Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 211

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1
Chunk 211
---
 whether to consent to a
transfer of the applicable Legacy Montana Equityholder’s right to receive Earnout Shares. Earnout Shares issuable in respect of
Legacy Montana options outstanding as of immediately prior to the effective time of the Merger may be issued to the holder of such Legacy
Montana option only if such holder continues to provide services (whether as an employee, director or individual independent contractor)
to the Post-Combination Company or one of its subsidiaries through the date on which such Earnout Shares are issued, as determined by
a majority of the independent members of the Post-Combination Company Board.

If
the conditions for payment of the Earnout Shares are satisfied and assuming all originally designated employees are then still providing
services to the Post-Combination Company on the date such condition is met, approximately 21% of the aggregate Earnout Shares will be
payable to the employees and 79% of the aggregate Earnout Shares will be payable to the holders of Legacy Montana common units, in accordance
with their respective pro rata share immediately following the Closing.

The
settlement of the Earnout Shares to the holders of Legacy Montana common units contains 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. The Earnout Shares are subject to ASC 718 and are accounted
for as post-combination compensation cost.

F-27

The
estimated fair value of the Earnout Shares was determined with a Monte Carlo simulation using a distribution of potential outcomes for
expected 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. The commission dates
used reflected XPDB’s management’s best estimates regarding the time to complete full construction and operational viability
of a production line, including all permitting, regulatory approvals and necessary or useful inspections. The Earnout term