Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 1006

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 6
Chunk 1006
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 achieved, the future value of the Earnout Shares was
discounted to the valuation date utilizing a risk-free rate commensurate with the overall term. Expected EBITDA assumes that each production
line will achieve equivalent production generating $50.0 million of Annualized EBITDA. The commission dates used reflected 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 represent contractual
inputs. The contingent Earnout Shares liability involves certain assumptions requiring significant judgment and actual results may differ
from assumed and estimated amounts.

Derivative Financial Instruments and Other
Financial Instruments Carried at Fair Value

We do not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks. We evaluate 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 (defined below) and FASB ASC 815, Derivatives
and Hedging, or 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 the Subscription Agreement do not qualify
as equity under ASC 815; therefore, the Class A common stock, or the True Up Shares is required to be classified as a liability and measured
at fair value with subsequent changes in fair value recorded in earnings. Changes in the estimated fair value of the derivative liability
is recognized as a non-cash gain or loss on the consolidated statements of operations. The fair value of the derivative liability is discussed
in Note 12 - Fair Value Measurements.

32

The Subject Vesting Shares liability was an assumed liability of XPDB.
The Subject Vesting Shares liability 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 issuer’s stock. 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 in earnings. The estimated fair value of the Subject Vesting Share liability was determined utilizing a
Monte Carlo