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As part of the settlement of the Entrenchment Litigation, we were able to secure several key safeguards for stockholders to ensure the current Board, including the three new directors - Timothy Eriksen, David Lontini, and Howard Brownstein - who have never stood for election, cannot continue to manipulate the Company's corporate machinery to insulate themselves from accountability and further disenfranchise stockholders until stockholders have the opportunity to make their voices heard at the Company's 2025 Annual Meeting of Stockholders (the "2025 Annual Meeting").

Specifically, pursuant to the terms of the settlement, until the conclusion of the 2025 Annual Meeting:

• the Board cannot undertake any dilutive transactions, which would have allowed them to place newly issued shares into the hands of new shareholders at the expense of the Company's existing stockholders;

• the Board can no longer continue to unreasonably delay the 2025 Annual Meeting to avoid standing for election, and the Company has agreed to hold the 2025 Annual Meeting no later than June 30^th; and

• the enforcement of the agreement, arrangement, or understanding provision of the Poison Pill Section 1(g)(iii) has been suspended, allowing stockholders to more freely communicate and coordinate activities without the threat of a poison pill looming over them.

Further, under the terms of the settlement, we secured Samuel S. Weiser's resignation from his role as CEO. Notably, in yet another misleading statement, the Company makes no reference to that requirement under the settlement in its press release announcing Mr. Weiser's resignation.

The Company's willingness to settle the litigation and provide me with virtually all of the relief that I sought in my complaint appears to be clear evidence that they knew they were unlikely to succeed on the merits of the Entrenchment Litigation and did not want their conduct to be subjected to the unbiased scrutiny of the Court.

After this significant step forward for the future of the Company, I was hopeful that the Board would have recognized that they had wasted enough time and stockholder money in their efforts to entrench themselves and attack me, and we could have moved forward in a professional manner until the 2025 Annual Meeting, where the stockholders would have the final say on Paragon's leadership and future. Unfortunately, the current Board has decided to continue its defamatory and misleading campaign against me, and I am once again compelled to set the record straight and address the Company's desperate and spurious claims against me.

Setting the Record Straight

The Company's recent press releases attempt to revive a narrative that has already been tested and rejected. Many of these purported claims against me refer to events that are decades old and known to Paragon, and specifically, known to Weiser (proof of which is included below). Conveniently, these claims only became urgent concerns after I delivered consents to remove Weiser from the Board.

After months of litigation over the Board's conduct, including its adoption of entrenching bylaws and a poison pill, the directors sought to justify their actions by presenting these same so-called committee "findings" about me to the Court. The Board and Paragon tried to use these "findings" to justify delaying trial, which in turn would have delayed the 2025 Annual Meeting - prolonging the control over the Company by three directors who have never once stood for election and were handpicked by Weiser. In rejecting that argument, the Court stated:

"The defendants [Brownstein, Eriksen, Lontini, Weiser] thus seek to upset the schedule for this case based on a questionable claim [against Gad] that seeks to litigate matters which, while doubtless important to the company, are not relevant to the propriety of the defendants' conduct when making the decisions challenged in this litigation." (emphasis added).

That context makes the Board's latest disclosures all the more telling. Despite the Board's best attempts to damage my reputation, their "findings" were ultimately the same tired personal attacks and narrative, assembled by the very individuals who now seek to justify wasting what will be significant costs to stockholders when all litigation costs are paid. Weiser and his hand-picked directors, who present themselves as a voice for governance reform, transparency, and success at Paragon have done no such thing, but rather embrace selective disclosure, or using their words, "cherry picking", when it suits their position, and that choice speaks for itself.

Further, despite all the purported "findings" and misconduct the other members of the Board have alleged against me, they have not once sought to remove me from the Board "for cause," and in fact, have agreed to a full release of potential claims of wrongdoing. Certainly, if I had acted in the manner they are claiming, there would be ample evidence to support removing me from the Board "for cause." However, as discussed in greater detail below, their attacks against me are not supported by the facts and I believe they have intentionally proliferated an extremely misleading narrative in an attempt to maintain control of the Company at the expense of stockholders.

The Facts: Rubicon Technology and other activism

Beginning with the campaign at Rubicon Technology, in 2016, our engagement as stockholders led to the appointment of a new CEO. When Rubicon's share price continued to trade below what we believed was its intrinsic value, we advanced a strategic plan publicly. That process ultimately resulted in a sale of the business that generated approximately $700,000 in gains for Paragon, as reflected in Paragon's 2022 audited financial statements and disclosed in our annual letter that year. The Board notably failed to mention these gains in their cherry-picked description of the events.

Weiser has repeatedly claimed that I pursued another "activist" investment that was not authorized by the Board. The other directors have echoed this claim. This claim is, yet again, categorically false. The facts are that I identified an undervalued business that I disclosed to Weiser and indicated could be a very attractive acquisition/merger with Paragon, and Weiser supported the idea. I wrote the CEO a friendly letter outlining the rationale for a transaction between Paragon and the target company. The CEO responded that they were not interested at the time, and we agreed to stay in touch. Still believing the target company was an attractive investment coupled with such company's announcement of pursuing value unlocking alternatives, we began building a stake for investment purposes. I emailed the Board expressly requesting approval to acquire up to 15% of the equity and the filing of a 13G - a document announcing a passive investment - once we exceeded 5% ownership. Ultimately, the Board did not approve my request, and I adhered to their decision and limited the position to 4.9%. Several months later, the target company announced a value unlocking transaction, which recently closed. Given our cost basis, Paragon has achieved an approximate 40% annualized return from this transaction and there may be future upside when contingent rights are factored in. The fact that Weiser's new hand-picked directors have supported Weiser's claim of my alleged unapproved activism on behalf of the Company without at least acknowledging these facts is yet another example of the other directors following in Weiser's footsteps and perpetuating the pattern of misleading stockholders for their own interests.

The Facts: Soccer Tickets

As for the Company's repeated claims regarding soccer tickets, the facts are neither new nor complicated. Beginning in 2018, Paragon purchased season tickets to Atlanta United with the approval of the Company's CFO. The expense-approximately $9,000 annually-was known each year to both the Company's auditors and the Audit Committee, which at the time was chaired by Mr. Weiser. The purchase was modest in scope and justified by the Company's business relationships in Atlanta, where SI's Vice President of Sales was based and where Paragon maintained a significant client and partner base.

In 2023, SEDC, one of our operating subsidiaries, purchased season tickets for Inter Miami as part of a broader strategy to reestablish a commercial presence in South Florida. The total cost was approximately $32,000. To offset unused tickets, SEDC sold a number of them throughout the season, generating $11,400 in proceeds. These proceeds were fully documented at the time and returned to the Company with supporting third-party verification.

The Facts: U.S. Work Authorization

Regarding the conjecture relating to my immigration status, the Board conveniently leaves out that I am indeed legally authorized to work in the U.S., and my lawful efforts in pursuit of such have always been known and disclosed to the Board and the Company's current counsel. In fact, in a 2013 email to Weiser, Paragon's counsel stated:

"The other charge relates to Sham checking the incorrect box on his driver's license application, stemming from his uncertain and unknown immigration status that resulted from the application of technical immigration laws when Sham was a child. …. These charges would not disqualify Sham from serving on a public company board or from running a hedge fund or investment partnership, such as a FINRA or SEC violation.

You should accept this explanation and Sham's prior e-mail on the topic to wrap-up your due diligence or, if you wish, assume the worst possible facts based on the charges listed. In either case, they do not in any way disqualify Sham from running an investment partnership, serving on a board or serving in any capacity."

As further evidence of the Board's knowledge of my immigration status, then-serving director, Jack Jacobs wrote a letter of recommendation on my behalf, dated December 2, 2021, which included the following:

"I first came to know [Mr. Gad] when he was given the opportunity to use his education and formidable skills to rescue [Paragon]. In doing so, he saved dozens of jobs, and now [Paragon] is thriving and growing.... During all those years, [Mr. Gad] has behaved with the utmost integrity, character, and humility.... From the very beginning, I have been aware of his efforts to readjust his immigration status..."

Despite all of these facts, the new directors shamefully continued Weiser's self-serving path and saw fit to spend what is likely more than a million dollars in stockholder funds in pursuit of spurious claims related to $11,000 worth of soccer tickets, decades-old driver's license records, and other allegations that do not withstand scrutiny.

The record speaks for itself. I led Paragon for more than a decade, during which the Company delivered an 11% annualized return to stockholders. Unable to challenge that record, the directors have returned to well-worn claims they have known about for years, and which never appeared to cause them any concern before they were facing removal, because they have nothing else.

The Facts: Weiser's Misconduct and the Consequences of his "Leadership"

The results of the Entrenchment Litigation are of key significance now because that is what cuts through the other directors' misleading narrative. After adopting entrenchment measures, including bylaw amendments and a poison pill, the directors failed to secure meaningful stockholder support. Faced with the prospect of being held liable for breaching their fiduciary duties, Weiser, along with Jack H. Jacobs, H. Timothy Eriksen, David Lontini and Howard Brownstein (collectively, the "Director Defendants") pivoted. Rather than defend their actions on the merits, the Defendant Directors asked the Court to delay the trial and the 2025 Annual Meeting, citing the need for more time to conduct discovery on their baseless claims.

The Court rejected that effort outright and was unmoved by the Defendant Directors' disingenuous claims.

That decision by the Court is not spin. Unlike the directors' conjecture and what they believe to "likely" be true, this is the actual language of the Court and a clear ruling based on record evidence.

Over the past nine months, the Director Defendants, through their efforts to maintain their control over the Company, have authorized actions that have undoubtedly resulted in significant legal fees for the Company. And the cost to Paragon is not over. The very actions that caused the Entrenchment Litigation have left the Company obligated to pay not only the legal fees of the Defendant Directors but also a corporate benefit award to cover my attorney fees. To put this in a context the Director Defendants have used against me: when the legal spend of their entrenchment actions is concluded, the total will likely exceed the legal costs associated with the Ocean Power campaign.

Naturally, the financial consequences of this campaign of retaliation have little bearing on the Defendant Directors themselves, since they each directly hold minimal equity, almost all of which was granted to them by Weiser. Despite claims by the Defendant Directors that they are acting in the best interest of stockholders, the cost they have imposed on Paragon will be borne foremost by stockholders, with whom they are not truly aligned.

Further, as noted above, Weiser is not stepping down voluntarily. His resignation as CEO of the Company was a key condition of the settlement.

Importantly, Weiser's effort to maintain confidentiality and keep relevant information from stockholders failed. On April 10, 2025, the Court denied the Director Defendants' motion for confidentiality, and as a result, the extent to which Weiser has acted in his own self-interest can now be shared. Last November, just days after Weiser assumed full control of the Company, I received a series of emails from the Company's outside counsel that exposed the reality of his conduct and intentions.

On November 16, 2024, the Board held a meeting during which Messrs. Weiser and Jacobs agreed to increase Weiser's compensation. Days later, on November 22, 2024, Weiser circulated fabricated minutes of that meeting, minutes he had altered in an attempt to make his compensation appear retroactive so he would receive additional compensation, which had not been approved by the Board and to which he was not entitled.

Weiser's self-serving behavior is on full display in emails, which are now publicly available, forwarded to me by Paragon's former corporate counsel in an effort to alert me that he was concerned about Weiser's conduct (emphasis added):

Hi Sam. I'm not sure why you have copied me here, but the November 16 minutes are not the minutes I drafted or that you provided to [Paragon's Director of Finance]. When you brought up your increased compensation during that board meeting, you stated it as "consulting" compensation and it was not stated as being "retroactive." After the meeting, we had several conversations where I told you that paying your compensation as "consulting" compensation was likely not lawful, as you have accused Sham. When you redrafted the minutes to state that the compensation was "retroactive" and asked me to bless them as "kosher" I told you multiple [sic] times that the board did not approve your compensation as retroactive and that my recommendation was to "have it approved at the next board meeting." If [Paragon] has paid your increased compensation retroactively, that was not approved by the board.[1]

As Weiser scrambled to contain the fallout from his actions, more revelations began to surface (emphasis added):

Hi Sam. I'm not sure why you keep copying me, as we withdrew several days ago, but to state the issue I raised more succinctly: you drafted fabricated minutes and then pressured me to bless them so that [Paragon's Director of Finance] would pay your comp "retroactively" to October 6.You revised your fabricated minutes further and then circulated them to the board for approval earlier today, after not circulating minutes to the board for approval for months. I'm curious how you are now going to get the board to approve your "retroactive" comp to October 6, as your attempt to fabricate the minutes has failed. Although you told counsel that our withdrawal was "Gad related," a critical component of our withdrawal was your obsessive focus on increasing your compensation over the past two weeks and creating fabricated minutes to make your comp increase "retroactive," knowing that the board did not approve retroactive compensation.[2]

The next day, on November 23, 2024, the Company's former corporate counsel responded again, this time with even greater clarity as he addressed Weiser's conduct directly and left no room for ambiguity (emphasis added):

You didn't take over the board, or fire Sham 60 days later, to settle our fees. You could have done that as a director, or instructed Sham to. I didn't ask for your help or intervention with our fees. I asked for your advice. You did not make a simple mistake with the minutes, and there is a trail of texts and emails to show what you did. Your retroactive comp might be a relatively minor matter, but taking your comp unlawfully as a "consultant" and fabricating minutes and pressuring me over it are not minor matters to me. You focused on all of that while disregarding my reasonable requests relating to the jeopardy that our fees are under while we are accumulating time at a rate of more than $100k per month, while still owed fees from a year ago. Your threats including malpractice were the final nail. We haven't abandoned the company at a critical juncture, we teed up 5 law firms to handle the specific matters involved. Everything for Monday, for your entrenchment not the company, is ready to go. And there is no malpractice claim for failing to preserve two directors against the wishes of 51% of the shareholders.[3]

For more than nine months, stockholders have been misled in the worst possible way. The emails from Paragon's former corporate counsel make the reality clear: the leadership changes orchestrated by Weiser were not made in the interest of stockholders, but for his entrenchment. Further, just days into his new role, he was seemingly obsessed with lining his own pockets, while likely significantly increasing the Company's legal spend.

Mr. Eriksen, who publicly presents himself as a steward of shareholder rights and transparency, has inaccurately accused me of self-dealing by taking small stakes in companies and causing Paragon to spend "multiples" in pursuit of board seats, while ignoring the returns generated for the Company's stockholders. Meanwhile, Mr. Eriksen and the other directors were authorizing far greater expenditures to retain an incompetent and self-interested CEO.

It was Weiser's fixation on his personal compensation that led him to disregard the will of 53% of the stockholder base when they delivered consents to remove him, to amend Paragon's bylaws, and later, with the support of the new directors, to orchestrate the implementation of a poison pill and attempt to delay the 2025 Annual Meeting.

I raised my concerns about Weiser's misconduct with the new directors, first in December, when I asked Mr. Eriksen to look into them, and again in March, when I delivered a detailed letter to the full Board. The response? Weeks later, the Board rewarded Weiser with 5,000 shares of stock.

As noted above, the favorable terms I secured in the settlement of the Entrenchment Litigation resolved these issues that the Board refused to address. Paragon, despite the significant wasteful spending by the Director Defendants, is where it is today because my team and I built a resilient Company designed to protect downside risk first and foremost. When Weiser grabbed control of the Company in August 2024, Paragon had around $4 million in cash invested in U.S. Treasuries, earning around $200,000 a year in risk-free income, and over $4 million worth of real estate assets.

Weiser claims his efforts and those of his directors have left Paragon better off. Again, let the facts do the talking. After months of promising a strategic plan, there has been no plan except for Paragon to continue the vision I implemented years ago to create a diversified holding company with resilience.

Today, cash is significantly lower, assets have been sold with nothing to show for it, shares outstanding have increased due to grants, and notably, Paragon's shareholder equity declined year over year in 2024. While Weiser and his directors gained, Paragon stockholders lost.

The Path Forward

Nevertheless, stockholders should be optimistic that once these directors are no longer serving on the Board, a new and independent Board that will be highly aligned with all stockholders, will work constructively and decisively to efficiently move past the prior Board's mistakes and reckless spending for their own personal benefit and focus on unlocking Paragon's potential and value.

More importantly, we will be ready on day one to move the Company forward. Our distribution subsidiary, SEDC, should be ready to implement its strategic growth plan to expand product flow from the United States to international markets, a plan we believe will drive material revenue growth in the years ahead. And the strategic vision I was implementing with our capable team at SI Systems will once again resume.

I look forward to continuing to engage transparently and collaboratively with my fellow stockholders and urge you to support my slate of uniquely qualified director candidates to help usher in a new era of growth and success at the Company.

Sincerely,

Sham Gad

For inquiries, please reach out to the address below:

hmgad78@gmail.com

[1] Verified Second Amended and Supplemental Complaint, paragraph 83.
[2] Verified Second Amended and Supplemental Complaint, paragraph 86.
[3] Verified Second Amended and Supplemental Complaint, paragraph 87.

SOURCE: Sham Gad

View the original press release on ACCESS Newswire