It's been a rough Friday for T3 Defense Inc. (DFNS). The defense technology company announced it had bought a 60% stake in Israeli drone and counter-UAV developer Project35, and the market responded by sending its stock down 27% to $0.1065.
Project35 is no small player in the drone world. Its customer list includes Israel Aerospace Industries (IAI), ELTA Systems, Rafael Advanced Defense Systems, Elbit Systems, and even the Israel Ministry of Defense. So T3 Defense is getting access to some serious defense tech.
The deal was structured as a mix of stock and cash. T3 Defense issued 21,059,871 common shares and a $1.25 million promissory note with a 12% interest rate to acquire the majority stake. That's a lot of shares for a company whose stock is trading at pennies, but it shows how T3 Defense is betting big on Project35's technology.
What exactly is T3 Defense getting? Project35's portfolio includes heavy-lift cargo drones, VTOL (vertical takeoff and landing) aircraft, AI-guided tactical FPV (first-person view) systems, and an autonomous drone interceptor that recently completed successful live-fire trials. That last one is particularly interesting — an autonomous drone that can take out other drones is exactly the kind of thing militaries are scrambling to buy.
Project35 has some financial momentum, too. It generated about $1.4 million in unaudited revenue in 2025 and expects around $2.4 million in fiscal 2026. T3 Defense also plans to invest another $2.5 million over the next 12 months to help Project35 commercialize its products, expand production, and win new customers. And Project35's founding management team will stick around after the acquisition, which should help with continuity.
CEO Menny Shalom framed the acquisition as a way to play both offense and defense in the drone market. "The acquisition of Project35 positions T3 Defense on both sides of that equation," Shalom said. "Project35 brings operational, field-deployed platforms and a purpose-built autonomous interceptor validated in successful live-fire testing, giving us proven technology to address one of the defining threats of modern conflict."
Investors, though, seem to be focusing on the dilution from all those new shares. The stock is down more than 27% on the day. But if Project35's technology lives up to the hype, today's sell-off might look like a bargain down the road.
