Kernel (KRNL) DEFM14AProxy related to merger

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Kernel Group Holdings, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS OF

KERNEL GROUP HOLDINGS, INC.

PROXY STATEMENT FOR
EXTRAORDINARY GENERAL MEETING OF

KERNEL GROUP HOLDINGS, INC.

(A CAYMAN ISLANDS EXEMPTED COMPANY)

PROSPECTUS FOR
95,934,699 SHARES OF COMMON STOCK AND

23,987,500 WARRANTS

OF

AIRO GROUP, INC.

The board of directors of Kernel Group Holdings, Inc., a Cayman Islands exempted company (“Kernel”) has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated March 3, 2023 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Kernel, AIRO Group, Inc., a Delaware corporation (“ParentCo”), Kernel Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of ParentCo (“Kernel Merger Sub”), AIRO Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of ParentCo (“AIRO Merger Sub”), VKSS Capital, LLC, in the capacity as the representative from and after the First Effective Time (as defined below) for the stockholders of Kernel and ParentCo (the “ParentCo Representative”) and also in its capacity as Kernel’s sponsor (“Sponsor”), Dr. Chirinjeev Kathuria, in the capacity as the representative from and after the Second Effective Time for the AIRO stockholders as of immediately prior to the Second Effective Time (the “Seller Representative”), and AIRO Group Holdings, Inc., a Delaware corporation (“AIRO”), a copy of which is attached to this proxy statement/prospectus as Annex A, including the deregistration of Kernel under the Cayman Islands Companies Act (As Revised) and the domestication under Part XII of the Delaware General Corporation Law, pursuant to which Kernel’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the “Domestication”). As described in this proxy statement/prospectus, Kernel’s shareholders are being asked to consider a vote upon each of the Domestication and the Business Combination, among other items.

In connection with the Domestication, each issued and outstanding Kernel Class A Ordinary Share, each issued and outstanding Kernel Class B Ordinary Share, each issued and outstanding Kernel Private Placement Warrant, each issued and outstanding Kernel Public Warrant, and each issued and outstanding Kernel Unit shall convert automatically, on a one-for-one basis, into one share of Kernel Class A common stock, one share of Kernel Class B common stock, one Kernel private warrant, one Kernel public warrant and one Kernel public unit, respectively, and (ii) immediately following the Domestication, (a) each share of Kernel Class B common stock shall convert automatically, on a one-for-one basis, into one share of Kernel Class A common stock, (b) the Kernel Class A common stock will be reclassified as Kernel common stock, and (c) each Kernel public unit will be separated into one share of Kernel common stock and one Kernel Public Warrant.

On the Closing Date, Kernel Merger Sub will merge with and into Kernel (the “First Merger”), with Kernel surviving the First Merger as a wholly owned subsidiary of ParentCo. In accordance with the terms and subject to the conditions of the Business Combination Agreement and the Proposed ParentCo Charter, (i) each share of Kernel common stock, each Kernel Private Placement Warrant, and each Kernel Public Warrant issued and outstanding immediately prior to the First Effective Time shall automatically be converted into and exchanged for one validly issued, fully paid and nonassessable share of ParentCo Common Stock, one ParentCo Private Placement Warrant or one ParentCo Public Warrant, respectively (“Kernel Merger Consideration”), (ii) each share of ParentCo Common Stock held by Kernel issued and outstanding immediately prior to the First Effective Time shall automatically be cancelled and shall cease to exist as of the First Effective Time, (iii) each share of Kernel Merger Sub Common Stock issued and outstanding as of immediately prior to the First Effective Time shall automatically be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the company surviving the First Merger. Immediately following the First Merger, AIRO Merger Sub will merge with and into AIRO (the “Second Merger”) with AIRO surviving the Second Merger as a wholly-owned subsidiary of ParentCo. In accordance with the terms and subject to the conditions of the Business Combination Agreement, the holders of AIRO’s securities collectively shall be entitled to receive from ParentCo, in the aggregate, a number of shares of ParentCo common stock with an aggregate value equal to (a) $770,000,000 minus (b) the amount, if any, by which the net working capital is less than $(5,500,000) by more than $500,000, plus (c) the amount, if any, by which the net working capital is greater than $(5,500,000) by more than $500,000 (but not less than zero), minus (d) the amount, if any, by which the closing net debt exceeds $75,000,000 by more than $500,000 (but not less than zero), plus (e) the amount, if any, by which the closing net debt is less than $75,000,000, minus (f) the amount, if any, by which the company transaction expenses exceed $14,000,000 (such resulting amount, the “AIRO Merger Consideration”).

It is anticipated that, upon completion of the Business Combination, (i) Kernel’s Public Shareholders will retain an ownership interest of approximately 0.6% of the outstanding shares of ParentCo Common Stock, (ii) the AIRO stockholders (as defined in the accompanying proxy statement/prospectus) will own, collectively, approximately 85.9% of the outstanding shares of ParentCo Common Stock, and (iii) Kernel’s Sponsor will own approximately 8.4% of the outstanding shares of ParentCo Common Stock, in each case, assuming that none of Kernel’s outstanding Public Shares are redeemed in connection with the Business Combination, or approximately nil, 86.4%, and 8.4%, respectively, assuming that all of Kernel’s outstanding Public Shares are redeemed in connection with the Business Combination. See “Shareholder Proposal No. 1: The Business Combination Proposal — Post-Business Combination Ownership of ParentCo” for more details.

The number of shares of ParentCo Common Stock that this proxy statement/prospectus covers is the maximum number of shares that may be issued to AIRO stockholders and the maximum number of shares issued or issuable to the existing shareholders and warrant holders of Kernel, in each case, in connection with the Business Combination. The number of Warrants that this proxy statement/prospectus covers is the number of redeemable warrants issued by Kernel in its IPO, plus the Private Placement Warrants that were issued in a private placement simultaneously with Kernel’s IPO.

Kernel’s Units, Public Share and Public Warrants are currently listed on Nasdaq Capital Market (“Nasdaq”) under the symbols “KRNLU,” “KRNL,” and “KRNLW,” respectively. Kernel will apply for listing, to be effective at the time of the Business Combination, of ParentCo Common Stock and warrants on Nasdaq under the proposed symbols “AIRO” and “AIROW,” respectively. It is a condition of the consummation of the Business Combination that Kernel receive confirmation from Nasdaq that ParentCo Common Stock has been conditionally approved for listing on Nasdaq, but there can be no assurance such listing condition will be met or that Kernel will obtain such confirmation from Nasdaq, and you may not know whether the listing condition has been met at the time of the Extraordinary General Meeting (as defined below). If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the Nasdaq condition set forth in the Business Combination Agreement is waived by ParentCo.

Kernel will hold an extraordinary general meeting (the “Extraordinary General Meeting”) to consider matters relating to the Business Combination at 9:00 a.m., Eastern Time, on July 31, 2024. For the purposes of Cayman Islands Companies Law and the Second Amended and Restated Memorandum and Articles of Association of Kernel, the physical location of the Extraordinary General Meeting shall be Nelson Mullins Riley & Scarborough LLP, 101 Constitution Ave. NW, Suite 900, Washington, DC 20001, or you or your proxyholder will be able to attend and vote at the Extraordinary General Meeting online by visiting https://agm.issuerdirect.com/krnl and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the Extraordinary General Meeting, registered shareholders and beneficial shareholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the accompanying proxy statement/prospectus.

Kernel is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, and has elected to take advantage of certain reduced public company reporting requirements.

If you have any questions or need assistance voting your ordinary shares, please contact Issuer Direct Corporation, our proxy solicitor, by calling (919) 481-4000, or banks and brokers can call collect at (919) 481-4000, or by emailing proxy@issuerdirct.com. The notice of the Extraordinary General Meeting and the proxy statement/prospectus relating to the Business Combination will be available at https://agm.issuerdirect.com/krnl.

The accompanying proxy statement/prospectus provides shareholders of Kernel with detailed information about the Business Combination and other matters to be considered at the Extraordinary General Meeting of Kernel. We encourage you to read the entire accompanying proxy statement/prospectus, including the Annexes and other documents referred to therein, carefully and in their entirety. In particular, when you consider the recommendation of the board of directors of Kernel to vote in favor of the proposals described in this proxy statement/prospectus, you should keep in mind that Kernel’s directors and officers have interests in the Business Combination that are different from, in addition to or may conflict with your interests as a shareholder. For instance, the Sponsor, and the officers and directors of Kernel who have invested in the Sponsor entity, will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to shareholders rather than liquidate. See the section entitled “Interests of Kernel’s Directors and Officers and Others in the Business Combination” for a further discussion. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 37 of the accompanying proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

The accompanying proxy statement/prospectus is dated July 10, 2024, and is first being mailed to Kernel’s shareholders on or about July 10, 2024.

Kernel Group Holdings, Inc.

515 Madison 8th Floor – Suite 8078

New York, New York 10022

(646) 908-2659

NOTICE OF EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS OF

KERNEL GROUP HOLDINGS, INC.

TO BE HELD ON JULY 31, 2024

To the Stockholders of Kernel Group Holdings, Inc.:

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the shareholders (the “Extraordinary General Meeting”) of Kernel Group Holdings, Inc. (“Kernel”), a Cayman Islands exempted company, will be held at 9:00 a.m., Eastern Time, on July 31, 2024, at Nelson Mullins Riley & Scarborough LLP, 101 Constitution Ave. NW, Suite 900, Washington, DC 20001. You will also be able to attend the Extraordinary General Meeting online, vote and submit your questions during the Extraordinary General Meeting by visiting https://agm.issuerdirect.com/krnl.

At the Extraordinary General Meeting, Kernel shareholders will be asked to consider and vote upon the following proposals (each, a “Proposal” and collectively, the “Proposals”), as more fully described in the accompanying proxy statement/prospectus:

Kernel’s board of directors (the “Kernel Board”) has adopted and approved the Business Combination Agreement and recommends a vote “FOR” the Business Combination Proposal, “FOR” the Domestication Proposal “FOR” the ParentCo Charter Amendment Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the Employee Stock Purchase Plan Proposal, “FOR” the Election of Directors Proposal, and “FOR” the NTA Proposal, and “FOR” the Adjournment Proposal. Kernel does not expect a vote to be taken on any other matters at the Extraordinary General Meeting or any adjournment or postponement thereof. When you consider the recommendation of these proposals by the Kernel Board, you should keep in mind that the Sponsor and certain of Kernel’s directors and officers and others have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled “Interests of Kernel’s Directors and Officers and Others in the Business Combination” in the accompanying proxy statement/prospectus for a further discussion of these considerations.

Holders of record of Kernel’s Class A Ordinary Shares, par value $0.0001 per share, and Kernel’s Class B Ordinary Shares, par value $0.0001 per share (also referred to herein as “Founder Shares”) (collectively, the “Kernel Ordinary Shares”) at the close of business on July 10, 2024 (the “Record Date”) will be entitled to notice of and to vote at the Extraordinary General Meeting or any adjournment or postponement thereof. Each Kernel Ordinary Share entitles the holder thereof to one vote. The holders of the Founder Shares (the “Kernel Restricted Shareholders”) are parties to the Kernel Support Agreement pursuant to which they have agreed to vote their Founder Shares and any Class A Ordinary Shares purchased during or after our IPO in favor of the Business Combination. As of July 3, 2024, our Kernel Restricted Shareholders own approximately 93.7% of our issued and outstanding Kernel Ordinary Shares.

Attention is directed to the proxy statement/prospectus accompanying this notice (including the financial statements and annexes attached thereto) for a more complete description of the proposed Business Combination and related transactions and each of our Proposals. We encourage you to read the accompanying proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Issuer Direct Corporation at (919) 481-4000 or email Issuer Direct Corporation at proxy@issuerdirect.com.

All Kernel shareholders are cordially invited to attend the Extraordinary General Meeting in virtual format. Kernel shareholders may attend, vote and examine the list of Kernel shareholders entitled to vote at the Extraordinary General Meeting by visiting https://agm.issuerdirect.com/krnl and using the conference ID number listed on the proxy card. To ensure your representation at the Extraordinary General Meeting, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. To vote online, please have your proxy card available and visit https://www.iproxydirect.com/KRNL and follow the prompts to vote your shares. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the Extraordinary General Meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. If you sold or transferred your shares after the record date, it is still important that you vote. Each of the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and NTA Proposal is interdependent upon the others and must be approved in order for Kernel to complete the Business Combination as contemplated by the Business Combination Agreement. The Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, and the Adjournment Proposal all require the affirmative vote of a majority of the issued and outstanding Kernel Ordinary Shares cast by the shareholders represented in person (which would include presence at a virtual meeting) or by proxy at the Extraordinary General Meeting and entitled to vote thereon, voting as a single class. Each of the Domestication Proposal, the ParentCo Charter Amendment Proposal, and the NTA Proposal requires the affirmative vote of at least a two-thirds (2/3) majority of the issued and outstanding Kernel Ordinary Shares cast by the shareholders represented in person (which could include presence at a virtual meeting) or by proxy at the Extraordinary General Meeting and entitled to vote thereon, voting as a single class. The election of directors under the Election of Directors Proposal requires a majority vote of the Class B Ordinary Shares present in person (which would include presence at a virtual meeting) or represented by proxy and entitled to vote at the Extraordinary General Meeting.

TABLE OF CONTENTS

ADDITIONAL INFORMATION

You may request copies of this proxy statement/prospectus and any other publicly available information concerning Kernel, without charge, by written request to Kernel Group Holdings, Inc., 515 Madison Avenue, Suite 8133, New York, New York 10022, or by telephone request at (646) 908-2659; or Issuer Direct Corporation, our proxy solicitor, by calling (919) 481-4000, or banks and brokers can call collect at (919) 481-4000, or by emailing proxy@issuerdirect.com or from the SEC through the SEC website sec.gov.

In order for Kernel’s shareholders to receive timely delivery of the documents in advance of the Extraordinary General Meeting of Kernel to be held on July 31, 2024, you must request the information no later than five business days prior to the date of the Extraordinary General Meeting, by July 24, 2024.

ABOUT THIS PROXY STATEMENT/PROSPECTUS

No person has been authorized to give any information or any representation concerning us or the Business Combination (other than as contained in this proxy statement/prospectus) and we take no responsibility for, nor can we provide any assurance as to the reliability of, any other information that others may give you. You should not assume that the information contained or incorporated by reference in this proxy statement/prospectus is accurate as of any date other than the date on the front cover of this proxy statement/prospectus or the date of the incorporated document, as applicable.

In making an investment decision, prospective investors must rely on their own examination of us, and the terms of the Business Combination, including the merits and risks involved. Prospective investors should not construe anything in this proxy statement/prospectus as legal, business, or tax advice.

This proxy statement/prospectus contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference.

TRADEMARKS

This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this proxy statement/prospectus may appear without the ^® or ^TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Shareholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement/prospectus, but does not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus, including the attached Annexes, for a more complete understanding of the matters to be considered at the Extraordinary General Meeting. In addition, for definitions used commonly throughout this proxy statement/prospectus, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and the “Company” refer to Kernel Group Holdings, Inc. (which prior to the Domestication is an exempted company incorporated under the laws of the Cayman Islands and thereafter a corporation incorporated under the laws of the State of Delaware). In this proxy statement/prospectus:

“Accounting Principles” means in accordance with GAAP as in effect at the date of the financial statement to which it refers or if there is no such financial statement, then as of the Closing Date, using and applying the same accounting principles, practices, procedures, policies and methods (with consistent classifications, judgments, elections, inclusions, exclusions and valuation and estimation methodologies) used and applied by the Target Companies in the preparation of the latest audited Company Financials (as defined in the Business Combination Agreement).

“AIRO” shall mean AIRO Group Holdings, Inc., a Delaware corporation.

“AIRO Merger Consideration” shall mean a number of shares of ParentCo Common Stock with an aggregate value equal to (a) $770,000,000 minus (b) the amount, if any, by which the Target Net Working Capital Amount exceeds the Net Working Capital by more than $500,000, plus (c) the amount, if any, by which the Net Working Capital exceeds the Target Net Working Capital Amount by more than $500,000 (but not less than zero), minus (d) the amount, if any, by which the Closing Net Debt exceeds the Target Net Debt, by more than $500,000 (but not less than zero), plus (e) the amount, if any, by which the Target Net Debt exceeds Closing Net Debt, minus (f) the amount, if any, by which the Company Transaction Expenses exceed the Target Company Transaction Expenses (but not less than zero), with each share of ParentCo Common Stock valued at the Per Share Price.

“AIRO Merger Sub” shall mean AIRO Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of ParentCo.

“AIRO Warrants” shall mean, collectively, that Warrant to Purchase Equity dated March 10, 2022 by and between AIRO and Stephenson Management Inc. and that Warrant to Purchase Equity dated March 10, 2022 by and between AIRO and Scarsdale Capital Inc. The term “AIRO Warrants” shall include the replacement warrants to purchase shares of ParentCo common stock that will be issued to Stephenson Management Inc. and Scarsdale Capital Inc. upon Closing of the Business Combination.

“Amended and Restated Memorandum and Articles of Association” means the amended and restated memorandum and articles of association of Kernel.

“Business Combination” shall mean the transactions contemplated by the Business Combination Agreement, whereby, among other things, Kernel will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware, following which, (i) Kernel Merger Sub will merge with and into Kernel, with Kernel continuing as the surviving entity as a wholly owned subsidiary of ParentCo (the “First Merger”), and (ii) AIRO Merger Sub will merge with and into AIRO, with AIRO continuing as the surviving entity as a wholly-owned subsidiary of ParentCo (the “Second Merger”).

“Business Combination Agreement” means that certain Agreement and Plan of Merger dated March 3, 2023 by and among Kernel, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Sponsor, Seller Representative, and AIRO.

“Cayman Islands Companies Law” means the Companies Act (As Revised) of the Cayman Islands as the same may be amended from time to time.

“Citigroup” shall mean Citigroup Global Markets Inc., the representative of the underwriters in the IPO.

“Class A Ordinary Shares” shall mean the Class A ordinary shares, par value $0.0001 per share, of Kernel.

“Class B Ordinary Shares” shall mean the Class B ordinary shares, par value $0.0001 per share, of Kernel.

“Closing” shall mean the closing of the Business Combination.

“Closing Company Cash” means, as of the Reference Time, the aggregate cash and cash equivalents of the Target Companies on hand or in bank accounts, including deposits in transit, minus the aggregate amount of outstanding and unpaid checks issued by or on behalf of the Target Companies as of such time.

“Closing Date” shall mean the date and time at which the Closing is actually being held.

“Closing Net Debt” means, as of the Reference Time, (a) the aggregate amount of all Indebtedness of the Target Companies, less (b) the Closing Company Cash, in each case of clauses (a) and (b), on a consolidated basis and as determined in accordance with the Accounting Principles.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Company Transaction Expenses” means all fees and expenses of any of the Target Companies incurred or payable as of the Closing and not paid prior to the Closing (i) in connection with the consummation of the transactions contemplated hereby, including any amounts payable to professionals (including investment bankers, brokers, finders, attorneys, accountants and other consultants and advisors) retained by or on behalf of any Target Company, (ii) any change in control bonus, accrued but unpaid salary, transaction bonus, retention bonus, termination or severance payment or payment relating to terminated options, warrants or other equity appreciation, phantom equity, profit participation or similar rights, in any case, to be made to any current or former employee, independent contractor, director or officer of any Target Company at or after the Closing pursuant to any agreement to which any Target Company is a party prior to the Closing which become payable (including if subject to continued employment) as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby, (iii) any sales, use, real property transfer, stamp, stock transfer or other similar transfer Taxes imposed on Target Company in connection with the Business Combination or the other transactions contemplated by this Agreement, and (iv) in connection with the Company’s prior attempt at completing an initial public offering or SPAC transaction, including any amounts payable to professionals (including investment bankers, brokers, finders, attorneys, accountants and other consultants and advisors) retained by or on behalf of any Target Company in connection with the Company’s attempted initial public offering or SPAC transaction.

“Continental” shall mean Continental Stock Transfer & Trust Company, the transfer agent.

“DGCL” shall mean the Delaware General Corporation Law, as amended.

“Definitive Proxy Statement” shall mean Kernel’s definitive proxy statement on Schedule 14A filed with the SEC on January 17, 2024.

“Earnout Eligibility Period” shall mean the period commencing on the Closing Date and ending on December 31, 2026.

“Earnout Shares” shall mean the 33,000,000 shares of ParentCo Common Stock which are comprised of three different tranches, issuable to AIRO stockholders during the Earnout Eligibility Period as additional consideration from ParentCo based on ParentCo’s revenue performance.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Existing Kernel Governing Documents” means Kernel’s Amended and Restated Memorandum and Articles of Association, as subsequently amended by that Amendment to the Amended and Restated Articles of Association dated February 3, 2023.

“Existing ParentCo Governing Documents” means ParentCo’s certificate of incorporation dated February 27, 2023 and ParentCo’s bylaws adopted February 27, 2023.

“Extension Meeting” means the Kernel extraordinary general meeting of shareholders held on February 3, 2023, at which shareholders voted upon, among other items, a proposal to amend Kernel’s amended and restated memorandum and articles of association to extend the date by which Kernel must consummate an initial business combination.

“Extension Meeting - Second” means the Kernel extraordinary general meeting of shareholders held on August 3, 2023, at which shareholders voted upon, among other items, a proposal to amend Kernel’s amended and restated memorandum and articles of association to extend the date by which Kernel must consummate an initial business combination.

“Extension Meeting - Third” means the Kernel extraordinary general meeting of shareholders to be held on February 1, 2024, at which shareholders will vote upon, among other items, the Extension Amendment Proposal.

“Extension Redemption” means the redemption of 22,848,122 Class A Ordinary Shares in connection with the Extension Meeting.

“Extension Redemption - Second” means the redemption of 1,310,929 Class A Ordinary Shares in connection with the Extension Meeting - Second.

“Extension Redemption - Third” means the redemption of Class A Ordinary Shares in connection with the Extension Meeting - Third.

“Extraordinary General Meeting” shall mean the Extraordinary General Meeting of the shareholders of Kernel, to be held on July 31, 2024 at 9:00 a.m. Eastern Time, which will be a virtual meeting conducted via live webcast.

“First Amendment to the Business Combination Agreement” shall mean that certain First Amendment to the Business Combination Agreement, dated August 29, 2023.

“First Effective Time” shall mean the time when the First Merger is consummated, upon the filing of the Certificate of Merger for the merger of Kernel Merger Sub with and into Kernel with the Delaware Secretary of State in accordance with the relevant provisions of the DGCL.

“First Merger” shall mean the merger of Kernel Merger Sub with and into Kernel, with Kernel surviving as a wholly owned subsidiary of ParentCo.

“Founder Shares” shall mean the 7,618,750 Kernel Class B Ordinary Shares, par value $0.0001 per share, owned by the Sponsor and Kernel’s directors.

“Fourth Amendment to the Business Combination Agreement” shall mean that certain Fourth Amendment to the Business Combination Agreement, dated June 24, 2024.

“HSR Act” shall mean the Hart Scott Rodino Antitrust Act.

“Indebtedness” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money (including the outstanding principal and accrued but unpaid interest), (b) all obligations for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business), (c) any other indebtedness of such Person that is evidenced by a note, bond, debenture, credit agreement or similar instrument, (d) all obligations of such Person under leases that should be classified as capital leases in accordance with GAAP, (e) all obligations of such Person for the reimbursement of any obligor on any line or letter of credit, banker’s acceptance, guarantee or similar credit transaction, in each case, that has been drawn or claimed against, (f) all obligations of such Person in respect of acceptances issued or created, (g) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (h) all obligations secured by an Lien (as defined in the Business Combination Agreement) on any property of such Person, (i) any premiums, prepayment fees or other penalties, fees, costs or expenses associated with payment of any Indebtedness of such Person and (j) all obligation described in clauses (a) through (i) above of any other Person which is directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against loss.

“IPO” shall mean Kernel’s Initial Public Offering of Units, consummated on February 5, 2021.

“Kernel” shall mean Kernel Group Holdings, Inc., a Cayman Islands exempted company.

“Kernel Board” shall mean the board of directors of Kernel.

“Kernel Merger Consideration” shall mean the shares of ParentCo Common Stock, into which each share of Kernel common stock issued and outstanding immediately prior to the First Effective Time shall automatically convert.

“Kernel Merger Sub” shall mean Kernel Merger Sub, Inc., a Delaware corporation, and a wholly-owned subsidiary of ParentCo.

“Kernel Ordinary Shares” shall mean the Class A Ordinary Shares and Class B Ordinary Shares, par value $0.0001 per share, of Kernel.

“Kernel Restricted Shareholders” shall mean the holders of the Founder Shares.

“Kernel Support Agreement” shall mean the agreement by and among Kernel, Sponsor and certain shareholders of Kernel to, among other things, vote their shares of Kernel Ordinary Shares in favor of the adoption and approval of the Business Combination Agreement and the transactions contemplated thereby.

“Lock-Up Agreements” shall mean the agreements entered into by Kernel with the Sponsor and agreements entered into by ParentCo with the Sponsor and certain AIRO stockholders in form and substance mutually acceptable to the parties thereto.

“Net Working Capital” means, as of the Reference Time, (i) all current assets of the Target Companies (excluding, without duplication, Closing Company Cash), on a consolidated basis, minus (ii) all current liabilities of the Target Companies (excluding, without duplication, Indebtedness and unpaid Company Transaction Expenses), on a consolidated basis and as determined in accordance with the Accounting Principles; provided, that, for purposes of this definition, whether or not the following is consistent with the Accounting Principles, “current assets” will exclude any receivable from an AIRO stockholder.

“Original Sponsor” shall mean Kernel Capital Holdings, LLC.

“ParentCo” shall mean AIRO Group, Inc., a Delaware corporation.

“ParentCo Board” shall mean the board of directors of ParentCo.

‘ParentCo Common Stock” shall mean the common stock, par value $0.0001 per share, of the ParentCo.

“ParentCo Representative” shall mean VKSS Capital, LLC.

“Person” means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership), limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.

“Private Placement Warrants” shall mean the warrants to purchase Class A Ordinary Shares purchased in a private placement in connection with the IPO, or the ParentCo warrants issued in exchange for Kernel Private Placement Warrants.

“Proposals” shall mean the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Director Election Proposal, and the Adjournment Proposal.

“Proposed Kernel Bylaws” means the proposed bylaws of the Kernel to be in effect as of the Closing of the Business Combination, a form of which is attached as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

“Proposed Kernel Charter” means the proposed certificate of incorporation of the Kernel to be in effect as of the Closing of the Business Combination, a form of which is attached as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

“Proposed Kernel Governing Documents” means the Proposed Kernel Charter and Proposed Kernel Bylaws.

“Proposed ParentCo Bylaws” means the proposed bylaws of ParentCo to be in effect as of the Closing of the Business Combination, a form of which is attached as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

“Proposed ParentCo Charter” means the proposed certificate of incorporation of ParentCo to be in effect as of the Closing of the Business Combination, a form of which is attached as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

“Proposed ParentCo Governing Documents” means the Proposed ParentCo Charter and Proposed ParentCo Bylaws.

“Pro Rata Share” shall mean (a) with respect to each AIRO stockholder, a fraction expressed as a percentage equal to (i) the portion of the AIRO Merger Consideration payable by ParentCo to such AIRO stockholder in accordance with the terms of the Business Combination Agreement, divided by (ii) the total AIRO Merger Consideration payable by ParentCo to all AIRO stockholders in accordance with the terms of the Business Combination Agreement, and (b) with respect to each Kernel shareholder, a fraction expressed as a percentage equal to (i) the portion of the Kernel Merger Consideration payable by ParentCo to such Kernel shareholder in accordance with the terms of the Business Combination Agreement, divided by (ii) the total Kernel Merger Consideration payable by ParentCo to all Kernel shareholders in accordance with the terms of the Business Combination Agreement.

“Public Shares” shall mean the Class A Ordinary Shares included in the Units sold in the IPO.

“Public Shareholders” shall mean the persons who own the Public Shares.

“Public Warrants” shall mean the warrants underlying the Public Units issued in the IPO, and after the Closing, shall mean the converted Public Warrants, with an exercise price of $11.50 per share of ParentCo Common Stock.

“Record Date” shall mean July 10, 2024.

“Redeemable” shall mean, in respect of the Public Warrants, the ability of ParentCo to redeem such Public Warrants after the closing of the proposed Business Combination, provided that certain other conditions as set forth in the Warrant Agreement are met.

“Redemption” shall mean the right of Kernel shareholders to have their Public Shares redeemed in accordance with the procedures set forth in this proxy statement/prospectus.

“Reference Time” means the close of business of AIRO on the Closing Date (but without giving effect to the transactions contemplated by the Business Combination Agreement, including any payments by ParentCo hereunder to occur at the Closing, but treating any obligations in respect of Indebtedness, Transaction Expenses or other liabilities that are contingent upon the consummation of the Closing as currently due and owing without contingency as of the Reference Time).

“Registration Rights Agreement” shall mean the Registration Rights Agreement by and among Kernel and significant AIRO stockholders required as a closing condition in the Business Combination Agreement.

“SEC” shall mean the U.S. Securities and Exchange Commission.

“Second Effective Time” shall mean the time when the Second Merger is consummated, upon the filing of the Certificate of Merger for the merger of AIRO Merger Sub with and into AIRO with the Delaware Secretary of State in accordance with the relevant provisions of the DGCL.

“Second Merger” shall mean the merger of AIRO Merger Sub with and into AIRO, with AIRO surviving as a wholly owned subsidiary of ParentCo.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Seller Representative” shall mean Dr. Chirinjeev Kathuria.

“Sponsor” shall mean VKSS Capital, LLC, a Delaware limited liability company.

“Target Company” means each of AIRO and its direct and indirect subsidiaries.

“Target Company Transaction Expenses” shall mean $14,000,000.

“Target Net Debt” shall mean $75,000,000.

“Target Net Working Capital Amount” shall mean an amount equal to $(5,500,000).

“Transfer Agent” shall mean Continental.

“Trust Account” shall mean the trust account of Kernel, which holds the net proceeds of the IPO, together with interest earned thereon, less amounts released to pay franchise and income tax obligations.

“Units” shall mean units consisting of a Class A Ordinary Share and a warrant to purchase a Class A Ordinary Share, sold together as a unit in the IPO.

“Warrants” shall mean the Private Placement Warrants, the Public Warrants, the AIRO Warrants, and any other warrants to purchase capital stock of Kernel, ParentCo or AIRO.

“Warrant Agreement” shall mean the warrant agreement by and between Kernel and Continental Stock Transfer & Trust Company, dated February 5, 2021 (and, after the Closing, shall mean the Warrant Agreement as assumed by ParentCo).

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR SHAREHOLDERS

The following questions and answers briefly address some commonly asked questions about the Proposals to be presented at the Extraordinary General Meeting of Kernel shareholders. The following questions and answers do not include all the information that is important to shareholders of Kernel. We urge the shareholders of Kernel to carefully read this entire proxy statement/prospectus, including the annexes and other documents referred to herein. Capitalized terms not otherwise defined in these questions and answers shall have the meanings ascribed to them in the Business Combination Agreement, which is attached to the Proxy Statement as Annex A.

Why am I receiving this proxy statement/prospectus?

This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Extraordinary General Meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.

Below are proposals on which Kernel shareholders are being asked to vote.

Are the Proposals conditioned on one another?

Unless the Business Combination Proposal is approved, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal will not be presented to the shareholders of Kernel at the Extraordinary General Meeting. The Adjournment Proposal is not conditioned on the approval of any other Proposal set forth in this proxy statement/prospectus. It is important for you to note that in the event that the Business Combination Proposal does not receive the requisite vote for approval, then we will not consummate the Business Combination. If Kernel does not consummate the Business Combination and fails to complete an initial business combination by August 5, 2024, Kernel will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to its Public Shareholders. The approval of the Business Combination, the Domestication Proposal, the Nasdaq Proposal, the ParentCo Charter Amendment Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal are preconditions to the consummation of the Business Combination.

What will happen in the Business Combination?

At the Closing, Kernel Merger Sub shall be merged with and into Kernel (the “First Merger”), following which the separate corporate existence of Kernel Merger Sub shall cease and Kernel shall continue as the surviving corporation and a wholly owned subsidiary of ParentCo. Immediately thereafter, AIRO Merger Sub shall be merged with and into AIRO (the “Second Merger”, following which the separate corporate existence of AIRO Merger Sub shall cease and AIRO shall continue as the surviving corporation and a wholly owned subsidiary of ParentCo. In connection with the Business Combination, the cash held in the Trust Account will be used to fund redemptions by Kernel shareholders, and for working capital and general corporate purposes. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A.

What equity stake will current shareholders of Kernel and AIRO hold in ParentCo after the Closing?

It is anticipated that, upon the completion of the Business Combination, Kernel’s Public Shareholders will retain an ownership interest of approximately 0.6% of the outstanding capital stock of ParentCo, the Sponsor will retain an aggregate ownership interest of approximately 8.4% of the outstanding capital stock of ParentCo and the AIRO stockholders will own approximately 85.9% of the outstanding capital stock of ParentCo, in each case, assuming that none of Kernel’s outstanding Public Shares are redeemed in connection with the Business Combination, or approximately nil, 86.4%, and 8.4%, respectively, assuming that all of Kernel’s outstanding Public Shares are redeemed in connection with the Business Combination. The foregoing ownership percentages with respect to ParentCo following the Business Combination excludes any outstanding Warrants and assumes that there are no redemptions of any shares by Kernel’s Public Shareholders in connection with the Business Combination and Kernel does not engage in any kind of additional equity financing prior to the Closing. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Kernel’s existing shareholders in ParentCo will be different.

If any of Kernel’s Public Shareholders exercise their redemption rights, the percentage of ParentCo’s outstanding common stock held by ParentCo’s Public Shareholders will decrease and the percentages of ParentCo’s outstanding common stock held by the Sponsor and by the AIRO stockholders will increase, in each case, relative to the percentage held if none of the Public Shares are redeemed.

If any of Kernel’s Public Shareholders as of the Record Date redeem their Public Shares at Closing in accordance with the Existing Kernel Governing Documents but continue to hold Public Warrants after the Closing, the aggregate value of the Public Warrants that may be retained by them, based on the closing trading price per Public Warrant of $0.13 as of July 3, 2024, would be approximately $2.0 million, regardless of the amount of redemptions by the Public Shareholders. Upon the issuance of ParentCo common stock in connection with the Business Combination, the percentage ownership of ParentCo by Kernel’s Public Shareholders who do not redeem their Public Shares will be diluted. Kernel Public Shareholders that do not redeem their Public Shares in connection with the Business Combination will experience further dilution upon the exercise of Public Warrants that are retained after the Closing by redeeming Kernel Public Shareholders. The percentage of the total number of outstanding shares of ParentCo common stock that will be owned by Kernel Public Shareholders as a group will vary based on the number of Public Shares for which the holders thereof request redemption in connection with the Business Combination.

The table below shows the issued and outstanding shares under each of the Scenarios set forth above following the closing of the Business Combination based on the varying levels of redemptions by the Public Shareholders on a fully diluted basis, as well as potential sources of dilution. As further described herein under “Notes to Unaudited Pro Forma Combined Financial Information - Adjustments to Unaudited Pro Forma Combined Balance Sheet”, the Business Combination will not close under any scenario unless AIRO waives the Unencumbered Cash closing condition and the NTA Proposal is approved.

● Scenario 1: Assuming No Redemptions: This presentation assumes that no Kernel Public Shareholders exercise redemption rights with respect to their Public Shares of 509,341 which were outstanding as of the date of this filing. Public Shares are based on a total of 30,475,000 redeemable Public Shares pursuant to the Kernel Charter less the 22,848,122 Public Shares redeemed in February 2023, 1,310,929 Public Shares redeemed in August 2023 and 5,806,608 Public Shares redeemed in February 2024.

● Scenario 2: Assuming 50% Redemptions: This presentation assumes that 50% of Kernel Public Shareholders holding 254,670 Public Shares will exercise their redemption rights for approximately $2.8 million of funds in Kernel’s Trust Account.

● Scenario 3: Assuming Maximum Redemptions: This presentation assumes that 100% of Kernel public shareholders holding 509,341 Public Shares will exercise their redemption rights for approximately $5.5 million of funds in Kernel’s Trust Account.

(i) In the event ParentCo’s revenue for the fiscal year that includes the Closing Date is greater than or equal to $50,000,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

(ii) In the event ParentCo’s revenue for the first full fiscal year following the Closing Date is greater than or equal to $62,500,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

(iii) In the event ParentCo’s revenue for the second full fiscal year following the Closing Date is greater than or equal to $78,100,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

See the section entitled “Unaudited Pro Forma Combined Financial Information” for further information.

How much consideration will AIRO stockholders receive in connection with the Business Combination?

As consideration for the Second Merger, the AIRO stockholders collectively shall be entitled to receive from ParentCo, in the aggregate, a number of shares of ParentCo common stock with an aggregate value equal to (a) $770,000,000 minus (b) the amount, if any, by which the net working capital is less than negative $5,500,000 by more than $500,000, plus (c) the amount, if any, by which the net working capital is greater than negative $5,500,000 by more than $500,000 (but not less than zero), minus (d) the amount, if any, by which the closing net debt exceeds the target net debt of $75,000,000 by more than $500,000 (but not less than zero), plus (e) the amount, if any, by which the target net debt of $75,000,000 is less than closing net debt, minus (f) the amount, if any, by which the company transaction expenses exceed the target company transaction expenses of $14,000,000 (such resulting amount, the “AIRO Merger Consideration”).

In addition, AIRO stockholders shall also be entitled to receive from ParentCo up to 33,000,000 additional shares of ParentCo common stock based on ParentCo’s achievement of certain revenue thresholds, as follows:

(a) if ParentCo’s revenue for the fiscal year that includes the Closing Date is greater than or equal to $50,000,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares;

(b) if ParentCo’s revenue for the first full fiscal year following the Closing Date is greater than or equal to $62,500,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares; and

(c) if ParentCo’s revenue for the second full fiscal year following the Closing Date is greater than or equal to $78,100,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares.

What conditions must be satisfied to complete the Business Combination?

Unless waived by the applicable party or parties to the Business Combination Agreement, and subject to applicable law, the completion of the Business Combination is subject to a number of conditions set forth in the Business Combination Agreement, including, among others, with respect to the obligations of all of the parties to the Business Combination Agreement:

In addition, unless waived by AIRO, the obligations of AIRO to consummate the Business Combination are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (a) the representations and warranties of Kernel being true and correct as of the date of the Business Combination Agreement and as of the Closing, except for those representations and warranties addressing matters only as of a particular date, and any failures to be true and correct that have not and would not reasonably be expected to have a Material Adverse Effect with respect to Kernel; (b) Kernel, ParentCo, Kernel Merger Sub, and AIRO Merger Sub having performed in all material respects their respective obligations and complied in all material respects with their respective covenants and agreements under the Business Combination Agreement required to be performed or complied with on or prior the date of the Closing; (c) absence of any Material Adverse Effect with respect to Kernel since the date of the Business Combination Agreement which is continuing and uncured; and (d) at the Closing, Kernel having $50,000,000 in Unencumbered Cash, including funds remaining in the trust account (after giving effect to the completion and payment of any redemptions and any Transaction Expenses) and the proceeds of the PIPE/Convertible Note Investment, fifty percent (50%) of any net cash proceeds of any capital investment raise and/or convertible debt raise conducted by the Company during the period beginning on the date of the Business Combination Agreement and ending on the Closing Date, and any net cash proceeds of any executed agreements regarding a capital investment raise and/or convertible debt raise conducted by Kernel or ParentCo in which such cash proceeds are required to be paid to ParentCo during the thirty (30) day period beginning on the Closing Date.

Unless waived by Kernel, the obligations of Kernel, ParentCo, Kernel Merger Sub and AIRO Merger Sub to consummate the Business Combination are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (a) the representations and warranties of AIRO being true and correct as of the date of the Business Combination Agreement and as of the Closing, except for those representations and warranties addressing matters only as of a particular date, and any failures to be true and correct that have not and would not reasonably be expected to have a Material Adverse Effect with respect to AIRO; (b) AIRO having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Business Combination Agreement required to be performed or complied with on or prior the date of the Closing; and (c) absence of any Material Adverse Effect with respect to AIRO as a whole since the date of the Business Combination Agreement which is continuing and uncured; (d) delivery of AIRO’s 2022 Audited Financials within 60 days of the Business Combination Agreement’s signing; (e) the completion of Kernel’s legal due diligence of AIRO and its subsidiaries to Kernel’s reasonable satisfaction; (f) the delivery of the Replacement Warrants and Replacement Options; and (g) the aggregate amount of all Indebtedness of the Target Companies due earlier than 180 days after the Closing (net of Company cash at Closing) is less than Fifty Million U.S. Dollars ($50,000,000).

For a summary of the conditions that must be satisfied or waived prior to the Closing of the Business Combination, see the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal — Conditions to the Closing.”

Why is Kernel providing shareholders with the opportunity to vote on the Business Combination?

Under the Existing Kernel Governing Documents, Kernel must provide all holders of its Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of Kernel’s initial business combination either in conjunction with a tender offer or in conjunction with a shareholder vote. For business and other reasons, Kernel has elected to provide its shareholders with the opportunity to have their Public Shares redeemed in connection with a shareholder vote rather than a tender offer. Therefore, Kernel is seeking to obtain the approval of its shareholders of the Business Combination in order to allow its Public Shareholders to effectuate redemptions of their Public Shares in connection with the Closing of the Business Combination.

How many votes do I have at the Extraordinary General Meeting?

Kernel shareholders are entitled to one vote at the Extraordinary General Meeting for each Kernel Ordinary Share held of record as of July 10, 2024, the record date for the Extraordinary General Meeting (the “Record Date”). As of the close of business on the Record Date, there were 509,341 outstanding Kernel Ordinary Shares.

What vote is required to approve the Proposals presented at the Extraordinary General Meeting?

As of the record date, Kernel had 8,128,091 Ordinary Shares issued and outstanding. Kernel shareholders are entitled to one vote at the Extraordinary General Meeting for each Ordinary Share held of record as of the record date. 7,618,750 Ordinary Shares are subject to the Kernel Support Agreement, pursuant to which the Sponsor have agreed to vote all of their shares in favor of the Business Combination.

Assuming all holders that are entitled to vote on such matter vote all of their Ordinary Shares in person or by proxy, no Public Shares will need to be voted in favor of each of the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, the NTA Proposal, or the Adjournment Proposal in order to approve each of the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, the NTA Proposal, and the Adjournment Proposal.

Holders of Kernel Class B Ordinary Shares will have the right to elect all of Kernel’s directors prior to the closing of the Business Combination and holders of Kernel Class A Ordinary Shares will not have the right to vote on the election of directors during such time. A majority of the Kernel Class B Ordinary Shares will need to vote in favor of the Election of Directors Proposal.

If the Business Combination is not approved, the Domestication Proposal, the ParentCo Charter Amendment Proposal, Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal and the Election of Directors Proposal will not be presented to Kernel’s shareholders for a vote. The approval of the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal are preconditions to the consummation of the Business Combination.

May Kernel, the Sponsor or Kernel’s directors, officers, advisors or their affiliates purchase shares in connection with the Business Combination?

In connection with the shareholder vote to approve Proposals, including the Business Combination Proposal, Kernel and its affiliates may purchase shares prior to the Closing from shareholders who would have otherwise elected to have their shares redeemed for a pro rata portion of the Trust Account upon consummation of the Business Combination. Such a purchase would in a privately negotiated purchase arrangement include a contractual acknowledgement that such shareholder, although still the record holder of such shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. While they have no current plans to do so, the Sponsor, Kernel’s directors, officers or advisors, or their affiliates reserve the right to purchase shares from holders of Kernel Ordinary Shares who have already elected to exercise their redemption rights, in which event such selling shareholders would be required to revoke their prior elections to redeem their shares. Any such transaction would be separately negotiated at the time of the transaction. The consideration for any such transaction would consist of cash and/or Kernel Ordinary Shares owned by the Sponsor and/or Kernel’s directors, officers, advisors, or their affiliates.

None of Kernel, the Sponsor or Kernel’s directors, officers or advisors, or their respective affiliates, will make any such purchases when they are in possession of any material non-public information not disclosed to the seller. Any Kernel Ordinary Shares purchased by the Sponsor or Kernel’s directors, officers or advisors, or their respective affiliates will not (i) be purchased at a price higher than the price offered through the redemption process in the Redemption, (ii) be voted in favor of the Business Combination or (iii) have redemption rights, and if such Kernel Ordinary Shares do have redemption rights, then such rights will be waived by each of the Sponsor, or Kernel’s directors, officers or advisors, or their respective affiliates. The Sponsor and each of Kernel’s directors, officers or advisors, or their respective affiliates received no additional consideration in exchange for the agreement to waive their redemption rights. The purpose of these purchases could be to increase the amount of cash available to Kernel for use in the Business Combination to satisfy the closing condition that requires Kernel to have a minimum amount of cash upon the consummation of the Business Combination, where it appears that such requirement would otherwise not be met. The purpose of these purchases would be to increase the amount of cash available to Kernel for use in the Business Combination.

As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of Public Shares by the persons described above have been entered into with any such investor or holder. In the event of any such newly purchased shares (i) the Sponsor or its affiliates will purchase the Kernel Public Shares at a price no higher than the price offered through the redemption process; (ii) any such purchases by Sponsor or its affiliates will not be voted in favor of approving the Business Combination; and (iii) the Sponsor and its affiliates have waived their redemption rights to such shares. Prior to the special meeting to approve the Business Combination, Kernel will disclose in a Form 8-K (i) the amount of Public Shares purchased outside of the redemption offer by the Sponsor or its affiliates, along with the purchase price; (ii) the purpose of the purchases by the Sponsor or its affiliates; (iii) the impact, if any, of the purchases by the Sponsor or its affiliates on the likelihood that the Business Combination transaction will be approved; (iv) the identities of shareholders who sold to the Sponsor or its affiliates (if not purchased on the open market) or the nature of shareholders (e.g., 5% security holders) who sold to the Sponsor or its affiliates; and (v) the number of Public Shares for which Kernel has received redemption requests pursuant to its redemption offer.

Unlike our Sponsor’s and Kernel Initial Shareholders’ holdings currently, such newly purchased shares (if any) by those purchasers would not be subject to a lock-up period under the terms of our Sponsor Support Agreement. However, these newly purchased shares would be subject to limitations on resale under Rule 144 of the Securities Act as “control securities”, to the extent those shares were acquired by an affiliate of Kernel, unless they are registered on a subsequent registration statement filed under the Securities Act. Limitations on resale would require those affiliated purchasers of such newly purchased shares to hold them for at least one year (from the date ParentCo files certain information on Form 8-K following the Closing in accordance with rules applicable to special purpose acquisition companies), assuming they are not registered on a registration statement following the Closing and ParentCo has fully complied with its reporting requirements and other requirements under Rule 144. When eligible to be sold, such securities if not registered under such a registration statement would be limited by applicable requirements of Rule 144, including limitations in their manner of sale and to the volume of sales eligible under Rule 144.

Entering into any such incentive arrangements may have an effect lowering the price of Kernel Ordinary Shares or possibly reducing the public float of ParentCo Ordinary Shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the Special Meeting. In addition, if such purchases are made, the public float of Kernel Ordinary Shares and the number of its beneficial holders may be reduced, possibly making it difficult to maintain the quotation, listing or trading of ParentCo Ordinary Shares on a national securities exchange.

What constitutes a quorum at the Extraordinary General Meeting?

Holders of a majority of Kernel Ordinary Shares being individuals present in person or by proxy or if a corporation or other non-natural person by its duly authorized representative or proxy shall be a quorum. If a quorum is not present within half an hour from the time appointed for the meeting to commence, the meeting shall stand adjourned to the same day in the next week at the same time and/or place or to such other day, time and/or place as the directors may determine. As of the Record Date, 4,064,046 Kernel Ordinary Shares would be required to achieve a quorum.

How will Kernel’s Sponsor, directors and officers vote?

The Sponsor has agreed to vote its Founder Shares (as well as any Public Shares purchased during or after the IPO) in favor of the Business Combination. Accordingly, if Kernel seeks shareholder approval of the Business Combination, it is more likely that the necessary shareholder approval will be received than would be the case if the Sponsor agreed to vote their Founder Shares in accordance with the majority of the votes cast by Kernel’s Public Shareholders.

What interests do Kernel’s current officers and directors have in the Business Combination?

The Sponsor (including certain equity holders of the Sponsor), and certain of Kernel’s directors and executive officers (including Suren Ajjarapu who is Kernel’s chief executive officer and the Sponsor’s controlling equity holder) may have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. These interests include:

Kernel’s Board considered these interests when reviewing the proposed terms of the Business Combination and how they might impact the identification of and negotiations with AIRO and how they might impact the ParentCo if the Business Combination were to be completed. In reviewing these interests, and others deemed relevant by the Kernel Board, the Board concluded that, on the whole, these interests provided an alignment between the interests of Kernel’s officers and directors, on the one hand, and those of Kernel’s shareholders, on the other hand. See the section entitled “Interests of Kernel’s Directors and Officers and Others in the Business Combination” in the accompanying proxy statement/prospectus for a further discussion of these considerations.

These interests may influence Kernel’s directors and executive officers in making their recommendation that you vote in favor of the approval of the Business Combination.

What happens if I sell my Class A Ordinary Shares before the Extraordinary General Meeting?

The Record Date is earlier than the date of the Extraordinary General Meeting. If you transfer your Class A Ordinary Shares after the Record Date, but before the Extraordinary General Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Extraordinary General Meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your Class A Ordinary Shares prior to the Record Date, you will have no right to vote those shares at the Extraordinary General Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.

What happens if I vote against the Business Combination Proposal?

Pursuant to the Existing Kernel Governing Documents, if the Business Combination Proposal is not approved and Kernel does not otherwise consummate an alternative business combination by August 5, 2024, Kernel will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the Public Shareholders.

Do I have redemption rights?

Pursuant to the Existing Kernel Governing Documents holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Existing Kernel Governing Documents. For illustrative purposes, based on approximately $5.5 million of funds in the Trust Account and 509,341 shares subject to possible redemption, in each case, following the Extension Redemption, this would have amounted to approximately $10.80 per issued and outstanding Public Share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of Kernel Ordinary Shares for cash. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Kernel’s Transfer Agent prior to the Extraordinary General Meeting. See the section entitled “Extraordinary General Meeting of Kernel Shareholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 15% of the Kernel Ordinary Shares without the consent of Kernel. Accordingly, all Public Shares in excess of 15% held by a Public Shareholder, together with any affiliate of such Public Shareholder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed without the consent of Kernel.

Will how I vote affect my ability to exercise redemption rights?

No. You may exercise your redemption rights whether you vote your shares of Kernel Ordinary Shares “FOR” or “AGAINST” the Business Combination Proposal or abstain from a vote on the Business Combination Proposal or any other Proposal described by this proxy statement/prospectus. As a result, the Business Combination Agreement can be approved by shareholders who will redeem their shares and no longer remain shareholders, leaving shareholders who choose not to redeem their shares holding shares in a company with a potentially less liquid trading market, fewer shareholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

Why is Kernel Proposing the NTA Proposal?

The adoption of the proposed amendments to remove the net asset test limitation from Kernel’s Amended and Restated Memorandum and Articles of Association is being proposed in the NTA Proposal in order to facilitate the consummation of the Business Combination, by removing the limitation on its ability to consummate an initial business combination if Kernel would have less than $5,000,001 in net tangible assets prior to or upon consummation of such initial business combination. The purpose of the net asset test limitation was initially to ensure that Kernel’s Ordinary Shares are not deemed to be a “penny stock” pursuant to Rule 3a51-1 under the Exchange Act. Because the Kernel Ordinary Shares and ParentCo Ordinary Shares would not be deemed to be a “penny stock” pursuant to other applicable provisions of Rule 3a51-1 under the Exchange Act, Kernel is presenting the NTA Proposal so that the parties may consummate the Business Combination even if Kernel does not have at least $5,000,001 in net tangible assets prior to or upon consummation of the Business Combination.

If Kernel redeems its Public Shares in an amount in excess of the current redemption limitation and its securities do not meet Nasdaq’s continued listing requirements, Nasdaq may delist Kernel’s securities from trading on its exchange. If Nasdaq delists any of Kernel’s securities from trading on its exchange and it is not able to list such securities on another approved national securities exchange, Kernel expects that such securities could be quoted on an over-the-counter market. If this were to occur, Kernel or ParentCo could face significant material adverse consequences, including: (i) a limited availability of market quotations for Kernel’s securities, (ii) reduced liquidity for Kernel’s securities, (iii) a determination that Kernel’s Public Shares are “penny stocks” which will require brokers trading in Kernel’s Public Shares to adhere to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly result in a reduced level of trading activity in the secondary trading market for Kernel’s securities, (iv) a decreased ability to issue additional securities or obtain additional financing in the future, and (v) a less attractive acquisition vehicle to a target business in connection with an initial business combination. The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Kernel’s public shares, units and warrants qualify as covered securities under such statute. If Kernel were no longer listed on Nasdaq, its securities would not qualify as covered securities under such statute and it would be subject to regulation in each state in which it offers its securities.

How do I exercise my redemption rights?

In connection with the Business Combination, holders of Public Shares may seek to redeem their Public Shares regardless of whether such Public Shareholder votes “FOR” or “AGAINST” the Business Combination Proposal.

To exercise your redemption rights, you must demand that Kernel redeem your Public Shares. In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates to Continental, at Continental Stock Transfer & Trust Company, One State Street Plaza, 30th Floor, New York, New York 10004-1561, Attn: SPAC Administration Team, at least two (2) business days prior to the Extraordinary General Meeting or deliver your shares to Continental electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, which election would likely be determined based on the manner in which you hold your shares.

Certificates that have not been tendered in accordance with these procedures at least two (2) business days prior to the Extraordinary General Meeting will not be redeemed for cash. In the event that a Public Shareholder tenders its shares and decides that it does not want to redeem its Public Shares, such shareholder may withdraw the tender. If you delivered your Public Shares for redemption to Continental and decide prior to the Extraordinary General Meeting not to redeem your Public Shares, you may request that Continental return the shares (physically or electronically). You may make such request by contacting Continental at the address listed below:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004-1561

Attn: SPAC Administration Team

Email: SPACredemptions@continentalstock.com

Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 15% of the Kernel Ordinary Shares without the consent of Kernel. Accordingly, all Public Shares in excess of 15% held by a Public Shareholder, together with any affiliate of such Public Shareholder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed without the consent of Kernel.

Shareholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is Kernel’s understanding that shareholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, Kernel does not have any control over this process and it may take longer than two weeks. Shareholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Kernel’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Kernel’s Transfer Agent and decide within the required timeframe not to exercise your redemption rights, you may request that Kernel’s Transfer Agent return the shares (physically or electronically). You may make such request by contacting Kernel’s Transfer Agent at the phone number or address listed under the question “Who can help answer my questions?” below.

What are the federal income tax consequences of exercising my redemption rights?

Kernel shareholders who exercise their redemption rights to receive cash in exchange for their Ordinary Shares generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the Ordinary Shares redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. The redemption, however, may be treated as a distribution to a redeeming shareholder for U.S. federal income tax purposes if the redemption does not effect a sufficient reduction (as determined under applicable federal income tax law) in the redeeming shareholder’s percentage ownership in us (whether such ownership is direct or through the application of certain attribution and constructive ownership rules). Any amounts treated as such a distribution will constitute a dividend to the extent not in excess of our current and accumulated earnings and profits as measured for U.S. federal income tax purposes. Any amounts treated as a distribution and that are in excess of our current and accumulated earnings and profits will reduce the redeeming shareholder’s basis in his or her redeemed Ordinary Shares, and any remaining amount will be treated as gain realized on the sale or other disposition of our Ordinary Shares. These tax consequences are described in more detail in the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal — Certain Material U.S. Federal Income Tax Considerations of the Redemption.” The discussion in the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal — Certain Material U.S. Federal Income Tax Considerations of the Redemption,” insofar as it relates to matters of United States federal tax law and regulations or legal conclusions with respect thereto, reflects the opinion of Nelson Mullins Riley & Scarborough LLP, counsel to Kernel, as to the material U.S. federal income tax consequences of the Business Combination. We urge you to consult your tax advisor regarding the tax consequences of exercising your redemption rights.

If I am a holder of Warrants, can I exercise redemption rights with respect to my Warrants?

No. The holders of Warrants have no redemption rights with respect to such Warrants.

If I am a Unit holder, can I exercise redemption rights with respect to my Units?

No. Holders of outstanding Units must separate the underlying Public Shares and Public Warrants prior to exercising redemption rights with respect to the Public Shares.

If you hold Units registered in your own name, you must deliver the certificate for such Units to Continental, with written instructions to separate such Units into Public Shares and Public Warrants. This must be completed far enough in advance to permit the mailing of the Public Share certificates back to you so that you may then exercise your redemption rights upon the separation of the Public Shares from the Units. See “How do I exercise my redemption rights?” above. The address of Continental is listed under the question “Who can help answer my questions?” below.

If a broker, dealer, commercial bank, trust company or other nominee holds your Units, you must instruct such nominee to separate your Units. Your nominee must send written instructions by facsimile to Continental. Such written instructions must include the number of Units to be split and the nominee holding such Units. Your nominee must also initiate electronically, using DTC’s deposit withdrawal at custodian (“DWAC”) system, a withdrawal of the relevant Units and a deposit of an equal number of Public Shares, and Public Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the Public Shares from the Units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Public Shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

Do I have appraisal rights if I object to the proposed Business Combination?

No. There are no appraisal rights available to holders of Kernel Ordinary Shares in connection with the Business Combination.

What happens to the funds held in the Trust Account upon consummation of the Business Combination?

If the Business Combination is consummated, the funds held in the Trust Account will be released to pay:

What happens if a substantial number of the Public Shareholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

The Public Shareholders are not required to vote “FOR” the Business Combination or vote at all in order to exercise their redemption rights and Public Shareholders who vote in favor of the Business Combination my also nevertheless exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of Public Shareholders are reduced as a result of redemptions by Public Shareholders.

On February 3, 2023, Kernel held an extraordinary general meeting of shareholders, at which shareholders voted upon, among other items, a proposal (the “Extension Amendment Proposal”) to amend Kernel’s governing documents (the “Charter Amendment”) to extend the date by which Kernel must consummate an initial business combination from February 5, 2023 by up to six (6) one-month Extensions (defined below) to August 5, 2023 (the “Extension Meeting”). At the Extension Meeting, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Charter Amendment.

In connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Extension Meeting, a total of 200 Kernel shareholders elected to redeem an aggregate of 22,848,122 Public Shares. Following the payment of redemptions, Kernel had approximately $77.6 million left in its Trust Account.

On August 3, 2023, Kernel held an extraordinary general meeting of shareholders, at which shareholders voted upon, among other items, a proposal (the “Second Extension Amendment Proposal”) to amend Kernel’s governing documents (the “Second Charter Amendment”) to extend the date by which Kernel must consummate an initial business combination from August 5, 2023 by up to six (6) one-month Extensions to February 5, 2024 (the “Extension Meeting - Second”). At the Extension Meeting - Second, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Second Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Second Charter Amendment.

In connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Extension Meeting - Second, holders of 1,310,929 of the Company’s Public Shares exercised their right to redeem those shares for cash at an approximate price of $10.44 per share, for an aggregate of approximately $13.7 million. Following the payment of the redemptions, the Trust Account had a balance of approximately $65.9 million.

On February 1, 2024, Kernel held an extraordinary general meeting of its shareholders (the “Extension Meeting - Third”). At the Extension Meeting - Third, the Company’s shareholders entitled to vote at the meeting cast their votes and approved a proposal (the “Third Extension Amendment Proposal”) to amend the Kernel’s Amended and Restated Memorandum and Articles of Association (the “Third Charter Amendment”) to extend the date (the “Termination Date”) by which Kernel must (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving Kernel and one or more businesses (a “business combination”), (ii) cease its operations if it fails to complete such business combination, and (iii) redeem or repurchase 100% of Kernel’s Class A Ordinary Shares included as part of the Units sold in Kernel’s IPO. The Third Charter Amendment allows Kernel to extend the Termination Date by up to six (6) one-month extensions to August 5, 2024 (each of which we refer to as an “Extension”, and such later date, the “Extended Deadline”), unless the closing of Kernel’s initial business combination shall have occurred. At the Extension Meeting - Third, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Third Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Third Charter Amendment.

In connection with the approval of the Third Extension Amendment Proposal and the Third Trust Amendment Proposal at the Extension Meeting - Third, holders of 5,806,608 of the Kernel’s Public Shares exercised their right to redeem those shares for cash at an approximate price of $10.80 per share, for an aggregate of approximately $62.7 million. Following the payment of the redemptions, the Trust Account will have a balance of approximately $5.5 million.

The table below presents the trust value per share to a Public Shareholder that elects not to redeem across a range of redemptions scenarios. For purposes of calculating the redemption scenarios, the trust value date as of December 31, 2023 is used because such date is the date the redemption requests in connection with the Extension Meeting - Second were effectuated.

● Scenario 1: Assuming No Redemptions: This presentation assumes that no Kernel Public Shareholders exercise redemption rights with respect to their Public Shares of 509,341 which were outstanding as of the date of this filing. Public Shares are based on a total of 30,475,000 redeemable Public Shares pursuant to the Kernel Charter less the 22,848,122 Public Shares redeemed in February 2023, 1,310,929 Public Shares redeemed in August 2023 and 5,806,608 Public Shares redeemed in February 2024.

● Scenario 2: Assuming 50% Redemptions: This presentation assumes that 50% of Kernel Public Shareholders holding 254,670 Public Shares will exercise their redemption rights for approximately $2.8 million of funds in Kernel’s Trust Account.

● Scenario 3: Assuming Maximum Redemptions: This presentation assumes that 100% of Kernel public shareholders holding 509,341 Public Shares will exercise their redemption rights for approximately $5.5 million of funds in Kernel’s Trust Account.

(i) In the event ParentCo’s revenue for the fiscal year that includes the Closing Date is greater than or equal to $50,000,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

(ii) In the event ParentCo’s revenue for the first full fiscal year following the Closing Date is greater than or equal to $62,500,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

(iii) In the event ParentCo’s revenue for the second full fiscal year following the Closing Date is greater than or equal to $78,100,000, ParentCo shall issue to each of the AIRO stockholders such AIRO stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

The following table illustrates the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders at the following redemption levels:

What happens if the Business Combination is not consummated?

There are certain circumstances under which the Business Combination Agreement may be terminated. See the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal — Conditions to the Closing” for information regarding the parties’ specific termination rights.

If, as a result of the termination of the Business Combination Agreement or otherwise, Kernel is unable to complete the Business Combination or another initial business combination transaction by August 5, 2024, the Existing Kernel Governing Documents provide that it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, subject to lawfully available funds therefor, redeem 100% of the Public Shares in consideration of a per-share price, payable in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to it to pay franchise and income taxes payable, by (B) the total number of then outstanding Public Shares, which redemption will completely extinguish rights of the Public Shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemptions, subject to the approval of Kernel’s remaining shareholders and the Kernel Board in accordance with applicable law, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under the Cayman Islands Companies Law to provide for claims of creditors and other requirements of applicable law.

Kernel expects that the amount of any distribution its Public Shareholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Business Combination, subject in each case to Kernel’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law. Holders of Founder Shares have waived any right to any liquidation distribution with respect to those shares.

In the event of liquidation, there will be no distribution with respect to Kernel’s outstanding Public Warrants. Accordingly, the Public Warrants will expire worthless.

When is the Business Combination expected to be completed?

The Closing is expected to take place (a) the second business day following the satisfaction or waiver of the conditions described below under the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal —Conditions to the Closing” or (b) such other date as agreed to by the parties to the Business Combination Agreement in writing, in each case, subject to the satisfaction or waiver of the Closing conditions. The Business Combination Agreement may be terminated by either Kernel or AIRO if the Closing has not occurred by August 5, 2024, subject to certain exceptions. For a description of the conditions to the completion of the Business Combination, see the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal – Conditions to the Closing.”

What do I need to do now?

You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a shareholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

How do I vote?

If you were a holder of record of Kernel Ordinary Shares on July 10, 2024, the Record Date, you may vote with respect to the Proposals virtually at the Extraordinary General Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to virtually attend the Extraordinary General Meeting and vote, obtain a proxy from your broker, bank or nominee.

What will happen if I abstain from voting or fail to vote at the Extraordinary General Meeting?

At the Extraordinary General Meeting, Kernel will count a properly executed proxy marked “ABSTAIN” with respect to a particular Proposal as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Business Combination Proposal, the Domestication Proposal and the ParentCo Charter Amendment Proposal. Broker non-votes will not be counted as present for the purposes of establishing a quorum and will have no effect on any of the Proposals.

What will happen if I sign and return my proxy card without indicating how I wish to vote?

Signed and dated proxies received by Kernel without an indication of how the shareholder intends to vote on a Proposal will be voted “FOR” each Proposal presented to the shareholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Extraordinary General Meeting. If you fail to indicate how you vote, you will not be able to exercise your redemption rights.

If I am not going to attend the Extraordinary General Meeting, should I return my proxy card instead?

Yes. Whether you plan to attend the Extraordinary General Meeting or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Kernel believes the Proposals presented to the shareholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

May I change my vote after I have mailed my signed proxy card?

Yes. You may change your vote by sending a later-dated, signed proxy card to Kernel’s secretary at the address listed below so that it is received by Kernel’s secretary prior to the Extraordinary General Meeting or attend the Extraordinary General Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to Kernel’s secretary, which must be received by Kernel’s secretary prior to the Extraordinary General Meeting.

What should I do if I receive more than one set of voting materials?

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

Who will solicit and pay the cost of soliciting proxies?

Kernel will pay the cost of soliciting proxies for the Extraordinary General Meeting. Kernel has engaged Issuer Direct Corporation (“Issuer Direct”) to assist in the solicitation of proxies for the Extraordinary General Meeting. Kernel has agreed to pay Issuer Direct its customary fee, plus disbursements. Kernel will reimburse Issuer Direct for reasonable out-of-pocket expenses and will indemnify Issuer Direct and its affiliates against certain claims, liabilities, losses, damages and expenses. Kernel will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Kernel Ordinary Shares for their expenses in forwarding soliciting materials to beneficial owners of Kernel’s Ordinary Shares and in obtaining voting instructions from those owners. Kernel’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Who can help answer my questions?

If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:

Kernel Group Holdings, Inc.

515 Madison Avenue, Suite 8078

New York, New York 10022

Attn: Suren Ajjarapu

Telephone No.: (646) 908-2659

You may also contact our proxy solicitor at:

Issuer Direct Corporation

One Glenwood Ave, Suite 1001

Raleigh, NC 27603

Telephone No.: (919) 481-4000

Email: proxy@issuerdirect.com

To obtain timely delivery, Kernel shareholders must request the materials no later than 15 business days prior to the Extraordinary General Meeting.

You may also obtain additional information about Kernel from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Kernel’s Transfer Agent prior to the Extraordinary General Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004-1561

Attn: SPAC Administration Team

Email: SPACredemptions@continentalstock.com

SUMMARY OF THE PROXY STATEMENT

This Summary of the Proxy Statement, together with the sections entitled “Summary Term Sheet” and “Questions and Answers About the Proposals for Shareholders” summarize information contained in this proxy statement/prospectus, but do not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus, including the attached annexes, for a more complete understanding of the matters to be considered at the Extraordinary General Meeting. In addition, for definitions of terms commonly used throughout this proxy statement/prospectus, including in this Summary of the Proxy Statement, see the section entitled “Frequently Used Terms.” Capitalized terms not otherwise defined in the Proxy Statement shall have the meanings ascribed to them in the Business Combination Agreement, which is attached to the Proxy Statement as Annex A. Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and the “Company” refer to Kernel Group Holdings, Inc.

Kernel

Kernel is a blank check company incorporated as a Cayman Islands exempted company on November 10, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. Kernel’s Units, Class A Ordinary Shares and warrants are trading on Nasdaq under the symbols “KRNL,” “KRNLU,” and “KRNLW,” respectively. The mailing address of Kernel’s principal executive office is 515 Madison Avenue, Suite 8078, New York, New York 10022. The telephone number is (646) 908-2659.

On February 3, 2023, Kernel held an extraordinary general meeting of shareholders, at which shareholders voted upon, among other items, a proposal (the “Extension Amendment Proposal”) to amend Kernel’s governing documents (the “Charter Amendment”) to extend the date by which Kernel must consummate an initial business combination from February 5, 2023 by up to six (6) one-month Extensions (defined below) to August 5, 2023 (the “Extension Meeting”). At the Extension Meeting, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Charter Amendment.

In connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Extension Meeting, a total of 200 Kernel shareholders elected to redeem an aggregate of 22,848,122 Public Shares. Following the payment of redemptions, Kernel had approximately $77.6 million left in its Trust Account.

On August 3, 2023, Kernel held an extraordinary general meeting of shareholders, at which shareholders voted upon, among other items, a proposal (the “Second Extension Amendment Proposal”) to amend Kernel’s governing documents (the “Second Charter Amendment”) to extend the date by which Kernel must consummate an initial business combination from August 5, 2023 by up to six (6) one-month Extensions to February 5, 2024 (the “Extension Meeting - Second”). At the Extension Meeting - Second, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Second Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Second Charter Amendment.

In connection with the approval of the Extension Amendment Proposal and the Trust Amendment Proposal at the Extension Meeting - Second, holders of 1,310,929 of the Company’s Public Shares exercised their right to redeem those shares for cash at an approximate price of $10.44 per share, for an aggregate of approximately $13.7 million. Following the payment of the redemptions, the Trust Account had a balance of approximately $65.9 million.

On February 1, 2024, Kernel held an extraordinary general meeting of its shareholders (the “Extension Meeting - Third”). At the Extension Meeting - Third, the Company’s shareholders entitled to vote at the meeting cast their votes and approved a proposal (the “Third Extension Amendment Proposal”) to amend the Kernel’s Amended and Restated Memorandum and Articles of Association (the “Third Charter Amendment”) to extend the date (the “Termination Date”) by which Kernel must (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving Kernel and one or more businesses (a “business combination”), (ii) cease its operations if it fails to complete such business combination, and (iii) redeem or repurchase 100% of Kernel’s Class A Ordinary Shares included as part of the Units sold in Kernel’s IPO. The Third Charter Amendment allows Kernel to extend the Termination Date by up to six (6) one-month extensions to August 5, 2024 (each of which we refer to as an “Extension”, and such later date, the “Extended Deadline”), unless the closing of Kernel’s initial business combination shall have occurred. At the Extension Meeting - Third, Kernel’s shareholders also approved a proposal to amend the Trust Agreement, as defined below (the “Third Trust Amendment Proposal”) to conform the procedures in the Trust Agreement by which the Company may extend the date on which the Trust Account must be liquidated if the Company has not completed its initial Business Combination to the procedures in the Third Charter Amendment.

In connection with the approval of the Third Extension Amendment Proposal and the Third Trust Amendment Proposal at the Extension Meeting - Third, holders of 5,806,608 of the Kernel’s Public Shares exercised their right to redeem those shares for cash at an approximate price of $10.80 per share, for an aggregate of approximately $62.7 million. Following the payment of the redemptions, the Trust Account will have a balance of approximately $5.5 million.

On February 5, 2024, Kernel received a notice from the staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, unless Kernel timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”), Kernel’s securities would be subject to suspension and delisting from The Nasdaq Capital Market at the opening of business on February 14, 2024, due to Kernel’s non-compliance with Nasdaq IM-5101-2, which requires that a special purpose acquisition company must complete one or more business combinations within 36 months of the effectiveness of its IPO registration statement. Since Kernel’s registration statement for its initial public offering became effective on February 2, 2021, it was required by this rule to complete its initial business combination by no later than February 2, 2024. Kernel timely requested a hearing before the Panel to request sufficient time to complete the Business Combination with AIRO Group Holdings. The hearing request will result in a stay of any suspension or delisting action pending the hearing. The hearing took place on April 11, 2024. On April 19, 2024, the Panel issued written notice of its decision to grant the Company’s request for an exception to its listing deficiencies until July 1, 2024 in view of the Company’s substantial steps toward closing its previously announced initial business combination with AIRO Group Holdings and its plan for achieving compliance with Nasdaq listing rules upon closing of the transaction for listing on The Nasdaq Capital Market. On June 20, 2024, the Company requested that the Panel extend the deadline to regain compliance from July 1, 2024 to August 5, 2024, and on June 20, 2024, the request was granted. There can be no assurance that Kernel will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq IM-5101-2, and maintain compliance with other Nasdaq listing requirements.

Kernel Merger Sub

Kernel Merger Sub is a wholly-owned subsidiary of ParentCo, formed on January 25, 2023, to consummate the Business Combination. On the Closing Date, Kernel Merger Sub will merge with and into Kernel, with Kernel surviving the First Merger as a wholly-owned subsidiary of ParentCo. The mailing address of Kernel Merger Sub’s principal executive office is 515 Madison Avenue, Suite 8078 New York, New York 10022. Its telephone number is (646) 908-2659. After the consummation of the First Merger, Kernel Merger Sub will cease to exist as a separate legal entity.

AIRO Merger Sub

AIRO Merger Sub is a wholly-owned subsidiary of ParentCo, formed on February 27, 2023, to consummate the Business Combination. On the Closing Date, immediately following the First Merger, AIRO Merger Sub will merge with and into AIRO, with AIRO surviving the Second Merger as a wholly-owned subsidiary of ParentCo. The mailing address of AIRO Merger Sub’s principal executive office is 515 Madison Avenue, Suite 8078 New York, New York 10022. Its telephone number is (646) 908-2659. After the consummation of the Second Merger, AIRO Merger Sub will cease to exist as a separate legal entity.

AIRO Group, Inc.

AIRO Group, Inc., a Delaware corporation (“ParentCo”), was formed on February 27, 2023 for the purpose of facilitating the Business Combination. As a result of the Domestication and Mergers, ParentCo will succeed Kernel as registrant and public company pursuant to the federal securities laws. Prior to the Business Combination, ParentCo has had no business activity or operations other than in preparation for the Business Combination.

The mailing address of ParentCo’s principal executive office is 515 Madison Avenue, Suite 8078 New York, New York 10022. Its telephone number is (646) 908-2659.

AIRO

AIRO Group, Inc. n/k/a Old AGI, Inc., a Delaware corporation (“Legacy AIRO”), was formed on March 16, 2020 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry, including those that are discussed in this prospectus as having been acquired by AIRO. AIRO was formed on August 30, 2021, and Legacy AIRO became a wholly owned subsidiary of AIRO through a reorganization effective as of October 5, 2021. AIRO then entered into a series of transactions to develop its business across four primary divisions, as further discussed below: (i) Advanced Avionics; (ii) Training; (iii) Uncrewed Air Systems; and (iv) Electric Air Mobility.

The Business Combination Proposal

On March 6, 2023, Kernel entered into the Business Combination Agreement, pursuant to which at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), Kernel Merger Sub will merge with and into Kernel (the “First Merger”), with Kernel continuing as the surviving corporation and wholly-owned subsidiary of ParentCo. Immediately following the First Merger, AIRO Merger Sub will merge with and into AIRO (the “Second Merger”), with AIRO continuing as the surviving corporation and wholly-owned subsidiary of ParentCo.

On August 29, 2023, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the First Amendment to the Business Combination Agreement (the “First Amendment”). The First Amendment amends the Business Combination Agreement to make certain changes to the earnout provisions to fix the number of Earnout Shares that can be granted in each Earnout Period based on a $10.00 per share price.

On January 16, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Second Amendment to the Business Combination Agreement (the “Second Amendment”). The Second Amendment amends the Business Combination Agreement to change the terms under which the AIRO Group Holdings stockholders and the Sponsor shall have a contingent right to receive the Earnout Shares as additional consideration based on ParentCo’s achievement of certain revenue thresholds. The Second Amendment also changes the “Outside Date” from August 2, 2023 to August 5, 2024.

On February 5, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Third Amendment to the Business Combination Agreement (the “Third Amendment”). The Third Amendment amends the Business Combination Agreement to remove the requirement that Kernel have net tangible assets of at least $5,000,001 at Closing.

On June 24, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Fourth Amendment to the Business Combination Agreement (the “Fourth Amendment”). The Fourth Amendment amends the Business Combination Agreement to delete the Sponsor’s right to receive Earnout Shares.

Merger Consideration

As consideration for the Second Merger, the AIRO stockholders collectively shall be entitled to receive from ParentCo, in the aggregate, a number of shares of ParentCo common stock with an aggregate value equal to (a) $770,000,000 minus (b) the amount, if any, by which the net working capital is less than negative $5,500,000 by more than $500,000, plus (c) the amount, if any, by which the net working capital is greater than negative $5,500,000 by more than $500,000 (but not less than zero), minus (d) the amount, if any, by which the closing net debt exceeds the target net debt of $75,000,000 by more than $500,000 (but not less than zero), plus (e) the amount, if any, by which the target net debt of $75,000,000 is less than closing net debt, minus (f) the amount, if any, by which the company transaction expenses exceed the target company transaction expenses of $14,000,000 (such resulting amount, the “AIRO Merger Consideration”).

In addition, AIRO stockholders shall also be entitled to receive from ParentCo up to 33,000,000 additional shares of ParentCo common stock as additional consideration based on ParentCo’s achievement of certain revenue thresholds during the Earnout Eligibility Period, as follows:

(a) if ParentCo’s revenue for the fiscal year that includes the Closing Date is greater than or equal to $50,000,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares;

(b) if ParentCo’s revenue for the first full fiscal year following the Closing Date is greater than or equal to $62,500,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares; and

(c) if ParentCo’s revenue for the second full fiscal year following the Closing Date is greater than or equal to $78,100,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s pro rata share of 11,000,000 Earnout Shares.

For more information, see the section entitled “Shareholder Proposal No. 1: The Business Combination Proposal – Merger Consideration.”

Representations and Warranties

The Business Combination Agreement contains customary representations and warranties by each of Kernel, ParentCo, Kernel Merger Sub, AIRO Merger Sub, and AIRO. Certain of the representations are subject to specified exceptions and qualifications contained in the Business Combination Agreement or in information provided pursuant to certain disclosure schedules to the Business Combination Agreement.

Covenants of the Parties

Each party agreed in the Business Combination Agreement to use its commercially reasonable efforts to effect the Closing and consummate the transactions contemplated by the Business Combination Agreement. The Business Combination Agreement also contains certain customary covenants by each of the parties during the period between the signing of the Business Combination Agreement and the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms (the “Interim Period”), including, among other things, those relating to: (i) the provision of access to their properties, books and personnel; (ii) the operation of their respective businesses in the ordinary course of business; (iii) the provision by AIRO to Kernel of unaudited financial statements on a monthly, quarterly and annual basis and audited financial statements as of December 31, 2022 within 60 days of the Business Combination Agreement’s signing (“AIRO’s 2022 Audited Financials”); (iv) Kernel’s public filings; (v) use of Kernel’s Unencumbered Cash; (vi) no insider trading; (vii) notifications of certain breaches, consent requirements or other matters; (viii) the preparation and filing of the Registration Statement as described in more detail below, (ix) public announcements; and (x) confidentiality. Each party also agreed during the Interim Period not to solicit or enter into any inquiry, proposal or offer, or any indication of interest in making an offer or proposal for an alternative competing transactions, to notify the others as promptly as practicable in writing of the receipt of any inquiries, proposals or offers, requests for information or requests relating to an alternative competing transaction or any requests for non-public information relating to such transaction, and to keep the other party informed of the status of any such inquiries, proposals, offers or requests for information. The Business Combination Agreement also contains certain customary post-Closing covenants regarding (a) maintenance of books and records; (b) tax matters; and (c) indemnification of directors and officers and the purchase of tail directors’ and officers’ liability insurance.

In addition, AIRO agreed to obtain its required shareholder approvals in the manner required under its governing documents and applicable law for the execution, delivery and performance of the Business Combination Agreement and each of the ancillary documents to the Business Combination Agreement to which AIRO is or is required to be a party or bound, and the consummation of the transactions contemplated thereby, including the Business Combination.

In the Business Combination Agreement the parties made customary covenants regarding the registration statement on Form S-4 to be filed by ParentCo with SEC under the Securities Act.

Kernel will distribute a proxy statement to seek the consent of Kernel’s shareholders to, among other things, (i) adopt and approve the Business Combination Agreement and the Transaction; (ii) approve, to the extent necessary, the issuance of any shares in connection with any PIPE/Convertible Note Investment; (iii) approve the certificate of incorporation of Kernel in connection with the Merger; (iv) the appointment of the members of ParentCo’s post-Closing board of directors (the “Post-Closing Board”); (v) such other matters as Kernel and AIRO shall hereafter mutually determine to be necessary or appropriate in order to effect the Transaction and (vi) the adjournment of the Extraordinary General Meeting, if necessary or desirable in the reasonable determination of Kernel.

The parties agreed that the Post-Closing Board will consist of nine directors, comprised of (i) two directors designated prior to the Closing by Kernel, at least one of whom will be required to qualify as an independent director under Nasdaq rules, and (ii) seven designated by AIRO, at least four of whom will be required to qualify as an independent director under Nasdaq rules.

The parties further agreed to take all action necessary so that the individuals serving as the chief executive officer and chief financial officer, respectively, of ParentCo immediately after the Closing will be the same individuals (in the same office) as that of AIRO immediately prior to the Closing.

Conditions to Consummation of the Merger

The Business Combination Agreement contains customary conditions to Closing, including the following mutual conditions of the parties (unless waived): (i) approval of the shareholders of Kernel and AIRO of the Transaction and the other matters requiring shareholder approval; (ii) approvals of any required governmental authorities and completion of any antitrust expiration periods; (iii) receipt of specified third party consents; (iv) no law or order preventing the Transaction; (v) the Registration Statement having been declared effective by the SEC; (vi) no material uncured breach by the other party; (vii) no occurrence of a Material Adverse Effect with respect to the other party; (viii) the satisfaction of the $5,000,001 minimum net tangible asset test by Kernel (not waivable); (ix) approval from Nasdaq for the listing of the shares of ParentCo’s common to be issued in connection with the Transaction; and (x) reconstitution of the Post-Closing Board as contemplated under the Business Combination Agreement.

In addition, unless waived by AIRO, the obligations of AIRO to consummate the Transaction are subject to the satisfaction of the following additional Closing conditions, in addition to the delivery by Kernel of the Related Agreements (as defined and described in greater detail below), customary certificates and other Closing deliverables: (i) the representations and warranties of Kernel being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to customary exceptions, including materiality qualifiers); (ii) Kernel, ParentCo, Kernel Merger Sub, and AIRO Merger Sub having performed in all material respects their respective obligations and complied in all material respects with their respective covenants and agreements under the Business Combination Agreement required to be performed or complied with by them on or prior to the date of the Closing; (iii) absence of any Material Adverse Effect with respect to Kernel since the date of the Business Combination Agreement which is continuing and uncured; (iv) the replacement of the Replacement Warrants and Replacement Options; (v) at the Closing, Kernel having $50,000,000 in Unencumbered Cash, including funds remaining in the trust account (after giving effect to the completion and payment of any redemptions and any Transaction Expenses) and the proceeds of the PIPE/Convertible Note Investment, fifty percent (50%) of any net cash proceeds of any capital investment raise and/or convertible debt raise conducted by the Company during the period beginning on the date of the Business Combination Agreement and ending on the Closing Date, and any net cash proceeds of any executed agreements regarding a capital investment raise and/or convertible debt raise conducted by Kernel or ParentCo in which such cash proceeds are required to be paid to ParentCo during the thirty (30) day period beginning on the Closing Date.

Finally, unless waived by Kernel, the obligations of Kernel to consummate the Transaction are subject to the satisfaction of the following additional Closing conditions, in addition to the delivery by AIRO of the Related Agreements (as defined and described in greater detail below), customary certificates and other Closing deliverables: (i) the representations and warranties of AIRO being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to customary exceptions, including materiality qualifiers); (ii) AIRO having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Business Combination Agreement required to be performed or complied with by it on or prior to the date of the Closing; (iii) absence of any Material Adverse Effect with respect to AIRO and its subsidiaries on a consolidated basis since the date of the Business Combination Agreement which is continuing and uncured; (iv) delivery of AIRO’s 2022 Audited Financials within 60 days of the Business Combination Agreement’s signing; (v) the completion of Kernel’s legal due diligence of AIRO and its subsidiaries to Kernel’s reasonable satisfaction; (vi) the delivery of the Replacement Warrants and Replacement Options; and (vii) the aggregate amount of all Indebtedness of the Target Companies due earlier than 180 days after the Closing (net of AIRO cash at Closing) is less than Fifty Million U.S. Dollars ($50,000,000).

Termination

The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including: (i) by mutual written consent of Kernel and AIRO; (ii) by either Kernel and AIRO if any of the conditions to Closing have not been satisfied or waived by August 5, 2024 (the “Outside Date”), provided that any breach or violation of any representation, warranty or covenant of the party seeking termination is not the cause of the failure of the Closing to occur by the Outside Date; (iii) by either Kernel or AIRO if a governmental authority of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the Transaction, and such order or other action has become final and non-appealable; (iv) by either Kernel or AIRO in the event of the other party’s uncured breach, if such breach would result in the failure of a closing condition (and so long as the terminating party is not also in breach under the Business Combination Agreement); (v) by Kernel if there has been a Material Adverse Effect on AIRO and its subsidiaries on a consolidated basis following the date of the Business Combination Agreement that is uncured and continuing; and (vi) by either Kernel or AIRO if Kernel and AIRO holds a special meeting of its shareholders to approve the Business Combination Agreement and the Transaction, and the required approvals related to the Business Combination Agreement and the Transaction of either Kernel’s shareholders or AIRO’s shareholders is not obtained.

If the Business Combination Agreement is terminated, all further obligations of the parties under the Business Combination Agreement (except for certain obligations related to publicity, confidentiality, fees and expenses, trust fund waiver, no recourse, termination and general provisions) will terminate, and no party to the Business Combination Agreement will have any further liability to any other party thereto except for liability for fraud. The Business Combination Agreement does not provide for any termination fees.

Trust Account Waiver

AIRO agrees that it and its affiliates will not have any right, title, interest or claim of any kind in or to any monies in Kernel’s Trust Account held for its Public Shareholders, and agrees not to, and waives any right to, make any claim against the Trust Account (including any distributions therefrom).

Management

The following persons are expected to serve as executive officers and directors of ParentCo following the Business Combination. For biographical information concerning AIRO’s executive officers and AIRO’s designees to the Post-Closing Board, see “Management After the Business Combination – Executive Officers and Directors after the Business Combination.” For biographical information concerning the Kernel designees to the Post-Closing Board, see “Information About Kernel — Directors and Executive Officers.”

Pursuant to the Existing Kernel Governing Documents, in connection with the Business Combination, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Existing Kernel Governing Documents. For illustrative purposes, based on approximately $77.6 million of funds in the Trust Account and 7,626,878 shares subject to possible redemption, in each case, following the Extension Redemption, this would have amounted to approximately $10.17 per issued and outstanding Public Share. If a holder of Public Shares exercises his, her or its redemption rights in connection with the Business Combination, such holder will be exchanging his, her or its Public Shares for cash. Such a holder will be entitled to receive cash for its Public Shares only if he, she or it properly demands redemption and delivers its Public Shares (either physically or electronically) to Kernel’s Transfer Agent at least two (2) business days prior to the Extraordinary General Meeting. Holders of Public Shares may elect to redeem their shares whether or not such shares are voted at the Extraordinary General Meeting. See the section entitled “Extraordinary General Meeting of Kernel shareholders — Redemption Rights.”

The Business Combination involves numerous risks. For more information about these risks, see the section entitled “Risk Factors.”

The Domestication Proposal

Kernel is proposing that its shareholders approve the Domestication Proposal to change Kernel’s jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Please see the section entitled “Shareholder Proposal No. 2 – The Domestication Proposal.”

The ParentCo Charter Amendment Proposal

Kernel is proposing that its shareholders vote to approve the amendment and restatement of the Existing ParentCo Governing Documents by their deletion and replacement with the proposed new certificate of incorporation and bylaws. Please see the section entitled “Shareholder Proposal No. 3 – The ParentCo Charter Amendment Proposal.”

The Nasdaq Proposal

Kernel is proposing that its shareholders vote to approve, for purposes of complying with Nasdaq Listing Rules 5635(a) and (b), the issuance of more than 20% of issued and outstanding Class A Ordinary Shares in connection with the Business Combination. Please see the section entitled “Shareholder Proposal No. 4 – The Nasdaq Proposal.”

The Incentive Plan Proposal

Kernel is proposing that its shareholders approve and adopt the Equity Incentive Plan, which will become effective upon the Closing of the Business Combination. Please see the section entitled “Shareholder Proposal No. 5 – The Incentive Plan Proposal.”

The Employee Stock Purchase Plan Proposal

Kernel is proposing that its shareholders approve and adopt the Employee Stock Purchase Plan, which will become effective upon the Closing of the Business Combination. Please see the section entitled “Shareholder Proposal No. 6 – The Employee Stock Purchase Plan Proposal”.

The Election of Directors Proposal

Kernel is proposing that its shareholders vote to elect seven (7) directors to serve staggered terms on the ParentCo Board until the 2024, 2025 and 2026 annual meeting of stockholders of ParentCo, respectively, and until their respective successors are duly elected and qualified. Please see the section entitled “Shareholder Proposal No. 7 — The Election of Directors Proposal.”

The NTA Proposal

Kernel is proposing that its shareholders vote to approve amendments to Kernel’s Amended and Restated Memorandum and Articles of Association, which amendments shall be effective, if adopted and implemented by Kernel, immediately prior to the consummation of the Business Combination, to remove the requirements limiting Kernel’s ability to consummate an initial business combination if Kernel would have less than $5,000,001 in net tangible assets prior to or upon consummation of such initial business combination. Please see the section entitled “Shareholder Proposal No. 8 — The NTA Proposal.”

The Adjournment Proposal

Kernel shareholders will be asked to consider and vote upon a proposal to adjourn the Extraordinary General Meeting to a later date or dates if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal or the Employee Stock Purchase Plan Proposal. Please see the section entitled “Shareholder Proposal No. 9 — The Adjournment Proposal.”

Interests of Kernel’s Directors and Officers and Others in the Business Combination.

The Kernel Board has adopted and approved the Business Combination Agreement. In arriving at its recommendations, the Kernel Board carefully considered a number of factors described in this proxy statement/prospectus. Please see section entitled “Shareholder Proposal No. 1: The Business Combination Proposal.”

When you consider the recommendation of the Kernel Board in favor of approval of the Proposals, you should keep in mind that the Sponsor (including certain equity holders of the Sponsor) and certain of Kernel’s directors and executive officers (including Suren Ajjarapu who is Kernel’s chief executive officer) may have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests as a shareholder. These interests include, among other things:

Kernel’s Board considered these interests, among other matters when reviewing and evaluating the proposed terms of the Business Combination, how they might impact the identification of and negotiations with AIRO, and how they might impact the ParentCo if the Business Combination were to be completed. In reviewing these interests, and others deemed relevant by the Kernel Board, the Kernel Board concluded that, on the whole, these interests provided an alignment between the interests of Kernel’s officers and directors, on the one hand, and those of Kernel’s shareholders, on the other hand.

The Existing Kernel Governing Documents provide that the doctrine of corporate opportunity will not apply with respect to any of its officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have, except as set forth in the Existing Kernel Governing Documents. Certain of Kernel’s officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including entities that are affiliates of the Sponsor, pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he has then-current fiduciary or contractual obligations, he will honor his fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under applicable law. Kernel’s Board evaluated and considered three (3) potential target companies as candidates for a possible business combination transaction with Kernel, and Kernel’s Board did not believe that the other fiduciary duties or contractual obligations of its officers and directors materially affected Kernel’s ability to source a potential business combination. Kernel’s Board considered the factors supporting, and risks and uncertainties related to, a business combination with AIRO as set forth above under “Recommendation of the Kernel Board and Reasons for the Business Combination,” and did not believe that such other fiduciary duties or contractual obligations impacted such consideration.

Risk Factors

In evaluating the Proposals set forth in this proxy statement/prospectus, you should carefully read this proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.”

Risks Related to ParentCo and its Common Stock Following the Business Combination

Risks Related to Kernel and the Business Combination

SELECTED HISTORICAL FINANCIAL INFORMATION OF KERNEL

We are providing the following selected historical financial information to assist you in your analysis of the financial aspects of the Business Combination. Kernel’s condensed balance sheet data as of March 31, 2024 and the condensed statement of operations data for the three months ended March 31, 2024 are derived from Kernel’s unaudited condensed financial statements included elsewhere in this registration statement. Kernel’s balance sheet data as of December 31, 2023 and the statement of operations data for the year ended December 31, 2023 is derived from Kernel’s audited financial statements included elsewhere in this registration statement.

The information is only a summary and should be read in conjunction with the Company’s financial statements and related notes and “Kernel’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this registration statement. Kernel’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

SELECTED HISTORICAL FINANCIAL INFORMATION OF AIRO 

We are providing the following selected historical financial information to assist you in your analysis of the financial aspects of the Business Combination. AIRO’s condensed consolidated balance sheet data as of March 31, 2024 and the condensed consolidated statement of operations data for the three months ended March 31, 2024 are derived from AIRO’s unaudited condensed consolidated financial statements included elsewhere in this registration statement. AIRO’s consolidated balance sheet data as of December 31, 2023 and the consolidated statement of operations data for the year ended December 31, 2023 is derived from AIRO’s audited consolidated financial statements included elsewhere in this registration statement.

The information is only a summary and should be read in conjunction with AIRO’s consolidated financial statements and related notes and “AIRO’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this registration statement. AIRO’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Defined terms included below shall have the same meaning as terms defined and included elsewhere in this registration statement.

The following summary unaudited pro forma combined financial data (the “Summary Pro Forma Information”) gives effect to the transactions contemplated by the Business Combination (the “Transaction”). The Business Combination will be accounted for as a reverse recapitalization, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, although ParentCo is the legal acquirer, Kernel will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be reflected as the equivalent of AIRO issuing shares for the net assets of Kernel, followed by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination will be those of AIRO. There will be no accounting effect or change in the carrying amount of the assets and liabilities as a result of the reverse recapitalization.

The summary unaudited pro forma combined balance sheet as of March 31, 2024 gives effect to the Transaction as if it had occurred on March 31, 2024.

The summary unaudited pro forma combined statements of operations for the three months ended March 31, 2024 and the year ended December 31, 2023 gives effect to the Transaction as if it had occurred on January 1, 2023.

The Summary Pro Forma Information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma combined financial information included in the section entitled “Unaudited Pro Forma Combined Financial Information” in this registration statement and the accompanying notes thereto. The unaudited pro forma combined financial information is based upon, and should be read in conjunction with, the historical financial statements and related notes of Kernel and AIRO for the applicable periods included in this registration statement.

The Summary Pro Forma Information has been presented for informational purposes only and is not necessarily indicative of what the ParentCo’s financial position or results of operations actually would have been had the Business Combination been completed as of the dates indicated. In addition, the Summary Pro Forma Information does not purport to project the future financial position or operating results of the ParentCo following the reverse recapitalization.

The unaudited pro forma combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of Kernel Class A Ordinary:

● Scenario 1: Assuming No Redemptions: This presentation assumes that no Kernel Public Shareholders exercise redemption rights with respect to their Public Shares of 509,341 which were outstanding as of the date of this filing. Public Shares are based on a total of 30,475,000 redeemable Public Shares pursuant to the Kernel Charter less the 22,848,122 Public Shares redeemed in February 2023, 1,310,929 Public Shares redeemed in August 2023 and 5,806,608 Public Shares redeemed in February 2024.

● Scenario 2: Assuming 50% Redemptions: This presentation assumes that 50% of Kernel Public Shareholders holding 254,670 Public Shares will exercise their redemption rights for approximately $2.8 million of funds in Kernel’s Trust Account.

● Scenario 3: Assuming Maximum Redemptions: This presentation assumes that 100% of Kernel public shareholders holding 509,341 Public Shares will exercise their redemption rights for approximately $5.5 million of funds in Kernel’s Trust Account.

The Business Combination will not close under any scenario unless AIRO waives the Unencumbered Cash closing condition and the NTA Proposal is approved.

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented. Significant assumptions include conversions of debt to equity as further described in the notes to the unaudited pro forma combined financial information. These conversion agreements have been executed but do not take effect until no later than two days prior to closing of the Business Combination. The pro forma adjustments also do not include additional Unencumbered Cash provided by Kernel beyond funds remaining in its trust account in each redemption scenario though, pursuant to the Business Combination Agreement, it is required to deliver $50 million in Unencumbered Cash at Closing unless such condition is waived by AIRO. While Kernel is pursuing various avenues of financing to meet such closing condition, no definitive agreements have been executed, so no proceeds from such efforts are reflected in the pro forma adjustments. As part of the pro forma adjustments, AIRO included adjustments to recognize interest, contingent consideration expense related to Jaunt Air Mobility LLC, and additional sales and marketing expense related to the Aspen Management Carveout Plan.

The unaudited pro forma combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain available information as of the date of these unaudited pro forma combined financial statements and certain assumptions and methodologies that Kernel believes are reasonable under the circumstances. The unaudited pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Kernel believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial information.

The unaudited pro forma combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of ParentCo. They should be read in conjunction with the historical financial statements and notes thereto of Kernel and AIRO.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement/prospectus are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are being made pursuant to the safe harbor provisions contained therein. These forward-looking statements relate to current expectations and strategies, future operations, future financial positioning, future revenue, projected costs, prospects, current plans, current objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from expectations, estimates, and projections expressed or implied by these forward-looking statements and, consequently, you should not rely on these forward-looking statements as a guarantee, an assurance, a prediction or a definitive statement of fact or probability of future events. In some cases, you can identify forward-looking statements through the use of words or phrases such as “may”, “should”, “could”, “predict”, “potential”, “plan”, “seeks”, “believe”, “will likely result”, “expect”, “continue”, “will continue”, “will”, “will be”, “anticipate”, “seek”, “estimate”, “intend”, “project”, “would”, “outlook”, “intend”, “strive”, and similar expressions, or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature, but the absence of such words does not mean that a statement is not forward-looking. These forward-looking statements are not historical facts, but instead they are predictions, projections and other statements about future events are based upon estimates and assumptions that, while considered reasonable by Kernel and its management, and AIRO and its management, as the case may be, are inherently uncertain. These forward-looking statements are provided for illustrative purposes only and actual events and circumstances are difficult or impossible to predict and will differ from assumptions.

Forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements about the:

Many factors may cause actual results to differ materially from these forward-looking statements including, but not limited to:

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that will be described in the “Risk Factors” section of this proxy statement/prospectus and the amendments hereto, and other documents to be filed by us from time to time with the SEC, which are publicly available on the SEC’s website at www.sec.gov. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and while we may elect to update these forward-looking statements at some point in the future, they assume no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. We are not giving any assurance that we will achieve our expectations. These forward-looking statements should not be relied upon as representing our assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

RISK FACTORS

You should carefully consider the following risk factors in addition to the other information included in this proxy statement/prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements,” before deciding how to vote your shares of Kernel Ordinary Shares. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination and may have a material adverse effect on the business, financial condition and operating results of AIRO and ParentCo following the Business Combination. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by Kernel and AIRO that later may prove to be incorrect or incomplete. Kernel and AIRO may face additional risks and uncertainties that are not presently known to Kernel or AIRO or that Kernel and AIRO currently deem immaterial, which may also impair ParentCo’s business, financial condition or results of operations. The following discussion should be read in conjunction with the financial statements of AIRO and the financial statements of Kernel and the notes thereto included elsewhere in this proxy statement/prospectus.

Risks Related to AIRO’s Business

The following risk factors will apply to the business and operations of ParentCo following the Closing. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation with respect to the business, financial condition and operating results of AIRO and the business, financial condition and operating results of ParentCo following the completion of the Business Combination.

Unless the context requires otherwise, references to “AIRO,” in this section are to the business and operations of AIRO prior to the Business Combination which will be the business of ParentCo after the Business Combination, and references to “ParentCo” “we”, “us” or “our” in this section are to the business and operations of ParentCo as directly or indirectly affected by AIRO by virtue of ParentCo’s ownership of the business of AIRO after the Business Combination. Following the Business Combination, ParentCo will be a holding company with no direct operations or material assets, other than the operations and assets of AIRO. Accordingly, ParentCo’s stockholders and warrant holders will be subject to all of the risks of the business of AIRO following the Business Combination.

Our limited operating history as a combined company and our evolving business make it difficult to evaluate our current business and future prospects and increase the risk of your investment.

We were organized on August 30, 2021 for the purpose of acquiring and integrating various companies in the aerospace and defense industry. See “Business of AIRO – Formation of AIRO Group Holdings, Inc.” Our limited operating history and rapidly evolving business make it difficult to evaluate our current business, future prospects and plan for growth. We will continue to encounter significant risks and uncertainties frequently experienced by growing companies in rapidly changing and heavily regulated industries, such as attracting new customers to our products and services; retaining customers and encouraging them to utilize new products and services that we make available; competition from other companies; hiring, integrating, training and retaining skilled personnel; developing new solutions; determining prices for our solutions; unforeseen expenses; challenges in forecasting accuracy; and new or adverse regulatory developments affecting aspects of the aerospace and defense industry. Further, because we depend, in part, on market acceptance of our newer and future products and services, it is difficult to evaluate trends that may affect our business and whether our expansion will be profitable. If we have difficulty launching new products or services, then our reputation may be harmed and our business, financial condition and results of operations may be adversely affected. If our assumptions regarding these and other similar risks and uncertainties that relate to our business, which we use to plan our business, are incorrect or change as we gain more experience operating as a combined company, or if we do not address these challenges successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

We have identified a material weakness in our internal control over financial reporting. We have made and continue to make changes to our internal controls to remediate this material weakness. However, if we are unable to effectively remediate this material weakness, identify additional material weaknesses in the future, or otherwise fail to maintain effective internal control over financial reporting, then we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Any failure to maintain effective internal control over financial reporting could cause us to fail to accurately or timely report our financial condition or results of operations to meet our reporting obligations.

We have identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As further discussed in “Business of AIRO”, AIRO acquired six subsidiaries during the first two fiscal quarters of 2022. Several of AIRO’s recently-acquired subsidiaries did not have adequate personnel to manage their accounting functions and did not maintain a segregation of duties between different roles at their organizations. In addition, in the course of preparing its consolidated financial statements for the periods in which the acquisitions occurred, AIRO did not have an effective risk assessment process that successfully identified and assessed risks of material misstatement to ensure controls were designed and implemented to respond to those risks, and it did not have an effective monitoring process to assess the consistent operation of internal control over financial reporting and remediate known control deficiencies. As a result of these deficiencies, AIRO did not effectively implement and operate process-level control activities related to the accounting and reporting for the six acquisitions, including the fair value of its common stock issued in certain of the transactions, resulting in the restatement of its consolidated financial statements as of and for the year ended December 31, 2022, as well as its unaudited condensed consolidated financial statements for the six month period ended June 30, 2022, the nine month period ended September 30, 2022, the three month period ended March 31, 2023, the six month period ended June 30, 2023 and the nine month period ended September 30, 2023.

While we have made changes to our accounting processes and other internal controls as a combined company and have engaged additional accounting personnel, we cannot assure that the measures we have taken to date, actions we continue to take, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to this material weakness and restatement of our consolidated financial statements.

We are a relatively small company with limited accounting staff. Our limited staff and resources may affect our internal controls over financial reporting. Our failure to implement measures that will ensure adequate controls over our financial and other reporting processes could cause us to fail to meet our financial and other reporting obligations.

We are a relatively small company with limited accounting staff. The limited staff may not allow for effective internal controls over financial reporting due to the lack of adequate segregation of duties and insufficient secondary review of GAAP. Due to our current staffing limitations, we cannot be certain that the measures we implement in the future will ensure that we design, undertake, and maintain adequate controls over our financial processes and reporting. Any failure by us to hire and retain experienced accounting and financial reporting personnel, implement required new or improved controls, or any difficulties we encounter in their implementation, could cause us to fail to meet our reporting obligations.

Our or our subsidiaries’ failure to comply with covenants under debt instruments could adversely affect our business and financial condition.

The agreements governing our and our subsidiaries’ indebtedness contain restrictive covenants that will limit our and our subsidiaries’ ability to engage in activities that may be in our and their long-term best interests. The creditors who hold our debt could accelerate amounts due in the event that we default on these covenants, which could potentially trigger a default or acceleration of the maturity of our other debt. If we are unable to comply with any covenant, we may need to obtain waivers from the required creditors under our debt instruments to avoid default.

Our failure to comply with the terms of certain promissory notes entered into with former stockholders of several of AIRO’s wholly-owned subsidiaries could adversely affect our business, financial condition, results of operations or liquidity.

As discussed below in “Business of AIRO - Formation of AIRO Group Holdings, Inc.,” in connection with the Put-Together Transaction (as defined in the notes to AIRO’s financial statements below), AIRO entered into promissory notes with the equity holders (the “Note Holders”) of Agile Defense, CDI, Sky-Watch and AIRO Drone (all as defined below under “Business of AIRO”) (the “AIRO Subsidiaries”). The promissory notes become payable within five (5) business days after the common stock of ParentCo begins public trading. Each promissory note is secured by all of the shares of AIRO’s interest in the respective AIRO Subsidiary (the “Collateral”). If we are unable to repay the principal amount of one or more of the promissory notes when due, then the associated Note Holders may take possession of and exercise control over the Collateral, resulting in our loss of all or partial ownership of such AIRO Subsidiary, which could adversely affect our business and financial condition.

We operate in evolving markets, which makes it difficult to evaluate our business and future prospects.

Our drones, electric vertical take-off and landing (“eVTOL”) aircraft and other products are sold in new and rapidly evolving markets. Accordingly, our business and future prospects may be difficult to evaluate. We cannot accurately predict the extent to which demand for our products and services will increase, if at all. The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact our ability to do the following:

If we fail to address these and other challenges, risks and uncertainties successfully, our business, results of operations, prospects and financial condition would be materially harmed.

We face significant competition from other firms, some of which have substantially greater resources than us.

The defense and broader aerospace industry is highly competitive and generally characterized by intense competition to win contracts. Our current principal competitors include the following: (i) for our Uncrewed Air Systems Division: AeroVironment, Inc. (AVAV), Zipline International Inc., AgEagle Aerial Systems, Inc. (UAVS), Draganfly Inc. (DPRO), and Drone Delivery Canada Corp. (TAKOF); (ii) for our Training Division: Lockheed Martin Corporation (LMT), Raytheon Technologies Corporation (RTX), Northrop Grumman Corporation (NOC), Draken International, Inc., Top Aces Inc., Airborne Tactical Advantage Company, LLC, Tactical Air Defense Services Inc., Air USA, Inc., Embry-Riddle Aeronautical University, Inc., Spartan Aviation Industries, Inc., ATP, Inc., and FlightSafety International, Inc.; (iii) for our Advanced Avionics Division: Honeywell International Inc. (HON; “Honeywell”), Avidyne Corporation, Collins Aerospace, Dynon Avionics, Inc., uAvionix Corporation, L3Harris Technologies, Inc. (LHX), and Garmin Ltd. (GRMN); and (iv) for our Electric Air Mobility Division: BETA Technologies, Inc., Volocopter GmbH, Wisk Aero LLC, Joby Aviation, Inc. (JOBY), Archer Aviation Inc. (ACHR), Vertical Aerospace Ltd. (EVTL), Lilium N.V. (LILM), and Eve Holding Inc. (EVEX) in addition to ground transportation services, such as Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT), and incumbent aircraft carrier services, such as Blade Air Mobility, Inc. (BLDE) and NetJets Inc. Some of these firms have substantially greater financial, management, research and marketing resources than us. Our competitors may be able to provide customers with different or greater capabilities or benefits than we can provide in areas such as technical qualifications, past contract performance, geographic presence, price and the availability of key professional personnel, including those with security clearances. Furthermore, many of our competitors may be able to utilize their substantially greater resources and economies of scale to develop competing products and technologies, manufacture in high volumes more efficiently, divert sales away from us by winning broader contracts or hire away our employees by offering more lucrative compensation packages. Small business competitors may be able to offer more cost competitive solutions, due to their lower overhead costs, and take advantage of small business incentives and set-aside programs for which we are ineligible. In order to secure contracts successfully when competing with larger, well-financed companies, we may be forced to agree to contractual terms that provide for lower aggregate payments to us over the life of the contract, which could adversely affect our margins.

We expect to incur substantial R&D costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce our profitability and may never result in revenue to us.

Our future growth depends on penetrating new markets, adapting existing products to new applications, and introducing new products and services that achieve market acceptance. We plan to incur substantial R&D costs as part of our efforts to design, develop and commercialize new products and services and enhance existing products. We believe that there are significant investment opportunities in a number of our business areas. Because we account for internal R&D as an operating expense, these expenditures will adversely affect our earnings in the future. Further, our R&D programs may not produce successful results, and our new products and services may not achieve market acceptance, create additional revenue or become profitable, which could materially harm our business, prospects, financial results and liquidity.

Even if the Business Combination is successful, we will require substantial additional capital at a future date to finance our operations and fund our R&D. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate our R&D activities, as well as our commercialization efforts.

Developing products and services in the defense and broader aerospace industry is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations, as well as our R&D, have consumed substantial amounts of cash since they began. We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the development of our aircraft and other products, seek regulatory approvals, and launch and commercialize our products at scale. Following the Business Combination, we also expect to incur additional costs associated with operating a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations. If we are unable to raise capital when needed or on acceptable terms, then we may be forced to delay, reduce or eliminate our R&D activities as well as our commercialization efforts.

Our consumers may experience service failures or interruptions due to defects in the software, infrastructure, components or engineering system that compromise our products and services, or due to errors in product installation, any of which could harm our business.

Our products and services may contain undetected defects in the software, infrastructure, components or engineering system. Sophisticated software and applications, such as those adopted and offered by us in connection with or as a part of our eVTOL, drone, and avionics offerings, may contain “bugs” that can unexpectedly interfere with the software and applications’ intended operations. Our communication services may from time to time experience outages, service slowdowns or errors. Defects may also occur in components or processes used in our products or for our services.

There can be no assurance that we will be able to detect and fix all defects in the hardware, software and services we offer. Failure to do so could result in decreases in sales of our products and services, lost revenues, significant warranty and other expenses, decreases in customer confidence and loyalty, losing market share to our competitors, and harm to our reputation.

We rely on a limited number of suppliers in Canada and Europe for critical components and raw materials used to manufacture and develop our products. If we are forced to use suppliers outside these jurisdictions and, as a result, such materials become scarce or unavailable, or such suppliers fail, then we may incur delays in development, manufacture and delivery of our products, which could damage our business.

Particularly in our Advanced Avionics, Uncrewed Air Systems and Electric Air Mobility Divisions, we obtain hardware components, raw materials, and various systems and subsystems from a limited group of suppliers located in Canada and Europe, some of which are sole source suppliers. We do not have long-term agreements with any of these suppliers that obligate them to continue to sell such components, materials, systems or subsystems to us. Our reliance on these suppliers involves significant risk and uncertainty, including whether such suppliers will provide an adequate supply of products of sufficient quality, will increase prices for the products and will perform their obligations on a timely basis. Changes in business conditions, wars, governmental changes, political intervention, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Furthermore, if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are acceptable to us, or at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. In addition, certain components and raw materials used in the development and manufacture of our products are periodically at risk of supply shortages, and our business is subject to the risk of price increases and periodic delays in delivery. If shortages occur and we are unable to obtain components from third party suppliers in the quantities and of the quality we require, on a timely basis and at acceptable prices, then we may not be able to timely complete development of or deliver our products on a timely or cost effective basis to our customers, which could cause customers to terminate their contracts with us, increase our costs and seriously harm our business, results of operations, prospects and financial condition. Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us with raw materials or components, then we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers. Even if we are successful at locating alternative suppliers the costs of the components may be higher than the original supplier’s components or we may be required to purchase in larger quantities than we normally would, which may result in higher inventory levels than desired. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our products. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable cost, if at all. In particular, the global COVID-19 pandemic has disrupted manufacturing and some supply chains, including our supply chain, which has had, and is expected to continue to have, a significant impact, both direct and indirect, on businesses and commerce worldwide.

We do not control our suppliers’ labor or other compliance practices, including environmental, health and safety practices. If our current suppliers, or any other suppliers we may use in the future, violate U.S. or foreign laws or regulations, we may be subjected to extra duties, significant monetary penalties, adverse publicity, the seizure and forfeiture of products that we are attempting to import or the loss of our import privileges. The effects of these factors could render the conduct of our business in a particular country undesirable or impractical and have a negative impact on our operating results.

We are impacted by increasing stakeholder interest in public company performance, disclosure, and goal-setting with respect to environmental, social, and governance (“ESG”) matters.

In response to growing customer, investor, employee, governmental, and other stakeholder interest in the ESG practices of public companies, we plan to hire a Chief Sustainability Officer to guide our work in and reporting on our ESG initiatives. Our ability to achieve any goals in connection with our ESG initiatives is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (a) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements affecting ESG standards or disclosures, (3) the availability of suppliers that can meet our sustainability, diversity and other standards, (4) our ability to recruit, develop, and retain diverse talent in our labor markets, and (5) the impact of our organic growth and acquisitions or dispositions of businesses or operations. In addition, standards for tracking and reporting on ESG maters have not been harmonized and continue to evolve. Our processes and controls for reporting of ESG matters may not always comply with evolving and disparate standards for identifying, measuring, and reporting ESG metrics, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our reported progress in our ESG initiatives.

If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, supplier, business partner, or acquirer could be negatively impacted.

There may be a future shortage of pilots who meet the training standards required by our customers, which could reduce our ability to sell our aircraft at scale and on the timelines contemplated.

There may be a future shortage of pilots that could exacerbate over time as more pilots in the industry approach mandatory retirement age. This will affect the aviation industry, including advanced air mobility (“AAM”) services and, more specifically, our business. If we are unable to hire, train, and retain qualified pilots, our business could be harmed, and we may be unable to implement our growth plans.

We are subject to cybersecurity and other security risks to our operational systems, security systems, infrastructure, integrated software in our aircraft and customer data processed by us or third-party vendors, which risks are amplified by our work for world governments.

We are at risk for interruptions, outages and breaches of our: (i) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers; (ii) facility security systems, owned by us or our third-party vendors or suppliers; (iii) aircraft technology, including powertrain and avionics and flight control software, owned by us or our third-party vendors or suppliers; (iv) the integrated software in our aircraft; or (v) customer data that we process or our third-party vendors or suppliers process on our behalf. As a government contractor, these security threats to our information technology (“IT”) infrastructure and facilities are amplified. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent disruptions, the unauthorized release of confidential technical information, the misappropriation of intellectual property or trade secrets, financial or banking information or corruption of data. Accordingly, any significant operational delays, or any destruction, manipulation or improper use of our data, information systems or networks could adversely affect our financial results and damage the reputation for our products and services. The occurrence of some of these risks may be increased due to the increase in remote working by our employees, suppliers, contractors and other third parties due to the COVID-19 pandemic. Due to the ever-developing nature of such risks, the impact of any potential incident cannot be predicted. If we or our partners are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures, either of which could materially and adversely affect our business, prospects and financial results. Additionally, expenses resulting from cyber security attacks and other security risks may not be fully insured or otherwise mitigated, which could harm our financial results. If our security measures and systems do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

It remains unclear how the coronavirus (COVID-19) pandemic may impact our business, financial condition, results of operations and growth.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The pandemic has adversely affected economies and financial markets worldwide, as well as business operations and the conduct of commerce generally. While the WHO declared the pandemic ended in 2023, the extent of the business disruption and financial impact depend on factors beyond our knowledge and control making it difficult for us to accurately predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations or financial condition at this time, but such effects may be material. In addition, our continued access to sources of liquidity depend on global economic conditions and the condition of global financial markets. Given the uncertainty caused by the pandemic, there is no guarantee that debt or equity financing will be available in the future to fund our obligations, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.

Our commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively impact our financial results.

The operating results of our commercial aviation products, systems and services businesses – particularly our Electric Air Mobility and Advanced Avionics Divisions – may be adversely affected by downturns in the global demand for air travel, which impacts new aircraft production and orders, and global flying hours, which impacts air transport, regional and business aircraft utilization rates and pilot training needs. The aviation industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and international economies and is impacted by long-term trends in airline passenger and cargo traffic. The results of our commercial aviation businesses also depend on other factors, including general economic growth, political stability in both developed and emerging markets, pricing pressures, trends in capital goods markets and changes in original equipment manufacturer production rates. Our commercial aviation businesses experienced adverse COVID-related impacts in fiscal 2020 and remain at a higher risk of further adverse COVID-related impacts.

Our business and financial performance could be adversely affected by inflation.

Until recently, the inflation rate has generally been low in the geographies where we operate. However, recently, the inflation rate in the U.S. reached a 40-year high, primarily as a result of higher energy costs and global supply chain disruptions. In the event of a significant increase in consumer prices, particularly over an extended period of time, customer demand for our products and services could be adversely affected and we could experience lower than expected sales. In addition, if any of our suppliers implemented price increases in response to higher raw material, labor, and energy costs or otherwise, we may not be able to pass along such price increased to our customers and our profitability may be reduced. The occurrence of any of these events could have a material adverse effect on our business, financial condition, and results of operations.

We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our profitability.

Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East and Asia, and the potential for other conflicts and future terrorist activities, as well as other recent geopolitical events throughout the world, including the ongoing conflict in Ukraine and new or increased tariffs and potential trade wars, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability. We have not experienced, and do not anticipate, any disruption in our supply chain or other business operations due to the ongoing conflict in Ukraine. We sell drones that are being deployed by Ukraine via sales to other NATO nations, but given the uncertainty of the future of that conflict we have not projected continuing sales in that area in our financial projections. As the conflict expands or contracts, diminished sales would have little or no impact on our financial position, while increased sales would be reflected in increased revenue. However, notwithstanding our current and anticipated position, these types of matters can cause uncertainty in financial markets and may significantly increase the political, economic and social instability in geographic areas in which we operate now or may operate in the future. If credit in financial markets outside of the U.S. tightened, it could adversely affect the ability of our international customers and suppliers to obtain financing and could result in a decrease in or cancellation of orders for our products, systems and services or impact the ability of our customers to make payments.

Risks Related to Electric Air Mobility

The market for eVTOL aircraft and electric air mobility (“EAM”) has not been established with precision, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected, which may harm our business, financial condition, and results of operations.

The EAM market is still emerging and has not been established with precision. We are uncertain as to what extent market acceptance will grow, if at all. Our customers will likely initially launch operations in a limited number of metropolitan areas. The success of these markets, if any, and the opportunity for future growth in these and other markets may not be representative of the potential market for EAM in other metropolitan areas. Our success will depend to a substantial extent on regulatory approval and availability of eVTOL technology, as well as the willingness of commuters and travelers to widely adopt air mobility as an alternative for ground transportation. If the public does not perceive EAM as beneficial, or chooses not to adopt EAM as a result of concerns regarding safety, affordability, value proposition or for other reasons, then the market for our aircraft may not develop, may develop more slowly than we expect or may not achieve the growth potential we expect. Any of the foregoing could materially adversely affect our business, financial condition, prospects, and results of operations.

There may be reluctance by consumers to adopt this new form of mobility, or an unwillingness to pay aircraft operators’ projected prices.

Our growth is highly dependent upon the adoption by consumers of an entirely new form of mobility offered by eVTOL aircraft and the EAM market. If consumers do not adopt this new form of mobility or are not willing to pay the projected prices for the aerial ridesharing services provided by our customers, our prospects, financial condition and operating results will be harmed. This market is new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, new aircraft announcements and changing consumer demands and behaviors. There may be heightened public skepticism of this nascent technology and its adopters. In particular, there could be negative public perception surrounding eVTOL aircraft, including the overall safety and the potential for injuries or death occurring as a result of accidents involving eVTOL aircraft, regardless of whether any such safety incidents involve our aircraft. Any of the foregoing risks and challenges could adversely affect our prospects, business, financial condition, and results of operations.

Our success in a given market will depend on our customers’ ability to develop a network of passengers and accurately assess and predict passenger demand and price sensitivity. Demand and price sensitivity may fluctuate based on a variety of factors, including macroeconomic factors, quality of service, negative publicity, safety incidents, corporate reporting related to safety, quality of customer support, perceived political or geopolitical affiliations, or dissatisfaction with our products and offerings in general. If the operators of our aircraft fail to attract passengers or fail to accurately predict demand and price sensitivity, it could reduce demand for our aircraft and harm our financial performance.

We expect that a large driver of passenger demand for EAM will be time savings when compared with alternative modes of transportation. Should operators of our aircraft be unable to deliver a sufficient level of time savings for passengers, or if expected time savings are impacted by delays or cancellations, it could reduce consumer demand and, in turn, demand for our aircraft. If demand does not materialize or falls, our business, financial conditions, prospects, and results of operations could be adversely affected.

Operators of our aircraft may be unable to reduce end-user pricing over time at rates sufficient to stimulate demand for our aircraft, drive expected growth and accomplish planned production.

Operators of our aircraft may not be able to successfully reduce end-user pricing over time to increase demand, address new market segments and develop a significantly broader customer base. We expect that initial end-user pricing may be most applicable to relatively affluent consumers, and operators will need to address additional markets and expand their customer demographic in order to further grow their EAM business. If operators are unable to meet their end-user pricing projections, then demand for our aircraft will decline and we will be unable to meet our production plans, resulting in an increase in our per-unit costs, adversely affecting our results of operations.

Our aircraft may not perform at the level we expect, and may have design or manufacturing deficiencies, such as higher than expected noise profile, lower payload than initially estimated, shorter range and/or shorter useful lives than we anticipate.

Our aircraft may contain defects in design or manufacture that may cause them not to perform as expected or that may require repair. For example, our aircraft may have a higher noise profile than we expect or carry a lower payload or have shorter maximum battery range than we estimate. Our aircraft also use a substantial amount of software code to operate. Software products are inherently complex and often contain defects and errors when first introduced. There can be no assurance that we will be able to detect and fix these defects in these products prior to their use. While we have performed extensive testing, in some instances we are still relying on projections and models to validate the projected performance of our aircraft. To date, we have been unable to validate the performance of our aircraft over the expected lifetime of the aircraft.

Accidents or safety incidents involving eVTOL aircraft, us or our competitors could have a material adverse effect on our business, financial condition, and results of operations.

Test flying prototype aircraft is inherently risky, and accidents or incidents involving our aircraft are possible. Urban environments may present particular challenges to the operators of UAS, such as an increased risk of collisions resulting in property damage, injury or death. As the usage of UAS has increased, the danger of such collisions has increased. Any such occurrence would negatively impact our development, testing and certification efforts, and could result in re-design, certification delay and/or postponements or delays to the sales of our aircraft It could also significantly damage the reputation of and support for UAS in general.

The operation of aircraft is subject to various risks, and we expect demand for our aircraft to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft. Such accidents or incidents could also have a material impact on our ability to obtain certification from the Transport Canada Civil Aviation (“TCCA”), the U.S. Federal Aviation Administration (“FAA”), and/or the European Union Aviation Safety Agency (“EASA”) (the TCCA, FAA and EASA together, the “Civil Aviation Authorities”) for our aircraft, or to obtain such certification in a timely manner. Such events could impact confidence in a particular aircraft type or the air transportation services industry as a whole, particularly if such accidents or disasters were due to a safety fault. We believe that regulators and the general public are still forming their opinions about the safety and utility of aircraft that are highly reliant on lithium-ion batteries and/or advanced flight control software capabilities. An accident or other safety incident involving either our aircraft or a competitor’s aircraft during these early stages of opinion formation could have a disproportionate impact on the longer-term view of the emerging EAM market.

Further, if our personnel, our aircraft or other types of aircraft are involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident, which would adversely impact our business, results of operations and financial condition.

Our competitors may commercialize their technology before us, either in general or in specific markets.

While we expect to be one of the pioneering companies to market eVTOL aircraft, we expect this industry to be increasingly competitive, and it is possible that our competitors could get to market before us, either generally or in specific markets. Even if we are first to market, we may not fully realize the benefits we anticipate, and we may not receive any competitive advantage or may be overcome by other competitors. Many of our current and potential competitors are larger and have substantially greater resources than we have and expect to have in the future. They may also be able to devote greater resources to the development of their current and future technologies or the promotion and sale of their offerings, or offer lower prices. In particular, our competitors may be able to obtain the relevant certification and approvals for their aircraft before us.

We may encounter obstacles outside of our control that slow market adoption of eVTOL aircraft or aerial rideshares, such as infrastructure limitations, regulatory requirements and challenges in the certification process.

The fleet market for electric aircraft is new and untested and is characterized by rapidly changing and evolving government regulation and industry standards. If we are unable to get through the certification process on the timeline planned, then our business, financial conditions, prospects, and results of operations could be adversely affected.

In addition, while our aircraft will be operating within the existing aviation airspace and infrastructure, long-term continued adoption of EAM will depend on operators’ ability to develop and operate vertiports in desirable locations in metropolitan locations. Developing and operating vertiport locations will require permits and approvals from federal, state, and local regulatory authorities and government bodies, and operation of our aircraft will depend on such permits and approvals. If our operators are prohibited, restricted, or delayed from developing and operating desirable vertiport locations, then demand for our aircraft could decline and our business could be adversely affected.

If we experience harm to our reputation and brand by customers, employees or operators, our business, financial condition, and results of operations could be adversely affected.

Continuing to increase the strength of our reputation and brand for high-performing, sustainable, safe and cost-effective EAM is critical to our ability to attract and retain customers and partners. In addition, our growth strategy includes international expansion through joint ventures or other partnerships with local companies that would benefit from our reputation and brand recognition. The successful development of our reputation and brand will depend on several factors, many of which are outside of our control. Negative perception of our aircraft or company may harm our reputation and brand, including as a result of:

Any of the foregoing could adversely affect our business, financial condition, and results of operations.

In order to reach production for our aircraft, we need to develop complex software and technology systems in coordination with our partners and suppliers, and there can be no assurance such systems will be successfully developed.

We anticipate that our aircraft will use a substantial amount of sophisticated software and hardware to operate. The development of such advanced technologies is inherently complex, and we will need to coordinate with our partners and suppliers in order to reach production for our aircraft. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our potential inability to develop the necessary software and technology systems may harm our competitive position.

We are relying on third-party partners to develop a number of emerging technologies for use in our products. These technologies are not today, and may not ever be, commercially viable. There can be no assurances that our partners will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance, useful life, and warranty characteristics that we anticipate in our business plan or may have performance problems related to mechanical or software defects. As a result, our business plan could be significantly adversely impacted, and we may incur significant liabilities under warranty claims, which could adversely affect our business, prospects, and results of operations.

We may not be able to produce aircraft in the volumes and on the timelines projected.

There are significant challenges associated with mass producing aircraft in the volumes that we are projecting. The aerospace industry has traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing and manufacturing aircraft, long lead times to bring aircraft to market from the concept and design stage, the need for specialized design and development expertise, extensive regulatory requirements, difficulty establishing a brand name and image, and the need to establish maintenance and service locations. As a manufacturer of electric aircraft, we face a variety of added challenges to entry that a traditional aircraft manufacturer would not encounter, including additional costs of developing and producing an electric powertrain, regulations associated with the transport of lithium-ion batteries and unproven high-volume consumer demand for a fully electric aerial mobility service. Additionally, we are developing production lines for components and at volumes for which there is little precedent within the traditional aerospace industry. If we are not able to overcome these barriers, our business, prospects, operating results and financial condition will be negatively impacted, and our ability to grow our business will be harmed.

We will also need to do extensive testing to ensure that the aircraft is in compliance with applicable TCCA safety regulations and other relevant regulations prior to beginning mass production. In addition to certification of the aircraft, we will be required to obtain TCCA approval to manufacture completed aircraft pursuant to a TCCA-approved type design (e.g., type certificate). Production approval involves initial TCCA manufacturing approval and extensive ongoing oversight of mass produced aircraft. If we are unable to obtain production approval for the aircraft, or if TCCA imposes unanticipated restrictions as a condition of approval, our projected costs of production could increase substantially.

The timing of our production ramp is dependent upon finalizing certain aspects of the design, engineering, component procurement, testing, build out, and manufacturing plans in a timely manner and upon our ability to execute these plans within the current timeline. It is also dependent on being able to timely obtain TCCA certification.

Unsatisfactory safety performance of our aircraft as a result of our customers’ operations could have a material adverse effect on our business, financial condition, and results of operation.

There can be no assurance that our operator customers will not experience operational or process failures and other problems, including pilot error, cyberattacks or other intentional acts, that could result in potential safety risks. Any actual or perceived safety issues may result in significant reputational harm to the EAM industry and, accordingly, our business, in addition to tort liability, increased safety infrastructure and other costs that may arise. Such issues could result in increased regulation or other systemic consequences. Adverse publicity affecting the industry and our reputation as a result of accidents, operational failures, or other safety incidents could have a material adverse effect on our business, financial condition, prospects, and results of operation. In addition, our aircraft may be grounded by regulatory authorities due to safety concerns that could have a material adverse impact on our business, financial condition, operating results and prospects.

Risks Related to Our U.S. Government Contracts

We are subject to extensive government regulation, and our failure to comply with applicable regulations may subject us to penalties that restrict our ability to conduct our business.

As a contractor to the U.S. government and provider of various technologies, we are subject to and must comply with various government regulations that impact our revenue, operating costs, profit margins and the internal organization and operation of our business. We also need special security clearances and regulatory approvals to continue working on certain projects with the U.S. government. Our failure to comply with applicable regulations, rules and approvals, changes in the government’s interpretation of such regulations, rules and approvals as have been and are applied to our contracts, proposals or business or misconduct by any of our employees could result in the imposition of fines and penalties, the loss of security clearances, a decrease in profitability, the loss of our government contracts or our suspension or debarment from contracting with the U.S. government generally, any of which could harm our business, financial condition, and results of operations. We are also subject to certain regulations of comparable government agencies in other countries, and our failure to comply with these non-U.S. regulations could also harm our business, financial condition or results of operations.

U.S. government contracts are subject to a competitive bidding process, are generally not fully funded at inception, and contain certain provisions that may be unfavorable to us, which could result in contracts and opportunities consuming significant resources without generating revenue.

U.S. government contracts typically involve long lead times for design and development, and are subject to significant changes in scheduling. Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program. In addition, U.S. government contracts generally contain provisions permitting termination, in whole or in part, at the government’s convenience. Because a substantial majority of our revenue is dependent on the procurement, performance and payment under our U.S. government contracts, the termination of one or more critical government contracts could have a negative impact on our results of operations and financial condition.

U.S. government contracts are frequently awarded only after formal, protracted competitive bidding processes and, in many cases, unsuccessful bidders for U.S. government contracts are provided the opportunity to protest contract awards through various agency, administrative and judicial channels. Competitive bidding presents a number of risks, including the following:

We rely to a significant degree on sales to the U.S. government, particularly to agencies of the DoD, and a decline in government budgets, funding, changes in spending or budgetary priorities, or delays in contract awards may materially adversely affect our future revenue, business, financial condition, results of operations, cash flow and equity.

We derive a significant portion of our total sales from the U.S. government and its agencies, either as a prime contractor or subcontractor, particularly in connection with our Uncrewed Air Systems and Training Divisions. The Department of Defense (“DoD”) is our principal U.S. government customer. We believe that the success and growth of our business for the foreseeable future will continue to depend to a significant degree on our ability to win government contracts, in particular from the DoD.

The U.S. government may modify, curtail or terminate one or more of our contracts.

The U.S. government contracting party may modify, curtail or terminate its contracts with us, without prior notice and either at its convenience or for default based on performance. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of the U.S. Congressional appropriations process due to fiscal constraints, changes in U.S. national security strategy and/or priorities or other reasons. Historically, our Training Division has received some U.S. government contract funding under programs designed to benefit “small businesses” as defined under certain provisions of the U.S. Small Business Administration (“SBA”) regulations. The SBA regulations address multiple different programs that have varying eligibility requirements. While we believe that we will continue to be eligible as a small business under some programs, we will likely not be eligible under others. Moreover, the SBA regulations are subject to different interpretations, and the U.S. government may determine that we should no longer be classified as small. If the U.S. government made such a determination, it could terminate, cancel, or decide not to award options on existing agreements.

Any loss or anticipated loss or reduction of expected funding and/or modification, curtailment, or termination of one or more of our U.S. government contracts could have a material adverse effect on our earnings, cash flow and/or financial position, as well as our access to government testing facilities and/or our ability to secure pre-certification operating experience and/or revenues.

Risks Related to Legal and Regulatory Requirements

Some of our products and services are subject to local, state, federal and international regulatory frameworks that are costly to comply with, are subject to interpretation, may be dependent on political pressures and factors and/or are subject to change.

Many of the products we develop and manufacturer are highly dependent on our ability to meet local, state, federal and international regulations. In particular, our ability to meet the certification requirements for our products in the U.S. and abroad could determine the ability to sell, deliver, and manufacture our products, and therefore, could impact our operating results. These regulations include design and manufacture of products and components. While a common framework exists among many regulatory authorities allowing for recognition of different regulatory approvals by other regulatory entities, often times there are differences that require additional validation to meet the requirements of a specific entity. The risk not only lies in the viability of a particular product but also the time to market. Delays in the process are not unusual and can lead to delays in bringing product to market. These delays could result in financial and competitive impacts on AIRO’s operations. For a description of the regulatory frameworks that apply to our products and services, see “Business of AIRO — Government Regulation.”

All of our divisions are highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes.

Aerospace manufacturers and aircraft operators are subject to extensive regulatory and legal requirements that involve significant compliance costs. The Civil Aviation Authorities may issue regulations relating to the operation of aircraft that could require significant expenditures. Implementation of the requirements created by such regulations may result in increased costs for our EAM passengers and us. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of our operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising fares, reducing revenue and increasing costs. We cannot ensure that these and other laws or regulations enacted in the future will not have a negative impact on our business, financial condition, and results of operations.

Governments and regulatory agencies in the markets where we manufacture and sell drone products may enact additional regulations relating to product safety and consumer protection in the future, and may also increase the penalties for failure to comply with product safety and consumer protection regulations. In addition, one or more of our customers might require changes in our products, such as the non-use of certain materials, in the future. Complying with any such additional regulations or requirements could impose increased costs on our business. Similarly, increased penalties for non-compliance could subject us to greater expenses in the event any of our products were found to not comply with such regulations. Such increased costs or penalties could have a negative impact on our business, financial condition, and results of operations.

International sales may pose different economic, regulatory, competition and other risks.

All of our divisions sell their products and/or services to international customers and these sales may grow in the future. International sales are subject to numerous political and economic factors, budget uncertainty, regulatory requirements, significant competition, taxation, and other risks associated with doing business outside the U.S. In international sales, we face substantial competition from both U.S. manufacturers and international manufacturers whose governments sometimes provide R&D assistance, marketing subsidies and other assistance for their products and services.

Risks Related to AIRO Intellectual Property

If we fail to protect, or incur significant costs in defending or enforcing our intellectual property and other proprietary rights, our business, financial condition, and results of operations could be materially harmed.

Our success depends, in large part, on our ability to protect our intellectual property and other proprietary rights. We rely primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, a portion of our technology is not patented, and we may be unable or may not seek to obtain patent protection for this technology. In addition, the U.S. government has licenses under certain of our patents and certain other intellectual property that are developed or used in performance of government contracts, and it may use or authorize others to use such patents and intellectual property for government and other purposes. Moreover, existing U.S. legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide us with any competitive advantages, and our rights may be challenged by third parties. The laws of countries other than the U.S. may be even less protective of our intellectual property rights. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology. Unauthorized third parties may try to copy or reverse engineer our products or portions of our products or otherwise obtain and use our intellectual property. Moreover, many of our employees have access to our trade secrets and other intellectual property. If one or more of these employees leave our employment to work for one of our competitors, then they may disseminate this proprietary information despite our established procedures and policies to prevent such dissemination, which may as a result damage our competitive position. If we fail to protect our intellectual property and other proprietary rights, then our business, results of operations or financial condition could be materially harmed. From time to time, we have initiated lawsuits to protect our intellectual property and other proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact our results of operations.

In addition, affirmatively defending our intellectual property rights and investigating whether any of our products or services violate the rights of others may entail significant expense. Our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to us and divert the attention and efforts of our management and technical employees, even if we prevail.

We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.

We may become subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. Defending against, or otherwise addressing, any such claims, whether they are with or without merit, could be time-consuming and expensive, and could divert our management’s attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from these claims could require us to pay substantial amounts or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit our use of the technology. We cannot ensure that we would be able to: obtain from the third party asserting the claim a license on commercially reasonable terms, if at all; develop alternative technology on a timely basis, if at all; or obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product. An adverse determination also could prevent us from offering our products to others. Infringement claims asserted against us may have a material adverse effect on our business, results of operations or financial condition.

Risks Related to Tax and Accounting Matters

Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

We may from time to time generate net operating loss carryforwards for U.S. federal and state income tax purposes that are subject to expiration. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, changes in our ownership may limit the amount of our net operating loss carryforwards and tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50 percentage points within a three-year period. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards before they expire. Private placements and other transactions that we may execute, as well as the Business Combination, may trigger such an ownership change pursuant to Section 382. Any such limitation, sales of our common stock by our existing stockholders or additional sales of our common stock by us, could have a material adverse effect on our results of operations in future years. Our ability to utilize those net operating loss carryforwards could be limited by an “ownership change” as described above, which could result in increased tax liability to us. Net operating losses generated after December 31, 2017 are not subject to expiration, but may not be carried back to prior taxable years, except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years. Additionally, the deductibility of such U.S. federal net operating losses is limited to 80% of our taxable income in any taxable year beginning after December 31, 2020.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually, beginning with our second Annual Report on Form 10-K. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). However they will not be required to do so for so long as we are an emerging growth company. We could be an emerging growth company for up to five years from the date of the first sale of Kernel Class A Ordinary Shares in Kernel’s IPO. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

Risks Related to Our Securities

The price of our stock and Public Warrants may be volatile, and you could lose all or part of your investment.

The trading price of ParentCo’s common stock and Public Warrants following the Closing is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this proxy statement/prospectus, these factors include:

In addition, the stock market in general, and the market for aerospace & defense companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors, as well as local or global socio-economic and political factors, including the conflict between Russia and Ukraine and between Israel and Hamas, may negatively affect the market price of our common stock, regardless of our actual operating performance. If the market price of ParentCo’s common stock and Public Warrants after the Closing does not exceed the price you paid for them, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

The terms of the Warrant Agreement may be amended.

Amending our warrant agreement would require the affirmative vote of holders of at least 50% of the Public Warrants and, solely with respect to any amendment to the terms of the Private Placement Warrants or any provision of the warrant agreement with respect to the Private Placement Warrants, holders of 50% of the number of the then outstanding Private Placement Warrants. Notwithstanding the foregoing, we may lower the exercise price or extend the duration of the exercise period of the warrants in certain circumstances without the consent of the warrant holders.

We may redeem the Private Placement Warrants and Public Warrants (collectively, the “ParentCo warrants”) after the closing of the Business Combination if the reported last sale price of the ParentCo common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable.

Once the ParentCo warrants become exercisable, we may redeem not less than all of them at a price of $0.01 per warrant upon not less than 30 days’ prior written notice of redemption (such period, the “30-day Redemption Period”) to each warrant holder if, and only if, the reported last sale price of the ParentCo common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders. The trading price for the Kernel common stock has never equaled or exceeded $18.00 per share.

If and when the ParentCo warrants become redeemable we may exercise our redemption right if there is a current registration statement in effect with respect to the ParentCo common stock underlying such warrants. Redemption of the outstanding ParentCo warrants could force you to: (i) exercise your warrants and pay the related exercise price at a time when it may be disadvantageous for you to do so; (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price, which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. In these circumstances, and you choose option (i) to exercise the ParentCo warrants, the value received upon exercise of the ParentCo warrants (1) may be less than the value warrant holders would have received if they had exercised their public ParentCo warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the ParentCo warrants. If you choose to sell under option (ii) there is no guarantee the sale price will be high enough to compensate warrant holders for the value of the ParentCo warrants.

We will not redeem the ParentCo warrants as described above unless a registration statement under the Securities Act covering the issuance of the ParentCo Ordinary Shares issuable upon exercise of the warrants is then effective and a current prospectus relating to those ParentCo Ordinary Shares is available throughout the 30-day Redemption Period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.

If we call the ParentCo warrants for redemption as described above, our management will have the option to require all holders that wish to exercise the warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our shareholders of issuing the maximum number of shares of ParentCo common stock issuable upon the exercise of the ParentCo warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of ParentCo Common Stock equal to the quotient obtained by dividing (i) the product of the number shares of ParentCo Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (ii) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the ParentCo Common Stock for the 10 trading days ending on the third trading day prior to the date on which we send the notice of redemption to the holders of the ParentCo warrants.

As provided in the Warrant Agreement, in the event we elect to redeem the ParentCo warrants, we will fix a date for the redemption (the “Redemption Date”). We will mail or cause to be mailed notice of redemption by first class mail, postage prepaid, not less than thirty (30) days prior to the Redemption Date to the registered holders of the warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in such manner shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

As ParentCo has no obligation to net cash settle the ParentCo warrants, such warrants may expire worthless.

In no event will ParentCo have any obligation to net cash settle the ParentCo warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of ParentCo warrants upon consummation of an initial business combination, including the Business Combination, or exercise of the warrants. Accordingly, the warrants may expire worthless.

ParentCo does not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

ParentCo currently anticipates that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Furthermore, future debt or other financing arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any return to stockholders will therefore be limited to the appreciation of their stock.

ParentCo’s principal stockholders and management will own a significant percentage of our stock following the Closing and will be able to exert significant control over matters subject to stockholder approval.

Immediately following the Closing, ParentCo’s executive officers, directors and their affiliates, as well as our principal stockholders will beneficially hold, in the aggregate, approximately 44.5% of our outstanding voting stock (assuming maximum redemptions). These stockholders, acting together, would be able to significantly influence all matters requiring stockholder approval. For example, these stockholders would be able to significantly influence elections of directors, amendments of our governing documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

ParentCo’s issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plan, employee stock purchase plan or otherwise will dilute all other stockholders.

ParentCo expects to issue additional capital stock in the future that will result in dilution to all other stockholders. ParentCo expects to grant equity awards to employees, directors, and consultants under our stock incentive plan and employee stock purchase plan. ParentCo may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock, including as a result of the exercise of any warrants to purchase shares of common stock, may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

ParentCo will incur increased costs as a result of operating as a public company, and its management will devote substantial time to compliance with its public company responsibilities and corporate governance practices.

If Kernel and AIRO complete the Business Combination and ParentCo becomes a public company, it will incur significant legal, accounting and other expenses that AIRO did not incur as a private company, and these expenses may increase even more after ParentCo is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.

ParentCo will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial reporting controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period for the first five fiscal years from the date of first sale of Kernel’s Class A Ordinary Shares in its IPO. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

ParentCo expects the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have an adverse effect on our business. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. ParentCo cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on the ParentCo Board, the ParentCo board committees or as ParentCo executive officers.

AIRO’s management team has limited experience managing a public company.

Most of the members of AIRO’s management team who will become the management team of ParentCo have limited to no experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. AIRO’s management team has not worked together at prior companies that were publicly traded. AIRO’s management team may not successfully or efficiently manage their new roles and responsibilities. AIRO’s transition to being a public company subjects it to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from ParentCo’s senior management and could divert their attention away from the day-to-day management of ParentCo’s business, which could have a material adverse effect on ParentCo’s business, financial condition and results of operations.

The Proposed ParentCo Charter requires, to the fullest extent permitted by law, that derivative actions brought in ParentCo’s name, as applicable, against their respective directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware, which may have the effect of discouraging lawsuits against Kernel’s or ParentCo’s directors, officers, other employees or stockholders, as applicable.

Pursuant to the Proposed ParentCo Charter, as will be in effect upon the closing of the Business Combination, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law claims for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation or our amended and restated by-laws; (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or by-laws; or (v) any action asserting a claim governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, or the Delaware forum provision. This exclusive forum provision will not apply to any causes of action arising under the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternate forum, the United States District Courts shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the federal forum provision, as our principal office is located in Providence, Rhode Island. In addition, ParentCo’s Charter, as will be in effect upon the Closing, provides that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware forum provision and the Federal forum provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

The Delaware forum provision and the federal forum provision may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. In addition, these forum selection clauses in the Proposed ParentCo Charter may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court were “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision. If the federal forum provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The federal forum provision may also impose additional litigation costs on stockholders who assert the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the United States District Courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. 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. Accordingly, both state and federal courts have jurisdiction to entertain such claims. As noted above, the Proposed ParentCo Charter provides that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. Due to the concurrent jurisdiction for federal and state courts created by Section 22 of the Securities Act over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, there is uncertainty as to whether a court would enforce the exclusive forum provision. Investors also cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Claims for indemnification by ParentCo’s directors and officers may reduce ParentCo’s available funds to satisfy successful third-party claims against ParentCo and may reduce the amount of money available to ParentCo.

The Proposed ParentCo Charter and Proposed ParentCo Bylaws will provide that ParentCo will indemnify its directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the DGCL, the Proposed ParentCo Charter and Bylaws and its indemnification agreements that it will enter into with its directors and officers will provide that:

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about ParentCo, its business or its market, or if they change their recommendations regarding ParentCo’s securities adversely, the price and trading volume of ParentCo’s securities could decline.

The trading market for ParentCo’s securities will be influenced by the research and reports that industry or securities analysts may publish about ParentCo, its business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on ParentCo. If no securities or industry analysts commence coverage of ParentCo, ParentCo’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover ParentCo change their recommendation regarding ParentCo common stock adversely or provide more favorable relative recommendations about ParentCo’s competitors, the price of shares of ParentCo common stock would likely decline. If any analyst who may cover ParentCo were to cease coverage of ParentCo or fail to regularly publish reports on it, ParentCo could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

Future issuances of debt securities and equity securities may adversely affect ParentCo, including the market price of ParentCo common stock and may be dilutive to existing stockholders.

In the future, we may incur debt or issue equity-ranking senior to ParentCo common stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting ParentCo’s operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of ParentCo common stock. Because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of ParentCo common stock and be dilutive to existing stockholders.

There can be no assurance that ParentCo common stock and Public Warrants that will be issued in connection with the Business Combination will be approved for listing on Nasdaq or, if approved, will continue to be so listed following the closing of the Business Combination, or that we will be able to comply with the continued listing standards of Nasdaq. ParentCo’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of its Securities.

In connection with the closing of the Business Combination, we intend to list ParentCo’s common stock and warrants on Nasdaq under the symbols “AIRO” and “AIROW,” respectively. AIRO has the right to terminate the Business Combination Agreement if ParentCo’s securities are not approved for listing, subject to notice of issuance, at the time of the closing of the Business Combination Agreement. ParentCo’s continued eligibility for listing may depend on the number of Kernel’s shares that are redeemed. If, after the Business Combination, Nasdaq delists ParentCo’s shares from trading on its exchange for failure to meet the listing standards, ParentCo and its stockholders could face significant material adverse consequences including, but not limited to:

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If ParentCo common stock and Public Warrants are listed on Nasdaq, they will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the state of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if ParentCo was no longer listed on Nasdaq, ParentCo’s securities would not be covered securities and ParentCo would be subject to regulation in each state in which ParentCo offers its securities.

If, after listing, ParentCo fails to satisfy the continued listing requirements of Nasdaq such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist its securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, ParentCo can provide no assurance that any action taken by it to restore compliance with listing requirements would allow its securities to become listed again, stabilize the market price or improve the liquidity of its securities, prevent its securities from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if ParentCo’s securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of these securities may be more limited than if they were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your ParentCo securities unless a market can be established or sustained.

An active market for ParentCo’s securities may not develop, which would adversely affect the liquidity and price of ParentCo’s securities.

The price of ParentCo’s securities may vary significantly due to factors specific to ParentCo as well as to general market or economic conditions. Furthermore, an active trading market for ParentCo’s securities may never develop or, if developed, it may not be sustained. Holders of ParentCo’s securities may be unable to sell their securities unless a market can be established and sustained.

The market price of ParentCo’s securities may decline as a result of the Business Combination or other market factors.

If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of Kernel’s securities prior to the Closing may decline following the Closing when they trade as ParentCo securities. The market values of ParentCo’s securities at the time of the Business Combination may vary significantly from the market price of Kernel’s securities on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus or the date on which Kernel’s shareholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of ParentCo’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for AIRO common stock. Accordingly, the valuation ascribed to AIRO may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for ParentCo’s securities develops and continues, the trading price of ParentCo’s securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond ParentCo’s control. Any of the factors listed below could have a material adverse effect on your investment in ParentCo’s securities and ParentCo’s securities may trade at prices significantly below the price you paid for your Kernel securities. In such circumstances, the trading price of ParentCo’s securities may not recover and may experience a further decline.

The market price of ParentCo securities may decline as a result of the Business Combination and for a number of other reasons including:

Future sales, or the perception of future sales, by ParentCo or its stockholders in the public market following the Business Combination could cause the market price for ParentCo common stock to decline.

The sale of shares of ParentCo common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of ParentCo common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for ParentCo to sell equity securities in the future at a time and at a price that it deems appropriate.

Upon consummation of the Business Combination, it is currently expected that ParentCo will have a total of 89,628,091 shares of ParentCo common stock outstanding (excluding any outstanding Warrants and assuming that (i) there are no redemptions of any shares by Kernel’s Public Shareholders in connection with the Business Combination, (ii) no awards are issued under the 2024 Equity Incentive Plan or the Employee Stock Purchase Plan (“ESPP”), and (iii) Kernel does not engage in any kind of equity financing prior to the Closing). All shares currently held by Kernel Public Shareholders will be freely tradable without registration under the Securities Act, and without restriction, following the Closing, by persons other than ParentCo’s “affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including ParentCo’s directors, executive officers and other affiliates.

In connection with the Business Combination, certain existing AIRO stockholders, who are expected to collectively own approximately 77,000,000 shares of ParentCo common stock following the Business Combination, have agreed with Kernel, subject to certain exceptions, not to dispose of or hedge any of their shares of ParentCo common stock or securities convertible into or exchangeable for shares of ParentCo common stock during the period from the date of the Closing and ending on the earlier of (x) one year from the Closing or (y) subsequent to the Closing, if the reported last sale price of ParentCo’s Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, right issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination. For more information, see the section of this proxy statement/prospectus entitled “Shareholder Proposal No. 1: The Business Combination Proposal—Business Combination Agreement.”

In addition, the shares of ParentCo common stock reserved for future issuance under the 2024 Equity Incentive Plan and ESPP will become eligible for sale in the public market once those shares are issued, subject to any applicable vesting requirements, lockup agreements and other restrictions imposed by law. Assuming the Business Combination Proposal and the Nasdaq Proposal are approved and subject to approval by stockholders, the proposed 2024 Equity Incentive Plan and ESPP will initially reserve up to 12,000,000 shares of ParentCo common stock following the consummation of the Business Combination for issuance as awards in accordance with the terms of the 2024 Equity Incentive Plan and ESPP. ParentCo is expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of ParentCo common stock or securities convertible into or exchangeable for shares of ParentCo common stock issued pursuant to the 2024 Equity Incentive Plan or the ESPP. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. The initial registration statement on Form S-8 is expected to cover shares of ParentCo common stock.

In the future, ParentCo may also issue its securities in connection with investments or acquisitions. The amount of shares of ParentCo common stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of ParentCo common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to ParentCo stockholders.

ParentCo will qualify as an “emerging growth company” as well as a “smaller reporting company” within the meaning of the Securities Act, and if ParentCo takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make ParentCo’s securities less attractive to investors and may make it more difficult to compare ParentCo’s performance with other public companies.

Following the consummation of the Business Combination, ParentCo will qualify as an “emerging growth company” within the meaning of the Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, ParentCo may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies for as long as ParentCo continues to be an emerging growth company, including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in ParentCo’s periodic reports and proxy statements and (iii) 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, ParentCo’s stockholders may not have access to certain information they may deem important. ParentCo will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of ParentCo common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which ParentCo has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which ParentCo has issued more than $1,000,000,000 in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of Kernel Ordinary Shares in the Kernel IPO. Investors may find ParentCo’s securities less attractive because ParentCo will rely on these exemptions. Kernel cannot predict whether investors will find ParentCo’s securities less attractive because it will rely on these exemptions. If some investors find ParentCo’s securities less attractive as a result of its reliance on these exemptions, the trading prices of ParentCo’s securities may be lower than they otherwise would be, there may be a less active trading market for its securities and the trading prices of its securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of ParentCo’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Additionally, ParentCo will qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K promulgated by the SEC. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. ParentCo will remain a smaller reporting company for so long as the market value of its common stock held by non-affiliates is less than $250.0 million measured on the last business day of its second fiscal quarter, or its annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of its common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. To the extent ParentCo takes advantage of such reduced disclosure obligations, it may also make comparison of its consolidated financial statements with other public companies difficult or impossible.

The unaudited pro forma financial information included herein may not be indicative of what ParentCo’s actual financial position or results of operations would have been.

The unaudited pro forma combined financial information included herein is presented for illustrative purposes only and is not necessarily indicative of what ParentCo’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See the section entitled “Unaudited Pro Forma Combined Financial Information” for more information.

Transfers of ParentCo’s securities utilizing Rule 144 of the Securities Act may be limited.

A significant portion of ParentCo’s securities are restricted from immediate resale. Holders should be aware that transfers of ParentCo securities pursuant to Rule 144 may be limited as Rule 144 is not available, subject to certain exceptions, for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. As a result, we anticipate that holders will not be able to sell their restricted ParentCo securities pursuant to Rule 144 without registration until one year after the Business Combination has been completed.

Risks Related to Kernel and the Business Combination

The following risk factors will apply to Kernel and the Business Combination. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation into the implications of the Business Combination for investors. Unless the context requires otherwise, references to “we”, “us” or “our” in this section are to Kernel.

Subsequent to the consummation of the Business Combination, ParentCo may be required to take write-downs or write-offs, or ParentCo may be subject to restructuring, impairment or other charges that could have a significant negative effect on ParentCo’s financial condition, results of operations and the price of ParentCo’s securities, which could cause you to lose some or all of your investment.

Although Kernel has conducted due diligence on AIRO, this diligence may not surface all material issues that may be present with AIRO’s business. Factors outside of AIRO’s and outside of Kernel’s control may, at any time, arise. As a result of these factors, ParentCo may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in ParentCo reporting losses. Even if Kernel’s due diligence successfully identified certain risks, unexpected risks may arise, and previously known risks may materialize in a manner not consistent with Kernel’s preliminary risk analysis. Even though these charges may be non-cash items and therefore not have an immediate impact on ParentCo’s liquidity, the fact that ParentCo reports charges of this nature could contribute to negative market perceptions about ParentCo or its securities. In addition, charges of this nature may cause ParentCo to be unable to obtain future financing on favorable terms or at all.

The Sponsor and Kernel’s executive officers and directors have agreed to vote in favor of the Business Combination, regardless of how the Public Shareholders vote.

Unlike many other blank check companies in which the Founder, executive officers and directors agree to vote their founder shares in accordance with the majority of the votes cast by the Public Shareholders in connection with an initial business combination, the Sponsor and Kernel’s executive officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of the Kernel Support Agreement entered into with Kernel, to vote any shares of Kernel Ordinary Shares held by them in favor of the Business Combination. Kernel expects that the Sponsor and Kernel’s executive officers and directors (and their permitted transferees) will own at least approximately 49.7% of the issued and outstanding shares of Kernel Ordinary Shares at the time of any such stockholder vote. As a result, Kernel would not need any of the Public Shares sold in the IPO to be voted in favor of an initial business combination in order to have Kernel’s initial business combination approved, assuming all of the outstanding shares of Kernel Ordinary Shares vote.

Kernel may not be able to consummate an initial business combination within the required time period, in which case it would cease all operations except for the purpose of winding up and it would redeem the Public Shares and liquidate.

The Sponsor and Kernel’s executive officers and directors have agreed that Kernel must complete its initial business combination by August 5, 2024, Kernel may not be able to consummate an initial business combination within such time period. However, Kernel’s ability to complete its initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein.

If Kernel is unable to consummate its initial business combination within the required time period, it will, as promptly as reasonably possible but not more than ten business days thereafter, distribute the aggregate amount then on deposit in the Trust Account (net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), pro rata to the Public Shareholders by way of redemption and cease all operations except for the purposes of winding up of its affairs, as further described herein. This redemption of Public Shareholders from the Trust Account will be effected as required by function of the Existing Kernel Governing Documents and prior to any voluntary winding up.

The transactions may not be completed on the terms or timeline currently contemplated, or at all.

The consummation of the Business Combination is subject to the satisfaction (or, if applicable, valid waiver) of various conditions, including (a) approval of the Business Combination by Kernel shareholders, (b) the absence of any legal restraint (including legal actions or proceedings pursued by U.S. state authorities in the relevant states) preventing the consummation of the transactions, (c) the expiration or termination of any applicable waiting period under the HSR Act, (d) the clearance of this proxy statement/prospectus the SEC, (e) the delivery by each party to the other party of a certificate with respect to (i) the truth and accuracy of such party’s representations and warranties as of execution of the Business Combination Agreement and as of the closing of the Business Combination and (ii) the performance by such party of covenants contained in the Business Combination Agreement and (f) other customary closing conditions. See “Business Combination Agreement — Conditions to Closing the Business Combination.” There is no guarantee that these conditions will be satisfied (or, if applicable, validly waived) in a timely manner or at all, in which case closing of the transactions may be delayed or may not occur and the benefits expected to result from the transactions may not be achieved.

If the Business Combination is not completed for any reason, the price of Kernel Ordinary Shares may decline to the extent that the market price of such shares reflects or previously reflected positive market assumptions that the Business Combination would be completed and the related benefits would be realized. In addition, Kernel and AIRO have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory, printing and financial services fees related to the Business Combination and related transactions. Many of these expenses must be paid regardless of whether the Business Combination and related transactions are consummated. As a result of the conditions to closing of the Business Combination and related transactions, some of which are dependent upon the actions of third parties, the parties cannot provide any assurance that the Business Combination and related transactions will be consummated in a timely manner or at all.

The Sponsor or Kernel’s directors, executive officers or advisors or their respective affiliates may elect to purchase shares from Public Shareholders, which may influence the vote on the Business Combination and reduce the public “float” of Kernel Ordinary Shares.

In connection with the shareholder vote to approve Proposals, including the Business Combination Proposal, Kernel and its affiliates may purchase shares prior to the Closing from shareholders who would have otherwise elected to have their shares redeemed for a pro rata portion of the Trust Account upon consummation of the Business Combination. Such a purchase would in a privately negotiated purchase arrangement include a contractual acknowledgement that such shareholder, although still the record holder of such shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. While they have no current plans to do so, the Sponsor, Kernel’s directors, officers or advisors, or their affiliates reserve the right to purchase shares from holders of Kernel Ordinary Shares who have already elected to exercise their redemption rights, in which event such selling shareholders would be required to revoke their prior elections to redeem their shares. Any such transaction would be separately negotiated at the time of the transaction. The consideration for any such transaction would consist of cash and/or Kernel Ordinary Shares owned by the Sponsor and/or Kernel’s directors, officers, advisors, or their affiliates.

None of Kernel, the Sponsor or Kernel’s directors, officers or advisors, or their respective affiliates, will make any such purchases when they are in possession of any material non-public information not disclosed to the seller. Any Kernel Ordinary Shares purchased by the Sponsor or Kernel’s directors, officers or advisors, or their respective affiliates will not (i) be purchased at a price higher than the price offered through the redemption process in the Redemption, (ii) be voted in favor of the Business Combination or (iii) have redemption rights, and if such Kernel Ordinary Shares do have redemption rights, then such rights will be waived by each of the Sponsor, or Kernel’s directors, officers or advisors, or their respective affiliates. The Sponsor and each of Kernel’s directors, officers or advisors, or their respective affiliates received no additional consideration in exchange for the agreement to waive their redemption rights. The purpose of these purchases could be to increase the amount of cash available to Kernel for use in the Business Combination to satisfy the closing condition that requires Kernel to have a minimum amount of cash upon the consummation of the Business Combination, where it appears that such requirement would otherwise not be met. The purpose of these purchases would be to increase the amount of cash available to Kernel for use in the Business Combination.

As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of Public Shares by the persons described above have been entered into with any such investor or holder. In the event of any such newly purchased shares (i) the Sponsor or its affiliates will purchase the Kernel Public Shares at a price no higher than the price offered through the redemption process; (ii) any such purchases by Sponsor or its affiliates will not be voted in favor of approving the Business Combination; and (iii) the Sponsor and its affiliates have waived their redemption rights to such shares. Prior to the special meeting to approve the Business Combination, Kernel will disclose in a Form 8-K (i) the amount of Public Shares purchased outside of the redemption offer by the Sponsor or its affiliates, along with the purchase price; (ii) the purpose of the purchases by the Sponsor or its affiliates; (iii) the impact, if any, of the purchases by the Sponsor or its affiliates on the likelihood that the Business Combination transaction will be approved; (iv) the identities of shareholders who sold to the Sponsor or its affiliates (if not purchased on the open market) or the nature of shareholders (e.g., 5% security holders) who sold to the Sponsor or its affiliates; and (v) the number of Public Shares for which Kernel has received redemption requests pursuant to its redemption offer.

Unlike our Sponsor’s holdings currently, such newly purchased shares (if any) by those purchasers would not be subject to a lock-up period under the terms of our Sponsor Support Agreement. However, these newly purchased shares would be subject to limitations on resale under Rule 144 of the Securities Act as “control securities”, to the extent those shares were acquired by an affiliate of Kernel, unless they are registered on a subsequent registration statement filed under the Securities Act. Limitations on resale would require those affiliated purchasers of such newly purchased shares to hold them for at least one year (from the date ParentCo files certain information on Form 8-K following the Closing in accordance with rules applicable to special purpose acquisition companies), assuming they are not registered on a registration statement following the Closing and ParentCo has fully complied with its reporting requirements and other requirements under Rule 144. When eligible to be sold, such securities if not registered under such a registration statement would be limited by applicable requirements of Rule 144, including limitations in their manner of sale and to the volume of sales eligible under Rule 144.

Entering into any such incentive arrangements may have an effect lowering the price of Kernel Ordinary Shares or possibly reducing the public float of ParentCo Ordinary Shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the Special Meeting. In addition, if such purchases are made, the public float of Kernel Ordinary Shares and the number of its beneficial holders may be reduced, possibly making it difficult to maintain the quotation, listing or trading of ParentCo Ordinary Shares on a national securities exchange.

The nominal purchase price paid by the Sponsor for the Founder Shares may significantly dilute the implied value of the Public Shares in the event Kernel completes the Business Combination. In addition, the value of the Sponsor’s Founder Shares will be significantly greater than the amount the Sponsor paid to purchase such shares in the event Kernel completes the Business Combination, even if the Business Combination causes the trading price of ParentCo’s common stock to materially decline.

The Sponsor is currently the owner of 7,493,750 Kernel Class B Ordinary Shares and 8,750,000 Kernel Private Placement Warrants, each of which is exercisable to purchase one Kernel Class A Ordinary Share, which it purchased for $1.00 due to the Original Sponsor at the Closing of the Business Combination. The amount held in Kernel’s Trust Account was $67,819,662 as of December 31, 2023, implying a value of $4.91 per outstanding Public Share.

The following table shows the Public Shareholders’ and Kernel’s initial stockholders’ (including the Sponsor’s) investment per share and how these compare to the implied value of one share of ParentCo common stock upon the completion of the Business Combination. The following table assumes that (i) Kernel’s valuation is $8,128,091 (which is the amount held in Kernel’s Trust Account as of March 31, 2024), (ii) no additional interest is earned on the funds held in the Trust Account, (iii) no Public Shares are redeemed in connection with the Business Combination and (iv) all Founder Shares are held by the Sponsor and independent directors upon completion of the Business Combination, and does not take into account other potential impacts on Kernel’s valuation at the time of the Business Combination such as (a) the value of Kernel’s Public Warrants and Private Placement Warrants contained, (b) the trading price of Kernel’s common stock, (c) the Business Combination transaction costs, (d) any equity issued or cash paid to the AIRO equity holders, (e) any equity issued to other third party investors, or (f) AIRO’s business itself.

Based on these assumptions, each share of ParentCo common stock would have an implied value of $4.91 per share upon completion of the Business Combination, representing a 50.9% decrease/increase from the initial implied value of $10.00 per Public Share. While the implied value of $4.91 per share upon completion of the Business Combination would represent a dilution to Kernel’s Public Shareholders, this would represent a significant increase in value for the Sponsor relative to the price it paid for each Founder Share. At $4.91 per share, the 7,493,750 shares of ParentCo common stock that the Sponsor and Kernel’s independent directors holding Founder Shares would own upon completion of the Business Combination would have an aggregate implied value of $36,801,931. As a result, even if the trading price of ParentCo common stock significantly declines, the value of the Founder Shares held by the Sponsor and independent directors will be significantly greater than the amount the Sponsor paid to purchase such shares. In addition, the Sponsor could potentially recoup its entire investment, inclusive of its investment in the Private Placement Warrants, even if the trading price of ParentCo common stock after the Business Combination is as low as $0.00 per share. As a result, the Sponsor and independent directors holding Founder Shares are likely to earn a substantial profit on their investment in Kernel upon disposition of shares of ParentCo common stock even if the trading price of ParentCo common stock declines after Kernel completes the Business Combination. The Sponsor and independent directors holding Founder Shares may therefore be economically incentivized to complete an initial business combination with a riskier, weaker-performing or less-established target business, or on terms less favorable to the Public Shareholders, rather than liquidating Kernel. This dilution would increase to the extent that Public Shareholders seek redemptions from the Trust Account for their Public Shares.

Public Shareholders who redeem their Kernel Ordinary Shares may continue to hold any Public Warrants they own, which results in additional dilution to non-redeeming holders upon exercise of the Public Warrants.

Public Shareholders who redeem their Kernel Ordinary Shares may continue to hold any Public Warrants they owned prior to redemption, which results in additional dilution to non-redeeming holders upon exercise of such Public Warrants. Assuming all redeeming Public Shareholders acquired Units in the IPO and continue to hold the Public Warrants that were included in the Units, 15,237,500 Public Warrants would be retained by redeeming Public Shareholders with a value of approximately $2.0 million, based on the market price of $0.13 of the Public Warrants as of July 3, 2024. As a result, the redeeming Public Shareholders would recoup their entire investment and continue to hold Public Warrants with an aggregate market value of approximately $2.0 million, while non-redeeming Public Shareholders would suffer additional dilution in their percentage ownership and voting interest of ParentCo upon exercise of the Public Warrants held by redeeming Public Shareholders.

The exercise of Kernel warrants for shares of Kernel Class A Common Stock would increase the number of shares eligible for future resale in the public market and result in dilution to stockholders of Kernel. Such dilution will increase if more shares of Kernel Class A Common Stock are redeemed.

As of the record date, Kernel had warrants to purchase an aggregate of 23,987,500 shares of Kernel Class A Common Stock outstanding, which includes 15,237,500 underlying Public Warrants and 8,750,000 underlying Private Placement Warrants (collectively, the “Kernel warrants”). The Kernel warrants will become exercisable commencing 30 days after the completion of the Business Combination. The likelihood that the Kernel warrants will be exercised increases if the trading price of ParentCo common stock exceeds the exercise price of the warrants, which is $11.50 per share.

Based on the closing price of $0.13 per warrant on Nasdaq on July 3, 2024, the most recent practicable date prior to the date of this proxy statement/prospectus, the Kernel warrants have an aggregate market value of approximately $3.1 million. However, there is no guarantee that the Kernel warrants will ever be in the money after they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.

To the extent the Kernel warrants are exercised, additional shares of ParentCo common stock will be issued, which will result in dilution to the holders of ParentCo common stock and increase the number of shares eligible for resale in the public market. The dilution, as a percentage of outstanding shares, caused by the exercise of the Kernel warrants will increase if a large number of holders of Kernel Class A Common Stock elect to redeem their shares in connection with the Business Combination. Holders of Kernel warrants do not have a right to redeem the warrants. Further, the redemption of Kernel Class A Common Stock without any accompanying redemption of Public Warrants will increase the dilutive effect of the exercise of Public Warrants. Sales of substantial numbers of shares issued upon the exercise of warrants in the public market or the potential that such warrants may be exercised could also adversely affect the market price of ParentCo common stock.

Kernel’s Sponsor, executive officers and directors have potential conflicts of interest in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement/prospectus.

When considering the Kernel Board’s recommendation that Kernel’s shareholders vote in favor of the approval of the Business Combination Proposal and the other proposals described in this proxy statement/prospectus, Kernel’s shareholders should be aware that the Sponsor and certain of Kernel’s executive officers and directors (including Suren Ajjarapu who is Kernel’s chief executive officer and the Sponsor’s controlling shareholder) have interests in the Business Combination that may be different from, or in addition to, the interests of Kernel’s shareholders generally. These interests include:

These interests may have influenced Kernel’s directors in making their recommendation that you vote in favor of the Business Combination Proposal and the other proposals described in this proxy statement/prospectus.

There are risks to Kernel’s shareholders who are not affiliates of the Sponsor of becoming stockholders of ParentCo through the Business Combination rather than acquiring securities of AIRO directly in an underwritten public offering, including no independent due diligence review by an underwriter and conflicts of interest of the Sponsor.

Because there is no independent third-party underwriter involved in the Business Combination or the issuance of common stock in connection therewith, investors will not receive the benefit of any outside independent review of Kernel’s and AIRO’s respective finances and operations. Underwritten public offerings of securities conducted by a licensed broker-dealer are subjected to a due diligence review by the underwriter or dealer manager to satisfy statutory duties under the Securities Act, the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”) and the national securities exchange where such securities are listed. Additionally, underwriters or dealer-managers conducting such public offerings are subject to liability for any material misstatements or omissions in a registration statement filed in connection with the public offering. As no such review will be conducted in connection with the Business Combination, Kernel’s shareholders must rely on the information in this proxy statement/prospectus and will not have the benefit of an independent review and investigation of the type normally performed by an independent underwriter in a public securities offering.

In addition, the Sponsor and certain of Kernel’s executive officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of Kernel’s shareholders generally. Such interests may have influenced Kernel’s directors in making their recommendation that you vote in favor of the Business Combination Proposal and the other proposals described in this proxy statement/prospectus. See “Risk Factors — Kernel’s Sponsor, executive officers and directors have potential conflicts of interest in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement/prospectus,” “— The nominal purchase price paid by the Sponsor for the Founder Shares may significantly dilute the implied value of the Public Shares in the event Kernel completes an initial business combination. In addition, the value of the Sponsor’s Founder Shares will be significantly greater than the amount the Sponsor paid to purchase such shares in the event Kernel completes an initial business combination, even if the business combination causes the trading price of ParentCo’s common stock to materially decline” and “— Certain of Kernel’s officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by Kernel and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.”

Certain of Kernel’s officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by Kernel and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.

Until Kernel consummates a business combination, it intends to engage in the business of identifying and combining with one or more businesses, subject to restrictions in the Business Combination Agreement. The Sponsor and Kernel’s officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, including other special purpose acquisition companies with a class of securities registered under the Exchange Act. As a result, Kernel’s officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including entities that are affiliates of the Sponsor.

Kernel’s officers and directors also may become aware of business opportunities which may be appropriate for presentation to Kernel and the other entities to which they owe certain fiduciary or contractual duties. The Existing Kernel Governing Documents provide that Kernel renounce its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as Kernel’s director or officer and such opportunity is one Kernel is legally and contractually permitted to undertake and would otherwise be reasonable for Kernel to pursue, and to the extent the director or officer is permitted to refer that opportunity to Kernel without violating any legal obligation.

In the absence of the “corporate opportunity” waiver in the Existing Kernel Governing Documents, certain candidates would not be able to serve as an officer or director. Kernel believes it substantially benefits from having representatives who bring significant, relevant and valuable experience to Kernel’s management, and, as a result, the inclusion of the “corporate opportunity” waiver in in the Existing Kernel Governing Documents provides Kernel with greater flexibility to attract and retain the officers and directors that Kernel feels are the best candidates.

However, the personal and financial interests of Kernel’s directors and officers may influence their motivation in timely identifying and selecting a target business and completing a business combination. The different timelines of competing business combinations could cause Kernel’s directors and officers to prioritize a different business combination over finding a suitable acquisition target for Kernel’s business combination. Consequently, Kernel’s directors’ and officers’ discretion in identifying and selecting a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular business combination are appropriate and in Kernel’s shareholders’ best interest, which could negatively impact the timing for a business combination.

Kernel does not believe, however, that the fiduciary duties or contractual obligations of its officers and directors or waiver of corporate opportunity materially affected its search for an acquisition target or will materially impact its ability to complete the Business Combination. While certain of Kernel’s directors and officers serve as officers and directors to other entities (such as operating companies or investment vehicles) that are engaged in a similar business, including other special purpose acquisition companies, no opportunity was presented to Kernel that was also presented to any of the other entities and no opportunity that would have been appropriate for presentation to Kernel was also presented to the other entities. Kernel’s Board evaluated and considered three (3) potential target companies as candidates for a possible business combination transaction with Kernel, and Kernel’s Board did not believe that the other fiduciary duties or contractual obligations of its officers and directors materially affected Kernel’s ability to source a potential business combination. For more information, see the section entitled “Interests of Kernel’s Directors and Officers and Others in the Business Combination.”

The waiver of fees by Citigroup Global Markets Inc. may indicate that they may be unwilling to be associated with the disclosures in this proxy statement/prospectus or the underlying business analysis related to the Business Combination.

Kernel contacted Citigroup after the Extension Meeting resulting in the redemption of 22,848,122 Kernel Class A Ordinary Shares with only $74.7 million remaining in the Trust Account. The IPO underwriting services being provided by the IPO Underwriter were complete at the time of the IPO, with any fees payable to the IPO Underwriters contingent upon the closing of the Business Combination therefore Kernel requested Citigroup Global Markets Inc. to waive its rights to the deferred underwriting commission.

On May 24, 2023, Citigroup Global Markets Inc., the underwriter of the Kernel IPO waived its rights to the deferred underwriting commission totaling $10.7 million held in the Trust Account. Citigroup Global Markets Inc. did not provide a reason for waiving its deferred underwriting commission. Representatives of Citigroup Global Markets Inc. did not review or comment on any of the disclosures in this proxy statement/prospectus. Accordingly, no inference should be drawn that Citigroup Global Markets Inc. agrees with the disclosure regarding their respective waiver. Shareholders should be aware that such waivers indicate that Citigroup Global Markets Inc. does not want to be associated with the disclosures in this proxy statement/prospectus or any underlying business analysis related to the transaction described herein. Further, pursuant to the letter received on May 24, 2023, Citigroup Global Markets Inc. ceased and refuses to act in every office, capacity and relationship with respect to the Business Combination.

Citigroup Global Markets Inc. has performed all its obligations under the Underwriting Agreement to obtain its fee and is therefore gratuitously waiving its right to be compensated. Such a fee waiver for services already rendered is unusual. Kernel was not made aware of the reasons why Citigroup Global Markets Inc. waived the deferred underwriting commission fee. Citigroup Global Markets Inc. has not performed any additional services for Kernel after the IPO and is not expected to perform any additional services following the consummation of the Business Combination.

Kernel shareholders who do not redeem their Kernel Ordinary Shares will have a reduced ownership and voting interest after the Business Combination and will exercise less influence over management.

Upon the issuance of Kernel Ordinary Shares in connection with the Business Combination, the percentage ownership of Public Shareholders who do not redeem their Kernel Ordinary Shares will be diluted. The percentage of ParentCo’s common stock that will be owned by Public Shareholders as a group will vary based on the number of Public Shares for which the holders thereof request redemption in connection with the Business Combination. To illustrate the potential ownership percentages of Public Shareholders under different redemption levels, based on the number of issued and outstanding Kernel Ordinary Shares and AIRO Capital Stock on July 3, 2024, after giving effect to the Extension Redemption, and based on the ParentCo common stock expected to be issued in the Business Combination, non-redeeming Public Shareholders, as a group, will own:

Because of this, Public Shareholders, as a group, will have less influence on the board of directors, management and policies of ParentCo than they now have on the board of directors, management and policies of Kernel.

The ownership percentage with respect to ParentCo following the Business Combination does not take into account the following potential issuances of securities, which will result in further dilution to Public Shareholders who do not redeem their Public Shares:

If all such shares were issued immediately after the Business Combination, based on the number of issued and outstanding Kernel Ordinary Shares and AIRO Capital Stock on July 3, 2024, after giving effect to the Extension Redemption and based on the ParentCo Common Stock expected to be issued in the Business Combination, non-redeeming Public Shareholders, assuming no redemptions of Public Shares, as a group, would own 0.6% of ParentCo’s common stock outstanding assuming all such shares were issued immediately after the Business Combination.

Unlike many blank check companies, Kernel does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it easier for Kernel to consummate the Business Combination even if a substantial majority of Kernel’s shareholders do not agree.

Since Kernel has no specified percentage threshold for redemption contained in its amended and restated memorandum and articles of association, its structure is different in this respect from the structure used by many blank check companies. Historically, blank check companies would not be able to consummate an initial business combination if the holders of such company’s Public Shares voted against a proposed business combination and elected to convert or redeem more than a specified maximum percentage of the shares sold in such company’s initial public offering, which percentage threshold was typically between 19.99% and 39.99%. As a result, many blank check companies were unable to complete a business combination because the number of shares voted by their Public Shareholders electing conversion or redemption exceeded the maximum conversion or redemption threshold pursuant to which such company could proceed with its initial business combination. As a result, Kernel may be able to consummate the Business Combination even if a substantial majority of the Public Shareholders do not agree with the Business Combination and have redeemed their shares. However, in no event will Kernel redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon the consummation of the Business Combination unless the NTA Proposal passes. If enough Public Shareholders exercise their redemption rights such that Kernel cannot satisfy the net tangible asset requirement, unless the NTA Proposal passes, Kernel would not proceed with the redemption of Public Shares and the Business Combination, and instead may search for an alternate business combination. However, because the minimum cash requirements provided in the Business Combination Agreement may be waived by AIRO, if Kernel did not proceed with the Business Combination in such situation, it may be in breach of its obligations under the Business Combination Agreement, which could have an adverse effect on its ability to consummate an alternate business combination.

Public Shareholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, Public Shareholders may be forced to sell their securities, potentially at a loss.

Public Shareholders are entitled to receive funds from the Trust Account only (i) in the event of a redemption to Public Shareholders prior to any winding up in the event Kernel does not consummate its initial business combination or its liquidation, (ii) if they redeem their shares in connection with an initial business combination that Kernel consummates or, (iii) if they redeem their shares in connection with a stockholder vote to amend the Existing Kernel Governing Documents (A) to modify the substance or timing of Kernel’s obligation to redeem 100% of the Public Shares if Kernel does not complete its initial business combination within 12 months from the closing of the IPO subject to extensions in accordance with the Existing Kernel Governing Documents or (B) with respect to any other provision relating to Kernel’s pre-business combination activity and related stockholders’ rights. In no other circumstances will a stockholder have any right or interest of any kind to the funds in the Trust Account. Accordingly, to liquidate their investment, the Public Shareholders may be forced to sell their securities, potentially at a loss.

If third parties bring claims against Kernel, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.

Kernel’s placing of funds in the Trust Account may not protect those funds from third-party claims against Kernel. Although Kernel has sought to have all vendors, service providers (other than its independent registered public accounting firm), prospective target businesses or other entities with which it does business execute agreements with Kernel waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against Kernel’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, Kernel’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to Kernel than any alternative.

Examples of possible instances where Kernel may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where Kernel is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Kernel and will not seek recourse against the Trust Account for any reason. Upon redemption of Kernel’s Public Shares, if Kernel is unable to complete the Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination, Kernel will be required to provide for payment of claims of creditors that were not waived that may be brought against Kernel within the 10 years following redemption. Accordingly, the per share redemption amount received by Public Shareholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.

The Sponsor has agreed that it will be liable to Kernel if and to the extent any claims by a third party (other than Kernel’s independent registered public accounting firm) for services rendered or products sold to Kernel, or a prospective target business with which Kernel has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay Kernel’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under Kernel’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. Kernel believes that the Sponsor’s only assets are securities of Kernel and, therefore, the Sponsor may not be able to satisfy those obligations. Kernel has not asked the Sponsor to reserve for such obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for Kernel’s initial business combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, Kernel may not be able to complete its initial business combination, and its stockholders would receive such lesser amount per share in connection with any redemption of their Public Shares. None of Kernel’s officers or directors will indemnify Kernel for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Kernel’s directors may decide not to enforce indemnification obligations against the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Shareholders.

In the event that the proceeds in the Trust Account are reduced below $10.00 per Public Share and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, Kernel’s independent directors would determine whether to take legal action against the Sponsor to enforce such indemnification obligations. It is possible that Kernel’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If Kernel’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to Public Shareholders may be reduced below $10.00 per Public Share.

Kernel’s shareholders may be held liable for claims by third parties against Kernel to the extent of distributions received by them.

The Existing Kernel Governing Documents provide that Kernel will continue in existence only until 30 months from the closing of the IPO. As promptly as reasonably possible following the redemptions Kernel is required to make to the Public Shareholders in such event, subject to the approval of Kernel’s remaining stockholders and the Kernel Board, Kernel would dissolve and liquidate, subject to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Kernel cannot assure you that it will properly assess all claims that may be potentially brought against it. As such, Kernel’s shareholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of Kernel’s shareholders may extend well beyond the third anniversary of the date of distribution. Accordingly, Kernel cannot assure you that third parties will not seek to recover from Kernel’s shareholders amounts owed to them by Kernel.

If Kernel is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against Kernel which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Kernel’s shareholders. Furthermore, because Kernel intends to distribute the proceeds held in the Trust Account to the Public Shareholders promptly after expiration of the time Kernel has to complete an initial business combination, this may be viewed or interpreted as giving preference to the Public Shareholders over any potential creditors with respect to access to or distributions from Kernel’s assets. Furthermore, the Kernel Board may be viewed as having breached their fiduciary duties to Kernel’s creditors and/or may have acted in bad faith, and thereby exposing itself and Kernel to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. Kernel cannot assure you that claims will not be brought against Kernel for these reasons.

Kernel may amend the terms of the Public Warrants in a manner that may be adverse to holders with the approval by the holders of at least a majority of the then outstanding Public Warrants.

The Public Warrants were issued in registered form under the Kernel Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Kernel. The Kernel Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least a majority of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, Kernel may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding Public Warrants approve of such amendment. Although Kernel’s ability to amend the terms of the Public Warrants with the consent of a majority of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, convert the Public Warrants into stock or cash, shorten the exercise period or decrease the number of warrant shares issuable upon exercise of a Public Warrant.

ParentCo may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.

ParentCo will have the ability to redeem outstanding Public Warrants (i) at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Kernel Ordinary Shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date ParentCo gives notice of redemption, or (ii) at varying prices depending on the then current fair market value of Kernel’s Ordinary Shares and the length of time from the closing of the Business Combination. If and when the Public Warrants become redeemable by ParentCo, ParentCo may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants. None of the Private Placement Warrants will be redeemable by ParentCo so long as they are held by their initial purchasers or their permitted transferees.

If we do not file and maintain a current and effective proxy statement/prospectus relating to the common stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.”

If we do not file and maintain a current and effective prospectus relating to the ParentCo common stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of shares of ParentCo common stock that holders will receive upon exercise of the warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective proxy statement/prospectus relating to the ParentCo common stock issuable upon exercise of the warrants is available. Under the terms of certain warrant agreements, we have agreed to use its best efforts to meet these conditions and to file and maintain a current and effective proxy statement/prospectus relating to the common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that it will be able to do so. If we are unable to do so, the potential “upside” of the holder’s investment in ParentCo may be reduced or the warrants may expire worthless.

Even if Kernel consummates the Business Combinations, there is no guarantee that the Public Warrants will ever be in the money, and they may expire worthless and the terms of warrants may be amended.

The exercise price for the Public Warrants is $11.50 per share of common stock. There is no guarantee that the Public Warrants will ever be in the money prior to their expiration, and as such, the Public Warrants may expire worthless.

In addition, Kernel’s Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Kernel. The warrant agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any other change. Accordingly, Kernel may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Although Kernel’s ability to amend the terms of the Public Warrants with the consent of at least 65% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, shorten the exercise period or decrease the number of shares and their respective affiliates and associates have of common stock purchasable upon exercise of a Public Warrant.

The exercise price for our Public Warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Public Warrants are more likely to expire worthless.

The exercise price of our Public Warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a Public Warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our Public Warrants is $11.50 per share, subject to adjustment as provided therein. As a result, the Public Warrants are less likely to ever be in the money and more likely to expire worthless.

Public Warrants will become exercisable for the ParentCo common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

Our Public Warrants are exercisable for 15,237,500 shares of common stock as part of our IPO at $11.50 per share. The additional shares of our common stock issued upon exercise of our Public Warrants will result in dilution to the then existing holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

Holders who redeem their public shares of Kernel Class A Common Stock may continue to hold any Public Warrants that they own, which results in additional dilution to non-redeeming holders upon exercise of the Public Warrants.

Public stockholders who redeem their shares of Kernel Class A Common Stock may continue to hold any Public Warrants that they owned prior to redemption, which results in additional dilution to non-redeeming holders upon exercise of such Public Warrants. Assuming the maximum redemption of the shares of Kernel Class A Common Stock held by the redeeming holders of Kernel public shares, up to 15,237,500 publicly traded warrants would be retained by redeeming holders of Kernel public shares (assuming all such holders elected not to exercise their warrants) with an aggregate market value of approximately $2.0 million, based on the market price of $0.13 per Public Warrant as of July 3, 2024. As a result, the redeeming holders of Kernel public shares would recoup their entire investment and continue to hold Public Warrants with an aggregate market value of up to approximately $2.0 million, while non-redeeming holders of Kernel public shares would suffer additional dilution in their percentage ownership and voting interest of AIRO if the Business Combination is consummated, upon exercise of Public Warrants by redeeming holders of Kernel public shares. However, if redemptions exceed the amount allowable for consummation of the Business Combination, or the Business Combination is otherwise not consummated, the Kernel warrants will not be exercisable and expire worthless.

The Public Warrants are not identical to the Private Warrants and may allow for different rights to exercise following the Closing of the Business Combination.

The Private Placement Warrants are identical to the Public Warrants except that the Private Placement Warrants, (i) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Business Combination, (ii) are not redeemable while held by Kernel’s Sponsor or its permitted transferees; and (iii) have different terms for cashless exercise. For more information on these differences, see the section “Description of Kernel’s and ParentCo’s Securities – Warrants”.

We may redeem the Public Warrants after the closing of the Business Combination if the reported last sale price of the ParentCo common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable.

Once the Public Warrants become exercisable, we may redeem not less than all of them at a price of $0.01 per warrant upon not less than 30 days’ prior written notice of redemption (such period, the “30-day Redemption Period”) to each warrant holder if, and only if, the reported last sale price of the ParentCo common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders. The trading price for the Kernel common stock has never equaled or exceeded $18.00 per share. The Public Warrants may also be redeemed at varying prices depending on the then current fair market value of Kernel’s Ordinary Shares and the length of time from the closing of the Business Combination.

If and when the Public Warrants become redeemable, we may exercise our redemption right if there is a current registration statement in effect with respect to the ParentCo common stock underlying such warrants. Redemption of the outstanding Public Warrants could force you to: (i) exercise your warrants and pay the related exercise price at a time when it may be disadvantageous for you to do so; (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price, which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. In these circumstances, and you choose option (i) to exercise the Public Warrants, the value received upon exercise of the Public Warrants (1) may be less than the value warrant holders would have received if they had exercised their Public Warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the Public Warrants. If you choose to sell under option (ii) there is no guarantee the sale price will be high enough to compensate warrant holders for the value of the Public Warrants.

We will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the issuance of the ParentCo common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of ParentCo common stock is available throughout the 30-day Redemption Period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.

If we call the Public Warrants for redemption as described above, our management will have the option to require all holders that wish to exercise the warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our shareholders of issuing the maximum number of shares of ParentCo common stock issuable upon the exercise of the Public Warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of ParentCo common stock equal to the quotient obtained by dividing (i) the product of the number of shares of ParentCo common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (ii) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the shares of ParentCo common stock for the 10 trading days ending on the third trading day prior to the date on which we send the notice of redemption to the holders of the Public Warrants.

As provided in the Warrant Agreement, in the event we elect to redeem the Public Warrants, we will fix a date for the redemption (the “Redemption Date”). We will mail or cause to be mailed notice of redemption by first class mail, postage prepaid, not less than thirty (30) days prior to the Redemption Date to the registered holders of the warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in such manner shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

ParentCo has no obligation to net cash settle the Public Warrants, and such warrants may expire worthless.

ParentCo has no obligation to net cash settle the Public Warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of Public Warrants upon consummation of an initial business combination, including the Business Combination, or exercise of the warrants. Accordingly, the warrants may expire worthless.

The Warrant Agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of Public Warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with Kernel.

The Warrant Agreement will provide that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the Warrant Agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that Kernel irrevocably submits to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. Kernel will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the Warrant Agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of Kernel’s warrants shall be deemed to have notice of and to have consented to the forum provisions in the Warrant Agreement. If any action, the subject matter of which is within the scope the forum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Kernel, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, Kernel may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect Kernel’s business, financial condition and results of operations and result in a diversion of the time and resources of Kernel’s management and board of directors.

We have not registered the shares of ParentCo common stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise Public Warrants, thus precluding such investor from being able to exercise its Public Warrants except on a cashless basis and potentially causing such Public Warrants to expire worthless.

We have not registered the shares of common stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of common stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current proxy statement/prospectus relating to the common stock issuable upon exercise of the Public Warrants, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or proxy statement, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the Public Warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Public Warrants on a cashless basis. However, no Public Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our common stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any Public Warrant, or issue securities or other compensation in exchange for the Public Warrants in the event that we are unable to register or qualify the shares underlying the Public Warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the Public Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such Public Warrant shall not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In such event, holders who acquired their Public Warrants as part of a purchase of Units will have paid the full Unit purchase price solely for the shares of common stock included in the Units. If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the IPO. However, there may be instances in which holders of our Public Warrants may be unable to exercise such Public Warrants but holders of our Private Placement Warrants may be able to exercise such Private Placement Warrants.

Kernel will require Public Shareholders who wish to redeem their Kernel Ordinary Shares in connection with the Business Combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

Kernel will require the Public Shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to Kernel’s transfer agent prior to the expiration date set forth in the tender offer documents mailed to such holders, or in the event Kernel distributes proxy materials, up to two business days prior to the vote on the proposal to approve the Business Combination, or to deliver their shares to the transfer agent electronically using DTC’s DWAC System, at the holder’s option. To obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and Kernel’s transfer agent will need to act to facilitate this request. It is Kernel’s understanding that stockholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, because Kernel does not have any control over this process or over the brokers or DTC, it may take significantly longer than one week to obtain a physical stock certificate. While Kernel has been advised that it takes a short time to deliver shares through the DWAC System, this may not be the case. Under Kernel’s memorandum and articles of association, it is required to provide at least two days’ advance notice of any stockholder meeting, which would be the minimum amount of time a stockholder would have to determine whether to exercise redemption rights. Accordingly, if it takes longer than Kernel anticipates for stockholders to deliver their shares, stockholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their shares. In the event that a stockholder fails to comply with the various procedures that must be complied with to validly tender or redeem Public Shares, its shares may not be redeemed.

Additionally, despite Kernel’s compliance with the proxy rules, stockholders may not become aware of the opportunity to redeem their shares.

There is some uncertainty regarding the U.S. federal income tax consequences to holders of Kernel Ordinary Shares who elect to exercise their redemption rights.

There is some uncertainty regarding the U.S. federal income tax consequences to holders of Kernel Ordinary Shares who exercise their redemption rights. The uncertainty of tax consequences relates primarily to the individual circumstances of the taxpayer and include (i) whether the redemption results in a distribution or a sale taxable as capital gain, and (ii) whether such capital gain, if applicable, is “long-term” or “short-term.” Whether the redemption qualifies for sale treatment will depend largely on whether the holder owns (or is deemed to own) any shares of Kernel Ordinary Shares following the redemption, and if so, the total number of shares of Kernel Ordinary Shares held by the holder both before and after the redemption relative to all shares of Kernel Ordinary Shares outstanding both before and after the redemption. The redemption generally will be treated as a sale, rather than a distribution, if the redemption (i) is “substantially disproportionate” with respect to the holder, (ii) results in a “complete termination” of the holder’s interest in Kernel or (iii) is “not essentially equivalent to a dividend” with respect to the holder. Due to the personal and subjective nature of certain of such tests and the absence of clear guidance from the Internal Revenue Service (the “IRS”), there is uncertainty as to whether a holder who elects to exercise its redemption rights will be taxed on any gain from the redemption as ordinary income or capital gain. See the section entitled “Shareholder Proposal No. 1: The Business combination Proposal – Certain Material U.S. Federal Income Tax Considerations of the Redemption.”

Kernel or ParentCo may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Business Combination from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger or business combination agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Kernel’s or AIRO’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Business Combination, then that injunction may delay or prevent the Business Combination from being completed, which may adversely affect Kernel’s or AIRO’s or, if the Business Combination is completed but delayed, ParentCo’s business, financial position and results of operations. Neither Kernel nor AIRO can predict whether any such lawsuits will be filed.

ParentCo may be subject to securities litigation, which is expensive and could divert management attention.

Following the Business Combination, ParentCo’s share price may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including class action litigation. ParentCo may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on ParentCo’s business, financial condition, and results of operations. Any adverse determination in litigation could also subject ParentCo to significant liabilities.

The SEC issued final rules to regulate special purpose acquisition companies that may increase our costs and the time needed to complete our initial business combination.

With respect to the regulation of special purpose acquisition companies like the Company (“SPACs”), on January 24, 2024, the SEC adopted the previously proposed rules (the “SPAC Rules”) relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions. These SPAC Rules may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.

If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted and, as a result, we may abandon our efforts to consummate an initial business combination and liquidate.

Whether a SPAC is an investment company as defined in the Investment Company Act is a question of facts and circumstances according to the adopting release, which added, “Given the individualized nature of this analysis, and … depending on the facts and circumstances, a SPAC could be an investment company at any stage of its operations.” As a result, it is possible that a claim could be made that we have been operating as an unregistered investment company.

If we are deemed to be an investment company under the Investment Company Act, our activities would be severely restricted. In addition, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the Company.

Moreover, if we are deemed to be an investment company under the Investment Company Act, we may be required to liquidate our Trust Account by returning the then remaining funds in such account to the Public Shareholders and then proceed to liquidate and dissolve. If we are required to liquidate and dissolve, we will be unable to complete our business combination with AIRO, we may lose the opportunity for any stock price appreciation and our outstanding warrants would expire worthless.

To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, in February 2023, we instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial Business Combination or our liquidation. In July 2023, we instructed the trustee to instead hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, following such liquidation of investments in the Trust Account, we will receive less interest on the funds held in the Trust Account than we would have received had we not liquidated such investments in the Trust Account, which would reduce the dollar amount our Public Shareholders would receive upon any redemption or liquidation of the Company.

Until February 2023, the funds in the Trust Account had been, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, in February 2023, we instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial Business Combination or our liquidation. In July 2023, we instructed the trustee to instead hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank until the earlier of the consummation of our initial Business Combination or our liquidation. Following such liquidation, we may receive less interest on the funds held in the Trust Account than the interest we would have received pursuant to our original Trust Account investments; however, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. Consequently, the transfer of the funds in the Trust Account into cash in February 2023 and to an interest-bearing demand deposit account at a bank in February 2023 could reduce the dollar amount our Public Shareholders would receive upon any redemption or our liquidation.

Notwithstanding the divestment of all investments in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations effective as of January 24, 2024, we may still be deemed to be an investment company under the Investment Company Act, which could require us to liquidate our Trust Account by returning the then remaining funds in such account to the Public Shareholders and then proceed to liquidate and dissolve. If we are required to liquidate and dissolve, we will be unable to complete our business combination with AIRO, we may lose the opportunity for any stock price appreciation and our outstanding warrants would expire worthless.

The ability of Kernel’s Public Shareholders to exercise redemption rights in combination with the Business Combination with respect to a large number of Kernel’s Public Shares may adversely affect the liquidity and trading of Kernel’s securities and may impact Kernel’s ability to complete the Business Combination.

Pursuant to Kernel’s Amended and Restated Memorandum and Articles of Association, a Public Shareholder may request that Kernel redeem all or a portion of such Public Shareholder’s Public Shares for cash in connection with the Business Combination. The ability of Kernel’s Public Shareholders to exercise such redemption rights with respect to a large number of Kernel’s Public Shares may adversely affect the liquidity of Kernel’s Class A Ordinary Shares. As a result, you may be unable to sell your Class A Ordinary Shares even if the per-share market price is higher than the per-share redemption price paid to Public Shareholders that elect to redeem their Public Shares in connection with the Businesss Combination.

Following the Business Combination, ParentCo’s securities will be listed on Nasdaq. However, Kernel cannot assure you that its securities will continue to be listed on Nasdaq prior to the Business Combination or that ParentCo’s securities will continue to be listed on Nasdaq following the Business Combination. In order to continue listing its securities on Nasdaq, Kernel must maintain certain financial, distribution and stock price levels. Generally, Kernel must maintain a minimum number of holders of its securities (generally 300 public holders). Additionally, in connection with the Business Combination, ParentCo will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of ParentCo’s securities on Nasdaq. Generally, ParentCo must maintain a minimum amount of stockholders’ equity (generally $4.0 million) and a minimum number of holders of its securities (generally 300 unrestricted, round-lot holders). ParentCo may be unable to meet those initial listing requirements at that time, and Kernel cannot assure you that ParentCo will be able to meet those initial listing requirements at that time.

If Kernel redeems its Public Shares in an amount in excess of the current redemption limitation and its securities do not meet Nasdaq’s continued listing requirements, Nasdaq may delist Kernel’s securities from trading on its exchange. If Nasdaq delists any of Kernel’s securities from trading on its exchange and it is not able to list such securities on another approved national securities exchange, Kernel expects that such securities could be quoted on an over-the-counter market. If this were to occur, Kernel or ParentCo could face significant material adverse consequences, including: (i) a limited availability of market quotations for Kernel’s securities, (ii) reduced liquidity for Kernel’s securities, (iii) a determination that Kernel’s Public Shares are “penny stocks” which will require brokers trading in Kernel’s Public Shares to adhere to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly result in a reduced level of trading activity in the secondary trading market for Kernel’s securities, (iv) a decreased ability to issue additional securities or obtain additional financing in the future, and (v) a less attractive acquisition vehicle to a target business in connection with an initial business combination. The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Kernel’s public shares, units and warrants qualify as covered securities under such statute. If Kernel were no longer listed on Nasdaq, its securities would not qualify as covered securities under such statute and it would be subject to regulation in each state in which it offers its securities.

If Nasdaq delists ParentCo’s securities from trading on its exchange and ParentCo is not able to list its securities on another national securities exchange, Kernel expects such securities could be quoted on an over-the counter market. If this were to occur, ParentCo could face significant material adverse consequences, including:

If ParentCo’s securities are listed on Nasdaq following the Business Combination and qualify as covered securities and are subsequently delisted, ParentCo’s securities would not be covered securities and ParentCo would be subject to regulation in each state in which ParentCo offers its securities.

Additionally, the Business Combination was subject to a closing condition pursuant to the Business Combination Agreement that unless waived by the parties thereto, that Kernel shall have at least $5,000,001 of net tangible assets immediately following the closing of the Business Combination. On February 1, 2024, Kernel held the Extension Meeting – Third, and holders of 5,806,608 of Kernel’s Public Shares exercised their right to redeem those shares for cash at an approximate price of $10.80 per share, for an aggregate of approximately $62.7 million. Following the payment of the redemptions, the Trust Account had a balance of approximately $5.5 million. As a result of the decreased balance of the Trust Account, on February 5, 2024, Kernel, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor amended the Business Combination Agreement to remove the closing condition that Kernel have net tangible assets of at least $5,000,001 at Closing. If the Kernel shareholders do not approve the NTA Proposal to remove the net tangible asset requirement from Kernel’s Amended and Restated Memorandum and Articles of Association, the Business Combination will not close in any redemption scenario. If the Business Combination does not close, Public Shareholders who do not elect to redeem their Public Shares in connection with the shareholder meeting to approve the Business Combination may be unable to recover their investment except through sales of Kernel’s shares on the open market or upon our liquidation or redemption of shares. The price of Kernel’s shares may be volatile, and there can be no assurance that shareholders will be able to dispose of Kernel’s shares at favorable prices, or at all.

Nasdaq may delist Kernel’s securities from its exchange which could limit investors’ ability to make transactions in its securities and subject Kernel to additional trading restrictions.

Kernel is listed on The Nasdaq Capital Market. Nasdaq IM-5101-2 requires that a special purpose acquisition company completes one or more business combinations within 36 months of the effectiveness of its IPO registration statement, which, in the case of Kernel, would be February 2, 2024 (the “Nasdaq Deadline”). The approval of the Third Charter Amendment at the Extension Meeting -Third extended the date by which Kernel must complete it initial business combination to August 5, 2024, which is beyond the Nasdaq Deadline. As a result, Kernel’s Amended and Restated Memorandum and Articles of Association do not comply with Nasdaq rules.

On February 5, 2024, Kernel received a notice from the staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that, unless Kernel timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”), Kernel’s securities would be subject to suspension and delisting from The Nasdaq Capital Market at the opening of business on February 14, 2024, due to Kernel’s non-compliance with Nasdaq IM-5101-2. Kernel timely requested a hearing before the Panel to request sufficient time to complete the Business Combination with AIRO Group Holdings. The hearing took place on April 11, 2024. On April 19, 2024, the Panel issued written notice of its decision to grant the Company’s request for an exception to its listing deficiencies until July 1, 2024 in view of the Company’s substantial steps toward closing its previously announced initial business combination with AIRO Group Holdings and its plan for achieving compliance with Nasdaq listing rules upon closing of the transaction for listing on The Nasdaq Capital Market. On June 20, 2024, the Company requested that the Panel extend the deadline to regain compliance from July 1, 2024 to August 5, 2024, and on June 20, 2024, the request was granted. There can be no assurance that Kernel will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq IM-5101-2, and maintain compliance with other Nasdaq listing requirements. We cannot assure you that Nasdaq will not delist Kernel.

If Nasdaq delists any of Kernel’s securities from trading on its exchange and Kernel is not able to list its securities on another national securities exchange, Kernel expects such securities could be quoted on an over-the counter market. If this were to occur, Kernel could face significant material adverse consequences, including:

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because Kernel’s units, Class A ordinary shares, and warrants are currently listed on Nasdaq, Kernel’s units, Class A ordinary shares, and warrants are covered securities. If Kernel is no longer listed on Nasdaq, Kernel’s securities would not be covered securities and Kernel would be subject to regulation in each state in which Kernel offers its securities.

Without additional financing, it is possible that our shareholders will vote in favor of the Business Combination and related proposals and yet the Business Combination may not close.

Even if the Business Combination Agreement is approved by the shareholders of Kernel, specified conditions must be satisfied or waived before the parties to the Business Combination Agreement are obligated to complete the Business Combination. For further details, see “Shareholder Proposal No. 1 - Business Combination Proposal — Conditions to Consummation of the Merger.” Kernel and AIRO may not satisfy all of the closing conditions in the Business Combination Agreement. In particular, the Business Combination Agreement requires that after giving effect to the payment of expenses set forth in the Business Combination Agreement, at the Closing, Kernel having $50,000,000 in Unencumbered Cash.

Without any additional financing transactions, Kernel will not meet the Unencumbered Cash requirement under any redemption scenario. Therefore, without additional financing, assuming the Unencumbered Cash requirement is not waived by AIRO, the Business Combination will not close in any redemption scenario. There is no assurance that Kernel will enter into additional financing transactions at all. Accordingly, it is possible that the shareholders of both companies may approve the Business Combination and yet the transaction may not close because one or more other conditions to Closing are not satisfied or waived. For further information about the ability of the Business Combination to close, see “Notes to Unaudited Pro Forma Combined Financial Information - Adjustments to Unaudited Pro Forma Combined Balance Sheet.”

Additionally, if the Kernel shareholders do not approve the NTA Proposal to remove the net tangible asset requirement from Kernel’s Amended and Restated Memorandum and Articles of Association, the Business Combination will not close in any redemption scenario. For more information, see “Notes to Unaudited Pro Forma Combined Financial Information - Adjustments to Unaudited Pro Forma Combined Balance Sheet.”

EXTRAORDINARY GENERAL MEETING OF KERNEL SHAREHOLDERS

General

Kernel is furnishing this proxy statement/prospectus to its stockholders as part of the solicitation of proxies by the Kernel Board for use at the Extraordinary General Meeting to be held on July 31, 2024 and at any adjournment or postponement thereof. This proxy statement/prospectus provides Kernel’s shareholders with information they need to know to be able to vote or direct their vote to be cast at the Extraordinary General Meeting.

Date, Time and Place

The Extraordinary General Meeting will be held on July 31, 2024, at 9:00 a.m. Eastern Time, at Nelson Mullins Riley & Scarborough LLP, 101 Constitution Ave. NW, Suite 900, Washington, DC 20001. You also can attend the Extraordinary General Meeting online, and vote and submit your questions during the Extraordinary General Meeting via a live webcast available at https://agm.issuerdirect.com/krnl.

Purpose of the Extraordinary General Meeting

At the Extraordinary General Meeting, Kernel is asking holders of its Class A Ordinary Shares and Class B Ordinary Shares:

Recommendation of the Kernel Board

The Kernel Board has unanimously determined that each of the Proposals is fair to and in the best interests of Kernel and its stockholders, and has unanimously approved such Proposals. The Kernel Board unanimously recommends that stockholders:

When you consider the recommendation of the Kernel Board in favor of approval of the Proposals, you should keep in mind that the Sponsor (including certain equity holders of the Sponsor), and certain of Kernel’s directors and executive officers (including Suren Ajjarapu who is Kernel’s chief executive officer and the Sponsor’s controlling equity holder) may have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a stockholder. These interests include, among other things:

For more information, see the section entitled “Interests of Kernel’s Directors and Officers and Others in the Business Combination.”

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast at the Extraordinary General Meeting if you owned shares of Kernel Ordinary Shares at the close of business on July 10, 2024 which is the Record Date. You are entitled to one vote for each share of Kernel Ordinary Shares that you owned as of the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the Record Date, there were 8,128,091 shares of Kernel Ordinary Shares outstanding, of which 509,341 are Public Shares and 7,618,750 are Founder Shares.

Vote of the Sponsor, Directors and Officers

In connection with the IPO, Kernel entered into agreements with each of its Original Sponsor, directors and officers pursuant to which each agreed to vote any Ordinary Shares owned by it in favor of the Business Combination and for all other Proposals presented at the Extraordinary General Meeting. These agreements apply to the Sponsor as they relate to the Founder Shares and any shares underlying the Private Placement Warrants.

Kernel’s Sponsor, directors and officers have waived any redemption rights, including with respect to Class A Ordinary Shares issued or purchased in the IPO or in the aftermarket, in connection with Business Combination. The Founder Shares have no redemption rights upon Kernel’s liquidation and will be worthless if no business combination is effected by Kernel by August 5, 2024, subject to Sponsor’s electing to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time. The Sponsor and each of Kernel’s directors and officers received no additional consideration in exchange for the agreement to waive their redemption rights.

Quorum and Required Vote for Proposals

A quorum of Kernel stockholders is necessary to hold a valid meeting. A quorum will be present at the Extraordinary General Meeting if a majority of the Ordinary Shares outstanding and entitled to vote at the Extraordinary General Meeting is represented in person or by proxy at the Extraordinary General Meeting.

The approvals of the Business Combination Proposal, Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal are required to be passed by a simple majority of the stockholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the Extraordinary General Meeting. The approvals of the Domestication Proposal, the ParentCo Charter Amendment Proposal, and the NTA Proposal are required to be passed by at least a two-thirds (2/3) majority of the stockholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the Extraordinary General Meeting. In computing the majority when a poll is demanded, regard shall be had to the number of votes to which each stockholder is entitled by the Existing Kernel Governing Documents.

Under the Existing Kernel Governing Documents, the election of directors under the Election of Directors Proposal requires passage by a simple majority of the holders of the Class B Ordinary Shares that, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the Extraordinary General Meeting. Prior to the closing of a business combination, holders of Class A Ordinary Shares have no right to vote on the appointment or removal of any director.

If the Business Combination Proposal is not approved, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal will not be presented to the Kernel shareholders for a vote. The approval of the Business Combination Proposal, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal are preconditions to the consummation of the Business Combination. The Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal are conditioned on the approval of the Business Combination Proposal.

It is important for you to note that in the event the Proposals do not each receive the requisite vote for approval, then Kernel will not consummate the Business Combination. If Kernel does not consummate the Business Combination and fails to complete an initial business combination by August 5, 2024, Kernel will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the Public Shareholders.

Abstentions and Broker Non-Votes

Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, are not treated as votes cast and will have no effect on the Business Combination, the Domestication Proposal, the ParentCo Charter Amendment Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the Employee Stock Purchase Plan Proposal, the Election of Directors Proposal, and the NTA Proposal. Broker non-votes will not be counted as present for the purposes of establishing a quorum and will have no effect on any of the Proposals.

Voting Your Shares

Each Kernel Ordinary Shares that you own in your name entitles you to one vote. If you are a record owner of your shares, there are two ways to vote your Ordinary Shares at the Extraordinary General Meeting:

If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. If you wish to attend the meeting and vote in person and your shares are held in “street name,” you must obtain a legal proxy from your broker, bank or nominee. That is the only way Kernel can be sure that the broker, bank or nominee has not already voted your shares.

Revoking Your Proxy

If you are a record owner of your shares and you give a proxy, you may change or revoke it at any time before it is exercised by doing any one of the following:

If your shares are held in “street name” or are in a margin or similar account, you should contact your broker for information on how to change or revoke your voting instructions.

Who Can Answer Your Questions About Voting Your Shares

If you are a stockholder and have any questions about how to vote or direct a vote in respect of your Kernel Ordinary Shares, you may call Issuer Direct Corporation, Kernel’s proxy solicitor, at (919) 481-4000 or email: proxy@issuerdirect.com.

No Additional Matters May Be Presented at the Extraordinary General Meeting

The Extraordinary General Meeting has been called only to consider the approval of the Proposals. Under the Existing Kernel Governing Documents, other than procedural matters incident to the conduct of the Extraordinary General Meeting, no other matters may be considered at the Extraordinary General Meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the Extraordinary General Meeting.

Redemption Rights

Pursuant to the Existing Kernel Governing Documents, any holders of Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, less franchise and income taxes payable, calculated as of two (2) business days prior to the consummation of the Business Combination. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account which holds the proceeds of the IPO (calculated as of two (2) business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account and not previously released to it to pay Kernel’s franchise and income taxes). For illustrative purposes, based on approximately $5.5 million of funds in the Trust Account and 509,341 shares subject to possible redemption, in each case, following the Extension Redemption, this would have amounted to approximately $10.80 per issued and outstanding Public Share.

In order to exercise your redemption rights, you must:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30 Floor

New York, New York 10004-1561

Attn: SPAC Administration Team

E-mail: SPACredemptions@continentalstock.com

and

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests (and submitting shares to the Transfer Agent) and thereafter, with Kernel’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Kernel’s Transfer Agent and decide within the required timeframe not to exercise your redemption rights, you may request that Kernel’s Transfer Agent return the shares (physically or electronically). You may make such request by contacting Kernel’s Transfer Agent at the phone number or address listed above.

Prior to exercising redemption rights, stockholders should verify the market price of Kernel Ordinary Shares as they may receive higher proceeds from the sale of their Kernel Ordinary Shares in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. We cannot assure you that you will be able to sell your Kernel Ordinary Shares in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in Kernel Ordinary Shares when you wish to sell your shares.

If you exercise your redemption rights, your shares of Kernel Ordinary Shares will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of AIRO, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

If the Business Combination is not approved and Kernel does not consummate an initial business combination by August 5, 2024, Kernel will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the Public Shareholders and the Public Warrants and Private Placement Warrants will expire worthless.

Appraisal Rights

Kernel shareholders do not have appraisal rights in connection with the Business Combination Proposal or the other Proposals.

Proxy Solicitation

Kernel is soliciting proxies on behalf of the Kernel Board. This solicitation is being made by mail but also may be made by telephone or in person. Kernel and its directors, officers and employees may also solicit proxies in person.

Kernel has hired Issuer Direct Corporation to assist in the proxy solicitation process. Kernel will pay Issuer Direct Corporation its customary fee plus disbursements.

Kernel will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Kernel will reimburse them for their reasonable expenses.

SHAREHOLDER PROPOSAL NO. 1: THE BUSINESS COMBINATION PROPOSAL

General

Holders of Kernel Ordinary Shares are being asked to approve and adopt the Business Combination Agreement and the transactions contemplated thereby, including the Business Combination. Kernel shareholders should carefully read this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement. The Business Combination Agreement is attached as Annex A to this proxy statement/prospectus. Please see the sections entitled “Shareholder Proposal No. 1: The Business Combination Proposal — The Business Combination Agreement” and “Shareholder Proposal No. 1: The Business Combination Proposal — General Description of the Business Combination Agreement” below for additional information and a summary of certain terms of the Business Combination Agreement. You are urged to carefully read the Business Combination Agreement in its entirety before voting on this proposal.

Because Kernel is holding a stockholder vote on the Business Combination, Kernel may consummate the Business Combination only if it is approved by a majority of the shares present or represented by proxy and entitled to vote at a meeting as of the Record Date for the Extraordinary General Meeting.

The Business Combination Agreement

The subsections that follow this subsection describe the material provisions of the Business Combination Agreement, but do not purport to describe all of the terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, a copy of which is attached as Annex A, which is incorporated herein by reference. Stockholders and other interested parties are urged to read the Business Combination Agreement in its entirety carefully, as amended (and, if appropriate, with the advice of financial and legal counsel), because it is the primary legal document that governs the Business Combination. The Business Combination Agreement and all descriptions thereof are being furnished to provide information regarding the terms of the Business Combination and are not intended to provide any factual information regarding the parties to the Business Combination or their respective businesses or affairs.

The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates, which may be updated prior to the Closing of the Business Combination. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in important part by the disclosure schedules attached thereto which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders. The disclosure schedules were used for the purpose of allocating risk among the parties rather than establishing matters as facts. We do not believe that the disclosure schedules contain information that is material to an investment decision. Accordingly, you should not rely on the representations and warranties in the Business Combination Agreement as characterizations of the actual state of facts about the respective parties. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Business Combination Agreement, which subsequent information may or may not be fully reflected in our public disclosures.

General Description of the Business Combination Agreement

On March 3, 2023, Kernel entered into the Business Combination Agreement by and among Kernel, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Sponsor, Seller Representative, and AIRO, pursuant to which, among other things, Kernel will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”).

On August 29, 2023, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the First Amendment to the Business Combination Agreement (the “First Amendment”). The First Amendment amends the Business Combination Agreement to make certain changes to the earnout provisions to fix the number of Earnout Shares that can be granted in each Earnout Period based on a $10.00 per share price.

On January 16, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Second Amendment to the Business Combination Agreement (the “Second Amendment”). The Second Amendment amends the Business Combination Agreement to change the terms under which the AIRO Group Holdings stockholders and the Sponsor shall have a contingent right to receive the Earnout Shares as additional consideration based on ParentCo’s achievement of certain revenue thresholds. The Second Amendment also changes the “Outside Date” from August 2, 2023 to August 5, 2024.

On February 5, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Third Amendment to the Business Combination Agreement (the “Third Amendment”). The Third Amendment amends the Business Combination Agreement to remove the closing condition that Kernel have net tangible assets of at least $5,000,001 at Closing.

On June 24, 2024, the Company, ParentCo, Kernel Merger Sub, AIRO Merger Sub, Seller Representative, AIRO Group Holdings, and the Sponsor entered into the Fourth Amendment to the Business Combination Agreement, which amends the Business Combination Agreement to delete the Sponsor’s right to receive Earnout Shares.

In connection with the Domestication, each issued and outstanding Kernel Class A Ordinary Share, each issued and outstanding Kernel Class B Ordinary Share, each issued and outstanding Kernel Private Placement Warrant, each issued and outstanding Kernel Public Warrant, and each issued and outstanding Kernel Unit shall convert automatically, on a one-for-one basis, into one share of Kernel Class A common stock, one share of Kernel Class B common stock, one Kernel Private Placement Warrant, one Kernel Public Warrant and one Kernel Unit, respectively, and (ii) immediately following the domestication, (a) each share of Kernel Class B common stock shall convert automatically, on a one-for-one basis, into one share of Kernel Class A common stock, (b) the Kernel Class A common stock will be reclassified as Kernel common stock, and (c) each Kernel Unit will be separated into one share of Kernel common stock and one Kernel Public Warrant.

Following the Domestication, the parties will affect the merger of Kernel Merger Sub with and into Kernel, with Kernel continuing as the surviving entity as a wholly owned subsidiary of ParentCo (the “First Merger”). Immediately following the First Merger, AIRO Merger Sub will merge with and into AIRO, with AIRO continuing as the surviving entity as a wholly owned subsidiary of ParentCo (the “Second Merger” and the other transactions contemplated by the Business Combination Agreement, together, the “Transaction”).

Merger Consideration

As consideration for the Second Merger, the AIRO stockholders collectively shall be entitled to receive from ParentCo, in the aggregate, a number of shares of ParentCo common stock with an aggregate value equal to (a) $770,000,000 minus (b) the amount, if any, by which the net working capital is less than negative $5,500,000 by more than $500,000, plus (c) the amount, if any, by which the net working capital is greater than negative $5,500,000 by more than $500,000 (but not less than zero), minus (d) the amount, if any, by which the closing net debt exceeds the target net debt of $75,000,000 by more than $500,000 (but not less than zero), plus (e) the amount, if any, by which the target net debt of $75,000,000 is less than closing net debt, minus (f) the amount, if any, by which the company transaction expenses exceed the target company transaction expenses of $14,000,000 (such resulting amount, the “AIRO Merger Consideration”).

In addition, AIRO stockholders shall also be entitled to receive from ParentCo up to 33,000,000 additional shares of ParentCo common stock as additional consideration based on ParentCo’s achievement of certain revenue thresholds during the Earnout Eligibility Period, as follows:

(a) if ParentCo’s revenue for the fiscal year that includes the Closing Date is greater than or equal to $50,000,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s Pro Rata Share of 11,000,000 Earnout Shares;

(b) if ParentCo’s revenue for the first full fiscal year following the Closing Date is greater than or equal to $62,500,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s Pro Rata Share of 11,000,000 Earnout Shares; and

(c) if ParentCo’s revenue for the second full fiscal year following the Closing Date is greater than or equal to $78,100,000, then ParentCo shall issue to each of the AIRO stockholders such stockholder’s Pro Rata Share of 11,000,000 Earnout Shares.

Representations and Warranties

The Business Combination Agreement contains customary representations and warranties by each of Kernel, ParentCo, Kernel Merger Sub, AIRO Merger Sub, and AIRO. Certain of the representations are subject to specified exceptions and qualifications contained in the Business Combination Agreement or in information provided pursuant to certain disclosure schedules to the Business Combination Agreement.

Covenants of the Parties

Each party agreed in the Business Combination Agreement to use its commercially reasonable efforts to effect the Closing and consummate the transactions contemplated by the Business Combination Agreement. The Business Combination Agreement also contains certain customary covenants by each of the parties during the period between the signing of the Business Combination Agreement and the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms (the “Interim Period”), including, among other things, those relating to: (i) the provision of access to their properties, books and personnel; (ii) the operation of their respective businesses in the ordinary course of business; (iii) the provision by AIRO to Kernel of unaudited financial statements on a monthly, quarterly and annual basis and audited financial statements as of December 31, 2022 within 60 days of the Business Combination Agreement’s signing (“AIRO’s 2022 Audited Financials”); (iv) Kernel’s public filings; (v) use of Kernel’s Unencumbered Cash; (vi) no insider trading; (vii) notifications of certain breaches, consent requirements or other matters; (viii) the preparation and filing of the Registration Statement as described in more detail below, (ix) public announcements; and (x) confidentiality. Each party also agreed during the Interim Period not to solicit or enter into any inquiry, proposal or offer, or any indication of interest in making an offer or proposal for an alternative competing transactions, to notify the others as promptly as practicable in writing of the receipt of any inquiries, proposals or offers, requests for information or requests relating to an alternative competing transaction or any requests for non-public information relating to such transaction, and to keep the other party informed of the status of any such inquiries, proposals, offers or requests for information. The Business Combination Agreement also contains certain customary post-Closing covenants regarding (a) maintenance of books and records; (b) tax matters; and (c) indemnification of directors and officers and the purchase of tail directors’ and officers’ liability insurance.

In addition, AIRO agreed to obtain its required shareholder approvals in the manner required under its governing documents and applicable law for the execution, delivery and performance of the Business Combination Agreement and each of the ancillary documents to the Business Combination Agreement to which AIRO is or is required to be a party or bound, and the consummation of the transactions contemplated thereby, including the merger.

In the Business Combination Agreement the parties made customary covenants regarding the registration statement on Form S-4 to be filed by ParentCo with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”).

Kernel will distribute a proxy statement to seek the consent of Kernel’s shareholders to, among other things, (i) adopt and approve the Business Combination Agreement and the Transaction; (ii) approve, to the extent necessary, the issuance of any shares in connection with any PIPE/Convertible Note Investment; (iii) approve the certificate of incorporation of Kernel in connection with the Merger; (iv) the appointment of the members of ParentCo’s post-Closing board of directors (the “Post-Closing Board”); and (v) such other matters as Kernel and AIRO shall hereafter mutually determine to be necessary or appropriate in order to effect the Transaction and (vi) the adjournment of the Extraordinary General Meeting, if necessary or desirable in the reasonable determination of Kernel.

The parties agreed that the Post-Closing Board will consist of nine directors, comprised of (i) two directors designated prior to the Closing by Kernel, at least one of whom will be required to qualify as an independent director under Nasdaq rules, and (ii) seven designated by AIRO, at least four of whom will be required to qualify as an independent director under Nasdaq rules.

The parties further agreed to take all action necessary so that the individuals serving as the chief executive officer and chief financial officer, respectively, of ParentCo immediately after the Closing will be the same individuals (in the same office) as that of AIRO immediately prior to the Closing.