F-1/A: Liberty Defense Seeks Nasdaq Listing Amidst Rising Losses

Liberty Defense Holdings, an AI-based security firm, is pursuing a Nasdaq listing and a $12.4M IPO, despite reporting increased net losses and decreased revenue in preliminary 2025 estimates.

Summary

• Liberty Defense Holdings, Ltd. is an emerging leader in AI-based contactless security technology, offering the HEXWAVE system and the HD-AIT Upgrade Kit.
• The company is conducting an initial public offering (IPO) of 3,333,333 common shares on the Nasdaq Capital Market under the symbol DETX, with an estimated price between US$4.00 and US$5.00 per share.
• Net proceeds from the IPO are estimated at approximately US$12.4 million (or US$14.5 million if the over-allotment option is fully exercised), intended for working capital, HD-AIT commercialization, HEXWAVE business development, and cost reduction efforts.
• Preliminary estimates for the year ended December 31, 2025, indicate cash between US$0.3 million and US$0.4 million (down from US$1.2 million in 2024), total revenue between US$1.76 million and US$2.0 million (down from US$2.4 million in 2024), total cost of revenue between US$3.3 million and US$4.0 million (down from US$4.1 million in 2024), total operating expenses between US$11.5 million and US$12.0 million (up from US$5.8 million in 2024), and a net loss between US$12.8 million and US$14.5 million (up from US$8.8 million in 2024).
• The HEXWAVE system uses millimeter wave, 3D imaging, and AI to detect metallic and non-metallic weapons, with early commercial deployment generating US$0.91 million in revenue for 9 months ended Sept 30, 2025, and US$1.01 million for the year ended Dec 31, 2024.
• The HD-AIT Upgrade Kit is being developed under TSA contracts, with initial commercial sales anticipated in 2026, subject to TSA certification, and represents a potential US$125 million market opportunity for upgrades in North America.
• 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.
• The company has a history of losses and negative operating cash flows, raising substantial doubt about its ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting were identified by independent auditors for fiscal year 2024, with remediation steps underway.
• The company is dependent on a single-source supplier, Analog Devices Inc. (ADI), for approximately 22% of HEXWAVE's cost of goods sold, with efforts to reduce this dependency not expected before late 2026.
• Competing security interests exist on substantially all assets of its wholly-owned subsidiary, Liberty Defense Technologies, Inc., granted to Viken Detection Corp. and Parabilis, which remains unresolved and could trigger defaults.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with cautious optimism. While the company possesses innovative technology in a growing market and is actively raising capital, significant financial challenges, including increasing losses, negative cash flow, and going concern doubts, temper the positive outlook. The reliance on a single supplier and unresolved competing security interests add notable risk.

Positives

• The company is an emerging leader in AI-based contactless security technology with two key products: HEXWAVE and HD-AIT Upgrade Kit.
• HEXWAVE uses advanced millimeter wave, 3D imaging, and AI to detect a wide range of threats (metallic and non-metallic) without requiring removal of personal items, offering high throughput and reduced false alarms.
• The target urban security market and aviation employee screening market for HEXWAVE is projected to grow from US$11 billion to US$22.4 billion by 2036 (7.5% CAGR).
• The HD-AIT Upgrade Kit addresses a significant near-term market opportunity of approximately US$125 million for upgrading over 1,000 TSA body scanners in the U.S. over five years, with potential global demand.
• The company holds an exclusive license from MIT for core HEXWAVE technology and a non-exclusive license from Battelle/PNNL for HD-AIT technology, positioning it favorably for TSA contracts.
• Strategic global partnerships with Rapiscan, Viken, 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 over two decades of experience in the security industry, including leadership roles at L-3 Communications Securities and Detection Systems, Inc. and Palantir Technologies.
• The AI algorithms for HEXWAVE are continuously improved through a self-reinforcing adoption cycle, gathering more data from deployments to enhance detection accuracy.
• HEXWAVE has generated revenue from early-adopter customers in stadium, transportation, and government facility sectors, including international U.S. airports.
• The HD-AIT Upgrade Kit is in the product development and TSA certification phase, with the first unit delivered for formal evaluation and testing in August 2025, and design improvements contracted in December 2025.
• The company has successfully raised over US$40 million in private placements for research and development.

Negatives

• The company has a history of losses and negative operating cash flows since inception, with a net loss of US$8,845,163 in 2024 and US$9,369,043 in 2023.
• Preliminary estimates for 2025 show a projected net loss between US$12.8 million and US$14.5 million, a significant increase from 2024.
• Preliminary estimates for 2025 project total revenue between US$1.76 million and US$2.0 million, a decrease from US$2.4 million in 2024.
• Cash balance as of September 30, 2025, was approximately US$0.64 million, down from US$1.2 million as of December 31, 2024.
• The company had a working capital deficiency of approximately US$4.5 million as of September 30, 2025, and US$2.7 million as of December 31, 2024.
• The audit report for 2024 includes an explanatory paragraph raising substantial doubt about the company's ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting were identified for fiscal year 2024, which could impact financial reporting accuracy.
• 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 decreased by 31.6% for the nine months ended September 30, 2025, compared to the same period in 2024, due to the completion of major milestones in 2024.
• Total operating expenses are estimated to increase significantly to between US$11.5 million and US$12.0 million in 2025, up from US$5.8 million in 2024.
• The company is dependent on a single-source supplier (Analog Devices Inc. ADI) for safety-critical HEXWAVE components (22% of COGS), without a long-term contract, posing supply chain risks.
• Delays have occurred in TSA contract revenue projects and additional contract line items planned for 2025 and 2026.
• Competing security interests granted to Viken Detection Corp. and Parabilis on substantially all assets of Liberty Defense Technologies, Inc. are unresolved and could lead to defaults or limit access to capital.
• The company has no history of paying dividends and does not anticipate doing so in the foreseeable future.

Risks

• Early-stage company with a limited operating history and lack of sustained profitability.
• History of losses and negative cash flows, raising substantial doubt about the ability to continue as a going concern.
• Inability to achieve milestones on expected timeframes, impairing business plan execution.
• Preliminary estimates of 2025 results are subject to change and may differ materially from final results.
• Material weaknesses in internal control over financial reporting, potentially affecting financial reporting accuracy.
• Dependence on sales to government agencies, which are subject to challenges, risks, and potential delays (e.g., TSA mandate challenge).
• Ability to generate future revenue and profits relies heavily on increased production and cost reduction of HEXWAVE, which may take years and significant resources.
• HD-AIT Upgrade Kit may not achieve TSA certification within expected timelines or at all, delaying commercialization and revenue.
• Addressable markets for HEXWAVE and HD-AIT may be smaller than estimated due to regulatory, technical, adoption, and procurement uncertainties.
• Reliance on a limited number of products (HEXWAVE and HD-AIT) subjects the company to greater risk from changes in customer preference or increased competition.
• Rapid technological change could lead to product obsolescence or short product life cycles.
• Failure of weapons detection technology market to grow as anticipated would negatively affect the business.
• Product failures or perceived failures to detect threats could result in injury or loss of life, harming brand and reputation.
• Reliance on certain license agreements (MIT, Battelle) for key technology, which contain termination and other provisions that could materially affect the business.
• Reliance 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 and risk of conflicts of interest.
• Growth may cause pressure on management and resources, potentially straining systems and service levels.
• Acquisitions or investments in other companies/technologies could divert management attention, fail to meet expectations, result in dilution, or disrupt operations.
• Diverting resources from product development to brand development may adversely affect financial condition if not yielding increased revenues.
• Inadequate insurance policies to fully protect against material judgments and expenses, including product liability and cybersecurity risks.
• Vulnerability of internal computer systems to damage, failure, and cyber-attacks, potentially disrupting operations or compromising data.
• Decline in perceived security threats could harm business.
• Breaches of security could adversely affect brand reputation, lead to litigation, and liability.
• Use of AI could expose the company to liability or adversely affect business if unable to compete effectively or if AI systems are flawed/controversial.
• Low barriers to entry and high competition in the industry could impact contract acquisition and future revenues.
• Risks associated with international business expansion, including legal uncertainty, trade barriers, compliance with foreign laws (e.g., FCPA, UK Bribery Act), staffing difficulties, and geopolitical events.
• Impact of worldwide economic conditions, including inflation, interest rates, and geopolitical conflicts, on security spending and operating results.
• Deterioration of economic conditions or weakening credit/capital markets may affect customer funding and access to capital.
• Tariffs and retaliatory tariffs may increase manufacturing costs, affect margins, and delay deliveries.
• Currency fluctuations may have a material effect on financial results.
• Disruption at places of business due to natural and manmade disasters could delay revenues and increase expenses.
• Non-compliance with various local, provincial, and federal tax laws could harm operating results.
• 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 costs, could harm reputation and financial position.
• Protecting and defending against intellectual property claims may have a material adverse effect on the business.
• Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets.
• Reliance on permits, certifications, and licenses to operate, with potential for delays or failure to obtain/maintain them.
• Complex and evolving laws and regulations regarding data privacy and security could lead to investigations, claims, or penalties.
• Substantial capital requirements and potential failure to raise additional capital, leading to dilution or asset divestment.
• Issuance of debt could impair ability to obtain additional financing.
• Dependence on Parabilis Credit Facilities, which are short-term, contain restrictive covenants, and include lender remedies.
• Immediate and substantial dilution for new investors purchasing Common Shares in this offering.
• No liquid public market for Common Shares in the United States, and potential for share price fluctuations.
• Liquidity of Common Shares may decrease due to the Share Consolidation.
• Management will have broad discretion over the use of IPO proceeds.
• No operating experience as a publicly traded company in the United States, leading to increased costs and management time.
• Difficulty for U.S. investors to enforce civil liabilities against the company or its non-U.S. directors/officers.
• Inability to comply with Nasdaq's continued listing requirements could result in delisting.
• Extreme share price volatility unrelated to operating performance.
• Need to raise additional financing in the future may dilute share capital.
• Failure to satisfy Sarbanes-Oxley requirements or ineffective internal controls could question financial statement reliability.
• Reliance on emerging growth company and foreign private issuer exemptions may make securities less attractive or provide less protection to shareholders.
• Potential loss of foreign private issuer status in the future could result in significant additional costs and expenses.

Future Outlook

The company anticipates initial commercial sales of the HD-AIT Upgrade Kit in 2026, subject to successful TSA certification. It plans to expand its commercial team and channel partnerships for a broader HEXWAVE market rollout in 2026. The company expects to continue investing significantly in research and development to enhance existing products and develop new technologies, aiming for long-term revenue growth despite anticipated near-term profitability impacts. Future revenues and existing cash, combined with IPO proceeds, are estimated to fund operations and capital expenditures through June 30, 2026, but additional financing will be critical for scaling production and achieving profitability.

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 are actively expanding our commercial team and building channel partnerships to support broader market rollout in 2026."
• "We believe the market for countermeasures is growing as a result of these trends, creating a market-driven need for security detection that can be broadly deployed across nearly all public and private facilities."
• "We believe that our HD-AIT Upgrade Kit is very well positioned to fill most or all of this demand [from TSA upgrades]."
• "Management also recognizes that current capital market conditions directly affect our liquidity and working capital position. As at September 30, 2025, we had a working capital deficiency of $4.5 million and contractual obligations of $8.6 million. Continued access to external financing will therefore be critical to support operations and growth initiatives until we are able to generate sustainable revenues from commercial sales."
• "We remain committed to overcoming these challenges and have taken proactive measures to mitigate these challenges and position ourselves for growth."
• "We believe the world will continue to focus on the safety and security of people in the places where they gather."
• "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."

Industry Context

StockSavvy.ai notes that Liberty Defense Holdings operates in a rapidly evolving and competitive security screening market, driven by increasing concerns over mass shootings and terrorist attacks. The company's focus on AI-based, contactless millimeter wave technology positions it to address shortcomings of legacy metal detectors, particularly in urban security and aviation employee screening. The market is projected for significant growth, with a 7.5% CAGR to US$22.4 billion by 2036. However, the industry also faces challenges from rapid technological change, the need for continuous innovation, and the complexities of government procurement and certification processes, as evidenced by the TSA mandate challenge. Competitors like Evolv Technologies, Xtract One Technologies, Thruvision Group, and Leidos are also active in developing next-generation solutions, indicating a crowded but high-potential landscape.

Comparison to Industry Standards

• HEXWAVE's contactless, 3D-imaging and AI-enabled screening technology represents a new generation compared to legacy metal detectors, which are prone to false alarms and inefficient processes.
• HEXWAVE is designed to detect both metallic and non-metallic threats (e.g., liquid, plastic, powder explosives, 3D printed guns, ceramic knives, ghost guns), a capability described as 'extremely limited in the urban security market today' for traditional systems.
• HEXWAVE offers increased throughput of up to 700 people per hour, which is up to twice as fast as old screening processes, and significantly reduces false alarms compared to traditional walk-through metal detectors.
• The HD-AIT Upgrade Kit aims to enhance existing TSA HD-AIT systems, which have been deployed since 2010, by providing greater detection capabilities and lower false alarm rates, aligning with DHS's $1 billion Screening at Speed program.
• The HD-AIT Upgrade Kit scans over a wider range of frequencies (10 to 40 GHz) compared to Leidos Wideband System (20 to 40 GHz), which is expected to result in improved passenger MMW image details, better threat detection, lower false alarm rates, and less divestiture of clothing.
• The company's collaboration with TSA on an Open Architecture Platform for HD-AIT Upgrade Kit is a key differentiator, as it integrates TSA-identified best-in-class partners for optimal performance, unlike potentially proprietary systems from competitors like Leidos.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently engaged in any litigation or criminal proceedings.
• A group of municipalities and airports challenged the 2023 TSA mandate (TSA-NA-23-02) regarding aviation worker screenings, arguing non-compliance with the Administrative Procedure Act (APA). In August 2025, the U.S. Court of Appeals for the D.C. Circuit found the TSA failed to comply with notice and comment requirements, staying its order until TSA completes rulemaking or abandons the rule. The outcome is uncertain and could impact the company's market opportunity.

Related Party Transactions

• Daryl Rebeck, former Executive Chairman, participated in a non-brokered private placement on June 8, 2023, purchasing 1,111 units for CAD$100,000.
• The company received approximately US$787,908 in unsecured, non-interest-bearing working capital loans from Jay Adelaar (Senior VP 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.
• Compensation of key management personnel (executive management team and Board of Directors) included US$1,061,266 in G&A Salaries, US$693,419 in G&A Stock-based compensation, and US$72,788 in G&A Consulting fees for the nine months ended September 30, 2025.
• As of September 30, 2025, a balance payable of US$197,021 was owed to key management personnel, which is unsecured, non-interest bearing, and has no specific terms of settlement.

Stakeholder Impact

• **Shareholders:** Will experience immediate and substantial dilution from the IPO. Existing shareholders will see an increase in net tangible book value, while new investors will face dilution. The share consolidation may decrease liquidity. The company's ability to achieve profitability and resolve going concern issues will directly impact shareholder value. No dividends are expected in the foreseeable future.
• **Employees:** The company's growth strategy and continued investment in R&D could create opportunities. However, financial constraints (e.g., early 2023 furlough) and the need to raise additional capital pose risks to job security and operational stability. Stock-based compensation is a significant part of executive and employee incentives.
• **Customers:** Benefit from advanced AI-based security solutions (HEXWAVE, HD-AIT Upgrade Kit) offering improved threat detection, reduced false alarms, and increased throughput. Delays in TSA certification or product delivery could impact customer satisfaction and deployment schedules. The competing security interests could disrupt production and customer commitments.
• **Suppliers:** The company's reliance on a limited number of third-party manufacturers and a single-source supplier (ADI) for critical components means disruptions could affect production and payments. Efforts to diversify the supply chain could create new opportunities for other suppliers.
• **Creditors:** The company's significant debt, working capital deficiency, and going concern issues pose risks. The unresolved competing security interests granted to Parabilis and Viken Detection Corp. could lead to defaults and enforcement actions, impacting the recovery of outstanding amounts.

Next Steps

• Complete the initial public offering and list Common Shares on the Nasdaq Capital Market under the symbol DETX.
• Continue commercialization of the HD-AIT Upgrade Kit, subject to successful TSA certification, with initial commercial sales anticipated in 2026.
• Expand the commercial team and build channel partnerships to support broader market rollout of HEXWAVE in 2026.
• Focus on optimizing unit economics, reducing production costs, and enhancing HEXWAVE system performance through ongoing engineering and supply chain improvements.
• Remediate identified material weaknesses in internal control over financial reporting.
• Resolve competing security interests with Parabilis and Viken Detection Corp. on assets of Liberty Defense Technologies, Inc.
• 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.
• Continue to pursue equity and/or debt financing to support operations and growth initiatives.

Key Dates

Recommendation

Liberty Defense Holdings presents a compelling long-term opportunity with its innovative AI-based security technology addressing a growing market need. The Nasdaq listing and capital raise are crucial steps for growth. However, the company's significant history of losses, negative cash flow, and the 'going concern' qualification from auditors indicate substantial financial risk. The preliminary 2025 results showing increased losses and decreased revenue are concerning, and the unresolved competing security interests add a layer of legal and financial uncertainty. While the technology is promising, the execution risks, capital requirements, and current financial instability warrant a 'hold' recommendation. Investors should monitor the resolution of the security interest dispute, progress on TSA certification for HD-AIT, and the company's ability to scale HEXWAVE production and reduce costs effectively before considering a stronger position.

Keywords

AI-based security, Contactless security, Weapons detection, Millimeter wave technology, 3D imaging, HEXWAVE, HD-AIT Upgrade Kit, TSA certification, Urban security, Aviation security, Public safety, SEC filing, IPO, Nasdaq listing, Risk factors, Financial performance, Going concern, Supply chain risk, Intellectual property, Corporate governance, Capital raise, Emerging growth company, Foreign private issuer