AirJoule Technologies Corp. (AIRJ) FY 2022 MD&A

Item 7. 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.

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Overview

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.

Upon the closing of the IPO and the private placement on December 14,
2021, approximately $290.4 million ($10.10 per unit) of the net proceeds of the sale of the units in the IPO, including proceeds from
the sale of the Over-Allotment Units and certain of the proceeds from the sale of the private placement warrants, were deposited into
a segregated trust account (the “Trust Account”) located in the United States with Continental Stock Transfer & Trust
Company acting as trustee and approximately $1.7 million of such net proceeds were deposited in our operating account to pay expenses
in connection with the closing of the IPO and for working capital following the IPO. The proceeds held in the Trust Account have been
invested 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.

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We will have until 18 months from the closing of
the IPO, or June 14, 2023, 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, 2022, there were no amounts outstanding under any working capital loans.

In connection with the Company’s assessment
of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB’s”) Accounting
Standards Codification (“ASC”) Topic 205-40, “Presentation of Financial Statements – Going Concern,” management
has determined that the liquidity needs, mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s
ability to continue as a going concern, which is considered to be one year from the issuance of these financial statements. No adjustments
have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 14, 2023. The financial
statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. The Company
intends to complete a Business Combination before the mandatory liquidation date, as it may be extended. Over this time period, the Company
will be using the funds 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 Business Combination.

The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern through one year from the issuance date of these financial statements. These financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.

We continue to evaluate the impact of the COVID-19
pandemic on the Company and have concluded that while it is reasonably possible that the virus could have a negative effect on our financial
position, results of the Company’s 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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In February 2022, the Russian Federation and Belarus
commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have
instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on
the world economy are not determinable as of the date of these financial statements.

On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise
tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its
shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased
at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the
fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition,
certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority
to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other
share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject
to the excise tax. Whether and to what extent we would be subject to the excise tax in connection with a Business Combination, extension
vote or otherwise will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection
with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any
“PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business
Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by us and not by the redeeming holder, the mechanics of any required
payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a
Business Combination and in our ability to complete a Business Combination. Further, the application of the excise tax in the event of
a liquidation is uncertain.

Results of Operations

Our entire activity since inception up to December
31, 2022 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.

For the year ended December 31, 2022, we had a net income of approximately
$2.0 million, which consisted of approximately $4.2 million of income from investments held in the trust account, partially offset by
approximately $1.3 million in operating expenses and approximately $802,000 in income tax expenses. Operating expenses were comprised
of approximately $888,000 of general and administrative expenses, $240,000 of general and administrative expenses - related party, and
$215,000 of franchise tax expense.

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.

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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.

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.

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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 sheets.

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 loss per common share is calculated
by dividing the net 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 year ended December 31, 2022 and 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.

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 recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our balance
sheets.

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Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2022, 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.