AirJoule Technologies Corp. (AIRJ) FY 2021 MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “our,”
“us” or “we” refer to Power & Digital Infrastructure Acquisition II Corp.. The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes
related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form
10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth
under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1.A. Risk Factors” and elsewhere in this Annual
Report on Form 10-K.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities 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,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

We are a blank check company incorporated in Delaware
on March 23, 2021. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses or entities. We are an emerging growth company and, as such,
we are subject to all of the risks associated with emerging growth companies.

Our sponsor is XPDI Sponsor II LLC, a Delaware
limited liability company. The registration statement for our IPO was declared effective on December 9, 2021. On December 14, 2021, we
consummated our IPO of 28,750,000 units, which included the exercise of the underwriters’ option to purchase an additional 3,750,000
units at the initial public offering price to cover over-allotments (the “over-allotment units”), at $10.00 per unit, generating
gross proceeds of $287.5 million, and incurring offering costs of approximately $20.7 million, of which approximately $10.1 million
was for deferred underwriting fees.

Simultaneously with the closing of our IPO, we
completed the private placement (the “private placement”) of 11,125,000 private placement warrants, at a price of $1.00 per
private placement warrant to our sponsor and anchor investors, generating proceeds of approximately $11.1 million.

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Upon the closing of the IPO and the private
placement, approximately $290.4 million ($10.10 per unit) of the net proceeds of the sale of the units in the IPO and of the
private placement warrants in the private placement were placed in a trust account (the “trust account”) located
in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government
securities,” within the meaning of Section 2(a)(16) of the Investment Company Act 1940, as amended (the “Investment Company
Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the company, until
the earlier of: (i) the completion of an initial business combination and (ii) the distribution of the trust account as described
below.

Our management has broad discretion with respect
to the specific application of the net proceeds of the IPO and the sale of private placement warrants, although substantially all of the
net proceeds are intended to be applied generally toward consummating an initial business combination. There is no assurance that we will
be able to complete an initial business combination successfully. We must complete one or more initial business combinations having an
aggregate fair market value of at least 80% of the net assets held in the trust account (net of amounts disbursed to management for working
capital purposes and excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at
the time of the agreement to enter into the initial business combination. However, we will only complete an initial business combination
if the post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

We will have until 18 months from the
closing of the IPO, or June 14, 2023 (the “Combination Period”), to complete the initial business combination. However,
if we anticipate that it may not be able to complete the initial business combination within 18 months, we may, but are not
obligated to, extend the period of time we will have to complete an initial business combination by up to two additional
three-month periods (for a total of up to 24 months from the closing of the IPO to complete an initial business
combination), subject to the sponsor or its affiliates or designees contributing, for each such three-month extension, $0.10
per share of Class A common stock to the trust account (or approximately $2.9 million in the aggregate). In connection with
each such additional deposit, the sponsor or its affiliates or designees will receive an additional 2,875,000 private placement
warrants, with the same terms as the original private placement warrants. The Public Stockholders will not be entitled to vote on,
or redeem their shares in connection with, any such extension.

Liquidity and Capital Resources

Our liquidity needs to date have been
satisfied through a capital contribution of $25,000 from our sponsor to purchase our Class B common stock (the “founder
shares”), the related party loan under a promissory note of approximately $115,000 from, our sponsor, which was repaid in full
on December 17, 2021, and the net proceeds from the consummation of the private placement not held in the trust account. In
addition, in order to finance transaction costs in connection with an initial business combination, our officers, directors and
initial stockholders may, but are not obligated to, provide working capital loans. As of December 31, 2021, there were no amounts
outstanding under any working capital loans.

Based on the foregoing, we believe that we will
have sufficient working capital and borrowing capacity to meet our needs through one year from this filing. Over this time period, we
will be using the funds held outside of the trust account for paying existing accounts payable, identifying and evaluating prospective
initial business combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to merge with or acquire, and structuring, negotiating and consummating the initial business combination.

We continue to evaluate the impact of the COVID-19
pandemic on the industry and have concluded that while it is reasonably possible that the virus could have a negative effect on our financial
position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date
of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Results of Operations

Our entire activity since inception up to December
31, 2021 related to our formation, the preparation for the IPO, and since the closing of the IPO, the search for a prospective initial
business combination. We will not generate any operating revenues until after the completion of our initial business combination. We generate
non-operating income in the form of investment income from the trust account. We will continue to incur increased expenses as a result
of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement
of our derivative liabilities at each reporting period.

For the period from March 23, 2021 (inception)
through December 31, 2021, we had a net loss of approximately $544,000, which consisted of approximately $392,000 in general and administrative
expenses and approximately $152,000 in franchise tax expense, partially offset by approximately $900 in income from investments held in
the trust account.

Contractual Obligations

Registration Rights

The holders of founder shares, private placement
warrants and warrants that may be issued upon conversion of working capital loans, if any (and any shares of common stock issuable upon
the exercise of the private placement warrants or warrants issued upon conversion of the working capital loans and upon conversion of
the founder shares), were entitled to registration rights pursuant to a registration rights agreement to be signed prior to the consummation
of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights
agreement provides that we will not be required to effect or permit any registration or cause any registration statement to become effective
until termination of the applicable lock-up period. We will bear the expenses incurred in connection with the filing of any such
registration statements.

Underwriting Agreement

The underwriter was entitled to an underwriting
discount of $0.20 per unit on all units sold in the IPO, except for the units purchased by the anchor investors, or approximately $5.3 million
in the aggregate, paid upon the closing of the IPO.

The underwriter received an additional fee of $0.35
per unit, or approximately $10.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions.
The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete
an initial business combination, subject to the terms of the underwriting agreement.

Administrative Support Services

Commencing on December 9, 2021, we have agreed
to pay affiliates of our sponsor a total of $20,000 per month for office space and administrative support services. Upon completion of
our initial business combination or our liquidation, we will cease paying these monthly fees. In connection with our initial business
combination, we may potentially make a cash payment to affiliates of our sponsor or anchor investor for any financial advisory, placement
agency or other similar investment banking or consulting services that affiliates of our sponsor or anchor investor may provide to us
in connection with our initial business combination, and may reimburse to affiliates of our sponsor or anchor investor for any out-of-pocket expenses
incurred by it in connection with the performance of such services

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Critical Accounting Policies and Estimates

The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks. Management evaluates all of our financial instruments, including issued stock purchase
warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Financial
Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815-40, “Derivatives and Hedging - Contracts in Entity’s
Own Stock” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be classified
as liabilities or as equity, is re-assessed at the end of each reporting period.

The warrants issued in the IPO (“public warrants”)
and the private placement warrants are not precluded from equity classification, based on the guidance in ASC 480 and ASC 815. Equity-classified
contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the
contracts continue to be classified in equity.

Class A common shares subject to possible redemption

We account for our Class A common stock subject
to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) is classified
as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock
that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within our control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’
equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, all of our outstanding shares of Class A common stock is presented at redemption value
as temporary equity, outside of the stockholders’ equity section of our balance sheet.

Under ASC 480, we have elected to recognize changes
in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end
of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the security.
Effective with the closing of the IPO, we recognized the accretion from initial book value to redemption amount, which resulted in charges
against additional paid-in capital (to the extent available) and accumulated deficit.

Net income (loss) per common shares

We comply with accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock
and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share
is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.

The calculation of diluted net income (loss) does
not consider the effect of the public warrants and the private placement warrants to purchase an aggregate of 25,500,000 shares of Class
A common stock in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as
basic net income (loss) per share for the period from March 23, 2021 (inception) through December 31, 2021. Accretion associated with
the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

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Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting
Standards Update (“ASU”) No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by
removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for
equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. We adopted ASU 2020-06 on March 23, 2021 (inception).
Adoption of the ASU did not impact our financial position, results of operations or cash flows.

Our management does not believe that there are
any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our
balance sheet.

Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2021, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

JOBS Act

The Jumpstart Our Business Startups Act of 2012,
or the JOBS Act, contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We
qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non- emerging growth companies. As a result, the financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating
the benefits of relying on the other 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 choose to rely on such exemptions we may not be 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, (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 PCAOB 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 CEO’s compensation to median employee compensation. These exemptions
will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,”
whichever is earlier.