Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 347

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1A
Chunk 347
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 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 of 5 years
and the Earnout mechanics which impact the timing of future cash flows represent contractual inputs. Assumptions such as risk-free rate,
stock price, volatility, and discount rate were based on market data. See the following summary of key inputs:

    As
    of December 31, 2024  
    As
    of March 14, 2024 
  
    Stock Price (1) 
    $7.97  
    $10.00 
  
    Volatility 
     40% 
     35%
  
    Risk free
    rate of return 
     4.30% 
     4.24%
  
    Expected
    term (in years) 
     4.2  
     5.0 

  (1) At