 2024, as a Cayman Islands exempted company with no material operations of our own. We were formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses (the “Business Combination”). We may pursue an initial Business Combination in any business or industry, but we expect to focus on biotechnology, healthcare and technology companies. Our units include shares of a Cayman Islands blank check company, not shares of any operating entities with whom we may ultimately combine.

Previous wording

We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 1, 2024 (inception) through September 30, 2025 relates to organizational activities, our initial public offering, and, subsequent to the initial public offering, our pursuit of an initial business combination. We will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after the initial public offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We have incurred, and expect to incur, increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. Additionally, we expect our expenses to increase substantially after identifying a target for our initial business combination.

Current wording

We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 1, 2024 (inception) through March 31, 2026 relate to organizational activities, our Initial Public Offering, and, subsequent to the Initial Public Offering, our pursuit of an initial business combination. We will not generate any operating revenues until after completion of our initial business combination. We have and will continue to generate non-operating income in the form of interest income on cash and cash equivalents and dividend income from marketable securities after the Initial Public Offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We have incurred, and expect to incur, increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. Additionally, we expect our expenses to increase substantially after identifying a target for our initial business combination.

Previous wording

For the three months ended September 30, 2025, we had net income of $2,292,067, which consisted of $2,715,577 of income earned on cash and marketable securities held in the Trust Account, offset by $137,670 of formation, general and administrative expenses, $236,837 of legal and accounting expenses, $30,000 of administrative support fees, and $19,003 of insurance expense.

Current wording

For the three months ended March 31, 2026, we had net income of $1,924,957, which consisted of $2,278,517 of income earned on cash and marketable securities held in the Trust Account, offset by $52,487 of formation, general and administrative expenses, $261,698 of legal and accounting expenses, $20,783 of listing fees, and $18,592 of insurance expense.

Previous wording

As of September 30, 2025 and December 31, 2024, we had cash of $759,229 and $0, respectively, and working capital (deficit) of $577,284 and $(48,541), respectively.

Current wording

As of March 31, 2026 and December 31, 2025, we had $420,414 and no cash, respectively, no cash equivalents, and a working capital (deficit) of $56,028 and $(109,004), respectively.

Previous wording

For the nine months ended September 30, 2025, net cash used in by operating activities was $367,921. Net income of $2,660,637 was increased by $101,708 of formation, general and administrative costs paid by the Sponsor under the promissory note and an $142,193 increase in operating assets and liabilities, offset by $3,272,459 of interest income on the trust account.

Current wording

For the three months ended March 31, 2025, net cash used in operating activities was $0. Net loss of $75,822 was increased by $67,465 formation, general and administrative costs paid by the Sponsor under the promissory note – related party, and an $8,357 increase in operating assets and liabilities.

Previous wording

The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statement. Although no formal agreement exists, the Sponsor is committed to extend Working Capital Loans (defined in Note 6) as needed. The Company cannot assure that its plans to consummate an initial Business Combination will be successful.

Current wording

The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the Sponsor is committed to extending Working Capital Loans (defined in Note 6) as needed. The Company cannot ensure that its plans to consummate an initial Business Combination will be successful.

Previous wording

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these financial statements are issued. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Current wording

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these unaudited condensed financial statements are issued. These unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Previous wording

Our liquidity needs have been satisfied to date through the purchase of founder shares from our Sponsor for $25,000, $300,000 in loans from our Sponsor, and proceeds generated from our initial public offering and simultaneous private placement that generated gross proceeds of $259,830,000.

Current wording

Our liquidity needs have been satisfied to date through the purchase of Founder Shares from our Prior Sponsor for $25,000, $300,000 in loans from our Prior Sponsor, and proceeds generated from our Initial Public Offering and simultaneous private placement that generated gross proceeds of $259,830,000. $253,000,000 of the net proceeds are held in the trust account and are not available for the working capital needs of the Company.

Previous wording

Following the closing of the initial public offering, on June 11, 2025, an amount of $253,000,000 ($10.00 per unit) from the net proceeds of the sale of the Units and the Private Placement Units, was placed in the trust account, with Continental Stock Transfer & Trust Company acting as trustee. The funds are initially to be held in cash, including demand deposit accounts at a bank, or invested only in U.S. government treasury obligations with a maturity 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; the holding of these assets in this form is intended to be temporary and for the sole purpose of facilitating the intended business combination. To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the trust account, we may, at any time (based on management team’s ongoing assessment of all factors related to the potential status under the Investment Company Act), instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in cash or in an interest bearing demand deposit account at a bank. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the proceeds from the initial public offering and the sale of the private placement units will not be released from the trust account until the earliest of (i) the completion of our initial business combination, (ii) the redemption of our public shares if we are unable to complete the initial business combination within 24 months from the closing of the initial public offering or by such earlier liquidation date as the Company’s board of directors may approve (the “Completion Window”), subject to applicable law, or (iii) the redemption of our public shares properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles of association to (A) modify the substance or timing of our obligation to allow redemption in connection with the initial business combination or to redeem 100% of our public shares if we have not consummated an initial business combination within the Completion Window or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public shareholders.

Current wording

Following the closing of the Initial Public Offering, on June 11, 2025, an amount of $253,000,000 ($10.00 per unit) from the net proceeds of the sale of the Public Units and the Private Placement Units, was placed in the trust account, with Continental Stock Transfer & Trust Company acting as trustee. The funds are initially to be held in cash, including demand deposit accounts at a bank, or invested only in U.S. government treasury obligations with a maturity 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; the holding of these assets in this form is intended to be temporary and for the sole purpose of facilitating the intended business combination. To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the trust account, we may, at any time (based on management team’s ongoing assessment of all factors related to the potential status under the Investment Company Act), instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in cash or in an interest bearing demand deposit account at a bank. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the proceeds from the Initial Public Offering and the sale of the Private Placement Units will not be released from the trust account until the earliest of (i) the completion of our initial business combination, (ii) the redemption of our Public Shares if we are unable to complete the initial business combination within 24 months from the closing of the Initial Public Offering or by such earlier liquidation date as the Company’s board of directors may approve (the “Completion Window”), subject to applicable law, or (iii) the redemption of our Public Shares properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles of association to (A) modify the substance or timing of our obligation to allow redemption in connection with the initial business combination or to redeem 100% of our Public Shares if we have not consummated an initial business combination within the Completion Window or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination activity. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public shareholders.

Previous wording

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding deferred underwriting commissions). We may withdraw interest to pay our taxes, if any (but without deduction for any excise or similar tax that may be due or payable). Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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.

Current wording

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding deferred underwriting commissions). We may withdraw interest to pay our taxes, if any (but without deduction for any excise or similar tax that may be due or payable). Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes, if any. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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.

Previous wording

As of September 30, 2025, we have $759,229 of cash held outside of the trust account generated from the proceeds of the initial public offering. We will use these funds to primarily 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.

Current wording

As of March 31, 2026 and December 31, 2025, we have $420,414 and no cash held outside of the trust account generated from the proceeds of the Initial Public Offering, respectively. We will seek funds to primarily 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.

Previous wording

Pursuant to the underwriting agreement for our initial public offering, the underwriters are entitled to a deferred underwriting discount of 3.50% of the gross proceeds of the initial public offering held in the trust account, or $8,855,000 in the aggregate, payable to BTIG, LLC to be deposited in the trust account and released to BTIG, LLC only upon the completion of an initial business combination. The deferred underwriting commissions will be payable as follows: (i) $0.30 per Unit sold in the initial public offering will be paid to BTIG, LLC in cash upon the closing of the initial business combination and (ii) $0.05 per Unit sold in the initial public offering will be payable to BTIG, LLC in cash, provided that the Company and the Sponsor have the right, in the Company and the Sponsor’s discretion, to reallocate any portion of the Allocable Amount to third parties not participating in the initial public offering (but who are members of FINRA) that assist the Company in consummating the initial business combination.

Current wording

Pursuant to the underwriting agreement for our Initial Public Offering, the underwriters are entitled to a deferred underwriting discount of 3.50% of the gross proceeds of the Initial Public Offering held in the trust account, or $8,855,000 in the aggregate, payable to BTIG, LLC to be deposited in the trust account and released to BTIG, LLC only upon the completion of an initial business combination. The deferred underwriting commissions will be payable as follows: (i) $0.30 per Public Unit sold in the Initial Public Offering will be paid to BTIG, LLC in cash upon the closing of the initial business combination and (ii) $0.05 per Public Unit sold in the Initial Public Offering will be payable to BTIG, LLC in cash, provided that the Company and the Sponsor have the right, in the Company and the Sponsor’s discretion, to reallocate any portion of the Allocable Amount to third parties not participating in the Initial Public Offering (but who are members of FINRA) that assist the Company in consummating the initial business combination.

Previous wording

We granted the underwriters a 45-day option from the date of the initial public offering to purchase up to an additional 3,300,000 units to cover over-allotments which was exercised in full on the date of the initial public offering. The underwriters were entitled to cash underwriting discount of 2.00% of the gross proceeds of the units offered in the initial public offering, or $5,060,000 in the aggregate, which was paid to the underwriters upon the closing of the initial public offering. Additionally, the underwriters are entitled to a deferred underwriting discount of 3.50% of the gross proceeds of the initial public offering held in the trust account, or $8,855,000 in the aggregate, payable to BTIG, LLC to be deposited in the trust account and released to BTIG, LLC only upon the completion of an initial business combination. The deferred underwriting commissions will be payable as follows: (i) $0.30 per Unit sold in the initial public offering will be paid to BTIG, LLC in cash upon the closing of the initial business combination and (ii) $0.05 per Unit sold in the initial public offering will be payable to BTIG, LLC in cash, provided that the Company and the Sponsor have the right, in the Company and the Sponsor’s discretion, to reallocate any portion of the Allocable Amount to third parties not participating in the initial public offering (but who are members of FINRA) that assist the Company in consummating the initial business combination.

Current wording

We granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to an additional 3,300,000 Public Units to cover over-allotments which was exercised in full on the date of the Initial Public Offering. The underwriters were entitled to cash underwriting discount of 2.00% of the gross proceeds of the units offered in the Initial Public Offering, or $5,060,000 in the aggregate, which was paid to the underwriters upon the closing of the Initial Public Offering. Additionally, the underwriters are entitled to a deferred underwriting discount of 3.50% of the gross proceeds of the Initial Public Offering held in the trust account, or $8,855,000 in the aggregate, payable to BTIG, LLC to be deposited in the trust account and released to BTIG, LLC only upon the completion of an initial business combination. The deferred underwriting commissions will be payable as follows: (i) $0.30 per Public Unit sold in the Initial Public Offering will be paid to BTIG, LLC in cash upon the closing of the initial business combination and (ii) $0.05 per Public Unit sold in the Initial Public Offering will be payable to BTIG, LLC in cash, provided that the Company and the Sponsor have the right, in the Company and the Sponsor’s discretion, to reallocate any portion of the Allocable Amount to third parties not participating in the Initial Public Offering (but who are members of FINRA) that assist the Company in consummating the initial business combination.

Previous wording

We do not anticipate that we will need to raise additional funds following the initial public offering in order to meet the expenditures required for operating our business prior to our initial business combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an 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. In order to fund working capital deficiencies or finance transaction costs in connection with an intended 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 would repay such loaned amounts. In the event that our initial business combination does not close, we may use amounts 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 $1,500,000 of such loans may be convertible into private placement units of the post business combination entity at a price of $10.00 per unit at the option of the lender. Such units would be identical to the private placement units. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

Current wording

In order to finance transaction costs in connection with an intended initial Business Combination, the New Sponsor or an affiliate of the New Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required on a non-interest basis. If the Company completes an initial Business Combination, the Company would repay such loaned amounts. In the event that the initial Business Combination does not close, the Company may use amounts held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units of the post business combination entity at a price of $10.00 per unit at the option of the lender. Such units would be identical to the Private Placement Units.

Previous wording

Refer to Note 2. Summary of Significant Accounting Policies of the Notes to the Financial Statements.

Current wording

Refer to Note 2. Summary of Significant Accounting Policies of the Notes to the Unaudited Condensed Financial Statements.