Bridger Aerospace Group Holdings, Inc. 10-K/A

ITEM 7. 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 should be read together with the historical audited annual consolidated financial statements as of and for the years ended December 31, 2023 and 2022, and the related notes thereto, that are included elsewhere in this Annual Report on Form 10-K. This discussion 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. However, we do not expect that our existing cash and cash equivalents provided by equity and debt financing 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 Annual Report on Form 10-K. Refer to the Liquidity and Capital Resources section below and “ Note 1 – Organization and Basis of Presentation ” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K 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 we consummated the Reverse Recapitalization. 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-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. 35 Table of Contents 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 this Annual Report on Form 10-K. 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. However, revenue was lower than the Company initially anticipated for 2023 due to a less intense wildfire season. Per the 2023 National Centers for Environmental Information annual report, approximately 2.6 million acres of U.S. land burned in 2023, 62.4% lower than the 2001-2020 annual average and the total number of wildfires during 2023 was 19.1% lower than the 2001-2020 annual average. Additionally, according to data from the National Interagency Coordination Center, the national wildland fire preparedness level last reached Level 5 in 2021, while reaching only Level 4 in both 2023 and 2022. This decrease in the U.S. national level of wildland fire preparedness in 2022 was partially attributed to the Western United States, which experienced one of the slowest wildfire seasons in recent years due to increased and timely precipitation and cooler temperatures. 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 are 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. 36 Table of Contents 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 and repair on externally owned 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, the Series C preferred shares of Legacy Bridger (the “Legacy Bridger Series C Preferred Shares”), the Series B preferred shares of Legacy Bridger (the “Legacy Bridger Series B Preferred Shares”), which were fully redeemed prior to Closing, the change in fair value of the freestanding derivative, 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 Annual Report on Form 10-K for a discussion of our loan commitments. 37 Table of Contents RESULTS OF OPERATIONS Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 The following table sets forth our Consolidated Statements of Operations information for the years ended December 31, 2023 and 2022 and should be reviewed in conjunction with the financial statements and notes included elsewhere in this Annual Report on Form 10-K. $s in thousands Year Ended December 31, 2023 Year Ended December 31, 2022 Period Over Period Change ($) Period Over Period Change (%) Revenues $ 66,708 $ 46,388 $ 20,320 44% Cost of revenues: Flight operations 24,412 18,762 5,650 30% Maintenance 16,928 15,124 1,804 12% Total cost of revenues 41,340 33,886 7,454 22% Gross income 25,368 12,502 12,866 103% Selling, general and administrative expense 82,863 35,128 47,735 136% Operating loss (57,495) (22,626) (34,869) 154% Interest expense (23,218) (20,020) (3,198) 16% Other income 3,053 521 2,532 486% Loss before income taxes (77,660) (42,125) (35,535) 84% Income tax benefit 302 — 302 n/a Net loss $ (77,358) $ (42,125) $ (35,233) 84% Revenues Revenue increased by $20.3 million, or 44%, to $66.7 million for the year ended December 31, 2023, from $46.4 million for the year ended December 31, 2022. Revenues by service offering for the years ended December 31, 2023 and 2022 were as follows: $s in thousands Year Ended December 31, 2023 Year Ended December 31, 2022 Period Over Period Change ($) Period Over Period Change (%) Fire suppression $ 56,022 $ 38,845 $ 17,177 44% Aerial surveillance 9,730 7,216 2,514 35% Other services 956 327 629 192% Total revenues $ 66,708 $ 46,388 $ 20,320 44% Fire suppression revenue increased by $17.2 million, or 44%, to $56.0 million for the year ended December 31, 2023, from $38.8 million for the year ended December 31, 2022. The increase was primarily driven by a higher number of aircraft operating for the full 2023 wildfire season compared to the 2022 wildfire season. The increase in fire suppression revenue accounted for 85% of the total increase in revenues for the year ended December 31, 2023. Aerial surveillance revenue increased by $2.5 million, or 35%, to $9.7 million for the year ended December 31, 2023, from $7.2 million for the year ended December 31, 2022. The increase was primarily driven by the type of aircraft operating during 2023 compared to 2022. Other services revenue increased by $0.6 million, or 192%, to $1.0 million for the year ended December 31, 2023, from $0.3 million for the year ended December 31, 2022. The increase was primarily due to labor, maintenance and improvements to an aircraft under the ownership of a related party and additional contractually specified items. Refer to “Note 19 – Related Party Transactions” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details. 38 Table of Contents Revenues by type for the years ended December 31, 2023 and 2022 were as follows: $s in thousands Year Ended December 31, 2023 Year Ended December 31, 2022 Period Over Period Change ($) Period Over Period Change (%) Flight revenue $ 34,171 $ 25,105 $ 9,066 36% Standby revenue 30,650 20,772 9,878 48% Other revenue 1,887 511 1,376 269% Total revenues $ 66,708 $ 46,388 $ 20,320 44% Flight revenue increased by $9.1 million, or 36%, to $34.2 million for the year ended December 31, 2023, from $25.1 million for the year ended December 31, 2022. The increase was primarily driven by a higher number of Super Scooper aircraft flying on deployment for the full 2023 wildfire season compared to the 2022 wildfire season. Standby revenue increased by $9.9 million, or 48%, to $30.7 million for the year ended December 31, 2023, from $20.8 million for the year ended December 31, 2022. The increase was primarily driven by a higher number of Super Scooper aircraft available for deployment for the full 2023 wildfire season compared to the 2022 wildfire season. Other revenue increased by $1.4 million, or 269%, to $1.9 million for the year ended December 31, 2023, from $0.5 million for the year ended December 31, 2022. The increase was primarily due to labor, maintenance and improvements to an aircraft under the ownership of a related party and additional contractually specified items. Refer to “Note 19 – Related Party Transactions” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details. Revenues by geographic area for the years ended December 31, 2023 and 2022 were as follows: $s in thousands Year Ended December 31, 2023 Year Ended December 31, 2022 Period Over Period Change ($) Period Over Period Change (%) United States $ 49,534 $ 46,388 $ 3,146 7% Canada 17,174 — 17,174 n/a Total revenues $ 66,708 $ 46,388 $ 20,320 44% United States revenue increased by $3.1 million, or 7%, to $49.5 million for the year ended December 31, 2023, from $46.4 million for the year ended December 31, 2022. The increase was primarily driven by a higher number of aircraft operating during 2023 compared to 2022. The increase in Unites States revenue accounted for 15% of the total increase in revenues for the year ended December 31, 2023. Canada revenue was $17.2 million for the year ended December 31, 2023 compared to zero for the year ended December 31, 2022. The increase was primarily driven by the result of our first expansion of aerial firefighting operations into Canada in 2023. Cost of Revenues Total cost of revenues increased by $7.5 million, or 22%, to $41.3 million for the year ended December 31, 2023, from $33.9 million for the year ended December 31, 2022. Flight Operations Flight operations costs increased by $5.7 million, or 30%, to $24.4 million for the year ended December 31, 2023, from $18.8 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in employee labor expenses of $5.0 million and an increase in depreciation expense of $1.5 million, partially offset by a decrease in fuel expense of $0.8 million in 2023 compared to 2022. The increase in employee labor and depreciation was primarily due to an increase in flight hours associated with two additional Super Scooper aircraft placed into service in September 2022 and February 2023, respectively. 2023 employee labor expenses also include higher non-cash stock-based compensation from increased employee equity grants. The decrease in fuel expense is primarily attributable to a decrease in aerial surveillance, training and resource flight hours in 2023 compared to 2022. Maintenance Maintenance costs increased by $1.8 million, or 12%, to $16.9 million for the year ended December 31, 2023, from $15.1 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in employee labor expenses of $1.4 million and an increase in other maintenance costs of $0.5 million, primarily attributable to two additional Super Scooper aircraft placed into service in September 2022 and February 2023, respectively. 39 Table of Contents Selling, General and Administrative Expense Selling, general and administrative expense increased by $47.7 million, or 136%, to $82.9 million for the year ended December 31, 2023, from $35.1 million for the year ended December 31, 2022. The increase was primarily attributable to $45.7 million of non-cash stock-based compensation for RSUs issued to management and employees in 2023. The remaining increase was primarily attributable to a $10.7 million increase in business development, insurance, professional services and other expenses associated with operating as a publicly-traded company in 2023 and impairment charges of $2.4 million associated with three of our Twin Commander aircraft and our two Aurora eVTOL Skiron drone aircraft due to our plan to phase out our use of these specific platforms in our aerial surveillance operations. The increase was partially offset by $10.1 million of transaction related bonuses for employees recorded in the third quarter of 2022 in connection with the issuance of the Bridger Series C Preferred Shares, issuance of the Series 2022 Bonds, execution of the Transaction Agreements and initial filing of the proxy statement/prospectus. Interest Expense Interest expense increased by $3.2 million, or 16%, to $23.2 million for the year ended December 31, 2023, from $20.0 million for the year ended December 31, 2022. The increase was primarily driven by a full year, or $18.4 million, of interest expense on the Series 2022 Bonds issued in July 2022, partially offset by lower interest expense on the Legacy Bridger Series A-1 and Series A-2 Preferred Shares and Legacy Bridger Series B Preferred Shares which were fully redeemed in August 2022 and April 2022, respectively. Other Income Other income increased by $2.5 million, or 486%, to $3.1 million for the year ended December 31, 2023, from $0.5 million for the year ended December 31, 2022. The increase was primarily attributable to a $1.3 million increase in interest income, a $0.7 million decrease in losses on extinguishment of debt and a $0.5 million increase in gains on sales of marketable securities in 2023 compared to 2022. Income Tax Benefit Income tax benefit increased to $0.3 million for the year ended December 31, 2023, from zero for the year ended December 31, 2022. The increase was attributable to a discrete benefit generated from the Ignis acquisition during 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 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). 40 Table of Contents 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 stock-based compensation, business development and integration expenses, offering costs, loss on disposal of fixed assets and non-cash impairment charges, non-cash adjustments to the fair value of earnout consideration, non-cash adjustments to the fair value of Warrants issued in connection with the Reverse Recapitalization, loss on extinguishment of debt, and discretionary bonuses to employees and executives. 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 years ended December 31, 2023 and 2022 is as follows: ($s in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 Period Over Period Change ($) Period Over Period Change (%) Net loss $ (77,358) $ (42,125) $ (35,233) 84% Income tax benefit (302) — (302) n/a Depreciation and amortization 11,089 9,091 1,998 22% Interest expense 23,218 20,020 3,198 16% EBITDA (43,353) (13,014) (30,339) 233% Stock-based compensation 1 47,796 9 47,787 530,967% Business development & integration expenses 2 5,687 954 4,733 496% Offering costs 3 5,773 2,962 2,811 95% Loss on disposals and non-cash impairment charges 4 2,869 1,770 1,099 62% Change in fair value of earnout consideration 5 167 — 167 n/a Change in fair value of Warrants 6 (266) — (266) n/a Loss on extinguishment of debt 7 — 845 (845) n/a Discretionary bonuses to employees and executives 8 — 10,137 (10,137) n/a Adjusted EBITDA $ 18,673 $ 3,663 $ 15,010 410% Net loss margin 9 (116) % (91) % Adjusted EBITDA margin 9 28 % 8 % 1 Represents stock-based compensation expense associated with employee and non-employee equity awards. 2 Represents expenses related to potential acquisition targets and additional business lines. 3 Represents one-time costs for professional service fees related to the preparation for potential offerings that have been expensed during the period. 4 Represents loss on the disposal of an aging aircraft and non-cash impairment charges on aircraft with projected cash flow losses. 5 Represents the fair value adjustment for earnout consideration issued in connection with the Ignis Acquisition. 6 Represents the fair value adjustment for Warrants issued in connection with the Reverse Recapitalization. 7 Represents loss on extinguishment of debt related to the Series 2021 Bond. 8 Represents one-time discretionary bonuses to certain employees and executives of Bridger in connection with the issuance of the Legacy Bridger Series C Preferred Shares, the issuance of the Series 2022 Bonds, execution of the Reverse Recapitalization transaction agreements and the initial filing of the proxy/statement/prospectus prepared in connection with the Reverse Recapitalization. 9 Net loss margin represents Net loss divided by Total revenue and Adjusted EBITDA margin represents Adjusted EBITDA divided by Total revenue. 41 Table of Contents 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 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 year ended December 31, 2023, the Company had an operating loss of $57.5 million, net loss of $77.4 million and cash flow used in operating activities of $26.8 million. In addition, as of December 31, 2023, the Company had unrestricted cash and investments of $24.0 million. As disclosed in detail under the section entitled “ Liquidity and Capital Resources—Indebtedness ” below, the Company is not in compliance, or is projected to not be in compliance, with certain financial covenants associated with the Series 2022 Bonds during the next 12 months. Additionally, based on projected cash use, management anticipates that without additional cash funding the Company will not have sufficient cash on hand to fund operations within the next 12 months, until the Company begins to collect cash from its seasonal firefighting operations in 2024. 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 issuing additional shares of common stock pursuant to our shelf registration statement. These sources of additional working capital are not currently assured, and consequently do not sufficiently mitigate the risks and uncertainties disclosed above. 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 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 consolidated financial statements as of and for the period ended December 31, 2023. Cash and Marketable Securities As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents of $23.0 million which were held for working capital purposes and restricted cash of $14.0 million. The restricted cash was procured through a county bond and is accessed for financing capital projects. As of December 31, 2023, the Company had $1.0 million of investments in debt securities classified as available-for-sale with short-term maturities of less than one year and carried at fair value. The Company’s available-for-sale securities investment portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. In connection with the Reverse Recapitalization, stockholders owning 34,245,643 JCIC Class A ordinary shares exercised their rights to have those shares redeemed for cash at a redemption price of approximately $10.16 per share, or an aggregate of $347.8 million. Following the payment of redemptions and expenses related to the Trust Account, there was approximately $2.4 million in remaining cash in the Trust Account, which was paid to UBS Securities LLC as a portion of its deferred underwriting fee from the JCIC’s initial public offering. As a result, we did not receive any cash proceeds from the Reverse Recapitalization. Total direct and incremental transaction costs of Bridger, JCIC and Legacy Bridger paid at Closing were approximately $16.6 million. 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 December 29, 2023, the closing price of our Common Stock was $6.91 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. 42 Table of Contents 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 December 31, 2023, 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 July 21, 2023, we entered into a Purchase and Sale Agreement (the “Bighorn Purchase Agreement”), through our subsidiary Bridger Bighorn, LLC, with Robert Eisele and Christopher Eisele (the “Bighorn Sellers”), the owners of Big Horn Airways, Inc. (“Bighorn”), pursuant to which we agreed to acquire 100% of the outstanding equity interests of Bighorn. The aggregate consideration for the Bighorn acquisition was $39.3 million, with $14.8 million payable in unregistered shares of Common Stock, and the remainder of $24.5 million payable in cash, as may be adjusted pursuant to the terms of the Bighorn Purchase Agreement, including for Bighorn’s cash, indebtedness, and net working capital as of the closing of the Bighorn acquisition. In November 2023, the Company and the Bighorn Sellers mutually agreed to terminate the Bighorn Purchase Agreement. There are no termination fees payable by either party and the Company has agreed to reimburse Bighorn $0.5 million for all fees incurred in connection with the proposed transaction. 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 December 31, 2023, we held $25.4 million of current liabilities, $17.2 million of which was accrued expenses and other current liabilities. As of December 31, 2023, we held $221.1 million of long-term liabilities with $204.6 million of total long-term debt, net of debt issuance costs, 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. 43 Table of Contents 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 debt service coverage ratio covenant as of December 31, 2023 and management anticipates the Company to continue to not be in compliance with the debt service coverage ratio covenant at future quarterly measurement periods during the next 12 months, primarily attributable to the seasonal nature of our business and a less intense 2023 wildfire season. Although the Company is in compliance with the $8.0 million minimum liquidity requirement as of December 31, 2023, based on projected cash use, management anticipates that without additional cash funding the Company will not have sufficient cash on hand to comply with the minimum liquidity covenant or to fund operations, including $18.4 million of required interest payments associated with the Series 2022 Bonds, within the next 12 months, until the Company begins to collect cash 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. 44 Table of Contents 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 December 31, 2023. 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 December 31, 2023. Mandatorily Redeemable Preferred Stock Legacy Bridger Series B Preferred Shares On April 25, 2022, we used a portion of the proceeds from the issuance of the Legacy Bridger Series C Preferred Shares to redeem all 60,000,000 of our outstanding Legacy Bridger Series B Preferred Shares for $70.0 million, inclusive of $10.0 million in accrued interest. Legacy Bridger Series A Preferred Shares On April 25, 2022, we and our investors included a new mandatory redemption provision requiring Legacy Bridger Series A Preferred Shares to be redeemed on April 25, 2032. Due to the mandatory redemption provision, Legacy Bridger Series A Preferred Shares were reclassified from mezzanine equity to liability. We elected the fair value option to measure the modification of the Legacy Bridger Series A Preferred Shares. On July 25, 2022, we used the proceeds from the Series 2022 Bonds plus cash on hand to redeem in full the remaining 6,055,556 shares of the Legacy Bridger Series A Preferred Shares for aggregate proceeds of $136.3 million. The fair values of the Legacy Bridger Series A Preferred Shares increased by $3.9 million from interest accrued since the modification on April 25, 2022 and no gain or loss were recorded to net loss upon redemption. 45 Table of Contents 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 20 – 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 Series A Preferred Stock was $22.2 million as of December 31, 2023. As of December 31, 2023, 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. Upon the Closing and exchange of Legacy Bridger Series C Preferred Shares for Series A Preferred Stock, the 50% multiplier, applicable to redemptions of Legacy Bridger Series C Preferred Shares, valued at $157.9 million as of December 31, 2022, was removed and treated as a deemed dividend. As of December 31, 2023, Series A Preferred Stock had a carrying value and redemption value of $354.8 million. Common Stock Legacy Bridger had 30,000,000 Legacy Bridger Class A common shares issued and outstanding as of December 31, 2022. The holders of these shares were entitled to one vote for each share held of record on all matters submitted to a vote of Legacy Bridger’s equityholders. These Legacy Bridger Class A common shares were issued to ElementCompany, LLC. Legacy Bridger had 9,756,130 Legacy Bridger Class B common shares issued and outstanding as of December 31, 2022. The holders of these Legacy Bridger Class B common shares were entitled to one vote for each share held of record on all matters submitted to a vote of Legacy Bridger’s equityholders. Legacy Bridger had 243,871 Legacy Bridger Class C common shares issued and outstanding as of December 31, 2022. Legacy Bridger also had 606,061 Legacy Bridger Class D common shares issued and outstanding as of December 31, 2022. These Legacy Bridger Class C common shares and Legacy Bridger Class D common shares were non-voting shares. Prior to the Closing, Legacy Bridger’s voting power followed the structure of the elected board members with three (3) designees from the holders of Legacy Bridger Class A common shares and two (2) designees from the holders of Legacy Bridger Class B common shares. This remained in place until the Closing. Upon the Closing on January 24, 2023 and at December 31, 2023, we had 43,769,290 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 years ended December 31, 2023 and 2022 were as follows: $s in thousands Year Ended December 31, 2023 Year Ended December 31, 2022 Net cash used in operating activities $ (26,808) $ (9,918) Net cash provided by (used in) investing activities 27,158 (89,813) Net cash (used in) provided by financing activities (5,831) 124,930 Effects of exchange rate changes (42) — Net change in cash and cash equivalents $ (5,523) $ 25,199 46 Table of Contents Operating Activities Net cash used in operating activities was $26.8 million for the year ended December 31, 2023, compared to Net cash used in operating activities of $9.9 million for the year ended December 31, 2022. Net cash used in operating activities reflects Net loss of $77.4 million for the year ended December 31, 2023 compared to $42.1 million for the year ended December 31, 2022. Net cash used in operating activities for the year ended December 31, 2023 reflects add-backs to Net loss for non-cash charges totaling $62.2 million, primarily attributable to stock-based compensation expense of $47.8 million and depreciation and amortization of $11.1 million. Net cash used in operating activities for the year ended December 31, 2022 reflects add-backs to Net loss for non-cash charges totaling $20.9 million, primarily attributable to depreciation and amortization of $9.1 million, change in fair value of Legacy Bridger Series A Preferred Shares of $3.9 million and interest accrued on Legacy Bridger Series B Preferred Shares of $3.6 million. Investing Activities Net cash provided by investing activities was $27.2 million for the year ended December 31, 2023, compared to Net cash used in investing activities of $89.8 million for the year ended December 31, 2022. Net cash provided by investing activities for the year ended December 31, 2023 primarily reflects proceeds from sales and maturities of marketable securities of $55.4 million, partially offset by purchases of property, plant and equipment of $20.7 million. Net cash used in investing activities for the year ended December 31, 2022 primarily reflects purchases of marketable securities of $60.2 million and purchases of property, plant and equipment and investments in construction in progress of $35.4 million. Financing Activities Net cash used in financing activities was $5.8 million for the year ended December 31, 2023, compared to Net cash provided by financing activities of $124.9 million for the year ended December 31, 2022. Net cash used in financing activities for the year ended December 31, 2023 primarily reflects costs incurred related to the Closing of $6.8 million and repayments of debt of $2.2 million partially offset by proceeds from the Closing of $3.2 million. Net cash provided by financing activities for the year ended December 31, 2022 primarily reflects borrowings from the Legacy Bridger Series C Preferred Shares and Series 2022 Bonds of $448.5 million, partially offset by payments to Legacy Bridger Series A and Series B Preferred Shares members of $306.2 million. Contractual Obligations Our principal commitments consist of obligations for outstanding leases and debt. The following table summarizes our contractual obligations as of December 31, 2023: Payments Due by Period $s in thousands Total Current Noncurrent Lease obligations $ 11,155 $ 2,179 $ 8,976 Debt obligations 211,374 2,993 208,381 Total $ 222,529 $ 5,172 $ 217,357 On February 14, 2023, we made the final $9.1 million payment for the purchase of aircraft under our purchase agreement with Longview Aviation Services Inc. and Viking Air Limited (the manufacturer of our Super Scooper aircraft and an affiliate of Longview Aviation Services Inc.), dated April 13, 2018. 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 the 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. 47 Table of Contents 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 December 31, 2023 and 2022, 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 Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of these 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 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 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 CWN or 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. 48 Table of Contents 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 from the rental of BSI, LLC facilities to another related party as well as external repair work performed on customer aircraft by Bridger Aviation Repair, LLC. 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 permitted under the practical expedient available under 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 Consolidated Statements of Operations. Stock-Based Compensation In January 2023, the Company along with the Board 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, restricted stock units (“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 over the life of the Omnibus Plan. As of December 31, 2023, 5,314,546 shares of common stock remain available for grant under the Omnibus Plan. As of December 31, 2023, the Company has granted participants RSUs and bonuses paid in Common Stock under the Omnibus Plan. Upon satisfying the vesting conditions, each RSU provides the participant the right to receive one share of Common Stock. 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 Consolidated Statements of Operations. Upon vesting of each RSU, the Company will issue one share of Common Stock to the RSU holder. 49 Table of Contents Prior to the adoption of the Omnibus Plan, Legacy Bridger granted incentive units (the “Legacy Bridger Incentive Units”) to selected board members and executives. Within each grant, 80% of the Legacy Bridger Incentive Units vest annually over a four-year period subject to continued service by the grantee (the “Time-Vesting Incentive Units”) and the remaining 20% of the Legacy Bridger Incentive Units vest upon a qualifying change of control event (the “Exit-Vesting Incentive Units”). In connection with the Reverse Recapitalization, the Company assumed all of the remaining 242,424 outstanding and unvested Legacy Bridger Incentive Units. Upon vesting of each Legacy Bridger Incentive Unit, the Company will issue Common Stock to the Incentive Unit holder at an exchange ratio of 0.96246 shares of Common Stock per Incentive Unit. Notwithstanding the above, any unvested Time-Vesting Incentive Units will become vested Time-Vesting Incentive Units if a qualifying change of control event occurs prior to the respective award’s four-year service-based vesting period. Upon termination of the board member or executive, the Company has the right, but not the obligation, to repurchase all or any portion of the vested Incentive Units at fair market value. For the Time-Vesting Incentive Units, compensation cost is recognized over the requisite service period on a straight-line basis. Upon a qualifying change of control event, the unrecognized compensation expense related to the Time-Vesting Incentive Units will be recognized when the change of control event is considered probable. For the Exit-Vesting Incentive Units, expense is recognized when a qualifying change of control event is considered probable, which has not occurred as of December 31, 2023. Forfeitures are accounted for as they occur. Compensation cost for the Legacy Bridger Incentive Units was measured at their grant-date fair value. The value of Legacy Bridger common shares was derived through an option pricing model, which incorporated various assumptions. Refer to “ Note 18 – Stock-Based Compensation ” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a summary of the assumptions utilized in determining grant-date fair value. Impairment of Goodwill 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 and December 31, 2022 annual goodwill impairment tests, the Company’s qualitative analysis indicated the fair value of the Company’s reporting unit exceeded its carrying value. 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. 50 Table of Contents 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 and buildings is computed using the straight-line method over the estimated useful lives of the property, plant and equipment. 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 40 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 and $1.0 million as of December 31, 2023 and 2022, respectively. 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 years ended December 31, 2023 and 2022, 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 Consolidated Financial Statements included in this Annual Report on Form 10-K 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 13 – Accrued Expenses and Other Liabilities ” of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information. 51 Table of Contents 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 Consolidated Financial Statements included in this Annual Report on Form 10-K. 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 Consolidated Financial Statements included in this Annual Report on Form 10-K for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 31, 2023 and 2022. 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 SEC 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. 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 properly accounting for complex transactions within our financial statement closing and reporting process, including the calculation and related presentation and disclosure of diluted earnings per share amounts and merger and acquisition activity. 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, and assist with the accounting and review of complex transactions, accounting matters, and related presentation and disclosure, as well as implementing processes and controls to segregate key functions within our finance systems, as appropriate; 52 Table of Contents • 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. 53 Table of Contents