Part I Financial Information Item 1. Financial Statements (Unaudited) The unaudited financial statements detail the company's financial position and performance, noting a substantial doubt about its ability to continue as a going concern Condensed Consolidated Balance Sheets Total assets increased to $281.7 million driven by acquisitions, while cash decreased significantly and a stockholders' deficit persists Condensed Consolidated Balance Sheet Highlights ($s in thousands) | Account | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,526 | $22,956 | | Total current assets | $38,914 | $45,195 | | Property, plant and equipment, net | $195,391 | $196,611 | | Goodwill | $24,741 | $13,163 | | Total assets | $281,705 | $273,470 | | Liabilities & Equity | | | | Total current liabilities | $24,926 | $25,398 | | Long-term debt, net | $203,586 | $204,585 | | Total liabilities | $242,480 | $246,539 | | Series A Preferred Stock (Mezzanine Equity) | $367,225 | $354,840 | | Total stockholders' deficit | $(328,000) | $(327,909) | Condensed Consolidated Statements of Operations Q2 2024 revenue grew 12% and net loss improved to $10.0 million, driven by lower selling, general, and administrative expenses Q2 & H1 2024 vs 2023 Operating Results ($s in thousands, except per share amounts) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $13,014 | $11,616 | $18,521 | $11,981 | | Gross income (loss) | $3,147 | $1,105 | $(552) | $(5,778) | | Selling, general and administrative expense | $7,902 | $15,187 | $19,512 | $48,416 | | Operating loss | $(4,755) | $(14,082) | $(20,064) | $(54,194) | | Net loss | $(9,981) | $(19,022) | $(30,068) | $(63,707) | | Loss per share - basic & diluted | $(0.33) | $(0.55) | $(0.89) | $(0.84) | Condensed Consolidated Statements of Cash Flows Net cash used in operations for H1 2024 was significantly reduced to $22.6 million, supported by financing from a direct offering Six Months Ended June 30 Cash Flow Summary ($s in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(22,558) | $(53,445) | | Net cash provided by investing activities | $1,448 | $28,565 | | Net cash provided by (used in) financing activities | $6,718 | $(4,496) | | Net change in cash, cash equivalents and restricted cash | $(14,392) | $(29,375) | Notes to Condensed Consolidated Financial Statements The notes detail a going concern warning, the FMS acquisition, debt covenant non-compliance, and recent equity offerings - Going Concern Warning: The company has substantial doubt about its ability to continue as a going concern due to non-compliance with the DSCR covenant as of June 30, 2024, and anticipates continued non-compliance3839 - Acquisition Activity: The company completed the acquisition of Flight Test & Mechanical Solutions, Inc. (FMS) on June 28, 2024, for total consideration of $21.2 million, paid primarily in stock, adding $11.6 million in goodwill8486 - Debt Covenants: The Series 2022 Bonds require a DSCR exceeding 1.25x and minimum liquidity of $8.0 million; the company is not in compliance with the DSCR covenant117119 - Equity Offerings: In H1 2024, the company raised approximately $9.4 million in net proceeds from a registered direct offering and an at-the-market (ATM) offering134135 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved Q2 revenue and a narrowed net loss, while reiterating the going concern warning due to debt covenant breaches Results of Operations Q2 revenue grew 12% YoY driven by surveillance services, while operating loss narrowed significantly due to lower SG&A expenses Revenue by Service - Q2 2024 vs Q2 2023 ($s in thousands) | Service Offering | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Fire suppression | $7,466 | $10,449 | $(2,983) | (29)% | | Aerial surveillance | $3,514 | $1,124 | $2,390 | 213% | | Other services | $2,034 | $43 | $1,991 | 4,630% | | Total revenues | $13,014 | $11,616 | $1,398 | 12% | - The decrease in Q2 2024 SG&A expense by $7.3 million (48%) was primarily due to a $3.0 million decrease in the market value of Warrants and a $2.9 million decrease in stock-based compensation168 - For the six months ended June 30, 2024, SG&A expense decreased by $28.9 million (60%), mainly due to a $22.8 million reduction in stock-based compensation related to the Reverse Recapitalization in 2023183 Non-GAAP Financial Measures Adjusted EBITDA for Q2 2024 was $0.2 million, a decrease from the prior year, with adjustments for non-cash and non-recurring items Reconciliation of Net Loss to Adjusted EBITDA ($s in thousands) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(9,981) | $(19,022) | $(30,068) | $(63,707) | | EBITDA | $(2,613) | $(10,246) | $(15,473) | $(47,515) | | Stock-based compensation | $4,477 | $7,547 | $10,350 | $33,144 | | Change in fair value of Warrants | $(1,865) | $1,066 | $(2,132) | $(533) | | Adjusted EBITDA | $191 | $959 | $(6,737) | $(9,711) | Liquidity and Capital Resources Liquidity is under pressure due to debt covenant breaches, with a low cash balance and a potential $15.0 million contingent liability - The company is not in compliance with the Debt Service Coverage Ratio (DSCR) covenant on its Series 2022 Bonds, raising substantial doubt about its ability to continue as a going concern197204 - As of June 30, 2024, the company had $8.5 million in cash and cash equivalents and $14.0 million in restricted cash199 - The company has a contingent commitment related to the Spanish Scoopers agreement, which may result in a liability of up to $15.0 million215 Critical Accounting Policies and Estimates Key accounting policies involve significant judgment in revenue recognition, business combinations, and impairment testing - Revenue recognition involves contracts on a Call-When-Needed (CWN) or Exclusive Use (EU) basis, with flight and standby revenue recognized as services are rendered222 - Business combination accounting requires significant estimates for allocating purchase price to assets and liabilities at fair value, as applied in the FMS Acquisition223 - Goodwill is assessed for impairment annually on October 1 or more frequently if indicators exist; the latest assessment indicated no impairment226 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Bridger Aerospace is not required to provide information for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk241 Controls and Procedures Disclosure controls were deemed ineffective due to three material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed ineffective as of June 30, 2024242 - The company identified three material weaknesses in internal control over financial reporting related to complex accounting, IT general controls, and period-end review precision244 - A remediation plan is in progress, which includes hiring staff, implementing new software, and using third-party experts244 Part II Other Information Legal Proceedings The company is not a party to any material pending legal proceedings, other than routine litigation - There are no material pending legal proceedings against the company246 Risk Factors Updated risk factors emphasize substantial debt, covenant non-compliance, and material weaknesses in internal controls - A key risk is the company's substantial debt and its current non-compliance with the DSCR covenant, which could result in default and acceleration of debt obligations247 - The company's non-compliance with debt covenants raises substantial doubt about its ability to continue as a going concern249 - The company reiterates the risk posed by its three identified material weaknesses in internal control over financial reporting249251 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None251 Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None251 Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable251 Other Information No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter251 Exhibits This section lists exhibits filed with the report, including acquisition agreements and officer certifications
Bridger Aerospace(BAER) - 2024 Q2 - Quarterly Report