Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 182

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1
Chunk 182
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 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 derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

The True Up Shares issued under one of the Subscription Agreements
do not qualify as equity under ASC 815; therefore, the True Up Shares are required to be classified as a liability and measured at fair
value with subsequent changes in fair value recorded in the consolidated statements of operations. The fair value of the derivative liability
is discussed in Note 12 — Fair Value Measurements.

F-12

The Subject Vesting Shares liability was an assumed liability of XPDB.
The Subject Vesting Shares vest and are no longer subject to forfeiture as described in Note 4 – Recapitalization. They do
not meet the “fixed-for-fixed” criterion and thus are not considered indexed to the Company’s stock price. As such,
management determined that the Subject Vesting Shares should be classified as a liability and recognized at fair value at each reporting
period with changes in fair value included the consolidated statements of operations . The estimated fair value of the Subject Vesting
Shares was determined utilizing a Monte Carlo simulation, with underlying forecast mathematics based on geometric Brownian motion in a
risk-neutral framework. The Calculation of the value of the Subject Vest