| Description of Organization, Business Operations and Basis of Presentation | 1. Organization and Description of Business Operations Clarus Therapeutics, Inc.
(the “Company” or “Clarus”) is a specialty pharmaceutical company focused on the commercialization of JATENZO,
the first and only oral testosterone (“T”) replacement, or testosterone replacement therapy (“TRT”), of its kind
approved by the U.S. Food and Drug Administration, or FDA. The FDA completed its review of the Company’s New Drug Application and
approved JATENZO for marketing on March 27, 2019. The Company commercially launched JATENZO on February 10, 2020. JATENZO is the Company’s
sole source of revenue and sales are exclusively within the United States. Management remains committed to the product’s commercial
success. The Company was founded in 2004 and is located and headquartered in Northbrook, Illinois. The Company is subject to risks
and uncertainties associated with any pharmaceutical company that is transitioning from the development to commercial stage. Since inception,
the Company has incurred substantial operating losses due to substantial product development and commercialization expenditures. In addition,
the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.
The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of JATENZO, is cash
flow positive from operations, or enters into cash flow positive business development transactions. The Company’s U.S. patent
portfolio on JATENZO currently includes five issued patents. The issued U.S. patents contain claims to both pharmaceutical compositions
and methods of treatment using the Company’s proprietary pharmaceutical composition and all are listed in the FDA Orange Book: Approved
Drug Products with Therapeutic Equivalence Evaluations. In addition, the Company has several patent applications pending in the United
States and other countries that, if issued, will cover pharmaceutical compositions, methods of treatment and other features of JATENZO,
and have the potential to extend patent coverage beyond 2030. Merger On September 9, 2021 (the “Closing
Date”), Blue Water Acquisition Corp. (“Blue Water”, or “BLUW”), a Delaware corporation and Special Purpose
Acquisition Company (“SPAC”) and Blue Water Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of Blue Water
(“Merger Sub”), consummated the previously announced merger, dated as of April 27, 2021, with Clarus Therapeutics, Inc., a
Delaware corporation (“Clarus”), pursuant to which, subject to the terms and conditions set forth in the Merger Agreement,
the Merger Sub merged with and into Clarus, with Clarus surviving as a wholly-owned subsidiary of Blue Water, and with Clarus’s
equity holders and convertible debt holders equity interests converted into the right to receive shares of New Blue Water common stock
or else be canceled, retired and terminated without consideration, as provided in the Merger Agreement. Upon the consummation of the Business
Combination, Blue Water changed its name to “Clarus Therapeutics Holdings, Inc.” In connection with the Merger,
the Company’s convertible noteholders and senior secured noteholders provided $25.0 million in additional capital to the Company
following the announcement of the merger. All such proceeds plus accrued interest converted to shares of Combined Entity common stock
at a price of $10.00 per share at the Closing Date, resulting in 2,558,705 shares issued. As of June 30, 2021 the Company had received
$17.8 million of the $25.0 million in additional capital through the issuance of convertible notes and indenture notes (Note
6, Debt At the effective time of the
Merger (the “Effective Time”), shares of Clarus’s redeemable convertible Series D Preferred Stock issued and outstanding
and all principal and accrued interest under the Company’s Series D convertible notes and Clarus’ outstanding warrants immediately
prior to the Effective Time converted into 13,431,889 shares of the combined Company’s common stock. Additionally, $10.0 million
of debt related to the Company’s senior secured notes including certain royalty rights was exchanged for an aggregate 1,905,000
shares of the combined Company’s common stock (which included 135,000 shares from the Sponsor pursuant to a share allocation agreement).
All unexpired, outstanding Series D Warrants remain outstanding and became exercisable shares of common stock of the surviving entity,
subject to adjustment in accordance with the exchange ratio All other series of preferred
stock, common stock and stock options were cancelled and extinguished upon completion of the Merger. In addition, Clarus’s existing
equity incentive plans were terminated. Liquidity and Going Concern The Company has evaluated
whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the condensed financial statements are issued. Since its inception, the Company
has devoted substantially all its efforts to business planning, clinical development, commercial planning and raising capital. The Company
has incurred losses since inception and has an accumulated deficit of $359.3 million as of June 30, 2021, including $101.7 million of
cumulative accretion on the Series A Redeemable Convertible Preferred Stock (“Series A Preferred Stock”), the Series B Redeemable
Convertible Preferred Stock (“Series B Preferred Stock”), the Series C Redeemable Convertible Preferred Stock (“Series
C Preferred Stock”) and the Series D Redeemable Convertible Preferred Stock (“Series D Preferred Stock”), collectively,
Preferred Stock, and $99.0 million of cumulative non-cash interest related to previously issued convertible debt. The Company is also
in forbearance and default on its March 12, 2020 senior secured notes as it was unable to maintain at least $10.0 million in cash and
cash equivalents as of the last day of each calendar month beginning December 2020 and was unable to pay the required $3.1 million
interest payment due in March 2021. In addition to the consummation
of the SPAC merger and the related investment, the Company plans to seek additional funding through the expansion of its commercial efforts
to grow JATENZO and its operating cash flow, business development efforts to out-license JATENZO internationally, equity financings,
debt financings such as the secured notes described in Note 6, Debt If the Company is unable to
obtain funding or generate operating cash flow, the Company will be forced to delay, reduce or eliminate some or all of its product portfolio
expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue
operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining
sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. The terms of any financing may adversely
affect the holdings or the rights of the Company’s stockholders. Based on its recurring losses
from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and need to raise additional
capital to finance its future operations, as of the issuance date of the condensed financial statements for the six months ended June
30, 2021, the Company has concluded that its cash and cash equivalents will not be sufficient to fund its operating expenses, capital
expenditure requirements and debt service payments through at least twelve months from the date that these condensed financial statements
are available to be issued and that there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed
financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed
financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the
realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Impact of the COVID-19 Pandemic The business disruptions associated
with the COVID-19 pandemic had a significant negative impact on the Company’s condensed financial statements for the six months
ended June 30, 2021. Management expects that the public health actions being undertaken to reduce the spread of the virus, and that may
have to be undertaken again in the event of a resurgence of the virus, will create significant disruptions to the Company with respect
to: (i) the demand for its products, (ii) the ability of its sales representatives to reach healthcare customers, (iii) its
ability to maintain staffing levels to support its operations, (iv) its ability to continue to manufacture certain of its products,
(v) the reliability of its supply chain and (vi) its ability to achieve the financial covenants required by the senior secured
notes agreement (see Note 6, Debt The Company is closely monitoring
the evolving impact of the pandemic on all aspects of its business. The Company has implemented a number of measures designed to protect
the health and safety of its employees, support its customers and promote business continuity. The Company is also actively reviewing
and implementing cost-saving measures, including discontinuing or delaying all non-essential services and programs and instituting controls
on travel, events, marketing and clinical studies to adapt the business plan for the evolving COVID-19 challenges. | | 1.
Organization and Description of Business Operations Clarus
Therapeutics, Inc. (the “Company” or “Clarus”) is a specialty pharmaceutical company focused on the commercialization
of JATENZO, the first and only oral testosterone (“T”) replacement, or testosterone replacement therapy (“TRT”),
of its kind approved by the U.S. Food and Drug Administration, or FDA. The FDA completed its review of the Company’s New Drug Application
and approved JATENZO for marketing on March 27, 2019. The Company commercially launched JATENZO on February 10, 2020. JATENZO is the
Company’s sole source of revenue and sales are exclusively within the United States. Management remains committed to the product’s
commercial success. The Company was founded in 2004 and is located and headquartered in Northbrook, Illinois. The
Company is subject to risks and uncertainties associated with any pharmaceutical company that is transitioning from the development to
commercial stage. Since inception, the Company has incurred substantial operating losses due to substantial product development and commercialization
expenditures. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services
of its employees and consultants. The Company anticipates incurring additional losses until such time, if ever, that it can generate
significant sales of JATENZO, is cash flow positive from operations, or enters into cash flow positive business development transactions. Liquidity
and Going Concern The
Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about
the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Since
its inception, the Company has devoted substantially all its efforts to business planning, clinical development, commercial planning
and raising capital. The Company has incurred losses since inception and has an accumulated deficit of $325.8 million as of December
31, 2020, including $94.0 million of cumulative accretion on the Series A Redeemable Convertible Preferred Stock (“Series A Preferred
Stock”), the Series B Redeemable Convertible Preferred Stock (“Series B Preferred Stock”), the Series C Redeemable
Convertible Preferred Stock (“Series C Preferred Stock”) and the Series D Redeemable Convertible Preferred Stock (“Series
D Preferred Stock”), collectively, Preferred Stock, and $97.6 million of cumulative non-cash interest related to previously issued
convertible debt. The Company is also in forbearance on its March 12, 2020 senior secured notes as it was unable to maintain at least
$10.0 million in cash and cash equivalents as of the last day of each calendar month beginning December 2020 and was unable to pay
the required $3.1 million interest payment due in March 2021. In accordance with the related forbearance agreement, the Company
will need to maintain at least $2.5 million of cash and cash equivalents as of the last day of each calendar month until the proposed
SPAC merger (see below). The
Company is seeking to complete a merger with a newly-formed Special Purpose Acquisition Company (“SPAC”), whereby the Company
will become a 100% owned subsidiary of the SPAC. In addition, current Clarus stakeholders will invest an additional $25.0 million in
Clarus before the close of this transaction (Note 15). In addition to pursuing consummation of the SPAC merger and the related investment,
the Company plans to seek additional funding through the expansion of its commercial efforts to grow JATENZO and its operating cash flow,
business development efforts to out-license JATENZO internationally, equity financings, debt financings such as the secured notes described
in Note 7, Debt If
the Company is unable to obtain funding or generate operating cash flow, the Company will be forced to delay, reduce or eliminate some
or all of its product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company
may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will
be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. The terms
of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Based
on its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future,
and need to raise additional capital to finance its future operations, as of the issuance date of the financial statements for the year
ended December 31, 2020, the Company has concluded that its cash and cash equivalents will not be sufficient to fund its operating expenses,
capital expenditure requirements and debt service payments through at least twelve months from the date that these financial statements
are available to be issued and that there is substantial doubt about the Company’s ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly,
the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates
the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Impact
of the COVID-19 Pandemic The
business disruptions associated with the COVID-19 pandemic had a significant negative impact on the Company’s financial statements
for the year ended December 31, 2020. Management expects that the public health actions being undertaken to reduce the spread of the
virus, and that may have to be undertaken again in the event of a resurgence of the virus, will create significant disruptions to the
Company with respect to: (i) the demand for its products, (ii) the ability of its sales representatives to reach healthcare
customers, (iii) its ability to maintain staffing levels to support its operations, (iv) its ability to continue to manufacture
certain of its products, (v) the reliability of its supply chain and (vi) its ability to achieve the financial covenants required
by the senior secured notes agreement (see Note 7, Debt The
Company is closely monitoring the evolving impact of the pandemic on all aspects of its business. The Company has implemented a number
of measures designed to protect the health and safety of its employees, support its customers and promote business continuity. The Company
is also actively reviewing and implementing cost-saving measures including discontinuing or delaying all non-essential services and programs
and instituting controls on travel, events, marketing and clinical studies to adapt the business plan for the evolving COVID-19 challenges. |
| Description of Organization, Business Operations and Basis of Presentation | Note 1—Description of Organization, Business
Operations and Basis of Presentation Blue Water Acquisition Corp.,
including its consolidated subsidiary, (the “Company”) is a blank check company incorporated in Delaware on May 22, 2020.
The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth
company and, as such, the Company is subject to all of the risks associated with emerging growth companies. On April 27, 2021, Blue Water
Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of the Company was formed. As of June 30, 2021, the
Company had not commenced any operations. All activity for the period from May 22, 2020 (inception) through June 30, 2021 relates
to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below. The Company
will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
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. The Company has selected December 31 as its fiscal year end. The Company’s sponsor
is Blue Water Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on December 15, 2020. On December 17, 2020, the Company consummated its Initial
Public Offering of 5,750,000 units (the “Units” and, with respect to the Class A Common Stock included in the
Units being offered, the “Public Shares”), including 750,000 additional Units to cover over-allotments (the “Over-Allotment
Units”), at $10.00 per Unit, generating gross proceeds of $57.5 million, and incurring offering costs of approximately
$3.7 million, of which approximately $2.0 million was for deferred underwriting commissions (Note 5). Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 3,445,000 warrants
(each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per
Private Placement Warrant to the Sponsor, generating proceeds of approximately $3.4 million (Note 4). Upon the closing of the Initial
Public Offering and the Private Placement, approximately $58.7 million ($10.20 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement was held in a trust account (“Trust Account”)
located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in
U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185
days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act 1940,
as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined
by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account
as described below. The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust
Account (excluding the deferred underwriting commissions and taxes payable and interest previously released for working capital purposes
on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company
will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. The Company will provide
the holders (the “Public Stockholders”) of the Public Shares with the opportunity to redeem all or a portion of their Public
Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be
entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be
$10.20 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares
will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These
Public Shares are recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering
in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will proceed with a Business Combination
if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an
amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company
does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation
(the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and
Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however,
stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal
reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they
vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the
initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased
during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders agreed to waive
their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination. The Certificate of Incorporation
provided that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is
acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more
of the Public Shares, without the prior consent of the Company. The Sponsor and the Company’s
officers and directors (the “initial stockholders”) agreed not to propose an amendment to the Certificate of Incorporation
to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity
to redeem their Public Shares in conjunction with any such amendment. The Company will have up
to 12 months from the closing of the Initial Public Offering, or December 17, 2021, (or up to 18 months from the consummation
of the Initial Public Offering, or June 17, 2022, if the Company extends the period of time to consummate a Business Combination) (the
“Combination Period”) to complete a Business Combination. In order to extend the time available for the Company to consummate
a Business Combination, the Sponsor or its affiliate or designees must deposit into the Trust Account $575,000 ($0.10 per Public Share),
on or prior to the date of the applicable deadline, for each three-month extension. If the Company is unable
to complete a Business Combination within the Combination Period, the Company 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 the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the
Trust Account and not previously released to the Company for working capital purposes or to pay its taxes (less up to $50,000 of
interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and the board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. The initial stockholders
agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after
the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares
if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to
the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination
within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will
be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value
of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.20. In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party
(except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement
or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i)
$10.20 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of
the Trust Account, if less than $10.20 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies
held in the Trust Account (whether or not such waiver is enforceable) not will it apply to any claims under the Company’s indemnity
of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account. Going Concern As of June 30, 2021, the
Company had approximately $225,000 in cash and working capital deficit of approximately $650,000. The Company’s liquidity
needs prior to the consummation of the Initial Public Offering were satisfied through the payment $25,000 from the Sponsor to cover
certain offering costs on behalf of the Company in exchange for issuance of the Founders Shares (as defined in Note 4), and a loan from
the Sponsor of approximately $157,000 under the Note (as defined in Note 4). The Company repaid the Note in full on December 17,
2020. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net
proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In connection with the Company’s
assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Basis of Presentation – Going Concern,”
management has determined that the anticipated cash requirements in the next twelve months raise substantial doubt about the Company’s
ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date the Company is required
to liquidate, June 17, 2022. The unaudited condensed consolidated financial statements do not include any adjustment that might be necessary
if the Company is unable to continue as a going concern. COVID-19 Impact Management is currently evaluating
the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have
a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis of Presentation The accompanying unaudited
condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal
accruals) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are
not necessarily indicative of the results that may be expected for the year ended December 31, 2021. The accompanying consolidated
financial statements comprise the Company and its wholly-owned subsidiary. As of June 30, 2021 and for the three and six month
ended June 30, 2021, the wholly-owned subsidiary has had no activity. Emerging Growth Company The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period, which means that when a standard is issued or revised and it has different application dates for public or
private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt
the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is
neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used. Proposed Business Combination On April 27, 2021, the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blue Water Merger Sub Corp., a Delaware corporation
(the “Merger Sub”) and wholly-owned subsidiary of the Company, and Clarus Therapeutics, Inc. a Delaware corporation (“Clarus”). Pursuant to the Merger Agreement,
subject to the terms and conditions set forth therein, upon the consummation of the transactions contemplated by the Merger Agreement
(the “Closing”), Merger Sub will merge with and into Clarus (the “Merger” and, together with the other transactions
contemplated by the Merger Agreement, the “Transactions”), with Clarus continuing as the surviving corporation in the Merger
and a wholly-owned subsidiary of the Company. In the Merger, based on existing Clarus share preference and convertible debtholder rights, (i)
certain shares of Clarus preferred stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective
Time”) will be canceled and converted into the right to receive a portion of the Merger Consideration (as defined below), (ii) all
other shares of Clarus capital stock, and all outstanding options under the Company’s equity incentive plan to purchase any capital
stock that have not been exercised prior to the Effective Time, will be canceled, retired and terminated without any consideration or
any liability to Clarus with respect thereto, and (iii) certain convertible and non-convertible promissory notes of the Company outstanding
as of the Closing will be canceled and converted into, or exchanged for, the right to receive a portion of the Merger Consideration. The aggregate merger consideration
to be paid pursuant to the Merger Agreement to Clarus securityholders as of immediately prior to the Effective Time (“Clarus Securityholders”)
will be a number of shares of Company Class A Common Stock equal to (the “Merger Consideration”): (A) (i) $198,184,295.43,
plus (or minus) the estimated indebtedness of Clarus as of the Closing, net of its cash and cash equivalents (“Closing Net Indebtedness”),
divided by (ii) $10.20. minus 1,500,000 shares of Company Class A Common Stock (the “2025 Note Exchange Shares”) issuable
to the holders of certain non-convertible promissory notes of Clarus in exchange for $10 million of the aggregate principal amount of
such notes and other amendments to the terms of the remaining indebtedness pursuant to the Transaction Support Agreement; plus (B) the
2025 Note Exchange Shares, plus (C) (i) the outstanding balance (principal and interest) at Closing of certain convertible and non-convertible
promissory notes of Clarus issued between signing of the Merger Agreement and Closing, divided by (ii) $10.00, other than any such non-convertible
promissory notes that the Company elects in its discretion to pay off at Closing. The Merger Consideration to be paid to Clarus Securityholders
will be paid solely by the delivery of new shares of Company Class A Common Stock. The Closing Net Indebtedness (and the resulting Merger
Consideration) is based solely on estimates determined shortly prior to the Closing and is not subject to any post-Closing true-up or
adjustment. The Merger Consideration will be allocated among Clarus Securityholders as determined by Clarus shortly prior to the Closing
based on existing share preference and convertible debtholder rights. | Note
1 — Description of Organization, Business Operations and Basis of Presentation Blue
Water Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on May 22, 2020. The
Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging
growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies. As
of December 31, 2020, the Company had not commenced any operations. All activity for the period from May 22, 2020 (inception)
through December 31, 2020 relates to the Company’s formation and the initial public offering (the “Initial Public
Offering”) described below. The Company will not generate any operating revenues until after the completion of its initial
Business Combination, at the earliest. The Company 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. The Company has selected December 31
as its fiscal year end. The
Company’s sponsor is Blue Water Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The
registration statement for the Company’s Initial Public Offering was declared effective on December 15, 2020. On December
17, 2020, the Company consummated its Initial Public Offering of 5,750,000 units (the “Units” and,
with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 750,000 additional
Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $57.5 million,
and incurring offering costs of approximately $3.7 million, of which approximately $2.0 million was for deferred underwriting
commissions (Note 5). Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”)
of 3,445,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement
Warrants”) at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $3.4 million
(Note 4). Upon
the closing of the Initial Public Offering and the Private Placement, approximately $58.7 million ($10.20 per Unit) of
the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was held in a trust
account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting
as trustee, and will be invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the
Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act 1940, as amended (the “Investment Company Act”), which invest only in direct U.S.
government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account as described below. The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied
generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business
Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market
value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable
and interest previously released for working capital purposes on the income earned on the Trust Account) at the time of the agreement
to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in the target
sufficient for it not to be required to register as an investment company under the Investment Company Act. The
Company will provide the holders (the “Public Stockholders”) of the Public Shares with the opportunity to redeem all
or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company
will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its
discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held
in the Trust Account (initially anticipated to be $10.20 per Public Share). The per-share amount to be distributed
to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company
will pay to the underwriters (as discussed in Note 5). These Public Shares are recorded at a redemption value and classified as
temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination.
The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other
legal reasons, the Company will, pursuant to its Certificate of Incorporation (the “Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of
the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company
will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender
offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for
or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the
initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares
purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders
agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion
of a Business Combination. The
Certificate of Incorporation provided that a Public Stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect
to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company. The
Sponsor and the Company’s officers and directors (the “initial stockholders”) agreed not to propose an amendment
to the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the
Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or with
respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination
activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction
with any such amendment. The
Company will have up to 12 months from the closing of the Initial Public Offering, or December 17, 2021, (or up to 18 months
from the consummation of the Initial Public Offering, or June 17, 2022, if the Company extends the period of time to consummate
a Business Combination) (the “Combination Period”) to complete a Business Combination. In order to extend the time
available for the Company to consummate a Business Combination, the Sponsor or its affiliate or designees must deposit into the
Trust Account $575,000 ($0.10 per Public Share), on or prior to the date of the applicable deadline, for each three-month extension. If
the Company is unable to complete a Business Combination within the Combination Period, the Company 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 the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account including interest earned on the funds held in the Trust Account and not previously released to the Company for working
capital purposes or to pay its taxes (less up to $50,000 of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve
and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and
the requirements of other applicable law. The
initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder
Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders
acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust
Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period.
The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in
the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts
will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution
(including Trust Account assets) will be only $10.20. In order to protect the amounts held in the Trust Account, the Sponsor has
agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent
registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with
which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement
(a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 per Public Share and
(ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account,
if less than $10.20 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such
liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held
in the Trust Account (whether or not such waiver is enforceable) not will it apply to any claims under the Company’s indemnity
of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the Trust Account. Going Concern As of December 31, 2020, the
Company had approximately $655,000 in cash, and working capital of approximately $575,000. The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment $25,000
from the Sponsor to cover certain offering costs on behalf of the Company in exchange for issuance of the Founders Shares (as
defined in Note 4), and a loan from the Sponsor of approximately $157,000 under the Note (as defined in Note 4). The
Company repaid the Note in full on December 17, 2020. Subsequent to the consummation of the Initial Public Offering, the Company’s
liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement
held outside of the Trust Account. In
connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Basis
of Presentation – Going Concern,” management has determined that the anticipated cash requirements in the next twelve months
raise substantial about the Company’s ability to continue as a going concern until the earlier of the consummation of the Business
Combination or the date the Company is required to liquidate, June 17, 2022. The financial statements do not include any adjustment that
might be necessary if the Company is unable to continue as a going concern. COVID-19
Impact Management
is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably
possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or
search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis
of Presentation The
accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in
the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Emerging
Growth Company The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved. Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition
period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised
and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt
the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company that is neither an emerging growth company nor an emerging growth company that
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used. | |
