BLUW 10-K & 10-Q changes, risk factors and insider trading

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 ourthe Prior 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) “New Sponsor” are to BlueYorkville WaterBW Acquisition IIISponsor, 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.

As of MarchJune 31,30, 2026, the Company has not commenced any operations. All activity for the period from November 1, 2024 (inception) through MarchJune 31,30, 2026, relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), as defined below, and activities associated with identifying and negotiating a potential Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents and dividend income from marketable securities from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 683,000 units (the “Private Placement Units” and, with respect to the Class A Ordinary Shares included in the Private Placement Units, the “Private Placement Shares”) at a price of $10.00 per Private Placement Unit, in a private placement to the Prior Sponsor, and BTIG, LLC (“BTIG”), the representative of the underwriters in the Initial Public Offering, generating gross proceeds of $6,830,000. Each Private Placement Unit consists of one Class A Ordinary Share and one-half of one redeemable warrant (the “Private Placement Warrants” and together with the Public Warrants, the “Warrants”). Each whole Warrant entitles the holder to purchase one Class A Ordinary Share at a price of $11.50 per share, subject to adjustment, and will become exercisable beginning at the later of 12 months from the closing of the Initial Public Offering and 30 days after the completion of an initial Business Combination, and will expire at 5:00 p.m., New York City time, five years after the consummation of the initial Business Combination, or earlier upon redemption or liquidation, and with respect to Private Placement Warrants held by BTIG or its designees, will not be exercisable more than five years from the commencement of sales in the Initial Public Offering in accordance with Financial Industry Regulatory Authority (“FINRA”) Rule 5110(g)(8). The Private Placement Warrants are identical to the Public Warrants sold in the Initial Public Offering except that, so long as they are held by the New Sponsor, BTIG, or their permitted transferees, the Private Placement Warrants (i) may not (including the Class A Ordinary Shares issuable upon exercise of these Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (ii) will be entitled to registration rights and (iii) with respect to Private Placement Warrants held by BTIG, LLC and/or its designees, will not be exercisable more than five years from the commencement of sales in the Initial Public Offering in accordance with FINRA Rule 5110(g)(8).

As a condition to consummation of the Purchase, all of the then-existing members of the board of directors (the “Prior Board”) and all then-existing officers of the Company resigned, and the New Sponsor designated (i) a new board of directors, which was elected immediately prior to the closing of the Purchase by the Prior Sponsor as the then-sole holder of the Class B Ordinary Shares in accordance with the terms of the Company’s amended and restated memorandum and articles of association, and (ii) a new management team, which was appointed immediately prior to the closing of the Purchase by the Prior Board, effective as of the closing of the Purchase. Except as otherwise specified or where the context requires otherwise, references in this Quarterly Report to “the board of directors” (the “Board”), “our directors,” “our officers,” or “management” shall refer to the board of directors, officers, and management team designated by the New Sponsor and serving following the closing of the Purchase, and all references to the “Sponsor” refer to the “New Sponsor.”Purchase.

We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 1, 2024 (inception) through MarchJune 31,30, 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.

For the three months ended MarchJune 31,30, 2026, we had net income of $1,924,957,$2,098,158, which consisted of $2,278,517$2,296,107 of income earned on cash and marketable securities held in the Trust Account, offset by $52,487$37,837 of formation, general and administrative expenses, $261,698$120,064 of legal and accounting expenses, $20,783$21,250 of listing fees, and $18,592$18,798 of insurance expense.

As of MarchJune 31,30, 2026 and December 31, 2025, we had $420,414$32,560 and no cash, respectively, no cash equivalents, and a working capital (deficit) of $56,028$627,254 and $(109,004),$109,004, respectively.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $79,586.$467,440. Net income of $1,924,957$4,023,115 was increased by a $273,974$84,069 increase in operating assets and liabilities, offset by $2,278,517$4,574,624 of interest income on the trust account.

For the threesix months ended MarchJune 31,30, 2025, net cash used in operating activities was $0.$87,484. Net lossincome of $75,822$368,570 was increased by $67,465$101,708 formation, general and administrative costs paid by the Prior Sponsor under the promissory note – related party, offset by $556,881 of interest income on the trust account, and ana $8,357$881 increasedecrease in operating assets and liabilities.

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 nothe formal agreement exists, theNew Sponsor ismay committedextend to extendingthe Working Capital Loans (defined in Note 6) as needed.needed, Thethe Company cannot ensure that its plans to consummate an initial Business Combination will be successful.

As of MarchJune 31,30, 2026 and December 31, 2025, we have $420,414$32,560 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.

On January 26, 2026, the Company issued a convertible unsecured promissory note (the “Working Capital Note”) in the aggregate principal amount of $500,000 to the New Sponsor in order to provide the Company with additional working capital. Pursuant to the terms of the Working Capital Note, the principal balance shall not accrue interest; shall be payable by the Company on the earlier of the date on which Company consummates its initial Business Combination or the date that the winding up of the Company is effective; and is convertible at the New Sponsor’s election upon the consummation of the Company’s initial Business Combination. Should the New Sponsor elect to convert all or a portion of the principal balance, the elected principal balance amount will convert, at a price of $10.00 per unit, into units identical to the Private Placement Units issued in connection with the Company’s Initial Public Offering (each, a “Working Capital Units”), rounded down to the nearest whole number. The Company has relied upon Section 4(a)(2) of the Securities Act of 1933, as amended, in connection with the issuance of the Working Capital Note.

As of MarchJune 31,30, 2026, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this report as we have not conducted any operations to date.

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of MarchJune 31,30, 2026 or December 31, 2025.

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 New Sponsor have the right, in the Company and the New 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.

The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of the Initial Public Offering, (ii) Private Placement Units (and the securities comprising such units and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) which will bewere issued in a private placement simultaneously with the closing of the Initial Public Offering and (iii) Private Placement Units (and the securities comprising such units and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of the Company’s securities held by them and any other securities of the Company acquired by them prior to the consummation of an initial business combination pursuant to a registration rights agreement entered into on the effective date of the Initial Public Offering.

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 New Sponsor have the right, in the Company and the New 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.

On December 3, 2024, the Prior Sponsor made capital contributions of $25,000, or approximately $0.004 per share, to cover certain of the Company’s expenses, for which the Company issued 5,750,000 Founder Shares to the Prior Sponsor. On June 9, 2025, the Company, through a share capitalization, issued the Prior Sponsor an additional 575,000 Founder Shares, resulting in the Prior Sponsor holding 6,325,000 Founder Shares in the aggregate. On November 25, 2025, the New Sponsor purchased from the Prior Sponsor 6,325,000 Founder Shares pursuant to the Purchase Agreement.

The Prior Sponsor agreed to loan the Company an aggregate of up to $300,000 to be used for a portion of the expenses of the Initial Public Offering (the “Promissory Note”). The Promissory Note was non-interest bearing, unsecured and due at the earlier of (i) November 20, 2025, (ii) the closing of the Initial Public Offering or (iii) the date which the Company determines not to proceed with the Initial Public Offering. As of June 11, 2025, the date of the consummation of the Initial Public Offering, the Company had borrowed $242,397 under the Promissory Note. On June 11, 2025, the Company paid $283,472 to the Prior Sponsor, resulting in an overpayment of $41,075 that was recorded as a related party receivable and repaid in full as of December 31, 2025. The Promissory Note was repaid in full in connection with the Initial Public Offering. The Promissory Note is no longer available as of December 31, 2025. Accordingly, as of MarchJune 31,30, 2026 and December 31, 2025, the Company had no amounts outstanding under the Promissory Note, respectively, and the Promissory Note is no longer available for draw down.

Commencing on June 11, 2025, the Company entered into an agreement with an affiliate of the Prior Sponsor to pay an aggregate of $10,000 per month for office space, utilities, and secretarial and administrative support. Upon completion of the initial Business Combination or the liquidation, the Company will cease paying the $10,000 per month fee. The Company did not incurincurred administrative service fees of $0 and $6,333 for the three months ended MarchJune 31,30, 20262026, and 2025.2025, respectively, and $0 and $6,333 for the six months ended June 30, 2026, and 2025, respectively. In connection with the Purchase Agreement, the administrative services agreement was terminated and the outstanding balance, which totaled $25,683 as of November 25, 2025, the date of termination, was settled through a distribution to the Prior Sponsor.

On December 26, 2025, the Board of Directors of the Company approved the payment by the Company of a monthly advisory fee of $15,000 payable to the Company’s Chief Executive Officer, Kevin McGurn, in connection with identifying, investigating, negotiating and completing the Company’s initial business combination and related matters. The advisory fee is effective as of December 2025 and will continue on a monthly basis until the earlier of (i) the closing and completion of the Company’s initial business combination and (ii) the liquidation of the Company. For the three and six months ended MarchJune 31,30, 2026, the Company incurred $45,000 and $90,000 of such advisory feesfees, respectively, with $15,000 accrued and unpaid as of MarchJune 30, 2026 and December 31, 2026.2025. For the yearthree and six months ended DecemberJune 31,30, 2025, the Company incurred $15,000 ofno such advisory fees with $15,000 accrued and unpaid as of December 31, 2025.fees.

In connection with the Purchase Agreement on November 25, 2025, the Prior Sponsor received a cash distribution of $188,273, equivalent to the remaining cash after payment of all outstanding liabilities of the Company as of the closing of the Purchase, including all liabilities to the Prior Sponsor through the closing of the Purchase. The cash distribution was paid from the cash and cash equivalents of the Company and excluded amounts held in the Trust Account.

Prior to the drawdown of the Working Capital Note on March 23, 2026, YA II PN, Ltd., an affiliate of the New Sponsor (the “Affiliate”), paid for certain expenses on behalf of the Company, amounting to $250,371$259,017 in the aggregate,aggregate. $250,371 was repaid during the three and six months ended June 30, 2026, resulting in a due to related party balance of $8,646 as of MarchJune 31,30, 2026. The amount due to the Affiliate is not a drawdown on the Working Capital Loan, it is non-interest bearing, and is due on demand.

On January 26, 2026, the Company issued a convertible unsecured promissory note (the “Working Capital Note”) in the aggregate principal amount of $500,000 to the New Sponsor. Pursuant to the terms of the Working Capital Note, the principal balance does not accrue interest, is payable on the earlier of the date on which we consummate an initial Business Combination or the date that the Company’s winding up is effective, and is convertible at the New Sponsor’s election upon the consummation of an initial Business Combination into units identical to the Private Placement Units at a price of $10.00 per unit. On March 23, 2026, the Company drew $500,000 under the Working Capital Note. As such, as of MarchJune 31,30, 2026, there was $500,000 outstanding under the Working Capital Note.

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 not identified any critical accounting estimates as of MarchJune 31,30, 2026.