Company: AIRJW
Filing Date: 2025-05-05
Form Type: 424B3
Source: 0001213900-25-039770
Chunk: 194

Company: AirJoule Technologies Corp.
Filing Date: 2025-05-05
Form: 424B3
Chunk 194
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 Predecessor equity holders are entitled to receive additional shares of Common Stock
upon the Company achieving certain milestones. See Note 4 — Recapitalization. The settlement of the Earnout Shares
to the Predecessor equity holders depends on factors other than just the Company’s stock price. As such, management determined that
the Earnout Shares should be classified as a liability and recognized at fair value at each reporting period with changes in fair value
included in the consolidated statements of operations.

The Company estimated fair value of the Earnout
Shares with a Monte Carlo simulation using a distribution of potential outcomes for expected earnings before interest, taxes, depreciation
and amortization (“EBITDA”) and stock price at expected commission dates, utilizing a correlation coefficient for EBITDA and
stock price, and assuming $50.0 million of Annualized EBITDA per production line, with each of the production lines commissioned
over a five-year period. EBITDA was discounted to the valuation date with a weighted average cost of capital estimate and forecasted to
each estimated commission date. Earnout mechanics at each estimated commission date were assessed, and if the earnout thresholds were
achieved, the future value of the Earnout Shares was discounted to the valuation date utilizing a risk-free rate commensurate with the
overall term. The commission dates used reflected management’s best estimates regarding the time to complete full construction and
achieve operational viability of a production line, including all permitting, regulatory approvals and necessary or useful inspections.
The five-year period and overall settlement mechanics for the Earnout Shares represent contractual inputs. Management’s valuation
of the Earnout Shares liability involves certain assumptions requiring significant judgment and actual results may differ from assumed
and estimated amounts.

The Company determined the Earnout Shares associated
with employees are accounted for as compensation expense under FASB ASC Topic 718, Share-based Compensation (“ASC 718”).
See “Share-Based Compensation” below.

Derivative Financial Instruments and Other Financial Instruments Carried at Fair Value

The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including
the True Up Shares issued in connection with the Subscription Agreement and the Subject Vesting Shares issued in connection with the Business
Combination, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC 815, Derivatives and Hedging (“ASC 815”). The classification of