• A $500 million homeland counter-drone IDIQ awarded sole-source to AeroVironment, with an $80.5 million task order funded on day one. Then a $4 billion fiscal 2030 revenue target from AVAV and a Street split between the contract tape and the multiple.
• Kratos adding 100,000 square feet of jet drone capacity with the Marine Corps’ CCA program of record as the anchor tenant.
• Ondas writing an $875 million check for DZYNE as sector M&A enters its nine-figure phase.
• Russia banning diesel exports and risking its grain harvest because Ukrainian drones reached all ten of its largest refineries.
• The Marines standing up permanent drone warfare units on both coasts.
• Eight men indicted for plotting a drone attack on the White House.

June closed with the drone trade on its back foot. Red Cat had just logged its worst month in five years, money was rotating out of defense names on hopes that geopolitical tensions were cooling, and several of the sector’s biggest 2026 winners were giving back gains. Then AeroVironment reported, and the narrative reset inside a single evening. A more-than-doubling of revenue, a 65% jump in funded backlog, and a management team telling analysts the counter-drone business is still in its opening act sent the stock up more than 20% and pulled the rest of the group along with it. Within twenty-four hours the company won a half-billion-dollar counter-drone award, the Pentagon announced it was putting one office in charge of the entire drone buildout, and Ukraine’s long-range drones pushed Putin into conceding that Russia’s fuel production is buckling.

Here’s the breakdown.

AeroVironment reported fiscal fourth-quarter results on June 30 that blew past every estimate on the Street. Revenue came in at roughly $642 million, more than double the prior-year quarter and well ahead of the $559 million analysts expected.

Adjusted earnings landed at $1.84 per share against a $1.46 estimate, and funded backlog jumped 65% to $1.2 billion. Shares surged more than 20% on the print, and the read-through lifted nearly every publicly traded drone name with it.

The number that mattered most was not in the quarter but in the guidance and the commentary around it. CEO Wahid Nawabi told analysts the counter-drone business is still in its “early stages” and could eventually grow “as large as, or even two to three times larger than” the company’s existing business over the next three to five years.

AeroVironment guided fiscal 2027 revenue to a range of roughly $2.13 to $2.23 billion, which would mean another near-doubling. The one soft spot was the earnings guide, which came in below Street expectations as the company spends heavily to scale manufacturing capacity to meet demand it says it has never seen at this level.

One market commentator summed up the reaction bluntly: the drone defense super cycle has arrived. The willingness to sacrifice near-term margin to build capacity is long term bullish for earnings indicating the durability of the cycle.

The day after the earnings call, AeroVironment backed the talk with a contract. On July 1 the Department of Defense awarded the company a $500 million firm-fixed-price deal for commercial counter-unmanned aerial systems and counter-small-UAS capabilities, with work running through June 2029. Shares, already up sharply on the quarter, pushed higher on the news.

The timing turned an earnings-call thesis into a purchase order inside of a day. Nawabi had spent the previous evening telling analysts counter-drone could become the largest part of the business, and the market got a real-time proof point before it could even reprice the stock on the quarter. The contract is a ceiling vehicle, meaning specific orders, funding, and delivery locations get defined over time, but the structure tells you the customer intends to buy at volume rather than in one-off tranches.

Counter-UAS is the segment where the demand curve is steepest, because it is the answer to the cheap-drone problem playing out on every modern battlefield. When an adversary can field attack drones by the hundred, defenders cannot afford to answer each one with a million-dollar interceptor. The market for systems that push the cost-per-kill back down toward the cost of the threat have the run of the market.

On July 1 the Pentagon announced it is consolidating oversight of all military drones and autonomous systems under a newly created office, the Direct Reporting Portfolio Manager for Unmanned Systems, which will report directly to Deputy Secretary of War Stephen Feinberg. Secretary of War Pete Hegseth framed the move as the organizational backbone for a doctrine shift already underway, pledging to deliver tens of thousands of small drones to U.S. forces in 2026 and hundreds of thousands more by 2027.

The structural point is friction. Until now, drone programs have been scattered across services, offices, and acquisition pipelines that move at different speeds and answer to different bosses. Putting a single accountable owner one step below the department’s top civilian collapses that fragmentation into one chain of command, which is how you buy at the speed and scale the doctrine requires. Hegseth tied the effort to the Drone Dominance program funded through this year’s reconciliation bill and to a fiscal 2027 request that earmarks tens of billions of dollars for drone warfare.

Org-chart changes rarely make headlines, but they are the unglamorous machinery of a real buildout. A dedicated portfolio manager reporting to the number-two civilian in the building is indicative of its long-term commitment to this new form of weaponry. The message to industry is that the government intends to buy high-volume, low-cost autonomous systems as a permanent category rather than a one-time surge, and it is rewiring itself internally to do it.

The clearest signal that the nature of military doctrine has fundamentally changed came from the war in Ukraine. On June 29, Vladimir Putin conceded for the first time that Russia is facing fuel shortages after a sustained campaign of long-range Ukrainian drone strikes on refineries and energy infrastructure, including a strike on Gazprom’s Moscow Refinery that sent black smoke over the capital.

Ukrainian officials say their deep-strike drones are now reaching targets more than a thousand miles inside Russia. Days earlier, reporting detailed the secretive Ukrainian units running the program, and Zelensky warned that “Moscow will burn” if the war continues. Russia answered on July 2 with a massive missile-and-drone barrage that pushed Poland to scramble fighter jets and Finland to restrict its airspace.

The mechanism is economic warfare waged with cheap autonomy. Ukraine is manufacturing long-range strike drones at a price point that lets it launch them in volume against soft, high-value targets like refineries, and no air defense network was built to intercept that quantity economically.

Every interceptor Russia fires to stop a low-cost one-way drone is a losing trade, and the cumulative damage is now showing up in fuel production a head of state was forced to acknowledge publicly.

This is the proof that separates strategic effect from tactical nuisance. Cheap, mass-produced autonomous systems can degrade the war economy of a far larger adversary, not just harass its front lines. Every defense ministry watching has drawn the same two conclusions: build the low-cost strike drones, and build the layered counter-drone systems to stop the other side’s.

The capital-markets side produced its own headline. On June 26, autonomous heavy-cargo drone developer Elroy Air agreed to go public through a merger with Columbus Circle Capital Corp. II, an Inflection Point-led blank-check company that will be renamed Inflection Point Acquisition Corp VII. The deal values Elroy at roughly $800 million pre-money and about $1.0 billion in enterprise value, backed by more than $165 million in committed PIPE capital, with closing targeted for the fourth quarter of 2026.

Elroy’s flagship Chaparral is a hybrid-electric aircraft that takes off and lands vertically and carries more than 300 pounds of cargo without a runway. That capability maps directly onto the logistics problem the U.S. military is wrestling with in the Pacific, where fixed airfields are among the first targets and forces need to resupply from distributed, austere locations. The same runway independence that makes strike drones survivable makes cargo drones useful, and Elroy is pitching both defense and commercial logistics buyers.

The transaction matters beyond one company because it shows the public markets opening to drone names well outside the established defense primes. Following Swarmer’s debut earlier this year, the pipeline of autonomous-systems companies moving from private rounds to public listings is widening, and investors are signaling they will fund the buildout at scale. A billion-dollar valuation for a cargo-drone maker still years from mass deployment is a bet on where the category is going.

While the primes grabbed the contracts, the domestic supply base got a builder. Unusual Machines made a $30 million strategic equity investment in Powerus, the autonomous systems company behind the Guardian family of counter-drone interceptors. Powerus has already won a limited procurement order from the U.S. Air Force to supply its Guardian-2 interceptor “at scale,” was selected for the second phase of the Pentagon’s Drone Dominance program, and posted imagery on June 30 tying the system to recent intercepts in the Middle East, claiming thousands of successful engagements to date.

The deal is vertical integration in a sector that badly needs it. Powerus was already an Unusual Machines customer, sourcing motors and components, including an order worth more than $5 million in April. The equity investment deepens that relationship and points both companies at the same target: building the American manufacturing base for counter-drone hardware the government keeps saying it wants and keeps discovering does not yet exist at the required scale.

The economics are the whole story. A rotary-wing interceptor that costs a fraction of the drone it kills is the structural answer to the cost-asymmetry problem, the same math driving AeroVironment’s $500 million counter-drone award and the Pentagon’s rush to fund domestic production. The government can write all the contracts it wants, but someone has to make the parts.

AeroVironment’s blowout print did more than move one stock. It reversed a month-long rotation out of the group and reminded investors why they crowded into these names in the first place.

AeroVironment (AVAV) was the catalyst. The fiscal-fourth-quarter beat and the $1.2 billion funded backlog sent shares up more than 20%, and the follow-on $500 million counter-drone contract added to the move. The stock had drifted with the broader defense pullback through June before the print, and the reaction shows how quickly sentiment in this group can turn on a single data point. The fiscal 2027 revenue guide implies another near-doubling; the softer earnings guide is the tell that management is prioritizing capacity over margin. For the sector’s closest thing to a scaled pure-play, execution on that ramp is now the whole ballgame.

Kratos Defense (KTOS) had its own catalyst. JPMorgan upgraded the stock to Overweight from Neutral on June 30, citing long-term growth, margin expansion, and new contract wins, and shares rose roughly 9% on the call. The company is riding a U.S. Space Force other-transaction award worth up to $446.8 million and continued momentum behind its XQ-58A Valkyrie autonomous wingman, with 2026 revenue guided to $1.70 to $1.76 billion against roughly $1.35 billion last year. The valuation is stretched by any conventional measure, which means Kratos, like much of the group, is priced for continued wins. The Valkyrie production cadence and the space backlog are what the market is paying for.

Red Cat Holdings (RCAT) was the divergence. The stock fell roughly 36% in June, its worst month in about five years, as investors rotated out of defense on cooling-tension headlines, before rebounding about 8% on June 29 as sentiment turned. Roth Capital initiated coverage with a Buy rating and a $25 target, pointing to breakout growth potential and a path toward roughly 30% gross margins. Operationally the story is intact: Red Cat launched its new Hellcat small UAS, a dual-use system built on the Black Widow platform with more than 50 minutes of endurance and range past 11 kilometers in GPS-denied conditions, and its Blue Ops division is moving the Variant 7 uncrewed surface vessel into full-rate production with NDAA-compliant parts. The gap between the stock’s June drawdown and its order pipeline is the setup investors are now weighing.

AeroVironment more than doubling revenue to roughly $642 million and declaring the counter-drone super cycle has arrived. A $500 million counter-drone contract landing twenty-four hours after the earnings call. The Pentagon consolidating every military drone program under one office reporting to the deputy secretary of war. Ukraine’s deep-strike drones forcing Putin to admit Russia is short of fuel, and Russia’s retaliation pushing Poland and Finland to scramble. Elroy Air heading to the public market at a billion-dollar valuation. Unusual Machines putting $30 million behind a domestic interceptor maker. Kratos winning a JPMorgan upgrade on a record backlog. Red Cat rebounding off its worst month in years as new coverage flags the growth. This is a sector where the earnings, the contracts, the capital, and the combat demand are all confirming the same thesis at the same time.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the REX Shares. To obtain a Fund’s prospectus and summary prospectus call 844-802-4004 or visit rexshares.com. Read prospectuses carefully before investing.

Investing in the Funds involves a high degree of risk. As with any investment, there is a risk that you could lose all or a portion of your investment in the Funds.

The Fund, Trust, Adviser, and Sub-Adviser are not affiliated with the Fund’s underlying securities.

Funds distributed by Foreside Fund Services, LLC, member FINRA.

• The Air Force moving CCA into production with both Anduril and General Atomics rather than down-selecting to one.
• France ordering 5,000 Sonora drones from a two-year-old startup that delivered on time.
• Ukraine sending roughly 660 drones toward Moscow and Crimea in a single night and overwhelming Russian air defenses.
• Mach Industries winning a DIU contract for runway-independent maritime strike.
• Poland buying Shield AI’s V-BAT to patrol the Baltic.
• The Navy demonstrating a power-beaming counter-drone laser while Romania buys Skyranger and a World Cup host city layers on counter-UAS coverage.
• Ondas booking another nine-figure order.
• AeroVironment riding compressed procurement timelines.
• Red Cat repricing on conflict demand.
• DroneShield posting triple-digit growth.

The drone war went global this week, and every theater fired at once. In the Persian Gulf, Iran and the United States traded drones, missiles, and airstrikes across two days that ended with a civilian airport in flames. In Eastern Europe, Russia staged its second record-scale drone barrage in as many weeks while Ukraine reached deeper into Russian territory than the headlines usually allow. And at home, the procurement machine kept grinding: a nine-figure production order for the Army’s new battalion reconnaissance drone, a ten-figure acquisition in counter-UAS, a prime contractor’s containerized drone killer passing its live-fire exam, and one of the Pentagon’s favorite small-drone makers buying its way up the supply chain. The demand signals came from both sides of the drone equation this week, the aircraft and the systems built to stop them. Here’s the breakdown.

On June 2, a U.S. aircraft put an AGM-114 Hellfire into the engine room of the M/T Lexie, an empty tanker attempting to run the American blockade of Iranian ports. Iran answered within hours, launching three one-way attack drones at commercial ships transiting the Persian Gulf. U.S. forces shot down all three, then struck the Iranian ground-control station on Qeshm Island that supported the drone operations. Moments later Iran fired ballistic missiles at Kuwait and Bahrain. Three aimed at Bahrain were intercepted by U.S. and Bahraini air defenses; two fired toward Kuwait fell short or broke apart in the air. More Iranian drones followed that evening, and on Wednesday morning roughly 30 missiles and drones struck Kuwait’s international airport, killing one person, injuring at least 63, and damaging airport facilities and nearby diplomatic missions. Iran’s Revolutionary Guard claimed strikes on U.S. installations across the region while denying it hit the terminal, blaming a malfunctioning Patriot battery instead.

The exchange was the fifth in just over a week, all of it unfolding under a ceasefire that has nominally held since April 8, after the U.S.-Israeli air campaign that ran from late February to early May. The blockade that triggered this round has disabled six vessels and turned back 122 more since mid-April. Iran’s escalation currency through all of it is the cheap one-way attack drone: launched at shipping lanes, at air bases, at airports, in volumes calibrated to probe layered defenses without reopening the full war.

The investment story is the defense math. Every exchange burns interceptors that cost multiples of the drones they kill, and every Gulf airport and U.S. installation in the region now sits inside the drone threat envelope full time. The counter-UAS demand the Pentagon has been budgeting against is not theoretical. It is operating in real time over Kuwait.

On June 3, Army Contracting Command at Redstone Arsenal awarded AeroVironment a $117.3 million contract for 82 P550 unmanned aircraft systems under the Long-Range Reconnaissance program. The award was competitive, with ten proposals received, and the contract carries an estimated completion date of July 23, 2026. That is roughly seven weeks from award to scheduled delivery on the first major production purchase of the P550 since the aircraft was unveiled in October 2024.

The P550 gives battalion commanders what the Army calls organic reconnaissance, surveillance, and target acquisition capability: a long-endurance small drone that belongs to the unit that flies it, rather than borrowed from higher echelons. It is the production answer to a gap the Army has been working since it retired the Shadow fleet, and it slots into the same modernization push that produced the Skydio order and the SkyFoundry initiative covered here in prior weeks.

The timeline is the story inside the story. A competitive ten-bidder award moving 82 aircraft from contract signature to scheduled completion in under two months is the “buy what works, buy it fast” doctrine showing up in an actual transaction, not a strategy document. For AeroVironment, it extends a contract streak that has now run for most of the spring, and it lands four weeks before the company reports fiscal fourth-quarter results on June 30. The Street’s question about AVAV has never been whether the orders come. It is whether the multiple holds. The orders keep coming.

On June 1, Motorola Solutions announced it will acquire D-Fend Solutions, the Israel-based counter-drone firm, for $1.5 billion, with the deal expected to close in the fourth quarter pending regulatory approval. D-Fend builds radio-frequency cyber-takeover technology: rather than jamming or shooting down an unauthorized drone, its systems assume control of the aircraft and land it in a safe area, leaving approved drones in the same airspace untouched. The company has deployed its technology thousands of times across more than 30 countries, has grown revenue more than 50 percent annually for three straight years, and is projected to generate roughly $185 million in revenue in 2026. Motorola is paying about eight times that figure.

The buyer matters as much as the price. Motorola Solutions is a public-safety infrastructure company, and it is buying counter-UAS for police departments, stadiums, airports, and critical infrastructure, not for the battlefield. The Safer Skies Act handed state and local law enforcement detect-and-mitigate authority in December, and the deadline that makes it urgent is June 14, when the World Cup opens. The FAA spent last Friday establishing no-drone zones across every U.S. host city, and the DHS Secretary said this week that federal counter-drone preparations for the tournament are still being built out. Congress, meanwhile, introduced the bipartisan GUARD Act on June 4, extending the Covered List security-review framework beyond drones to foreign-made robotics.

An eight-times-revenue strategic acquisition is a statement about scarcity: proven counter-UAS technology with a deployment record is rare, and the buyers arriving now are not defense primes but the companies that wire up civilian public safety. The week’s smaller deal made the same point. Lidar maker Ouster jumped after announcing on June 2 that German interceptor firm ARGUS will build its sensors into net-firing counter-drone aircraft. The civil counter-drone market the legislation promised is now consolidating in public.

On June 3, Lockheed Martin announced that its GRIZZLY launcher downed a Group 3 attack drone in a live-fire demonstration at Yuma Proving Ground, the first kill of its kind using the Joint Air-to-Ground Missile fired from the system. GRIZZLY is a counter-drone battery that lives inside a standard 10-foot shipping container holding up to eight Hellfire or JAGM missiles, with toolless reloading and wireless connectivity. In the Yuma test, Fortem R-40 radars detected and tracked the target while Lockheed’s Sanctum battle-management software ran the engagement end to end.

The program is moving at a pace that does not resemble traditional prime-contractor development. Lockheed completed live-fire testing in under 45 days after system integration began. The first launch, a vertically fired Hellfire at Yakima Training Center, happened in March. In April, Lockheed put $25 million into Utah-based Fortem Technologies to fold its radars and interceptors into the Sanctum ecosystem. By June it was killing Group 3 targets, the class of drone that weighs up to 1,320 pounds and flies below 18,000 feet. That is the Shahed class, the airframe family Iran and Russia used against airports and cities this same week.

The legacy primes are conspicuously absent from the Pentagon’s small-drone airframe competitions, and GRIZZLY shows where they went instead: the kill chain. The Army plans nearly $1 billion in counter-drone procurement in FY27, and a containerized launcher that can sit on a base perimeter, a ship deck, or a flatbed answers the exact threat profile the Gulf demonstrated on Wednesday. The drone war has two sides of the ledger, and the primes have picked theirs.

On June 4, PDW, the Huntsville-based maker of small tactical drones formerly known as Performance Drone Works, announced a definitive agreement to acquire Vanteon Corporation, an engineering firm with decades of experience in advanced communications, RF systems, and software-defined radio. The company said the deal strengthens its ability to design and deliver next-generation small UAS and expands what it called mission-critical connectivity at the tactical edge.

The timing is what makes the deal notable. One week ago, PDW was named in reporting as one of the companies the Pentagon’s Office of Strategic Capital is courting for direct equity and debt investment, alongside Neros and Unusual Machines. The company has raised close to $200 million privately and holds an Army reconnaissance contract. Now it is spending to own its radio stack outright, and the logic traces straight back to the battlefield: jam-resistant communications are the difference between a drone that completes its mission and a drone that falls out of the sky, and the Drone Dominance scoring system punishes vulnerable links accordingly.

This is the second supply-chain acquisition by a small-drone insurgent in a month, after Unusual Machines signed its $52 million deal for battery maker Upgrade Energy in May. The pattern is vertical integration ahead of scale. The companies expecting to win slices of a 300,000-drone procurement are buying the component layers they cannot afford to import, and the proving ground arrives immediately: Gauntlet 2, the Phase II fly-off of the Drone Dominance Program, opens Monday at Camp Grayling with 48 vendors and roughly 78 designs competing. In Gauntlet I, UK-Ukrainian entrant Skycutter topped the scoring at 99.3 points against Neros at 87.5. The leaderboard that comes out of Michigan will decide who the production orders, and possibly the government’s equity dollars, chase next.

Overnight into June 2, Russia launched at least 656 drones and 73 missiles at Ukraine, a week after the 600-drone attack on Kyiv covered here last Friday. Ukrainian air defenses intercepted 602 drones and 40 missiles, but 38 sites were struck. At least 22 civilians were killed and more than 100 wounded. In Dnipro, a four-story apartment building collapsed, killing nine. Kyiv lost four residents and counted 58 wounded, and the strikes cut electricity to 140,000 people. President Zelenskyy was blunt about the arithmetic: the current level of air-defense supplies, he said, does not allow Ukraine to shoot down a significant share of the incoming missiles.

Ukraine’s answer came the following night, a thousand kilometers from the border. On June 3, Ukrainian long-range drones struck an oil terminal in St. Petersburg and set it ablaze, hours before the city opened the economic forum often called Putin’s Davos. The city’s airport suspended flights and authorities cut mobile internet service. The strike capped a campaign that has hit the Taganrog and Voronezh airbases, the Tuapse refinery, and, by Ukrainian count, 174 Russian air-defense systems in 2026 worth more than $5.4 billion.

The pattern from last week did not just hold, it compounded. Russia’s barrage volume is now setting records on a weekly cadence, and a 92 percent intercept rate still let 38 sites get hit, which is the whole argument for magazine depth in one sentence. Ukraine, outgunned on volume, keeps trading precision for mass and reaching targets Russia assumed were out of range. Both sides are running the same playbook the Pentagon is now funding at $50 billion scale: produce more, strike deeper, and force the other side to spend interceptors faster than they can be replaced.

The week’s tape consolidated the prior week’s government-stake rally while company-specific catalysts did the work.

AeroVironment (AVAV) booked the week’s marquee contract, the $117.3 million Army order for 82 P550 aircraft, and shares edged higher on the award, closing near $201 on Thursday. The order extends a spring run of franchise wins across loitering munitions, counter-UAS, and now battalion reconnaissance at production scale. The next catalyst has a date: fiscal fourth-quarter results land June 30 after the close, the Street’s first full look at how the contract streak is converting into revenue and backlog.

Ondas Holdings (ONDS) unveiled two new autonomous defense products on June 4, the MODUS counter-drone system and the IRON WAVE robotic combat platform, its first major product news since closing the $196.6 million all-stock acquisition of Israeli defense-software firm Omnisys on May 21. Management has raised full-year revenue guidance to at least $390 million and pulled its EBITDA profitability target forward by six months, positioning the company as a software-led defense platform rather than a drone hardware maker. The product cadence is now the thing to watch: the thesis depends on integration, and two launches two weeks after closing is an early data point in its favor.

ZenaTech (ZENA) reported first-quarter results on June 3: revenue of $8.4 million, up 640 percent year over year, with the Drone-as-a-Service segment contributing $7.8 million, roughly 93 percent of the total, built on 23 completed acquisitions of land-survey and legacy service firms across ten U.S. states, Canada, the UK, and Australia. The net loss widened to $26.6 million from $4.6 million a year earlier, and the market’s reaction was muted accordingly. The growth engine is real and the roll-up is executing; the path from 640 percent revenue growth to operating leverage is the part the stock is waiting on. The ZenaDrone 2000 heavy-lift interceptor, the company’s counter-UAS entry, completed fuselage manufacturing with flight testing targeted for the third quarter.

Unusual Machines (UMAC) spent the week consolidating a 104 percent May gain, the steepest in the sector, and hits the investor circuit with three conference appearances this month. The $52 million Upgrade Energy battery acquisition remains on track pending its audit condition, and the open catalyst is unchanged: confirmation and terms of any Office of Strategic Capital investment, the report that ignited the stock last week and has yet to produce a signed deal.

Iranian one-way attack drones and ballistic missiles over the Gulf, answered by U.S. air defenses and a strike on the ground-control station that ran them. A $117.3 million Army production order for 82 AeroVironment P550s on a seven-week clock. Motorola paying $1.5 billion, roughly eight times forward revenue, for counter-drone firm D-Fend ahead of a World Cup that opens in nine days. Lockheed killing a Group 3 drone with a missile fired from a shipping container 45 days after integration began. PDW buying its RF supplier one week after the Pentagon floated taking a stake in the company. Russia putting 656 drones over Ukraine in a single night while Ukrainian drones set a St. Petersburg oil terminal on fire a thousand kilometers away. Gauntlet 2 opens Monday in Michigan. This is a sector where the shooting war, the procurement ramp, and the corporate consolidation are all accelerating at the same time.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the REX Shares. To obtain a Fund’s prospectus and summary prospectus call 844-802-4004 or visit rexshares.com. Read prospectuses carefully before investing.

Investing in the Funds involves a high degree of risk. As with any investment, there is a risk that you could lose all or a portion of your investment in the Funds.

The Fund, Trust, Adviser, and Sub-Adviser are not affiliated with the Fund’s underlying securities.

Funds distributed by Foreside Fund Services, LLC, member FINRA.

On May 28, the Wall Street Journal reported that the Trump administration is in talks to take direct equity and debt positions in U.S. drone manufacturers, with the Pentagon’s Office of Strategic Capital leading the negotiations. The companies named as candidates are Neros Technologies, the Sequoia-backed FPV maker that has raised more than $120 million and whose Archer drone is already in the hands of deploying Marines; Performance Drone Works, which has raised close to $200 million and holds an Army reconnaissance-drone contract; and Unusual Machines, the publicly traded parts maker. The stated goal is to expand domestic production and drive the per-unit cost of an attack drone down toward roughly $5,000. The structure could combine loans and equity, which would mean Washington taking an ownership position, not just writing a purchase order.

The Office of Strategic Capital was built to fund companies considered critical to national-security supply chains, and the drone push is tied directly to the Drone Dominance Program, a “presidential priority” inside Trump’s $1.5 trillion FY2027 defense budget request that targets 300,000 affordable attack drones by the end of 2027. The reason the talks are happening is capacity. The U.S. built on the order of 100,000 small drones in 2025 against a Ukrainian production base running at roughly 4 million a year, and the domestic supply chain remains thin and dependent on Chinese inputs, with China controlling an estimated 98 percent of rare-earth magnet manufacturing.

This is a different kind of demand signal than the sector has been pricing. For two years the thesis rested on the Pentagon as the anchor customer. Equity stakes would make it the anchor capital provider as well, on the model of the government’s recent positions in Intel and MP Materials. Washington has effectively decided the domestic drone base is too strategically important to leave to the market’s funding timeline. The talks are pre-decisional and unsigned, and the Unusual Machines connection to Donald Trump Jr., a shareholder and advisory-board member, will draw congressional scrutiny if a deal closes. But the direction is unmistakable. The government wants the industrial base built, and it is now willing to put public capital directly on the line to get there.

Between May 23 and May 26, the Department of War released the expanded vendor list for “Gauntlet 2,” the Phase II qualifying event of the Drone Dominance Program. Forty-eight companies fielding roughly 78 unique small drone designs will compete, far above the 18 vendors originally planned. The fly-off runs June 8–20, 2026 at Camp Grayling, home of Michigan’s National All-Domain Warfighting Center. The list spans returning Gauntlet I winners and a deep bench of new entrants, including Neros, Auterion, Griffon Aerospace, XTEND, ModalAI, Teal, Draganfly, and AeroVironment.

The competition splits into two mission profiles: long-range strike at distances beyond 12 miles, and close-quarters work for urban, interior, and subterranean environments. Roughly ten vendors per profile are expected to advance out of the June event, and reported per-unit price ceilings run about $5,500 for the long-range designs and $4,500 for the close-quarters ones. Phase II carries at least $300 million in prototype delivery orders toward an initial tranche of 30,000 drones, one slice of the $1.1 billion, four-phase, 300,000-drone program structured under the Pentagon’s other-transaction authority.

Gauntlet 2 is the funnel through which dozens of small and mid-sized makers turn prototypes into production orders, and the shape of the field tells the story. A vendor pool that ballooned from 18 to 48 in a single phase is evidence the domestic supply base is broader and hungrier than the headline capacity numbers suggest. The price ceilings are the cost-asymmetry doctrine written into the contract terms. And the absence of the legacy primes from the airframe list is conspicuous. Boeing, Lockheed, and RTX are not on it. The small-drone insurgents own this competition, which is exactly why the government is now considering taking equity in them.

On May 28, Defense One detailed how the Pentagon intends to spend the roughly $50 billion in its FY27 request tied to autonomous and drone warfare, with deputy undersecretary James Mazol describing a strategy of “buying platforms en masse” by scaling systems that already work rather than financing new development from scratch. The number is staggering in context. The Defense Autonomous Warfare Group, the office at the center of the effort, spent $225.9 million in FY26. The FY27 request lands near $54.6 billion, more than 200 times the prior year, with about $1 billion in the base budget and roughly $53 billion routed through a five-year reconciliation pot. Secretary Pete Hegseth has separately signaled up to $74 billion in unmanned air and surface procurement across the request.

The policy framework is straining to keep up. At a May 20 hearing of the Senate Emerging Threats and Capabilities Subcommittee, Senators Joni Ernst and Elissa Slotkin pressed Under Secretary for Research and Engineering Emil Michael that AI-driven targeting fused with autonomous munitions is outpacing DoD Directive 3000.09, the 2023 rule requiring “appropriate levels of human judgment” over the use of force. The Autonomous Warfare Group operates as a software and orchestration pathfinder, embedded with private technology firms rather than structured as a traditional program office.

The magnitude is the story. A line item that goes from $226 million to more than $50 billion in a single budget cycle is not a normal procurement ramp. It is a national reprioritization, and the “scale what already works” philosophy tells you who captures it: makers with production lines and fielded systems, not research shops with slide decks. The 3000.09 debate is the regulatory variable sitting underneath all of it. The doctrine is being written in budget dollars faster than the rules governing autonomy can be rewritten to match, and that gap is where the next two years of policy fights will play out.

On May 27, U.S. Special Operations Command selected NASA’s Stennis Space Center on the Mississippi Gulf Coast as the site for a new Autonomous Warfare Proving Ground, a facility to integrate, test, and employ unmanned systems across air, sea, and ground domains. The effort executes SOCOM’s tasking under the Drone Dominance directive and the “Unleashing American Drone Dominance” executive order, with the command’s Joint Acquisition Task Force and SOFWERX running the program. The timeline is already set: a vendor collaboration event in mid-July, with a registration deadline of June 24, capability submissions from mid-September to mid-October, and a final pitch event at SOFWERX in Tampa.

A proving ground is different from a demonstration. It is persistent infrastructure built to put production-representative systems through integration and operational evaluation across domains on a continuous basis, rather than gathering vendors for a one-time showcase. Stennis extends the momentum from SOF Week earlier in the month and gives the special-operations community a permanent home for the all-domain autonomy work the Pentagon has been describing in doctrine for two years.

You do not stand up a permanent national test facility for a program you expect to wind down. The Stennis selection is a statement that autonomous systems have become a standing acquisition category with their own real estate, their own evaluation cadence, and their own front door for the vendor base. For the companies feeding the Drone Dominance pipeline, it is one more recurring access point. For the sector, it is one more piece of fixed infrastructure betting that the demand is structural rather than cyclical.

Two domestic moves this week showed the counter-drone market moving from authority to deployment. On May 26, the FCC’s Public Safety and Homeland Security Bureau announced that the Department of War had granted Conditional Approval to three more drone systems, Blueflite’s Cobalt 461, Verity AG’s Series 4 indoor system, and Air VEV’s 120C and 060C platforms, exempting them from Covered List restrictions through the end of 2026 and bringing the running allow-list to roughly ten systems. A day later, on May 27, the Texas Department of Public Safety unveiled the first state-level counter-UAS plan for the 2026 FIFA World Cup, protecting matches at AT&T Stadium in Dallas and NRG Stadium in Houston with a $3.2 million slice of the $250 million FY26 FEMA counter-UAS fund.

The Covered List flags communications gear judged an unacceptable national-security risk, and it is steadily pushing foreign hardware, principally DJI and other Chinese systems, out of the U.S. market while the conditional-approval pathway builds a vetted allow-list in its place. The Texas plan leans on RF monitoring, Remote ID, and non-kinetic mitigation, operating under the Safer Skies Act passed in the December 2025 NDAA, which gave state and local law enforcement the authority to detect and disable threatening drones. The first World Cup matches begin June 14. The same week, ParaZero secured full-scale production capacity for its DefendAir net-pod interceptors, sized for thousands of units annually, and Draganfly was selected by the Army’s DEVCOM research lab for a counter-UAS development contract.

The domestic counter-drone story has shifted from legislation to procurement. The Covered List is building a two-tier market in real time, vetted U.S. and allied hardware in, Chinese hardware out, and every batch of approvals decides who gets to keep selling into the country. The World Cup and the broader America250 security buildout are the largest near-term demand drivers, and the Texas deployment is the proof that the detect-and-defeat authority Congress granted in the NDAA is now turning into hardware orders at named venues with dates on the calendar.

Overnight on May 24, Russia launched roughly 600 drones and 90 missiles at Kyiv and the surrounding regions, the largest attack on the capital by number of locations struck in the full-scale war. Ukrainian air defenses shot down or jammed 549 drones and 55 missiles. At least four people were killed nationwide and around 100 injured, roughly 30 residential buildings were damaged or destroyed across every district of the city, and Russia fired its hypersonic Oreshnik missile for only the third time in the war. The barrage used the now-familiar mix of Shahed-type attack drones and decoys designed to saturate radars and drain interceptor stockpiles.

Ukraine answered within days. On May 27, Defense Minister Mykhailo Fedorov announced what he called a “logistics lockdown” of Russian forces, scaling the deep-strike campaign by increasing procurement funding for the most effective drone units and opening large competitive tenders. Over May 26 and 27, Ukrainian strikes hit the Taganrog airbase and its aircraft-repair plant, the Voronezh “Baltimore” bomber base, the Tuapse oil refinery, and the Black Sea Fleet’s naval-aviation headquarters in Sevastopol.

The backdrop is an escalating technology race: Ukrainian military intelligence reports Russia has begun serial production of jet-powered Geran-4 and Geran-5 drones, with capacity that could reach 500 jet drones a month and an ambition to make jets half the Shahed-type fleet, trading volume for speed and survivability against improving defenses.

The 600-drone night is the production story made vivid. Russia can now sustain in a single evening what would have been close to a month’s output two years ago, and it is climbing the technology curve toward faster, harder-to-intercept airframes. Ukraine’s response, funding its best units and running tenders to buy at scale, is the procurement playbook in miniature, and it points at the same conclusion U.S. planners keep arriving at: the side that produces and fields drones fastest wins the air-defense math. This is the demand signal the entire American build-out is responding to, and this week it got louder.

The week’s tape was driven almost entirely by one headline. Wednesday’s report that Washington might take equity stakes in the sector sent nearly every publicly traded drone name sharply higher, with the rally concentrated in the small-cap pure-plays most likely to be on the Office of Strategic Capital’s list.

Unusual Machines (UMAC) was the signature mover. The Journal named it among the companies the Pentagon is pursuing, and the stock surged more than 60 percent on May 28, closing near $29.60 and touching a fresh 52-week high of $32.00 intraday. The reaction sits on top of a Q1 print, reported earlier in May, of roughly $8.1 million in revenue, up about 296 percent year over year, alongside a recent Department of War order for 3,500 drone motors with a path to thousands more components in 2026. The conflict-of-interest angle around Donald Trump Jr.’s shareholding will draw scrutiny, but the near-term catalyst is simple: confirmation and terms of any actual funding arrangement.

AeroVironment (AVAV) rallied roughly 18 percent on the report and added a contract of its own, a $20 million, 39-month award from the Air Force Research Laboratory announced May 28 to advance ceramic and ceramic-matrix-composite materials for hypersonics and thermal protection at Wright-Patterson. The materials work is adjacent to the drone franchises rather than central to them. The Switchblade loitering munitions and the LOCUST counter-UAS line remain the core of the story, and the AV_Halo edge-autonomy expansion earlier this month lines the company up squarely with the capability layer the FY27 budget is now funding. Clear Street’s recent Buy initiation framed the bull case near a $293 price target.

Ondas Holdings (ONDS) was among the biggest beneficiaries of the rally, extending a run that began with its mid-May earnings, when it posted Q1 revenue of $50.1 million, roughly ten times the prior year, and raised full-year guidance to at least $390 million. With around $1.48 billion in cash and investments, Ondas has the balance sheet to keep acquiring against its platform-versus-product thesis. The open question is the quality of earnings, since much of the reported net income came from gains on securities rather than from operations, but the market spent this week pricing the platform narrative, not the footnotes.

Red Cat Holdings (RCAT) climbed double digits across May 27 and 28, recovering the ground it gave up to last week’s $225 million equity offering. The fresh operational item was confirmation that Red Cat completed flight testing of Palantir’s VNav visual-navigation software on the Black Widow, validating flight in GPS-denied conditions, the capability that separates contested-environment drones from commercial hardware. Red Cat also disclosed the acquisition of Quebec’s Quaze Technologies for autonomous wireless-charging technology, extending the platform beyond the airframe.

Kratos Defense (KTOS) rode the report to a roughly 14 percent single-day gain, closing near $65 with the stock up about 75 percent over the trailing year. Kratos did not announce a new standalone award this week, but as the maker of the Valkyrie collaborative-combat drone, carrying a Q1 book-to-bill of 1.6 to 1 on a roughly $2 billion backlog, it sits squarely in the set of names that would benefit if the Office of Strategic Capital widens its circle beyond the small FPV makers.

ZenaTech (ZENA) had the busiest small-cap news flow, gaining about 13 percent on May 28. The company launched ZenaWorx, a LiDAR-and-drone 3D progress-monitoring product aimed at the AI-data-center construction boom, opened a partner program for founder-led defense and AI companies, and kept pushing three ZenaDrone platforms through the cybersecurity phase of DoD Blue UAS certification. The ZenaDrone 2000 heavy-lift interceptor remains the counter-drone catalyst, with flight testing targeted for the third quarter.

The throughline this week is that the United States has decided its drone industrial base is too important to leave to the market’s timeline, and it is now putting public capital, public infrastructure, and tens of billions of budget dollars directly behind it.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the REX Shares. To obtain a Fund’s prospectus and summary prospectus call 844-802-4004 or visit rexshares.com. Read prospectuses carefully before investing.

Investing in the Funds involves a high degree of risk. As with any investment, there is a risk that you could lose all or a portion of your investment in the Funds.

The Fund, Trust, Adviser, and Sub-Adviser are not affiliated with the Fund’s underlying securities.

Funds distributed by Foreside Fund Services, LLC, member FINRA.

JIATF 401 awards Perennial Autonomy a $500 million counter-drone IDIQ just six days after the task force ran Project Flytrap 5.0 in Lithuania. Northrop Grumman wins a payload slot in the Pentagon’s Drone Dominance Program with a stated goal of arming more than 200,000 attack drones by 2027. Shield AI’s Hivemind autonomy stack gets wired into the new LUCAS low-cost strike drone for an Army swarm pilot. SOF Week packs the Tampa Convention Center with operators, integrators, and the densest concentration of small-UAS demonstrations the event has ever hosted. And Ukraine puts an exclamation point on the demand signal with the largest drone strike on Moscow in over a year. What investors need to know this week.

If last week was about XPONENTIAL and FAA doctrine, this week was about checks getting written. JIATF 401 inked a three-year, $500 million indefinite-delivery counter-drone contract with Perennial Autonomy on Tuesday, the largest counter-UAS procurement the task force has issued since standing up under the FY26 NDAA. The Department of War named Northrop Grumman a preferred payload provider in the $1 billion Drone Dominance Program, formalizing the prime contractor on-ramp into the small-UAS economy. The Pentagon then tapped Shield AI to integrate its Hivemind autonomy stack onto the new LUCAS low-cost strike drone, putting an AI pilot at the center of the Army’s swarm doctrine. SOF Week filled Tampa’s downtown convention floor with autonomous platforms across air, surface, and subsurface domains. And Ukrainian drones flew through Russian air defenses to hit Moscow at the heaviest tempo in over a year, with a Ukrainian strike on a Russian drone-pilot training camp later in the week killing 65 cadets. Here’s the breakdown.

On May 19, Joint Interagency Task Force 401 awarded California startup Perennial Autonomy a three-year, $500 million indefinite-delivery/indefinite-quantity contract to deliver AI-enabled counter-drone systems. The contract covers three platforms: the Merops interceptor, the Bumblebee autonomous quadcopter, and the Hornet midrange strike drone. Brigadier General Matt Ross, director of JIATF 401, framed the buy as part of a layered defense to deploy “low-cost, attritable air-to-air drone interceptors at all our facilities at home and abroad,” and called drones “the defining threat of our time.”

The Merops is a single-use interceptor that has been combat-proven against the Iranian-designed Shahed in Ukraine. Perennial says Merops has intercepted more than 4,000 Russian one-way attack drones since mid-2024. Unit cost is roughly $15,000 per Merops, less than half of the Shahed’s estimated $30,000 to $50,000 production cost. Bumblebee is the company’s autonomous quadcopter combat platform. Hornet is its midrange strike drone. The contract terminates either at three years or when JIATF 401 has obligated the full $500 million, whichever arrives first.

This is the largest single counter-UAS contract the task force has issued since it stood up. It also confirms the trajectory the directed-energy site selections telegraphed last week: counter-UAS procurement has moved past study contracts and pilot demonstrations into scaled production at named installations. Perennial’s combat-tested Merops fleet now slots in as the kinetic interceptor layer underneath AeroVironment’s LOCUST, Raytheon’s KuRFS-and-Coyote LIDS, and Anduril’s Lattice command-and-control architecture. The cost asymmetry holds. Fifteen thousand dollars to take out a forty-thousand-dollar Shahed is the math of cost-effective defense, and it is now contracted, funded, and on a delivery schedule.

On May 18, the Department of War named Northrop Grumman one of five preferred munitions providers for the Drone Dominance Program, the Pentagon’s roughly $1 billion initiative to field more than 200,000 low-cost one-way attack drones by 2027. Northrop is supplying the payloads, not the airframes. The company’s Common UAS Payload is a standardized fuze-and-effects module engineered for rapid integration across small unmanned aerial, maritime, and ground platforms.

The Common UAS Payload is designed for 360-degree lethality in extreme environments, using mature energetics and rugged electronics adapted from Northrop’s existing precision munitions catalog. The program structure separates airframe sourcing from payload sourcing for the first time at scale, allowing the Pentagon to pull Group 1 drones from a competing vendor pool (the “Gauntlet” phases that began with 12 vendors in February 2026, narrowing to five by the final round) and standardize the warhead and fuze interface across all of them.

This is a structural shift in how the Pentagon procures attritable munitions. Decoupling drone production from payload production lets the Department of War pull airframes from any compliant vendor, including new entrants, without re-engineering the effects package each time. It also gives a tier-one prime contractor a sustainable role in a market the small-drone insurgents have largely defined. Northrop, Lockheed, and the other primes have been searching for a credible way to plug into the low-cost UAS economy without competing on airframe price with FPV manufacturers. Common UAS Payload is the answer. Scale the munitions production these drones require, rather than chasing the airframe race to the bottom.

On May 19, the Office of the Under Secretary of Defense for Research and Engineering tapped Shield AI to integrate its Hivemind autonomy software onto the new Low-Cost Uncrewed Combat Attack System, or LUCAS. The deal puts Hivemind in the cockpit of a long-range strike drone the Pentagon is positioning as an American answer to the Shahed. An operational demonstration is scheduled for fall 2026.

Hivemind is Shield AI’s autonomy stack, the same software that flies the company’s V-BAT vertical-takeoff ISR drone and that ST Engineering signed up to integrate at the Singapore Airshow in February. On LUCAS, Hivemind serves as the AI pilot. A single operator supervises multiple platforms while the software handles navigation, coordination, and target prosecution. The fall demonstration is structured to validate scalable, single-operator-to-many-drones command at long range, the architectural milestone the Pentagon has been describing as a requirement of the Drone Dominance doctrine for two years.

LUCAS only works if the AI pilot is solved. Shield AI putting Hivemind into the airframe formalizes the swarming-strike doctrine that has been described in budget documents but rarely in named program contracts. It also clarifies the layering of the procurement architecture. Airframes come from the Drone Dominance Gauntlet vendor pool. Payloads come from Northrop and the four other preferred munitions providers. Autonomy software comes from Shield AI. The platform is becoming modular at the doctrinal level, which means the Pentagon can swap components without restarting the program of record. That is how scaled procurement actually gets to volume.

Special Operations Forces Week 2026 ran May 18–21 at the Tampa Convention Center, drawing roughly 19,000 attendees from USSOCOM, allied special operations commands, and the broadest cross-section of unmanned-systems exhibitors the event has ever hosted. Drones across air, surface, and subsurface domains were the defining product category on the floor.

USSOCOM and British robotic-vessel maker Kraken Technology Group demonstrated the K4 MANTA, an uncrewed surface and subsurface vessel now under evaluation by the special operations community for maritime ISR and interdiction. Anduril and Booz Allen Hamilton announced a joint offering combining Lattice with Booz Allen’s mission integration capabilities for SOF teams. Northrop Grumman showcased its AiON counter-drone command-and-control system. Red Cat Holdings ran live demonstrations of the Blue Ops Variant 7 USV with Kymeta-integrated satellite connectivity in Tampa Bay. And SOFWERX, the USSOCOM innovation lab, disclosed that it has now executed $503 million in purchase orders across 1,824 contracts and commercial agreements since 2023.

SOF Week has become the second-most-important fielding event in the U.S. drone calendar after XPONENTIAL, and the gap is closing. Most of the systems on the floor were production-ready hardware in final operational evaluation, not concept demos. A senior Pentagon acquisition official described “a golden age of private capital” reshaping the drone industrial base, with venture-funded autonomy companies now competing for the same contracts the legacy primes used to dominate. Capital, contracts, and field demonstrations are now co-located in one place by design. That is the procurement architecture functioning as intended.

Overnight on May 17, Ukraine launched its largest drone strike on Moscow since 2024. Russian air defenses claimed 81 drones shot down over the capital region and 556 destroyed across Russia overall. Debris fell on Sheremetyevo, Russia’s busiest airport, without disrupting operations. At least four people were killed and a dozen injured in the broader strike. Four days later, on May 21, a Ukrainian strike on a Russian drone-pilot training camp in occupied Snizhne, Donetsk Oblast, killed 65 cadets and an instructor.

Ukraine is now producing more than 4 million drones annually, with disclosed capacity to roughly double that figure under additional financing. The May 17 strike used a layered mix of long-range one-way attack drones designed to saturate Russian air-defense radars, force expensive interceptor expenditures, and reach hardened targets through volume rather than payload. The May 21 Snizhne strike was a counter-force operation. Ukraine is now killing Russian drone operators inside the schoolhouses where they are trained, removing trained personnel from the conflict at the bottleneck the Pentagon has openly identified as its own critical-path constraint.

The strategic message for U.S. procurement officials is unambiguous. The side that can produce and field drones at scale wins the air-defense math. Ukraine’s roughly 4 million annual production figure makes the U.S. domestic base, around 300,000 drones across all of 2025, look like a pilot program. Pentagon planners are explicit that Drone Dominance’s 200,000-by-2027 target is a floor. Perennial’s $500 million counter-drone IDIQ, Northrop’s payload selection, and the LUCAS-Hivemind integration all sit on top of a single insight: U.S. industrial capacity has to be measured in millions of drones per year for the doctrine to be credible. The Ukrainian production curve is the benchmark the U.S. base is being measured against, and the gap is large.

This week’s stock action reflected the procurement architecture’s lineup more than broader defense sentiment. Public contractors that captured named slots in this week’s announcements outperformed the tape, while equity-raise activity and integration announcements drove the rest.

Northrop Grumman (NOC) captured the most structural win of the week. The May 18 selection as preferred payload provider for the Drone Dominance Program plugs the company directly into the Pentagon’s stated goal of fielding 200,000 small attack drones by 2027. The Common UAS Payload positioning is a deliberately conservative play. Northrop is selling the standardized warhead and fuze interface that every airframe vendor in the Gauntlet pool will need, rather than competing with FPV insurgents on airframe price. That is the kind of recurring munitions revenue stream the primes have been chasing since the Replicator initiative launched in 2023. Northrop also showed its AiON counter-drone command-and-control system at SOF Week, deepening its presence in the C-UAS architecture that JIATF 401 is now formalizing.

Red Cat Holdings (RCAT) had the most operationally dense week of any small-cap drone name. The company priced and closed an upsized public equity offering of 23.94 million shares at $9.40, raising approximately $225 million in gross proceeds, with a 30-day option for up to 3.59 million additional shares. The capital raise sits on top of last week’s Japan Ground Self-Defense Force win for 173 Black Widow systems, the $9.5 million Army SRR purchase order in delivery for Q2 2026, and Clear Street’s Buy initiation at a $22 price target. At SOF Week, Red Cat ran live demonstrations of the Blue Ops Variant 7 uncrewed surface vessel with Kymeta-integrated satellite connectivity in Tampa Bay, advancing the maritime expansion thesis that Clear Street called out in its initiation. The stock closed May 20 at $8.94, just below the offering price, suggesting the market is digesting the dilution while pricing in the contract pipeline.

AeroVironment (AVAV) announced on May 19 the expansion of its AV_Halo platform with two new capabilities: INSTINCT and DETECT. The platform expansion targets faster, more resilient decision-making at the edge, the architectural problem behind every modern counter-UAS and ISR mission. The announcement landed alongside continuing integration of the Blue Halo acquisition and follows the $43 million Pentagon contract earlier this month for PANTHER phased-array antenna integration on SkyRange hypersonic test platforms. The Switchblade and LOCUST franchises remain the centerpieces of the AVAV narrative; the AV_Halo additions deepen the company’s edge-autonomy positioning at exactly the moment the Pentagon is buying that capability layer.

Ondas Holdings (ONDS) spent the week being recharacterized by the Street as a scaled defense-technology platform rather than a single-product drone company. A widely circulated May 18 retrospective cataloged the six acquisitions Ondas has completed in 2026: Sentrycs (counter-drone protection), 4M Defense (AI-enabled land intelligence with roughly $80 million in active tender activity), World View (stratospheric ISR via long-endurance Stratollites), Mistral (which unlocked U.S. defense prime contractor status, with $264 million in backlog and participation in a $982 million Army loitering munitions IDIQ), Omnisys (battlefield command-and-control software), and Roboteam (tactical unmanned ground vehicles). Pro forma 2026 revenue guidance now sits at roughly $390 million, against Q1 revenue of $50.1 million. The platform-versus-product reframing is the bull case, and the market is now pricing it.

JIATF 401 awarding Perennial Autonomy a $500 million counter-drone IDIQ to deliver Merops, Bumblebee, and Hornet at scale. Northrop Grumman winning a preferred payload slot in the Drone Dominance Program with a target of arming more than 200,000 small drones by 2027. Shield AI’s Hivemind getting wired into the LUCAS low-cost strike drone with a fall 2026 operational demonstration on the calendar. SOF Week filling the Tampa Convention floor with air, surface, and subsurface autonomous systems while SOFWERX disclosed $503 million in contracts placed since 2023. Ukraine launching the largest drone strike on Moscow in over a year and following it with a counter-force strike that killed 65 Russian drone operators in their training camp. Red Cat closing a $225 million public offering and demonstrating Blue Ops Variant 7 at SOF Week. AeroVironment expanding its AV_Halo platform with INSTINCT and DETECT. Ondas being recharacterized as a six-acquisition defense platform with $390 million in 2026 revenue guidance. This is a sector where the contracts, the production capacity, and the combat employment are all moving in the same direction at the same time.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the REX Shares. To obtain a Fund’s prospectus and summary prospectus call 844-802-4004 or visit rexshares.com. Read prospectuses carefully before investing.

Investing in the Funds involves a high degree of risk. As with any investment, there is a risk that you could lose all or a portion of your investment in the Funds.

The Fund, Trust, Adviser, and Sub-Adviser are not affiliated with the Fund’s underlying securities.

Funds distributed by Foreside Fund Services, LLC, member FINRA.

XPONENTIAL packs Huntington Place in Detroit with a sold-out show floor and the first MDEX co-location, signaling the industry’s shift from concept to production. The FAA’s Air Traffic COO tells the room that drones are aircraft and operators are pilots, a doctrinal pivot a decade in the making. Red Cat Holdings wins a 173-unit Black Widow contract with Japan’s Ground Self-Defense Force and a fresh $9.5 million Army purchase order in the same week. Joint Interagency Task Force 401 stamps a new standardized testing framework onto Project Flytrap 5.0 while five U.S. bases are selected to host the directed-energy counter-drone pilot. And the Pentagon’s Defense Autonomous Working Group is asking for a 24,070% budget increase. What investors need to know this week.

The drone sector spent the week in Detroit, and Detroit returned the favor. XPONENTIAL 2026 sold out its floor space at Huntington Place with the largest defense programming track in the show’s history, anchored by the first MDEX co-location and a Pentagon fireside featuring the Assistant Secretary of War for Industrial Base Policy. Outside the convention hall, the news flow was just as dense: Red Cat closed a major Japan deal, the FAA reframed how it talks about drones in front of the entire industry, JIATF 401 executed its first standardized multinational counter-UAS exercise, and the Pentagon’s autonomous-warfare office submitted a budget request that would grow its line item more than 240 times in a single year. Five U.S. military installations were named as the first sites for directed-energy counter-drone operations under the FY26 NDAA. And the U.S. and Ukraine moved publicly toward a formal drone defense partnership. Here’s the breakdown.

AUVSI’s XPONENTIAL 2026 ran May 11–14 at Huntington Place in Detroit, drawing thousands of operators, manufacturers, and government procurement officials. The show floor was sold out. Michigan Governor Gretchen Whitmer delivered the opening keynote, framing Michigan’s manufacturing base, and a state-deployed $42 million in drone-related investment during 2025, as a strategic asset for U.S. defense industrial policy. The MDEX defense expo co-located with XPONENTIAL for the first time, pulling the southeast Michigan defense cluster directly into the industry’s biggest annual gathering.

The programming reflected the industry’s center of gravity. The Tuesday morning keynote slot went to a Pentagon fireside with Assistant Secretary of War for Industrial Base Policy Michael Cadenazzi, followed by an FAA fireside featuring Air Traffic COO and the senior policy team. Announcements came in waves. ZenaTech showcased its full ZenaDrone lineup and held a Drone as a Service keynote pitched at defense ISR, perimeter security, and counter-UAS use cases. Detroit-based AeroNet debuted its EdgeNode V2X tactical deconfliction platform for shared airspace. SiLC Technologies introduced an ultra-long-range 4D vision system targeting perimeter security and counter-UAS applications. Gremsy launched a new payload integration program. TECO debuted high-payload UAV propulsion systems and robotic joint modules for the North American market.

The structural read on XPONENTIAL 2026 is that the show has stopped being a commercial drone trade fair with a defense sidebar and has become a defense industrial event with a commercial sidebar. Procurement officers are walking the floor. Pentagon principals are on the keynote stage. The exhibit hall layout itself has been reorganized around dual-use and defense capability clusters. This is what the build-out of a domestic autonomous systems industrial base looks like in real time.

The most consequential policy moment of the week came not in a press release but in a fireside panel. Speaking at XPONENTIAL on Tuesday, the FAA’s Air Traffic Organization Chief Operating Officer told the room: drones are aircraft, operators are pilots. The framing matters. For two decades the commercial drone industry has been arguing that uncrewed systems belong in the National Airspace System on equal terms with crewed aviation, and for two decades the FAA’s organizational posture has treated drones as a peripheral category. That posture is now officially being inverted.

The shift carries operational weight. The FAA reorganized its drone integration function in January 2026, expanded the eIPP (electronic Integration Pilot Program) participant pool in March, and signed a counter-UAS coordination agreement with the Pentagon in April following the El Paso airspace closures. Last week’s announcement of the Section 2209 Notice of Proposed Rulemaking — a decade in the making — sits on top of all of that. The agency’s public language has now caught up to its internal reorganization.

For the industry, this means BVLOS approvals, airspace integration, and counter-UAS coordination are all moving from exception-based handling to a regulated norm. For investors, it means the regulatory overhang that has constrained the domestic commercial drone market for ten years is finally being lifted, just as the Pentagon’s procurement pipeline opens up underneath it. The two moves are not coincidental. The administrative state is aligning behind a single thesis: the United States needs scaled domestic drone capability, and the rules need to match the strategy.

Red Cat Holdings had the cleanest stock-and-fundamentals week of any name in the drone universe. On May 8, Teal Drones — Red Cat’s wholly-owned subsidiary — received a $9.5 million purchase order from the U.S. Army under the Short-Range Reconnaissance Program of Record, with delivery scheduled for Q2 2026. On May 11, Red Cat disclosed a contract to supply 173 Black Widow small, unmanned aircraft systems to Japan’s Ground Self-Defense Force, awarded through a competitive tender run by Japan’s Acquisition, Technology & Logistics Agency under the country’s FY26 defense budget. The Japan deal will be fulfilled through Japanese partners HAMA K.K. and ITOCHU Aviation and may expand into licensed local manufacturing. On the same day, Clear Street initiated coverage on RCAT with a Buy rating and a $22 price target.

The Japan win is structurally significant. Black Widow is now the small UAS of choice for the U.S. Army’s SRR program, the Australian Army, and Japan’s Ground Self-Defense Force: three of the most demanding small-drone buyers among U.S. allies. Each system delivered to Japan includes two Black Widow aircraft, a WEB ground control station, training, and spares, with the contract structure leaving room for follow-on procurement and in-country production.

The stock responded. RCAT closed up 10.93% on May 11 on the news, with Clear Street’s price target implying meaningful additional upside even after the move. The Q1 2026 print was messy: $15.47 million in revenue with a $26.55 million net loss and EBITDA losses near $27 million, but the balance sheet remains strong at roughly $131.9 million in cash, and the contract pipeline is now visibly accelerating. Red Cat is being valued on order flow, not earnings, and the order flow is delivering.

The Joint Interagency Task Force 401 — the Pentagon’s inter-service counter-drone authority created under the FY26 NDAA — had a working week. On May 12, the task force announced that its standardized testing and evaluation framework had been applied for the first time at Project Flytrap 5.0, a multinational counter-UAS exercise led by the Army’s V Corps with the United Kingdom and Australia. The exercise evaluated more than 20 counter-UAS systems across performance, interoperability, and tactical employment in operational environments. Data collected under the JIATF 401 framework is now available to all services and federal agencies participating in the task force.

JIATF 401 also confirmed the five U.S. installations selected for the directed-energy counter-UAS pilot program authorized in the FY26 NDAA: Fort Huachuca in Arizona, Fort Bliss in Texas, Naval Base Kitsap in Washington, Grand Forks Air Force Base in North Dakota, and Whiteman Air Force Base in Missouri. Two of those sites, Huachuca and Bliss, sit on the southern border, where Customs and Border Protection has been operating anti-drone lasers under a Pentagon authorization that briefly closed El Paso airspace twice in February. The April FAA–Pentagon safety agreement cleared the operational path. Deployment plans will be finalized within 180 days, with operations commencing this year.

This is the build-out of a doctrinally coherent U.S. counter-drone posture, and it is happening on multiple tracks at once. AeroVironment’s LOCUST counter-UAS system completed a landmark demonstration with JIATF 401 and the FAA at White Sands on May 6. Anduril’s Lattice command-and-control suite remains the architecture layer connecting the sensors and effectors. Raytheon’s KuRFS-and-Coyote LIDS system continues to scale under a $237 million Army contract. JIATF 401 sits on top of all of it, standardizing the procurement framework. The $20 billion-plus counter-UAS market is no longer a forecast. It is a funded program of record with named installations.

Buried inside the FY27 budget request is the most aggressive single-line increase in modern Pentagon history. The Defense Autonomous Working Group, the office that absorbed the Biden-era Replicator initiative and is now the lead Pentagon entity for drone warfare, is asking for $54.6 billion in research and development authority in FY27, up from $225.9 million in FY26. That is a 24,070% increase. Of the $54.6 billion, $1 billion sits in the base budget and the remainder runs through reconciliation. The Office of Strategic Capital, which provides debt financing for critical technology manufacturing, is requesting a parallel $20.2 billion, a 1,247% increase from FY26.

The DAWG ask reflects what Pentagon leadership now believes the autonomous-warfare problem actually costs. The line item covers drone procurement, counter-drone systems, autonomy software, integration testing, and collaborative-autonomy R&D across services. It includes funding for DARPA programs like Materials for Physical Compute in Untethered Robotics and Decentralized Artificial Intelligence through Controlled Emergence, both designed to scale the number of robots a single human operator can effectively command. SOUTHCOM stood up its own Autonomous Warfare Command this month to handle theater-level fielding.

Two things are true at the same time. First, this is a procurement environment the U.S. drone industry has not seen since the Cold War, in scale or in policy urgency. Second, the bottleneck is no longer dollars. It is doctrine, trained personnel, and domestic supply chain. As General David Petraeus and Isaac Flanagan noted in a recent commentary, each legacy Predator combat air patrol required about 150 personnel. The autonomous future requires fewer operators per platform, but those operators need to exist, and the platforms they will operate need to be built in factories that do not yet exist at scale. Capital is no longer the constraint. Capacity is.

American and Ukrainian officials are openly drafting a defense partnership that would integrate Ukraine’s battlefield drone technology with U.S. manufacturing and military programs. The Pentagon has formally invited Ukrainian companies to participate in the $1.1 billion Drone Dominance initiative, which is identifying drones for U.S. military contracts. The CBS News reporting this week made the previously-implicit collaboration explicit.

The asymmetry matters. One Ukrainian manufacturer alone plans to produce more than 3 million low-cost first-person-view military drones in 2026. The United States built roughly 300,000 drones in all of 2025. Ukraine has signed drone defense agreements with Saudi Arabia, Qatar, and the UAE in the past two months, with about twenty more countries at various stages of negotiation. Sine Engineering’s GPS-denied navigation technology, already proven against Russian jamming, recently received a multi-million-dollar investment from the U.S.-Ukraine Reconstruction Investment Fund. In March, General Cherry, one of Ukraine’s largest drone manufacturers, signed a U.S. production deal with Wilcox Industries.

What is happening is a transatlantic transfer of combat-tested doctrine and unit economics into a U.S. industrial base that needs both. Ukraine has solved the problem of producing tens of millions of cheap, lethal, jam-resistant drones at scale. The United States is the only buyer with the capital to absorb that production model at the volume Pentagon planners are now describing. The Drone Dominance Program is the institutional bridge. Expect more bilateral and trilateral announcements through the back half of 2026.

This week’s stock action tracked the news flow with unusual fidelity, with Red Cat leading the tape and several names benefiting from XPONENTIAL programming and counter-UAS contract momentum.

Red Cat Holdings (RCAT) had the breakout week. The Japan Ground Self-Defense Force win for 173 Black Widow systems pushed the stock up 10.93% on May 11. Clear Street initiated coverage with a Buy rating and a $22 price target, citing NDAA-compliant drones and the Blue Ops maritime expansion as share-gain drivers in ISR. The $9.5 million U.S. Army SRR purchase order announced May 8 will deliver in Q2 2026, providing near-term revenue visibility. Q1 2026 numbers were soft on the bottom line, but the balance sheet, with roughly $131.9 million in cash, and the order pipeline give RCAT the runway to scale. The stock is now being valued on contracts, not earnings.

AeroVironment (AVAV) had a quieter week on the tape but a meaningful operational one. The company’s LOCUST counter-UAS system completed a landmark demonstration with JIATF 401 and the FAA at White Sands on May 6, a critical step toward the directed-energy pilot program now being stood up at five U.S. installations. The Switchblade franchise remains the centerpiece of the small-UAS loitering-munition segment, with the broader BlueHalo integration still working through the margin compression that has weighed on the multiple. The Street is still digesting the $1.7 billion Space Force contract loss from last week, but the counter-UAS franchise is now firmly aligned with the JIATF 401 procurement architecture.

Kratos Defense (KTOS) continues to print. The Q1 2026 results released May 6 showed revenue of $371 million, up 22.6% year over year with 15.8% organic growth, on a consolidated book-to-bill ratio of 1.6 to 1. Unmanned Systems segment organic growth came in at 30.9%. Management raised full-year 2026 guidance to $1.700–$1.760 billion in revenue and $170–$176 million in adjusted EBITDA, with consolidated bookings of $1.715 billion over the trailing twelve months. The XQ-58A Valkyrie remains a formal Program of Record. The Kratos thesis is unchanged: scaled, attritable, jet-powered autonomy at production cost.

Ondas Holdings (ONDS) delivered a landmark quarter, reporting Q1 2026 revenue of $50.1 million: a 1,065% increase year-over-year and 66% above Q4 2025, blowing past the top end of management’s own guidance by 25%. To put that in perspective, Q1 revenue alone nearly matched everything the company generated in all of 2025. Gross margins expanded meaningfully to 49%, up from 35% a year ago, and the company’s product divisions achieved adjusted EBITDA profitability six months ahead of schedule. Perhaps most telling: pro forma backlog surged from $68.3 million at the end of 2025 to $457 million in a single quarter, reflecting a dramatic acceleration in order activity driven by defense and autonomous systems demand. On the strength of these results, Ondas raised its full-year 2026 revenue target to at least $390 million, representing approximately 670% year-over-year growth. The market responded emphatically: the stock surged 23% on earnings day to approximately $10.94, finishing the week up roughly 21% from its Friday May 8th close of $9.06. A particularly meaningful move given that the stock had sold off nearly 14% in the two weeks heading into the print. The earnings essentially snapped a short-term downtrend and re-rated the stock in a single session. Roth Capital maintained its Buy rating and $25 price target following the quarter, implying approximately 130% upside from current levels.

ZenaTech (ZENA) brought its largest defense-focused presence to date at XPONENTIAL with its full drone lineup and a Drone as a Service keynote pitched at ISR, perimeter security, and counter-UAS deployments. Market reaction was muted on the day, but the company’s positioning toward AI autonomy and integration pathways aligns with the procurement direction at JIATF 401 and DAWG.

XPONENTIAL 2026 selling out its Detroit show floor with the first MDEX co-location and a Pentagon keynote anchoring the program. The FAA’s Air Traffic COO formally telling the industry that drones are aircraft. Red Cat winning 173 Black Widow systems for Japan’s Ground Self-Defense Force, a $9.5 million Army SRR purchase order, and a Clear Street Buy initiation with a $22 price target — all in the same week. Joint Interagency Task Force 401 applying its new standardized counter-UAS testing framework at Project Flytrap 5.0 with U.S., U.K., and Australian forces. Five U.S. installations named for the directed-energy counter-drone pilot program. AeroVironment’s LOCUST completing a landmark demonstration at White Sands. The Pentagon’s Defense Autonomous Working Group asking Congress for a 24,070% budget increase to $54.6 billion. Kratos posting 22.6% revenue growth and a 1.6 book-to-bill. Ondas raising 2026 guidance 25%. The United States and Ukraine moving publicly toward a formal drone defense partnership. This is a sector where the regulatory rails, the procurement budgets, and the export contracts are now lining up in the same direction at the same time.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the REX Shares. To obtain a Fund’s prospectus and summary prospectus call 844-802-4004 or visit rexshares.com. Read prospectuses carefully before investing.

Investing in the Funds involves a high degree of risk. As with any investment, there is a risk that you could lose all or a portion of your investment in the Funds.

The Fund, Trust, Adviser, and Sub-Adviser are not affiliated with the Fund’s underlying securities.

Funds distributed by Foreside Fund Services, LLC, member FINRA.