Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 630

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 2
Chunk 630
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 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 Vesting Shares considered the $12.00 and $14.00 vesting conditions
in addition to the vesting related to the milestones associated with the Earnout Shares. Management’s valuation of the Subject Vesting
Shares liability involves certain assumptions requiring significant judgment and actual results may differ from assumed and estimated
amounts. See Note 12 – Fair Value Measurements.

Share-Based Compensation

The Company accounts for share-based compensation arrangements granted
to employees and non-employees in accordance with ASC 718, Share-based Compensation, by measuring the grant date fair value of
each award and recognizing the resulting expense over the period during which the recipient is required to perform services in exchange
for the award. Equity-based compensation expense is only recognized for awards subject to performance conditions if it is probable that
the applicable performance conditions will be achieved. The Company accounts for forfeitures when the forfeitures occur.

The Company estimates the fair value of stock option awards subject
to only a service condition on the date of grant using the Black-Scholes valuation model. The Black-Scholes model requires the use of
highly subjective and complex assumptions, including the stock option’s expected term, the price volatility of the underlying stock,
the applicable risk-free interest rate and the expected dividend yield of the underlying common stock, as well as an estimate of the fair
value of the common stock underlying the stock option.

The Company estimates the fair value of Earnout Shares awards to employees,
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