Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 282

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1A
Chunk 282
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 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 distribution of potential outcomes for expected earnings before interest, taxes, depreciation, and amortization, or 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. Expected EBITDA assumes that each production
line will achieve equivalent production generating