F-1/A: Liberty Defense Amends IPO Filing Amid Mounting Losses

Liberty Defense Holdings, an AI-based security technology firm, filed an amended F-1 registration statement for its U.S. IPO, revealing increased losses and a declining cash position for 2025.

Summary

• Liberty Defense Holdings, Ltd. is pursuing an initial public offering in the United States, offering up to 3,888,889 common shares and pre-funded warrants to purchase an equal number of common shares.
• The estimated initial public offering price is between US$4.00 and US$5.00 per Common Share, with a midpoint of US$4.50.
• The company has applied to list its Common Shares on the Nasdaq Capital Market under the symbol DETX; approval from Nasdaq and the TSX Venture Exchange is a condition for the offering.
• A 1-for-45 share consolidation was effected on March 13, 2026, to meet Nasdaq's minimum bid price requirement of US$4.00 per share.
• Preliminary estimates for the year ended December 31, 2025, project a net loss between US$12.8 million and US$14.5 million, a significant increase from US$8.8 million in 2024.
• Total operating expenses are estimated to rise to between US$11.5 million and US$12.0 million in 2025, up from US$5.8 million in 2024.
• Cash is expected to decrease to between US$0.3 million and US$0.4 million by December 31, 2025, down from US$1.2 million at the end of 2024.
• Total revenue for 2025 is estimated to be between US$1.76 million and US$2.0 million, a decrease from US$2.4 million in 2024.
• The company reported a working capital deficiency of approximately US$4.5 million as of September 30, 2025.
• Net proceeds from the offering are estimated at US$14.7 million (or US$17.1 million if the over-allotment option is fully exercised), intended for working capital, commercialization of the HD-AIT Upgrade Kit, HEXWAVE business development, and engineering efforts.
• The HEXWAVE system generated US$0.91 million in revenue for the nine months ended September 30, 2025, and US$1.01 million for the year ended December 31, 2024.
• The HD-AIT Upgrade Kit is in the product development and TSA certification phase, with initial commercial sales anticipated in 2026, targeting a US$125 million market opportunity from TSA upgrades.
• As of September 30, 2025, the company had a HEXWAVE order backlog of approximately US$1.45 million.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with caution due to significant financial deterioration in preliminary 2025 results, including increased losses and decreased cash, alongside ongoing liquidity concerns and material weaknesses in internal controls, despite the potential for future growth from new products and the IPO.

Positives

• The initial public offering aims to raise substantial capital, with estimated net proceeds of up to US$17.1 million, which is crucial for funding operations and growth initiatives.
• The application for Nasdaq listing could enhance liquidity and attract broader investor interest, including institutional investors.
• The HEXWAVE system is in early commercial deployment, generating US$0.91 million in revenue for the nine months ended September 30, 2025, and has a backlog of US$1.45 million.
• The HD-AIT Upgrade Kit targets a significant market opportunity of approximately US$125 million from TSA upgrades alone and is the only licensed technology from PNNL for this purpose.
• HEXWAVE offers superior detection of both metallic and non-metallic threats using AI and 3D imaging, providing high throughput (up to 700 people per hour) and reducing false alarms compared to legacy systems.
• The HEXWAVE system's mobility and flexibility allow for versatile indoor and outdoor deployment, supporting a layered security approach.
• The company has established strategic global partnerships with several industry-leading distributors, including Rapiscan and Viken, to expand market reach.
• An experienced management team with deep expertise in the security industry and millimeter-wave applications leads the company.
• The company benefits from a self-reinforcing adoption cycle where increased deployments generate more data, leading to improved AI detection accuracy and further customer attraction.
• HEXWAVE has received FCC certification in both the U.S. and Canada, facilitating market entry.

Negatives

• The company has a history of recurring losses and negative operating cash flows, which raises substantial doubt about its ability to continue as a going concern.
• Preliminary estimates for the year ended December 31, 2025, show a significant increase in net loss (US$12.8M-US$14.5M) and operating expenses (US$11.5M-US$12.0M), while cash balances are projected to decline sharply.
• Total revenue is expected to decrease in 2025 (US$1.76M-US$2.0M) compared to 2024 (US$2.4M), indicating a challenging sales environment.
• New investors in the offering will experience immediate and substantial dilution of US$2.30 per Common Share.
• The HD-AIT Upgrade Kit remains in the product development and TSA certification phase, with initial commercial sales contingent on successful completion in 2026.
• Delays have occurred in TSA contract revenue projects and additional contract line items planned for 2025 and 2026, impacting revenue recognition.
• The company is dependent on a single-source supplier, Analog Devices Inc. (ADI), for safety-critical HEXWAVE components, accounting for approximately 22% of cost of goods sold, without a long-term supply agreement.
• Competing security interests have been granted over substantially all assets of Liberty Defense Technologies, Inc. (a wholly-owned subsidiary) to both Parabilis and Viken Detection Corp., creating a risk of default and adverse effects on liquidity.
• Management estimates that current capital resources, even with IPO proceeds, will only fund operations through approximately December 31, 2026, and this runway would be shortened by 6-9 months if US$4.1 million is used to repay Parabilis and Viken debt.
• The company's interim financial statements for the three and nine months ended September 30, 2025, were amended and restated due to identified errors, suggesting weaknesses in internal control over financial reporting.

Risks

• The company is an early-stage entity with a limited operating history, making its prospects speculative.
• A history of losses and negative operating cash flows raises substantial doubt about the company's ability to continue as a going concern.
• There is no assurance that the company will achieve or maintain profitability in the future.
• Milestones may not be achieved on the expected timeframe or at all, impairing the business plan.
• Preliminary estimates of 2025 results are subject to change and may differ materially from final audited results.
• Material weaknesses in internal control over financial reporting have been identified, and failure to remediate them could lead to inaccurate financial reporting.
• A significant portion of the business depends on sales to government agencies, which are subject to challenges like changes in fiscal policies, delays, and legal disputes (e.g., the TSA mandate challenge).
• Future revenue and profits are largely dependent on increasing HEXWAVE production and reducing costs, which may take several years and significant resources.
• The HD-AIT Upgrade Kit may not achieve TSA certification within the expected timeline or at all, delaying commercialization and expected revenue.
• The addressable markets for HEXWAVE and HD-AIT Upgrade Kit may be materially smaller than current estimates.
• Reliance on a limited number of products (HEXWAVE, HD-AIT Upgrade Kit) subjects the company to greater risk from changes in customer preferences.
• Rapid technological change could result in product obsolescence or short product life cycles.
• The weapons detection technology market may fail to grow or grow more slowly than anticipated.
• Product failures or perceived failures to detect threats could result in injury or loss of life, harming brand and reputation.
• Customers may be unable to implement products successfully, or the company may fail to provide effective support and training.
• Reliance on certain license agreements (MIT, Battelle) for key technology, which contain termination and other provisions that could materially affect the business.
• Dependence on a limited number of third parties for manufacturing, shipping, logistics, marketing, and sales.
• Reliance on a single-source supplier (Analog Devices Inc.) for safety-critical HEXWAVE components poses supply chain risks.
• Loss of key management personnel could materially adversely affect the business.
• Growth may strain management and operational resources.
• Future acquisitions or investments could divert management attention, fail to meet expectations, or dilute shareholders.
• Diverting resources to brand development may adversely affect financial condition without guaranteed returns.
• Insurance policies may be inadequate to fully protect against material judgments and expenses, including cybersecurity risks and natural disasters.
• Internal computer systems are vulnerable to damage, failure, and cyber-attacks, which could disrupt operations and compromise data.
• A decline in the general level of security threats or the perception thereof could harm the business.
• Breaches of security could adversely affect brand reputation and lead to litigation.
• Utilization of AI could expose the company to liability due to flaws, bias, intellectual property issues, or evolving regulations.
• Low barriers to entry and high competition in the security industry could impact contract acquisition and future revenues.
• International business expansion faces risks including legal uncertainty, tariffs, compliance with foreign laws, geopolitical events, and currency fluctuations.
• Adverse worldwide economic conditions (inflation, interest rates, recession) could negatively impact customer spending.
• Investigations, audits, claims, disputes, enforcement actions, litigation, or other legal proceedings could result in large damage awards or penalties.
• Environmental matters, including compliance and remediation efforts, could have a material adverse effect.
• Protecting and defending against intellectual property claims may be costly and time-consuming.
• Substantial capital requirements and the risk of failing to raise additional capital on favorable terms.
• Issuance of debt could impair the ability to obtain additional financing.
• Dependence on the Parabilis Credit Facilities, which are short-term, contain restrictive covenants, and include lender remedies.
• Competing security interests granted in substantially all assets of Liberty Defense Technologies, Inc. to Parabilis and Viken Detection Corp. could lead to default or adverse effects on liquidity.
• No history of dividends; capital appreciation is the sole source of gain for shareholders.
• May be required to divest assets if sufficient capital is not available.
• Liquidity risk due to the slowdown of the global economy.
• Immediate and substantial dilution for new investors purchasing securities in this offering.
• No liquid public market for Common Shares in the United States prior to this offering, and future liquidity is uncertain.
• The liquidity of Common Shares may decrease as a result of the 1-for-45 Share Consolidation.
• Management will have broad discretion over the use of offering proceeds, which may not be used effectively.
• Future financing needs may dilute existing share capital.
• No operating experience as a publicly traded company in the United States, leading to increased costs and management strain.
• Risk of not receiving requisite approvals from Nasdaq or the TSXV, or delisting if continued listing requirements are not met.
• No public market for the Pre-Funded Warrants, limiting their liquidity.
• The company may not receive additional funds upon the exercise of Pre-Funded Warrants due to cashless exercise options.
• Significant holders of Pre-Funded Warrants may be limited in their ability to exercise due to a 9.99% ownership cap.
• Common Shares have experienced and may continue to experience extreme share price volatility unrelated to operating performance.
• Trading on different markets (TSXV, OTCQB, FSE, Nasdaq) may result in price variations and arbitrage activity.
• Selling a substantial number of securities in this offering could cause the price of Common Shares to decline.
• Inability to satisfy Sarbanes-Oxley requirements or ineffective internal controls over financial reporting could question financial statement reliability.
• As an emerging growth company, reliance on reduced reporting requirements may make securities less attractive to some investors.
• As a foreign private issuer, following home country corporate governance practices may afford less protection to shareholders than U.S. domestic issuers.

Future Outlook

The company anticipates initial commercial sales of its HD-AIT Upgrade Kit in 2026, contingent on successful TSA certification, and plans to expand HEXWAVE's market rollout through commercial team expansion and channel partnerships. Management expects to fulfill the current HEXWAVE backlog by mid-2026 and aims for unit cost reductions and improved gross margins as production scales. While the company projects continued investment in R&D for both product lines, it also expects to incur significant operating losses in the foreseeable future. The current capital, supplemented by IPO proceeds, is estimated to fund operations only through late 2026, with a shorter runway if debt obligations are repaid, necessitating additional financing earlier than anticipated. The company believes the urban security screening market will continue to grow, presenting opportunities for its advanced technologies.

Management Comments

• Our mission is protecting communities and preserving peace of mind through superior security detection solutions, while simultaneously increasing ease of travel and convenience for security at major checkpoints.
• We believe HEXWAVE can empower gathering spaces to address the chronic epidemic of mass shootings and terrorist attacks, as well as emerging risks such as 3D printed weapons, in a cost-effective manner while improving the visitor experience.
• We believe that the increasing frequency and severity of violent incidents in public venues is prompting both businesses and governments to adopt more proactive and scalable security screening solutions.
• We believe that we are well-positioned to become a market leader in the rapidly growing market for next-generation urban security screening technologies.
• We believe that our HD-AIT Upgrade Kit is very well positioned to fill most or all of this demand [TSA upgrades], representing an opportunity for approximately US$125 million in revenue over the life of the upgrades...
• We believe that our collective expertise coupled with the following competitive strengths will allow us to establish a leadership position in next-generation security screening and expand our market opportunity.
• We believe that real-world screening operations based on our products detect more actual weapon threats with fewer false alarms than similar screening operations based on old walk-through metal detectors.
• We believe that as we acquire more customers and deploy more of our products, we gather more digital data that helps us improve the detection accuracy and performance of our systems.
• We believe the world will continue to focus on the safety and security of people in the places where they gather.
• Management also recognizes that current capital market conditions directly affect our liquidity and working capital position.
• We remain committed to overcoming these challenges and have taken proactive measures to mitigate these challenges and position ourselves for growth.
• We believe that investment in our security screening products will contribute to long-term revenue growth, but it may adversely affect our near-term profitability.

Industry Context

The security screening market is projected to grow from US$11 billion to US$22.4 billion by 2036, driven by the increasing need for effective solutions against evolving threats like 3D-printed weapons and mass shootings. Legacy metal detectors are proving inadequate due to false alarms and inability to detect non-metallic threats. Liberty Defense's AI-based millimeter wave technology, including HEXWAVE and the HD-AIT Upgrade Kit, positions it within the next-generation security screening segment, which aims to provide contactless, high-throughput, and accurate detection. The U.S. Transportation Security Administration's (TSA) 'Screening at Speed' program, with its focus on upgrading over 1,000 body scanners, highlights a significant government-driven market opportunity for advanced imaging technologies. The industry is highly competitive, with established players like Leidos and emerging companies such as Evolv Technologies and Xtract One Technologies also developing advanced screening solutions. Geopolitical instability and economic conditions are noted as factors influencing security spending and supply chains.

Comparison to Industry Standards

• HEXWAVE's AI-based millimeter wave (MMW) and 3D imaging technology offers superior detection of both metallic and non-metallic threats (e.g., liquid, plastic, powder explosives, 3D printed guns) compared to legacy metal detectors, which are limited to metallic threats and prone to false alarms.
• HEXWAVE provides rapid, automated, contactless walkthrough screening with a throughput of up to 700 people per hour, which is up to twice as fast as older screening processes, addressing the inefficiency and long wait times associated with traditional methods.
• The HD-AIT Upgrade Kit is designed to enhance existing TSA AIT systems by scanning over a wider range of frequencies (10 to 40 GHz) compared to the Leidos Wideband System (20 to 40 GHz), which is expected to result in improved MMW image details, better threat detection, lower false alarm rates, and less need for passengers to remove clothing.
• The HD-AIT Upgrade Kit fully functions with all TSA's selected Open Architecture third-party vendor software, aligning with TSA's key priority for modularity and enhanced security effectiveness, a capability whose level of support in the competing Leidos Wideband System is unknown.
• StockSavvy.ai notes that while the company highlights its technological advantages, the competitive landscape includes established players like Leidos with existing infrastructure and larger resources, which could pose challenges in market penetration and scaling, particularly in government contracts where incumbent relationships are strong.

Management Changes

Corporate Governance

Legal Proceedings

• Not currently engaged in any litigation or criminal proceedings.
• A group of municipalities and airports challenged the 2023 TSA mandate (City of Billings, et al. v. Transportation Security Administration et al.), which required random physical screenings of aviation workers. In August 2025, the U.S. Court of Appeals for the D.C. Circuit found that the TSA failed to comply with notice and comment requirements. The outcome of this challenge is uncertain and could adversely affect the company's market opportunity in U.S. aviation worker screening.

Related Party Transactions

• Daryl Rebeck, former Executive Chairman, participated in a non-brokered private placement on June 8, 2023, purchasing 1,111 units for C$100,000.
• Since January 1, 2023, the company received approximately US$787,908 in unsecured, non-interest-bearing working capital loans from Jay Adelaar (Senior Vice President of Capital Markets), Nicole Ridgedale (spouse of former Board chair Daryl Rebeck), and Jennifer Frain (spouse of CEO William Frain).
• As of September 30, 2025, there was no outstanding balance on these related party working capital loans.
• Compensation of key management personnel (executive management team and Board of Directors) includes salaries, stock-based compensation, and consulting fees. As of September 30, 2025, US$197,021 was payable to key management personnel.

Stakeholder Impact

• **Shareholders:** Face significant dilution from the IPO and rely solely on capital appreciation for returns, as no dividends are anticipated. Subject to risks of share price volatility and potential delisting from Nasdaq. Corporate governance practices, as a foreign private issuer, may offer less protection than for U.S. domestic issuers.
• **Employees:** Continued investment in R&D and commercialization efforts may lead to job growth and opportunities through equity incentive plans. However, financial constraints could lead to furloughs or staffing reductions.
• **Customers (Urban Security, Aviation):** Stand to benefit from advanced AI-based contactless security solutions (HEXWAVE, HD-AIT Upgrade Kit) offering enhanced threat detection, increased throughput, and improved visitor experience. Potential for cost savings due to reduced staffing needs. Delays in TSA certification could impact the availability of the HD-AIT Upgrade Kit.
• **Suppliers:** The company's dependence on a single-source supplier (Analog Devices Inc.) for critical HEXWAVE components creates supply chain risk, but also potential for increased orders as production scales.
• **Creditors (Parabilis, Viken):** The existence of competing security interests on the assets of Liberty Defense Technologies, Inc. (a wholly-owned subsidiary) creates uncertainty regarding claim priority and potential for default, impacting their ability to recover funds. The company's ability to repay debt is highly dependent on successful capital raises and future revenue generation.

Next Steps

• Complete fulfillment of the US$1.45 million HEXWAVE order backlog during the first half of 2026.
• Actively expand the commercial team and build channel partnerships to support broader market rollout of HEXWAVE in 2026.
• Achieve successful TSA certification for the HD-AIT Upgrade Kit to commence initial commercial sales in 2026.
• Continue to focus on optimizing unit economics, reducing production costs, and enhancing HEXWAVE system performance through ongoing engineering and supply chain improvements.
• Invest significant resources in ongoing research and development programs, including assessing new threat detection capabilities and integrating complementary technologies.
• Evaluate potential design changes to reduce dependency on Analog Devices Inc. (ADI) for HEXWAVE components, with an alternate supply path not expected before late 2026.
• Engage in discussions with Parabilis and Viken Detection Corp. to resolve the issue of competing security interests over subsidiary assets.
• Develop and implement internal control systems and procedures to satisfy SEC reporting requirements and comply with Nasdaq listing standards.
• Prepare for compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
• File an annual report on Form 20-F within four months of the end of each fiscal year and furnish unaudited quarterly financial information to the SEC on Form 6-K.
• Seek new Director & Officer insurance before listing on Nasdaq.

Key Dates

Recommendation

The company presents a high-risk investment profile. While the technology (AI-based security screening) addresses a growing market need and has significant potential, the current financial performance is deeply concerning. The preliminary estimates for FY 2025 show a substantial increase in net loss and operating expenses, coupled with a sharp decline in cash and revenue. The 'going concern' warning from auditors, coupled with a significant working capital deficit and reliance on future financing, indicates severe liquidity challenges. The immediate and substantial dilution for new investors, along with the unresolved issue of competing security interests on core subsidiary assets, further exacerbates the risk. The company's ability to execute its commercialization plans and achieve profitability is highly uncertain, making it a speculative investment with significant downside risk.

Keywords

Security Technology, AI, Millimeter Wave, HEXWAVE, HD-AIT Upgrade Kit, TSA, Weapons Detection, Public Safety, Airport Security, Contactless Screening, Defense, Homeland Security, IPO, Nasdaq Listing, F-1/A, British Columbia Corporation, Financial Reporting, Risk Management