Ocean Power Fails to Engage in Good Faith with Paragon Creating Going Concern Issues and Risk for the Company and Its Shareholders

Rhea-AI Summary

Paragon Technologies, a major shareholder of Ocean Power Technologies (OPTT), has expressed serious concerns about OPT's refusal to engage in good faith discussions regarding a $3 million investment offer. Paragon proposed this investment in April 2024, which included dropping existing lawsuits against OPT. However, OPT's Board has made unreasonable demands and continues to issue vague press releases about partnerships and testing studies that lack clear financial impact.

OPT's recent SEC filing claimed it would achieve positive cash flow in 2025, but without specific accountability. Despite increased trading volume, OPT's share price has dropped by 50% over the past three months and over 90% since 2021. Paragon criticizes OPT for diluting shareholders by selling additional shares at low prices while failing to deliver transparent financial information. Paragon urges OPT's CEO to address the company's true financial state and the impact of recent actions on achieving profitability.

Positive

• Paragon's offer could provide $3 million in non-dilutive preferred equity, potentially alleviating OPT's financial distress.
• Dropping existing lawsuits as part of the investment terms could reduce legal expenses for OPT.

Negative

• OPT's share price has declined by approximately 50% over the past three months and over 90% since 2021.
• Failure to engage in good faith negotiations with Paragon could lead to lost investment opportunities.
• OPT's press releases are criticized for being vague and lacking clear financial impact, potentially misleading shareholders.
• Increased trading volume may suggest OPT is selling additional shares at low prices, diluting existing shareholders.
• OPT's Board made unreasonable demands as a condition for discussions with Paragon, reflecting poor corporate governance.
• OPT's claim of achieving positive cash flow in 2025 is viewed as lacking specificity and accountability.
• OPT's CEO previously assured shareholders of sufficient capital to achieve profitability, conflicting with recent actions to raise cash.

Insights

Financial Analyst

The situation with Ocean Power Technologies (OPT) raises significant financial concerns. The refusal to engage with Paragon Technologies, despite their offer of $3 million in non-dilutive preferred equity, signals potential distress. OPT's strategy of issuing vague press releases without substantial financial backing and selling additional shares to raise cash suggests a lack of robust financial planning. This action dilutes existing shareholder value and erodes confidence. The continued decline in share price, down 50% over the past three months, indicates market skepticism. The discrepancy between CEO Stratmann's optimistic projections and actual financial performance must be addressed transparently to rebuild investor trust.

Corporate Governance Expert

The refusal to engage with Paragon’s financing proposal, combined with the lack of transparency in OPT's communications, raises serious governance issues. Effective corporate governance requires that the board prioritize shareholder interests, especially in distressed scenarios. OPT's actions suggest a preference for maintaining control rather than exploring viable, non-dilutive financial options. This approach could be viewed as disregarding shareholder protection. Moreover, the lack of specificity in financial projections and the ongoing issuance of shares at low prices without clear justification indicates poor accountability and strategic oversight. These governance shortcomings could further deteriorate investor confidence.

Market Research Analyst

The behavior of Ocean Power Technologies in issuing frequent, yet vague, press releases appears to be an attempt to influence short-term market perceptions. The increase in trading volume might be indicative of such attempts, aligning with the concerns of diluting shareholder value through open market sales. Market participants generally seek clarity and quantifiable impacts from company announcements. The lack of detailed financial outcomes related to OPT’s partnerships and completed testing studies detracts from their credibility. Given the historical poor performance of OPT's stock, down over 90% since 2021, the market’s response underscores the need for concrete, measurable business outcomes to restore investor confidence.

EASTON, PA / ACCESSWIRE / June 7, 2024 / Paragon Technologies, Inc. ("Paragon"), a diversified holding company and a large shareholder of Ocean Power Technologies, Inc. (NYSE American:OPTT), ("Company" or "OPT"), issues the following statement.

On April 28^th Paragon announced its willingness to consider investing up to $3 million in non-dilutive preferred equity in OPT. In exchange for making this investment, Paragon put forward a general framework of terms customary for distressed investments. Paragon agreed to drop existing lawsuits pending against OPT should a suitable financing solution be agreed upon.

Despite the Company's precarious financial condition, the OPT Board has decided not to make a good faith effort to engage Paragon to discuss this potentially crucial investment instead making unreasonable demands of Paragon a condition for such discussions.

Instead of engaging with Paragon, OPT continues to issue press releases touting completed testing studies or partnerships that are vague and lack any substance as to the impact of these awards, contracts or results on OPT's operating performance which has been dismal. OPT CEO Phillip Stratmann continues to make optimistic remarks putting a positive spin on the announcements without quantifying their impact on the Company's future financial performance.

In an SEC filing on December 13, 2023, OPT's Board issued a statement that OPT would generate "positive cash flow in calendar year 2025 using current cash available" which also lacked any specificity that would create accountability for management or the Board in achieving this objective.

Over the past several weeks, while continuing to issue vague press releases, OPT trading volume has surged to millions of shares per today. We believe this increased volume reflects OPT initiating sales of millions of additional shares in the open market at punishing prices to raise cash that serves to only severely dilute existing shareholders. All of this occurred just months after OPT's CEO assured shareholders the Company had sufficient capital to achieve profitability.

In our opinion, shareholders should be concerned that Ocean Power is issuing these cryptic press releases in hopes of temporarily boosting the share price to support the equity sales necessary to raise cash for operations that management just months ago said would not be necessary to achieve positive cash flow.

The market has clearly not responded positively to any of OPT's news as the share price has continued to decline, down by approximately 50% over the past three months since the conclusion of the last annual meeting. OPT shares are now down over 90% since OPT's refreshed its Board and appointed Stratmann as CEO in 2021.

The refusal of OPT's Board to consider Paragon's offer of critical non-dilutive capital funding suggests that, rather than evaluate a viable financing option, Ocean Power's Board prefers to dilute existing shareholders to maintain their failed oversight of OPT's operations.

We invite Mr. Stratmann to communicate to shareholders now as directly as he did when soliciting their votes for the annual meeting when he painted what appears to have been an overly optimistic near-term outlook for OPT. Additionally, Stratmann should address:

1. Whether OPT is still expected to achieve cash flow positive and profitable operations in 2025.

2. Whether OPT has, in fact, been selling stock to raise capital only months after telling shareholders the Company would not need to take such action.

3. Quantifying the financial impact and timing of the revenue impact associated with each of the recent press releases purporting to demonstrate the success of the Company's products with respect to the Company's progress in achieving acceptable financial results.

We strongly believe in corporate transparency which we believe OPT lacks. Mr. Stratmann should provide shareholders with the full story, not just pieces that support his narrative. Shareholders are entitled to all the facts, not just positive spin.

Contact at ir@pgntgroup.com.

SOURCE: Paragon Technologies Inc.

View the original press release on accesswire.com

FAQ

What are the concerns Paragon Technologies has with Ocean Power Technologies (OPTT)?

Paragon Technologies is concerned about OPTT's refusal to engage in good faith discussions regarding a $3 million investment, issuing vague press releases, and diluting shareholders by selling additional shares at low prices.

Why did Paragon Technologies offer a $3 million investment to OPTT?

Paragon Technologies offered a $3 million investment to provide non-dilutive preferred equity, potentially helping OPTT alleviate its financial distress.

How has OPTT's share price performed recently?

OPT's share price has declined by approximately 50% over the past three months and over 90% since 2021.

What actions has OPTT taken that may have diluted existing shareholders?

OPT has been selling additional shares at low prices to raise capital, which has diluted existing shareholders.

What did OPTT's recent SEC filing claim regarding cash flow?

OPT's recent SEC filing claimed the company would achieve positive cash flow in 2025, although without specific accountability.

What is Paragon Technologies' view on OPTT's recent press releases?

Paragon believes OPTT's recent press releases are vague, lack clear financial impact, and may mislead shareholders by putting a positive spin without quantifying the impact.