Prospectus Supplement No. 7
(to Prospectus dated April 19, 2023) |
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-269456
|
Bridger Aerospace Group Holdings, Inc.
120,277,192 Shares of Common Stock
Up to 26,650,000 Shares of Common Stock Issuable
Upon
Exercise of the Warrants
Up to 9,400,000 Warrants
This prospectus supplement
updates and supplements the prospectus dated April 19, 2023 (the “Prospectus”), which forms a part of our Registration Statement
on Form S-1, as amended (Registration No. 333-269456). This prospectus supplement is being filed to update and supplement the information
in the Prospectus with the information contained in our Quarterly Report on Form 10-Q for the period ended March 31, 2024, filed with
the U.S. Securities and Exchange Commission on May 14, 2024 (the “Quarterly Report”), which is attached to this prospectus
supplement.
The Prospectus and this prospectus
supplement relate to the offer and sale from time to time by the selling securityholders named in the Prospectus, or their permitted transferees,
of (a) up to 120,277,192 shares of our common stock, $0.0001 par value (“Common Stock”), consisting of (i) up to 102,322,388
shares of Common Stock issued or issuable to the direct and indirect equityholders of Legacy Bridger (as defined in the Prospectus) in
connection with the Business Combination (as defined in the Prospectus) at an implied equity consideration value of $10.00 per share of
Common Stock, inclusive of up to 63,240,644 shares of Common Stock that may be issuable upon the conversion of shares of Series A Preferred
Stock (as defined in the Prospectus); (ii) up to 5,951,615 shares of Common Stock issuable to the holders of certain restricted stock
units that were issued by Legacy Bridger and assumed by us in connection with the closing (the “Closing”) of the Business
Combination, which were granted at no cost to the recipients thereof; (iii) up to 2,488,189 shares of Common Stock that were originally
issued in a private placement to JCIC Sponsor (as defined in the Prospectus) prior to the JCIC IPO (as defined in the Prospectus) (75,000
of which were subsequently transferred by the JCIC Sponsor to independent directors of JCIC), which were acquired at a purchase price
equivalent to approximately $0.003 per share; (iv) up to 115,000 shares of Common Stock originally issued at the Closing to JCIC Sponsor
in full consideration of the outstanding $1,150,000 loan balance under the Promissory Note (as defined in the Prospectus) for an equivalent
purchase price of $10.00 per share; and (v) up to 9,400,000 shares of Common Stock issuable upon the exercise, at an exercise price of
$11.50 per share, of the private placement warrants originally issued in connection with the JCIC IPO (the “Private Placement Warrants”)
and (b) up to 9,400,000 Private Placement Warrants originally acquired by JCIC Sponsor in connection with the JCIC IPO for $1.00 per Private
Placement Warrant.
The Prospectus and this prospectus
supplement also relate to the issuance by us of up to an aggregate of 26,650,000 shares of Common Stock that may be issued upon exercise
of the Warrants (as defined in the Prospectus), including 9,400,000 Private Placement Warrants and 17,250,000 Public Warrants (as defined
in the Prospectus).
This prospectus supplement
should be read in conjunction with the Prospectus. This prospectus supplement updates and supplements the information in the Prospectus.
If there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information
in this prospectus supplement.
Our Common Stock and Public
Warrants are listed on The Nasdaq Global Market under the symbols “BAER” and “BAERW,” respectively. On May 14,
2024, the closing price of our Common Stock was $4.08 and the closing price for our Public Warrants was $0.1499.
See the section entitled
“Risk Factors” beginning on page 8 of the Prospectus and under similar headings in any further amendments or supplements to
the Prospectus to read about factors you should consider before buying our securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this prospectus
supplement is truthful of complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is May 15,
2024.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
___________________________
FORM
10-Q
___________________________
|
|
|
|
|
| |
| ☒ |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended March
31, 2024
OR
|
|
|
|
|
| |
| ☐ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from___________to___________
Commission
file number: 001-41603
___________________________
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
___________________________
|
|
|
|
|
| |
| Delaware |
88-3599336 |
(State
or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S.
Employer
Identification No.) |
|
| |
|
90
Aviation Lane
Belgrade,
MT |
59714 |
| (Address
of Principal Executive Offices) |
(Zip
code) |
(406)
813-0079
(Registrant’s
telephone number, including area code)
___________________________
Securities
registered pursuant to Section 12(b) of the Act:
|
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|
|
|
|
|
|
|
|
| |
| Title
of each class |
| Trading
symbol(s) |
| Name
of each exchange
on which registered |
| Common
Stock, $0.0001 par value per share |
| BAER |
| The
Nasdaq Stock Market LLC |
| Warrants,
each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share |
| BAERW |
| The
Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
x No
o
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes
☒ No
☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
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|
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|
|
|
|
| |
| Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
|
|
|
| |
| Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
|
|
|
| |
|
|
| Emerging
growth company |
☒ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
As
of May 10, 2024, there were 47,014,189
shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
TABLE
OF CONTENTS
PART
I – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($s
in thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| As
of
March 31, 2024 |
| As
of
December 31, 2023 |
| ASSETS |
|
|
| |
| Current
assets: |
|
|
| |
| Cash
and cash equivalents |
| $ |
6,776 |
|
| $ |
22,956 |
|
| Restricted
cash |
| 9,289 |
|
| 13,981 |
|
| Investments
in marketable securities |
| — |
|
| 1,009 |
|
|
Accounts
and note receivable1 |
| 4,926 |
|
| 4,113 |
|
| Aircraft
support parts |
| 476 |
|
| 488 |
|
| Prepaid
expenses and other current assets |
| 3,740 |
|
| 2,648 |
|
|
|
|
|
| |
| Total
current assets |
| 25,207 |
|
| 45,195 |
|
| Property,
plant and equipment, net |
| 195,871 |
|
| 196,611 |
|
| Intangible
assets, net |
| 2,016 |
|
| 1,730 |
|
| Goodwill |
| 13,163 |
|
| 13,163 |
|
|
Other noncurrent
assets2 |
| 16,174 |
|
| 16,771 |
|
| Total
assets |
| $ |
252,431 |
|
| $ |
273,470 |
|
| LIABILITIES,
MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT |
|
|
| |
| Current
liabilities: |
|
|
| |
|
Accounts payable3 |
| $ |
3,932 |
|
| $ |
3,978 |
|
|
Accrued expenses
and other current liabilities4 |
| 11,955 |
|
| 17,168 |
|
|
Operating right-of-use
current liability5 |
| 2,153 |
|
| 2,153 |
|
| Current
portion of long-term debt, net of debt issuance costs |
| 2,028 |
|
| 2,099 |
|
| Total
current liabilities |
| 20,068 |
|
| 25,398 |
|
| Long-term
accrued expenses and other noncurrent liabilities |
| 10,492 |
|
| 10,777 |
|
|
Operating right-of-use
noncurrent liability6 |
| 5,395 |
|
| 5,779 |
|
|
Long-term debt,
net of debt issuance costs7 |
| 204,115 |
|
| 204,585 |
|
| Total
liabilities |
| $ |
240,070 |
|
| $ |
246,539 |
|
| COMMITMENTS
AND CONTINGENCIES |
| |
| |
| MEZZANINE
EQUITY |
|
|
| |
|
Series A Preferred
Stock, $0.0001
par value; 315,789.473684
shares authorized, issued and outstanding at March 31, 2024 and December 31, 2023 |
| 361,029 |
|
| 354,840 |
|
|
|
|
|
| |
| STOCKHOLDERS’
DEFICIT |
|
|
| |
|
Common Stock,
$0.0001
par value; 1,000,000,000
shares authorized; 44,842,587
shares issued and outstanding at March 31, 2024; 44,776,926
shares issued and outstanding at December 31, 2023 |
| 5 |
|
| 5 |
|
| Additional
paid-in capital |
| 83,953 |
|
| 84,771 |
|
| Accumulated
deficit |
| (433,759) |
|
| (413,672) |
|
| Accumulated
other comprehensive income |
| 1,133 |
|
| 987 |
|
| Total
stockholders’ deficit |
| (348,668) |
|
| (327,909) |
|
| Total
liabilities, mezzanine equity, and stockholders’ deficit |
| $ |
252,431 |
|
| $ |
273,470 |
|
1
Includes related party accounts receivable of $0.1
million as of March 31, 2024.
2
Includes
related party operating lease right-of-use assets of $6.0
million and $6.3
million as of March 31, 2024 and December 31, 2023, respectively.
3
Includes
related party accounts payable of $0.6
million and $0.1
million as of March 31, 2024 and December 31, 2023, respectively.
4
Includes
related party accrued interest expense of $0.1
million and $0.4
million as of March 31, 2024 and December 31, 2023, respectively.
5
Includes
related party operating lease right-of-use current liabilities of $1.7
million as of March 31, 2024 and December 31, 2023.
6
Includes
related party operating lease right-of-use noncurrent liabilities of $4.3
million and $4.6
million as of March 31, 2024 and December 31, 2023, respectively.
7
Includes
related party debt of $10.0
million as of March 31, 2024 and December 31, 2023.
The
accompanying notes are an integral part of these condensed consolidated financial statements.
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($s
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
|
|
| 2024 |
| 2023 |
|
|
| |
|
Revenues1 |
| $ |
5,507 |
|
| $ |
365 |
|
|
|
| |
| Cost
of revenues: |
| |
| |
|
|
| |
| Flight
operations |
| 5,009 |
|
| 3,733 |
|
|
|
| |
| Maintenance |
| 4,197 |
|
| 3,515 |
|
|
|
| |
| Total
cost of revenues |
| 9,206 |
|
| 7,248 |
|
|
|
| |
| Gross
loss |
| (3,699) |
|
| (6,883) |
|
|
|
| |
|
Selling, general
and administrative expense2 |
| 11,610 |
|
| 33,229 |
|
|
|
| |
| Operating
loss |
| (15,309) |
|
| (40,112) |
|
|
|
| |
|
Interest expense3 |
| (5,923) |
|
| (5,665) |
|
|
|
| |
| Other
income |
| 1,159 |
|
| 1,092 |
|
|
|
| |
| Loss
before income taxes |
| (20,073) |
|
| (44,685) |
|
|
|
| |
| Income
tax expense |
| (14) |
|
| — |
|
|
|
| |
| Net
loss |
| $ |
(20,087) |
|
| $ |
(44,685) |
|
|
|
| |
| Series
A Preferred Stock – adjustment for deemed dividend upon Closing |
| — |
|
| (48,300) |
|
|
|
| |
| Series
A Preferred Stock – adjustment to eliminate 50% multiplier |
| — |
|
| 156,362 |
|
|
|
| |
| Series
A Preferred Stock – adjustment to maximum redemptions value |
| (6,189) |
|
| (4,274) |
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
| (Loss)
earnings attributable to Common Stockholders - Basic and Diluted |
| $ |
(26,276) |
|
| $ |
59,103 |
|
|
|
| |
| (Loss)
earnings per share - Basic |
| $ |
(0.55) |
|
| $ |
1.36 |
|
|
|
| |
| (Loss)
earnings per share - Diluted |
| $ |
(0.55) |
|
| $ |
0.79 |
|
|
|
| |
| Weighted
average Common Stock outstanding – Basic |
| 47,602,241 |
| 43,488,468 |
|
|
| |
| Weighted
average Common Stock outstanding – Diluted |
| 47,602,241 |
| 74,986,752 |
|
|
| |
1
Includes
related party revenues of $0.1
million and $0.3
million for the three months ended March 31, 2024 and 2023, respectively.
2
Includes related party cost of revenues of $1.0
million and $0.1
million for the three months ended March 31, 2024 and 2023, respectively.
3
Includes
related party interest expense of $0.3
million for the three months ended March 31, 2024 and 2023.
The
accompanying notes are an integral part of these condensed consolidated financial statements.
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
($s
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
|
|
| 2024 |
| 2023 |
|
|
| |
| Net
loss |
| $ |
(20,087) |
|
| $ |
(44,685) |
|
|
|
| |
| Other
comprehensive income (loss), net of tax |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
| Unrealized
gain (loss) on derivative instruments |
| 116 |
|
| (272) |
|
|
|
| |
| Unrealized
gain on investments in marketable securities |
| — |
|
| 319 |
|
|
|
| |
| Reclassification
of realized loss (gain) on investments in marketable securities to earnings |
| 30 |
|
| (173) |
|
|
|
| |
| Total
other comprehensive income (loss), net of tax |
| 146 |
|
| (126) |
|
|
|
| |
| Comprehensive
loss |
| $ |
(19,941) |
|
| $ |
(44,811) |
|
|
|
| |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
($s
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Legacy
Bridger
Series C Preferred
Shares / Series A
Preferred Stock |
|
| Common
Stock |
| Additional
Paid-in
Capital
|
| Accumulated
Deficit |
| Accumulated
Other Comprehensive Income |
| Total
Stockholders' Deficit |
|
|
| Share |
| Value
|
|
| Share |
| Value |
|
|
| |
| Balance
at December 31, 2022 |
| 351,789 |
| $ |
489,022 |
|
|
| 39,081,744 |
| $ |
4 |
|
| $ |
— |
|
| $ |
(415,304) |
|
| $ |
1,678 |
|
| $ |
(413,622) |
|
| Net
loss |
| — |
| — |
|
|
| — |
| — |
|
| — |
|
| (44,685) |
|
| — |
|
| (44,685) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Unrealized
loss on derivative instruments |
| — |
| — |
|
|
| — |
| — |
|
| — |
|
| — |
|
| (272) |
|
| (272) |
|
| Unrealized
gain on investments in marketable securities |
| — |
| — |
|
|
| — |
| — |
|
| — |
|
| — |
|
| 319 |
|
| 319 |
|
| Reclassification
of realized gain on investments in marketable securities to earnings |
| — |
| — |
|
|
| — |
| — |
|
| — |
|
| — |
|
| (173) |
|
| (173) |
|
| Effect
of the Closing |
| — |
| (156,363) |
|
|
| 4,687,546 |
| 1 |
|
| 52,084 |
|
| 78,956 |
|
| — |
|
| 131,041 |
|
| Series
A Preferred Stock adjustment to maximum redemptions value |
| — |
| 4,274 |
|
|
| — |
| — |
|
| (4,274) |
|
| — |
|
| — |
|
| (4,274) |
|
| Stock
based compensation |
| — |
| — |
|
|
| 2,400,354 |
| — |
|
| 25,597 |
|
| — |
|
| — |
|
| 25,597 |
|
| Balance
at March 31, 2023 |
| 351,789 |
|
| $ |
336,933 |
|
|
| 46,169,644 |
| $ |
5 |
|
| $ |
73,407 |
|
| $ |
(381,033) |
|
| $ |
1,552 |
|
| $ |
(306,069) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Balance
at December 31, 2023 |
| 315,789 |
|
| $ |
354,840 |
|
|
| 47,200,504 |
| $ |
5 |
|
| $ |
84,771 |
|
| $ |
(413,672) |
|
| $ |
987 |
|
| $ |
(327,909) |
|
| Net
loss |
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| (20,087) |
|
| — |
|
| (20,087) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Unrealized
gain on derivative instruments |
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| 116 |
|
| 116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Reclassification
of realized loss on investments in marketable securities to earnings |
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| 30 |
|
| 30 |
|
| Series
A Preferred Stock adjustment to maximum redemptions value |
| — |
|
| 6,189 |
|
|
| — |
|
| — |
|
| (6,189) |
|
| — |
|
| — |
|
| (6,189) |
|
| Sales
of Common Stock through the at-the-market offering |
| — |
|
| — |
|
|
| 33,798 |
|
| — |
|
| 168 |
|
| — |
|
| — |
|
| 168 |
|
| Costs
related to the at-the-market offering |
| — |
|
| — |
|
|
| — |
|
| — |
|
| (670) |
|
| — |
|
| — |
|
| (670) |
|
| Stock
based compensation |
| — |
|
| — |
|
|
| 31,863 |
|
| — |
|
| 5,873 |
|
| — |
|
| — |
|
| 5,873 |
|
| Balance
at March 31, 2024 |
| 315,789 |
|
| $ |
361,029 |
|
|
| 47,266,165 |
| $ |
5 |
|
| $ |
83,953 |
|
| $ |
(433,759) |
|
| $ |
1,133 |
|
| $ |
(348,668) |
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($s
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
|
|
| 2024 |
| 2023 |
| Cash
Flows from Operating Activities: |
|
|
| |
| Net
loss |
| $ |
(20,087) |
|
| $ |
(44,685) |
|
| Adjustments
to reconcile net loss to net cash used in operating activities: |
|
|
| |
| Loss
(gain) on disposal of fixed assets |
| 255 |
|
| (1) |
|
| Depreciation
and amortization |
| 1,290 |
|
| 1,751 |
|
|
|
|
|
| |
| Stock-based
compensation expense |
| 5,873 |
|
| 25,597 |
|
|
|
|
|
| |
| Change
in fair value of the Warrants |
| (266) |
|
| (1,599) |
|
| Change
in fair value of freestanding derivative |
| — |
|
| 51 |
|
| Amortization
of debt issuance costs |
| 192 |
|
| 239 |
|
|
|
|
|
| |
| Change
in fair value of embedded derivative |
| (885) |
|
| (346) |
|
| Change
in fair value of earnout consideration |
| 15 |
|
| — |
|
| Realized
gain on investments in marketable securities |
| (16) |
|
| (259) |
|
| Changes
in operating assets and liabilities |
|
|
| |
|
Accounts
and note receivable1 |
| (813) |
|
| (338) |
|
| Aircraft
support parts |
| 12 |
|
| 1,326 |
|
| Prepaid
expense and other current and noncurrent assets |
| (379) |
|
| (3,897) |
|
|
Accounts
payable, accrued expenses and other liabilities2 |
| (4,953) |
|
| (14,492) |
|
| Net
cash used in operating activities |
| (19,762) |
|
| (36,653) |
|
| Cash
Flows from Investing Activities: |
|
|
| |
| Proceeds
from sales and maturities of marketable securities |
| 1,055 |
|
| 25,062 |
|
| Purchases
of property, plant and equipment |
| (957) |
|
| (11,171) |
|
| Expenditures
for capitalized software |
| (312) |
|
| — |
|
| Investments
in construction in progress – leasehold improvements |
| — |
|
| (1,046) |
|
| Sale
of property, plant and equipment |
| — |
|
| 114 |
|
| Net
cash (used in) provided by investing activities |
| (214) |
|
| 12,959 |
|
| Cash
Flows from Financing Activities: |
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
| Repayments
on debt |
| (733) |
|
| (469) |
|
| Payment
of issuance costs for Common Stock in the at-the-market offering |
| (324) |
|
| — |
|
| Proceeds
from issuance of Common Stock in the at-the-market offering |
| 168 |
|
| — |
|
| Payment
of finance lease liability |
| (7) |
|
| (8) |
|
| Costs
incurred related to the Closing |
| — |
|
| (6,794) |
|
| Proceeds
from the Closing |
| — |
|
| 3,194 |
|
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
| Net
cash used in financing activities |
| (896) |
|
| (4,077) |
|
|
|
|
|
| |
| Net
change in cash, cash equivalents and restricted cash |
| (20,872) |
|
| (27,771) |
|
| Cash,
cash equivalents and restricted cash – beginning of the period |
| 36,937 |
|
| 42,460 |
|
| Cash,
cash equivalents and restricted cash – end of the period |
| $ |
16,065 |
|
| $ |
14,689 |
|
| Less:
Restricted cash – end of the period |
| 9,289 |
|
| 12,399 |
|
| Cash
and cash equivalents – end of the period |
| $ |
6,776 |
|
| $ |
2,290 |
|
|
|
|
|
| |
|
|
|
|
| |
1
Includes
related party accounts receivable of $0.1
million and $0.3
million for the three months ended March 31, 2024 and 2023, respectively.
2
Includes
related party accounts payable of $1.0
million and $0.1
million for the three months ended March 31, 2024 and 2023, respectively.
The
accompanying notes are an integral part of these condensed consolidated financial statements.
BRIDGER
AEROSPACE GROUP HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
– ORGANIZATION AND BASIS OF PRESENTATION
Nature
of Business
Bridger
Aerospace Group Holdings, Inc. and its subsidiaries (“Bridger”, “the Company,” “we,” “us”
or “our”) provide aerial wildfire management, relief and suppression and delivery of firefighting services using next generation
technology and sustainable and environmentally safe firefighting methods.
As
of March 31, 2024, the Company owns fifteen
aircraft, including six
Viking CL-415EAFs (“Super Scoopers”), four
Twin Commander surveillance platforms, four
Daher Kodiak 100s (“Daher Kodiaks”) and one
Pilatus PC-12 (“Pilatus”).
Liquidity
and Going Concern
In
accordance with Accounting Standards Codification (“ASC”) 205-40,
Presentation of Financial Statements—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 12 months after the date that these condensed consolidated financial
statements are issued. This evaluation includes considerations related to the covenants contained in the Company’s loan agreements
as well as the Company’s liquidity position overall.
As
detailed in “Note
15 – Long-Term Debt” included
in this Quarterly Report on Form 10-Q (the “Quarterly Report”), the Company’s municipal bond issuances by Legacy Bridger
that closed in July and August 2022 (the “Series 2022 Bonds”) contain customary covenants and restrictions, including financial
and non-financial covenants. The financial covenants require the Company to maintain a debt service coverage ratio (“DSCR”)
that exceeds 1.25x,
operate in such a manner to produce gross revenues so as to be at all relevant times in compliance with the DSCR covenant and to maintain
liquidity of $8.0
million in the form of unrestricted cash or investments (excluding margin accounts and retirement accounts) at all times. Failure to comply
with these covenants could result in an event of default, subject to certain exceptions.
For
the three months ended March 31, 2024, the Company had an operating loss of $15.3
million, net loss of $20.1
million and net cash used in operating activities of $19.8
million. In addition, as of March 31, 2024, the Company had unrestricted cash or investments of $6.8
million.
The
Company is not in compliance with the DSCR covenant as of March 31, 2024 and management anticipates the Company will continue to
not be in compliance with the DSCR covenant at future quarterly measurement periods in the next 12 months, primarily attributable to the
seasonal nature of our business and a less intense 2023 wildfire season. In addition, the Company is not in compliance with the $8.0
million minimum liquidity requirement as of March 31, 2024 and management anticipates that it may not be in compliance with the minimum
liquidity requirement at future quarterly measurement periods in the next 12 months depending on the cash generated from its seasonal
firefighting operations in 2024.
The
Series 2022 Bonds agreements provide that, with regard to covenant violations, other than non-payment of principal or interest, no event
of default shall be deemed to have occurred so long as a reasonable course of action to remedy a violation commences within 30 days of
written notice of non-compliance from the trustee and management diligently prosecutes the remediation plan to completion.
Management
consulted with bond counsel on the impact of covenant violations and proactively developed a cost reduction plan, and began implementing
the plan in November 2023, to help remedy the anticipated covenant breaches in 2024. However, this plan is still in progress and there
is no assurance that management will be able to diligently prosecute the remediation plan to completion. Additionally, as described in
further detail in “Note
22 – Subsequent Events,” the
Company raised additional cash through a registered direct equity offering in April 2024 resulting in net cash proceeds of approximately
$9.2 million.
However, depending on the cash generated from its seasonal firefighting operations in 2024, there may be periods in the next 12 months
where the Company may not be in compliance with the $8.0 million
minimum liquidity requirement. The Company plans to seek additional cash funding through sales of our common stock through our at-the-market
offering, described in further detail in “Note
18 – Stockholders' Deficit” included
in this Quarterly Report. Our ability to raise additional funds will depend on, among other factors, financial, economic and market conditions,
many of which are outside of our control and there can be no assurance that we will be able to obtain additional funding on satisfactory
terms or at all.
Current
and anticipated noncompliance with financial covenants and uncertainty regarding the Company’s ability to diligently prosecute the
cost reduction plan and maintain minimum liquidity requirements raise substantial doubt about the Company’s ability to continue
as a going concern within 12 months following the issuance date of the condensed consolidated financial statements as of and for the three
months ended March 31, 2024. These condensed consolidated financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Basis
of Presentation
The
condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The condensed consolidated financial statements include the financial statements of the Company, all entities that are wholly-owned by
the Company and all entities in which the Company has a controlling financial interest.
The
condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes
that the disclosures are adequate to prevent the information presented from being misleading.
In
the opinion of management, all adjustments necessary to fairly present the financial position of the Company at March 31, 2024 and December
31, 2023, the results of the Company’s operations for the three months ended March 31, 2024 and 2023 and the Company’s cash
flows for the three months ended March 31, 2024 and 2023 have been included and are of a normal, recurring nature except as otherwise
disclosed. Management also has evaluated the impact of events occurring after March 31, 2024 up to the date of issuance of these condensed
financial statements, and these statements contain all necessary adjustments and disclosures resulting from that evaluation.
Due
to seasonal fluctuations and other factors, the Company’s operating results for the three months ended March 31, 2024 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2024 or for any future period. The condensed financial
statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2023.
Reverse
Recapitalization
On
January 24, 2023 (the “Closing Date”), Jack Creek Investment Corp (“JCIC”) completed the reverse recapitalization
(the “Closing” and the “Reverse Recapitalization”) with the Company’s predecessor, Bridger Aerospace Group
Holdings, LLC and its subsidiaries (collectively, “Legacy Bridger”), which operated the majority of the historical business
and was identified as the acquirer and predecessor upon the consummation of the transactions contemplated by the agreement and plan of
merger (the “Transaction Agreements”) entered into on August 3, 2022. On the Closing Date, pursuant to the Transaction Agreements,
JCIC and Legacy Bridger became wholly owned subsidiaries of a new public entity that was renamed Bridger Aerospace Group Holdings, Inc,
and JCIC shareholders and Legacy Bridger equity holders converted their equity ownership in JCIC and Legacy Bridger, respectively, into
equity ownership in Bridger.
Upon
the consummation of the Reverse Recapitalization, Bridger issued Common Stock to the Legacy Bridger equity holders and Series A Preferred
Stock (as defined below) as summarized below:
•the
surrender and exchange of all 606,061
Legacy Bridger incentive units (“Incentive Units”) into 583,308
shares of Bridger’s common stock, par value $0.0001,
(“Common Stock”) at a deemed value of $10.00
per share as adjusted by the per share Common Stock consideration of approximately 0.96246
(the “Exchange Ratio”), rounded down to the nearest share for each holder;
•the
direct or indirect surrender and exchange of the remaining 40,000,000
issued and outstanding shares of Legacy Bridger common shares (excluding Incentive Units) into 38,498,436
shares of Common Stock at a deemed value of $10.00
per share as adjusted by the Exchange Ratio, rounded down to the nearest share for each holder; and
•the
surrender and exchange of all 315,789.473684
issued and outstanding Series C preferred shares of Legacy Bridger (the “Legacy Bridger Series C Preferred Shares”), which
were surrendered and exchanged on a one-to-one
basis in connection with the Reverse Recapitalization into 315,789.473684
shares of preferred stock of Bridger that have the rights, powers, designations, preferences and qualifications, limitations and restrictions
set forth in Section 4.5 of the Amended and Restated Certificate of Incorporation (the “Series A Preferred Stock”). The Series
A Preferred Stock are convertible at the election of the holders into shares of Common Stock, without the payment of additional consideration
by the holders into such number of shares of Common Stock as determined by dividing the original issue price, plus accrued interest by
a conversion price equal to $11.00
at the time of conversion.
Other
related events occurred in connection with the Reverse Recapitalization, are summarized below:
•the
filing and effectiveness of the Amended and Restated Certificate of Incorporation of Bridger and the effectiveness of the Amended and
Restated Bylaws of Bridger, each of which occurred immediately prior to the Closing;
•the
adoption and assumption of the Bridger Aerospace Group Holdings, Inc. 2023 Omnibus Incentive Plan (the “Omnibus Plan”) and
any grants or awards issued thereunder and adoption of the 2023 Employee Stock Purchase Plan upon the Closing to grant equity awards to
Bridger employees; and
•during
the period from the Closing until five
years following the Closing, JCIC subjected 20%
of JCIC’s issued and outstanding common stock (“Sponsor Earnout Shares”), comprised of two
separate tranches of 50%
of the Sponsor Earnout Shares per tranche, to potential forfeiture to Bridger for no consideration until the occurrence (or deemed occurrence)
of certain triggering events.
Immediately
after giving effect to the Transaction Agreements, the following were outstanding:
•43,769,290
shares of Common Stock;
•315,789.473684
shares of Bridger Series A Preferred Stock;
•9,400,000
private placement warrants (“Private Placement Warrants”) to purchase shares of Common Stock at an exercise price of $11.50
per share;
•17,250,000
public warrants (“Public Warrants”) to purchase shares of Common Stock at an exercise price of $11.50
per share; and
•6,581,497
restricted stock units issued to the executives and senior management of the Company.
In
connection with the Reverse Recapitalization, the Company paid transaction costs of $10.3
million as of the Closing.
The
transactions contemplated by the Transaction Agreements were accounted for as a reverse recapitalization in accordance with GAAP. Under
this method of accounting, JCIC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting
purposes, the financial statements of Bridger represent a continuation of the financial statements of Legacy Bridger with the Reverse
Recapitalization treated as the equivalent of Legacy Bridger issuing stock for the net assets of JCIC, accompanied by a recapitalization.
The net assets of JCIC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the
Reverse Recapitalization will be those of Legacy Bridger in future reports of Bridger.
Legacy
Bridger has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•Legacy
Bridger equity holders have a relative majority of the voting power of Bridger;
•Bridger’s
board of directors (the “Board”) has eleven members, and representatives or designees of the Legacy Bridger equity holders
comprise the majority of the members of the Board;
•Legacy
Bridger’s senior management comprise the senior management roles and are responsible for the day-to-day operations of Bridger;
•Bridger
assumed Legacy Bridger’s name of business;
•The
strategy and operations of Bridger continue Legacy Bridger’s former strategy and operations; and
•The
Reverse Recapitalization created an operating public company, with management continuing to use Legacy Bridger operations to grow the
business.
The
Sponsor Earnout Shares are determined to be equity classified instruments of Bridger and the Public Warrants and Private Placement Warrants
are determined to remain liability classified instruments upon the Closing.
In
accordance with guidance applicable to these circumstances, the equity structure has been recast in all comparative periods up to the
Closing to reflect the number of shares of Common Stock issued to Legacy Bridger’s stockholders in connection with the Reverse Recapitalization.
As such, the shares and corresponding capital amounts and earnings per share related to Legacy Bridger’s common stock prior to the
Reverse Recapitalization have been retroactively recast as shares of Common Stock using the Exchange Ratio.
On
January 25, 2023, shares of the Company’s Common Stock began trading on the Nasdaq Global Market under the ticker symbol “BAER.”
NOTE 2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
Company consolidates those entities in which it, through the existing owners, has control over significant operating, financial or investing
decisions of the entity. All significant intercompany balances and transactions have been eliminated in consolidation.
Variable
Interest Entities
The
Company follows ASC 810-10-15, Consolidation, guidance
with respect to accounting for variable interest entities (“VIE”). These entities do not have sufficient equity at risk to
finance their activities without additional subordinated financial support from other parties or whose equity investors lack any of the
characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions
of a VIE’s expected losses or receive portions of its expected returns and are contractual, ownership or pecuniary in nature and
that change with changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and
must consolidate it when that party has a variable interest, or combination of variable interests, that provide it with a controlling
financial interest. A party is deemed to have a controlling financial interest if it meets both of the power and loss/benefits criteria.
The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits
criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to
the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes
in the facts and circumstances.
Northern
Fire Management Services, LLC (“NFMS, LLC”): The
Company assisted in designing and organizing NFMS, LLC with a business purpose of employing Canadian aviation professionals to provide
services to the Company. A master services agreement exists between NFMS, LLC, the Company, and Bridger Air Tanker, LLC, a wholly-owned
subsidiary of the Company, to transfer all annual expenses incurred to the Company in exchange for the Canadian employees to support the
Company’s water scooper aircraft. NFMS, LLC is 50%
owned by a Canadian citizen, and 50%
owned by Bridger Aerospace Group, LLC. NFMS, LLC was determined to be a VIE primarily due to the entity’s lack of sufficient equity
investment at risk and the Company was determined to be the primary beneficiary of the VIE primarily attributable to the Company’s
responsibility for all decisions related to NFMS, LLC’s expenditures. Accordingly, NFMS, LLC has been consolidated by the Company
for the three months ended March 31, 2024 and 2023 and the year ended December 31, 2023, and all intercompany expenses associated
with NFMS, LLC and its service agreement have been eliminated in consolidation. For the three months ended March 31, 2024 and 2023,
NFMS, LLC’s assets and liabilities were immaterial to the Company’s financial statements.
Bridger
Aerospace Europe, S.L.U. (“BAE”) and MAB Funding, LLC (“MAB”):
On November 17, 2023, we entered into a series of agreements designed to facilitate the purchase and return to service of four
Canadair CL-215T Amphibious Aircraft (the “Spanish Scoopers”) originally awarded to our wholly-owned subsidiary, BAE, in September
2023 via a public tender process from the Government of Spain for €40.3 million.
Under the terms of the agreements, we agreed to sell the entire outstanding equity interest in BAE to MAB and purchase $4.0 million
of non-voting Class B units of MAB. We also entered into a services agreement with MAB whereby we will manage the return to service upgrades
of the Spanish Scoopers through our wholly-owned Spanish subsidiary, Albacete Aero, S.L., while they are owned and funded by MAB. The
service agreement also provides that we have the right, but not the obligation, to acquire each Spanish Scooper as it is ready to be contracted
and returned to service. The Company assessed both MAB and BAE for variable interest entity accounting under ASC 810-10-15 and determined
that MAB is a voting interest entity and BAE is a variable interest entity. However, neither entity is consolidated in the consolidated
financial statements as the Company does not have a controlling financial interest in MAB and the Company is not the primary beneficiary
of BAE. Accordingly, neither of these entities have been consolidated in the consolidated financial statements of the Company for the
three months ended March 31, 2024 and the year ended December 31, 2023. Refer to “Note
16 – Commitments and Contingencies”
included in this Quarterly Report for additional details.
Seasonality
The
Company’s business is generally seasonal, with a significant portion of total revenue occurring during the second and third quarters
of the fiscal year due to the North American fire season. However, the weather dependency and seasonal fluctuation in the need to fight
wildfires based upon location and the varying intensity of the fire season may lead our operating results to fluctuate significantly from
quarter to quarter and year to year.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP, requires management to make assumptions and estimates that affect the reported
amounts of assets and liabilities, disclosure of gain or loss contingencies as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from their estimates and such differences could
be material to the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include: (a)
excess and aging aircraft support parts reserves, (b) allowance for doubtful accounts, (c) useful lives of property, plant and equipment,
net, (d) allocation of the purchase price to the fair value of assets acquired and liabilities assumed, (e) impairment of long-lived assets,
goodwill and other intangible assets, (f) disclosure of fair value of financial instruments, (g) variable interest entities, (h) accounting
for Series A Preferred Stock, (i) revenue recognition, (j) estimates and assumptions made in determining the carrying values of goodwill,
other intangible assets, and contingent consideration, and (k) Public Warrants and Private Placement Warrants.
Accounts
and Note Receivable
Accounts
receivable consist of amounts due from our customers. The Company maintains an allowance for doubtful accounts equal to the estimated
losses expected to be incurred based upon a review of the outstanding accounts receivable, historical collection information and existing
economic conditions. For the three months ended March 31, 2024 and 2023, the Company did not record any bad debt expense as accounts
receivable have historically been collected in accordance with the policy and there is no history of write-offs.
Note
receivable consists of a promissory note to pay a specific sum, with interest, within a defined period. Each reporting period, the Company
evaluates the collectability of the outstanding note receivable balance. If the promissory note is deemed uncollectible, the Company will
record the value of the note and the accrued interest as bad debt expense.
Deferred
Offering Costs
Deferred
offering costs primarily consist of capitalized legal, accounting and other third-party costs incurred that are directly related to the
Reverse Recapitalization, which has been accounted for as a reverse recapitalization. These costs were charged to Stockholders’
deficit as a reduction of Additional paid-in capital generated upon the completion of the Reverse Recapitalization.
As of March 31, 2024 and December 31, 2023, the Company recorded $18.6
million and $18.0
million to
Stockholders’ deficit in the Condensed Consolidated Balance Sheets, respectively. For the three months ended March 31, 2023,
the Company recorded $0.5
million to Selling, general and administrative expense in the Condensed Consolidated Statements of Operations.
Revenue
Recognition
Revenues
are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we
expect to be entitled to in exchange for those services.
The
Company charges daily and hourly rates depending upon the type of firefighting services rendered and under which contract the services
are performed. These services are primarily split into flight revenue and standby revenue. Flight revenue is primarily earned at an hourly
rate when the engines of the aircraft are started and stopped upon request of the customer, tracked via flight logs for Super Scoopers
or a Hobbs meter for other aircraft. Standby revenue is earned primarily as a daily rate when aircraft are available for use at a fire
base, awaiting request from the customer for flight deployment.
The
Company enters into short, medium and long-term contracts with customers, primarily with government agencies during the firefighting season,
to deploy aerial fire management assets. Revenue is recognized when performance obligations under the terms of a contract with our customers
are satisfied and payment is typically due within 30 days of invoicing. Invoicing occurs as the services are rendered and includes the
use of the aircraft, pilot and field maintenance personnel to support the contract.
Contracts
are based on either a Call-When-Needed (“CWN”) or Exclusive Use (“EU”) basis. Rates established are generally
more competitive based on the security of the revenue from the contract (i.e., an EU versus only on an as-needed basis in CWN). These
rates are delineated by the type of service, generally flight time or time available for deployment. Once an aircraft is deployed on a
contract the fees are earned at these rates, the aircraft cannot be obligated to another customer. Contracts have no financing components
and consideration is at pre-determined rates. No variable considerations are constrained within the contracts.
The
transaction prices are allocated on the service performed and tracked real-time by each operator in a duty log. On at least a monthly
basis, the services performed and rates are validated by each customer. Acceptance by the customer is evidenced by their funded task order
or accepted invoice.
The
Company has not
incurred incremental costs for obtaining contracts with customers. In addition, the Company evaluates whether or not it should capitalize
the costs of fulfilling a contract. Such costs would be capitalized when they are not within the scope of other standards and: (1) are
directly related to a contract; (2) generate or enhance resources that will be used to satisfy performance obligations; and (3) are expected
to be recovered. The Company has elected to use the practical expedient detailed in ASC 340-40, Other
Assets and Deferred Costs—Contracts with Customers,
to expense any costs to fulfill a contract as they are incurred when the amortization period would be one year or less.
Contract
assets are classified as a receivable when the reporting entity’s right to consideration is unconditional, which is when payment
is due only upon the passage of time. As the Company invoices customers for performance obligations that have been satisfied, at which
point payment is unconditional, contracts do not typically give rise to contract assets. Contract liabilities are recorded when cash payments
are received or due in advance of performance and are recorded as deferred revenue within Accrued expenses and other current liabilities
in the Condensed Consolidated Balance Sheets.
Payment
terms vary by customer and type of revenue contract. The Company generally expects that the period of time between payment and transfer
of promised goods or services will be less than one year. In such instances, the Company has elected the practical expedient to not evaluate
whether a significant financing component exists. As the Company has a right to consideration from customers in an amount that corresponds
directly with the value to the customer of the Company’s performance completed to date, the Company has applied the practical expedient
to recognize revenue in the amount to which we have the right to invoice. As permitted under the practical expedient available under ASC
606, Revenue
from Contracts with Customers
(“ASC 606”), the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original
expected length of one year or less, and (ii) contracts for which the Company recognizes revenue at the amount which it has the right
to invoice for services performed.
Other
revenue consists of leasing revenues for facilities as well as external repair and return-to-service work performed on customer aircraft.
The Company commonly contracts with third-parties to perform certain repair and return-to-service work that we have promised in our customer
agreements. The Company considers itself the principal in these arrangements as we control the timing and nature of the services ultimately
provided by the third-party to the customer.
Other
services and Other revenue presented in the tables below for the three months ended March 31, 2024 includes $1.0 million
of return-to-service revenue associated with the Spanish Scoopers. This revenue is recognized over time using a cost-to-cost measure because
it best depicts the transfer of value to the customer and also correlates with the amount of consideration to which the Company expects
to be entitled in exchange for transferring the promised services to the customer. Under the cost-to-cost measure of progress, progress
towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance
obligation. Revenues are recorded proportionally as costs are incurred.
Revenue
Disaggregation
The
following table presents the disaggregation of revenue by service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
| $s
in thousands |
| 2024 |
| 2023 |
|
|
| |
| Fire
suppression |
| $ |
3,881 |
|
| $ |
— |
|
|
|
| |
| Aerial
surveillance |
| 583 |
|
| — |
|
|
|
| |
| Other
services |
| 1,043 |
|
| 365 |
|
|
|
| |
| Total
revenues |
| $ |
5,507 |
|
| $ |
365 |
|
|
|
| |
The
following table presents the disaggregation of revenue by type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
| $s
in thousands |
| 2024 |
| 2023 |
|
|
| |
| Flight
revenue |
| $ |
913 |
|
| $ |
— |
|
|
|
| |
| Standby
revenue |
| 3,468 |
|
| — |
|
|
|
| |
| Other
revenue |
| 1,126 |
|
| 365 |
|
|
|
| |
| Total
revenues |
| $ |
5,507 |
|
| $ |
365 |
|
|
|
| |
Concentration
Risk
For
the three months ended March 31, 2024, the Company had two customers who individually accounted for 69%
and 19%
of total revenues, respectively. For the three months ended March 31, 2023, the Company had two customers who individually accounted
for 88%
and 12%
of total revenues, respectively. As of March 31, 2024, two customers accounted for 82%
and 13%
of accounts receivable, respectively. As of December 31, 2023, three customers accounted for 39%,
34%
and 19%
of accounts receivable, respectively.
Business
Combinations
The
Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method
of accounting in accordance with ASC 805, Business
Combinations.
Under the acquisition method of accounting, amounts paid for the acquisition are allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition inclusive of identifiable intangible assets. Acquisition consideration
includes contingent consideration with payment terms based on the achievement of certain targets of the acquired business. The estimated
fair value of identifiable assets and liabilities, including intangibles, are based on valuations that use information and assumptions
available to management. The Company allocates any excess purchase price over the fair value of the tangible and identifiable intangible
assets acquired and liabilities assumed to goodwill. Significant management judgments and assumptions are required in determining the
fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, including estimated useful lives. The
valuation of purchased intangible assets is based upon estimates of the future performance and discounted cash flows of the acquired business.
Each asset acquired or liability assumed is measured at estimated fair value from the perspective of a market participant.
Contingent
consideration, representing an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events
occur or conditions are met, is recognized when probable and reasonably estimable. Contingent consideration recognized is included in
the initial cost of the assets acquired and recorded in Accrued expenses and other current liabilities and Long-term accrued expenses
and other noncurrent liabilities within the Condensed Consolidated Balance Sheets. Subsequent changes in the estimated fair value of contingent
consideration are recognized as Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.
Hedging
Transactions and Derivative Financial Instruments
The
Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely
impact the Company’s financial performance and are referred to as “market risks.” The Company, when deemed appropriate,
uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The Company manages interest rate
risk through the use of derivative instruments, such as swap agreements. A swap agreement is a contract between two parties to exchange
cash flows based on specified underlying notional amounts, assets and/or indices. The Company does not enter into derivative financial
instruments for trading purposes.
The
accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives
have been designated and qualify as hedging instruments and the type of hedging relationships. The changes in fair values of derivatives
that have been designated and qualify as cash flow hedges are recorded in Accumulated other comprehensive income and are reclassified
into the line item on the Condensed Consolidated Statements of Comprehensive Loss in which the hedged items are recorded in the same period
the hedged items affect earnings.
The
Company formally assesses whether the financial instruments used in hedging transactions are effective at offsetting changes in either
the fair values or cash flows of the related underlying exposures. Any ineffective portion of a financial instrument’s change in
fair value is immediately recognized into earnings. The fair value is based on prevailing market data and using standard valuation models
based on reasonable estimates about future relevant market conditions. Refer to “Note
15 – Long-Term Debt” included
in this Quarterly Report for additional details. The notional amounts of the derivative financial instruments do not necessarily represent
amounts exchanged by the parties and, therefore, are not a direct measure of the Company’s exposure to the financial risks described
above.
Warrant
Liabilities
The
Company accounts for the Public Warrants and Private Placement Warrants (collectively, the “Warrants”) issued in connection
with the Reverse Recapitalization in accordance with ASC 480, Distinguishing
Liabilities from Equity
and ASC 815-40, Derivatives
and Hedging—Contracts in Entity’s Own Equity,
under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies
the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. The warrant liabilities
are subject to remeasurement at each balance sheet date until exercised. Refer to “Note
12 – Accrued Expenses and Other Liabilities” included
in this Quarterly Report for additional details.
Income
Taxes
For
periods prior to the Reverse Recapitalization, Bridger Aerospace Group Holdings, LLC was a partnership for federal income tax purposes.
Consequently, federal income taxes were not payable or provided for by Legacy Bridger. Members were taxed individually on their pro rata
ownership share of the Legacy Bridger’s earnings. Legacy Bridger’s net income or loss was allocated among the members in accordance
with the Company’s operating agreement.
Subsequent
to the Reverse Recapitalization, Bridger Aerospace Group Holdings, Inc. became the successor of Legacy Bridger as discussed in “Note
1 – Organization and Basis of Presentation” included
in this Quarterly Report. Bridger is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to
net taxable income or loss and any related tax credits of the Company. Bridger is also subject to taxes in foreign jurisdictions in which
it operates.
The
Company provides for income taxes and the related accounts under the asset and liability method. Income tax expense, deferred tax assets
and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future
taxes to be paid. The Company is subject to income taxes predominantly in the U.S. These tax laws are often complex and may be subject
to different interpretations.
Deferred
income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities
and are measured using the enacted tax rates expected to be in effect during the year in which the basis difference reverses. In evaluating
the ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive
and negative evidence. If based upon all available positive and negative evidence, it is more likely than not that the deferred tax assets
will not be realized, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if
Bridger determines that it is more likely than not that all or part of the deferred tax asset will become realizable.
(Loss)
Earnings Per Share
Basic
(loss) earnings per share is based on the weighted average number of shares of Common Stock outstanding during the period. Diluted (loss)
earnings per share is based on the weighted average number of shares of Common Stock used for the basic (loss) earnings per share calculation,
adjusted for the dilutive effect of restricted stock units (“RSUs”), Warrants and Incentive Units, if any, using the “treasury
stock” method, the Series A Preferred Stock that is convertible into shares of Common Stock and the Sponsor Earnout Shares that
will fully vest upon certain stock price metrics being achieved. In addition, (loss) earnings for diluted (loss) earnings per share is
adjusted for the after-tax impact of changes to the fair value of the Warrants, to the extent they are dilutive.
As
noted above, the Company accounted for the Closing as a reverse recapitalization. (Loss) earnings per share calculations for all periods
prior to the Closing have been retrospectively adjusted by the Exchange Ratio for the equivalent number of shares of Common Stock outstanding
immediately after the Closing to effect the reverse recapitalization. Subsequent to the Closing, (loss) earnings per share is calculated
based on the weighted average number of shares of Common Stock outstanding.
Collaboration
Agreements
The
Company analyzes its collaboration arrangement to assess if it is within the scope of ASC 808, Collaborative
Agreements,
by determining whether such an arrangement involves joint operating activities performed by parties that are both active participants
in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment
is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. If the
Company concluded that it has a customer relationship with its collaborator, the collaboration arrangement would be accounted for under
ASC 606.
Stock-Based
Compensation
The
Company accounts for its stock-based compensation in accordance with provisions of ASC 718, Compensation-Stock
Compensation,
at the grant date fair value.
Legacy
Bridger granted Incentive Units which contain service and performance vesting conditions to select board members and an executive officer.
Compensation cost for Incentive Units is measured at their grant-date fair value and is equal to the value of the Legacy Bridger’s
Class D Common shares, which was estimated using an option pricing model. Compensation cost for service-based units is recognized over
the requisite service period on a straight-line basis. For performance related units, expense is recognized when the performance related
condition is considered probable.
In
connection with the Closing, the Company along with the Board established and approved and assumed the Omnibus Plan which allowed the
Company to grant RSUs to Bridger employees (the “Participants”). Upon satisfying the vesting conditions, each RSU provides
the Participants the right to receive one share of Common Stock. The fair value of RSUs is determined based on the number of shares granted
and the quoted market price of the Common Stock on the date of grant. Compensation cost for the RSUs is recognized as the performance
condition of the Closing of the transaction was met and over the requisite service period based on the graded-vesting method. The Company
accounts for forfeitures as they occur. Stock-based compensation is included in both Cost of revenues and Selling, general and administrative
expense in the Condensed Consolidated Statements of Operations.
Recent
Accounting Pronouncements
Recently
Issued Accounting Pronouncements
In
October 2023, the FASB issued ASU No. 2023-06, Disclosure
Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.
This update modifies the disclosure or presentation requirements of a variety of topics in the codification. The effective date for each
amendment will be the date on with the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective.
Early adoption is prohibited. The Company is currently evaluating the impact of adopting the new accounting guidance on the Company’s
condensed consolidated financial statements.
In
November 2023, the FASB issued ASU No. 2023-07, Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures.
This update expands annual and interim reportable segment disclosure requirements, primarily through enhanced disclosures about significant
segment expenses. This new guidance is effective for the Company for its fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact
on the Company’s condensed consolidated financial statements.
In
December 2023, the FASB issued ASU No. 2023-09, Income
Taxes (Topic 740): Improvements to Income Tax Disclosures.
This update enhances the transparency and decision usefulness of income tax disclosures to provide investors information to better assess
how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects
for future cash flows. This new guidance is effective for the Company for its fiscal years beginning after December 15, 2024. The Company
is currently evaluating the impact of adopting the new accounting guidance on the Company’s condensed consolidated financial statements.
NOTE 3
– SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| $s
in thousands |
| 2024 |
| 2023 |
| Interest
paid |
| $ |
10,415 |
|
| $ |
10,312 |
|
| Fixed
assets in accounts payable |
| 27 |
|
| 1,469 |
|
| Conversion
of promissory note to Common Stock |
| — |
|
| 897 |
|
| Series
A Preferred Stock - adjustment for deemed dividend upon Closing |
| — |
|
| 48,300 |
|
| Series
A Preferred Stock - adjustment to eliminate 50% multiplier |
| — |
|
| 156,363 |
|
| Series
A Preferred Stock - adjustment to maximum redemption value |
| 6,189 |
|
| 4,274 |
|
|
|
|
|
| |
| Non-cash
operating and financing activities: |
|
|
| |
| Issuance
costs for ATM offering included in accounts payable, accrued expense and other liabilities |
| $ |
346 |
|
| $ |
— |
|
| Assumption
of JCIC liabilities |
| — |
|
| 7,464 |
|
| Recognition
of Warrant liabilities |
| — |
|
| 5,863 |
|
| Cancellation
of deferred underwriting fee |
| — |
|
| 1,500 |
|
NOTE 4
– CASH EQUIVALENTS AND INVESTMENTS IN MARKETABLE SECURITIES
The
investments in marketable securities are classified as available-for-sale debt securities with short-term maturities of less than one
year. The
fair values, gross unrealized gains and losses of the available-for-sale securities by type are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| As
of
March 31, 2024 |
| As
of
December 31, 2023 |
| ($s
in thousands) |
| Carrying
Value |
| Cash
equivalents: |
|
|
| |
| Commercial
paper |
| $ |
— |
|
| $ |
1,974 |
|
| Money
market fund |
| 3,769 |
|
| 11,208 |
|
| Total
cash equivalents |
| $ |
3,769 |
|
| $ |
13,182 |
|
| Restricted
cash: |
|
|
| |
| Money
market fund |
| $ |
9,289 |
|
| $ |
13,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| As
of December 31, 2023 |
| $s
in thousands |
| Purchase
Price |
| Unrealized
Gains |
| Unrealized
Losses |
| Fair
Value |
| Investment
in marketable securities: |
|
|
|
|
|
|
| |
| Government
securities |
| $ |
999 |
|
| $ |
10 |
|
| $ |
— |
|
| $ |
1,009 |
|
| Total
marketable securities |
| $ |
999 |
|
| $ |
10 |
|
| $ |
— |
|
| $ |
1,009 |
|
The
net unrealized gain included in accumulated other comprehensive income for the three months ended March 31, 2024 and 2023 is zero
and $0.3
million, respectively.
The
proceeds from sales of available-for-sale securities and gross realized gains included in earnings for the three months ended March 31,
2024 and 2023 are $1.1
million and $25.1
million, respectively, and $16,000
and $0.3 million,
respectively. The Company determines gains and losses using the first-in first-out method. For the three months ended March 31, 2024
and 2023, the Company reclassified out of accumulated other comprehensive income a loss of $30,000
and a gain of $0.2
million, respectively.
NOTE 5
– ACCOUNTS AND NOTE RECEIVABLE
Accounts
and note receivable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Trade
accounts receivable |
| $ |
4,664 |
|
| $ |
681 |
|
| Note
receivable |
| — |
|
| 3,000 |
|
| Other |
| 262 |
|
| 432 |
|
| Total
accounts and note receivable |
| $ |
4,926 |
|
| $ |
4,113 |
|
In
September 2023, the Company entered into a secured promissory note in the amount of $3.0
million. This note accrued interest at a rate of 8.5%
per annum and was paid in January 2024. Other receivables consists primarily of value-added taxes paid in 2023 and expected to be refunded
in 2024.
NOTE 6
– AIRCRAFT SUPPORT PARTS
Aircraft
support parts consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Repairables
and expendables |
| $ |
476 |
|
| $ |
488 |
|
|
|
|
|
| |
| Total
aircraft support parts |
| $ |
476 |
|
| $ |
488 |
|
NOTE 7
– PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Prepaid
insurance |
| $ |
2,414 |
|
| $ |
1,324 |
|
| Prepaid
subscriptions |
| 1,122 |
|
| 1,115 |
|
| Deposits |
| 183 |
|
| 120 |
|
| Other |
| 21 |
|
| 89 |
|
| Total
prepaid expenses and other current assets |
| $ |
3,740 |
|
| $ |
2,648 |
|
NOTE 8
– PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Aircraft |
| $ |
186,494 |
|
| $ |
186,167 |
|
| Less:
Accumulated depreciation |
| (26,419) |
|
| (25,656) |
|
| Aircraft,
net |
| 160,075 |
|
| 160,511 |
|
|
|
|
|
| |
| Leasehold
improvements |
| 35,916 |
|
| 35,941 |
|
| Vehicles
and equipment |
| 3,209 |
|
| 2,993 |
|
| Construction-in-progress
- Leasehold improvements |
| 5 |
|
| 5 |
|
| Finance
lease right-of-use asset |
| 121 |
|
| 121 |
|
| Licenses |
| 235 |
|
| 235 |
|
| Less:
Accumulated depreciation |
| (3,690) |
|
| (3,195) |
|
| Leasehold
improvements and equipment, net |
| 35,796 |
|
| 36,100 |
|
| Total
property, plant and equipment, net |
| $ |
195,871 |
|
| $ |
196,611 |
|
For
the three months ended March 31, 2024, the Company recorded $0.9
million and $0.4
million of depreciation expense in Cost of revenues and Selling, general and administrative expense, respectively. For the three months
ended March 31, 2023, the Company recorded $1.0
million and $0.7
million of depreciation expense in Cost of revenues and Selling, general and administrative expense, respectively.
For
the three months ended March 31, 2024 and 2023, capitalized interest to property, plant and equipment from debt financing was zero
and $0.4
million, respectively.
NOTE 9
– ACQUISITION ACTIVITY
On
September 12, 2023, the Company completed the acquisition of all the outstanding equity interests of Ignis Technologies, Inc. (“Ignis”
and the “Acquisition”), a fire technology company developing mission-critical intelligence and technology solutions for firefighting
organizations, for total consideration of $11.6 million,
payable in unregistered shares of Bridger’s Common Stock, consisting of $3.3
million payable at closing. At closing, 426,531
restricted shares of Common Stock were issued to the Ignis shareholders (determined based upon a volume-weighted average per-share price
(“VWAP”) of the Common Stock for the 30
consecutive trading days ended September 11, 2023). The remaining $8.3 million
of Common Stock consideration is contingent upon the achievement of certain operational milestones and, assuming achievement of such milestones,
will be issued to the Ignis shareholders in 2024, 2025, and 2026, with the price per share determined based upon a trailing 120-day
VWAP of the Common Stock at the time of each issuance. The maximum number of shares of Common Stock issuable to the Ignis shareholders
as contingent earnout consideration will not exceed 8,399,198
shares in the aggregate. All of the shares of Common Stock to be issued in the Acquisition will be subject to transfer restrictions for
a 12-month
period after each issuance, with 1/12th of the total shares of Common Stock vesting each month over the one-year
period after each issuance.
None
of the shares of Common Stock issued or issuable in connection with the Acquisition were registered under the Securities Act of 1933,
as amended (the “Securities Act”), on the Acquisition date in reliance on the exemption from registration provided by Section
4(a)(2) of the Securities Act. Recipients of shares of Common Stock in connection with the Acquisition will have customary resale registration
rights with respect to such shares of Common Stock pursuant to the terms and conditions of the Acquisition.
The
Company accounted for the Acquisition under the acquisition method of accounting and has reported the results of operations of the Acquisition
as of the respective date of the Acquisition. The Company based the estimated fair values of intangible assets on an income approach utilizing
the relief from royalties model. The income approach utilizes management’s estimates of future operating results and cash flows
using a weighted average cost of capital that reflects market participant assumptions. For all other assets acquired and liabilities assumed,
the fair value reflects the carrying value of the asset or liability due to their short maturity. The Company recorded the excess of the
fair value of the consideration transferred in the Acquisition over the fair value of net assets acquired as goodwill. The goodwill reflects
our expectations of favorable future growth opportunities. The Company expects that substantially all of the goodwill will not be deductible
for federal income tax purposes.
The
Company has not presented pro forma combined results for the Acquisition because the impact on previously reported statements of operations
was not material.
As
of December 31, 2023, the Company finalized the purchase accounting for the Acquisition. The
following table summarizes the final purchase price allocation:
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Purchase
Price Allocation |
| Cash
and cash equivalents |
| $ |
3 |
|
| Intangible
assets |
| 1,300 |
|
| Accounts
payable |
| (37) |
|
| Long-term
accrued expenses and other noncurrent liabilities |
| (67) |
|
| Deferred
tax liability |
| (314) |
|
| Total
identifiable net assets |
| 885 |
|
| Goodwill |
| 10,676 |
|
| Total
purchase price |
| $ |
11,561 |
|
Goodwill
of $10.7
million arising from the Acquisition is primarily attributable to the assembled workforce of Ignis and expected synergies from combining
operations. None
of the acquired goodwill is expected to be deductible for income tax purposes. Acquired intangible assets consist entirely of in-process
research and development (“IPR&D”) and is expected to be amortized over its useful life of five
years when placed into service. The Company concluded that the IPR&D is an identifiable intangible asset that would
be accounted for as a single asset in a business combination. The fair value of the IPR&D was determined using an income approach
based on significant unobservable inputs.
NOTE 10
– GOODWILL AND INTANGIBLE ASSETS, NET
As
of March 31, 2024 and December 31, 2023, goodwill was $13.2
million, respectively. There were no
impairment charges recorded for goodwill for the three months ended March 31, 2024 and 2023.
Intangible
assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| As
of March 31, 2024 |
| $s
in thousands |
| Estimated
Life
(Years) |
| Gross
Carrying
Amount |
| Accumulated
Amortization
|
| Net
Carrying
Amount |
| Licenses |
| 10 |
| $ |
67 |
|
| $ |
(56) |
|
| $ |
11 |
|
| Internal-use
software |
| 3 |
| 297 |
|
| (233) |
|
| 64 |
|
| IPR&D |
| 5 |
| 1,941 |
|
| — |
|
| 1,941 |
|
| Total
intangible assets |
|
|
| $ |
2,305 |
|
| $ |
(289) |
|
| $ |
2,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| As
of December 31, 2023 |
| $s
in thousands |
| Estimated
Life
(Years) |
| Gross
Carrying
Amount |
| Accumulated
Amortization |
| Net
Carrying
Amount |
| Licenses |
| 10 |
| $ |
67 |
|
| $ |
(54) |
|
| $ |
13 |
|
| Internal-use
software |
| 3 |
| 297 |
|
| (208) |
|
| 89 |
|
| IPR&D |
| 5 |
| 1,628 |
|
| — |
|
| 1,628 |
|
| Total
intangible assets |
|
|
| $ |
1,992 |
|
| $ |
(262) |
|
| $ |
1,730 |
|
IPR&D
is the historical know-how, software, formula protocols, designs and procedures expected to be needed to complete the development of the
technology asset and receive regulatory approval. The Company expects to amortize the IPR&D over its useful life of five
years when placed into service. For the three months ended March 31, 2024, the Company capitalized costs of $0.3 million
related to IPR&D.
Amortization
expense for intangible assets and other noncurrent assets was $26,000
for the three months ended March 31, 2024 and 2023, respectively. Amortization expense is included in Selling, general and administrative
expense in the Condensed Consolidated Statements of Operations.
NOTE 11
– OTHER NONCURRENT ASSETS
Other
noncurrent assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Operating
lease right-of-use asset |
| $ |
7,395 |
|
| $ |
7,777 |
|
| Investment
in MAB |
| 4,000 |
|
| 4,000 |
|
| Prepaid
subscriptions |
| 2,546 |
|
| 2,877 |
|
| Interest
rate swap |
| 1,233 |
|
| 1,117 |
|
| Investment
in Overwatch Imaging, Inc. |
| 1,000 |
|
| 1,000 |
|
|
|
|
|
| |
| Total
other noncurrent assets |
| $ |
16,174 |
|
| $ |
16,771 |
|
NOTE 12
– ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued
expenses and other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
| Contingent
consideration |
| $ |
8,501 |
|
| $ |
8,486 |
|
| Warrant
liabilities |
| 5,330 |
|
| 5,596 |
|
| Accrued
interest expense |
| 1,872 |
|
| 6,448 |
|
| Accrued
salaries, wages and bonuses |
| 1,542 |
|
| 1,099 |
|
| Deferred
underwriting fee payable |
| 1,500 |
|
| 1,500 |
|
| Deferred
revenue |
| 1,278 |
|
| — |
|
| Accrued
professional fees |
| 1,253 |
|
| 851 |
|
| Accrued
foreign tax |
| 925 |
|
| 2,707 |
|
| Finance
right-of-use liability |
| 40 |
|
| 46 |
|
| Embedded
derivative of Series A Preferred Stock |
| — |
|
| 885 |
|
| Other |
| 206 |
|
| 327 |
|
| Total
accrued expenses and other liabilities |
| 22,447 |
|
| 27,945 |
|
| Less:
Current accrued expenses and other current liabilities |
| (11,955) |
|
| (17,168) |
|
| Total
long-term accrued expenses and other noncurrent liabilities |
| $ |
10,492 |
|
| $ |
10,777 |
|
Warrant
liabilities
The
warrant liabilities consist of the following Warrants issued by the Company in connection with the Reverse Recapitalization:
Public
Warrants
The
Company issued Public Warrants to purchase 17,250,000
shares of Common Stock at an exercise price of $11.50
per share in exchange for the 17,250,000
JCIC warrants originally issued by JCIC in its initial public offering. The Warrants may only be exercised for a whole number of shares
of Common Stock. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants may also be adjusted in
certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. In no event
will the Company be required to net cash settle any Warrant.
The
Warrants became exercisable 30
days following the Reverse Recapitalization and will expire January 24, 2028.
Under
certain circumstances, the Company may elect to redeem the Public Warrants at a redemption price of $0.01
per Public Warrant at any time during the term of the warrant in which the Common Stock trading price has been at least $18.00
per share for 20
trading days within the 30
trading-day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant
holders. If the Company elects to redeem the Public Warrants, it must notify the Public Warrant holders in advance, who would then have
at least 30
days from the date of notification to exercise their respective warrants. If the warrant is not exercised within that 30-day period, it
will be redeemed pursuant to this provision. The Company may also elect to redeem the outstanding Warrants at a redemption price of $0.10
per Warrant at any time during the term of the Warrant in which the Common Stock trading price is between $10.00
per share and $18.00
per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganization, recapitalizations and the like)
for any 20
trading days within the 30
trading-day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant
holders. In such case, the Warrant holders will be able to exercise their Warrants on a cashless basis prior to the redemption for a number
of shares of our Common Stock determined based on the redemption date and the fair market value of the Common Stock.
As
of March 31, 2024 and December 31, 2023, 17,249,874
Public Warrants remain outstanding. The Public Warrants are liability-classified with a balance of $3.5
million and $3.6
million, respectively,
and a fair
value of $0.20
and $0.21
per warrant
as of March 31, 2024 and December 31, 2023, respectively.
Private
Placement Warrants
The
Company issued Private Placement Warrants to purchase 9,400,000
shares of Common Stock at an exercise price of $11.50
per share in exchange for the 9,400,000
JCIC warrants originally purchased in a private placement by JCIC Sponsor, LLC (“JCIC Sponsor”) contemporaneously with JCIC’s
initial public offering. JCIC Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless
basis. If the Private Placement Warrants are held by holders other than JCIC Sponsor or its permitted transferees, the Private Placement
Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public
Warrants.
As
of March 31, 2024 and December 31, 2023, the Company had 9,400,000
outstanding Private Placement Warrants to purchase 9,400,000
shares of Common Stock. The Private Placement Warrants are liability-classified with a balance of $1.9
million and $2.0
million, respectively, and a fair value of $0.20
and $0.21
per warrant as of March 31, 2024 and December 31, 2023, respectively.
Contingent
consideration
The
Company assumed contingent consideration as part of the Acquisition discussed in “Note
9 – Acquisition Activity”
included in this Quarterly Report. The Company is required to make contingent payments to the sellers based on the achievement of certain
operational milestones. The fair value of the liability for the contingent payments was recognized upon the acquisition as part of the
purchase accounting opening balance sheet. The initial cost was recognized at fair value on the closing date with subsequent changes in
estimated fair value recognized as Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
As of March 31, 2024 and December 31, 2023, $4.9
million and $4.8
million of accrued contingent consideration is included in Accrued expenses and other current liabilities, respectively, and $3.6
million and $3.7
million of accrued contingent consideration is included in Long-term accrued expenses and other noncurrent liabilities, respectively,
in the Condensed Consolidated Balance Sheets.
The
change in contingent consideration for the three months ended March 31, 2024 was as follows:
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Contingent
Consideration |
| As
of December 31, 2023 |
| $ |
8,486 |
|
| Change
in fair value of contingent consideration |
| 15 |
|
| As
of March 31, 2024 |
| $ |
8,501 |
|
NOTE 13
– INTEREST RATE SWAP
The
Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely
affect expected future cash flows and by evaluating hedging opportunities.
The
Company entered an interest rate swap with Rocky Mountain Bank (“RMB”) on March 12, 2020 to reduce risk related to variable-rate
debt from the term loan, which was subject to changes in market rates of interest as discussed in “Note
15 – Long-Term Debt” included
in this Quarterly Report. The interest rate swap is designated as a cash flow hedge. The Company records its corresponding derivative
asset on a gross basis in Other noncurrent assets at fair value on the Condensed Consolidated Balance Sheets.
Each
month, the Company made interest payments to RMB under its loan agreement based on the current applicable one-month LIBOR rate plus the
contractual LIBOR margin then in effect with respect to the term loan, without reflecting the interest rate swap until June 30, 2023.
Effective July 1, 2023, LIBOR was replaced by 1-month CME Term Secured Overnight Financing Rate (“SOFR”) plus 0.11448% tenor
spread adjustment plus the 2.5%
contractual SOFR margin then in effect with respect to the term loan. At the end of each calendar month, the Company receives or makes
payments on the interest rate swap difference, if any, based on the received interest rate set forth in the table below. Interest payments
on the Company’s term loan and payments received or made on the interest rate swap are reported net on the Condensed Consolidated
Statements of Operations as interest expense.
The
Company had the following interest rate swap designated as a cash flow hedge ($s in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| As
of March 31, 2024 |
Effective
Date |
| Maturity
Date |
| Notional
Amount |
| Fair
Value |
| Pay
Fixed |
| Receive
Rate |
| 4/15/2020 |
| 3/15/2030 |
| $10,305 |
| $1,233 |
| 3.887% |
|
1
Month SOFR + 2.61448% |
|
|
|
|
|
|
|
|
|
|
| |
| As
of December 31, 2023 |
Effective
Date |
| Maturity
Date |
| Notional
Amount |
| Fair
Value |
| Pay
Fixed |
| Receive
Rate |
| 4/15/2020 |
| 3/15/2030 |
| $10,466 |
| $1,117 |
| 3.887% |
|
1
Month SOFR + 2.61448% |
The
Company accounts for the interest rate swap as a cash flow hedge for accounting purposes under GAAP. The Company reflects the effect of
this hedging transaction in the condensed consolidated financial statements. The unrealized gain is reported in Other comprehensive income
(loss), net of tax in the Condensed Consolidated Statements of Comprehensive Loss included in this Quarterly Report. If the Company terminates
the interest rate swap agreement, the cumulative change in fair value at the date of termination would be reclassified from Accumulated
other comprehensive income, which is classified in Stockholders’ deficit, into earnings in the Condensed Consolidated Statements
of Operations included in this Quarterly Report.
NOTE 14
– FAIR VALUE MEASUREMENTS
Long-term
debt
As
of March 31, 2024, the Company has $160.2
million of fixed rate debt and $50.4
million of variable rate debt outstanding. The majority of the fixed rate debt is based on current market rates. The Company estimated
the fair value of the fixed rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy. When valuing fixed
rate debt, the fair value is capped at par value. The variable rate debt approximates fair value based on the closing or estimated market
prices of similar securities comparable to the Company’s debts as of March 31, 2024 and December 31, 2023. Debt financing
activities and loan agreements are further described in “Note
15 – Long-Term Debt” included
in this Quarterly Report for additional details.
Recurring
Fair Value Measurement
Our
cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current assets and liabilities (excluding
derivative instruments) are carried at amounts which reasonably approximate their fair values due to their short-term nature.
The
following tables summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis, by level,
within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| As
of March 31, 2024 |
| $s
in thousands |
| Level
1 |
| Level
2 |
| Level
3 |
| Assets |
|
|
|
|
| |
| Cash |
| $ |
6,776 |
|
| $ |
— |
|
| $ |
— |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
| Restricted
cash: |
| |
| |
| |
| Money
market fund |
| 9,289 |
|
| — |
|
| — |
|
| Total
restricted cash |
| 9,289 |
|
| — |
|
| — |
|
|
|
|
|
|
|
| |
| Interest
rate swap |
| — |
|
| 1,233 |
|
| — |
|
| Total
assets |
| $ |
16,065 |
|
| $ |
1,233 |
|
| $ |
— |
|
| Liabilities |
| |
| |
| |
| Warrant
liabilities – Public Warrants |
| $ |
3,450 |
|
| $ |
— |
|
| $ |
— |
|
| Warrant
liabilities – Private Placement Warrants |
| — |
|
| 1,880 |
|
| — |
|
| Contingent
consideration |
| — |
|
| — |
|
| 8,501 |
|
|
|
|
|
|
|
| |
| Total
liabilities |
| $ |
3,450 |
|
| $ |
1,880 |
|
| $ |
8,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| As
of December 31, 2023 |
| $s
in thousands |
| Level
1 |
| Level
2 |
| Level
3 |
| Assets |
|
|
|
|
| |
| Cash |
| $ |
22,956 |
|
| $ |
— |
|
| $ |
— |
|
| Restricted
cash: |
|
|
|
|
| |
| Money
market fund |
| 13,981 |
|
| — |
|
| — |
|
| Total
restricted cash |
| 13,981 |
|
| — |
|
| — |
|
| Investments
in marketable securities |
| — |
|
| 1,009 |
|
| — |
|
| Interest
rate swap |
| — |
|
| 1,117 |
|
| — |
|
| Total
assets |
| $ |
36,937 |
|
| $ |
2,126 |
|
| $ |
— |
|
| Liabilities |
|
|
|
|
| |
| Warrant
liabilities – Public Warrants |
| $ |
3,622 |
|
| $ |
— |
|
| $ |
— |
|
| Warrant
liabilities – Private Placement Warrants |
| — |
|
| 1,974 |
|
| — |
|
| Contingent
consideration |
| — |
|
| — |
|
| 8,486 |
|
| Embedded
derivative of Series A Preferred Stock |
| — |
|
| — |
|
| 885 |
|
| Total
liabilities |
| $ |
3,622 |
|
| $ |
1,974 |
|
| $ |
9,371 |
|
Interest
Rate Swap
The
Company’s derivative financial instruments are measured at fair value on a recurring basis based on quoted market prices or using
standard valuation models as described in “Note
13 – Interest Rate Swap” included
in this Quarterly Report.
The
notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore,
are not a direct measure of our exposure to the financial risks described in “Note
2 – Summary of Significant Accounting Policies” included
in this Quarterly Report.
The
fair value of the Company’s interest rate swap agreement was determined based on the present value of expected future cash flows
using discount rates appropriate with the terms of the swap agreement. The fair value indicates an estimated amount the Company would
be required to receive if the contracts were canceled or transferred to other parties. The Company calculates the fair value of interest
rate swap agreement quarterly based on the quoted market price for the same or similar financial instruments.
Embedded
derivative of Legacy Bridger Series C Preferred Shares and Series A Preferred Stock
The
Company identified a redemption feature of the Legacy Bridger Series C Preferred Shares that required bifurcation from the host instrument
as an embedded derivative liability. The embedded derivative was initially valued and remeasured using a “with-and-without”
method. The “with-and-without” methodology involved valuing the entire instrument both with and without the embedded derivative
using a discounted cash flow approach. Under this methodology, the difference in the estimated fair value between the instrument with
the embedded derivative and the instrument without the embedded derivative represents the estimated fair value of the embedded derivative.
This valuation methodology is based on unobservable estimates and judgements, and therefore is classified as a Level 3 fair value measurement.
The significant unobservable input used in the estimated fair value measurement of the embedded derivative is the timing for which the
Company may be in default of certain financing facilities that would require an increase of 2%
interest per annum to be accrued by the holders of the Legacy Bridger Series C Preferred Shares.
Commercial
paper and Investments in marketable securities
The
fair values of the commercial paper and available-for-sale marketable securities are based on observable market prices, and therefore
classified as a Level 2 fair value measurement. Refer to “Note
4 – Cash Equivalents and Investment in Marketable Securities”
included in this Quarterly Report for additional details.
Warrant
Liabilities
The
Company issued Warrants in connection with the Reverse Recapitalization. The Company classifies the Warrants as liabilities at their fair
value and adjust the Warrants to fair value at each reporting period. The warrant liabilities are subject to remeasurement at each balance
sheet date until exercised, and any change in fair value are recorded in earnings through Selling, general and administrative expense
on the Condensed Consolidated Statements of Operations included in this Quarterly Report.
The
Public Warrants are publicly traded under the symbol “BAERW,” and the fair value of the Public Warrants at a specific date
is determined by the closing price of the Public Warrants as of that date. Therefore, the Public Warrants are classified as Level 1 of
the fair value hierarchy. The Public Warrants are redeemable at any time during the term of the warrant in which the Common Stock share
trading price has been at least $18.00
per share for 20
trading days within the 30
trading-day period. JCIC Sponsor can redeem both the Private Placement Warrants and the Public Warrants when the stock price is between
$10.00
to $18.00.
As such, it is economically beneficial for the Company to redeem the Private Placement Warrants any time before the stock price crosses
the $18.00
threshold. Therefore, the Warrants have similar economic value, hence Private Placement Warrants are deemed to have the same value as
the Public Warrants and are classified Level 2 of the fair value hierarchy. Refer to “Note
12 – Accrued Expenses and Other Liabilities”
included in this Quarterly Report for additional details.
Contingent
consideration
In
connection with the Acquisition, the Company is required to make contingent payments to the sellers based on the achievement of certain
operational milestones. The fair value of the liability for the contingent payments recognized upon the acquisition as part of the purchase
accounting opening balance sheet totaled $8.3
million. The fair value of the contingent consideration was determined using the Monte-Carlo simulation-based model discounted to present
value. Assumptions used in this calculation are equity volatility, estimated future stock prices and various probability factors, including
management’s estimate of the likelihood of meeting certain operational milestones. The ultimate settlement of the contingent consideration
could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level
3 financial liability that is remeasured each reporting period. Changes in estimated fair value of contingent consideration are recognized
as Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations included in this Quarterly
Report. Refer to “Note
12 – Accrued Expenses and Other Liabilities”
included in this Quarterly Report for additional details.
Non-Recurring
Fair Value Measurements
The
Company measures certain assets at fair value on a non-recurring basis, including long-lived assets and goodwill and cost and equity method
investments, which are evaluated for impairment. Long-lived assets include property, plant and equipment, net, and certain intangible
assets. The inputs used to determine the fair value of long-lived assets are considered Level 3 measurements due to their subjective nature.
As
of March 31, 2024, the Company did not have any significant assets or liabilities that were remeasured at fair value on a non-recurring
basis in periods subsequent to initial recognition.
NOTE 15
– LONG-TERM DEBT
Long-term
debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| As
of March 31,
2024 |
| As
of December 31,
2023 |
|
Taxable
industrial revenue bonds, dated July 21, 2022, 11.5%
interest rate, maturing September 1, 20271 |
| $ |
160,000 |
|
| $ |
160,000 |
|
|
Permanent
loan agreement, dated August 21, 2020, greater of Prime + 1.5%
or 4.75%
interest rate, maturing August 21, 20352 |
| 18,183 |
|
| 18,391 |
|
|
Permanent
loan agreement, dated October 1, 2020, greater of Prime + 1.5%
or 4.75%
interest rate, maturing October 1, 20352 |
| 18,250 |
|
| 18,457 |
|
|
Term
loan agreement dated September 30, 2019, SOFR + 2.61448%
interest rate, maturing March 15, 20303 |
| 10,305 |
|
| 10,466 |
|
|
Term
loan agreement dated February 3, 2020, SOFR + 2.61448%
interest rate, maturing February 3, 20274 |
| 3,673 |
|
| 3,813 |
|
|
Various
term loan agreements, earliest start at September 9, 2021, 3.89-5.5%
interest rates, latest maturation on November 17, 20275 |
| 229 |
|
| 247 |
|
| Loans
payable |
| 210,640 |
|
| 211,374 |
|
| Less:
noncurrent debt issuance costs |
| (3,495) |
|
| (3,695) |
|
| Less:
current debt issuance costs |
| (1,002) |
|
| (995) |
|
| Less:
current portion of long-term debt, net of debt issuance costs |
| (2,028) |
|
| (2,099) |
|
| Total
long-term debt, net of debt issuance costs |
| $ |
204,115 |
|
| $ |
204,585 |
|
1.On
July 21, 2022, the Company closed on the 2022 Bonds, upon which the Company received aggregate proceeds of $135.0
million on July 21, 2022 and $25.0
million on August 10, 2022. The proceeds were designated to redeem in full the 2021 Bonds and the Series A Preferred Stock, to finance
the construction and equipping of the Company’s third and fourth aircraft hangars in Belgrade, Montana and to fund the purchase
of four additional Super Scoopers. The Series 2022 Bonds mature on September 1, 2027, with an annual interest rate of 11.5%
payable semiannually on March 1 and September 1 of each year, commencing on September 1, 2022. Debt issuance costs for the Series 2022
Bonds were $4.2
million. The Series 2022 Bonds are subject to redemption or prepayment prior to maturity, as follows: (a) optional redemption in whole
or in part, on any day thereafter at par plus accrued interest, and on certain dates, a premium; (b) mandatory redemption at par plus
any premium applicable to optional redemptions and a 3%
premium if such redemptions are made prior to September 1, 2025, in whole or in part, in the event of the occurrence of certain events;
and (c) extraordinary redemption at par plus accrued interest due to the occurrence of certain casualty, condemnation, or other unexpected
events. Optional redemptions are subject to 3%,
2%,
and 0%
premiums if redemptions are made on or after September 1, 2025, September 2026, and September 2027, respectively. At the Company’s
direction, the Series 2022 Bonds may be redeemed by Gallatin County at any time, at a redemption price equal to 100%
of the principal amount plus accrued interest upon the occurrence of certain events.
2.In
2020, the Company entered into two separate credit facilities brokered through Live Oak Bank (“LOB”) and backed by the U.S.
Department of Agriculture for the completed purchase of the Company’s first two Super Scoopers. The Company issued two $19.0
million promissory notes to LOB, established as 15-year
maturity, first two
years interest only payments monthly, then 13-year
term principal plus interest due monthly at the rate of the greater of prime plus 1.5%
or 4.75%
per annum. The first of these notes was issued on August 21, 2020 and the second was issued October 1, 2020 to BAT1, LLC and
BAT2, LLC, respectively. Debt issuance costs for BAT1 and BAT2 were $1.0
million and $0.9
million, respectively.
3.On
September 20, 2019, the Company entered into a credit facility with RMB for $12.9
million, established as a 10-year
maturity, 6-month
draw period, first 6
months interest only payments monthly, then 10-year
term principal plus interest due monthly on a 20-year
amortization at the rate of 1 month SOFR plus 2.61448%.
Debt issuance costs for this loan were $0.1
million.
4.On
February 3, 2020, the Company entered into a credit facility with RMB to finance in part the purchase of four Daher Kodiaks. A promissory
note was issued for $5.6
million, established as a 7-year
maturity, first 8
months interest only payments monthly, 60
day draw period, then 76-month
term plus principal interest due monthly on a 10-year
amortization at the rate of 1 month SOFR plus 2.61448%.
Debt issuance costs for this loan was $0.1
million.
5.On
November 18, 2021, the Company re-entered into a new short-term loan to finance aviation insurance premiums with Insurance Premium Financing
Leader. This was financed for $0.6
million with a maturity of one
year and at a rate of 3.89%.
No
debt issuance costs were incurred. The Company also entered into various term loan agreements for the purchase of vehicles through First
Interstate Bank with the earliest date of September 9, 2021. These loans ranged from $29,000
to $72,000
and were at rates from 4.8%
to 5.5%
and at durations from 5
to 6 years, with
the latest maturation on November 17, 2027.
The
Series 2022 Bonds are subject to financial covenants requiring the Company to maintain a DSCR that exceeds 1.25x
commencing with the fiscal quarter ending December 31, 2023, operate in such a manner to produce gross revenues so as to be at all relevant
times in compliance with the DSCR covenant and to maintain liquidity of $8.0
million in the form of unrestricted cash or investments (excluding margin accounts and retirement accounts) at all times and to be reported.
The
Company is not in compliance with the DSCR covenant as of March 31, 2024 and management anticipates the Company will continue to
not be in compliance with the DSCR covenant at future quarterly measurement periods in the next 12 months, primarily attributable to the
seasonal nature of our business and a less intense 2023 wildfire season. In addition, the Company is not in compliance with the $8.0 million
minimum liquidity requirement as of March 31, 2024 and management anticipates that it may not be in compliance with the minimum liquidity
requirement at future quarterly measurement periods in the next 12 months depending on the cash generated from its seasonal firefighting
operations in 2024.
The
Series 2022 Bonds agreements provide that, with regard to covenant violations, other than non-payment of principal or interest, no event
of default shall be deemed to have occurred so long as a reasonable course of action to remedy a violation commences within 30 days of
written notification of non-compliance from the trustee and management diligently prosecutes the remediation plan to completion.
Management
consulted with bond counsel on the impact of covenant violations and proactively developed a cost reduction plan, and began implementing
the plan in November 2023, to help remedy the anticipated covenant breaches in 2024. However, this plan is still in progress and there
is no assurance that management will be able to diligently prosecute the remediation plan to completion. Additionally, as described in
further detail in “Note
22 – Subsequent Events,” the
Company raised additional cash through a registered direct equity offering in April 2024 resulting in net cash proceeds of approximately
$9.2 million.
However, depending on the cash generated from its seasonal firefighting operations in 2024, there may be periods in the next 12 months
where the Company may not be in compliance with the $8.0 million
minimum liquidity requirement. The uncertainty regarding the company’s ability to diligently prosecute the remediation plan to completion
and the potential impact on the bonds maturity as a result of the anticipated debt covenant violations at subsequent compliance dates
or failure to make required interest payments, could result in the Series 2022 Bonds becoming immediately due and payable, which raises
substantial doubt about our ability to continue as a going concern as further disclosed in “Note
1 – Organization and Basis of Presentation”
included in this Quarterly Report.
The
LOB loans are subject to financial covenants requiring the Company to maintain a DSCR, generally calculated as the ratio of the net cash
flow (as defined in the applicable note agreements) to the amount of interest and servicing fees required to be paid over the succeeding
12 months on the principal amount of the note, as applicable, that will be outstanding on the payment date following such date of determination,
that exceeds 1.25x
at the aircraft or entity level and for the Company’s debt to worth ratio to not exceed 5.00x
at the aircraft or entity level. The Company is in compliance with such financial covenants as of March 31, 2024.
Both
of the loans with RMB are subject to financial covenants requiring the Company to maintain a DSCR, calculated as the ratio of adjusted
EBITDA (as defined in the applicable note agreements) to the amount of interest and principal payments for the fiscal year ending on the
compliance date, that exceeds 1.25x
for the Company. These notes are also subject to financial covenants requiring the Company to maintain a Senior Leverage Ratio on a quarterly
basis not to exceed 7.00
to 1.00 through Quarter 3, 2024, 6.00
to 1.00 through Quarter 3, 2025 and 5.00
to 1.00 thereafter. This is calculated as Total Funded Senior Debt (as defined in the applicable note agreements) less municipal debt,
divided by adjusted EBITDA (as defined in the applicable note agreements). The Company is in compliance with such financial covenants
as of March 31, 2024.
Amortization
of debt issuance costs was $0.2
million and $0.2
million for the three months ended March 31, 2024 and 2023, respectively.
NOTE 16
– COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, the Company is subject to various litigation and other claims in the normal course of business. No amounts have been accrued
in the condensed consolidated financial statements with respect to any matters.
Due
to the nature of our business, we may become, from time to time, involved in routine litigation or subject to disputes or claims related
to our business activities. In the opinion of our management, there are no pending litigation, disputes or claims against us which, if
decided adversely, will have a material adverse effect on our financial conditions, cash flows or results of operations. In the ordinary
course of its operations, the Company will continue to vigorously enforce its legal and contractual rights to ensure that its business
and operations continue on an unimpaired basis.
Contingencies
On
November 17, 2023, the Company entered into a series of agreements with MAB and its subsidiary designed to facilitate the purchase and
return to service of four Spanish Scoopers originally awarded to the Company in September 2023 via a public tender process from the Government
of Spain. The terms of the agreements provide that the Company will manage the return to service upgrades of the Spanish Scoopers while
they are owned and funded by MAB. The Company has the right, but not the obligation, to acquire each plane as it is ready to be contracted
and returned to service. In the event that Bridger does not purchase the aircraft within the time periods set forth in the agreements,
then either party may initiate a sales process for the sale of all aircraft that have not been purchased by the Company, which sales process
the Company will oversee and manage. If the aircraft are sold to a third party through such process, then the Company must pay MAB’s
subsidiary a cash fee equal to the amount, if any, by which the aggregate price of the Company’s purchase options for such aircraft
exceeds the consideration paid by the third-party purchaser for the same aircraft, not to exceed $15.0 million
in aggregate. If the aircraft are not sold to a third party and MAB’s subsidiary has not otherwise entered into an operating lease
with a third party for the aircraft, then the Company must pay MAB’s subsidiary $15.0 million.
NOTE 17
– MEZZANINE EQUITY
Legacy
Bridger Series C Preferred Shares
On
April 25, 2022, Legacy Bridger authorized and issued 315,789.473684
Legacy Bridger Series C Preferred Shares for aggregate proceeds of $288.5
million, net of issuance costs of $11.5
million. The Legacy Bridger Series C Preferred Shares ranked senior to Legacy Bridger’s common shares and ranked subordinate to
Legacy Bridger Series A Preferred Shares, which were later redeemed in 2022, with respect to the distribution of assets upon liquidation
or certain triggering events. The Legacy Bridger Series C Preferred Shares did not participate in earnings of Legacy Bridger and were
non-voting shares.
Prior
to the consummation of the qualified public offering, the Legacy Bridger Series C Preferred Shares accrued interest daily at 7%
per annum for the first year, 9%
per annum for the second year and 11%
per annum thereafter and were compounded semi-annually at June 30th and December 31st of each year. Following the consummation of a qualified
public offering, the Legacy Bridger Series C Preferred Shares were to accrue interest daily at 7%
per annum for the first 6 years, 9%
per annum for the seventh year and 11%
per annum thereafter, compounded semi-annually.
Upon
the Closing, Legacy Bridger surrendered and exchanged all 315,789.473684
issued and outstanding Legacy Bridger Series C Preferred Shares into 315,789.473684
shares of Series A Preferred Stock. The Company’s Certificate of Incorporation included provisions of the Legacy Bridger Series
C Preferred Shares that were already in effect prior to the consummation of the Reverse Recapitalization. As a result of the Reverse Recapitalization,
the maximum redemption value of the Company’s Series A Preferred Stock changed to approximately $332.7
million and excluded the 50%
multiplier which had historically been included in the maximum redemption value of Legacy Bridger Series C Preferred Shares.
The
Legacy Bridger Series C Preferred Shares were convertible at the election of the holder into shares of Legacy Bridger’s Class B
common shares after the occurrence of certain specified events, including after a qualified public offering, without the payment of additional
consideration by the holder into such number of Legacy Bridger Class B common stock as determined by dividing the original issue price,
plus accrued interest by a conversion price in effect at the time of conversion. The conversion price of Legacy Bridger Series C Preferred
Shares was initially equal to $12.929104.
The applicable conversion price was subject to future adjustments upon the occurrence of a qualified public offering.
The
Legacy Bridger Series C Preferred Shares were mandatorily redeemable by Legacy Bridger on April 25, 2032 at an amount dependent on whether
the redemption occurs prior or following a qualified public offering. If the mandatory redemption occurs prior to the consummation of
a qualified public offering, the redemption amount was equal to the stated value, plus the initial issue price multiplied by 50%,
plus accrued but unpaid interest. If the mandatory redemption occurs following the consummation of a qualified public offering, the redemption
amount was equal to the stated value, plus accrued but unpaid interest. The Legacy Bridger Series C Preferred Shares were also redeemable
upon certain triggering events outside of the control of Legacy Bridger. The redemption events include redemption by the holder after
March 29, 2027 and prior to a qualified public offering, or a fundamental change in Legacy Bridger’s voting and governance structure
such as the sale of Legacy Bridger or its subsidiaries representing more than 50%
of Legacy Bridger’s voting stock or a similar liquidity event.
Given
the conversion feature was considered substantive, the mandatory redemption date was not certain and the optional redemption was upon
the occurrence of certain events that are considered not solely within Legacy Bridger’s control, the Legacy Bridger Series C Preferred
Shares were classified as mezzanine equity.
As
of December 31, 2022, it was probable that the Legacy Bridger Series C Preferred Shares may become redeemable at either the holder’s
option on or after March 29, 2027 and prior to the consummation of a qualified public offering or in the event of a qualified public offering.
The Company elected to recognize changes in redemption value immediately, adjusting the Legacy Bridger Series C Preferred Shares to the
maximum redemption value at each reporting date. As of December 31, 2022, the Legacy Bridger Series C Preferred Shares were carried at
their redemption value of $489.0
million.
Series
A Preferred Stock
The
Series A Preferred Stock are convertible at the election of the holders into shares of Common Stock, without the payment of additional
consideration by the holders into such number of shares of Common Stock as determined by dividing the original issue price, plus accrued
interest by a conversion price equal to $11.00
per share at the time of conversion.
Shares
of Series A Preferred Stock are mandatorily redeemable by the Company on April 25, 2032 at a redemption amount that is equal to the stated
value, plus accrued but unpaid interest. Accrued interest for the Series A Preferred Stock was $6.2
million as of March 31, 2024. Shares of Series A Preferred Stock are also redeemable upon certain triggering events outside of the
control of the Company. The triggering events include redemption by the holder on or after April 25, 2027, or a fundamental change in
the Company’s voting and governance structure such as the sale of the Company or its subsidiaries representing more than 50%
of the Company’s voting stock or a similar liquidity event.
As
of the Closing Date and March 31, 2024, it is probable that the Series A Preferred Stock may become redeemable on April 25, 2032.
The Company has elected to recognize changes in redemption value immediately, adjusting the preferred stock to the maximum redemption
value at each reporting date. Upon Closing, the Series A Preferred Stock had both a carrying value and redemption value of $332.7
million, the 50%
multiplier, valued at $156.4
million, was removed. As of March 31, 2024, the Series A Preferred Stock had both a carrying value and redemption value of $361.0
million. Refer to table below.
As
of March 31, 2024 and December 31, 2023, the fair value of the embedded derivative related to the event of default is zero
and 0.9
million recorded as a liability on the Condensed Consolidated Balance Sheets and remeasured to fair value at each balance sheet date with
changes in fair value recorded within Interest expense on the Condensed Consolidated Statements of Operations.
The
Company determined the fair value of the other features requiring bifurcation, both individually and in the aggregate were immaterial
at March 31, 2024. The fair value of these features will be assessed at each reporting date and will be recognized and remeasured
at fair value, if material.
Additionally,
the reduction of the conversion price from $12.90
per share to $11.00
per share triggered a down round conversion feature embedded in the Series A Preferred Stock upon Closing. The Company recognized the
value of the effect of a down round feature as a deemed dividend, decreasing income attributable to common stockholders in the computation
of (loss) earnings per share by approximately zero
and $48.3
million during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there are 32,820,828
shares of Common Stock issuable upon conversion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Redeemable
Series A Preferred Stock |
| $s
in thousands |
| Shares |
| Amounts |
| Balance
as of December 31, 2023 |
| 315,789.473684 |
| $ |
354,840 |
|
| Adjustment
to maximum redemptions value |
| — |
| 6,189 |
|
| Balance
as of March 31, 2024 |
| 315,789.473684 |
| $ |
361,029 |
|
NOTE 18
– STOCKHOLDERS’ DEFICIT
Common
Stock
In
connection with the Reverse Recapitalization, the Company issued 43,769,290
shares of Common Stock, of which 39,081,744
shares were issued to Legacy Bridger Common shareholders, 2,084,357
shares were issued to the public shareholders of JCIC and 2,603,189
shares were issued to JCIC Sponsor and independent directors of JCIC upon Closing. Of the shares issued to Legacy Bridger Common shareholders
and JCIC Sponsor, 233,323
and 855,000
shares are subject to continuing vesting conditions, respectively.
Restricted
Stock Units
In
January 2023, in connection with the Closing, the Company and its Board established and approved and assumed the Omnibus Plan, which allowed
the Company to grant RSUs to Bridger employees (the “Participants”). RSUs are settled in shares of Common Stock as the RSUs
vest. The RSUs accrue dividend equivalents associated with the underlying shares of Common Stock as the Company declares dividends. Dividends
are paid to holders of RSUs in cash upon the vesting date of the associated RSU and are forfeited if the RSU does not vest. For the purposes
of calculating compensation expense, the fair value of RSUs is the closing stock price on the date of grant. Generally, RSUs vest over
a period of six
years, subject to the Participant’s continued employment. Upon vesting of each RSU, the Company will issue one
share of Common Stock to the RSU holder.
RSU
activity for the three months ended March 31, 2024 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Number
of
Awards |
| Weighted
average
grant date fair
value |
| Outstanding
as of December 31, 2023 |
| 6,624,459 |
| $ |
8.30 |
|
| Granted |
| 1,028,917 |
| 5.27 |
|
| Vested |
| (1,703,592) |
| 8.30 |
|
| Forfeited/Cancelled |
| (227,501) |
| 6.82 |
|
| Outstanding
as of March 31, 2024 |
| 5,722,283 |
| $ |
7.81 |
|
The
total fair value of RSUs vested during the three months ended March 31, 2024 and 2023 was $9.3
million and $21.6
million, respectively, based on the closing stock price on the date of vesting.
For
the three months ended March 31, 2024, the Company recorded stock-based compensation expense related to RSUs of $0.4
million and $5.5
million within Total cost of revenues and Selling, general and administrative expense, respectively, on the Condensed Consolidated Statements
of Operations.
As
of March 31, 2024, there was $29.1
million of unrecognized total compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average
period of 2.7
years.
Incentive
Units
Prior
to the adoption of the Omnibus Plan, during the year ended December 31, 2022, the Company granted Incentive Units to selected board members
and executives. Within each grant, 80%
of the Incentive Units vested annually over a four
year period subject to continued service by the grantee (the “Time-Vesting Incentive Units”), and the remaining
20%
of the Incentive Units vest upon a qualifying change of control event (the “Exit-Vesting Incentive Units”). For the Time-Vesting
Incentive Units, compensation cost was recognized over the requisite service period on a straight-line basis. For the Exit-Vesting Incentive
Units, expense will be recognized when a qualifying change of control event is considered probable, which has not occurred as of March 31,
2024. As of March 31, 2024, 40,404
Exit-Vesting Incentive Units with a weighted-average grant date fair value of $0.01
remain outstanding. Upon vesting of each Incentive Unit, the Company will issue 0.96246
shares of Common Stock to the Incentive Unit holder.
At-the-Market
(“ATM”) Offering
On
January 26, 2024, the Company entered into a sales agreement (“2024 ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated
(“Stifel”) and Virtu Americas LLC (together with Stifel, the “Agents”) under which we could offer and sell, from
time to time, shares of our Common Stock having an aggregate offering price of up to $100.0 million
through the Agents in negotiated transactions that are deemed to be an “at the market offering.”
The
offering was registered under the Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No.
333-276721), as previously filed with the Securities and Exchange Commission (“SEC”) and declared effective on February 6,
2024. We filed a prospectus supplement, dated February 6, 2024, with the SEC that provides for the sale of shares of Common Stock having
an aggregate offering price of up to approximately $22.2 million
(“2024 ATM Shares”).
Under
the 2024 ATM Agreement, the Agents may sell the 2024 ATM Shares by any method permitted by law and deemed to be an “at the market
offering” as defined in Rule 415 promulgated under the Securities Act, including sales made directly on or through the Nasdaq Global
Market, or any other existing trading market for the 2024 ATM Shares or in negotiated transactions at market prices prevailing at the
time of sale or at prices related to such prevailing market prices. Actual sales will depend on a variety of factors to be determined
by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, capital needs
and determinations by the Company of the appropriate sources of funding for the Company.
The
Company is not obligated to make any sales of the 2024 ATM Shares under the 2024 ATM Agreement. The offering of the 2024 ATM Shares pursuant
to the 2024 ATM Agreement will terminate upon the termination of the 2024 ATM Agreement by the Agents or us, as permitted therein.
The
2024 ATM Agreement contains customary representations, warranties and agreements by the Company, and customary indemnification and contribution
rights and obligations of the parties. The Company agreed to pay the Agents an aggregate commission of up to 3.0%
of the aggregate gross proceeds from each sale of the 2024 ATM Shares. The Company also agreed to reimburse the Agents for certain specified
expenses in connection with entering into the 2024 ATM Agreement.
During
the three months ended March 31, 2024, the Company sold an aggregate of 33,798
shares of Common Stock at a weighted-average price of $5.13
per share for net proceeds of $0.2 million,
net of fees of $5,000
under the 2024 ATM Agreement.
NOTE 19
– RELATED PARTY TRANSACTIONS
For
the three months ended March 31, 2024 and 2023, the Company incurred $0.6
million and $0.1
million, respectively, in training expenses provided by an entity in which Mr. Timothy Sheehy has a partial ownership, with $0.6
million and $0.1
million in related outstanding accounts payable as of March 31, 2024 and December 31, 2023, respectively.
On
November 17, 2023, the Company entered into a series of agreements designed to facilitate the purchase and return to service of the Spanish
Scoopers originally awarded to our wholly-owned subsidiary, BAE, in September 2023 via a public tender process from the Government of
Spain for €40.3 million.
Under the terms of the agreements, we agreed to sell the entire outstanding equity interest in BAE to MAB and purchase $4.0 million
of non-voting Class B units of MAB. ASSF Holdings LP (“Avenue Investor”) made capital contributions totaling $13.0 million
in exchange for 13,031
voting Class A Units of MAB. Avenue Investor holds approximately 10%
of Bridger’s outstanding convertible Series A Preferred Stock.
On
July 10, 2023, the Company entered into two operating lease agreements, each for a Pilatus under the ownership of Mr. Timothy Sheehy.
The Company recorded approximately $6.0
million of right-of-use assets, $1.7
million of right-of-use current liabilities, and $4.3
million of right-of-use noncurrent liabilities as of March 31, 2024, respectively, and incurred approximately $0.4
million in lease expense for the three months ended March 31, 2024. The Company recorded approximately $6.3
million of right-of-use assets, $1.7
million of right-of-use current liabilities, and $4.6
million of right-of-use noncurrent liabilities as of December 31, 2023, respectively.
For
the three months ended March 31, 2023, the Company earned $0.3 million
in revenues from services performed on an aircraft under the ownership of Mr. Timothy Sheehy, the Chief Executive Officer.
On
July 21, 2022, the Company closed on the Series 2022 Bonds, upon which the Company received aggregate proceeds of $135.0
million on July 21, 2022 and $25.0
million on August 10, 2022. In connection with the original issuance, three senior executives of the Company purchased approximately
$10.0
million of the Series 2022 Bonds, which purchases were entered into on an arm’s length basis during the public offering for the
Series 2022 Bonds, and on the same terms and conditions that were offered to all Bond purchasers. The Company accrued approximately $0.1
million and $0.4
million in interest for these three bond holders as of March 31, 2024 and December 31, 2023, respectively. The Company paid
approximately $0.6
million in interest to these three bond holders during the three months ended March 31, 2024 and 2023, and incurred approximately
$0.3
million in interest for the three months ended March 31, 2024 and 2023. Refer to “Note
15 – Long-Term Debt”
included in this Quarterly Report for additional information on the Series 2022 Bonds.
NOTE 20
– INCOME TAXES
As
a result of the Business Combination, the Company became the successor of Legacy Bridger, as discussed in “Note
1 – Organization and Basis of Presentation” included
in this Quarterly Report, which is treated as a partnership for U.S. federal income tax purposes. As a partnership, Legacy Bridger’s
net income or loss is allocated among the members in accordance with the Company’s operating agreement, and federal income taxes
are not payable or provided for by Legacy Bridger. Members are taxed individually on their pro rata ownership share of the Legacy Bridger’s
earnings. Bridger is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to net taxable income
or loss and any related tax credits of the Company. Bridger is also subject to taxes in foreign jurisdictions in which it operates.
For
the three months ended March 31, 2024, the Company recorded income tax expense of $14,000.
The effective tax rate was (0.07)%
for the three months ended March 31, 2024.
The
Company has assessed the realizability of the net deferred tax assets and in that analysis has considered the relevant positive and negative
evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
The
Company’s income tax filings will be subject to audit by various taxing jurisdictions. The Company will monitor the status of U.S.
federal, state and local income tax returns that may be subject to audit in future periods. No U.S. federal, state and local income tax
returns are currently under examination by the respective taxing authorities.
NOTE 21
– (LOSS) EARNINGS PER SHARE
(Loss)
earnings per share of Common Stock is calculated in accordance with ASC 260, Earnings
per share. (Loss)
earnings per share – Basic is calculated by dividing (loss) earnings attributable to Common Stockholders - Basic and Diluted by
the Weighted average Common Stock outstanding - Basic.
(Loss)
earnings per share – Diluted is based on the average number of shares of Common Stock used for the (loss) earnings per share - Basic
calculation, adjusted for the weighted-average number of common share equivalents outstanding for the period determined using the treasury
stock method and if-converted method, as applicable. (Loss) earnings attributable to Common Stockholders – Basic and Diluted is
adjusted for the impact of changes in the fair value of the Public Warrants and Private Placement Warrants, to the extent they are dilutive.
(Loss)
earnings per share calculations for all periods prior to the Closing have been retrospectively adjusted by the Exchange Ratio for the
equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization. Subsequent to the Closing,
(loss) earnings per share is calculated based on the Weighted average Common Stock outstanding.
The
following table sets forth the computation of the Company’s (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
| $s
in thousands, except per share amounts |
| 2024 |
| 2023 |
|
|
| |
| Net
loss |
| $ |
(20,087) |
|
| $ |
(44,685) |
|
|
|
| |
| Adjustments
to Net loss: |
|
|
|
|
|
|
| |
| Series
A Preferred Stock—adjustment for deemed dividend upon Closing |
| — |
|
| (48,300) |
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
| Series
A Preferred Stock—adjustment to eliminate 50% multiplier |
| — |
|
| 156,362 |
|
|
|
| |
| Series
A Preferred Stock—adjustment to maximum redemptions value |
| (6,189) |
|
| (4,274) |
|
|
|
| |
| (Loss)
earnings attributable to Common Stockholders – Basic and Diluted |
| $ |
(26,276) |
|
| $ |
59,103 |
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
| Weighted
average Common Stock outstanding—Basic |
| 47,602,241 |
| 43,488,468 |
|
|
| |
| Weighted
average effect of dilutive securities: |
|
|
|
|
|
|
| |
| Series
A Preferred Stock |
| — |
| 30,624,501 |
|
|
| |
|
|
|
|
|
|
|
|
| |
| Unvested
Legacy Bridger Incentive Units |
| — |
| 237,283 |
|
|
| |
| Sponsor
Earnout Shares |
| — |
| 636,500 |
|
|
| |
| Weighted
average Common Stock outstanding—Diluted |
| 47,602,241 |
| 74,986,752 |
|
|
| |
|
|
|
|
|
|
|
|
| |
| (Loss)
earnings per share—Basic |
| $ |
(0.55) |
|
| $ |
1.36 |
|
|
|
| |
| (Loss)
earnings per share—Diluted |
| $ |
(0.55) |
|
| $ |
0.79 |
|
|
|
| |
The
following table summarizes the potentially dilutive common shares that were excluded from diluted (Loss) earnings per share - Diluted
computations because the effect would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| For
the Three Months Ended March 31, |
| |
|
|
| 2024 |
| 2023 |
|
|
| |
| Series
A Preferred Stock |
| 32,820,828 |
| — |
|
|
| |
|
|
|
|
|
|
|
|
| |
| Unvested
Restricted Stock Units |
| 5,722,283 |
| 4,181,142 |
|
|
| |
| Public
Warrants |
| 17,249,874 |
| 17,250,000 |
|
|
| |
| Private
Placement Warrants |
| 9,400,000 |
| 9,400,000 |
|
|
| |
| Unvested
Legacy Bridger Incentive Units |
| 40,404 |
| — |
|
|
| |
| Sponsor
Earnout Shares |
| 855,000 |
| — |
|
|
| |
NOTE 22
– SUBSEQUENT EVENTS
The
Company evaluated its activities through the date of the filing of the Condensed Consolidated Financial Statements.
On
April 15, 2024, the Company entered into securities purchase agreements with certain accredited investors (the “Purchasers”),
pursuant to which the Company agreed to sell and issue to the Purchasers, severally, an aggregate of 2,183,366
shares of Common Stock, in a registered direct equity offering (the “Registered Direct Offering”). 808,080
of the shares in the Registered Direct Offering were sold to certain directors and executive officers of the Company at an offering price
of $4.95
per share, which was the closing bid price for shares of the Common Stock on the Nasdaq Global Market on April 15, 2024. The remaining
1,375,286
shares were sold in the Registered Direct Offering at an offering price of $4.25
per share.
The
aggregate net proceeds to the Company from the Registered Offering were approximately $9.2 million,
after deducting fees payable to the placement agent and other offering expenses payable by the Company.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The
following discussion and analysis is intended to help you understand our business, financial condition, results of operations, liquidity
and capital resources. The discussion and analysis should be read together with the condensed consolidated financial statements as of
March 31, 2024 and December 31, 2023, for the three months ended March 31, 2024 and 2023, and the related notes thereto,
that are included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). This discussion and analysis
should also be read together with the historical audited annual consolidated financial statements as of and for the years ended December 31,
2023 and 2022, included in the Annual Report on Form 10-K (the “Annual Report”). This discussion and analysis contains forward-looking
statements based upon our current expectations, estimates and projections that involve risks and uncertainties. Actual results could differ
materially from those anticipated in these forward-looking statements due to, among other considerations, the matters discussed in the
sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
BUSINESS
OVERVIEW
Bridger
provides aerial wildfire surveillance, relief and suppression and aerial firefighting services using next-generation technology and environmentally
friendly and sustainable firefighting methods primarily throughout the United States. Our mission is to save lives, property and habitats
threatened by wildfires, leveraging our high-quality team, specialized aircraft and innovative use of technology and data. We are meeting
an underserved and growing need for next-generation full-service aerial firefighting platforms.
Our
portfolio is organized across two core offerings:
•Fire
Suppression:
Consists of deploying specialized Viking CL-415EAF (“Super Scooper”) aircraft to drop large amounts of water quickly and directly
on wildfires.
•Aerial
Surveillance:
Consists of providing aerial surveillance via manned (“Air Attack”) aircraft for fire suppression aircraft over an incident
and providing tactical coordination with the incident commander.
We
manage our operations as a single segment for purposes of assessing performance, making operating decisions and allocating resources.
We
have made and will continue to make significant investments in capital expenditures to build and expand our aerial forest fire management
technologies. We expect that our existing cash and cash equivalents as well as cash generated from our operations and additional sales
of our common stock through our at-the-market offering will be sufficient to meet our current working capital and capital expenditure
requirements for a period of at least 12 months from the date of this Quarterly Report, depending on the cash generated from our seasonal
firefighting operations in 2024. Refer to the Liquidity
and Capital Resources
section below and “Note
1 – Organization and Basis of Presentation”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional details on management’s
assessment of the Company’s ability to continue as a going concern.
The
Reverse Recapitalization
On
January 24, 2023 (the “Closing Date”), Jack Creek Investment Corp (“JCIC”) completed the reverse recapitalization
(the “Closing” and the “Reverse Recapitalization”) with the Company’s predecessor, Bridger Aerospace Group
Holdings, LLC and its subsidiaries (collectively, “Legacy Bridger”). As a result of the Reverse Recapitalization, Legacy Bridger
and JCIC each became wholly-owned subsidiaries of the Company, and the JCIC shareholders and the equity holders of Legacy Bridger converted
their equity ownership in JCIC and Legacy Bridger, respectively, into equity ownership in the Company. Legacy Bridger has been determined
to be the accounting acquirer with respect to the Reverse Recapitalization, which will be accounted for as a reverse recapitalization,
with no goodwill or other intangible assets recorded, in accordance with GAAP.
Upon
consummation of the Reverse Recapitalization, the most significant change in Legacy Bridger’s future reported financial position
and results of operations was a gross decrease in cash and cash equivalents (as compared to Legacy Bridger’s balance sheet at December
31, 2022), of approximately $17.0 million. Total direct and incremental transaction costs of Bridger, JCIC and Legacy Bridger paid at
the closing of the Reverse Recapitalization on January 24, 2023 (the “Closing”) were approximately $16.6 million and have
been treated as a reduction of the cash proceeds and deducted from our additional paid-in capital.
Public
Company Costs
We
have become the successor to an SEC-registered and Nasdaq Global Market-listed company, which has required, and in the future may require,
us to hire additional staff and implement procedures and processes to address public company regulatory requirements and customary practices.
We have incurred and expect to incur additional annual expenses for, among other things, directors’ and officers’ liability
insurance, director fees and additional internal and external accounting, legal and administrative resources and fees.
KEY
FACTORS AFFECTING OUR RESULTS OF OPERATIONS
We
are exposed to certain risks inherent to an aerial firefighting business. These risks are further described in the section entitled “Risk
Factors”
in the Annual Report.
Seasonality
Due to the North American Fire Season
Our
operating results are impacted by seasonality. Climate conditions and other factors that may influence the revenues of our services may
vary each season and year. Historically, the demand for our services has been higher in the second and third quarters of each fiscal year
due to the timing and duration of the North American fire season. Consequently, revenues, expenses and operating cash flows from our services
are generated mostly in the second and third quarters of our fiscal year. However, the seasonal fluctuations in the need to fight wildfires
based upon location and the varying intensity of the fire season have and may continue to lead our operating results to fluctuate significantly
from quarter to quarter and year to year.
Weather
Conditions and Climate Trends
Our
business is highly dependent on the needs of government agencies to surveil and suppress fires. As such, our financial condition and results
of operations are significantly affected by the weather, as well as environmental and other factors affecting climate change, which impact
the number and severity of fires in any given period. The intensity and duration of the North American fire season is affected by multiple
factors, some of which, according to a 2016 article by Climate Central, a nonprofit climate science news organization, are weather patterns
including warmer springs and longer summers, lower levels of mountaintop snowpack which lead to drier soils and vegetation and frequency
of lightning strikes. Based on the climate change indicators published by the Environmental Protection Agency (“EPA”), these
factors have shown year over year increases linked to the effects of climate change and the overall trend in increased temperatures. We
believe that rising global temperatures have been, and in the future are expected to be, one factor contributing to increasing rates and
severity of wildfires. Historically, our revenue has been higher in the summer season of each fiscal year due to weather patterns which
are generally correlated to a higher prevalence of wildfires in North America. Larger wildfires and longer seasons are expected to continue
as droughts increase in frequency and duration, according to a 2022 article by the EPA.
Limited
Supply of Specialized Aircraft and Replacement and Maintenance Parts
Our
results of operations are dependent on sufficient availability of aircraft, raw materials and supplied components provided by a limited
number of suppliers. Our reliance on limited suppliers exposes us to volatility in the prices and availability of these materials which
may lead to increased costs and delays in operations.
Economic
and Market Factors
Our
operations, supply chain, partners and suppliers have been subject to various global macroeconomic factors. We expect to continue to remain
vulnerable to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ
from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most
impactful to our results of operations and financial condition include, but are not limited to, the impact on us of significant operational
challenges by third parties on which we rely, inflationary pressures, short-term and long-term weather patterns, potential labor and supply
chain shortages affecting us and our partners, volatile fuel prices, aircraft delivery delays and changes in general economic conditions
in the markets in which we operate.
Historically,
our results of operations have not been materially impacted by other factors. We continue to monitor the potential favorable or unfavorable
impacts of these and other factors on our business, operations, financial condition and future results of operations, which are dependent
on future developments. Our future results of operations may be subject to volatility and our growth plans may be delayed, particularly
in the short-term, due to the impact of the above factors and trends. However, we believe that our long-term outlook remains positive
due to the increasing demand for our services and our ability to meet those demands consistently, despite adverse market factors. We believe
that this expected long-term increase in demand will offset increased costs and that the operational challenges we may experience in the
near term can be managed in a manner that will allow us to support increased demand, though we cannot provide any assurances.
KEY
COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
Our
primary source of revenues is from providing services, which are disaggregated into fire suppression, aerial surveillance and other services.
Revenues and growth for our fire suppression and aerial surveillance services are driven by climate trends, specifically the intensity
and timing of the North American fire season. Other services primarily consist of extraneous fulfillment of contractual services such
as extended availability and mobilizations. Other services also include maintenance services performed externally for third parties.
We
charge daily and hourly rates depending upon the type of firefighting service rendered and under which contract the services are performed.
The recognition of revenues for our services are primarily split into flight, standby and other revenues. Flight revenue is primarily
earned at an hourly rate when the engines of the aircraft are cycled, upon request of the customer. Standby revenue is primarily earned
as a daily rate when aircraft are available for use at a fire base, awaiting request from the customer for flight deployment. Other revenue
consists of additional contractual items that can be charged to the customer, such as leasing revenues for facilities, as well as maintenance,
repair and return-to-service work performed on customer aircraft.
Cost
of Revenues
Cost
of revenues includes costs incurred directly related to flight operations including expenses associated with operating the aircraft on
revenue generating contracts. These include labor, depreciation, subscriptions and fees, travel and fuel. Cost of revenues also includes
routine aircraft maintenance expenses and repairs, consisting primarily of labor, parts, consumables, travel and subscriptions unique
to each airframe.
Selling,
General and Administrative Expense
Selling,
general and administrative expenses include all costs that are not directly related to satisfaction of customer contracts. Selling, general
and administrative expenses include costs for our administrative functions, such as finance, legal, human resources, and IT support, and
business development costs that include contract procurement, public relations and business opportunity advancement. These functions include
costs for items such as salaries, benefits, stock-based compensation and other personnel-related costs, maintenance and supplies, professional
fees for external legal, accounting, and other consulting services, insurance, intangible asset amortization and depreciation expense.
Selling, general and administrative expenses also include gains or losses on the disposal of fixed assets.
Interest
Expense
Interest
expense consists of interest costs related to our Gallatin municipal bond issuances by Legacy Bridger that closed in July and August 2022
(the “Series 2022 Bonds”), our permanent and term loan agreements, and the net effect of our interest rate swap. Interest
expense also includes amortization of debt issuance costs associated with our loan agreements. Refer to “
Liquidity and Capital Resources—Indebtedness”
included in this Quarterly Report for a discussion of our loan commitments.
RESULTS
OF OPERATIONS
Comparison
of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023
The
following table sets forth our Condensed Consolidated Statements of Operations information for the three months ended March 31, 2024
and 2023 and should be reviewed in conjunction with the financial statements and notes included elsewhere in this Quarterly Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Three
Months Ended
March 31, 2024 |
| Three
Months Ended
March 31, 2023 |
| Period
Over Period Change ($) |
| Period
Over Period Change (%) |
| Revenues |
| $ |
5,507 |
|
| $ |
365 |
|
| $ |
5,142 |
|
| 1,409% |
| Cost
of revenues: |
|
|
|
|
|
|
| |
| Flight
operations |
| 5,009 |
|
| 3,733 |
|
| 1,276 |
|
| 34% |
| Maintenance |
| 4,197 |
|
| 3,515 |
|
| 682 |
|
| 19% |
| Total
cost of revenues |
| 9,206 |
|
| 7,248 |
|
| 1,958 |
|
| 27% |
| Gross
loss |
| (3,699) |
|
| (6,883) |
|
| 3,184 |
|
| (46%) |
| Selling,
general and administrative expense |
| 11,610 |
|
| 33,229 |
|
| (21,619) |
|
| (65%) |
| Operating
loss |
| (15,309) |
|
| (40,112) |
|
| 24,803 |
|
| (62%) |
| Interest
expense |
| (5,923) |
|
| (5,665) |
|
| (258) |
|
| 5% |
| Other
income |
| 1,159 |
|
| 1,092 |
|
| 67 |
|
| 6% |
| Loss
before income taxes |
| (20,073) |
|
| (44,685) |
|
| 24,612 |
|
| (55%) |
| Income
tax expense |
| (14) |
|
| — |
|
| (14) |
|
| n/a |
| Net
loss |
| $ |
(20,087) |
|
| $ |
(44,685) |
|
| $ |
24,598 |
|
| (55%) |
Revenues
Revenues
increased by $5.1 million, or 1,409%, to $5.5 million for the three months ended March 31, 2024, from $0.4 million for the three
months ended March 31, 2023.
Revenues
by service offering for the three months ended March 31, 2024 and 2023 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Three
Months Ended
March 31, 2024 |
| Three
Months Ended
March 31, 2023 |
| Period
Over Period Change ($) |
| Period
Over Period Change (%) |
| Fire
suppression |
| $ |
3,881 |
|
| $ |
— |
|
| $ |
3,881 |
|
| n/a |
| Aerial
surveillance |
| 583 |
|
| — |
|
| 583 |
|
| n/a |
| Other
services |
| 1,043 |
|
| 365 |
|
| 678 |
|
| 186% |
| Total
revenues |
| $ |
5,507 |
|
| $ |
365 |
|
| $ |
5,142 |
|
| 1,409% |
Fire
suppression revenue increased to $3.9 million and aerial surveillance revenue increased to $0.6 million for the three months ended March 31,
2024, in each case, from zero for the three months ended March 31, 2023. The increase in fire suppression revenue and aerial surveillance
revenue was primarily due to an earlier start to the 2024 wildfire season, compared to the three months ended March 31, 2023, which
led to more aircraft operating for the three months ended March 31, 2024.
Other
services revenue increased by $0.7 million, or 186%, to $1.0 million for the three months ended March 31, 2024, from $0.4 million
for the three months ended March 31, 2023. The increase was primarily due to return-to-service work performed on the Spanish Scoopers
in connection with the MAB services agreement. Refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional details.
Revenues
by type for the three months ended March 31, 2024 and 2023 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Three
Months Ended
March 31, 2024 |
| Three
Months Ended
March 31, 2023 |
| Period
Over Period Change ($) |
| Period
Over Period Change (%) |
| Flight
revenue |
| $ |
913 |
|
| $ |
— |
|
| $ |
913 |
|
| n/a |
| Standby
revenue |
| 3,468 |
|
| — |
|
| 3,468 |
|
| n/a |
| Other
revenue |
| 1,126 |
|
| 365 |
|
| 761 |
|
| 208% |
| Total
revenues |
| $ |
5,507 |
|
| $ |
365 |
|
| $ |
5,142 |
|
| 1,409% |
Flight
revenue increased to $0.9 million and standby revenue increased to $3.5 million for the three months ended March 31, 2024, in each
case, from zero for the three months ended March 31, 2023. The increase in flight revenue and standby revenue was primarily due to
an earlier start to the 2024 wildfire season, compared to the three months ended March 31, 2023, which led to more aircraft operating
for the three months ended March 31, 2024.
Other
revenue increased by $0.8 million, or 208%, to $1.1 million for the three months ended March 31, 2024, from $0.4 million for the
three months ended March 31, 2023. The increase was primarily due to return-to-service work performed on the Spanish Scoopers in
connection with the MAB services agreement. Refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional details.
Cost
of Revenues
Total
cost of revenues increased by $2.0 million, or 27%, to $9.2 million for the three months ended March 31, 2024, from $7.2 million
for the three months ended March 31, 2023.
Flight
Operations
Flight
operations expenses increased by $1.3 million, or 34%, to $5.0 million for the three months ended March 31, 2024, from $3.7 million
for the three months ended March 31, 2023. The increase was primarily attributable to an increase in aircraft lease expense of $0.4
million due to two Pilatus PC-12 operating leases commencing in July 2023 and a Twin Otter operating lease commencing in April 2023, an
increase in training costs of $0.5 million and an increase in stock-based compensation expense of $0.3 million.
Maintenance
Maintenance
expenses increased by $0.7 million, or 19%, to $4.2 million for the three months ended March 31, 2024, from $3.5 million for the
three months ended March 31, 2023. The increase was primarily driven by an increase in contractor wages of $0.4 million and an increase
of employee labor expenses of $0.3 million.
Selling,
General and Administrative Expense
Selling,
general and administrative expense decreased by $21.6 million, or 65%, to $11.6 million for the three months ended March 31, 2024,
from $33.2 million for the three months ended March 31, 2023. The decrease was primarily attributable to a decrease in stock-based
compensation of $20.1 million associated with the immediate vesting of restricted stock units (“RSUs”) issued to executives
and senior management of Bridger in connection with the Reverse Recapitalization in January 2023. The remaining decrease is primarily
attributable to a decrease in professional service fees of $1.5 million due to higher costs associated with becoming a public company
in January 2023.
Interest
Expense
Interest
expense increased by $0.3 million, or 5%, to $5.9 million for the three months ended March 31, 2024, from $5.7 million for the three
months ended March 31, 2023. The increase was primarily driven by lower capitalized interest associated with the financing of the
construction of fixed assets.
Other
Income
Other
income increased by $0.1 million, or 6%, to $1.2 million for the three months ended March 31, 2024, from $1.1 million for the three
months ended March 31, 2023.
NON-GAAP
FINANCIAL MEASURES
Although
we believe that net income or loss, as determined in accordance with GAAP, is the most appropriate earnings measure, we use EBITDA and
Adjusted EBITDA as key profitability measures to assess the performance of our business. We believe these measures help illustrate underlying
trends in our business and use the measures to establish budgets and operational goals, and communicate internally and externally, in
managing our business and evaluating its performance. We also believe these measures help investors compare our operating performance
with its results in prior periods in a way that is consistent with how management evaluates such performance.
Each
of the profitability measures described below are not recognized under GAAP and do not purport to be an alternative to net income or loss
determined in accordance with GAAP as a measure of our performance. Such measures have limitations as analytical tools, and should not
be considered in isolation or as substitutes for our results as reported under GAAP. EBITDA and Adjusted EBITDA exclude items that can
have a significant effect on our profit or loss and should, therefore, be used only in conjunction with our GAAP profit or loss for the
period. Our management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to
provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies
use identical calculations, these measures may not be comparable to other similarly titled measures of other companies.
EBITDA
and Adjusted EBITDA
EBITDA
is a non-GAAP profitability measure that represents net income or loss for the period before the impact of the interest expense, income
tax expense (benefit) and depreciation and amortization of property, plant and equipment and intangible assets. EBITDA eliminates potential
differences in performance caused by variations in capital structures (affecting financing expenses), the cost and age of tangible assets
(affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization
expense).
Adjusted
EBITDA is a non-GAAP profitability measure that represents EBITDA before certain items that are considered to hinder comparison of the
performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, we exclude from Adjusted
EBITDA certain costs that are required to be expensed in accordance with GAAP, including non-cash stock-based compensation, business development
and integration expenses, offering costs, gain on disposal of fixed assets, non-cash adjustments to the fair value of earnout consideration,
and non-cash adjustments to the fair value of Warrants issued in connection with the Reverse Recapitalization. Our management believes
that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional
information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level
in the future.
The
reconciliation of Net loss, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three months ended March 31,
2024 and 2023 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Three
Months Ended
March 31, 2024 |
| Three
Months Ended
March 31, 2023 |
| Period
Over Period Change ($) |
| Period
Over Period Change (%) |
| Net
loss |
| $ |
(20,087) |
| $ |
(44,685) |
| $ |
24,598 |
|
| (55%) |
| Income
tax expense |
| 14 |
| — |
| 14 |
|
| n/a |
| Depreciation
and amortization |
| 1,290 |
| 1,751 |
| (461) |
|
| (26%) |
| Interest
expense |
| 5,923 |
| 5,665 |
| 258 |
|
| 5% |
| EBITDA |
| (12,860) |
| (37,269) |
| 24,409 |
|
| (65%) |
|
Stock-based
compensation1 |
| 5,871 |
| 25,597 |
| (19,726) |
|
| (77)% |
|
Business development
& integration expenses2 |
| 312 |
| 519 |
| (207) |
|
| (40)% |
|
Change in fair
value of earnout consideration3 |
| 15 |
| — |
| 15 |
|
| n/a |
|
Change in fair
value of Warrants4 |
| (266) |
| (1,599) |
| 1,333 |
|
| (83%) |
|
Offering costs5 |
| — |
| 2,083 |
| (2,083) |
|
| (100%) |
|
Gain on disposal6 |
| — |
| (2) |
| 2 |
|
| (100)% |
|
|
|
|
|
|
|
|
| |
| Adjusted
EBITDA |
| $ |
(6,928) |
| $ |
(10,671) |
| $ |
3,743 |
|
| (35%) |
|
Net loss margin7 |
| (365 |
%) |
| (12,242 |
%) |
|
|
| |
|
Adjusted EBITDA
margin7 |
| (126 |
%) |
| (2,924 |
%) |
|
|
| |
NM
- Not Meaningful
1Represents
non-cash stock-based compensation expense associated with employee and non-employee equity awards.
2Represents
expenses related to potential acquisition targets and additional business lines.
3Represents
non-cash fair value adjustment for earnout consideration issued in connection with the acquisition of Ignis Technologies, Inc.
4Represents
the non-cash fair value adjustment for Warrants issued in connection with the Reverse Recapitalization.
5Represents
one-time costs for professional service fees related to the preparation for potential offerings that have been expensed during the period.
6Represents
gain on the disposal of a fixed asset.
7Net
loss margin calculated as Net loss divided by Total revenue and Adjusted EBITDA margin calculated as Adjusted EBITDA divided by Total
revenue.
LIQUIDITY
AND CAPITAL RESOURCES
Going
Concern
In
accordance with Accounting Standards Codification (“ASC”) Topic 205-40, 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 12 months after the date that these condensed consolidated financial
statements are issued. This evaluation includes considerations related to the covenants contained in the Company’s loan agreements
as well as the Company’s liquidity position overall.
For
the three months ended March 31, 2024, the Company had an operating loss of $15.3 million, net loss of $20.1 million and cash flow
used in operating activities of $19.8 million. In addition, as of March 31, 2024, the Company had unrestricted cash and investments
of $6.8 million.
As
disclosed in detail under the section entitled “Liquidity
and Capital Resources—Indebtedness”
below, the Company is not in compliance, and is projected to not be in compliance, with certain financial covenants associated with the
Series 2022 Bonds during the next 12 months.
Beginning
in November 2023, management has implemented steps to help improve the Company’s near-term cash position through a combination of
cost reduction measures and the raising of funds through a number of potential avenues, including additional sales of our common stock
through our at-the-market offering and registered direct equity offering. Our ability to raise additional funds will depend on, among
other factors, financial, economic and market conditions, many of which are outside of our control and there can be no assurance that
we will be able to obtain additional funding on satisfactory terms or at all.
As
of May 10, 2024, $5,869,526 is available for potential future sales under the 2024 ATM Agreement, which may be utilized for future financings
under our effective shelf registration statement. The amount registered for potential future sales under the 2024 ATM Agreement was reduced
to $5,869,526 on April 15, 2024 in accordance with General Instruction I.B.6 of Form S-3 in connection with the Company’s registered
direct offering of 2,183,366 shares of Common Stock described in “Note
22 – Subsequent Events”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
Current
and anticipated noncompliance with financial covenants and uncertainty regarding the Company’s ability to diligently prosecute the
cost reduction plan and to raise additional cash funding raise substantial doubt about the Company’s ability to continue as a going
concern within 12 months following the issuance date of the condensed consolidated financial statements as of and for the period ended
March 31, 2024.
Cash
and Marketable Securities
As
of March 31, 2024, our principal sources of liquidity were cash and cash equivalents of $6.8 million which were held for working
capital purposes and restricted cash of $9.3 million. Restricted cash consists primarily of cash reserved for debt servicing on the Series
2022 Bonds. From time to time, the Company invests its excess cash in highly rated available-for-sale securities, with the primary objective
of minimizing the potential risk of principal loss. As of March 31, 2024, the Company had zero of investments in debt securities
classified as available-for-sale.
We
may receive up to $306.5 million from the exercise of the 9,400,000 private placement warrants and 17,249,874 public warrants of the Company
outstanding (collectively, the “Warrants”), assuming the exercise in full of all the Warrants for cash, but not from the sale
of the shares of Common Stock issuable upon such exercise. On March 28, 2024, the closing price of our Common Stock was $5.02 per share.
For so long as the market price of our Common Stock is below the exercise price of our Warrants ($11.50 per share), our Warrants remain
“out-of-the money,” and holders of our Warrants are unlikely to cash exercise their Warrants, resulting in little or no cash
proceeds to us. There can be no assurance that our Warrants will be in the money prior to their January 24, 2028 expiration date, and
therefore, we may not receive any cash proceeds from the exercise of our Warrants to fund our operations. Accordingly, we have not relied
on the receipt of proceeds from the exercise of our Warrants in assessing our capital requirements and sources of liquidity.
We
may in the future seek to raise additional funds through various potential sources, such as equity and debt financing for general corporate
purposes or for specific purposes, including in order to pursue growth initiatives. Based on our unrestricted cash and cash equivalents
balance as of March 31, 2024, and our projected cash use, we would anticipate the need to raise additional funds through equity or
debt financing (or the issuance of stock as acquisition consideration) to pursue any significant acquisition opportunity, at the time
of such acquisition opportunity. Our ability to generate proceeds from equity financings will significantly depend on the market price
of our Common Stock.
On
November 17, 2023, the Company entered into a series of agreements designed to facilitate the purchase and return to service of the Spanish
Scoopers originally awarded to the Company’s wholly-owned subsidiary, Bridger Aerospace Europe, S.L.U. (“BAE”), in September
2023 via a public tender process from the Government of Spain for €40.3 million. Under the terms of the agreements, the Company
agreed to sell its entire outstanding equity interest in BAE to MAB and purchase $4.0 million of non-voting Class B units of MAB. The
Company also entered into a services agreement with MAB whereby the Company will manage the return to service upgrades of the Spanish
Scoopers through the Company’s wholly-owned Spanish subsidiary, Albacete Aero, S.L., while they are owned and funded by MAB. The
service agreement also provides that the Company has the right, but not the obligation, to acquire each Spanish Scooper as it is ready
to be contracted and returned to service. Our management team estimates that the cost to renovate and upgrade these Spanish Scoopers will
be approximately $8 million to $12 million per aircraft. Assuming timely completion of such renovations and upgrades, we expect these
modified Spanish Scoopers to generate revenue and Adjusted EBITDA in-line with Bridger’s current fleet of Super Scoopers once contracting
mechanics are negotiated with various foreign governments during their respective return-to-service timeframes. However, there can be
no assurance that this acquisition will be completed upon the timeline discussed above or at all, nor that the Company will be able to
successfully contract with various foreign governments to generate revenue.
Indebtedness
As
of March 31, 2024, we held $20.1 million of current liabilities, $12.0 million of which was accrued expenses and other current liabilities.
As
of March 31, 2024, we held $220.0 million of long-term liabilities with $204.1 million of total long-term debt, net of debt issuance
costs, which are comprised of the Series 2022 Bonds, two separate credit facilities brokered through Live Oak Bank, two separate credit
facilities with Rocky Mountain Bank and various short term vehicle loans through First Interstate Bank.
Series
2022 Bonds
On
July 21, 2022, we closed our Series 2022 Bond Offering in a taxable industrial development revenue bond transaction with Gallatin County,
Montana for $160.0 million (the “Series 2022 Bond Offering”). Pursuant to the Series 2022 Bond Offering, Gallatin County issued
$135.0 million of bonds on July 21, 2022 and an additional $25.0 million of bonds on August 10, 2022. The proceeds from the offering,
together with cash on hand, were used to redeem the capital contributions plus accrued interest for all of the remaining Legacy Bridger
Series A-1 preferred shares and Legacy Bridger Series A-2 preferred shares totaling $134.0 million, the principal plus accrued interest
for the Series 2021 Gallatin County municipal bond, totaling $7.7 million, to finance the construction and equipping of the Company’s
third aircraft hangar in Belgrade, Montana and to fund the purchase of additional Super Scooper aircraft. The Series 2022 Bonds mature
on September 1, 2027, with an annual interest rate of 11.5%. Interest is payable semiannually on March 1 and September 1 of each year
until maturity and commenced on September 1, 2022. Debt issuance costs for the Series 2022 Bonds was $4.2 million.
Optional
Redemption—We
may redeem the Series 2022 Bonds (i) during the period beginning on September 1, 2025 through August 31, 2026, at a redemption price equal
to 103% of the principal amount plus accrued interest; (ii) during the period beginning on September 1, 2026 through August 31, 2027,
at a redemption price equal to 102% of the principal amount plus accrued interest; and (iii) on or after September 1, 2027, at a redemption
price equal to 100% of the principal amount plus accrued interest. At our direction, the Series 2022 Bonds may be redeemed by Gallatin
County at any time, at a redemption price equal to 100% of the principal amount plus accrued interest upon the occurrence of certain events
set forth in that certain Amended and Restated Trust Indenture, dated as of June 1, 2022 (the “Indenture”), between Gallatin
County and U.S. Bank Trust Company, National Association, Salt Lake City, Utah.
Mandatory
and Extraordinary Redemptions—Subject
to the terms of the Indenture, the Series 2022 Bonds must be redeemed, including, among other things, (i) from all the proceeds of the
sale of any Super Scooper, (ii) in an amount equal to (a) 50% of our operating revenues less the portion used to pay or establish reserves
for all our expenses, debt payments, capital improvements, replacements, and contingencies (“Excess Cash Flow”) or (b) 100%
of Excess Cash Flow, in each case, in the event we fall below certain debt service coverage ratio requirements set forth in the Indenture,
and (iii) upon a change of control (each a “Mandatory Redemption”). For each Mandatory Redemption, the Series 2022 Bonds will
be redeemed in whole or in part, at a redemption price equal to 100% of the principal amount of each Series 2022 Bond redeemed plus any
premium that would be applicable to an optional redemption of the Series 2022 Bonds on such date (and if such redemption occurs prior
to September 1, 2025, the applicable premium shall be three percent (3%)) and accrued interest. Furthermore, subject to the terms of the
Indenture, at our direction, the Series 2022 Bonds may be redeemed by Gallatin County at any time, at a redemption price equal to 100%
of the principal amount plus accrued interest upon the occurrence of certain events, including, among other things, casualty, condemnation,
or other unexpected events set forth in the Indenture.
Financial
Covenants—
In connection with the Series 2022 Bonds, we are a party to certain loan agreements that contain customary representation and warranties,
negative covenants, including, limitations on indebtedness, reduction of liquidity below certain levels, and asset sales, merger and other
transactions, and remedies on and events of default.
Under
the terms of such loan agreements, we are subject to certain financial covenants, that require, among other things, that we operate in
a manner and to the extent permitted by applicable law, to produce sufficient gross revenues so as to be at all relevant times in compliance
with the terms of such covenants, including that we maintain (i) beginning with the fiscal quarter ending December 31, 2023, a minimum
debt service coverage ratio (generally calculated as the aggregate amount of our total gross revenues, minus operating expenses, plus
interest, depreciation and amortization expense, for any period, over our maximum annual debt service requirements, as determined under
such loan agreement) that exceeds 1.25x and (ii) beginning with the fiscal quarter ending September 30, 2022, a minimum liquidity of not
less than $8 million in the form of unrestricted cash and cash equivalents, plus liquid investments and unrestricted marketable securities
at all times.
Subject
to the terms of the loan agreements, in the event we are unable to comply with the terms of the financial covenants, we may be required
(among other potential remedial actions) to engage an independent consultant to review, analyze and make recommendations with respect
to our operations or in some instances, this could result in an event of default and/or the acceleration of our debt obligations under
the loan agreements. In addition, the acceleration of our debt obligations may in some instances (as set forth in our Amended and Restated
Charter) result in an increase in the dividend rate of the Series A Preferred Stock by 2.00% per annum from the dividend rate otherwise
in effect at such time.
The
Company is not in compliance with the DSCR covenant as of March 31, 2024 and management anticipates the Company will continue to
not be in compliance with the DSCR covenant at future quarterly measurement periods in the next 12 months, primarily attributable to the
seasonal nature of our business and a less intense 2023 wildfire season. In addition, the Company is not in compliance with the $8.0 million
minimum liquidity requirement as of March 31, 2024 and management anticipates that it may not be in compliance with the minimum liquidity
requirement at future quarterly measurement periods in the next 12 months depending on the cash generated from its seasonal firefighting
operations in 2024.
The
Series 2022 Bonds agreements provide that, with regard to covenant violations, other than non-payment of principal or interest, no event
of default shall be deemed to have occurred so long as a reasonable course of action to remedy a violation commences within 30 days of
non-compliance and management diligently prosecutes the remediation plan to completion.
Management
consulted with bond counsel on the impact of covenant violations and proactively developed a cost reduction plan, and began implementing
the plan in November 2023, to help remedy the anticipated covenant breaches in 2024. However, this plan is in progress and there is no
assurance that management will be able to diligently prosecute the remediation plan to completion. The uncertainty regarding the company’s
ability to diligently prosecute the remediation plan to completion and the potential impact on the bonds maturity as a result of the anticipated
debt covenant violations at subsequent compliance dates or failure to make required interest payments, could result in the Series 2022
Bonds becoming immediately due and payable, which raises substantial doubt about our ability to continue as a going concern.
Live
Oak Bank Loans
Our
loans with Live Oak Bank are subject to financial covenants requiring the Company to maintain a debt service coverage ratio, generally
calculated as the ratio of the net cash flow (as defined in the applicable note agreements) to the amount of interest and servicing fees
required to be paid over the succeeding 12 months on the principal amount of the note, as applicable, that will be outstanding on the
payment date following such date of determination, that exceeds 1.25x at the aircraft or entity level and for the Company’s debt
to worth ratio to not exceed 5.00x at the aircraft or entity level. The Company is in compliance with such financial covenants as of March 31,
2024.
Rocky
Mountain Bank Loans
Through
certain of our subsidiaries, we entered into two credit facilities with Rocky Mountain Bank to finance in part (i) the construction of
airplane hangars on September 30, 2019 and (ii) the purchase of four Quest Kodiak aircraft on February 3, 2020. In connection with such
credit facilities, we also entered into various term loan and other long-term debt agreements which contain certain financial covenants,
including, that we maintain (i) a debt service coverage ratio that exceeds 1.25x (generally calculated as the ratio of the net operating
income over the debt service payments made or as the ratio of adjusted EBITDA over the aggregate amount of interest and principal payments,
in each case, as determined in the applicable agreement) and (ii) certain senior leverage ratios that do not exceed 7.00x through the
third quarter of 2024, 6.00x through the third quarter of 2025, or 5.00x thereafter (generally calculated as the ratio of the senior funded
debt over EBITDA, as determined in the applicable agreement). The Company is in compliance with such financial covenants as of March 31,
2024.
Mezzanine
and Permanent Equity
Preferred
Shares
On
April 25, 2022, we authorized and issued 315,789.473684 Legacy Bridger Series C Preferred Shares for aggregate proceeds of $288.5 million,
net of issuance costs of $11.5 million. Legacy Bridger Series C Preferred Shares rank senior to our Common Stock and ranked subordinate
to Legacy Bridger Series A Preferred Shares with respect to the distribution of assets upon liquidation or certain triggering events.
Upon the Closing, Legacy Bridger Series C Preferred Shares were exchanged for shares of Series A Preferred Stock on a one-to-one basis
as a portion of the merger consideration issued in connection with the Reverse Recapitalization. The Series A Preferred Stock is classified
as mezzanine equity as it remains probable that they may become redeemable upon the mandatory redemption date of April 25, 2032. Series
A Preferred Stock does not participate in earnings and is non-voting. For additional information regarding the terms and conditions of
the Series A Preferred Stock, see “Note
17 – Mezzanine Equity”
for additional details.
Prior
to the Closing, Legacy Bridger Series C Preferred Shares accrued interest daily at 7% per annum for the first year, 9% per annum for the
second year and 11% per annum thereafter. Following the Closing, the Series A Preferred Stock will continue to accrue interest daily at
7% per annum for the first six years, 9% per annum for the seventh year, and 11% per annum thereafter. Accrued interest for the Series
A Preferred Stock was $28.4 million as of March 31, 2024.
As
of March 31, 2024, it was probable that the Series A Preferred Stock may become redeemable at the holder’s option on or after
March 29, 2027. We have elected to recognize changes in redemption value immediately, adjusting the preferred shares to the maximum redemption
value at each reporting date. As of March 31, 2024, Series A Preferred Stock had a carrying value and redemption value of $361.0
million.
Common
Stock
As
of March 31, 2024 and December 31, 2023, we had 44,842,587 and 44,776,926 shares of Common Stock issued and outstanding, respectively.
Historical
Cash Flows
Our
consolidated cash flows from operating, investing and financing activities for the three months ended March 31, 2024 and 2023 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| $s
in thousands |
| Three
Months Ended
March 31, 2024 |
| Three
Months Ended
March 31, 2023 |
| Net
cash used in operating activities |
| $ |
(19,762) |
|
| $ |
(36,653) |
|
| Net
cash (used in) provided by investing activities |
| (214) |
|
| 12,959 |
|
| Net
cash used in financing activities |
| (896) |
|
| (4,077) |
|
|
|
|
|
| |
| Net
change in cash and cash equivalents |
| $ |
(20,872) |
|
| $ |
(27,771) |
|
Operating
Activities
Net
cash used in operating activities was $19.8 million for the three months ended March 31, 2024, compared to Net cash used in operating
activities of $36.7 million for the three months ended March 31, 2023. Net cash used in operating activities reflects Net loss of
$20.1 million for the three months ended March 31, 2024 compared to Net loss of $44.7 million for the three months ended March 31,
2023. Net cash used in operating activities for the three months ended March 31, 2024 reflects add-backs to Net loss for non-cash
charges totaling $6.5 million, primarily attributable to stock-based compensation expense of $5.9 million and depreciation and amortization
of $1.3 million, partially offset by the change in fair value of embedded derivative of $0.9 million. Net cash used in operating activities
for the three months ended March 31, 2023 reflects add-backs to Net loss for non-cash charges totaling $25.4 million, primarily
attributable to stock-based compensation expense of $25.6 million.
Investing
Activities
Net
cash used in investing activities was $0.2 million for the three months ended March 31, 2024, compared to Net cash provided by investing
activities of $13.0 million for the three months ended March 31, 2023. Net cash used in investing activities for the three months
ended March 31, 2024 reflects purchases of property, plant and equipment of $1.0 million, which primarily comprised of purchases
aircraft improvements, and expenditures for capitalized software of $0.3 million, partially offset by proceeds from maturities of marketable
securities of $1.1 million. Net cash provided by investing activities for the three months ended March 31, 2023 reflects proceeds
from sales and maturities of marketable securities of $25.1 million partially offset by purchases of property, plant and equipment of
$11.2 million, which is primarily comprised of aircraft improvements, and the construction in progress of the third hangar of $1.0 million.
Financing
Activities
Net
cash used in financing activities was $0.9 million for the three months ended March 31, 2024, compared to Net cash used in financing
activities of $4.1 million for the three months ended March 31, 2023. Net cash used in financing activities for the three months
ended March 31, 2024 primarily reflects repayments on debt of $0.7 million and payment of issuance costs for Common Stock in the
at-the-market offering of $0.3 million, partially offset by proceeds from issuance of Common Stock in the at-the-market offering of $0.2
million. Net cash used in financing activities for the three months ended March 31, 2023 primarily reflects costs incurred related
to the Closing of $6.8 million and repayments of debt of $0.5 million, partially offset by proceeds from the Closing of $3.2 million.
Contractual
Obligations
Our
principal commitments consist of obligations for outstanding leases and debt. The following table summarizes our contractual obligations
as of March 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Payments
Due by Period |
| $s
in thousands |
| Total |
| Current |
| Noncurrent |
|
|
|
|
|
|
| |
| Lease
obligations |
| $ |
10,613 |
|
| $ |
2,194 |
|
| $ |
8,419 |
|
| Debt
obligations |
| 210,640 |
|
| 3,030 |
|
| 207,610 |
|
| Total |
| $ |
221,253 |
|
| $ |
5,224 |
|
| $ |
216,029 |
|
On
November 17, 2023, the Company entered into a series of agreements with MAB and its subsidiary designed to facilitate the purchase and
return to service of four Spanish Scoopers originally awarded to the Company in September 2023 via a public tender process from the Government
of Spain. The terms of the agreements provide that the Company will manage the return to service upgrades of the Spanish Scoopers while
they are owned and funded by MAB. The Company has the right, but not the obligation, to acquire each plane as it is ready to be contracted
and returned to service. In the event that the Company does not purchase the aircraft within the time periods set forth in the agreements,
then either party may initiate a sales process for the sale of all aircraft that have not been purchased by the Company, which sales process
the Company will oversee and manage. If the aircraft are sold to a third party through such process, then the Company must pay MAB’s
subsidiary a cash fee equal to the amount, if any, by which the aggregate price of the Company’s purchase options for such aircraft
exceeds the consideration paid by the third-party purchaser for the same aircraft, not to exceed $15.0 million in aggregate. If the aircraft
are not sold to a third party and MAB’s subsidiary has not otherwise entered into an operating lease with a third party for the
aircraft, then the Company must pay MAB’s subsidiary $15.0 million.
Off-Balance
Sheet Arrangements
On
November 17, 2023, we entered into a series of agreements designed to facilitate the purchase and return to service of the Spanish Scoopers
originally awarded to our wholly-owned subsidiary, BAE, in September 2023 via a public tender process from the Government of Spain for
€40.3 million. Under the terms of the agreements, we agreed to sell the entire outstanding equity interest in BAE to MAB and purchase
$4.0 million of non-voting Class B units of MAB. We also entered into a services agreement with MAB whereby we will manage the return
to service upgrades of the Spanish Scoopers through our wholly-owned Spanish subsidiary, Albacete Aero, S.L., while they are owned and
funded by MAB. The service agreement also provides that we have the right, but not the obligation, to acquire each Spanish Scooper as
it is ready to be contracted and returned to service. The Company assessed both MAB and BAE for variable interest entity accounting under
ASC 810-10-15 and determined that MAB is a voting interest entity and BAE is a variable interest entity. However, neither entity is consolidated
in the consolidated financial statements as the Company does not have a controlling financial interest in MAB and the Company is not the
primary beneficiary of BAE.
As
of March 31, 2024 and December 31, 2023, we did not have any other relationships with special purpose or variable interest entities
which have been established for the purpose of facilitating off-balance sheet arrangement, which have not been consolidated in the consolidated
financial statements of the Company. Refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional information.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Bridger
is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required
under this item.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report are prepared in accordance
with GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, costs and expenses, provision for income taxes and related disclosures. We base
our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes
in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from
the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material
differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations
and cash flows will be affected.
We
believe that the following critical accounting policies involve a greater degree of judgment or complexity than our other accounting policies.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our condensed consolidated
financial condition and results of operations.
Investments
in Marketable Securities
Investments
in debt securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported as accumulated
other comprehensive income. Gains and losses are recognized when realized. Unrealized losses are evaluated for impairment to determine
if the impairment is credit related. An other-than-temporary credit impairment would be recognized as an adjustment to income. Gains and
losses are determined using the first-in first-out method. Investments in marketable securities are classified as current assets with
short-term maturities of less than one year.
Revenue
Recognition
Revenues
are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we
expect to be entitled to in exchange for those services.
We
charge daily and hourly rates depending upon the type of firefighting services rendered and under which contract the services are performed.
These services are primarily split into flight revenue and standby revenue. Flight revenue is primarily earned at an hourly rate when
the engines of the aircraft are started and stopped upon request of the customer, tracked via flight logs for Super Scoopers or a Hobbs
meter for other aircraft. Standby revenue is earned primarily as a daily rate when aircraft are available for use at a fire base, awaiting
request from the customer for flight deployment.
We
enter into short, medium and long-term contracts with customers, primarily with government agencies to deploy aerial fire management assets
during the firefighting season. Revenue is recognized when performance obligations under the terms of a contract with our customers are
satisfied and payment is typically due within 30 days of invoicing. This occurs as the services are rendered and include the use of the
aircraft, pilot and field maintenance personnel to support the contract.
Contracts
are based on either a Call-When-Needed (“CWN”) or Exclusive Use (“EU”) basis. Rates established are generally
more competitive based on the security of the revenue from the contract (i.e., an EU versus only on an as-needed basis in CWN). These
rates are delineated by the type of service, generally flight time or time available for deployment. Once an aircraft is deployed on a
contract the fees are earned at these rates and cannot be obligated to another customer. Contracts have no financing components and consideration
is at pre-determined rates. No variable considerations are constrained within the contracts.
The
transaction prices are allocated on the service performed and tracked real-time by each operator in a duty log. On at least a monthly
basis, the services performed and rates are validated by each customer. Acceptance by the customer is evidenced by the provision of their
funded task order or accepted invoice.
Other
revenue consists of leasing revenues for facilities as well as external repair and return-to-service work performed on customer aircraft.
The Company commonly contracts with third-parties to perform certain repair and return-to-service work that we have promised in our customer
agreements. The Company considers itself the principal in these arrangements as we control the timing and nature of the services ultimately
provided by the third-party to the customer. Return-to-service revenue associated with the Spanish Scoopers is recognized over time using
a cost-to-cost measure because it best depicts the transfer of value to the customer and also correlates with the amount of consideration
to which the Company expects to be entitled in exchange for transferring the promised services to the customer. Under the cost-to-cost
measure of progress, progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs
at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.
Payment
terms vary by customer and type of revenue contract. We generally expect that the period of time between payment and transfer of promised
goods or services will be less than one year. In such instances, we have elected the practical expedient to not evaluate whether a significant
financing component exists. As the Company has a right to consideration from customers in an amount that corresponds directly with the
value to the customer of the Company’s performance completed to date, the Company has applied the practical expedient to recognize
revenue in the amount to which we have the right to invoice. As permitted under the practical expedient available under Accounting Standards
Codification (“ASC”) 606, Revenue
from Contracts with Customers,
we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or
less and (ii) contracts for which we recognize revenue at the amount which we have the right to invoice for services performed.
Sales
taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted
for on a net basis and therefore are excluded from Revenues.
Business
Combinations
The
Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method
of accounting in accordance with ASC 805, Business
Combinations.
Under the acquisition method of accounting, amounts paid for the acquisition are allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition inclusive of identifiable intangible assets. Acquisition consideration
includes contingent consideration with payment terms based on the achievement of certain targets of the acquired business. The estimated
fair value of identifiable assets and liabilities, including intangibles, are based on valuations that use information and assumptions
available to management. The Company allocates any excess purchase price over the fair value of the tangible and identifiable intangible
assets acquired and liabilities assumed to goodwill. Significant management judgments and assumptions are required in determining the
fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, including estimated useful lives. The
valuation of purchased intangible assets is based upon estimates of the future performance and discounted cash flows of the acquired business.
Each asset acquired or liability assumed is measured at estimated fair value from the perspective of a market participant.
Contingent
consideration represents an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events
occur or conditions are met and is recognized when probable and reasonably estimable. Contingent consideration recognized is included
in the initial cost of the assets acquired. Subsequent changes in the estimated fair value of contingent consideration are recognized
as Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.
Stock-Based
Compensation
In
January 2023, the Company along with its board of directors established and approved and assumed the Bridger Aerospace Group Holdings,
Inc. 2023 Omnibus Incentive Plan (the “Omnibus Plan”). The Omnibus Plan was developed to motivate and reward employees and
other individuals to perform at the highest level and contribute significantly to the success of the Company, thereby furthering the best
interests of the Company and its shareholders. The Omnibus Plan provides, among other things, the ability for the Company to grant options,
stock appreciation rights, restricted stock, RSUs, performance awards and other stock-based and cash-based awards to employees, consultants
and non-employee directors.
The
Omnibus Plan expires on January 23, 2033 and authorizes 15,099,137 shares of common stock for grant life of the Omnibus Plan. As of March 31,
2024, 4,513,130 shares of common stock remain available under the Omnibus Plan.
As
of March 31, 2024, the Company has granted participants RSUs and bonuses paid in Common Stock under the Omnibus Plan. The fair value
of RSUs is determined based on the quoted market price of the Common Stock on the date of grant. Compensation cost for the RSUs is recognized
over the requisite service period based on a graded-vesting method. The Company accounts for forfeitures as they occur. Stock-based compensation
is included in both Cost of revenues and Selling, general and administrative expense in the Condensed Consolidated Statements of Operations.
Upon vesting of each RSU, the Company will issue one share of Common Stock to the RSU holder.
Impairment
of Goodwill, Other Intangible Assets and Long-Lived Assets
Goodwill
Goodwill
represents the excess of purchase price over fair value of the net assets acquired in an acquisition. Beginning in 2023, the Company assesses
goodwill for impairment as of October 1 annually or more frequently upon an indicator of impairment. Prior to 2023, the Company assessed
goodwill for impairment as of December 31 annually or more frequently upon an indicator of impairment. The change to an October 1 annual
goodwill impairment assessment date was made to ensure the completion of the Company’s assessment prior to the end of its annual
reporting period, thereby aligning impairment testing procedures with its year-end financial reporting.
When
we elect to perform a qualitative assessment and conclude it is more likely that the fair value of the reporting unit is greater than
its carrying value, no further assessment of that reporting unit’s goodwill is necessary. Otherwise, a quantitative assessment is
performed, and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds its fair value,
an impairment loss equal to the excess is recorded. Conditions that would trigger an impairment assessment include, but are not limited
to, a significant adverse change in legal factors or the business climate that could affect the value of an asset or an adverse reaction.
As of the October 1, 2023 annual goodwill impairment test, the Company’s qualitative analysis indicated the fair value of the Company’s
reporting unit exceeded its carrying value. No goodwill impairment charges were recorded for the three months ended March 31, 2024
or 2023.
Long-Lived
Assets
A
long-lived asset (including amortizable identifiable intangible assets) or asset group is tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be recoverable. Conditions that may indicate impairment include, but
are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, or an
adverse action or assessment by a regulator. When indicators of impairment are present, we evaluate the carrying value of the long-lived
assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. We adjust the net book value
of the long-lived assets to fair value if the sum of the expected future cash flows is less than book value.
Property,
Plant and Equipment, Net
Property,
plant and equipment is stated at net book value, cost less depreciation. Depreciation for aircraft, engines and rotable parts is recorded
over the estimated useful life based on flight hours. Depreciation for vehicles and equipment, buildings, and leasehold improvements is
computed using the straight-line method over the estimated useful lives of the property, plant and equipment. Airplane hangars located
on leased airport property are considered leasehold improvements with useful lives determined based on the estimated life of the underlying
ground lease. Depreciable lives by asset category are as follows:
|
|
|
|
|
|
|
|
| |
|
|
| Estimated
useful life |
| Aircraft,
engines and rotable parts |
| 1,500
–6,000 flight hours |
| Vehicles
and equipment |
| 3
– 5 years |
| Buildings |
| 50
years |
| Leasehold
improvements |
| 27
– 29 years |
Property,
plant and equipment are reviewed for impairment as discussed above under “Long-Lived
Assets.”
Cost
Method Investments
We
hold equity securities without a readily determinable fair value, which are only adjusted for observable price changes in orderly transactions
for the same or similar equity securities or any impairment, totaling $5.0 million as of March 31, 2024 and December 31,
2023.
Variable
Interest Entities
We
follow ASC 810-10-15 guidance with respect to accounting for VIEs. These entities do not have sufficient equity at risk to finance their
activities without additional subordinated financial support from other parties or whose equity investors lack any of the characteristics
of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s
expected losses or receive portions of its expected returns and are contractual, ownership or pecuniary in nature and that change with
changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and must consolidate
it when that party has a variable interest, or combination of variable interests, that provide it with a controlling financial interest.
A party is deemed to have a controlling financial interest if it meets both of the power and loss/benefits criteria. The power criterion
is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion
is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE.
The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in
the facts and circumstances. For the three months ended March 31, 2024 and 2023, Northern Fire Management Services, LLC, a VIE of
which the Company was identified as the primary beneficiary, is consolidated into our financial statements. Refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional information.
Fair
Value of Financial Instruments
We
follow guidance in ASC 820, Fair
Value Measurement,
where fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value measurements are determined within a framework that establishes a three-tier
hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification
of fair value measurements for disclosure purposes. Inputs may be observable or unobservable. Observable inputs reflect the assumptions
market participants would use in pricing the asset or liability based on market data obtained from sources independent of our business.
Unobservable inputs reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability
based on the information available.
Warrant
Liabilities
We
account for the Warrants issued in connection with the Reverse Recapitalization in accordance with the guidance contained in accordance
with ASC 480, Distinguishing
Liabilities from Equity
and ASC 815-40, Derivatives
and Hedging—Contracts in Entity’s Own Equity,
under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the
Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. The warrant liabilities are
subject to remeasurement at each balance sheet date until exercised. Refer to “Note
12 – Accrued Expenses and Other Liabilities”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for additional information.
RECENT
ACCOUNTING PRONOUNCEMENTS
For
additional information regarding recent accounting pronouncements adopted and under evaluation, refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
EMERGING
GROWTH COMPANY AND SMALLER REPORTING COMPANY STATUS
Section
102(b)(1) of the JOBS Act exempts “emerging growth companies” as defined in Section 2(A) of the Securities Act of 1933, from
being required to comply with new or revised financial accounting standards until private companies are required to comply with the new
or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition
period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the
extended transition period is irrevocable. We are an “emerging growth company” and have elected to take advantage of the benefits
of this extended transition period.
We
will use this extended transition period for complying with new or revised accounting standards that have different effective dates for
public business entities and non-public business entities until the earlier of the date that we (a) are no longer an emerging growth company
or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. The extended transition period
exemptions afforded by our emerging growth company status may make it difficult or impossible to compare our financial results with the
financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen
not to take advantage of this exemption because of the potential differences in accounting standards used. Refer to “Note
2 – Summary of Significant Accounting Policies”
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report for the recent accounting pronouncements
adopted and the recent accounting pronouncements not yet adopted for the three months ended March 31, 2024 and the year ended December 31,
2023.
We
will remain an “emerging growth company” under the JOBS Act until the earliest of (a) December 31, 2028, (b) the last date
of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the last date of our fiscal year in which
we are deemed to be a “large accelerated filer” under the rules of the Securities and Exchange Commission with at least $700.0
million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the previous three years.
We
will be a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held
by non-affiliates is greater than or equal to $250 million as of the end of that fiscal year’s second fiscal quarter, and (ii) our
annual revenues are greater than or equal to $100 million during the last completed fiscal year or the market value of our common stock
held by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements included in this Quarterly Report are not historical facts but are forward-looking statements, including for purposes of the
safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally
are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “project,”
“forecast,” “predict,” “poised,” “positioned,” “potential,” “seem,”
“seek,” “future,” “outlook,” “target,” and similar expressions that predict or indicate
future events or trends or that are not statements of historical matters, but the absence of these words does not mean that a statement
is not forward-looking. These forward-looking statements include, but are not limited to, (1) anticipated expansion of Bridger’s
operations and increased deployment of Bridger’s aircraft fleet, including references to Bridger’s acquisition of and/or right
to use the four Spanish Scoopers, including the expected closing timings thereof, the anticipated benefits therefrom, and the ultimate
structure of such acquisitions and/or right to use arrangements; (2) Bridger’s business and growth plans and future financial performance;
(3) current and future demand for aerial firefighting services, including the duration or severity of any domestic or international wildfire
seasons; (4) the magnitude, timing, and benefits from any cost reduction actions; (5) Bridger’s exploration of, need for, or completion
of any future financings, and (6) anticipated investments in additional aircraft, capital resources, and research and development and
the effect of these investments. These statements are based on various assumptions and estimates, whether or not identified in this Quarterly
Report, and on the current expectations of Bridger’s management and are not predictions of actual performance. These forward-looking
statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as,
a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult
or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Bridger. These
forward-looking statements are subject to a number of risks and uncertainties, including: Bridger’s ability to identify and effectively
implement any current or future anticipated cost reductions, including any resulting impacts to Bridger’s business and operations
therefrom; the duration or severity of any domestic or international wildfire seasons; changes in domestic and foreign business, market,
financial, political and legal conditions; Bridger’s failure to realize the anticipated benefits of any acquisitions; Bridger’s
successful integration of any aircraft (including achievement of synergies and cost reductions); Bridger’s ability to successfully
and timely develop, sell and expand its services, and otherwise implement its growth strategy; risks relating to Bridger’s operations
and business, including information technology and cybersecurity risks, loss of requisite licenses, flight safety risks, loss of key customers
and deterioration in relationships between Bridger and its employees; risks related to increased competition; risks relating to potential
disruption of current plans, operations and infrastructure of Bridger, including as a result of the consummation of any acquisition; risks
that Bridger is unable to secure or protect its intellectual property; risks that Bridger experiences difficulties managing its growth
and expanding operations; Bridger's ability to compete with existing or new companies that could cause downward pressure on prices, fewer
customer orders, reduced margins, the inability to take advantage of new business opportunities, and the loss of market share; the ability
to successfully select, execute or integrate future acquisitions into Bridger's business, which could result in material adverse effects
to operations and financial conditions; and those factors discussed in the sections entitled “Risk Factors” and “Cautionary
Statement Regarding Forward-Looking Statements” included in Bridger’s Annual Report filed with the U.S. Securities and Exchange
Commission on March 20, 2024 and in this Quarterly Report. If any of these risks materialize or Bridger management's assumptions prove
incorrect, actual results could differ materially from the results implied by these forward-looking statements. The risks and uncertainties
above are not exhaustive, and there may be additional risks that Bridger presently does not know or that Bridger currently believes are
immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking
statements reflect Bridger’s expectations, plans or forecasts of future events and views as of the date of this Quarterly Report.
Bridger anticipates that subsequent events and developments will cause Bridger’s assessments to change. However, while Bridger may
elect to update these forward-looking statements at some point in the future, Bridger specifically disclaims any obligation to do so.
These forward-looking statements should not be relied upon as representing Bridger’s assessments as of any date subsequent to the
date of this Quarterly Report. Accordingly, undue reliance should not be placed upon the forward-looking statements contained in this
Quarterly Report.
INTERNAL
CONTROL OVER FINANCIAL REPORTING
We
have identified material weaknesses in our internal control over financial reporting, which we are in the process of, and are focused
on, remediating. The first material weakness is related to reviewing third party accounting advice and properly accounting for complex
transactions, especially related to merger and acquisition activity, within our financial statement closing and reporting process. The
second material weakness arises from our failure to design and maintain effective IT general controls over the IT systems used within
the processing of key financial transactions. Specifically, we did not design and maintain user access controls to ensure appropriate
segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate
company personnel. Within the same material weakness, we have also failed to maintain adequate documentation around the process of implementing
new software solutions. Lastly, we identified a third material weakness in our internal control over financial reporting related to the
period-end account reconciliation and financial statement review controls which did not operate within a sufficient level of precision.
We
have begun the process of, and are focused on, designing and implementing effective internal controls measures to improve our internal
control over financial reporting and remediate the material weaknesses, including:
•the
recruitment of additional personnel with extensive knowledge of GAAP, implementation of software to facilitate the accumulation and review
of our financial information, and utilization of third party consultants and specialists to supplement our internal resources, as well
as implementing processes and controls to segregate key functions within our finance systems, as appropriate;
•designing
and following a formalized control plan related to IT general controls, including controls related to developing, implementing and managing
access to and implementing financially significant systems within our IT environment; and
•engaging
internal and external resources to assist with the design and evaluation of internal controls and the remediation of deficiencies, as
necessary.
While
these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and
operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous
improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial
reporting.
Although
we plan to complete this remediation process as quickly as possible, we are unable, at this time, to estimate how long it will take and
our efforts may not be successful in remediating the identified material weaknesses. In addition, even if we are successful in strengthening
our controls and procedures, we can give no assurances that in the future such controls and procedures will be adequate to prevent or
identify errors or irregularities or to facilitate the fair preparation and presentation of our condensed consolidated financial statements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant
to Item 305(e) of Regulation S-K, the Company is not required to provide the information required by this Item as it is a “smaller
reporting company.”
ITEM
4. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed
under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time period specified
in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated
and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief
financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of March 31,
2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure
controls and procedures were not effective as of March 31, 2024, due to the material weaknesses described below.
We
do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there
are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure
controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all
our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
Material
Weaknesses:
We have identified material weaknesses in our internal control over financial reporting. The first material weakness is related to properly
accounting for complex transactions, especially related to merger and acquisition activity, within our financial statement closing and
reporting process. The second material weakness arises from our failure to design and maintain effective IT general controls over the
IT systems used within the processing of key financial transactions. Specifically, we did not design and maintain user access controls
to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs,
and data to appropriate company personnel. Within the same material weakness, we have also failed to maintain adequate documentation around
the process of implementing new software solutions. Lastly, we identified a third material weakness in our internal control over financial
reporting related to the period-end account reconciliation and financial statement review controls which did not operate within a sufficient
level of precision.
Remediation
Plan: We have
begun the process of, and are focused on, designing and implementing effective internal controls measures to improve our internal control
over financial reporting and remediate the material weaknesses, including:
•the
recruitment of additional personnel with extensive knowledge of GAAP, implementation of software to facilitate the accumulation and review
of our financial information, and utilization of third party consultants and specialists to supplement our internal resources, as well
as implementing processes and controls to segregate key functions within our finance systems, as appropriate;
•designing
and following a formalized control plan related to IT general controls, including controls related to developing, implementing, and managing
access to and implementing financially significant systems within our IT environment; and
•engaging
internal and external resources to assist with the design and evaluation of internal controls and the remediation of deficiencies, as
necessary.
While
these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and
operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous
improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial
reporting.
Although
we plan to complete this remediation process as quickly as possible, we are unable, at this time, to estimate how long it will take and
our efforts may not be successful in remediating the identified material weaknesses. In addition, even if we are successful in strengthening
our controls and procedures, we can give no assurances that in the future such controls and procedures will be adequate to prevent or
identify errors or irregularities or to facilitate the fair preparation and presentation of our consolidated financial statements.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
The
Company is involved in legal proceedings and litigation in the ordinary course of business. Other than routine litigation incidental to
the Company’s business, there are no material pending legal proceedings to which the Company is a party or to which any of the Company’s
properties are subject.
ITEM
1A. RISK FACTORS.
Except
as detailed below, there have been no material changes in the Company’s risk factors from those discussed in our Annual Report on
Form 10-K filed with the SEC on March 20, 2024, which are incorporated herein by reference.
We
have a substantial amount of debt and servicing future interests or principal payments may impair our ability to operate our business
or require us to change our business strategy to accommodate the repayment of our debt. Our ability to operate our business is limited
by certain agreements governing our debt, including restrictions on the use of the loan proceeds, operational and financial covenants,
and restrictions on additional indebtedness. If we are unable to comply with the financial covenants or other terms of our debt agreements,
we may become subject to cross-default or cross-acceleration provisions that could result in our debt being declared immediately due and
payable, which could prolong the substantial doubt about our ability to continue as a going concern.
We
completed municipal bond financings in July 2022 and August 2022 that raised gross proceeds in the aggregate of $160.0 million. As of
March 31, 2024, we had $210.6 million of total debt outstanding. In connection with such bond financings, we have entered into various
loan agreements, which contain certain financial covenants, that require, among other things, that we operate in a manner and to the extent
permitted by applicable law, to produce sufficient gross revenues so as to be at all relevant times in compliance with the terms of such
covenants, including that we maintain (i) beginning with the fiscal quarter ending December 31, 2023, a minimum debt service coverage
ratio (generally calculated as the aggregate amount of our total gross revenues, minus operating expenses, plus interest, depreciation
and amortization expense, for any period, over our maximum annual debt service requirements, as determined under such loan agreement)
that exceeds 1.25x and (ii) beginning with the fiscal quarter ending September 30, 2022, a minimum liquidity of not less than $8.0 million
in the form of unrestricted cash and cash equivalents, plus liquid investments and unrestricted marketable securities at all times.
Subject
to the terms of the loan agreements, in the event we are unable to comply with the terms of the financial covenants, we may be required
(among other potential remedial actions) to engage an independent consultant to review, analyze and make recommendations with respect
to our operations or in some instances, this could result in an event of default and/or the acceleration of our debt obligations under
the loan agreements. In addition, the acceleration of our debt obligations may in some instances (as set forth in the Amended and Restated
Certificate of Incorporation (our “Amended and Restated Charter”)) result in an increase in the dividend rate of the shares
of Preferred Stock that have the rights, powers, designations, preferences, and qualification, limitations and restrictions set forth
in Section 4.5 of the Amended and Restated Charter (“Series A Preferred Stock”) of 2.00% per annum from the dividend rate
otherwise in effect with respect to the Series A Preferred Stock.
The
Company is not in compliance with the debt service coverage ratio (“DSCR”) covenant as of March 31, 2024 and management
anticipates the Company will continue to not be in compliance with the DSCR covenant at future quarterly measurement periods in the next
12 months, primarily attributable to the seasonal nature of our business and a less intense 2023 wildfire season. In addition, the Company
is not in compliance with the $8.0 million minimum liquidity requirement as of March 31, 2024 and management anticipates that it
may not be in compliance with the minimum liquidity requirement at future quarterly measurement periods in the next 12 months depending
on the cash generated from its seasonal firefighting operations in 2024.
The
agreements for the Gallatin municipal bond issuances by Bridger Aerospace Group Holdings, LLC totaling $160.0 million of gross proceeds
that closed in July and August 2022 (the “Series 2022 Bonds”) provide that, with regard to covenant violations, other than
non-payment of principal or interest, no event of default shall be deemed to have occurred so long as a reasonable course of action to
remedy a violation commences within 30 days of written notice of non-compliance from the trustee and management diligently prosecutes
the remediation plan to completion.
Management
consulted with bond counsel on the impact of covenant violations and proactively developed a cost reduction plan, and began implementing
the plan in November 2023, to help remedy the anticipated covenant breaches in 2024. However, this plan is in progress and there is no
assurance that management will be able diligently prosecute the remediation plan to completion. The uncertainty regarding the company’s
ability to diligently prosecute the remediation plan to completion and the potential impact on the bonds maturity as a result of the anticipated
debt covenant violations at subsequent compliance dates or failure to make required interest payments, could result in the Series 2022
Bonds becoming immediately due and payable, which raises substantial doubt about our ability to continue as a going concern as of the
date our financial statements are issued.
As
further described under the section of this Quarterly Report on Form 10-Q entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness,”
we have also entered into various term loan agreements and other long-term debt to fund the purchase of additional aircraft and finance
the construction of aircraft hangars. Under the terms of such agreements, we are subject to certain financial covenants including, a DSCR,
current assets to liabilities and senior leverage ratios requirements, respectively, under the agreements of our credit facilities with
Rocky Mountain Bank. The Company is in compliance with such financial covenants as of March 31, 2024. However, no assurance can be
provided that we will be able to satisfy such financial covenants in future periods or that we will be able to obtain a waiver from our
lenders in the event of non-compliance. A breach of any of these covenants or the occurrence of other events specified in the agreements
or related debt documents could result in an event of default under the same and give rise to the lenders’ right to accelerate our
debt obligations thereunder and pursue other remedial actions under our credit facilities and/or trigger a cross-default under our other
debt agreements, including our Series 2022 Bonds.
Subject
to the limits contained in some of the agreements governing our outstanding debt, we may incur additional debt in the future. Our maintenance
of higher levels of indebtedness could have adverse consequences including impairing our ability to obtain additional debt and/or equity
financing in the future.
Our
level of debt places significant demands on our cash resources, which could:
•make
it more difficult to satisfy our outstanding debt obligations;
•require
us to dedicate a substantial portion of our cash for payments related to our debt, reducing the amount of cash flow available for working
capital, capital expenditures, entitlement of our real estate assets, contributions to our tax-qualified pension plan, and other general
corporate purposes;
•make
it more difficult for us to satisfy certain financial tests and ratios under our loan or debt agreements, requiring us to seek waivers
from lenders to not enforce its rights and remedies under the applicable agreements;
•limit
our flexibility in planning for, or reacting to, changes in the industries in which we compete;
•place
us at a competitive disadvantage with respect to our competitors, some of which have lower debt service obligations and greater financial
resources than we do;
•limit
our ability to borrow additional funds;
•limit
our ability to expand our operations through acquisitions; and
•increase
our vulnerability to general adverse economic and industry conditions if we are unable to generate sufficient cash flow to service our
debt and fund our operating costs, our liquidity may be adversely affected.
There
are no assurances that we will maintain a level of liquidity sufficient to permit us to pay the principal, premium and interest on our
indebtedness. In addition to competitive conditions in the industry in which we operate, our financial condition and operating performance
are also subject to prevailing economic conditions and certain financial, business and other factors beyond our control.
ITEM
5. OTHER INFORMATION.
During
the three months ended March 31, 2024, none of the Company’s directors or executive officers adopted
or terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of
Regulation S-K.
On
May 8, 2024, the Company entered into an Amended and Restated Management Services Agreement (the “A&R Agreement”) by and
between, inter alia, the Company, Albacete Aero, S.L.U. (“Albacete”), a wholly-owned subsidiary of the Company, and MAB Funding
Designated Activity Company (“MAB”), a wholly-owned subsidiary of MAB Funding, LLC, which amended and restated in its entirety
its November 17, 2023 Management Services Agreement with MAB Funding, LLC. Pursuant to the A&R Agreement, an affiliate of MAB agreed
to fund certain value added taxes (“VAT”), which are indemnifiable by the Company, and to pursue a refund (if available) for
such VAT. Such VAT (to the extent not refunded) is subject to repayment by the Company pursuant to the terms of the A&R Agreement,
and shall also accrue interest at the rate of 15% per annum, compounded monthly, during the period between the time that the VAT is funded
and the time that it is refunded (unless the Company exceeds certain operational budgets set forth in the A&R Agreement, in which
case the interest rate will increase to 22.8% per annum). Additionally, the A&R Agreement provides that the Company will provide certain
financial information and access to MAB regarding the operations of the Company, and that Albacete is authorized to perform return-to-service
work on the aircraft subject to the A&R Agreement.
ITEM
6. EXHIBITS
|
|
|
|
|
|
|
|
| |
Exhibit
Number |
| Description |
|
|
| |
| 3.1 |
|
Amended
and Restated Certificate of Incorporation of Bridger Aerospace Group Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed with the SEC on January 27, 2023). |
|
|
| |
| 3.2 |
|
Amended
and Restated Bylaws of Bridger Aerospace Group Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current
Report on Form 8-K filed with the SEC on January 27, 2023). |
|
|
| |
| 10.1 |
|
First
Amendment to Services Agreement, dated January 18, 2024, by and between Bridger Aerospace Group Holdings, Inc. and Bridger Aerospace Europe,
S.L.U.. (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed with the SEC on March 20,
2024). |
|
|
| |
| 10.2 |
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Sales
Agreement, dated as of January 26, 2024, by and among Bridger Aerospace Group Holdings, Inc., Stifel, Nicolaus & Company, Incorporated
and Virtu Americas LLC (incorporated by reference to Exhibit 1.2 to the Company’s Registration Statement on Form S-3 (File No. 333-276721)
filed with the SEC on January 26, 2024). |
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| 10.3*++ |
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Second
Amendment to Services Agreement, dated May 8, 2024, by and between Bridger Aerospace Group Holdings, Inc. and Bridger Aerospace Europe,
S.L.U.. |
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| 31.1* |
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Certification
of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (18 U.S.C. Section 7241). |
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| 31.2* |
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Certification
of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (18 U.S.C. Section 7241). |
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| 32.1** |
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Certification
of the Company’s Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (18
U.S.C. Section 1350). |
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| 101.INS* |
| XBRL
Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document |
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| 101.SCH* |
| Inline
XBRL Taxonomy Extension Schema Document |
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| 101.CAL* |
| Inline
XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF* |
| Inline
XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB* |
| Inline
XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE* |
| Inline
XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104* |
| Cover
Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
* Filed
herewith.
** Furnished
herewith.
++ Portions
of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, duly authorized.
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Date: May 14,
2024 |
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| BRIDGER
AEROSPACE GROUP HOLDINGS, INC. |
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| By: |
/s/
Timothy Sheehy |
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| Name: |
Timothy
Sheehy |
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| Title: |
Chief
Executive Officer and Director |
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| (Principal
Executive Officer) |
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| |
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| By: |
/s/
Eric Gerratt |
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| Name: |
Eric
Gerratt |
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| Title: |
Chief
Financial Officer |
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|
| (Principal
Accounting and Financial Officer) |
AMENDED
AND RESTATED SERVICES AGREEMENT
Dated
as of the May 8, 2024,
by
and between
Bridger
Aerospace Group Holdings, Inc.,
Albacete
Aero, S.L.U.,
Bridger
Aerospace Europe, S.L.U.
and
MAB
Funding Designated Activity Company,
concerning
the aircraft set forth on Exhibit A hereto.
This
Amended and Restated Services Agreement (“Agreement”), is entered into as of May 8, 2024 (the “Amendment Date”)
by and between Bridger
Aerospace Group Holdings, Inc.,
a Delaware corporation (“Bridger”),
Albacete Aero, S.L.U.,
a limited liability company incorporated under the laws of Spain (“Albacete”), Bridger
Aerospace Europe, S.L.U.,
a limited liability company incorporated under the laws of Spain (“BAE”) and MAB
Funding Designated Activity Company,
a designated activity company (limited by shares) incorporated under the laws of Ireland (“Owner”) and amends and restates
in its entirety the Services Agreement entered into on November 17, 2023 (the “Effective Date”), between Bridger and BAE.
Bridger, Albacete, BAE and Owner may be referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS,
pursuant to those certain aircraft sale and purchase agreements, dated as of the date hereof, by and between Owner and BAE (collectively,
the “BAE Purchase Agreements”), Owner owns those aircraft described on Exhibit
A attached
hereto (each, an “Aircraft”, and, collectively, the “Aircraft”); and
WHEREAS,
Owner, Albacete, BAE and Bridger desire to enter into this Agreement to address, among other things, terms and conditions as to the retrofit,
operation, maintenance, lease, purchase, and exclusivity obligations as to all of the Aircraft, in addition to certain other terms and
conditions.
NOW,
THEREFORE, in consideration of the mutual covenants and understandings contained herein, the Parties agree as follows:
Section
1
Lease
1.1Lease.
With respect to each Aircraft, at the request of Owner at any time and from time to time, but no earlier than 90 days prior to the anticipated
date that such Aircraft is equipped to be flown in revenue service for aerial firefighting purposes, Owner and Bridger shall negotiate
in good faith for the entry into an operating lease with respect to the applicable Aircraft, together with all equipment, attachments,
accessories and parts as may be installed thereon or appurtenant thereto from time to time, on the terms and subject to the conditions
set forth on Exhibit B hereto (the “Lease Terms”) and otherwise containing such other customary terms and conditions for aircraft
leases of this type and as to similar aircraft and otherwise as reasonably satisfactory to Owner (each, an “Operating Lease”);
provided,
however,
that, as to each Aircraft, Owner and Bridger shall enter into an Operating Lease no later than the date such Aircraft is to be first operated.
With respect to each Aircraft, during the term of this Agreement and at any time that an Operating Lease is not then in effect with respect
to such Aircraft, Bridger agrees to hold such Aircraft as Owner’s bailee for the sole benefit of Owner. Substantially concurrently
with the entry into any Operating Lease, the Parties shall cooperate in good faith to amend this Agreement as may be required in order
to appropriately reflect the terms of such Operating Lease.
Section
2
Operation,
Retrofitting and Management of Aircraft
2.1Commencement
of Obligations.
Bridger acknowledges and agrees that its obligations under this Section 2 with respect to the Aircraft commenced as of the date the Aircraft
were delivered by The Ministry for Ecological Transition and the Demographic Challenge (“MITECO”).
2.2Operation
of Aircraft.
For so long as this Agreement is in effect with respect to any Aircraft, Bridger shall not operate such Aircraft at any time that an Operating
Lease is not then in effect with respect thereto other than any ferry flight, the purpose of which is to deliver such Aircraft to a third-party
that is either (x) providing maintenance, repair or storage services pursuant to a Key Contract (as defined herein) or (y) to a third-party
that is retained to perform the Work (defined below) in accordance with this Agreement. In all cases, the use and operational control
of an Aircraft, other than as explicitly set out in this Section 2.2, shall be governed by the terms and subject to the conditions set
forth in the applicable Operating Lease and the Key Contracts relating to such Aircraft or as otherwise mutually agreed upon in writing
by the Parties.
2.3Retrofit
and Return to Service Process.
2.3.1The
Parties acknowledge that the Aircraft are not currently equipped to be flown in revenue service for aerial firefighting purposes. Albacete
or Bridger (or an affiliate) shall be responsible for retrofitting each Aircraft to conform to the configuration as agreed to by Owner
and to return such Aircraft to service for aerial firefighting purposes in accordance with applicable laws and in accordance with a scope
of work plan in respect of the retrofit of each Aircraft for the following services: (i) C Check, including the maintenance, repair
and overhaul of the airframe; (ii) maintenance, repair and overhaul of landing gears (nose and main); (iii) maintenance, repair
and/or replacement of rotables, tires, seals, propellors, cockpit gauges and flight controls including any necessary testing for functionality
and serviceability; (iv) Non-Destructive Testing of materials; and (v) overhaul of four (4) Pratt & Whitney PW123AF engines
including full assembly and testing of operating conditions and airworthiness (as may be amended, modified or supplemented by mutual agreement
of the Parties) (collectively, the “Work”). Bridger and its affiliates (including Albacete) shall not cause, authorize or
permit any Work to be performed on any of the Aircraft without the prior written consent of Owner (in its sole and absolute discretion),
provided further, that Bridger does hereby delegate, authorize and permit its wholly-owned subsidiary Albacete to perform the Work obligations
in this Agreement, in accordance with and subject to the terms hereof, and any Work performed by Albacete shall not relieve, affect, modify
or in any way alter any of Bridger’s obligations, duties and payment responsibilities set forth in this Agreement. By signing this
Agreement, each of Bridger, Albacete, BAE and Owner acknowledge and accept such delegation.
Each
of the Parties acknowledges that Bridger has been providing the Work through Albacete before the Amendment Date, which has not been invoiced.
As of the Amendment Date, Albacete has issued invoices to BAE for all such Work performed prior to the Amendment Date in an amount of
approximately EUR 2,300,000 and following the Amendment Date, Albacete shall issue invoices to Owner for any additional Work performed
on or after the Amendment Date. Additionally, to support Albacete in documenting the ability to invoice Owner for the Work, Albacete and
Owner shall enter, as
the
Amendment Date and simultaneously with this Agreement, into a short form services agreement, set out in Exhibit
C. Similarly,
BAE shall collaborate with Albacete if reasonably requested by Albacete in documenting the services provided by Albacete to BAE in relation
to the Work.
2.3.2Bridger
or Albacete, as applicable, shall contract with one or more certified aircraft repair facilities reasonably acceptable to Owner to perform
the Work. Bridger or Albacete shall negotiate in good faith with qualified service providers as to proposed service contracts for the
performance of the Work, and shall keep Owner reasonably informed, on a current and prompt basis, as to any material developments as to
the negotiations and drafts of such proposed service contracts, and shall provide to Owner (a) a copy of the proposed service contracts
for each Aircraft (including all exhibits, schedules, and ancillary documents and agreements in connection therewith) reasonably in advance
of the proposed execution thereof and (b) a reasonable opportunity to review and comment thereon (which comments Bridger or Albacete,
as applicable, shall review and incorporate therein). Any such service contract entered into in full compliance with the foregoing shall
be deemed a “Retrofit Contract”, and, collectively, shall be deemed, the “Retrofit Contracts”. Without the prior
written consent of Owner, Bridger or Albacete shall not, directly or indirectly, enter into, materially amend, materially modify, terminate,
waive any material right under or waive any default under, any Retrofit Contract; provided,
however,
that after receiving Owner’s written consent to enter into any Retrofit Contract and beginning the Work, Bridger or Albacete may
enter into any change orders or other modifications to any Retrofit Contract so long as such change order or modification would neither
(i) increase the aggregate annual expenditures under such Retrofit Contract by more than ten percent (10%) nor (ii) exceed the aggregate
Retrofitting Costs for the applicable Aircraft set forth in the Retrofit Budget. Bridger or Albacete, as applicable, shall perform their
obligations under each Retrofit Contract in accordance with the terms thereof and shall notify Owner promptly in the event of any breach,
default or dispute (or anticipated breach, default or dispute) under any Retrofit Contract.
2.3.3Notwithstanding
anything in the foregoing to the contrary, without the prior written consent of, or unless otherwise directed by, Owner, as to Aircraft
3 and Aircraft 4, Bridger and Albacete shall not cause, authorize or permit any material Work to be performed until Bridger has acquired
Aircraft 1 and Aircraft 2 from Owner pursuant to the terms of Section 3.1 below or Owner has otherwise sold or disposed of Aircraft 1
and Aircraft 2.
2.3.4Owner
shall be responsible for reimbursing Albacete or Bridger (or its affiliates) for all costs and expenses incurred in connection with the
Work, including amounts payable pursuant to each Retrofit Contract and expenses incurred by Albacete or Bridger (or its affiliates) in
connection therewith, in each case, solely to the extent set forth in, and pursuant to the applicable line item amounts of, the Retrofit
Budget (collectively, the “Retrofitting Costs”). Albacete (or Bridger or its affiliates) shall provide Owner with invoices
for all Retrofitting Costs
(which invoices
shall be addressed directly to Owner, or shall be re-invoiced directly by Albacete or Bridger (or any of its affiliates) to Owner), together
with reasonable and appropriate supporting documentation, in respect of each calendar month, within ten (10) Business Days of the end
of such calendar month, provided that any invoices in respect of such month that are received by Albacete or Bridger (or its affiliates)
after such ten (10) Business Day period shall be included in the following month’s request. Within fifteen (15) Business Days of
receipt of such invoices (subject to the timely delivery thereof pursuant to the immediately preceding sentence), Owner shall pay or cause
to be paid to Albacete or Bridger (or its
affiliates)
the aggregate amount of such Retrofitting Costs that are not being disputed pursuant to the following sentence; provided,
that, Owner may delay any such payments to the extent they do not exceed $100,000. Notwithstanding anything to the contrary herein, Owner
shall have the right to (a) offset against any Retrofitting Costs owed to Bridger or Albacete any amounts due to Owner and unpaid pursuant
to this Agreement, the Bridger Purchase Agreement or any Operating Lease, including any Damages owed pursuant to Section 2.8 and (b) dispute
any invoice (or component thereof) for any Retrofitting Cost that Owner reasonably believes to have been incurred in breach or violation
of the terms of this Agreement or to be inconsistent with the Retrofit Budget. For purposes of this Agreement, “Business Day”
means any day that is not a Saturday, a Sunday or other day on which commercial banks in the City of New York, New York, Madrid, Spain
or Dublin, Ireland are required or authorized by applicable law to be closed.
2.3.5Bridger
shall prepare an estimated quarterly budget (the “Retrofit Budget”) for Retrofitting Costs to be incurred in each fiscal quarter
(or partial quarter) during the term of this Agreement and shall submit each such Retrofit Budget to Owner no later than 30 calendar days
prior to the commencement of the applicable fiscal year of Bridger. Owner shall have the right to approve the amounts set forth in the
Retrofit Budget, and none of Bridger or its affiliates (including Albacete) shall be entitled to reimbursement for any items not contained
in an approved Retrofit Budget (other than in connection with any variance to the Retrofit Contract, as set forth in Section 2.3.2).
In the event the Parties fail to agree to any Retrofit Budget, the most recent Retrofit Budget approved by Owner pursuant to this Section
2.3.5 shall continue to govern.
2.4Flight
Operations; Key Contracts.
2.4.1Once
the Work with respect to an Aircraft has been completed and such Aircraft has been returned to revenue service in accordance with the
terms and conditions of this Agreement (including the requirement to execute and deliver an Operating Lease with respect to such Aircraft
pursuant to Section 1 hereof), Bridger may deploy each Aircraft for aerial firefighting solely pursuant to the terms of Key Contracts
(as defined herein) entered into in accordance with Section 2.4.2.
2.4.2Bridger
shall provide to Owner (a) a draft copy of each proposed contract (including all exhibits, schedules, and ancillary documents and agreements
in connection therewith) in respect of any Aircraft that would involve the payment by Bridger or any of its affiliates of $100,000 or
more in any fiscal year (including in respect of the deployment, maintenance, storage, and insurance thereof but excluding any Retrofit
Contract, which shall be governed by Section 2.3.2), reasonably in advance of the proposed execution thereof and (b) a reasonable opportunity
to review and comment thereon (which comments Bridger shall review and incorporate therein). Any such contract entered into in full compliance
with the foregoing shall be deemed a “Key Contract”, and, collectively, shall be deemed, the “Key Contracts”.
Each Key Contract shall provide that: (i) Owner shall be a third party beneficiary of the rights of Bridger thereunder, with a specific
right of enforcement and (ii) such Key Contract shall be assignable by Bridger to Owner without any consent of, or notice to, the counterparty
thereto, at any time that the Aircraft that is the subject of such Key Contract is owned by Owner at the time of such assignment. Without
the prior written consent of Owner, Bridger shall not, directly or indirectly, enter into, materially amend, materially modify, terminate,
waive any material right under or waive any default under, any Key Contract. Bridger shall perform its obligations under each Key
Contract
in accordance with the terms thereof and shall notify Owner promptly in the event of any breach, default or dispute (or anticipated breach,
default or dispute) under any Key Contract.
2.4.3Bridger
shall cause each flight crew assigned to an Aircraft to be fully trained and qualified for the operation of the Aircraft and to meet all
requirements under applicable laws. All such flight crews shall be agents of or employees of Bridger or one of its subsidiaries and Bridger
shall exercise sole control and supervision over all flight crews, and Bridger shall be responsible for and liable for any action or inaction
of any such party (for the avoidance of doubt, any Damages related thereto that are indemnified by Bridger pursuant to Section 2.8.1 shall
be subject to the other terms and limitations set forth in Section 2.8).
2.4.4At
any time that an Aircraft is deployed, Bridger shall cause to be maintained flight logbooks showing the full flight time of the Aircraft
and shall keep such logs in the Aircraft and available for inspection by Owner or its representatives at all reasonable times.
2.4.5Any
revenue received by Bridger from deployment of an Aircraft shall be the sole and exclusive property of Bridger.
2.5Maintenance
and Operating Costs.
2.5.1Bridger
shall (a) take all requisite steps to maintain and keep the Aircraft in good repair and in an airworthy operating condition, (b) maintain
in full force and effect all approvals, consents, licenses, permits and other authorizations of any governmental or regulatory authority
applicable to the Aircraft and required to maintain, store, operate and/or deploy the Aircraft and (c) cause all maintenance and repair
work to be performed in compliance with applicable laws and by persons duly licensed to do such work, which may include employees of Bridger
or its affiliates and in each case, in the same manner and with the same degree of care as a reasonable and prudent operator of similar
aircraft. Except as previously approved in writing by Owner (in its sole and absolute discretion) in a Retrofit Budget, under no circumstance
shall Bridger transfer, sell, remove or otherwise encumber any engine of any Aircraft (including but not limited to an engine swap) without
the prior written consent of Owner. If at any time any Aircraft (i) is not in revenue service or (ii) is not receiving maintenance, repair,
overhaul or retrofit services pursuant to the terms of this Agreement, such Aircraft shall be held in accordance with an approved storage
plan pursuant to a Key Contract.
2.5.2Other
than the costs and expenses incurred in connection with the Work (solely to the extent set forth in, and pursuant to the applicable line
item amounts of, the Retrofit Budget), Bridger shall be responsible for, and shall pay on a current basis, all costs and expenses related
to the maintenance, repair and operation of each Aircraft, including but not limited to the following: flight crew, flight crew training
(initial, re-current or otherwise), crew per diem while performing duties in conjunction with an Aircraft, hangar rent, insurance costs
(as described in this Agreement), airframe & avionics maintenance (including labor and parts), engine maintenance, engine reserves
or other such engine, airframe, or avionics program costs, computerized maintenance tracking program subscriptions, landing fee, parking,
ramp fee, crew transportation, transient hangar, de-icing, flight related trip expenses, chart subscriptions, avionics database subscriptions,
fuel research program subscriptions, catering expenses, jet fuel, cleaning, and stocking, compliance (including compliance
with
all airworthiness directives, mandatory service bulletins, alert service bulletins and mandatory orders), registration and importation.
2.6Reimbursements.
2.6.1Notwithstanding
anything to the contrary in this Agreement, as to any service or item the cost of which Owner is required to reimburse Bridger (or its
affiliates) under this Agreement (whether by offset or otherwise), Owner may elect to provide or arrange to provide such service or item,
provided that such service or item has a substantially similar quality or service level (to be determined by Owner in its reasonable discretion),
in order to permit Owner to reduce its costs.
2.6.2Notwithstanding
anything to the contrary in this Agreement, Bridger shall use commercially reasonable efforts to minimize costs incurred by it if such
costs would be reimbursable by Owner to Bridger in accordance with the terms of this Agreement (whether by offset or otherwise). In connection
therewith, Bridger shall use commercially reasonable efforts to cooperate with Owner to identify opportunities to manage expenses relating
to the Aircraft.
2.6.3Bridger
and Owner acknowledge and agree that Owner’s remittance obligations are not intended to be duplicative and as such, in the event
of any unintended duplication of payments by Owner from time to time pursuant to this Section 2.6 or pursuant to any other provision of
this Agreement to the extent relating to Retrofitting Costs, Owner and Bridger shall work together in good faith to remedy such duplication
by crediting Owner’s future payment obligations under this Agreement (whether or not arising pursuant to this Section 2.6) against
the aggregate amount of such duplicated payments.
2.7Insurance.
2.7.1Except
as otherwise provided by an applicable Operating Lease, Bridger shall maintain, or cause to be maintained in effect, at all times during
the term of this Agreement, (i) aviation general liability insurance coverage with respect to each Aircraft with minimum limits of $50,000,000.00
per occurrence, and (ii) “all-risk” ground and flight hull insurance on an agreed-value basis for the Aircraft. All insurance
policies required under this Section 2.7 (“Required Insurance Policies”) shall name Owner, Marathon Member (as defined below),
Avenue Member (as defined below) and Bridger as Insureds or Additional Insureds. The Required Insurance Policies shall, without limitation:
(a) be primary without any right of contribution from any insurance maintained by Owner; and (b) shall include at minimum all territories
over which the Aircraft will be operated. Bridger shall pay all premiums for all Required Insurance Policies and shall provide Owner with
evidence of such policies of insurance, including providing Owner with a certificate of insurance and endorsements on or before the Effective
Date and at any time thereafter as Owner may reasonably request. In the event that Bridger shall fail to maintain the Required Insurance
Policies as herein provided, Owner may, at its option (and at the sole cost and expense of Bridger), obtain such insurance protecting
the interests of Owner and Bridger.
2.8Indemnification;
Waiver of Consequential Damages
2.8.1Bridger
Indemnification.
Bridger shall
defend, indemnify and otherwise hold harmless Owner, each of its affiliates, and its and their respective officers, directors, equityholders,
partners (general and limited), members, managers, employees, agents, representatives, and each of their respective successors and assigns,
as the case may be (each, a “Owner Indemnified Party”), from and against any and all liability of whatever nature, and shall
pay to each Owner Indemnified Party upon demand the amount as to any suits, claims, complaints, damages, penalties, fines, expenses, taxes
costs and losses, including legal expenses and settlement costs, of whatsoever kind and nature (collectively, “Damages”),
imposed on, incurred by or asserted against any Owner Indemnified Party in any way related to or arising from any of the following:
(i) any breach or violation of any representation, warranty, covenant or agreement of Bridger or Albacete in this Agreement and (ii) any
other negligent or willful misconduct of Bridger or Albacete arising out of or in connection with the execution, enforcement, or performance
of this Agreement.
2.8.2Owner
Indemnification.
Owner shall defend, indemnify and otherwise hold harmless Bridger, each of its affiliates (including Albacete), and its and their respective
officers, directors, equityholders, partners (general and limited), members, managers, employees, agents, representatives, and each of
their respective successors and assigns, as the case may be (each, a “Bridger Indemnified Party”), from and against any and
all liability of whatever nature, and shall pay to each Bridger Indemnified Party upon demand, the amount of any Damages actually incurred
by a Bridger Indemnified Party, in any way related to or arising from any (i) any breach or violation of any representation, warranty,
covenant or agreement of Owner in this Agreement; and (ii) any other negligent or willful misconduct of Owner arising out of or in
connection with the execution, enforcement, or performance of this Agreement.
2.8.3Calculation
of Damages.
The amount of any Damages paid to any Indemnified Party hereunder shall be reduced by the amount of any insurance proceeds or indemnification
proceeds from third parties actually received by such Bridger Indemnified Party or Owner Indemnified Party, as applicable (each, an “Indemnified
Party”), in respect of such Damages (net of reasonable and out-of-pocket costs of recovery thereof).
2.8.4Limitations
on Damages.
In no event shall any Party be entitled to recover from any other Party consequential, indirect, special, statutory, exemplary or punitive
damages or damages calculated using multiples of revenue or earnings, actual or potential lost profits or diminution in value in connection
with this Agreement or any other agreement referenced herein, or the termination or abandonment of any of the transactions contemplated
hereby, except to the extent actually paid by an Indemnified Party to a third party. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not limit: (i) any Party from recovering direct damages, including in respect of lost profits or diminution
in value but in each case only to the extent constituting direct damages; (ii) any indemnification obligation of Bridger pursuant
to the terms of the Bridger Purchase Agreement (as defined below) and (iii) any obligation of Bridger to pay the Termination Fee or any
other amounts payable pursuant to Section 3.4, when and if due.
2.8.5Indemnification
Procedures.
(a)The
applicable Indemnified Party shall promptly notify the other (as applicable, the “Indemnifying Party”) of the commencement
of any action for which indemnification may be sought hereunder, but the failure to so timely notify the Indemnifying Party will not relieve
the Indemnifying Party from liability hereunder unless and to the extent the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall be entitled to assume the defense of any action for which indemnification is sought hereunder with counsel of
the Indemnifying Party’s choice at its expense, provided,
however,
that such counsel shall be reasonably satisfactory to the Indemnified Party (in which case, the Indemnified Party will have the right
to employ separate counsel and to participate in the defense of such action at the Indemnifying Party’s expense). Notwithstanding
the foregoing, the Indemnifying Party shall not have the right to assume the defense of such action on the Indemnified Party’s behalf
and the Indemnified Party will have the right to employ one separate counsel (plus local counsel, if required, in any jurisdiction) for
such defense, and the Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel)
if (i) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party within a reasonable time
after notice of the institution of such action; (ii) the use of counsel chosen by the Indemnifying Party would present such counsel
with a conflict of interest; or (iii) the actual or potential defendants in, or targets of, any such action include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party shall have reasonably concluded that there may be legal defenses available
to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. The Indemnifying Party shall
not be liable for any settlement of any action for which indemnification is sought hereunder effected without its written consent (not
to be unreasonably withheld, conditioned, or delayed).
(b)The
Indemnifying Party agrees that it will not, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably
withheld, conditioned or delayed), settle any pending or threatened claim or proceeding related to or arising out of this Agreement (whether
or not the Indemnified Party or any indemnified party is a party to such claim or proceeding), or otherwise facilitate or participate
in any such settlement, unless such settlement includes a provision unconditionally releasing the Indemnified Party and each other indemnified
party from all liability in respect of claims by any releasing party related to or arising out of the engagement or any transactions or
conduct in connection therewith.
2.9Liens.
2.9.1Bridger
and its affiliates (including Albacete) shall ensure that no liens, encumbrances, levies or attachments (collectively, the “Liens”)
are created or placed against any Aircraft as a result of Bridger’s or its affiliates’ actions. Bridger shall notify Owner
promptly upon learning of any Liens not permitted by these terms.
2.9.2Bridger
and its affiliates (including Albacete) shall take all such actions as may be necessary to discharge and satisfy in full any such Lien
promptly after the same becomes known to it. Owner shall promptly reimburse Bridger for any costs and expenses incurred by Bridger in
causing such Liens to be removed.
2.10Taxes;
Withholding.
2.10.1Notwithstanding
anything to the contrary herein, all Retrofitting Costs, fees for service or other amounts paid or payable by Owner or BAE to Albacete
or Bridger (or any of its affiliates) as set forth in this Agreement shall be inclusive of any value-added tax or any other tax of a similar
nature imposed in a member state of the European Union or imposed in any other jurisdiction in substitution for, or levied in addition
to, such value-added tax (including consumption tax, goods and services tax, sales tax and turnover tax) (all such taxes, “Retrofit
VAT”). Bridger shall co-operate with BAE and Owner and any affiliate in respect of any tax compliance issue arising in respect hereof
and in connection with the same agrees (i) on written request, to provide Owner or any affiliate with full details of all tax arising
in respect hereof, and (ii) to authorize the relevant tax authority to disclose such information to Owner and BAE. Notwithstanding anything
to the contrary, Owner shall be entitled to, in its sole discretion, deduct and withhold from the amounts otherwise payable pursuant to
this Agreement such amounts, if any, as are required to be deducted and withheld under applicable law, and to the extent amounts are so
deducted or withheld, such amounts shall be treated for all purposes as having been paid to the Person in respect of which such deduction
or withholding was made. In respect of any Retrofit VAT, in the event of a conflict between the provisions of Section 2.8 and this Section
2.10, this Section 2.10 will govern.
2.10.2If
Owner makes any payment of Retrofit VAT and the Owner is entitled to a refund for such Retrofit VAT, then Owner shall make all reasonable
efforts to obtain such refund in accordance with the steps set out in clause 5.5.2, 5.5.3 and 5.5.4, which shall apply mutatis mutandis
to the same extent as if the applicable Retrofit VAT paid under Clause 2.10.1 were the VAT Amount, except that: (i) Owner shall be
required to apply for a refund of such Retrofit VAT under the system operated by Irish Revenue to reclaim from EU Member States only to
the extent that Owner is notified in writing of such a requirement by Bridger (or its affiliates, including Albacete) and (ii) Owner shall
not be subject to any requirement to apply for such refund within a 10 day time period of the services being invoiced by Albacete to Owner.
Any refunded Retrofit VAT by the Owner shall be referred to as a “Owner Retrofit Recovered VAT”.
2.10.3If
BAE makes any payment of Retrofit VAT for Works invoiced to BAE prior to the Amendment Date and BAE is entitled to a refund for such Retrofit
VAT, then BAE shall make all reasonable efforts to obtain such refund in accordance with the steps set out in clause 5.5.2, 5.5.3 and
5.5.4, which shall apply mutatis mutandis to the same extent as if the applicable Retrofit VAT paid under this Clause 2.10.3 were the
VAT Amount, except that: (i) BAE shall apply for the refund of Retrofit VAT under the ordinary VAT system operated by Spanish Revenue
as promptly and reasonably practicable within the statutory deadline to file the VAT return (form 303) corresponding to the last quarter
of year 2024 (and not, for the avoidance of doubt, within a 10 day time period of the services being invoiced to BAE) and (ii) BAE shall
not be subject to any requirement to apply for such refund within a 10 day time period of the services being invoiced by Albacete to BAE.
Any such refunded Retrofit VAT by BAE shall be referred to as a “BAE Retrofit Recovered VAT”.
Section
3
Purchase
Right
3.1First
Purchase. At
any time during the first eighteen (18) months following the Effective Date (the date of such 18-month anniversary, the “First Purchase
Date”, and such eighteen-
month
period, the “First Purchase Period”), Bridger (or an affiliate thereof) shall have the right, but not the obligation, to purchase
both (and only both unless mutually agreed by the Parties) of Aircraft 1 and Aircraft 2 from Owner (the “First Purchase”)
for aggregate consideration equal to the First Payment (as defined below) by delivery of an irrevocable written notice to Owner on or
prior to the First Purchase Date (a “First Purchase Election Notice”). If Bridger fails to deliver a First Purchase Election
Notice in accordance with this Section 3.1, all of its rights with respect to each of the First Purchase and the Second Purchase shall
terminate, unless otherwise mutually agreed upon by the Parties.
“First
Payment” shall mean the sum of (a) $40,000,000 plus
(b) the amount accrued commencing as of the VAT Payment Date (as defined below) through the earlier of (i) the VAT Recovery Date (as defined
below) and (ii) the closing date of the First Purchase, in each case, at a rate of 15% per annum, compounded monthly, on the VAT Amount
(provided,
however,
that if at any time prior to the VAT Recovery Date the aggregate Retrofitting Costs exceed $25,106,163.09, such rate shall be increased
to 22.8% per annum from and after the date any such excess costs are first incurred) (the amount set forth in this clause (b), the “First
VAT Interest Payment”). The First Payment is exclusive of VAT. To the extent VAT is chargeable on the First Purchase, Bridger shall
pay any applicable VAT to Owner or directly to the relevant tax authority, as applicable.
3.2Second
Purchase. Solely
in the event that Bridger has consummated the First Purchase (unless otherwise mutually agreed by the Parties), Bridger (or an affiliate
thereof) shall have the right, but not the obligation, at any time during the first thirty-six (36) months following the Effective Date
(the date of such 36-month anniversary, the “Second Purchase Date”, and such 36-month period, the “Second Purchase Period”),
to purchase both (and only both, unless mutually agreed upon by the Parties) of Aircraft 3 and Aircraft 4 from Owner (the “Second
Purchase”), for aggregate consideration equal to the Second Payment (as defined below), by delivery of an irrevocable written notice
to Owner on or prior to the Second Purchase Date (a “Second Purchase Election Notice”). If Bridger fails to deliver a Second
Purchase Election Notice in accordance with this Section 3.2, all of its rights with respect to the Second Purchase shall terminate.
“Second
Payment” shall mean an amount equal to the greater of (a) the IRR Calculated Price (as defined below) and (b) the MOIC Calculated
Price (as defined below). The Second Payment is exclusive of VAT. To the extent VAT is chargeable on the Second Purchase, Bridger shall
pay any applicable VAT to Owner or directly to the relevant tax authority, as applicable.
“IRR
Calculated Price” shall mean the sum of (1)(A) the Purchase Price Amount (as defined below), plus
(B) the RTS Amount (as defined below), plus
(C) the amount accrued commencing as of the Effective Date through the closing date of the Second Purchase at a rate of 22.8% per annum,
compounded monthly, on the sum of (1)(A) plus (1)(B), plus
(2)(A) the aggregate amount of all Overage, plus
(B) the amount accrued commencing as of the date of such costs through the closing date of the Second Purchase at a rate of 22.8% per
annum, compounded monthly, on the amount in clause (2)(A), plus
(3)(A)(i) the VAT Amount minus
(ii) the Recovered VAT Amount, if any, as of the closing date of the Second Purchase, plus
(B) the amount accrued commencing as of the VAT Payment Date through the earlier of (i) the VAT Recovery Date and (ii) the closing date
of the Second Purchase at a rate of 15% per annum, compounded monthly, on the VAT Amount (provided,
however,
that if at any time prior to the VAT Recovery Date the aggregate Retrofitting Costs exceed $25,106,163.09,
such
rate shall be increased to 22.8% per annum from and after the date any such excess costs are first incurred), minus
(4) an amount equal to (A) $40,000,000, plus
(B) the amount accrued commencing as of the date of the closing date of the First Purchase through the closing date of the Second Purchase
at a rate of 22.8% per annum, compounded monthly, on $40,000,000, minus
(5) an amount equal to (A) the First VAT Interest Payment, plus,
solely in the event the VAT Recovery Date has not occurred on or prior to the closing date of the First Purchase, (B) the amount accrued
commencing as of the closing date of the First Purchase through the earlier of (i) the VAT Recovery Date and (ii) the closing date of
the Second Purchase at a rate of 15% per annum, compounded monthly, on the First VAT Interest Payment (provided,
however,
that if at any time prior to the VAT Recovery Date the aggregate Retrofitting Costs exceed $25,106,163.09, such rate shall be increased
to 22.8% per annum from and after the date any such excess costs are first incurred), minus
(6) an amount equal to (A) the aggregate amount of payments received by Owner under any Operating Lease, plus
(B) the amount accrued commencing as of the date of the applicable Lease Payment through the closing date of the Second Purchase at a
rate of 22.8% per annum, compounded monthly, on the amount in clause (6)(A) and, solely in the event that any portion of the RTS Amount
in respect of Aircraft 4 has not been spent, minus
(7) the difference between (A) the RTS Amount in respect of Aircraft 4 minus
(B) the retrofitting costs (including Retrofit VAT) actually spent in respect of Aircraft 4 as of the closing date of the Second Purchase,
minus
(8) the sum of (A) the aggregate amount of all Owner Retrofit Recovered VAT, if any, plus
(B) the aggregate amount of all BAE Retrofit Recovered VAT, if any, in each case of the foregoing (8)(A) and (8)(B), as of the closing
date of the Second Purchase and net of all out-of-pocket costs of Owner to recover such Owner Retrofit Recovered VAT and of BAE to recover
such BAE Retrofit Recovered VAT, respectively. An illustrative calculation of the IRR Calculated Price is set forth on Schedule SP.
“MOIC
Calculated Price” shall mean the amount necessary to provide Owner a return equal to (i) 1.5 multiplied
by (ii)(A)
the portion of the Purchase Price Amount in respect of Aircraft 3 and Aircraft 4 only, plus
(B) the portion of the RTS Amount in respect of Aircraft 3 and Aircraft 4 only, plus
(C) the portion of the Overage in respect of Aircraft 3 and Aircraft 4 only, plus
(D) the excess of (1) the VAT Amount minus
(ii) the Recovered VAT Amount, if any, as of the closing date of the Second Purchase.
“Purchase
Price Amount” means the aggregate amount of purchase price paid by Owner to acquire Aircraft 1, Aircraft 2, Aircraft 3 and Aircraft
4, excluding the implied portion contributed by Bridger, in each case calculated in accordance with the PPA Schedule.
“RTS
Amount” means the estimated retrofitting costs in respect of Aircraft 1, Aircraft 2, Aircraft 3 and Aircraft 4, in each case calculated
in accordance with the RTS Schedule.
“Overage”
means an amount equal to (i) the aggregate amount of all Retrofitting Costs and other costs paid by Owner to Bridger, minus
(ii) the RTS Amount.
3.3Documentation.
In connection with the First Purchase and the Second Purchase, the Parties shall work together in good faith to negotiate and enter into
a purchase agreement and such other documents to effect such purchase that are customary for purchases by lessees on off-lease purchases
for such purpose; provided,
however,
that such purchase agreement: (a) shall contemplate a