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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.34pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.95pp
Lean +
Net-tone change vs last year's 10-K.
MD&A
-0.26pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
impairment+13
loss+11
penalties+8
critical+7
volatility+7
Positive rising
gain+7
effective+6
benefit+4
gains+4
opportunities+3
Risk Factors (Item 1A)
22,219 words
Item 1A. Risk Factors
Risks Related to Our Business, Our Technology and Our Industry
We have incurred significant losses since inception, we expect to incur losses in the future, and we may not be able to achieve or maintain profitability.
We are an early-stage water harvesting technology company with a history of losses. We have incurred a net income (loss) of $(9.0) million and $215.7 million for the years ended December 31, 2025 and 2024, respectively. Although our predecessor entity was established in 2018, we did not develop our first prototype of the AirJoule system until June 2021, and we have not yet begun commercializing our AirJoule systems. We expect that we will continue to incur losses in future periods as we:
design, develop, market and commercialize AirJoule systems;
continue to utilize and develop potential new relationships with third-party partners for supply and manufacturing;
build up inventories of parts and components for AirJoule systems;
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
volatility+3
Positive rising
achieving+2
achievement+1
MD&A (Item 7)
1,978 words
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Certain of these estimates require the use of significant judgment because they involve assumptions that are inherently uncertain and may change as new information becomes available. If actual results differ from these estimates, the resulting changes could have a material effect on our consolidated financial statements. We consider an accounting estimate to be critical if it requires management to make assumptions about matters that are highly uncertain and if different estimates could reasonably have a material impact on our financial condition or results of operations.
While our significant accounting policies are described in more detail in Note 3 to our consolidated financial statements appearing in Item 8 to this Annual Report on Form 10-K, we believe that the following accounting policies were most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Stock-Based Compensation
We grant stock-based awards to employees, directors and certain non-employees as part of our compensation programs. Determining the grant-date fair value of stock-based awards requires management to make estimates and assumptions that involve significant judgment.
The most significant assumptions used in estimating the fair value of stock option awards include the expected term of the award, expected stock price volatility, the risk-free interest rate and the fair value of our common stock on the grant date. Expected volatility is estimated using a combination of our historical volatility and the volatility of comparable publicly traded companies due to our limited trading history. The expected term of awards reflects management’s estimate of the period the awards are expected to remain outstanding based on historical exercise behavior and contractual terms.
We have also issued awards containing market and performance-based vesting conditions. The fair value of these awards is estimated using a Monte Carlo simulation model that incorporates assumptions regarding stock price volatility, expected term, risk-free interest rates and the probability of achieving performance conditions. These assumptions are inherently uncertain, and changes in these assumptions could materially affect the grant-date fair value of awards and the amount of stock-based compensation expense recognized in future periods.
Upon the exercise of stock options or settlement of restricted stock units, we issue newly issued shares of Class A common stock. We do not currently use treasury shares to settle equity awards. We do not currently expect to repurchase shares in the following year to satisfy equity award settlements.
We granted Earnout Share awards to certain employees in connection with the Business Combination. These awards are considered compensatory. The performance-based vesting conditions are not deemed probable of achievement as of December 31, 2025.
Earnout Shares Liability
In connection with the reverse recapitalization and pursuant to the Merger Agreement, eligible former Legacy Montana Equityholders (as defined below) are entitled to receive additional shares of our common stock upon the achievement of specified operational milestones. The Earnout Shares are classified as a liability and are remeasured at fair value at each reporting period, with changes in fair value recognized in our consolidated statements of operations.
The fair value of the Earnout Shares liability is estimated using a Monte Carlo simulation model that incorporates assumptions regarding projected EBITDA, the expected timing of commissioning production lines, stock price volatility, risk-free interest rates and the correlation between stock price and operating performance. Estimates regarding the timing of commissioning production lines and expected operating performance are based on management’s projections regarding the commercialization and scaling of our technology.
Because these assumptions involve significant judgment and are subject to change as our business evolves, changes in these assumptions could materially affect the estimated fair value of the Earnout Shares liability and result in significant gains or losses recognized in our consolidated statements of operations.
Derivative Financial Instruments and Other Financial Instruments Carried at Fair Value
Certain financial instruments issued in connection with the Business Combination and related financing transactions are classified as liabilities and measured at fair value at each reporting period. These instruments include the True Up Shares, Subject Vesting Shares and the Equity Line Obligation.
The fair value of these instruments is determined using valuation models that incorporate significant assumptions, including stock price volatility, expected term, risk-free interest rates and the probability of achieving certain market or operational conditions. Certain valuations utilize Monte Carlo simulation techniques to model potential outcomes for our stock price and operational milestones.
Because these valuations rely on assumptions about future market conditions and company performance, which are inherently uncertain, changes in these assumptions could materially affect the estimated fair value of these instruments and may result in significant gains or losses recognized in future periods. See Note 12 – Fair Value Measurements.
Equity Method Investment
We account for investments in entities over which we have significant influence but do not control using the equity method of accounting. Our investment balance reflects our share of the investee’s earnings or losses and is adjusted for basis differences identified at the time of investment.
We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. This evaluation requires significant judgment in assessing the investee’s financial condition, expected future operating performance, industry conditions and the estimated fair value of the investment.
Key assumptions used in this assessment may include projections of the investee’s future revenues, operating margins and the timing and likelihood of achieving anticipated business milestones. These assumptions are inherently uncertain because they depend on future market conditions and the investee’s operational performance. If the estimated fair value of the investment is determined to be less than its carrying value and the decline is considered other than temporary, we would record an impairment charge equal to the difference between the carrying value and estimated fair value.
Warrants
The accounting classification of warrants requires management to evaluate the contractual terms of the instruments and determine whether they should be classified as equity or as liabilities. This evaluation requires judgment in assessing whether the warrants meet the criteria for equity classification under applicable accounting guidance, including whether the warrants are indexed to the Company’s own stock and whether they meet the conditions for equity classification.
At issuance, the warrants were measured at fair value and recorded within stockholders’ equity because management determined that the warrants meet the requirements for equity classification. The fair value of the warrants at issuance was determined based on the observable market price of the publicly traded warrants and other relevant market information.
Although these warrants are classified within equity and are not subsequently remeasured, the initial classification and valuation required management to evaluate complex contractual provisions and apply judgment in interpreting the relevant accounting guidance. Changes in the interpretation of these contractual terms or the applicable accounting guidance could have resulted in a different accounting classification, which would have required the warrants to be recorded as liabilities and remeasured at fair value in each reporting period.
Income Taxes
We account for income taxes using the asset and liability method, which requires management to estimate deferred tax assets and liabilities based on temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities.
Significant judgment is required in assessing the realizability of deferred tax assets, including evaluating future taxable income, the reversal of existing temporary differences and potential tax planning strategies. When it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recorded.
Changes in our expectations regarding future taxable income or the timing of the reversal of temporary differences could result in adjustments to our valuation allowance, which could materially affect income tax expense and results of operations in future periods.
Management has evaluated our tax positions, including our Predecessor’s previous status as a pass-through entity for federal and state tax purposes, and has determined that we have taken no uncertain tax positions that require adjustment to the consolidated financial statements. Our reserves related to uncertain tax positions was zero as of December 31, 2025 and 2024. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025 and 2024. We are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
Recent Accounting Pronouncements
A discussion of recently issued accounting standards applicable to the Company is described in Note 3 – Summary of Significant Accounting Policies , in the Notes to Financial Statements contained elsewhere in this Annual Report on Form 10-K.
Off Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2025.
Emerging Growth Company Status
We are an emerging growth company as defined in the JOBS Act. The JOBS Act permits companies with emerging growth company status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion
and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of XPDB’s initial public offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
Item 7A. Quantit ative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 8. Financi al Statements and Supplementary Data
This information appears following Item 15 of this Annual Report and is included herein by reference.
expand our design, development, installation and servicing capabilities;
further develop our proprietary technology;
develop our distribution network;
increase our general and administrative functions to support our growing operations; and
expand our production and testing facilities to enhance our efficiency and capabilities for assembly of AirJoule systems.
Because we will incur the costs and expenses from these efforts before we receive any incremental revenues with respect thereto, our losses in future periods could be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in additional revenues, which could further increase our losses.
Our ability to become profitable in the future will require us to complete the design and development of our AirJoule systems and to begin commercializing the product and related services to customers at prices needed to achievepositive gross margins. We may need to sell our products at a loss or discounted prices in the short term to win initial customer orders and gain the confidence of potential customers. We anticipate also deploying the AirJoule systems through Water Purchase Agreements, where customers purchase water on a volumetric basis rather than purchasing AirJoule systems outright, and our losses related to WPA deployments may be significant as we are responsible for the capital requirements for the deployments. If we are unable to efficiently design, produce, market, sell, distribute and service our products, our margins, profitability and long-term prospects will be materially and adversely affected.
We have not yet commenced commercializing our AirJoule systems and have a limited operating history, which may make it difficult to evaluate the prospects for our future viability. There is no assurance that we will successfully execute our proposed strategy.
We are a pre-revenue and early-stage company. Our operations to date have been limited to developing our technology and products and deploying our AirJoule systems to select locations for field testing. Our limited operating history may make it difficult to evaluate our current business and future prospects as we continue to grow our business. Our ability to forecast future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, and we will continue to encounter such risks and uncertainties as we grow our business. If our assumptions regarding these uncertainties are incorrect, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer. Consequently, any predictions we make about our future success and our viability may not be as accurate as they could be if we had an operating history.
Demand for our products may not grow or may grow at a slower rate than we anticipate.
To date, we have had limited commercial sales of our products. Operating results are difficult to forecast as they generally depend on our assessment of the demand for our products. Our business may be affected by reductions in demand for our products and the price of competitors’ products as a result of a number of factors which may be difficult to predict. Similarly, our assumptions and expectations with respect to margins and the pricing of our AirJoule systems may not prove to be accurate. We may be unable to adopt measures in a timely manner to compensate for any unexpectedshortfall in demand, which could ultimately cause our operating results to differ from expectations. If actual results differ from our estimates, analysts or investors may negatively react and our share price could be materially adversely affected.
We depend on revenue generated from a single product and in the foreseeable future will be significantly dependent on a limited number of products.
After we have successfully developed and commercialized our AirJoule technology, we will initially depend on revenue generated from our AirJoule systems and revenue from ancillary services for the foreseeable future and will be significantly dependent on a single or limited number of products. Given that, for the foreseeable future, our business will depend on a single or limited number of products, to the extent that a particular product is not well-received by the market, our sales volume, prospects, business, results of operations and financial condition could be materially and adversely affected.
Our financial results depend on successful project execution and may be adversely affected by cost overruns, failure to meet customer schedules, failure of our suppliers or partners to fulfill their obligations to us or other execution issues.
Commercialization of our AirJoule technology is subject to a number of significant risks, including project delays, cost overruns, changes in scope, unanticipated site conditions, design and engineering issues, incorrect cost assumptions, increases in the cost of materials and labor, health and safety hazards, third-party performance issues and changes in laws or permitting requirements. If a third party or other subcontractor that we have contracted fails to fulfill its contractual obligations to us, we could face significant delays, cost overruns and liabilities. Our continued growth will depend in part on executing a greater volume of large projects, which will require us to expand and retain our project management and execution personnel and resources. If we are unable to manage these risks, we may incur higher costs, liquidateddamages and other liabilities, which may decrease our profitability and harm our reputation.
Our Water Purchase Agreements and other long-term commercial arrangements may include penalties for not delivering sufficient water on schedule, which may result in liabilities and reductions in cash flow.
We anticipate deploying our AirJoule systems through Water Purchase Agreements, where customers purchase water on a volumetric basis rather than purchasing AirJoule systems outright. These agreements may provide for penalties if adequate water is not provided on time. If they do and we incur penalties, such penalties may adversely impact our profitability and financial stability. Additionally, such penalties might lead to cash flow reductions as our financial resources are diverted to remediate. Reduced cash flow may inhibit
our ability to invest in growth opportunities and fund operational expenses, among other financial impacts. Incurring penalties might also harm our reputation in the market, and may put us at a competitive disadvantage to our competitors.
We may lack sufficient funds to achieve our planned business objectives. Our ability to continue as a going concern is dependent on (i) continued financial support from our shareholders and other related parties, (ii) raising capital via external financing and/or (iii) attainingprofitable operations. We may seek to raise further funds through one or more financing transactions, and any inability to access the capital or financial markets may limit our ability to fund our ongoing operations and execute our business plan to pursue investments that we may rely on for future growth.
We have limited capital resources and operations. From time to time, we may seek additional financing to provide the capital required to expand production of our business operations, development initiatives and/or working capital, as well as to repay outstanding loans if cash flow from operations is insufficient to do so. We cannot predict with certainty the timing or amount of any such capital requirements.
We may in the future require access to capital markets and debt financing as a source of liquidity for investments and expenditures. If we do not raise sufficient capital to fund our ongoing development activities, it is likely that we will be unable to carry out our business plans. We may not be able to obtain additional financing on terms acceptable, or at all. Even if we obtain financing for near term operations, we may require additional capital beyond the near term. If we are unable to raise capital when needed, or if our ability to access required capital were to become significantly constrained, we could incur material borrowing costs and our business, financial condition and results of operations would be materially adversely affected, and it could force us to reduce or discontinue our operations.
We face significant barriers in our attempts to deploy our technology and may not be able to successfully develop our technology. If we cannot successfullyovercome those barriers, it could adversely impact our business and operations.
The technology behind our AirJoule system is very complex. While we have produced AirJoule systems within our facilities and deployed systems to select locations for field testing, we are still in the process of optimizing the technology to deliver water and dehumidified and cooled air at the productivity and energy efficiency levels that we are anticipating we can achieve. If we are unable to successfully develop our technology, our operating and financial results could materially differ from our expectations and our business could suffer.
If we encounter difficulties in scaling our production and delivery capabilities, if we fail to develop such technologies before our competitors or if such technologies fail to perform as expected, are inferior to those of our competitors or are perceived as less safe than those of our competitors, our business, reputation and financial condition could be materially and adversely impacted.
We are subject to risks associated with changing technology, product innovation, manufacturing techniques, operational flexibility and business continuity, which could place us at a competitive disadvantage.
The industries in which we operate are subject to rapid technological change, evolving industry standards and practices and changing customer needs and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. We may introduce significant changes to our AirJoule systems or develop and introduce new and unproven products, including using technologies with which we have little or no prior development or operating experience. If we are unable to develop and sell new technology, features and functionality for our AirJoule systems that satisfy our customers and that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected. If new technologies emerge that deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely, it could adversely impact our ability to compete and place us at a competitive disadvantage.
We expect to incur research and development costs and devote resources to identifying and commercializing new products, which could reduce our profitability and may never result in revenue.
We will require significant capital to develop and grow our business and we expect to incur significant expenses, including those relating to developing and commercializing our AirJoule systems, research and development, production, sales, maintenance and service and building the AirJoule brand. Our current estimates of the costs associated with development and commercialization could prove inaccurate, and that could impact the cost of our technology and of our business overall. If we are unable to efficiently design, develop, commercialize, license, market and deploy our technology in a cost-effective manner, our margins, profitability and prospects would be materially and adversely affected.
Actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated and future development activities may not result in profitable operations.
The actual operating costs of manufacturing, commercializing and distributing AirJoule systems on a commercial scale will depend upon a variety of factors, such as changes in the availability of and price of materials and changes in governmental regulation, including taxation, environmental, permitting and other regulations and other factors, many of which are beyond our control. Due to any of these or other factors, our capital and operating costs may be significantly higher than those initially estimated by management. As a result of higher capital and operating costs, our financing ability may be impacted, and there can be no assurance that any of our development activities will result in profitable operations.
We may face significant competition from established companies with longer operating histories, customer incumbency advantages, access to and influence with governmental authorities and more capital resources than we do.
The markets for water generation, industrial dehumidification and energy-efficient air conditioning are evolving and highly competitive. We expect competition to increase in the future from established competitors and new market entrants. This could negatively impact our ability to compete in these markets. We will face competition from other water generation, dehumidification and comfort cooling companies that offer standalone solutions and services. In addition, we may face competition from niche companies and new market entrants that offer point products that attempt to address the specific problems that our AirJoule systems attempt to solve.
Many of our existing competitors have, and our potential competitors could have, substantial competitive advantages such as greater name recognition, longer operating histories, larger sales and marketing budgets and resources, greater customer support resources, lower labor and development costs, larger and more mature intellectual property portfolios and substantially greater financial, technical and other resources.
Some of our larger competitors also have substantially broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors, or continuing market consolidation. New start-up companies that innovate and/or large companies that are making significant investments in research and development may invent similar or superior products and technologies that compete with our AirJoule systems. In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with agency partners, technology and application providers in complementary categories or other parties. Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure, a loss of market share or a smaller addressable share of the market, all of which could harm our ability to compete and may materially affect our results of operations and financial condition.
If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
Our success depends to a significant extent on our and our joint ventures’ ability to attract and retain talent, specifically in senior management and skilled technical, engineering, project management and other key roles. Macroeconomic conditions, specifically labor shortages, increased competition for employees and wage inflation could have a material impact on our ability to attract and retain talent, our turnover rate and the cost of operating our business. If we are unable to attract and retain sufficient talent, minimize employee turnover or manage wage inflation, it could have a material adverse effect on our business, financial condition, results of operations or prospects.
Any failure by our management to properly manage our growth could have a material adverse effect on our business, operating results and financial condition.
We may experience rapid growth and organizational change, which may place significant demands on our management and our operational and financial resources. Our success will depend in part on our ability to manage this growth effectively. We will require significant capital expenditures and valuable management resources to grow without undermining our culture of innovation and teamwork, which has been central to our growth so far. If we fail to manage our anticipated growth and change in a manner that preserves our culture, it could negatively affect our reputation and ability to retain and attract customers and employees. We also intend to expand our international operations in the future. Our expansion may place a significant strain on our managerial, administrative, financial and other resources. If we are unable to manage our growth successfully, our business and results of operations could suffer.
If the estimates and assumptions we use to determine the size of our total addressable market are inaccurate, our future growth rate may be affected and the potential growth of our business may be limited.
Our estimates for our total addressable market are based on several internal and third-party estimates, including the number of potential customers who have expressed interest in licensing our technology, assumed prices and production costs for our products, our ability to leverage our current logistical and operational processes and general market conditions. However, our assumptions and the data underlying our estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the annual total addressable market for our products, as well as the expected growth rate for the total addressable market for our products, may prove to be incorrect, which could materially and adversely affect our business.
Damage to our reputation or brand image could adversely affect our business.
Our reputation is one of our key assets. Our ability to attract and retain customers will be highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities. Negative perceptions or publicity regarding these or other matters, including from actual or alleged conduct by us or our employees, could damage our reputation. Any resulting erosion of trust and confidence among customers, business partners, regulators and other parties important to the success of our business could make it difficult for us to attract customers and business partners, which could have a material adverse effect on our business, financial condition and results of operations.
The occurrence of significant events for which we may not be fully insured could have a material adverse effect on our business, financial condition and results of operations.
We may be subject, in the ordinary course of business, to losses resulting from product liability, accidents, acts of God and other claimsagainst us, for which we may have no insurance coverage. We cannot be certain that any future insurance coverage we obtain will be sufficient to cover all future losses or claimsagainst us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our business, financial condition and results of operations.
Cyber-attacks or a failure in our information technology and data security infrastructure could adversely affect our business and operations.
We rely on information technology systems in connection with various aspects of the operation of our business. Our business depends on the integrity of such information technology systems, which are inherently susceptible to a number of threats, including, but not limited to, viruses, ransomware, malware, malicious codes, hacking, phishing, denial of service actions, human error, network failures, electronic loss of data and other electronic security breaches. A successful material cyber-attack may result in the loss or compromise of customer, financial or operational data, theft of intellectual property, disruption of billing, collections or normal field service activities, disruption of data analytics and electronic monitoring and control of operational systems, loss of revenue, ransomware payments, remediation costs related to lost, stolen or compromised data, repairs to infrastructure, physical systems or data processing systems, increased cybersecurity protection costs or violation of United States and international privacy laws, which may result in litigation. Any of these occurrences could harm our reputation or have a material adverse effect on our business, financial condition, results of operation and prospects. We have and intend to continue to adopt measures to mitigate potential risks associated with information technology disruptions and cybersecurity threats; however, there is no assurance that these measures will prevent cyber-attacks or security breaches. Although we intend to periodically assess these risks, implement controls and perform business continuity and disaster recovery planning, we cannot be sure that interruptions with material adverse effects will not occur.
Increased scrutiny of ESG matters, including our completion of certain ESG initiatives, could have an adverse effect on our business, financial condition and results of operations, result in reputational harm and negatively impact the assessments made by ESG-focused investors when evaluating us.
We are increasingly facing more stringent ESG standards, policies and expectations, and expect to continue to do so as a listed company with growing operations. Companies across all industries are facing increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies, related to their ESG and sustainability practices. We generally experience a strong ESG emphasis among our customers, partners and competitors. Some of these stakeholders maintain standards, policies and expectations regarding environmental matters (e.g., climate change and sustainability), social matters (e.g., diversity and human rights) and corporate governance matters (e.g., taking into account employee relations when making business and investment decisions, ethical matters and the composition of the board of directors and various committees). There is no guarantee that we will be able to comply with applicable ESG standards, policies and expectations, or that we will, from the perspective of other stakeholders and the public, appear to be complying with such ESG standards, policies and expectations. If we do not adapt to or comply with investor or other stakeholder standards, policies, or expectations on ESG matters as they continue to evolve, or if we are perceived to have not
responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected.
We also expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters. We may be subject to ESG or sustainability-related regulation in multiple jurisdictions, including the U.S., and complying with these regulations in multiple jurisdictions may increase the complexity and cost of our compliance efforts. Moreover, increased regulation and increased stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us.
Risks Related to Our Joint Ventures, Our Suppliers and Our Customers
We conduct a substantial amount of our operations through joint ventures, which may lead to disagreements with joint venture partners and adversely affect our interest in the joint ventures.
We are currently conducting the majority of our development, operations and commercialization activities through our joint venture with GE Vernova, of which we and GE Vernova each own a 50% interest. This AirJoule JV was formed in March 2024 to incorporate GE Vernova’s proprietary sorbent materials into systems that utilize our water capture technology and to manufacture and bring products incorporating the combined technologies to market in the Americas, Africa and Australia. Additionally, we have entered into a joint venture agreement with an affiliate of CATL to manufacture and commercialize our AirJoule technology in Asia and Europe, but this joint venture has not yet been funded by either party and has not yet commenced any operations. Our heavy reliance on joint ventures could adversely affect our business and financial condition if any of our joint venture partners chooses to terminate their relationship with us or make material changes to their businesses, products or services in a manner that is adverse to us.
Under the A&R Joint Venture Agreement for the AirJoule JV, for the first six years, GE Vernova has the right, but not the obligation, to make capital contributions to the AirJoule JV, and we are solely responsible for funding the AirJoule JV if and until GE Vernova elects to participate in funding the AirJoule JV with its pro-rata share. We can provide no assurance that GE Vernova will elect to participate in capital contributions to the AirJoule JV, and our ability to continue fully funding the joint venture will likely depend on our ability to raise additional capital via external financing.
We may incur impairment charges related to the carrying value of our equity method investment in the AirJoule JV, which could have a significant negative effect on our results of operations and the price of our securities.
We regularly evaluate the carrying value of our equity method investment in the AirJoule JV, and we may incur an impairment charge if we determine that the carrying value of such investment exceeds the fair value.
The AirJoule JV tests its goodwill for impairment annually on October 1 and more frequently if events or changes in circumstances indicate that a potential goodwill impairment exists. Asset impairment evaluations with respect to goodwill are, by nature, highly subjective. The use of different estimates and assumptions could result in materially different carrying values of the AirJoule JV’s assets, which could impact the need to record an impairment charge and the amount of any charge taken. If AirJoule JV’s assumptions, including timing of revenue generation and forecasted EBITDA, are not achieved, or a sustained reduction in market capitalization occurs, then the AirJoule JV may be required to record goodwill impairment charges in future periods.
Though impairment charges would be non-cash and therefore not have an immediate impact on our liquidity, the fact that we report a charge of this nature could contribute to negative market perceptions about our business or our securities. In addition, charges of this nature may hinder our ability to obtain future financing on favorable terms or at all.
Based on triggering events, specifically a sustained decline in the Company’s stock price, the AirJoule JV performed an interim impairment test as of September 30, 2025 and December 31, 2025 on its in-process R&D. In performing the interim impairment test as of September 30, 2025, the AirJoule JV determined that the fair value of its in-process R&D exceeded the respective carrying value, concluding no impairment. In performing the interim impairment test as of December 31, 2025, the AirJoule JV determined that the carrying value of its in-process R&D exceeded the respective fair value, resulting in an impairment of $61.3 million. The Company’s share of the in-process R&D impairment reported by the AirJoule JV was recorded as an equity loss from investment in the AirJoule JV in the accompanying consolidated statements of operations.
The AirJoule JV also performed interim impairment tests as of September 30, 2025 and December 31, 2025 on its goodwill and determined that the carrying value exceeded the respective fair value and recorded goodwill impairment charges of $244.3 million during the year ended December 31, 2025. These impairment charges did not result in an impairment to our investment given the negative basis difference between our equity method investment asset in AirJoule, LLC. The portion of the Company’s negative basis
difference attributable to AirJoule, LLC’s goodwill balance is greater than our 50% share of the goodwill impairment charges recorded.
We may depend on sole-source and limited-source suppliers for key components and products. If we are unable to source these components and products on a timely basis or at acceptable prices, we will not be able to deliver our products to our customers and production time and production costs could increase, which may adversely affect our business.
Our manufacturing processes rely on many materials. We purchase, and will continue to purchase, a significant portion of our materials, components and finished goods used in our production facilities from a few suppliers, some of which are single-source suppliers. For example, our proprietary MTMOF1, which is highly engineered to adsorb water vapor molecules and is utilized in our AirJoule systems, is currently being manufactured solely by BASF (an international chemical company). As we scale up our operations ahead of full-scale commercialization, we are evaluating additional and alternate suppliers of our proprietary MTMOF1, but these materials are highly specialized, and the lead time needed to identify and qualify a new supplier is typically lengthy. We do not generally have long-term contracts with our suppliers, and substantially all of our purchases are on a purchase order basis. Suppliers may extend lead times, limit supplies, place products on allocation or increase prices due to commodity price increases, capacity constraints or other factors and could lead to interruption of supply or increased demand in the industry.
Additionally, the supply of these materials may be negatively impacted by increased trade tensions or additional or increased tariffs between the United States and its trading partners. In the event that a single-source supplier is unable or unwilling to provide sufficient materials to us in a timely manner and we have not identified and qualified additional or alternate providers for those materials, our business, financial condition and results of operations could be adversely impacted. Similarly, if we are unable to obtain sufficient quantities of materials in a timely manner, at reasonable prices or of sufficient quality, or if we are not able to pass on higher materials costs to our customers, our business, financial condition and results of operations could be adversely impacted.
We may face supply chain competition, including competition from businesses in other industries, which could result in insufficient inventory and negatively affect our results of operations.
Certain of our suppliers also supply systems and components to other businesses. As a relatively low-volume purchaser of certain of these parts and materials, we may be unable to procure a sufficient supply of the items we need in the event that our suppliers fail to produce sufficient quantities to satisfy the demands of all of their customers, which could materially adversely affect our business, financial condition and results of operations.
Manufacturing issues not identified prior to design finalization, long-lead procurement and/or fabrication could potentially be realized and may impact our deployment cost and schedule, which could adversely impact our business.
It is possible that in the future we may experience delays and other complications from our partners and third-party suppliers in the development and manufacturing of the components and other implementing technology required for deploying our AirJoule systems. Any disruption or delay in the development or supply of such components and technology could result in the delay or other complication in the design, manufacture, production and delivery of our technology that could prevent us from commercializing our AirJoule systems according to our planned timeline and scale. If delays like this recur or if we experience issues with planned manufacturing activities, supply of components from third parties or design and safety, we could experience issues or delays in commencing or sustaining our commercial operations.
If we encounter difficulties in scaling our production and delivery capabilities, if we fail to develop such technologies before our competitors or if such technologies fail to perform as expected, are inferior to those of our competitors or are perceived as less safe than those of our competitors, our business, reputation and financial condition could be materially and adversely impacted.
The Binding Term Sheets we and CAMT have entered into with Carrier may not ultimately yield definitive agreements with Carrier consistent with the term sheets or at all.
On January 7, 2024, we and CAMT entered into the Binding Term Sheets with Carrier, pursuant to which, among other things, the parties agreed to negotiate in good faith to finalize and enter into, as promptly as reasonably practicable, definitive agreements relating to the development of the Applicable Products and the viability of the commercialization of the Applicable Products. Despite entry into the Binding Term Sheets, we and CAMT ultimately may not enter into definitive agreements with Carrier on terms consistent with the Binding Term Sheets or at all.
We expect to be dependent on a limited number of customers and end markets. A decline in revenue from, or the loss of, any significant customer, could have a material adverse effect on our financial condition and operating results.
We are in the process of commercializing our technology and do not yet have any long-term commercial customers. We expect to initially depend upon a small number of customers for a substantial portion of our future revenue. Accordingly, a decline in revenue from, or the loss of, any significant customer could have a material adverse effect on our financial condition and operating results. We cannot assure you that prospective customers will ultimately utilize our products and services or enter into contracts with us for such products and services on acceptable terms or at all.
There can also be no assurance that our efforts to secure new customers, including through acquisitions, will succeed in reducing our customer concentration. Acquisitions are also subject to integration risk, and revenues and margins could be lower than we anticipate. Failure to secure business from new customers in any of our end markets would adversely impact our operating results.
Our long-term success depends, in part, on our ability to negotiate and enter into sales agreements with, and deliver our products to, customers on commercially viable terms. There can be no assurance that we will be successful in securing such agreements.
Our success depends, in part, on our ability to acquire and retain new customers and to do so in a cost-effective manner. In order to obtain and expand our customer base, we must appeal to, acquire and enter into sales agreements, lease agreements or Water Purchase Agreements with third-party customers on commercially viable terms, either directly or through third-party distributors. We expect to make significant investments related to customer acquisition in the future. If we fail to deliver and market a robust product that appeals to customers, or if customers do not perceive AirJoule systems to be of high value and quality, we may be unable to acquire or retain customers. If we are unable to acquire or retain customers sufficient to grow our business, we may be unable to generate the scale necessary to achieve operational efficiency. Consequently, our prices may increase or may not decrease to levels sufficient to generate customer interest, and total revenue may decrease and margins and profitability may decline. As a result, our business, financial condition and results of operations may be materially and adversely affected.
Our sales and profitability may be impacted by, and we may incur liabilities as a result of, warranty claims, product defects, recalls, improper use of our products, or our failure to meet performance guarantees or customer safety standards.
We anticipate that our customers will require product warranties as to the proper operation and conformance to specifications of the products we manufacture or install. Failure of our products to operate properly or to meet specifications of our customers or our failure to meet our performance guarantees may increase costs by requiring additional engineering resources and services, replacement of parts and equipment or monetary reimbursement to a customer, or could otherwise result in liability to our customers. There are significant uncertainties and judgments involved in estimating warranty and performance guarantee obligations, including changing product designs, differences in customer installation processes and failure to identify or disclaim certain variables. To the extent that we incur substantial warranty or performance guarantee claims in any period, our reputation, earnings and ability to obtain future business could be materially adversely affected.
Risks Related to Legal, Compliance, Regulations and Geopolitical Issues
There are risks associated with operating in foreign countries, including those related to economic, social and/or political instability, and changes of law affecting foreign companies operating in that country. In particular, we may suffer reputational harm due to our business dealings in certain countries that have previously been associated, or perceived to have been associated, with human rights issues. Increased scrutiny and changing expectations from investors regarding ESG considerations may result in a decrease of the trading price of our securities.
We are currently party to a joint venture with an affiliate of CATL, a Chinese battery manufacturer and technology company, and purchase our MOF from BASF, an international chemical producer headquartered in Germany. We have also entered into agreements with TenX Investment in Energy Enterprises & Management Co., an UAE-based technology and infrastructure investment firm, and we expect to coordinate with this entity on our deployment of AirJoule systems to the Middle East. We may continue to pursue partnerships and operations outside of the United States, including with suppliers and partners that are located or operate in other countries. Accordingly, we are subject to risks associated with operating in foreign countries, including:
fluctuations in currency exchange rates;
limitations on the remittance of dividends and other payments by foreign subsidiaries and joint ventures;
additional costs of compliance with local regulations;
historically, in certain countries, higher rates of inflation than in the United States;
changes in the economic conditions or consumer preferences or demand for our products in these markets;
restrictive actions by multinational governing bodies, foreign governments or subdivisions thereof;
changes in U.S. and foreign laws regarding trade and investment, including with respect to taxation, import and export tariffs, energy use, land use rights, intellectual property, network security and other matters;
less robust protection of our intellectual property under foreign laws;
geopolitical events, including natural disasters, public health issues, acts of war, nationalism and terrorism, social unrest or human rights issues; and
difficulty in obtaining distribution and support for our products.
In addition, our operations outside the United States are subject to the risk of new and different legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations and potentially adverse tax consequences. The costs associated with operating our continuing international business could adversely affect our results of operations, financial condition and cash flows in the future.
Our business may require numerous permits, licenses and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or delays in obtaining them, could materially adversely affect us.
Regulatory risks associated with our business include:
our ability to obtain and maintain applicable permits, approvals, licenses or certifications from regulatory agencies, if required;
regulatory delays, delays imposed as a result of regulatory inspections and changing regulatory requirements may cause a delay in our ability to fulfill our orders or may cause manufacturing plans to not be completed at all, many of which may be out of our control, including changes in governmental regulations or in the status of our regulatory approvals or applications or other events that force us to cancel or reschedule production, any of which could have an adverse impact on our business and financial condition;
regulatory, availability and other challenges may delay our progress in establishing the number of AirJoule units we are able to produce, and such challenges could have an adverse effect on our ability to grow our business; and
challenges as a result of regulatory processes or in our ability to secure the necessary permissions to deliver our products could adversely affect our business.
Any of these risk factors could have a material adverse effect on our business.
Our business and current and future production facilities are subject to liabilities and operating restrictions arising from environmental, health and safety laws, regulations and permits. We are and will be subject to environmental, health and safety laws and regulations in multiple jurisdictions, which impose substantial compliance requirements on our operations. Our operating costs could be significantly increased in order to comply with new or more stringent regulatory standards in the jurisdictions in which we operate.
Our business and our joint ventures’ and partners’ current and future production facilities are and will be subject to various foreign, federal, state and local environmental, health and safety (“ EHS” ) laws, regulations, guidelines, policies, directives, permits and other requirements. Pursuant to these requirements, we may be required to obtain various permits from certain regulatory agencies for our operations and for the sale of our AirJoule systems or water produced by such systems. We may incur significant costs and liabilities as a result of these environmental requirements. These costs and liabilities could arise under a wide range of foreign, federal, state and local environmental laws and regulations, including, for example, the following federal laws and their state counterparts, as amended from time to time:
the federal Clean Air Act (“CAA”), which restricts the emission of air pollutants from many sources, imposes various preconstruction, monitoring and reporting requirements and is relied upon by the U.S. Environmental Protection Agency (“EPA”) as authority for adopting climate change regulatory initiatives relating to GHG emissions. On February 18, 2026, EPA issued a final rule to rescind the 2009 Greenhouse Gas Endangerment Finding, which serves as the legal foundation for regulating GHG emissions. Without the Endangerment Finding, EPA may assert that it lacks authority under the Clean Air
Act to prescribe emissions standards. The potential impact of the final rule, potential subsequent revisions to existing emission standards for GHGs, and outcome of related litigation remain uncertain and could affect our operations;
the Federal Water Pollution Control Act, also known as the Clean Water Act (“CWA”), which regulates discharges of pollutants from facilities to state and federal waters and establishes the extent to which waterbodies are subject to federal jurisdiction and rulemaking as protected waters of the U.S. (“WOTUS”). The extent to which WOTUS are regulated pursuant to the CWA has been the subject of numerous rulemakings and litigation since 2015. The U.S. Supreme Court’s decision issued in May 2023 in Sackett v. EPA held that the jurisdiction of the CWA extends only to those adjacent wetlands that are indistinguishable from traditional navigable bodies of water due to a continuous surface connection, which narrowed the EPA’s jurisdiction over WOTUS pursuant to the CWA. In September 2023, the EPA and the U.S. Army Corps of Engineers (“Corps”) published a direct-to-final rule redefining WOTUS to amend the January 2023 rule and align with the decision in Sackett. Most recently, in November 2025, the EPA and the Corps published a proposed rule that would further revise regulations defining WOTUS under the CWA to align with the decision in Sackett. Future implementation of this proposed rule remains uncertain;
the National Pollutant Discharge Elimination System (“NPDES”) permit program, established under the CWA, which regulates the discharge of pollutants, including industrial wastewater and stormwater, from point sources into WOTUS. Our production facilities and operations may require NPDES permits or equivalent state-issued permits for the discharge of process water, cooling water or other industrial effluent. These permits impose effluent limitations, monitoring and reporting requirements and other conditions on discharges, and failure to obtain or comply with such permits could result in significant fines, penalties or operational restrictions;
the federal Resource Conservation and Recovery Act (“RCRA”), which imposes requirements for the generation, treatment, storage, transport, disposal and cleanup of nonhazardous and hazardous wastes;
the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), which imposes strict and joint and several liability on generators, transporters and arrangers of hazardous substances at sites where hazardous substance releases have occurred or are threatening to occur as well as imposes liability on present and certain past owners and operators of sites where hazardous substance releases have occurred or are threatening to occur;
the Emergency Planning and Community Right-to-Know Act, which requires facilities to implement a safety hazard communication program and disseminate information to employees, local emergency planning committees and response departments about toxic chemical uses and inventories; and
the Endangered Species Act (“ESA”) and the Migratory Bird Treaty Act (“MBTA”), which restrict activities that may affect federally identified endangered and threatened species or migratory birds or their habitats through the implementation of operating limitations or restrictions or a temporary, seasonal or permanent ban on operations in affected areas. The extent to which the Fish and Wildlife Service (“FWS”) can regulate habitats has been the subject of numerous rulemakings since 2016. In June 2023, the FWS issued three proposed rules governing critical habitat designation and expanding protection options for species listed as threatened pursuant to the ESA. Final rules were published in April 2024, and took effect in May 2024. In November 2025, FWS issued four proposed rules that would make further revisions to habitat rules, including to articulate the exclusion analysis for critical habitat, remove the “blanket rule” option for protecting newly listed threatened species, make revisions to interagency cooperations regulations and revise portions of the regulations related to procedures and criteria used for listing, reclassifying and delisting species and designating critical habitat.
If our facilities, operations, systems and resulting water do not comply with such laws, regulations, requirements or permits, each of which may vary across the jurisdictions in which we operate, we may be required to pay significant administrative or civil penalties or fines, curtail or cease operation of the affected facilities, make costly modifications to such facilities, be subject to civil litigation or seek new or amended permits for our operations. Violations of environmental and other laws, regulations and permit requirements, including certain violations of laws protecting wetlands, migratory birds and threatened or endangered species, may also result in criminal sanctions or injunctions. Failure to comply with these laws and regulations may also result in the imposition of investigatory, remedial and corrective action obligations, the incurrence of capital expenditures, the occurrence of delays in the permitting, development or expansion of projects and the issuance of orders enjoining some or all of our future operations in a particular area. Certain environmental laws and analogous state laws and regulations impose strict joint and several liability, without regard to fault or legality of conduct, for costs required to clean up and restore sites where hazardous substances or other wastes have been disposed of or otherwise released.
The global EHS regulatory environment continues to change, and these laws and regulations, and the enforcement thereof, have tended to become more stringent over time. It is possible that new standards could be imposed, or interpretation or enforcement of existing laws and regulations could change, making the regulatory environment more stringent. For example, additional environmental
laws, regulations or standards may be adopted relating to atmospheric water generation, which could restrict where our AirJoule systems could operate or how much water they could produce. Any new standards could result in higher operating expenses, the obsolescence of our products or an interruption or suspension of our operations and have an adverse effect on our business, financial condition and results of operations. If it is not economical to make those expenditures, or if we violate any applicable EHS laws and regulation, it may be necessary to retire or suspend operations of our facilities or restrict or modify our operations to obtain or maintain compliance, either of which could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Furthermore, foreign, federal, state and local governments are increasingly regulating and restricting the use of certain chemicals, substances and materials. Some of these policy initiatives could impact our business. For example, laws, regulations, or other policy initiatives might restrict substances found within component parts to our products, in which event we would be required to comply with such requirements, which could in turn require changes to our products and increase our production and operating costs.
Our business could be adversely affected by trade wars, trade tariffs or other trade barriers and related government actions.
Since early 2025, the U.S. government has implemented, and may in the future implement, a series of significant tariff actions that have substantially altered the global trade landscape, including the termination of existing bilateral or multi-lateral trade agreements, the imposition of new tariffs and increases to existing tariffs. These tariff actions have prompted and may in the future prompt threatened or actual retaliatory measures from foreign governments, including Canada, Mexico, the European Union, and China, resulting in increased costs for U.S. exports and creating significant uncertainty regarding international trade relations. Although certain of these tariffs were subsequently paused, modified, or made subject to ongoing trade negotiations, there can be no assurance that tariffs will not be further increased or expanded in scope.
The threat of tariffs, any significant increases in tariffs on goods or materials, any bilateral trade frictions or changes in trade policies, together with any future downturns in the global economy resulting therefrom, may limit our ability to obtain key components for our AirJoule systems or significantly increase freight charges, raw material costs and other expenses associated with our business, which could materially and adversely affect our business, financial condition, prospects and results of operations.
Exchange rate fluctuations may materially affect our results of operations and financial condition.
We anticipate that our partner and customer contracts will primarily be denominated in U.S. dollars, and therefore substantially all of our revenue will not be subject to foreign currency risk. However, a strengthening of the U.S. dollar could increase the real cost of AirJoule systems to our customers outside of the United States, which could adversely affect our operating results. In addition, a portion of our operating expenses are expected to be incurred and a portion of our assets are expected to be held outside the United States. These operating expenses and assets would be denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected.
Our failure to comply with applicable anti-corruption, anti-bribery, anti-money laundering, antitrust, foreign investment and similar laws and regulations could negatively impact our reputation and results of operations.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act and other anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years. These laws are interpreted broadly to prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. As we increase our international sales and business and sales to the public sector, we may engage with partners and third-party intermediaries to market our services and to obtain necessary permits, licenses and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state -owned or affiliated entities. We can be held liable for corrupt or other illegal activities of these third- party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.
While we have policies and procedures to address compliance with such laws, our employees and agents could violate our policies and applicable law, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
Noncompliance with anti-corruption, anti-bribery or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminalpenalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are
launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminallitigation, our business, results of operations and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations and financial condition.
Our past and potential future transactions with foreign-based commercial partners and investors may be subject to review by the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS actions, including potentially imposing restrictions or conditions on these transactions, or forcing us to terminate these transactions, could adversely impact our business and operations.
CFIUS has authority to review certain direct or indirect foreign investments in U.S. businesses for national security considerations. Among other things, CFIUS is authorized to require mandatory filings for certain foreign investments in the United States and to self-initiate national security reviews of certain foreign direct and indirect investments in U.S. businesses if the parties to such investments choose not to file voluntarily. With respect to transactions that CFIUS determines present unresolved national security concerns, CFIUS has the power to suspend transactions, impose mitigation measures or recommend that the president of the United States block pending transactions or order divestitures of completed transactions when national security concerns cannot be mitigated. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors: the nature and structure of the transaction; whether the target entity or assets constitute a U.S. business; the level of beneficial ownership and voting interests acquired by foreign persons; and the nature of any information, control, access or governance rights that the transaction affords foreign persons. For example, any transaction that could result in foreign “control” (as such term is defined in the CFIUS regulations) of a U.S. business is within CFIUS’s jurisdiction, including such a transaction carried out through a joint venture. In addition, CFIUS has jurisdiction over certain investments that do not result in control of a U.S. business by a foreign person but that afford a foreign person certain access, involvement or governance rights in a “TID U.S. business,” that is, a U.S. business that:
produces, designs, tests, manufactures, fabricates, or develops one or more “critical technologies;” (2) owns, operates, manufactures, supplies or services certain “covered investment critical infrastructure;” or (3) maintains or collects, directly or indirectly, “sensitive personal data” of U.S. citizens.
We have in the past entered into, and may in the future enter into, commercial arrangements with foreign persons including, for example, our development agreement with BASF and our joint venture with an affiliate of CATL. In addition, foreign investors have invested in us in the past and may invest in us in the future, and we may continue to pursue partnerships and operations outside of the United States.
CFIUS has broad discretion to interpret its regulations, and CFIUS policies and practices are evolving rapidly. As a result, we cannot predict whether CFIUS may seek to review our past or potential future transactions involving a foreign person, even if such transactions did not or will not require a mandatory CFIUS filing at the time of the transaction. Any review by CFIUS of one or more of our past or potential future transactions involving a foreign person may have outsized impacts on, among other things, the certainty, timing, feasibility and cost of the transaction in question, and there can be no assurance that we and the foreign person will be able to maintain (if the transaction has already been completed) or proceed with (if the transaction is pending) the transaction on acceptable terms or at all.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Changes to, or changes to interpretations of, the U.S. federal, state, local or other jurisdictional tax laws could have a material adverse effect on our business, financial condition and results of operations.
All statements contained herein concerning U.S. federal income tax (or other tax) consequences are based on existing law and interpretations thereof. The tax regimes to which we are subject or under which we operate, including income and non-income taxes, are unsettled and may be subject to significant change. While some of these changes could be beneficial, others could negatively affect our after- tax returns. Accordingly, no assurance can be given that the currently anticipated tax treatment will not be modified by legislative, judicial or administrative changes, possibly with retroactive effect. In addition, no assurance can be given that any tax authority or court will agree with any particular interpretation of the relevant laws.
State, local or other jurisdictions could impose, levy or otherwise enforce tax laws against us. Tax laws and regulations at the state and local levels frequently change, especially in relation to the interpretation of existing tax laws for new and emerging industries, and we cannot always reasonably predict the impact from, or the ultimate cost of compliance with, current or future taxes, which could have a material adverse effect on our business, financial condition and results of operations.
Our business may be adversely affected by force majeure events outside of our control, including labor unrest, civil disorder, war, subversive activities or sabotage, climate change, changes in climate change policies, extreme weather conditions, fires, floods, explosions or other catastrophes or epidemics.
The occurrence of one or more natural disasters, including and not limited to tornadoes, hurricanes, fires, floods and earthquakes, unusual weather conditions, pandemics and endemic outbreaks, terrorist attacks or geopolitical and military conflicts in certain regions where our facilities are located, or where our third-party contractors’ and suppliers’ facilities are located, could adversely affect our business. The continuing armed conflicts in the Middle East and in Ukraine, or strategic competition and tensions between China, the United States, Taiwan or other countries have also contributed to uncertainty in the geopolitical and regulatory landscape. Such conflicts and tensions could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic tariffs, sanctions and import-export restrictions from the United States and the international community in a manner that adversely affect us, including to the extent that any such actions cause material business interruptions or restrict our ability in these regions to conduct business with certain suppliers or vendors. Additionally, such conflict or sanctions may significantly devalue various global currencies and have a negative impact on economies in geographies in which we do business.
Similarly, other events such as labor forceinstability and strikes, terrorist attacks, pandemic, actual or threatened acts of war or the escalation of current hostilities, or any other military or trade disruptions impacting our domestic or foreign suppliers of components of our products, may impact our operations by, among other things, causing supply chain disruptions and increases in commodity prices, which could adversely affect our raw materials or transportation costs. These events also could cause or act to prolong an economic recession in the United States or abroad. Any future disaster recovery and business continuity plans we may put in place may prove inadequate in the event of a seriousdisaster or similar event, and, more generally, any of these events could cause consumer member confidence and spending to decrease, which could adversely impact our operations.
Risks Related to Intellectual Property
Our patent applications may not result in issued patents, and our issued patents may not provide adequate protection, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours. The registration of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, we cannot be certain that our patent applications will result in patents being issued, or that our patents and any patents that may be issued to us will afford protection against competitors with similar technology. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and will be developing our technology. Many of these existing patents and patent applications might have priority over our patent applications and could subject our patent applications to rejection. Furthermore, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.
Many patent applications in the United States are maintained in secrecy for a period of time after they are filed, and since publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, we cannot be certain that we will be the first creator of inventions covered by any patent application we make or that we will be the first to file patent applications on such inventions. Because some patent applications are maintained in secrecy for a period of time, there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued.
Even if our patent applications succeed and we are issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented, invalidated or limited in scope in the future. In addition to those who may claim priority, any of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable. The rights granted under any issued patents may not provide us with meaningful protection or competitive advantages, and some foreign countries provide significantly less effective patent enforcement than what the United States provides. In addition, the claims under any patents that are issued to us may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar or limit us from licensing, exploiting or enforcing any patents issued to us. In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that it needs to license or design around, either of which would increase costs and may adversely affect our business, financial condition, prospects and results of operations.
Our failure or the inadequacy of our efforts to protect our intellectual property rights may undermine our competitive position, and litigation associated with our intellectual property rights may be costly.
We seek to protect proprietary technologies primarily through patents and trade secrets. Patent protection may not be available or appropriate for some of the products or technology we are developing. While we own several patents and pending patent applications in the United States and in foreign jurisdictions, these applications do not ensure the protection of our intellectual property for a number of reasons, including that there may be prior art of which we are not aware or there may be other patents existing in the patent landscape that affect our freedom to operate. Our business and financial prospects may be harmed to the extent we are required to spend significant resources prosecuting, protecting or enforcing our patents, designing around patents held by others or licensing patents or other proprietary rights from third parties. Additionally, pending applications may not be issued or may be issued with claims significantly narrower than we currently seek. Similarly, patents for which claims have been allowed may be successfullychallenged and invalidated. Unless and until our pending applications issue, their protective scope is impossible to determine and, even after issuance, their protective scope may be limited. Also, litigation may be necessary to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of others. Such litigation may result in our intellectual property rights being challenged, limited in scope or declared invalid or unenforceable. We cannot be certain that the outcome of any litigation will be in our favor, and an adverse determination in any such litigation could impair our intellectual property rights and may harm our business, prospects and reputation.
In addition, our success depends in large part on our proprietary information, including certain processes, formulations and other know-how developed over years of research and development. We rely heavily on trade secrets, especially in cases where we believe patents or other forms of registered intellectual property protection may not be appropriate or obtainable. However, trade secrets are difficult to protect. We employ various methods to protect such intellectual property, such as entering into confidentiality agreements with certain third parties and our employees, and controlling access to, and distribution of, our proprietary information. We cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. We cannot assure you that these agreements will provide effective or meaningful protection against the unauthorized use, misappropriation, or disclosure of our trade secrets, know-how, or other proprietary information. Enforcing a claim that a party disclosed proprietary information in an unauthorized manner or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts are less willing or unwilling to protect trade secrets, and agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not be enforceable in certain cases. Furthermore, competitors may independently develop products or technologies that are substantially equivalent or superior to our own, regardless of our efforts to maintain the confidentiality of our trade secrets and other proprietary information.
If we are unable to effectively protect our technologies, intellectual property, trade secrets and other proprietary information, our competitive position, business, financial condition and results of operations could be harmed.
A number of foreign countries do not protect intellectual property rights to the same extent as the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States and efforts to protect against the infringement, misappropriation or unauthorized use of our intellectual property rights, technology and other proprietary rights may be difficult and costly outside of the United States. Furthermore, legal standards relating to the intellectual property rights are uncertain and any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our patent rights, trade secrets and other intellectual property rights.
Patent, trademark, trade secret and other intellectual property laws are geographical in scope and vary throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. In addition, trade secrets and know-how can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets and know-how. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us, and our competitive position would be materially and adverselyharmed. Further, even if we engaged local counsel in key foreign jurisdictions, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult or impossible. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States, and efforts to protect against the infringement, misappropriation or unauthorized use of our intellectual property rights, technology and other proprietary rights may be difficult and costly outside of the United States. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain, and any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our patent rights, trade secrets and other intellectual property rights.
We may need to defend ourselves againstclaims that we infringe, have misappropriated or otherwise violate the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs. Third- party claims that we are infringing on intellectual property, whether successful or not, could subject us to costly and time-consuming litigation or expensive licenses, and our business could be adversely affected.
Companies, organizations or individuals, including our competitors and suppliers, may hold or obtain patents, trademarks or other proprietary rights that they may in the future believe are infringed by our products or services. Although we are not currently subject to any claims related to intellectual property, these companies holding patents, trademarks or other intellectual property rights allegedly relating to our technologies could, in the future, make claims or bring suits alleginginfringement, misappropriation or other violations of such rights, or otherwise asserting their rights and seeking licenses or injunctions. If a claim is successfully brought in the future and we or our products are determined to have infringed, misappropriated or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following:
cease selling or using our products that incorporate the challenged intellectual property;
pay substantial royalty or license fees or other damages (including treble damages and attorneys’ fees if our infringement is determined to be willful);
obtain a license from the holder of the intellectual property right, which license may not be available on reasonable terms, or at all;
redesign or reengineer our technology, products or services, which may be costly, time-consuming or impossible; or
establish and maintain alternative branding for our technology, products or services.
Any of the foregoing could adversely affect our business, prospects, operating results and financial condition. In addition, any litigation or claims, whether or not valid, could harm our reputation, result in substantial costs and divert resources and management attention.
We rely on licenses to use the intellectual property rights of third parties, which are incorporated into our products, services and offerings.
We and our joint ventures rely, and expect to continue to rely on, certain services and intellectual property that we license from third parties for use in our operations. We cannot be certain that our licensors are not infringing upon the intellectual property rights of others or that our suppliers and licensors have sufficient rights to the third-party technology used in our business in all jurisdictions in which we may operate. Disputes with licensors over uses or terms could result in the payment of additional royalties or penalties by us, cancellation or non-renewal of the underlying license or litigation. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the operations, products, or offerings that include or incorporate the licensed intellectual property. Any such discontinuation or limitation could have a material and adverse impact on our business, financial condition and results of operation.
Risks Related to our Common Stock and Capital Structure
Concentration of ownership among our existing executive officers, directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.
As of December 31, 2025, our executive officers, directors and their respective affiliates, together, beneficially owned approximately 52% of our outstanding common stock. As a result, these stockholders are able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our Charter and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of us or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders. Moreover, this concentration of stock ownership by our significant stockholders may also adversely affect the trading price of our common stock to the extent investors perceive a disadvantage in owning stock of a company with stockholders who own such a significant percentage of our voting securities. Furthermore, any sales of common stock by these significant stockholders in the public market, or the perception that these sales could occur, could depress the market price of our common stock.
There may be future sales of our common stock or other dilution of our equity, which may adversely affect the market price of our common stock.
We are not restricted from issuing additional shares of common stock, including securities that are convertible into or exchangeable for, or that represent a right to receive, common stock. Any issuance of additional shares of our common stock or convertible
securities will dilute the ownership interest of our existing shareholders. Sales of a substantial number of shares of our common stock or other equity-related securities in the public market, or the perception that these sales could occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.
We do not intend to pay dividends on our common stock for the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our business prospects, results of operations, financial condition, cash requirements and availability, certain restrictions related to our indebtedness, industry trends and other factors that our board of directors may deem relevant. Any such decision will also be subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. In addition, we may incur additional indebtedness, the terms of which may further restrict or prevent us from paying dividends on our common stock. As a result, you may have to sell some or all of your common stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. Our inability or decision not to pay dividends, particularly when others in our industry have elected to do so, could also adversely affect the market price of our common stock.
Material weaknesses in our internal control over financial reporting could have a significant adverse effect on our business and the price of our common stock.
As a public company, we are required to comply with the rules of the SEC implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. When evaluating our internal control over financial reporting as of March 31, 2024, our management concluded that our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting, which pertains to internal controls over complex accounting issues, including the application of the reverse recapitalization accounting for the Business Combination and the VIE accounting for the AirJoule JV. Although the material weakness was remediated as of December 31, 2024, there can be no assurance that we will not identify additional material weaknesses in the future. If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
Our Charter and Bylaws contain provisions that could have the effect of making it more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. These provisions include:
a staggered board, which means that our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;
limitations on convening special stockholder meetings, which could make it difficult for our stockholders to adopt desired governance changes;
a prohibition on stockholder action by written consent, which means that our stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter;
a forum selection clause, which means certain litigationagainst us can only be brought in Delaware;
the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders; and
advance notice procedures, which apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock, from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board of directors approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the common stock, or (iii) following board approval, such business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder at an annual or special meeting of stockholders.
Any provision of our Charter, our Bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Our Charter provides that the Court of Chancery of the State of Delaware is, to the fullest extent permitted by applicable law, the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the (a) Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is, to the fullest extent permitted by applicable law, the sole and exclusive forum for: (i) any derivative action, suit or proceeding brought on our behalf; (ii) any action, suit or proceeding asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or stockholders to us or to our stockholders; (iii) any action, suit or proceeding asserting a claim arising pursuant to the DGCL, our Charter or our Bylaws; or (iv) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine; and (b) subject to the foregoing, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, such forum selection provisions shall not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
Additionally, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As noted above, our Charter and our Bylaws will provide that the federal district courts of the United States shall have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
We are an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We qualify as an “emerging growth company,” as defined in the JOBS Act. While we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include:
presenting only two years of audited financial statements, (2) presenting only two years of related selected financial data and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure, (3) an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley, (4) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (5) reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements and proxy statements and (6) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide will be different than the information that is available with respect to other public companies that are not emerging growth companies. Additionally, management has elected to present two years of audited financial statements and selected financial data.
We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock. The market price of our common stock may be more volatile.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of XPDB’s initial public offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
Item 1B. Unre solved Staff Comments
None.
Item 1C . Cybersecurity
Cybersecurity is a critical part of risk management and is integrated with our overall enterprise risk management framework. The board of directors and the Audit Committee are responsible for overseeing management’s execution of cybersecurity risk management and for assessing our approach to risk management. Our Chief Financial Officer is responsible for overseeing the assessment and management of cybersecurity risks, including coordinating with third-party cybersecurity service providers that support our cybersecurity monitoring and risk management processes . Senior management is responsible for assessing and managing our exposure to cybersecurity risks on an ongoing basis.
We regularly assess cybersecurity risks to our systems, applications and infrastructure; are in the process of building our capabilities to monitor our information systems for potential vulnerabilities; and implement controls pursuant to our cybersecurity policies, processes and practices. To protect our information systems from cybersecurity threats, we use various security tools that are designed to help identify, escalate, investigate, resolve and recover from security incidents in a timely manner. We also engage third-party cybersecurity specialists with experience in cybersecurity risk assessment , information systems evaluation and technology risk management, to assist with monitoring our information systems, identifying potential vulnerabilities and supporting our incident response capabilities.
Cybersecurity threats, including those resulting from any previous cybersecurity incidents, have not materially affected our Company, including our business strategy, results of operations, or financial condition. However, we face certain ongoing risks from cybersecurity threats that, if realized, may be reasonably likely to materially affect our operations and, therefore, our results of operations and/or financial condition.
For more information about these risks, refer to the risk factor captioned “Cyber-attacks or a failure in our information technology and data security infrastructure could adversely affect our business and operations.” in Part I, Item 1A. “Risk Factors.”
Governance
Our board of directors oversees our risk management process, including as it pertains to cybersecurity risks, directly and through its committees. The Audit Committee of the board of directors oversees our risk management program, which focuses on the most significant risks to our business, including oversight of information technology, cybersecurity and data privacy risks. Audit Committee meetings include discussions of specific risk areas throughout the year, including, among others, those relating to cybersecurity threats. The Audit Committee reviews our cybersecurity risk profile with management on a periodic basis using key performance and/or risk indicators. These key performance indicators are metrics and measurements designed to assess the effectiveness of our cybersecurity program in the prevention, detection, mitigation and remediation of cybersecurity incidents.
We take a risk-based approach to cybersecurity and have implemented cybersecurity policies throughout our operations that are designed to address cybersecurity threats and risks incidents. Management is responsible for the establishment of our cybersecurity environment, as well as the assessment and management of cybersecurity risks. Management provides regular updates on our cybersecurity risk profile to the Audit Committee of our board of directors.
Item 2. Pro perties
Our headquarters are located at 34361 Innovation Drive, Ronan, MT 59864. We maintain a corporate website at http:// airjouletech.com . The information contained on or accessible through our corporate website or any other website that we may maintain is not part of this Report.
Item 3. Lega l Proceedings
We may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any other legal proceedings that, in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. See Note 13 – Commitments and Contingencies .
Item 4. Mine Sa fety Disclosures
Not applicable.
PAR T II
Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders
Shares of the Company’s common stock and warrants commenced trading on the Nasdaq under the symbols “AIRJ” and “AIRJW,” respectively, on March 15, 2024. At March 1, 2026 we had 54 stockholders of record of common stock. Since many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividends
It is the present intention of the board of directors to retain all earnings, if any, for use in our business operations and, accordingly, the board of directors has not to date declared and does not anticipate declaring any dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Performance Graph
Not applicable.
Unregistered Sales of Equity Securities and Use of Proceeds
Set forth below is information regarding shares of capital stock issued by us from the closing of the Business Combination on March 14, 2024 through December 31, 2025. Also included is the consideration received by us for such shares and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
PIPE Investments
In connection with the closing of the Business Combination on March 14, 2024, the Company consummated that certain subscription agreement entered into by XPDB and a certain investor, pursuant to which the Company issued and sold to the investor an aggregate of 588,235 newly issued shares of Class A common stock on the terms and subject to the conditions set forth in the agreement at a purchase price of $8.50 per share for aggregate gross proceeds to the Company of $5.0 million. These securities were issued and sold in reliance on Section 4(a)(2) of the Securities Act. The subscription agreement provides that, subject to certain conditions set forth therein, the Company may be required to issue to the investor up to an additional 840,336 shares of Class A common stock if the trading price of the Class A common stock falls below the per share purchase price within one year of the Closing of the Business Combination. During the year ended December 31, 2024, the Company’s volume-weighted average price of the Class A common stock on the Nasdaq as reported by Bloomberg L.P. was less than $8.50 for 15 consecutive trading days. As a result of this triggering event, the Company issued to the investor 275,880 shares of Class A common stock on March 18, 2025.
On June 5, 2024, the Company entered into the subscription agreements (the “June 2024 PIPE Subscription Agreements”) with certain investors, pursuant to which, among other things, the investors agreed to subscribe for and purchase from the Company, and the Company has agreed to issue and sell to the investors, an aggregate of 1,238,500 shares of Class A common stock for an aggregate purchase price of approximately $12.4 million. These securities were issued and sold in reliance on Section 4(a)(2) of the Securities Act.
Cashless Exercise of Warrants
Between June 10, 2024 and June 11, 2024, we issued 705,758 shares of our Class A common stock pursuant to the exercise of 3,942,388 public warrants on a cashless basis pursuant to the alternate cashless exercise feature described therein. These securities were issued pursuant to Section 3(a)(9) of the Securities Act.
PIPE Subscription Agreements
On April 23, 2025, we entered into the subscription agreements (the “April 2025 PIPE Subscription Agreements”) with certain investors (the “April 2025 PIPE Investors”), pursuant to which, among other things, the April 2025 PIPE Investors agreed to subscribe for and purchase from the Company, and the Company agreed to issue and sell to the April 2025 PIPE Investors, an aggregate of 3,775,126 shares of Class A common stock at a purchase price of $3.98 per share. The transaction closed on April 25, 2025, and the
shares of Class A common stock were issued and sold to the April 2025 PIPE Investors in reliance on Section 4(a)(2) of the Securities Act generating net proceeds of $14.2 million.
Equity Line Purchase Agreement
On March 25, 2025, we entered into a common stock purchase agreement (the “Equity Line Purchase Agreement”) with B. Riley Principal Capital II, LLC (the “Equity Line Investor”). Under the terms and subject to the conditions of the Equity Line Purchase Agreement, the Company has the right, but not the obligation, to sell to the Equity Line Investor, over a 36-month period, up to an aggregate of $30,000,000 of shares of Class A common stock subject to certain conditions and limitations contained in the Equity Line Purchase Agreement, including that we may issue no more than 4,250,000 shares of our Class A common stock during the term of the Purchase Agreement. From March 25, 2025 through December 31, 2025, 755,946 shares of Class A common stock were sold under the Equity Line Purchase Agreement generating proceeds of approximately $3.0 million. These securities were issued and sold in reliance on Section 4(a)(2) of the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. R eserved
Item 7. Manage ment’s Discussion and Analysis of Financial Condition and Results of Operations
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with Part I of this Annual Report on Form 10-K, the consolidated financial statements and related notes included in Part II Item 8 in this Annual Report on Form 10-K and the section titled “Cautionary Note Regarding Forward-Looking Statements” included in the forepart in this Annual Report on Form 10-K.
This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “will,” “expect,” “might,” “plan,” “anticipate,” “could,” “intend,” “target,” “goal,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seek,” “would,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included herein. Factors that might cause or contribute to such a discrepancy include, but are not limited to: our status as an early stage company with limited operating history, which may make it difficult to evaluate the prospects for our future viability; our initial dependence on revenue generated from a single product; significant barriers we face to deploy our technology; the dependence of our commercialization strategy on our relationship with third parties; our history of losses; accuracy of assumptions underlying projections related to our equity method goodwill impairment testing; and other risks and uncertainties described in our other SEC filings.
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as defined below), the business and operations of AirJoule Technologies Corporation, formerly known as Montana Technologies Corporation and its consolidated subsidiaries, and (ii) prior to the Business Combination, AirJoule Technologies LLC, formerly known as Montana Technologies LLC, or Legacy Montana, and its consolidated subsidiaries.
Company Overview
We are an advanced technology company whose purpose is to free the world from its water and energy constraints by delivering groundbreaking sorption technologies. Our platform technology, AirJoule, produces pure distilled water from air and, at commercial scale, will mitigate water scarcity through distributed water generation for businesses and consumers around the world. Our products are especially valuable for industrial users, which generate significant amounts of waste heat that can be used to power our sorption technologies to produce low cost pure distilled water and dehumidified air – two key inputs for a variety of industrial activities, including data centers and advanced manufacturing. In HVAC applications, our technology is designed to reduce energy consumption, minimize or even eliminate the use of environmentally-harmful refrigerants and generate material cost efficiencies for air conditioning systems. We are commercializing and scaling manufacturing of our AirJoule systems through our global collaborations, including our 50/50 joint venture with GE Vernova Inc. (NYSE: GEV) and our commercial partnerships with Carrier Global Corporation (NYSE: CARR) and TenX Investment in Energy Enterprises & Management Co. We believe that deploying AirJoule systems worldwide will unleash the power of water from air and help to improve global water security. During 2025, we manufactured and deployed AirJoule Core systems (previously referred to as our A250 systems) for field testing and customer demonstrations in Texas, Arizona and Dubai, and we advanced the productization and manufacturing scale-up of our Core and larger Prime (previously referred to as our A1000 system) system in preparation for commercial sales beginning in late 2026.
Growth Strategy and Outlook
We anticipate significant growth opportunities by offering the AirJoule technology in global markets where demand for water, dehumidified air and cooling are highest. With our technology platform, we believe that we are uniquely positioned to provide solutions that satisfy our customers’ needs and expectations in fast-growing and water and energy-intensive industries, such as data centers and advanced manufacturing, along with military and HVAC applications. We estimate the combined total addressable market to be approximately $450 billion.
In the data center arena, we aim to address escalating energy and water efficiencychallenges associated with increased computing density by using low-grade waste heat to produce pure distilled water and enabling data center operators to reduce their cooling costs and improve water sustainability. Similarly, in advanced manufacturing environments, where product quality and process precision depend on consistent humidity and ultra-pure water, our technology can help customers with cost-effective dehumidification. The military sector presents a distinct opportunity, as AirJoule is able to operate in a variety of climate conditions to support troops in remote and water-scarce environments, ensuring mission readiness and resilience. In the HVAC space, where building owners and
facility managers are under pressure to cut energy consumption and improve indoor air quality, AirJoule’s superior moisture removal capability can reduce power consumption and the use of refrigerants in air conditioning systems.
To accelerate market penetration and scale our manufacturing capabilities, we plan to leverage our strategic partnerships. These partnerships offer access to industry-specific R&D expertise, mature supply chains, established sales channels and extensive service networks, allowing us to quickly move from pilot deployments to full-scale commercialization. We intend to co-develop sector-specific solutions, capitalizing on our partners’ market insights and reputational strength to better serve diverse customer needs. By combining our innovative AirJoule technology with their global reach and operational expertise, we expect to unlock value across multiple industries, establish our position as a leader in water-focused solutions and deliver long-term growth and value to our shareholders.
Recent Developments
Field Deployments and Demonstrations
During 2025, the AirJoule JV transitioned from laboratory testing to real-world field deployments across multiple geographies and climate conditions. From February 2025 through December 2025, the AirJoule JV and TenX Investment operated an AirJoule showcase system at the Dubai Future Lab in the United Arab Emirates. The system operated through wide temperature and humidity swings, generating high purity distilled water and demonstrating operational reliability in the region’s extreme climate conditions.
In September 2025, the AirJoule JV deployed our first full-scale AirJoule Core system to Hubbard, Texas, where the AirJoule JV demonstrated AirJoule’s ability to produce pure distilled water from ambient air. The system operated continuously for several months and generated performance data across varying environmental conditions.
In December 2025, the AirJoule JV announced a collaboration with the Red Dot Ranch Foundation for off-grid residential water solutions in Pescadero, California. Initial testing of the Core system began in January 2026 and was completed in February 2026.
In December 2025, the AirJoule JV sold a Core system to Arizona State University (“ASU”), where it is undergoing independent academic evaluation led by Dr. Paul Westerhoff, Regents Professor and Director of ASU’s Global Center for Water Technology. The evaluation, which includes planned peer-reviewed published research, is being conducted in the greater Phoenix area where temperatures exceed 110°F and relative humidity regularly falls below 20%. This represents one of the most demanding environments for atmospheric water harvesting.
Components of Our Results of Operations
Revenue
Revenue will be earned primarily from the assembly and sale of AirJoule systems. As of December 31, 2025, the AirJoule JV recognized $0.1 million of revenue.
Operating Expenses
We classify our operating expenses into the following categories:
General and administrative: General and administrative expenses consist primarily of personnel-related expenses for our executives, consultants and advisors. These expenses also include non-personnel costs, such as rent, office supplies, legal, audit and accounting services and other professional fees.
Research and development: Research and development expenses include internal personnel, parts, prototypes and third-party consulting costs related to preliminary research and development of our products.
Sales and marketing: Sales and marketing expenses consist primarily of business development professional fees, advertising and marketing costs.
Transaction costs incurred in connection with business combination: Transaction costs represent the initial recognition of the Earnout Shares liability and fees incurred for financial advisory, legal and other professional services that were directly related to the Business Combination.
Depreciation and amortization: Depreciation and amortization expense consists of depreciation of property and equipment.
Results of Operations
The following tables set forth the results of our operations for the periods presented, as well as the changes between periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
The year ended December 31, 2025 compared to the year ended December 31, 2024
The following table sets forth the Company’s consolidated statements of operations data for the year ended December 31, 2025 and 2024:
Year ended December 31,
Change ($)
Cost and expenses:
General and administrative
Research and development
Sales and marketing
Transaction costs incurred in connection with business combination
Depreciation and amortization
Loss from operations
Other income (expense):
Interest income
Gain on contribution to AirJoule, LLC
Equity loss from investment in AirJoule, LLC
Change in fair value of Earnout Shares liability
Change in fair value of True Up Shares liability
Change in fair value of Subject Vesting Shares liability
Change in fair value of Equity Line Obligation liability
Gain on settlement of legal fees
Other income
Total other income (expense), net
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
General and Administrative
General and administrative expenses for the year ended December 31, 2025 were $12.5 million as compared to $9.0 million for the year ended December 31, 2024. The $3.4 million increase was primarily related to a $3.8 million increase in stock-based compensation expense and a $1.6 million increase in salaries and benefits as a result of an increased headcount offset by an increase in the reimbursement of costs incurred per the statement of work with AirJoule, LLC of $0.8 million, a $0.7 million decrease in accounting, audit and legal fees, a $0.4 million decrease in professional services and a $0.1 million decrease in insurance expense. We expect that our general and administrative expenses will increase in future periods commensurate with the expected growth of our business.
Research and Development
Research and development expenses for the year ended December 31, 2025 were $1.0 million as compared to $2.0 million for the year ended December 31, 2024. The $1.0 million decrease was primarily related to a decrease in the purchase of materials and services of $2.0 million and the decrease in patent and royalty fees of $0.7 million offset by the decrease in reimbursement of costs incurred per the statement of work with AirJoule, LLC of $1.3 million and the increase in stock-based and employee compensation expense of $0.4 million.
Sales and Marketing
Sales and marketing expenses for the year ended December 31, 2025 were $79,326 as compared to $150,927 for the year ended December 31, 2024. We expect that our sales and marketing expenses will increase in future periods commensurate with the expected growth of our business.
Transaction Costs Incurred in Connection with Business Combination
Transaction costs incurred in connection with the business combination include the non-cash recognition of earnout liabilities of approximately $53.7 million and transaction costs incurred by our Predecessor of approximately $1.0 million, which were paid in 2024.
Depreciation and Amortization
Depreciation and amortization expenses for the year ended December 31, 2025 and 2024 were $9,837 and $6,517, respectively.
Interest Income
Interest income was $1.0 million and $0.9 million for the year ended December 31, 2025 and 2024, respectively.
Gain on Contribution to AirJoule, LLC
An equity method investment received in exchange for non-cash consideration is measured at fair value. As a result, for the year ended December 31, 2024, we recognized a gain of $333.5 million on the contribution to AirJoule, LLC which represents the difference between our carrying value and the fair value of the perpetual license to intellectual property that we transferred to AirJoule, LLC.
We determined the fair value of the intellectual property by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate, Level 3 measurements. Valuation specialists were used to develop and evaluate the appropriateness of the multi-period excess earnings method, our discount rates, attrition rate and fair value estimates using its cash flow projections.
Equity Loss from Investment in AirJoule, LLC
As previously noted, on January 25, 2024, AirJoule Technologies, LLC entered into a joint venture with GE Ventures LLC, the AirJoule JV which closed on March 4, 2024. For the year ended December 31, 2025 and 2024, we recognized a loss of $39.3 million and $5.3 million from our 50% equity investment in the AirJoule JV, respectively.
Change in Fair Value of Earnout Shares Liability
Upon consummation of the Business Combination, we expensed $53.7 million in Earnout Shares (as described in “ - Earnout Shares Liability ”) liability. The change in fair value of $18.3 million and $29.2 million for the years ended December 31, 2025 and December 31, 2024, respectively, was primarily due to a decrease in the estimated fair value of the liability and recognized as gains in the consolidated statements of operations. The fair value of the liability decreased primarily due to changes in the valuation inputs, mainly a decrease in the stock price and changes in the timing of future cash flows.
Change in Fair Value of True Up Shares Liability
Upon consummation of the Business Combination, we assumed $0.6 million in True Up Shares liability. The change in fair value of the liability during the year ended December 31, 2025 was primarily due to the triggering event and issuance of Class A common stock.
Change in Fair Value of Subject Vesting Shares Liability
Upon consummation of the Business Combination, we assumed an $11.8 million Subject Vesting Shares liability. The change in fair value of income of $6.6 million and $4.0 million during the year ended December 31, 2025 and December 31, 2024, respectively, was primarily due to a decrease in the estimated fair value of the liability and recognized as gains in the consolidated statements of operations. The fair value of the liability decreased primarily due to changes in the valuation inputs, mainly a decrease in the stock price and changes in the timing of future cash flows.
Change in Fair Value of Equity Line Obligation Liability
On March 25, 2025, we entered into a Equity Line Purchase Agreement with B. Riley Principal Capital II, LLC. See Note 2 - Liquidity and Capital Resources . During the year ended December 31, 2025, we recognized a $(0.5) million change in the fair value of the related liability, primarily driven by the initial recognition of the liability at fair value upon inception of the agreement and subsequent activity under the facility, including sales of common stock.
Income Tax Benefit (Expense)
Income tax benefit (expense) was $18.3 million and $(81.3) million for the year ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, the income tax benefit and the resulting effective tax rate differed from the U.S. federal statutory rate primarily due to the impact of state income taxes, including state jurisdictions in which the Company became subject to tax following the Business Combination, as well as changes in deferred tax liabilities associated with temporary differences. Our state effective tax rate of 19.5% for the year ended December 31, 2025 was primarily driven by the remeasurement of deferred tax balances resulting from a decrease in applicable state tax rates from 2024 to 2025. Due to the Company’s significant beginning deferred tax liabilities, this rate change had a disproportionate impact on the current year tax provision; the impact of such remeasurements may vary in future periods. The 2025 effective tax rate was also affected by other permanent items, including the changes in fair value of our liabilities and stock-based compensation expense. During the year ended December 31, 2024, our contribution of a perpetual license to AirJoule, LLC’s intellectual property was measured at fair value and resulted in a book gain and a temporary difference between book and taxable income. The temporary difference resulted in the recognition of a deferred tax expense and deferred tax liabilities. The deferred tax expense was partially offset by the recognition of deferred tax assets in connection with the Company’s Business Combination.
Liquidity and Capital Resources
The April 2025 PIPE
On April 23, 2025, we entered into the April 2025 PIPE Subscription Agreements with the April 2025 PIPE Investors pursuant to which, among other things, the April 2025 PIPE Investors agreed to subscribe for and purchase from the Company, and we agreed to issue and sell to the April 2025 PIPE Investors, an aggregate of 3,775,126 newly issued shares of Class A common stock at a purchase price of $3.98 per share on the terms and subject to the conditions set forth therein. The April 2025 PIPE Subscription Agreements entitled the April 2025 PIPE Investors to shelf registration rights with respect to the shares of Class A common stock they purchased. The transaction closed on April 25, 2025, and the shares of Class A common stock were issued and sold to the April 2025 PIPE Investors in reliance on Section 4(a)(2) of the Securities Act generating net proceeds of $14.2 million.
Committed Equity Facility
On March 25, 2025, we entered into the Equity Line Purchase Agreement with the Equity Line Investor. Under the terms and subject to the conditions of the Equity Line Purchase Agreement, the Company has the right, but not the obligation, to sell to the Equity Line Investor, over a 36-month period, up to an aggregate of $30,000,000 of our newly issued shares of common stock subject to certain conditions and limitations contained in the Equity Line Purchase Agreement, including that we may issue no more than the number of shares equal to 19.99% of the aggregate number of our issued and outstanding shares of common stock as of immediately prior to the execution of the Equity Line Purchase Agreement without first obtaining stockholder approval. As of December 31, 2025, 755,946 shares were sold under the Equity Line Purchase Agreement generating proceeds of approximately $3.0 million.
Capital Contributions
Pursuant to the A&R Joint Venture Agreement, we are expected to contribute additional capital to the AirJoule JV based on a business plan and annual operating budgets to be agreed between us and GE Vernova. During the year ended December 31, 2025, we contributed $17.8 million in capital contributions to the AirJoule JV.
General
Our primary sources of liquidity have been cash from contributions from founders or equity capital raised from other investors. As of December 31, 2025, we had $21.5 million of working capital including $21.8 million in cash, cash equivalents and restricted cash.
We assess liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. Our expected primary uses of cash on a short and long-term basis are for working capital requirements, capital expenditures and other general corporate services. Our primary working capital requirements are for project execution activities including purchases of materials, services and payroll which fluctuate during the year, driven primarily by the timing and extent of activities required for new and existing projects. Management expects that future operating losses and negative operating cash flows may increase from historical levels because of additional costs and expenses related to the development of its technology and the development of market and strategic relationships with other businesses and customers.
Our future capital requirements will depend on many factors, including the timing and extent of spending to support the launch of our product and research and development efforts, the degree to which we are successful in launching new business initiatives and the cost associated with these initiatives and the growth of our business generally.
In order to finance these opportunities and associated costs, it is possible that we would need to raise additional financing if the proceeds realized to date are insufficient to support our business needs, including the remaining commitment for capital contributions to the AirJoule JV. While we believe that the proceeds realized to date will be sufficient, management cannot assure that this will be the case. If additional financing is required by us from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital on acceptable terms when needed, our product development business, results of operations and financial condition would be materially and adversely affected.
Cash flows for the year ended December 31, 2025 and 2024
The following table summarizes our cash flows from operating, investing and financing activities for the year ended December 31, 2025 and 2024:
Year ended
December 31,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash Flows from Operating Activities
During the year ended December 31, 2025, net cash used in operating activities was $5.6 million and primarily reflected our net loss of $(9.0) million. Cash used in operating activities was partially offset by non-cash expenses, including equity loss from investment in AirJoule, LLC, stock-based compensation and changes in fair values of our complex liabilities. Changes in operating assets and liabilities used $2.6 million of cash and were primarily attributable to decreases in our due from related party receivable, as well as increases in accrued liabilities and payables related to the expansion of our operations. We expect to continue to use cash in our operating activities with the expected growth of our business.
During the year ended December 31, 2024, net cash used in operating activities was $24.3 million and primarily reflected our net income of $215.7 million, a $81.3 million deferred tax expense, a $53.7 million loss on transaction costs in connection with the business combination, a $5.3 million equity loss from our investment in AirJoule, LLC and $1.3 million of stock-based compensation offset by a $333.5 million gain on contribution to AirJoule, LLC, a decrease of net non-cash operating activities of $31.5 million of changes in fair value of our Earnout Shares liability, True Up Shares liability and Subject Vesting Shares liability, a $14.4 million decrease in our operating assets and liabilities and a gain of $2.2 million on settlement of legal fees.
Cash Flows from Investing Activities
During the year ended December 31, 2025, net cash used in investing activities was $17.8 million, primarily as a result of our contributions made to the AirJoule JV during the period.
During the year ended December 31, 2024, net cash used in investing activities was $10.0 million, primarily as a result of our contributions made to the AirJoule JV.
Cash Flows from Financing Activities
During the year ended December 31, 2025, net cash provided by financing activities was $17.2 million, primarily as a result of the $14.2 million of net proceeds from the April 2025 PIPE Offering, approximately $3.0 million, from the Equity Line Purchase Agreement and $0.1 million of proceeds from the exercise of options and purchases pursuant to our employee stock purchase plan.
During the year ended December 31, 2024, net cash provided by financing activities was $61.9 million, primarily related to proceeds from the issuance of the Predecessor common stock related to private placements prior to the Merger, the exercise of stock options and warrants and the issuance of common stock to PIPE investors.
Contractual Obligations and Commitments
Royalties
In October 2021, we entered into a patent license agreement with a third party whereby the third party granted us rights to use certain of their patents in exchange for an upfront payment and royalties based on a percentage of net sales until such patents expire. In
connection with this, we agreed to certain minimum royalty amounts. In September 2025, we entered into the Second Amended and Restated License Agreement which eliminated the minimum royalty amounts through 2029, which resulted in a reversal of $0.5 million in royalties expense.
Joint Venture Agreements
On October 27, 2021, we entered into a joint venture agreement with CATL, pursuant to which we and CATL formed CAMT. While we and CATL both continue to own 50% of CAMT’s issued and outstanding shares, neither we nor CATL funded this joint venture or contributed any assets to the joint venture. Similarly, no business plan or operating budget have ever been set by CAMT’s board of directors.
Pursuant to the Amended and Restated Joint Venture Agreement for CAMT, entered into on September 29, 2023, we and CATL US have each agreed to contribute $6.0 million to CAMT. Contributions will be requested by CAMT once a business plan and operating budget is set by CAMT’s board of directors. No action to establish a business plan or operating budget has occurred to date. Any additional financing beyond the initial $12.0 million (i.e., $6.0 million from each of Legacy Montana and CATL US) will be subject to the prior mutual agreement of Legacy Montana and CATL US. CAMT is managed by a four-member board of directors, with two directors (including the chairman) designated by CATL US and two directors (including the vice chairman) designated by Legacy Montana. In the event of an equal vote, the chairman may cast the deciding vote. Certain reserved matters, including debt issuances exceeding $5.0 million in a single transaction or in aggregate within a fiscal year, amendments to CAMT’s constitutional documents the annual financial budget of CAMT and any transaction between CAMT and CATL US or Legacy Montana in an amount exceeding $10.0 million in a single transaction or in aggregate within a fiscal year, require the unanimous vote of both CATL US and Legacy Montana or all directors. As of December 31, 2025, we have not funded this joint venture or contributed any assets to the joint venture.
The original purpose of our joint venture with CATL US was to commercialize certain technology in Asia and Europe and, pursuant to the Amended and Restated Joint Venture Agreement for CAMT, CAMT has the exclusive right to commercialize the technology in those territories. Subject to the oversight of CAMT’s board, CATL US is responsible for managing the day-to-day operations of CAMT (including the nomination and replacement of the Chief Executive Officer of CAMT), and is responsible for providing CAMT and any subsidiaries formed by CAMT with, among other things, administrative services, supply chain support, assistance in obtaining required permits and approvals and assistance in purchasing or leasing land and equipment.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Certain of these estimates require the use of significant judgment because they involve assumptions that are inherently uncertain and may change as new information becomes available. If actual results differ from these estimates, the resulting changes could have a material effect on our consolidated financial statements. We consider an accounting estimate to be critical if it requires management to make assumptions about matters that are highly uncertain and if different estimates could reasonably have a material impact on our financial condition or results of operations.
While our significant accounting policies are described in more detail in Note 3 to our consolidated financial statements appearing in Item 8 to this Annual Report on Form 10-K, we believe that the following accounting policies were most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Stock-Based Compensation
We grant stock-based awards to employees, directors and certain non-employees as part of our compensation programs. Determining the grant-date fair value of stock-based awards requires management to make estimates and assumptions that involve significant judgment.
The most significant assumptions used in estimating the fair value of stock option awards include the expected term of the award, expected stock price volatility, the risk-free interest rate and the fair value of our common stock on the grant date. Expected volatility is estimated using a combination of our historical volatility and the volatility of comparable publicly traded companies due to our limited trading history. The expected term of awards reflects management’s estimate of the period the awards are expected to remain outstanding based on historical exercise behavior and contractual terms.
We have also issued awards containing market and performance-based vesting conditions. The fair value of these awards is estimated using a Monte Carlo simulation model that incorporates assumptions regarding stock price volatility, expected term, risk-free interest rates and the probability of achieving performance conditions. These assumptions are inherently uncertain, and changes in these assumptions could materially affect the grant-date fair value of awards and the amount of stock-based compensation expense recognized in future periods.
Upon the exercise of stock options or settlement of restricted stock units, we issue newly issued shares of Class A common stock. We do not currently use treasury shares to settle equity awards. We do not currently expect to repurchase shares in the following year to satisfy equity award settlements.
We granted Earnout Share awards to certain employees in connection with the Business Combination. These awards are considered compensatory. The performance-based vesting conditions are not deemed probable of achievement as of December 31, 2025.
Earnout Shares Liability
In connection with the reverse recapitalization and pursuant to the Merger Agreement, eligible former Legacy Montana Equityholders (as defined below) are entitled to receive additional shares of our common stock upon the achievement of specified operational milestones. The Earnout Shares are classified as a liability and are remeasured at fair value at each reporting period, with changes in fair value recognized in our consolidated statements of operations.
The fair value of the Earnout Shares liability is estimated using a Monte Carlo simulation model that incorporates assumptions regarding projected EBITDA, the expected timing of commissioning production lines, stock price volatility, risk-free interest rates and the correlation between stock price and operating performance. Estimates regarding the timing of commissioning production lines and expected operating performance are based on management’s projections regarding the commercialization and scaling of our technology.
Because these assumptions involve significant judgment and are subject to change as our business evolves, changes in these assumptions could materially affect the estimated fair value of the Earnout Shares liability and result in significant gains or losses recognized in our consolidated statements of operations.
Derivative Financial Instruments and Other Financial Instruments Carried at Fair Value
Certain financial instruments issued in connection with the Business Combination and related financing transactions are classified as liabilities and measured at fair value at each reporting period. These instruments include the True Up Shares, Subject Vesting Shares and the Equity Line Obligation.
The fair value of these instruments is determined using valuation models that incorporate significant assumptions, including stock price volatility, expected term, risk-free interest rates and the probability of achieving certain market or operational conditions. Certain valuations utilize Monte Carlo simulation techniques to model potential outcomes for our stock price and operational milestones.
Because these valuations rely on assumptions about future market conditions and company performance, which are inherently uncertain, changes in these assumptions could materially affect the estimated fair value of these instruments and may result in significant gains or losses recognized in future periods. See Note 12 – Fair Value Measurements.
Equity Method Investment
We account for investments in entities over which we have significant influence but do not control using the equity method of accounting. Our investment balance reflects our share of the investee’s earnings or losses and is adjusted for basis differences identified at the time of investment.
We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. This evaluation requires significant judgment in assessing the investee’s financial condition, expected future operating performance, industry conditions and the estimated fair value of the investment.
Key assumptions used in this assessment may include projections of the investee’s future revenues, operating margins and the timing and likelihood of achieving anticipated business milestones. These assumptions are inherently uncertain because they depend on future market conditions and the investee’s operational performance. If the estimated fair value of the investment is determined to be less than its carrying value and the decline is considered other than temporary, we would record an impairment charge equal to the difference between the carrying value and estimated fair value.
Warrants
The accounting classification of warrants requires management to evaluate the contractual terms of the instruments and determine whether they should be classified as equity or as liabilities. This evaluation requires judgment in assessing whether the warrants meet the criteria for equity classification under applicable accounting guidance, including whether the warrants are indexed to the Company’s own stock and whether they meet the conditions for equity classification.
At issuance, the warrants were measured at fair value and recorded within stockholders’ equity because management determined that the warrants meet the requirements for equity classification. The fair value of the warrants at issuance was determined based on the observable market price of the publicly traded warrants and other relevant market information.
Although these warrants are classified within equity and are not subsequently remeasured, the initial classification and valuation required management to evaluate complex contractual provisions and apply judgment in interpreting the relevant accounting guidance. Changes in the interpretation of these contractual terms or the applicable accounting guidance could have resulted in a different accounting classification, which would have required the warrants to be recorded as liabilities and remeasured at fair value in each reporting period.
Income Taxes
We account for income taxes using the asset and liability method, which requires management to estimate deferred tax assets and liabilities based on temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities.
Significant judgment is required in assessing the realizability of deferred tax assets, including evaluating future taxable income, the reversal of existing temporary differences and potential tax planning strategies. When it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recorded.
Changes in our expectations regarding future taxable income or the timing of the reversal of temporary differences could result in adjustments to our valuation allowance, which could materially affect income tax expense and results of operations in future periods.
Management has evaluated our tax positions, including our Predecessor’s previous status as a pass-through entity for federal and state tax purposes, and has determined that we have taken no uncertain tax positions that require adjustment to the consolidated financial statements. Our reserves related to uncertain tax positions was zero as of December 31, 2025 and 2024. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025 and 2024. We are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
Recent Accounting Pronouncements
A discussion of recently issued accounting standards applicable to the Company is described in Note 3 – Summary of Significant Accounting Policies , in the Notes to Financial Statements contained elsewhere in this Annual Report on Form 10-K.
Off Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2025.
Emerging Growth Company Status
We are an emerging growth company as defined in the JOBS Act. The JOBS Act permits companies with emerging growth company status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion
and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of XPDB’s initial public offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
Item 7A. Quantit ative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 8. Financi al Statements and Supplementary Data
This information appears following Item 15 of this Annual Report and is included herein by reference.
