F-1/A: Liberty Defense Files F-1/A for US IPO Amidst Losses & Growth Plans

Liberty Defense Holdings, Ltd. is pursuing a U.S. initial public offering to fund the commercialization of its AI-based security screening technologies, HEXWAVE and HD-AIT Upgrade Kit, despite ongoing significant losses and a going concern warning.

Summary

• Liberty Defense Holdings, Ltd. is seeking to raise capital through a U.S. Initial Public Offering (IPO) of up to 3,888,889 Common Shares and Pre-Funded Warrants.
• The company develops AI-based contactless security technology, including the HEXWAVE system for detecting concealed metallic and non-metallic threats, and the HD-AIT Upgrade Kit for airport body scanners.
• Preliminary estimates for the year ended December 31, 2025, project a net loss between US$12.8 million and US$14.5 million, an increase from US$8.8 million in 2024.
• Cash balance is estimated to be between US$0.3 million and US$0.4 million as of December 31, 2025, down from US$1.2 million in 2024.
• Total revenue for the nine months ended September 30, 2025, decreased by 34.6% to US$1.76 million from US$2.70 million in the comparable 2024 period.
• The company effected a 1-for-45 reverse stock split on March 13, 2026, to meet Nasdaq's minimum bid price requirement for initial listing.
• Proceeds from the IPO, estimated at US$14.7 million (or US$17.1 million with over-allotment), are intended for working capital, commercialization of HD-AIT, HEXWAVE business development, and engineering/cost reduction.
• A material uncertainty exists regarding the company's ability to continue as a going concern due to recurring losses and negative cash flows.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-risk investment due to the company's significant and increasing net losses, negative cash flow, and a formal going concern warning. While the technology is innovative and market opportunities exist, the financial instability and operational challenges, including supply chain dependency and unresolved competing security interests, present substantial hurdles.

Positives

• The company is an emerging leader in AI-based contactless security technology with two distinct product lines: HEXWAVE and HD-AIT Upgrade Kit.
• HEXWAVE uses millimeter wave, 3D imaging, and AI to detect both metallic and non-metallic threats, offering high throughput and reduced false alarms.
• The HD-AIT Upgrade Kit is being developed under contracts with the U.S. Transportation Security Administration (TSA) and is positioned to address a US$125 million market opportunity for upgrading over 1,000 body scanners in U.S. airports.
• HEXWAVE is in early commercial deployment, generating 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, from early-adopter customers.
• The urban security and aviation employee screening market is projected to grow from US$11 billion to US$22.4 billion by 2036, representing a 7.5% compounded annual growth rate (CAGR).
• The company holds exclusive licenses for core HEXWAVE technology from MIT and a non-exclusive license for HD-AIT technology from Battelle/PNNL.
• Strategic global partnerships with Rapiscan Systems, Viken Detection Corp., K2 Security Screening Group, Isotec Security Inc., Grasp Innovations, KPrime Technologies, Inc., Linev Systems US, Inc., and Point Security Inc. provide significant leverage and global reach.
• The management team has extensive experience in the security industry, including MMW applications and AI algorithm development.
• The company's AI algorithms are continuously improved through rigorous data collection and software updates.
• Flexible leasing options for HEXWAVE are now offered in partnership with Amsource Capital.

Negatives

• The company has a limited operating history and a history of significant losses, with a net loss of US$10.51 million for the nine months ended September 30, 2025, and US$8.85 million for the year ended December 31, 2024.
• Recurring negative cash flows from operating activities (US$8.38 million for nine months ended September 30, 2025) and a working capital deficiency of US$4.45 million as of September 30, 2025, raise substantial doubt about the company's ability to continue as a going concern.
• HEXWAVE revenue decreased by 37.2% for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to lower unit deliveries and shifted customer deployment schedules.
• Contract revenue also decreased by 31.6% for the nine months ended September 30, 2025, due to the completion of major TSA contract milestones in 2024.
• Total operating expenses significantly increased by 134.7% in general and administrative expenses for the nine months ended September 30, 2025, primarily due to higher stock-based compensation, legal/professional fees, and investor relations.
• The company is dependent on a single-source supplier (Analog Devices Inc. ADI) for safety-critical HEXWAVE components, representing approximately 22% of cost of goods sold, without a long-term contract.
• The HD-AIT Upgrade Kit is still in the product development and TSA certification phase, with initial commercial sales anticipated in 2026, subject to successful completion of the certification process.
• The company had to amend and restate its interim financial statements for Q3 2025 due to identified errors, indicating potential issues with internal controls.
• The company has granted competing security interests in substantially all assets of its wholly-owned subsidiary, Liberty Defense Technologies, Inc., to both Viken Detection Corp. and Parabilis, which were an administrative error and remain unresolved, posing a risk of default and adverse impact on liquidity and financial condition.

Risks

• Limited Operating History: Early-stage company with limited revenue, subject to risks of under-capitalization, cash shortages, and resource limitations.
• History of Losses and Negative Cash Flow: May not achieve or maintain profitability, raising substantial doubt about ability to continue as a going concern.
• Milestone Achievement Uncertainty: No assurance that development and commercialization milestones will be achieved on expected timelines or at all, potentially impairing business plan execution.
• Preliminary Estimates Subject to Change: Preliminary financial estimates for year-end 2025 are subject to change and may differ materially from final results.
• Material Weaknesses in Internal Control: Identified material weaknesses in internal control over financial reporting for fiscal year 2024, which could lead to inaccurate financial reporting.
• Dependence on Government Sales: Significant portion of business relies on sales to government agencies, subject to competitive, expensive, and time-consuming procurement processes, and potential delays or changes in policies/funding (e.g., TSA mandate challenge).
• Reliance on Increased Production and Cost Reduction of HEXWAVE: Future revenue and profitability depend on successful mass production and cost reduction of HEXWAVE, which may take years and significant resources.
• HD-AIT Upgrade Kit Certification Risk: May not achieve TSA certification within expected timeline or at all, delaying commercialization and expected revenue.
• Addressable Market Size Uncertainty: Market opportunity estimates for HEXWAVE and HD-AIT may be smaller than anticipated due to regulatory, technical, adoption, and procurement uncertainties.
• Reliance on Limited Products: Substantial dependence on HEXWAVE and anticipated HD-AIT sales, making the company vulnerable to changes in customer preference or increased competition.
• Rapid Technological Change: Risk of product obsolescence or short product life cycles if the company fails to anticipate market needs and develop new products.
• If the weapons detection technology market fails to grow or grows more slowly than we currently anticipate, our business would be negatively affected.
• Product Failure/Defects: Products failing or being perceived to fail to detect threats, or containing undetected errors/defects, could result in injury/loss of life, harm reputation, and adversely affect business.
• Reliance on License Agreements: Dependence on MIT and Battelle license agreements for key technology, with termination clauses and ongoing obligations that could materially affect the business if breached.
• Reliance on Limited Third-Party Manufacturers/Suppliers: Dependence on a limited number of third parties for manufacturing, shipping, logistics, marketing, and sales, including a single-source supplier (ADI) for critical HEXWAVE components.
• Dependence on Key Personnel: Success relies on the ability, expertise, and judgment of senior management and the ability to attract and retain qualified personnel.
• Growth Pressure: Substantial business growth could strain management and resources, requiring new systems and infrastructure.
• Acquisition/Investment Risks: Future acquisitions or investments could divert management attention, fail to meet expectations, dilute shareholders, increase expenses, or disrupt operations.
• Brand Development Resource Diversion: Diverting resources to brand development may adversely affect financial condition if it doesn't yield increased revenues.
• Inadequate Insurance Policies: Insurance may be insufficient to fully protect against material judgments and expenses, including product liability, cybersecurity, and natural disasters.
• Internal Computer System Vulnerabilities: Systems vulnerable to damage from viruses, unauthorized access, natural disasters, and other disruptions, leading to business interruption or data loss.
• Decline in Security Threats Perception: If the general level of security threats declines or is perceived to have declined, demand for products could be harmed.
• Breaches of Security: Compromise of security or third-party service providers could damage reputation, lead to litigation, and harm business.
• Cyber-attacks: Reliance on IT systems makes the company vulnerable to evolving cybersecurity threats, potentially disrupting operations or compromising data.
• AI Usage Risks: Use of AI could expose the company to liability, especially if systems are flawed, biased, or infringe intellectual property, or if AI regulation evolves unfavorably.
• Low barriers to entry and high competition in the industry could impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.
• International Business Risks: Expansion into international markets involves legal, regulatory, economic, political, and currency risks, including compliance with FCPA and other anti-corruption laws.
• Economic Conditions Deterioration: Worldwide economic conditions, recessions, or credit market instability could negatively impact customer spending and access to capital.
• Geopolitical Events: Current or future geopolitical events (e.g., Russia-Ukraine, Middle East conflicts) could adversely affect markets and operations.
• Tariffs: Tariffs and retaliatory tariffs could increase manufacturing costs, reduce margins, delay deliveries, and impact competitiveness.
• Any disruption at our places of business due to natural and manmade disasters could delay revenues and increase our expenses.
• Non-compliance with Tax Laws: Failure to comply with tax laws could result in fines or additional obligations.
• Legal Proceedings: Litigation, claims, investigations, or enforcement actions could lead to large damage awards, penalties, and reputational harm.
• Protecting and defending against intellectual property claims may have a material adverse effect on our business.
• Confidentiality Breaches: Confidentiality arrangements may not prevent disclosure of trade secrets, harming competitive position.
• Permit/Certification/License Reliance: Operations and products require various government permits, certifications, and licenses, with delays or failures impacting commercialization.
• Data Privacy and Security Regulations: Subject to complex and evolving laws, non-compliance could lead to investigations, fines, and reputational damage.
• Substantial Capital Requirements: May fail to raise additional capital, leading to delays or divestment of assets.
• Debt Impairment: Issuance of debt could impair ability to obtain additional financing.
• Dependence on Parabilis Credit Facilities: Short-term, restrictive covenants, and lender remedies could materially harm the company if triggered.
• Competing Security Interests: Overlapping security interests granted to Viken and Parabilis on subsidiary assets, an administrative error, could lead to default and adverse impact.
• No History of Dividends: Shareholders rely solely on capital appreciation for returns.
• Asset Divestment Risk: Insufficient capital may require delaying, reducing, eliminating, or divesting assets or products.
• Liquidity Risk: Global economic slowdown and capital market downturn make raising capital difficult, impacting ability to meet obligations.
• Immediate and Substantial Dilution: New investors will experience significant dilution (US$2.30 per Common Share).
• No Liquid Public Market in US: Difficulty selling shares and potential for price fluctuations.
• Decreased Liquidity from Share Consolidation: Reduced number of shares outstanding may decrease liquidity.
• Management Discretion on Proceeds: Broad discretion over IPO proceeds, may not use effectively.
• Future Dilution: Need for additional financing may dilute share capital.
• No US Public Company Experience: Lack of operating experience as a U.S. public company, leading to increased costs and management strain.
• Foreign Private Issuer Status: Exempt from certain U.S. domestic public company provisions, potentially offering less protection to shareholders.
• Loss of Foreign Private Issuer Status: Could result in significant additional costs and expenses.
• Nasdaq Listing Approval/Compliance Risk: No assurance of Nasdaq or TSXV approval; failure to comply with listing requirements could lead to delisting.
• No Public Market for Pre-Funded Warrants: Limited liquidity for warrants.
• No Additional Funds from Pre-Funded Warrants Exercise: Cashless exercise means no new funds.
• Pre-Funded Warrant Exercise Limitations: Holders may be restricted from exercising if beneficial ownership exceeds 9.99%.
• Extreme Share Price Volatility: Past and potential future volatility unrelated to performance.
• Different Market Trading: Trading on multiple exchanges (TSXV, FSE, Nasdaq) may result in price variations and arbitrage.
• Substantial Securities Offering: Selling a large number of securities could cause price decline.
• Sarbanes-Oxley Compliance: Significant costs and effort to comply with Section 404, with risk of material weaknesses.
• Enforceability of Civil Liabilities: Difficult for U.S. investors to enforce civil liabilities against the company or non-U.S. directors/officers.

Future Outlook

The company anticipates initial commercial sales of the HD-AIT Upgrade Kit in 2026, subject to successful TSA certification. It expects to increase HEXWAVE production and reduce costs to drive future revenue and profitability. The company aims to expand its market position through continuous investment in R&D, enhancing existing products, and developing new ones. It forecasts that current capital resources, combined with IPO proceeds, will fund operations and capital expenditures through approximately December 31, 2026, assuming no significant debt repayments from IPO funds.

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.
• We remain committed to overcoming these challenges and have taken proactive measures to mitigate these challenges and position ourselves for growth.

Industry Context

StockSavvy.ai notes that Liberty Defense operates in a rapidly evolving security technology market driven by increasing concerns over mass shootings and terrorist attacks, and the emergence of new threats like 3D-printed weapons. The company's focus on AI-based contactless screening addresses a significant market need for more effective, efficient, and non-invasive detection solutions, particularly in urban security and aviation employee screening, which is projected to grow substantially. The industry is shifting away from legacy metal detectors due to their limitations in detecting non-metallic threats and high false alarm rates, creating an opportunity for next-generation solutions like HEXWAVE. The company's development of the HD-AIT Upgrade Kit aligns with the U.S. Transportation Security Administration's (TSA) $1 billion 'Screening at Speed' program to modernize airport security, indicating strong governmental demand for advanced solutions.

Comparison to Industry Standards

• HEXWAVE's contactless, 3D-imaging, and AI-enabled screening technology is presented as a new generation for urban security and aviation employee screening markets, which are currently dominated by legacy metal detectors and inefficient processes.
• The company claims HEXWAVE is 'up to twice as fast as old screening processes' due to normal walking pace throughput and low false alarm rates, contrasting with the 'frustrating delays' and 'invasive contact' of traditional methods.
• HEXWAVE's ability to detect both metallic and non-metallic threats (e.g., liquid, plastic, powder explosives, 3D printed guns, ceramic knives, ghost guns) is highlighted as superior to legacy metal detectors which are 'limited to metallic threats.'
• The HD-AIT Upgrade Kit is positioned against the Leidos Wideband System, a solution being developed by Leidos (developer of original ProVision and ProVision 2 systems). Liberty Defense claims competitive advantages such as scanning over a wider range of frequencies (10 to 40 GHz vs. Leidos' 20 to 40 GHz) for improved image details, lower false alarms, and less divestiture of clothing.
• Liberty Defense's HD-AIT Upgrade Kit is also noted for its collaboration with TSA's Open Architecture program, demonstrating full functionality with TSA-selected third-party vendor software, a potential advantage over competitors like Leidos whose support level for Open Architecture is 'unknown.'

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently engaged in any litigation or criminal proceedings.
• The company is subject to various state, federal, and foreign laws and regulations, and any violations could result in significant fines, sanctions, or reputational damage.
• Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require payment of large damage awards or penalties and be costly to defend.
• Protecting and defending against intellectual property claims may have a material adverse effect on the business.
• The company is subject to complex and evolving laws and regulations regarding data privacy and security, with potential for investigations, claims, or monetary penalties for non-compliance.

Related Party Transactions

• Daryl Rebeck, Former Executive Chairman, participated in a non-brokered private placement on June 8, 2023, purchasing 1,111 units for an aggregate purchase price of CAD$100,000.
• 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) since January 1, 2023. As of September 30, 2025, there was no outstanding balance on these loans.

Stakeholder Impact

• Shareholders: Will experience immediate and substantial dilution from the IPO. Existing shareholders will see their ownership percentage decrease. The stock price may be volatile, and there is no expectation of dividends in the foreseeable future. The going concern warning indicates significant risk to investment.
• Employees: The company's ability to attract and retain qualified personnel is critical for success. Furloughs have occurred in the past due to financial restraints. Stock-based compensation is a significant part of executive compensation.
• Customers: Potential for delays in product delivery (HEXWAVE, HD-AIT) due to supply chain issues or certification delays. Product failures or perceived failures could harm customer satisfaction and adoption.
• Suppliers: Dependence on a limited number of third-party suppliers, including a single-source supplier (ADI) for critical HEXWAVE components, poses risks of disruption and increased costs.
• Creditors: The existence of competing security interests on subsidiary assets granted to Viken and Parabilis creates uncertainty and could lead to default and enforcement of remedies, impacting the company's ability to repay debt.

Next Steps

• Complete the U.S. Initial Public Offering (IPO) of Common Shares and Pre-Funded Warrants.
• Obtain Nasdaq and TSXV approval for the listing of Common Shares.
• Commercialize the HD-AIT Upgrade Kit, subject to successful TSA certification in 2026.
• Optimize unit economics, reduce production costs, and enhance system performance for HEXWAVE through ongoing engineering and supply chain improvements.
• Actively expand the commercial team and build channel partnerships for broader HEXWAVE market rollout in 2026.
• Resolve the issue of competing security interests granted to Viken and Parabilis on subsidiary assets.
• Remediate identified material weaknesses in internal control over financial reporting.
• Continue to invest in research and development for HEXWAVE production, software development, and advancing other technologies, such as HD-AIT.
• Achieve annual net sales milestones for HEXWAVE products and services: US$5,000,000 in 2025, US$10,000,000 in 2026, US$15,000,000 in 2027, US$20,000,000 in 2028, and US$25,000,000 in 2029 and every calendar year thereafter.
• Update the timeline for Battelle License milestone deadlines.
• 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.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a formal 'going concern' warning from its auditors, substantial and increasing net losses (US$10.51M in 9M 2025, up 63.5% YoY), negative operating cash flows (US$8.38M in 9M 2025), and a growing working capital deficiency (US$4.45M). While the IPO aims to raise US$14.7M, a significant portion may be used to repay existing, problematic debt with competing security interests, shortening the operational runway. Revenue is declining, and critical product commercialization (HD-AIT) is subject to uncertain TSA certification. Dependence on a single-source supplier for key components adds significant operational risk. These fundamental financial weaknesses and high operational risks far outweigh the potential of its innovative technology and market opportunities, making it a highly speculative and precarious investment.

Keywords

Security Technology, AI, Millimeter Wave, HEXWAVE, HD-AIT, TSA, Airport Security, Urban Security, Weapons Detection, Public Safety, SEC Filing, IPO, Pre-Funded Warrants, Nasdaq, British Columbia, Massachusetts Institute of Technology, Battelle Memorial Institute, PNNL, Analog Devices Inc., Parabilis, Viken Detection Corp.