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United States securities and exchange commission logo
May 5, 2023
Surendra Ajjarapu
Chief Executive Officer
AIRO Group, Inc.
515 Madison Avenue, 8th Floor, Suite 8078
New York, NY 10022
Re:AIRO Group, Inc.
Draft Registration Statement on Form S-4
Submitted April 6, 2023
CIK No. 0001971544
Dear Surendra Ajjarapu:
            We have reviewed your draft registration statement and have the following comments.  In
some of our comments, we may ask you to provide us with information so we may better
understand your disclosure.
            Please respond to this letter by providing the requested information and either submitting
an amended draft registration statement or publicly filing your registration statement on
EDGAR.  If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.
            After reviewing the information you provide in response to these comments and your
amended draft registration statement or filed registration statement, we may have additional
comments.
Draft Registration Statement on Form S-4 submitted April 6, 2023
General
1.We note your disclosure on page 26.  Please clarify if the sponsor and its affiliates can
earn a positive rate of return on their investment, even if other SPAC shareholders
experience a negative rate of return in the post-business combination company.
2.Please highlight the material risks to public warrant holders, including those arising from
differences between private and public warrants.  Clarify whether recent common stock
trading prices exceed the threshold that would allow the company to redeem public
warrants.  Clearly explain the steps, if any, the company will take to notify all
shareholders, including beneficial owners, regarding when the warrants become eligible
for redemption.

 FirstName LastNameSurendra Ajjarapu
 Comapany NameAIRO Group, Inc.
 May 5, 2023 Page 2
 FirstName LastName
Surendra Ajjarapu
AIRO Group, Inc.
May 5, 2023
Page 2
3.Please disclose the sponsor and its affiliates’ total potential ownership interest in the
combined company, assuming exercise and conversion of all securities.
4.Please revise the conflicts of interest discussion so that it highlights all material interests
in the transaction held by the sponsor and the company’s officers and directors.  This
could include fiduciary or contractual obligations to other entities as well as any interest
in, or affiliation with, the target company.  In addition, please clarify how the board
considered those conflicts in negotiating and recommending the business combination.
5.We note your disclosure on page 56 that your governing documents waived the corporate
opportunities doctrine.  Please address this potential conflict of interest and whether it
impacted your search for an acquisition target.
6.We note that certain shareholders agreed to waive their redemption rights.  Please describe
any consideration provided in exchange for this agreement.
7.It appears that underwriting fees remain constant and are not adjusted based on
redemptions.  Revise to disclose the effective underwriting fee on a percentage basis for
shares at each redemption level presented in your sensitivity analysis related to dilution.
8.We note that you have entered into a forward purchase agreement.  Please revise to
disclose all the material terms of the agreement.  Also, revise to disclose the potential
impact of the agreement on non-redeeming shareholders.  Revise the risk factors section
accordingly.  File the agreement as an exhibit to this registration statement.
9.We note your disclosure on page 37 regarding Russia's invasion of Ukraine.  Please revise
your filing, as applicable, to provide more specific disclosure related to the direct or
indirect impact that Russia's invasion of Ukraine and the international response have had
or may have on your business.  For additional guidance, please see the Division of
Corporation Finance's Sample Letter to Companies Regarding Disclosures Pertaining to
Russia’s Invasion of Ukraine and Related Supply Chain Issues, issued by the Staff in May
2022.
10.We note section 5.7(e) of the business combination agreement appears to indicate the
financial projections of the target companies were delivered to you.  If applicable, please
revise to disclose the projections and all material assumptions underlying them and how
your board considered them.  Also revise to discuss when the projections were prepared,
who prepared them and when they were provided during the course of negotiations.
11.We note section 9.3 of your warrant agreement contains an exclusive forum provision.
Clarify whether the exclusive forum provision applies to actions arising under the
Securities Act, and tell us how you will inform investors whether the provision applies to
the Securities Act.  Please revise to include appropriate risk factor disclosure.

 FirstName LastNameSurendra Ajjarapu
 Comapany NameAIRO Group, Inc.
 May 5, 2023 Page 3
 FirstName LastName
Surendra Ajjarapu
AIRO Group, Inc.
May 5, 2023
Page 3
12.With a view toward disclosure, please tell us whether your sponsor is, is controlled by, or
has substantial ties with a non-U.S. person.  Please also tell us whether anyone or any
entity associated with or otherwise involved in the transaction, is, is controlled by, or has
substantial ties with a non-U.S. person.  If so, also include risk factor disclosure that
addresses how this fact could impact your ability to complete your initial business
combination.  For instance, discuss the risk to investors that you may not be able to
complete an initial business combination with a U.S. target company should the
transaction be subject to review by a U.S. government entity, such as the Committee on
Foreign Investment in the United States (CFIUS), or ultimately prohibited.  Further,
disclose that the time necessary for government review of the transaction or a decision to
prohibit the transaction could prevent you from completing an initial business
combination and require you to liquidate.  Disclose the consequences of liquidation to
investors, such as the losses of the investment opportunity in a target company, any price
appreciation in the combined company, and the warrants, which would expire worthless.
Questions and Answers about the Proposals for Stockholders
What happens if a substantial number of the Public Shareholders vote in favor..., page 17
13.Revise your disclosure to show the potential impact of redemptions on the per share value
of the shares owned by non-redeeming shareholders by including a sensitivity analysis
showing a range of redemption scenarios, including minimum, maximum and interim
redemption levels.
Selected Historical Financial Information of AIRO, page 29
14.It appears that the historical periods prior to the April 1, 2022 reverse recapitalization
between AIRO Group Holdings ("AIRO") and Aspen Avionics ("Aspen") should reflect
the historical financial information of Aspen, as AIRO's predecessor.  Please revise your
presentation or tell us why you believe your current presentation is appropriate.
Risk Factors
The Sponsor or Kernel's directors, executive officers or advisors..., page 53
15.We note the disclosure on page 53 that the SPAC sponsor and affiliates “may” purchase
SPAC securities in the open market and vote the securities in favor of approval of the
business combination transaction.  Please provide your analysis on how such potential
purchases would comply with Rule 14e-5.
Interests of Kernel's Directors and Officers and Others in the Business Combination, page 75
16.Please quantify the aggregate dollar amount and describe the nature of what the sponsor
and its affiliates have at risk that depends on completion of a business combination.
Include the current value of securities held, loans extended, fees due, and out-of-pocket
expenses for which the sponsor and its affiliates are awaiting reimbursement.  Provide
similar disclosure for the company’s officers and directors, if material.

 FirstName LastNameSurendra Ajjarapu
 Comapany NameAIRO Group, Inc.
 May 5, 2023 Page 4
 FirstName LastName
Surendra Ajjarapu
AIRO Group, Inc.
May 5, 2023
Page 4
17.Please expand your disclosure regarding the sponsor’s ownership interest in the target
company.  Disclose the approximate dollar value of the interest based on the transaction
value and recent trading prices as compared to the price paid.
Timeline of the Business Combination, page 78
18.Please clarify the basis for the initial $600 million valuation.  If the SPAC board
conducted any material analysis in connection with its negotiations regarding the
valuation of AIRO Group Holdings, Inc., discuss the material features of that analysis.
19.We note Kernel agreed to the final valuation of $770 million.  Please revise to disclose all
material factors that the Kernel board relied upon in agreeing to the current valuation.
Explain the quantitative factors regarding why the valuation increased from what was
initially offered.  Also, discuss in greater detail the discounted cash flow analysis
mentioned on page 79.
20.Please revise your disclosure in this section to include negotiations relating to material
terms of the transaction, including, but not limited to, valuation, structure, consideration,
proposals and counter-proposals, and the minimum cash amount.  In your revised
disclosure, please explain the reasons for the terms, each party’s position on the issues,
and how you reached agreement on the final terms.
Certain Material U.S. Federal Income Tax Considerations..., page 80
21.We note your disclosure here and in the business combination agreement indicating that
the parties intend that the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.  Please file a tax opinion that addresses each material tax
consequence discussed in this section.  To the extent that you intend to file a short form
tax opinion as Exhibit 8.1, please revise your disclosure on page 80 to reflect the fact that
the discussion reflects the opinion of counsel.  Also, revise your disclosure on page 16
accordingly.
Unaudited Pro Forma Condensed Combined Financial Information, page 97
22.Your disclosures on pages 98 and 104 state that the pro forma adjustments include a
contingent consideration expense related to the Aspen Management Carveout Plan.
 Please tell us where this expense has been reflected in your pro forma financial
statements.  If the arrangement is structured in such a manner that significantly different
results may occur, provide additional pro forma presentations which give effect to the
range of possible results.  See Rule 11-02(a)(10) of Regulation S-X.

 FirstName LastNameSurendra Ajjarapu
 Comapany NameAIRO Group, Inc.
 May 5, 2023 Page 5
 FirstName LastName
Surendra Ajjarapu
AIRO Group, Inc.
May 5, 2023
Page 5
Earnout Shares, page 105
23.We note that AIRO's stockholders and sponsor, after the closing of the business
combination, have the contingent right to receive "earnout shares" with an aggregate value
up to $330 million and $33 million, respectively.  Please address the following comments
related to the earnout share arrangement:

•Tell us in sufficient how you determined the earnout shares should not be classified
as liabilities under ASC 480.  We note that the shares issued appear to be based on a
fixed monetary amount depending on specific revenue and EBITDA thresholds.

•With respect to your analysis under ASC 815-40, your disclosure on page 106 states
that the earnout share arrangement contains contingencies involving "the daily
volume weighted average stock price on the basis of a specific price per share.”
However, it appears that the exercise contingency is based on future operating results,
specifically revenues and EBITDA.  Please clarify your disclosures accordingly.

•You disclose on page 106 that "in absence of dilutive activities, there will be either
zero or 19 million shares issuable under the Earnout Share arrangement."  As this
sentence appears to conflict with the potential scenarios discussed in items (i) through
(vi) on pages 105-106, clarify your disclosures accordingly.  Also tell us how the 19
million shares was determined and how it relates to the $330 million and $33 million
amounts referenced above.
2. Adjustments to Unaudited Pro Forma Combined Financial Information
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, page 107
24.Please address the following comments related to pro forma adjustment (5) disclosed on
page 111:

•Your disclosures discuss debt and contingent consideration "expected to be
renegotiated" and your "intent to convert" debt into equity.  Tell us and disclose if
there are existing signed agreements related to these transactions and if you can
unilaterally convert the debt.  To the extent you do not have arrangements in place
and/or you cannot unilaterally cause debt conversion, revise your disclosures to
remove the pro forma effect of these adjustments.

•Expand your disclosures to specifically identify and quantify the debt and contingent
payments due at closing, to quantify the amounts expected to be renegotiated, and to
indicate how you intend to account for payment deferrals and the issuance of
contingent consideration.  Additionally, clarify where the amounts due at closing and
amounts due after closing are classified on the pro forma balance sheet.

•Tell us and disclose what the $62.7 million adjustment to accumulated deficit

 FirstName LastNameSurendra Ajjarapu
 Comapany NameAIRO Group, Inc.
 May 5, 2023 Page 6
 FirstName LastNameSurendra Ajjarapu
AIRO Group, Inc.
May 5, 2023
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specifically represents.
25.Please address the following comments related to pro forma adjustments (6) and (8)
disclosed on page 112:

•Tell us and disclose the specific nature and pertinent details of the "unencumbered
cash provided by Kernel in an equity transaction at closing," the $25 million
convertible debt issuance and the conversion of debt to equity.

•Similar to our comment above, tell us if there are existing signed agreements related
to these transactions and if you can unilaterally convert the debt.  To the extent you
do not have arrangements in place and/or you cannot unilaterally cause debt
conversion, revise your disclosures to remove the pro forma effect of these
adjustments.
26.It does not appear that you have appropriately reflected pro forma adjustment (7) on the
face of the pro forma balance sheet.  It appears under Scenario 1 that the $18 million
adjustment should be an increase to additional paid-in capital and it appears under
Scenario 3 that the sign of the accumulated deficit adjustment should be reversed.  Please
revise your disclosures or tell us how your current presentation is appropriate.
27.Please address the following comments related to the Meteora Backstop Agreement:

•Tell us in sufficient detail how you determined the agreement should be accounted
for as an asset under ASC 480.

•Tell us what consideration you gave to accounting for the agreement as a hybrid
instrument consisting of a loan and an embedded forward purchase contract, with the
contract possibly requiring bifurcation as an embedded derivative under ASC 815 or
reflected as a reduction of equity under ASC 505-10-45-2.

•Explain how you intend to account for the agreement throughout its existence.
Provide us with illustrative journal entries that summarize your accounting treatment
for the agreement at its outset, during its term, and at maturity.

•Based on your table on page 110, it appears you reflected a valuation adjustment loss
of approximately $28.5 million within your pro forma financial statements.  Tell us in
further detail the nature of this adjustment and why it is necessary.  If applicable,
clarify why a day one loss is required.
Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Operations, page
112
28.Please