Note 10 — SHARE-BASED COMPENSATION

Legacy Montana Options

On April 5, 2023, Legacy Montana granted 383,151 options, as converted, exercisable for Class A common stock to key team members of Legacy Montana. The options immediately vested, had an exercise price of $0.49, as converted, a term of seven years, and a grant date fair value of $0.14, as converted. The Company used the Black-Scholes option pricing model to estimate the fair value of stock options. Fair value was estimated at the date of grant.

In January, February and March 2024, 13 Legacy Montana option holders exercised their options to purchase a total of 2,141,839 shares of Class A common stock, as converted, for a total purchase price of $56,250. In June 2024, one Legacy Montana option holder exercised its options to purchase a total of 8,000 shares of Class A common stock, as converted, for a total purchase price of $3,920.

In September 2024, three Legacy Montana option holders exercised their options to purchase a total of 67,495 shares of Class A common stock, as converted, for a total purchase price of $33,073.

In the three months ended December 31, 2024, three Legacy Montana option holders exercised their options to purchase a total of 85,496 shares of Class A common stock, as converted, for a total purchase price of $37,453.

In the three months ended March 31, 2025, four Legacy Montana option holders exercised their options to purchase a total of 147,579 shares of Class A common stock, as converted, for a total purchase price of $41,759.

In the three months ended June 30, 2025, two Legacy Montana option holders exercised their options to purchase a total of 148,486 shares of Class A common stock, as converted, for a total purchase price of $57,958.

As of June 30, 2025, of the 878,022 Legacy Montana options that are outstanding, 535,955 options expire on December 7, 2030, 71,395 options expire on March 15, 2031, 60,672 options expire on April 4, 2030, and 210,000 options expire on April 8, 2031.

2024 Incentive Award Plan

On March 8, 2024, the holders of XPDB common stock considered and approved the Montana Technologies Corporation’s 2024 Incentive Award Plan (the “Incentive Plan”), which became effective immediately upon the Closing on March 14, 2024. Under the Incentive Plan, the Company may grant equity and equity-based awards to certain employees, consultants and non-employee directors award, such as, (a) Incentive Stock Options (granted to employees only), (b) Non-Qualified Stock Options (“NSOs”), (c) Stock Appreciation Rights, (d) Restricted Stock Units, (e) Restricted Stock, (f) dividend equivalents and (g) other stock and cash-based awards of the Company (“Incentive Awards”). The sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with ASC 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year of the Company may not exceed $500,000 (or, with respect to the first fiscal year of the Post-Combination Company during which a non-employee director first serves as a non-employee director, $1,000,000). As of June 30, 2025, there were 4,887,182 shares of common stock available for future issuance under the Incentive Plan.

2024 Employee Stock Purchase Plan

The 2024 Employee Stock Purchase Plan (the “2024 ESPP”) became effective immediately upon the Closing on March 14, 2024 and as of June 30, 2025, a total of 1,074,213 shares of common stock are reserved for issuance under the 2024 ESPP. Eligible employees may purchase shares of common stock under the 2024 ESPP at 85% of the lower of the fair market value of the Company’s common stock as of the first or the last day of each offering period. Employees are limited to contributing 15% of the employee’s eligible compensation and may not purchase more than $25,000 of stock during any calendar year or more than 12,000 shares during any one

purchase period. The 2024 ESPP share reserve automatically increases on January 1st of each calendar year, for ten years, commencing on January 1, 2025, in an amount equal to 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Board may act prior to January 1st of a given year to provide that there will be no January 1st increase of the share reserve for such year or that the increase in the share reserve for such year will be a smaller number of shares of common stock than would otherwise occur pursuant to the preceding sentence. On January 1, 2025, the share reserve increased by 559,286. During the three and six months ended June 30, 2025 and 2024, the Company did not issue shares as the first purchase date had not yet occurred.

The Company recorded share-based compensation expense in the following expense categories of its accompanying unaudited condensed consolidated statements of operations during the three and six months ended June 30, 2025 and 2024.

Stock Options

There were 69,124 options granted during the three months ended June 30, 2025. As of June 30, 2025, the unrecognized compensation cost for options issued and then outstanding was $2.1 million and will be recognized over an estimated weighted-average amortization period of 2.93 years. The total intrinsic value of options exercised during the six months ended June 30, 2025 and 2024 was $1.7 million and $72,080, respectively. The aggregate intrinsic value of options outstanding and exercisable as of June 30, 2025 was $3.9 million.

Restricted Stock Units with Service-Only Conditions

The Company recognized $1.2 million and $0.1 million of stock-based compensation cost related to RSUs with Service-Only conditions for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, the unrecognized compensation cost for RSUs with service-only conditions was $6.7 million and will be recognized over an estimated weighted-average amortization period of 2.68 years. The fair values of RSUs with service-only conditions are based on the fair value of the Company’s common stock on the date of the grant. The 685,693 RSUs with service-only conditions that were granted during the six months ended June 30,

2025 consisted of 384,014 awards granted to employees, 133,457 awards granted to non-employee equity method investees and 168,222 awards granted to non-employee directors. The awards granted to employees and to non-employee equity method investees vest as to 33.33% of the total awards granted on each of the first three anniversaries of the applicable vesting commencement date, subject to the applicable employee’s continued service through the applicable vesting date. The awards granted to non-employee directors vest as to 100% of the total awards granted on the earlier of the first year anniversary of the applicable vesting commencement date and the date of the next annual shareholders' meeting.

Restricted Stock Units with Market-Based Conditions

The Company recognized $0.7 million of stock-based compensation cost related to RSUs with Market-Based conditions for the six months ended June 30, 2025. As of June 30, 2025, the unrecognized compensation cost for RSUs with market-based conditions was $4.3 million and will be recognized over an estimated weighted-average amortization period of 2.50 years. The fair values of RSUs with market-based conditions are estimated using a Monte Carlo simulation model, which incorporates the likelihood of achieving the market condition. The 496,483 RSUs with market-based conditions that were granted during the six months ended June 30, 2025 consisted of 475,298 awards granted to employees and 21,185 awards granted to non-employee equity method investees. These awards vest subject to certain market conditions.

The Company records expense ratably over the requisite service period, with expense determined based on the grant date fair value regardless of whether the market condition is satisfied because the awards are subject to market conditions. These awards that remain subject to market conditions are reflected at the target level, which is consistent with how expense will be recorded, regardless of the numbers of shares that are expected to be earned. The grant date fair value of the awards granted is established using the Monte Carlo simulation model. The following summarizes the assumptions used to estimate the fair value of the RSUs with market-based conditions that were granted during the six months ended June 30, 2025:

These awards vest subject to certain performance-based conditions. The Company recognized $0.1 million of stock-based compensation cost related to RSUs with Performance-Based conditions for the six months ended June 30, 2025.