Company: AIRJW
Filing Date: 2025-04-28
Form Type: S-1/A
Source: 0001213900-25-036124
Chunk: 90

Company: AirJoule Technologies Corp.
Filing Date: 2025-04-28
Form: S-1/A
Chunk 90
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out Shares were not deemed probable of achievement. Unrecognized share -basedcompensation expense for these Earnout Shares with a performance -basedvesting condition that was not deemed probable of occurring as of December 31, 2024 was $6.6 million which is expected to vest subject to the performance -basedvesting condition being satisfied or deemed probable. Earnout Shares Liability In connection with the reverse recapitalization and pursuant to the Merger Agreement, eligible former Predecessor equity holders are entitled to receive the Earnout Shares upon us achieving certain Earnout Milestones. The settlement of the Earnout Shares to the holders of the Predecessor’s common units contain 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. We 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, or 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 -yearperiod. 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 -freerate 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