Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 1637

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 10
Chunk 1637
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 date. The inputs are both unobservable for the asset and liability in the market and significant to the overall fair value measurement.

In some circumstances, the inputs used to measure fair value might
be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its
entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. The Company establishes
the fair value of its assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date and establishes a fair value hierarchy based on the inputs
used to measure fair value. The recorded amounts of certain financial instruments, including accounts payable, accrued expenses, and other
current liabilities approximate fair value due to their relatively short maturities. See Note 5 – Equity Method Investment
for measurements of the Investment in AirJoule, LLC measured utilizing level 3 inputs as of March 4, 2024. See Note 12 – Fair
Value Measurements for measurements of the Earnout Shares, True Up Shares and Subject Vesting Shares, measured utilizing level 3 inputs
as of December 31, 2024 and March 14, 2024.

Earnout Shares Liability

 In connection with the reverse recapitalization and pursuant to
                                                                         the Merger Agreement, eligible former 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. Earn