Former CEO Gad's Litigation and Mismanagement Continue to Cost Shareholders

Rhea-AI Summary

Paragon Technologies (OTC:PGNT) has issued a response to former CEO Hesham "Sham" Gad's claims regarding the company's Q1 2025 results. The company reports that its Q1 net loss was primarily due to legal and compliance costs stemming from Gad's actions. Operating expenses increased from $1.9 million to $3.2 million due to Gad-related legal costs. The company alleges that Gad initiated costly litigation, misappropriated corporate resources, mismanaged operations, and made poor investment decisions. Specifically, the litigation has cost shareholders $3 million in additional legal expenses. The board criticizes Gad's management of SI Systems and questions his motives regarding a Las Vegas real estate portfolio acquisition. The company is now pursuing recovery of legal costs from prior counsel and emphasizes its commitment to accountability and long-term value creation.

Positive

• Board is actively pursuing recovery of legal costs from prior counsel to protect shareholder interests

Negative

• Operating expenses increased by $1.3 million due to legal costs
• Q1 2025 resulted in net loss due to legal and compliance costs
• $3 million in additional legal costs from ongoing litigation
• Poor returns from Las Vegas real estate portfolio investment
• SI Systems subsidiary deteriorated under previous management
• Investment portfolio underperformed during bull market

EASTON, PA / ACCESS Newswire / May 14, 2025 / Paragon Technologies' (OTC PINK:PGNT) is responding to former CEO Hesham "Sham" Gad's recent press release, which attempts to shift blame for the Company's first quarter 2025 results onto the current board. This claim misrepresents the facts and overlooks that Gad himself was the root cause of the Company's recent expenses.

Mr. Gad's release continues a pattern where he deflects responsibility rather than accepting it - choosing instead to blame the board that is now working to address the issues he left behind. The Company's first quarter net loss was entirely due to legal and compliance costs attributable to Mr. Gad's own decisions. Operating expenses increased from $1.9 million to $3.2 million, all due to Gad related legal costs. Absent those costs, results were largely in line with the prior year.

Shareholders should be aware of the following:

• Gad initiated and prolonged the litigation that has cost shareholders millions.

• Gad refused to engage in meaningful settlement discussions for months and obstructed discovery efforts, compounding legal expenses.

• Gad used corporate resources to support activist campaigns that clearly were intended to serve his personal interests.

• Gad misappropriated corporate resources for non-business purposes, including personal entertainment.

• Gad misclassified his own employment status, exposing the Company to federal scrutiny and penalties.

• Gad hired an individual without proper work authorization and failed to disclose it.

• Gad managed the underperforming investment portfolio - built during a historic bull market.

• Gad recommended the acquisition of the Las Vegas real estate portfolio which delivered poor returns and raises serious questions about motive.

• SI Systems, despite the hard work of its team members, was left to deteriorate under Gad's leadership, starved of investment and strategic direction.

Gad's legal challenges appear to have been aimed at regaining influence at Paragon, rather than advancing shareholder interests as he claims. Mr. Gad filed his lawsuit to repeal bylaws he claimed were invalid under Delaware law - bylaws that were later rescinded. Rather than withdrawing the suit once the bylaws were rescinded, he continued to pursue litigation. The lawsuit was later expanded to include new directors, challenging their adoption of a shareholder rights plan when, in fact, the board acted in accordance with its fiduciary duties to protect shareholders from a potential creeping takeover. The result - $3 million in additional legal costs without Mr. Gad delivering any value to shareholders.

The board is also pursuing recovery of legal costs from prior counsel - a step it believes is in the best interest of shareholders as their actions resulted in the bylaw litigation. Mr. Gad's objections to this effort are unfounded and do not reflect the facts presented.

Ultimately, Mr. Gad's track record - including stalled acquisitions, lack of progress at SI Systems, and discretionary spending - speaks for itself.

Paragon shareholders deserve leadership committed to accountability, governance, and long-term value creation - not continued deflection and litigation.

About Paragon Technologies
Paragon Technologies, Inc. is a holding company owning subsidiaries that engage in diverse business activities, including material handling, distribution, real estate, and investments. For additional information please visit: www.pgntgroup.com.

Investor Relations Contact:
Alliance Advisors IR
ParagonIR@allianceadvisors.com

SOURCE: Paragon Technologies Inc.

View the original press release on ACCESS Newswire

FAQ

What caused Paragon Technologies (PGNT) Q1 2025 net loss?

Paragon's Q1 2025 net loss was primarily due to legal and compliance costs related to former CEO Hesham Gad's actions, with operating expenses increasing from $1.9 million to $3.2 million.

How much did the litigation involving former PGNT CEO Gad cost shareholders?

The litigation involving former CEO Gad has cost Paragon Technologies shareholders $3 million in additional legal expenses.

What are the main allegations against former Paragon Technologies CEO Hesham Gad?

The main allegations include initiating costly litigation, misappropriating corporate resources, mismanaging operations, making poor investment decisions, and misclassifying his employment status.

What actions is PGNT's board taking to address the legal costs?

The board is pursuing recovery of legal costs from prior counsel to protect shareholder interests and working to address issues left by the former CEO.

How did SI Systems perform under former CEO Gad's leadership at Paragon Technologies?

According to the company, SI Systems deteriorated under Gad's leadership, being starved of investment and strategic direction despite the hard work of team members.