Paragon Technologies letter to Ocean Power Technologies, Inc

$OPTT

Dear Shareholders of Ocean Power Technologies:

Paragon Technologies, Inc. (“Paragon”) (OTC PINK:PGNT), a diversified holding company, owns approximately 3.9% of the outstanding shares of the Company, which we believe makes Paragon the single largest shareholder in OPT.

This week Paragon commenced litigation against Ocean Power Technologies, Inc. board of directors – Terence J. Cyran, Peter E. Slaiby, Clyde W. Hewlett, Natalie Lorenz-Anderson, Diana G. Purcel -- and CEO Philip Stratmann alleging violation of their fiduciary duty as directors of the Company.

Despite Paragon’s numerous efforts and attempts to exercise its most basic lawful right as a shareholder, we believe OPT’s board has taken and continues to take deliberate measures to prevent Paragon from doing so.

Paragon wrote to OPT’s board a letter expressing our urgent concerns relating to the Company’s future viability given what we believe to be OPT’s alarming and precipitous financial record including:

·

A lack of a coherent, measurable, and accountable business plan.

·

Excessive and increasing director and executive compensation while OPT expenses and losses increase.

·

Continued assurances from CEO Stratmann and CFO Bob Powers that OPT’s “strategy is working,” and costs are being managed “tightly” while OPT continues to report growing losses and expenses.

In that letter, Paragon requested that its three directors be appointed to a six-member OPT Board, given that Paragon believes it is OPT’s largest shareholder. Rather than engage in a constructive dialogue with Paragon, OPT immediately adopted what we believe to be the most burdensome and extreme nomination by-laws found in the market today.

We believe that the timing of the Amended By-laws reflects an improper entrenchment purpose, and that the adoption of the By-laws may constitute a violation of the board’s fiduciary duties. We also believe that the OPT board has used these burdensome advance notice provisions, not in the way intended under Delaware law, but to block Paragon’s efforts to nominate a slate of directors.

Furthermore, on July 20, 2023, Paragon submitted an exemption request to OPT requesting an exemption to OPT’s suddenly adopted poison pill granting Paragon the right to acquire up to 19.9% of the Company’s common stock after having confirmed that the ownership by Paragon of up to 19.9% of OPT’s outstanding shares should not place in jeopardy any of OPT’s net operating losses. It has been over 60 days since Paragon made its exemption request and OPT has continued to ignore our request.

Unlike the incumbent board and executives of OPT who collectively own less than 1% of the Company, Paragon is demonstrating its confidence in its director nominees’ abilities in restructuring and revitalizing OPT through significant ownership of more equity.

Despite OPT’s statements that they are committed to driving value for “all shareholders,” we strongly believe – based on management’s actions, not words – that the current board is engaging in self-serving entrenchment tactics by taking conspicuously timed measures designed to entrench and perpetuate their roles as directors and executives.

On September 14, 2023, OPT announced its Fiscal 2024 First Quarter results. Yet again, despite 21% and 29% increases in losses and expenses, respectively, CEO Stratmann touts his pleasure with OPT’s performance and claims that their “strategy is working” while CFO Robert F. Powers tells shareholders that they “continue to manage costs tightly.”

We strongly condemn these statements which we believe to be fundamentally misleading to all OPT shareholders. OPT’s losses and expenses are growing. Shares outstanding increased by over 2.4 million shares as the Company continues to dilute shareholders to fund the increasing losses.

The strategy, if there is one, is not working. Costs are not being managed. OPT shareholders are suffering, and Paragon is determined to hold each individual director of OPT personally accountable for these actions to the fullest extent permitted by law.

If OPT is indeed committed to doing what is best for all shareholders, then OPT should let shareholders determine who they want to run their Company instead of implementing measures to deny Paragon its lawful right to represent OPT shareholders.

“OPT is a company in dire need of a management change,” says Sham Gad, Chairman of Paragon Technologies. “Since 2008, OPT’s share price has nose-dived from $3,600 per share to less than 40 cents today.” “Since OPT’s restructured executive team and directors were put in place the financial degradation of OPT has gotten exponentially worse.”

“OPT no longer has the luxury of time. Current management has taken a cash balance of over $80 million as of April 30, 2021 and brought it down to under $25 million as of July 31, 2023,” commented Mr. Gad, “yet during that time the company has failed to generate a single nickel of profitability, and whatever revenues OPT has mustered to earn have been consumed by the salaries and fees paid to the officers and directors. OPT can no longer be trusted under the current management scheme.”

Mr. Gad further states, “We have assembled a slate of directors that is imminently qualified to execute our strategy for long-term value creation because we have done just that – not once but twice.”

 From January 2015 through Sep 30, 2023, under the leadership of Mr. Gad, Paragon shares have advanced by over 900% versus 109% and 179% for the S&P 500 and NASDAQ, respectively.

Source:

https://www.sec.gov/Archives/edgar/data/90045/000110465923107731/tm2328073d1_dfan14.htm