Ocean Power Technologies Inc

On June 16, 2023, Paragon Technologies, Inc., a Delaware corporation that is a shareholder of the Company (“Paragon”), informed the Company that Paragon was planning a proxy contest against the Company and intended to nominate candidates for election to the Company Board of Directors (the “OPT Board”) at the Company’s 2023 Annual Meeting (the “2023 Annual Meeting”). Subsequently, Paragon disclosed its intention to replace a majority of the six-member OPT Board with initially five purported nominees, including three members of the Paragon Board of Directors, and, thereby, seek control of the Company. In furtherance of Paragon’s threatened agenda, Paragon brought three litigation matters against the Company in the Delaware Court of Chancery.

As clearly evidenced by the above, Paragon has filed three lawsuits against the OPT Board and the Company in an effort to seek control of the Company, without following appropriate governance standards and without offering fair value to the stockholders.

In addition, Sham Gad, the CEO of Paragon has also maintained in public that the nature of Paragon’s proposed investment in the Company was “non-dilutive.” To that point, on April 24, 2024, Paragon made the following “non-dilutive $3MM preferred stock” offer to the Company: “...The preferred would have the option to be convertible to common stock, at $0.05 a share, or 25% of the 30-day average trading price, whichever is higher...”. After the Board correctly rejected the $3MM preferred stock offer, on June 7, 2024, Paragon issued a press release that proclaimed its offer was non-dilutive. In fact, Paragon’s offer was highly dilutive because the offer stipulated that the proposed OPT preferred stock to be issued to Paragon would be convertible to OPT common stock at a 75% discount to the fair market value of the common stock. The Paragon offer thus essentially amounted to a change in control of the Company at 25% of its fair market value.

In order to defend the best interests of the Company’s shareholders against Paragon’s lawsuits and public statements, the Company has spent approximately $3.9 million in fees and costs.

Spain Income Tax Audit

The Company underwent an income tax audit in Spain for the period from 2011 to 2014, when our Spanish branch was closed. In connection with the tax audit, the Spanish tax inspector challenged the Company’s recognition of grant funds received in 2011 to 2014 from the European Commission in connection with the Company’s Waveport project. On July 30, 2018, the inspector concluded that although there was no tax owed in light of losses reported, the Company’s Spanish branch owed penalties for failure to properly account for the income associated with the funding grant. On August 30, 2018, the Company filed an administrative appeal of the penalty and its underlying conclusions. During the three months ended July 31, 2020, the Company received notice from the Spanish Central Economic and Administrative Tribunal that it agreed with the inspector and ruled that the Company owes the full amount of the penalty in the amount of €279,869.81 or approximately $331,000. In the quarter ended October 31, 2020, the Company recorded an additional reserve of €117,145.81 (or approximately $154,000) to Selling, general and administrative costs in the Statement of Operations making the total reserve €279,869.81, which amount was paid by the Company to the Spanish Tax Administration on January 25, 2021. As of April 30, 2024, the Company had no reserve related to this audit. The Company has appealed the decision of the Tribunal tax assessment to the Spanish National Court. The Company expects a ruling on the appeal prior to the end of fiscal 2025.