Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 147

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1
Chunk 147
---
 common stock, as well as an estimate of the fair value of the
common stock underlying the stock option.

We estimate the fair value of Earnout Shares (as described below),
which are considered compensatory awards and accounted for under ASC 718, using the Monte-Carlo simulation model. The Monte-Carlo
simulation model was selected as the valuation methodology for the Earnout Shares due to the path-dependent nature of applicable triggering
events. Under ASC 718, such Earnout Shares are measured at fair value as of the grant date and expense is recognized over the applicable
time-based vesting period (the applicable triggering event is a market condition and does not impact expense recognition). The Monte-Carlo
model requires the use of highly subjective and complex assumptions, estimates and judgements, including the current stock price, the
volatility of the underlying stock, the expected term, the risk-free interest rate, the selection of comparable companies, and the probability
of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact
our valuations as of each valuation date and may have a material impact on the valuation of share based compensation arrangements. An
increase of 100-basis points in interest rates would not have a material impact on our share-based compensation. During the period from
the date of the Business Combination through December 31, 2024 we did not record share-based compensation expense associated with these Earnout
Shares as the performance conditions associated with these Earnout Shares were not deemed probable of achievement. Unrecognized share-based
compensation expense for these Earnout Shares with a performance-based vesting condition that was not deemed probable of occurring
as of December 31, 2024 was $6.6 million which is expected to vest subject to the performance-based vesting condition being satisfied
or deemed probable.

Earnout Shares Liability

In connection with the reverse recapitalization and pursuant to the
Merger Agreement, eligible former Predecessor equity holders are entitled to receive the Earnout Shares upon us achieving certain Earnout
Milestones. The settlement of the Earnout Shares to the holders of the Predecessor’s common units contain variations in something
other than the fair value of the issuer’s equity shares. As such, management determined that they should be classified as a liability
and recognized at fair value at each reporting period with changes in fair value included in earnings.

We estimated fair value of the Earnout Shares with a Monte Carlo simulation
using a