Company: AIRJW
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001013762-25-002263
Chunk: 2204

Company: AirJoule Technologies Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 9A
Chunk 2204
---
, 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. 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 management’s best estimates regarding the time to complete full construction and achieve operational viability
of a production line, including all permitting, regulatory approvals and necessary or useful inspections. The five-year period and overall
settlement mechanics for the Earnout Shares represent contractual inputs. Management’s valuation of the Earnout Shares liability
involves certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts.

The Company determined the Earnout Shares associated with employees
are accounted for as compensation expense under FAS