Mr. Gad Comments on Paragon's First Quarter Earnings Results, Citing Poor Financial Performance and Significant Waste of Stockholder Capital Under Current Unelected Directors

Rhea-AI Summary

Hesham "Sham" Gad, Paragon Technologies' (PGNT) largest stockholder with 28.4% ownership, criticizes the company's Q1 2025 financial performance under the current board. The company reported a net loss of $790,000, marking its largest quarterly loss since 2017. Operating expenses surged 67% year-over-year to $3.2 million and 39% quarter-over-quarter. The company expects to incur over $3 million in legal costs within 6 months. Gad alleges that Samuel Weiser and his appointed directors (Howard Brownstein, Timothy Eriksen, and David Lontini) are responsible for value destruction through costly litigation and unnecessary entrenchment actions, including a poison pill. The company also increased shares outstanding by 25,000 via director compensation despite poor performance.

Positive

• None.

Negative

• Net loss of $790,000 in Q1 2025, largest quarterly loss since 2017
• 67% increase in operating expenses year-over-year to $3.2 million
• Expected legal costs exceeding $3 million in 6 months
• 25,000 share dilution through director compensation despite poor performance
• Asset liquidation reportedly being used to pay legal fees
• Additional litigation exposure through legal action against former counsel

Highlights Alarming Increase in Expenses and Legal Spending with No Strategic Justification

Notes that Wasteful Spending is Not Over Because of Continued Legal Liability

Highlights the New Directors' Decision to Expose the Paragon to More Potential Litigation Risk and Expense by Pursuing Legal Action against Paragon's Former Counsel and Filing Such Litigation Under Seal to Keep Important Information from Shareholders

Reaffirms that Gad Never Misclassified His Compensation, Which was Clearly Documented by the Company and its Auditors

Reaffirms His Unwavering Commitment to Restoring Accountability and Delivering a Bright Future for Paragon and Stockholders

NEW YORK, NY / ACCESS Newswire / May 13, 2025 / Hesham "Sham" Gad, the largest stockholder of Paragon Technologies, Inc. (OTC PINK:PGNT) ("Paragon" or the "Company"), owning approximately 28.4% of the Company's outstanding shares, today issued the following statement to fellow stockholders in response to the Company's first quarter 2025 financial results:

Dear Fellow Stockholders:

The results are in, and the numbers don't lie. For months, I have voiced serious concerns about the direction of the Company under the control of Samuel Weiser and the directors he installed, Howard Brownstein, Timothy Eriksen, and David Lontini. I have also warned that their actions were leading to value destruction, eroding Paragon's financial health, and draining stockholder capital through costly and unnecessary litigation.

Unfortunately, Paragon's quarterly results have confirmed my warnings. During the period ended March 31, 2025, a period when Weiser's hand-picked directors held full control over key decision-making under their "stewardship," the Company suffered substantial losses, spiraling expenses, and further alienated its stockholders. Under their "stewardship" the Company's has achieved the following:

• A net loss of $790,000 for the quarter, wiping out prior gains and what I believe to be the largest quarterly loss reported by Paragon since I assumed management of SI Systems in 2017

• A 67% increase in operating expenses year-over-year, from $1.9 million in Q1 2024 to over $3.2 million in Q1 2025;

• A 39% increase in operating expenses quarter-over-quarter, rising from $2.3 million in Q4 2024; and

• An increase in shares outstanding by 25,000 via director compensation rewards, including the 5,000 gifted to Weiser on April 1, 2025, despite the Company's poor performance.

• Company has stated it will likely incur over $3 million in legal costs in 6 months

In addition to results highlighted above, the "gain" of $450,000 on the sale of a fixed asset is principally due to the sale of one of our real estate assets, assets that were opportunistically acquired and which I have consistently expressed would be monetized for the benefit of the Company's stockholders. Under this Board, the assets are likely being monetized to pay for the legal fees incurred in the by the Board's self-serving entrenchment actions. In other words -assets are seemingly being liquidated to pay for costly entrenchment decisions, including illegal by law amendments and a poison pill, initiated by Weiser and perpetuated by Eriksen, Brownstein, and Lontini.

I have been sounding the alarm bells for months about the risks to the Company's financial strength and performance that the Weiser-led Board's conduct presented - and the risks are now becoming evident. The entrenchment actions implemented by these directors have exposed Paragon to a significant legal liability that has yet to be absorbed. And the biggest portion of that legal liability is almost certainly due to the poison pill that was passed by Eriksen, Brownstein, and Lontini and signed off by Weiser as the Company's earnings release indicated an expectation of $2 million more in legal spend during the second quarter

In December 2024, new directors were appointed by Weiser- who we now know was fabricating documents - and rather than address that concrete violation of fiduciary duty to the Company and its stockholders, Eriksen, Brownstein, and Lontini instead implemented a poison pill, claiming it served stockholder interests. In reality, the pill has done nothing but stifle open stockholder communication and expose the Company to further legal liability.

I have previously stated, I raised my concerns about Weiser's conduct with Eriksen in December. He and the other directors could have taken immediate action to look into Weiser, remove him from his position, and put an end to the self-serving entrenchment efforts. Had they done so, Paragon and its stockholders could have been spared from significant and unnecessary expenses.

Yet they chose not to intervene. Weiser's directors allowed him to remain in control, even as he fabricated internal records, undermined the confidence of key executives, and set the Board on a path toward adopting a poison pill designed to preserve his grip on power.

What the directors ARE choosing to do, as noted in their press release, is expose the Company to even more potential litigation risk and expense by pursuing legal action against Paragon's former counsel. This is more disheartening and alarming news, and this new litigation is only possible with the approval of the new directors, who also chose to file the litigation under seal to keep important information hidden from stockholders.

I urge all stockholders to carefully consider the facts to see what is going on here: a manufactured scheme by Weiser to seize power for his financial benefit. Now his three chosen directors are continuing the scheme of additional litigation while keeping relevant information away from stockholders.

So, who is truly exposing Paragon to financial risk? While these directors continue blasting press releases with bold headlines citing "potential" risks that I have caused Paragon or other risks caused by our subsidiaries and their management teams, they offer no substantive evidence to support those claims. In contrast, Paragon's own quarterly results present clear, tangible proof of the financial damage caused by their self-serving conduct.

I trust that my fellow stockholders can now see plainly that it is this Board that has placed your Company at risk, and the financial results make that reality undeniable. In just three months, under these current directors, Paragon has wasted $1.1 million in legal fees and expects to incur another $2 million in three months.

Finally, I have never misclassified my compensation, and during all my years as CEO of Paragon, my compensation was known by the Company and to our auditors, who never raised any issues. Again, the Weiser hand-picked directors are seemingly seeking to create risk for Paragon that could be avoided. Furthermore, Weiser and the directors conveniently fail to tell you that Weiser - and other key executives - are classifying their compensation structure the exact same way I had.

In light of the facts, I believe it is clear that the Weiser-picked directors are not acting in the best interests of stockholders and should not be trusted with the stewardship of the Company. I remain unwavering in my commitment to the Company and firmly believe that the continuance of the plan I pursued while I was CEO alongside our key executives and managers will continue to deliver real, meaningful results for stockholders and position Paragon for sustained growth. I believe my slate of five uniquely qualified candidates with significant stockholder alignment, product innovation, business turnaround, capital allocation and extensive industry experience, if elected, will work to ensure Paragon is governed with the focus and accountability its stockholders deserve. We urgently need directors who will restore a strategic vision centered on creating long-term value for stockholders.

Thank you for your support. I look forward to Paragon's stockholders having the opportunity to decide the future of our Company.

Sincerely,

Sham Gad

CONTACT:

hmgad78@gmail.com

SOURCE: Sham Gad

View the original press release on ACCESS Newswire

FAQ

What caused Paragon Technologies (PGNT) to report a loss in Q1 2025?

Paragon reported a $790,000 loss in Q1 2025 primarily due to a 67% increase in operating expenses to $3.2 million and significant legal costs related to board actions and litigation.

How much does PGNT expect to spend on legal costs in 2025?

Paragon Technologies expects to incur over $3 million in legal costs within 6 months, with $2 million expected in Q2 2025 alone.

What is the ownership stake of Hesham Gad in Paragon Technologies?

Hesham 'Sham' Gad owns approximately 28.4% of Paragon Technologies' outstanding shares, making him the company's largest stockholder.

How has PGNT's share count changed under the current board?

The company increased its shares outstanding by 25,000 through director compensation rewards, including 5,000 shares given to Samuel Weiser on April 1, 2025.

What are the main concerns raised by Sham Gad about PGNT's current management?

Gad criticizes the current board for value destruction, increased operating expenses, costly litigation, implementation of a poison pill, and using asset sales to fund legal fees for entrenchment actions.