Paragon Technologies : 2021 Annual Report

101 Larry Holmes Drive, Suite 500

Easton, PA 18042

Telephone: [phone]

www.PGNTGROUP.com

[e-mail]

SIC Codes: 3530 and 5045

Annual Report

For the Period Ending: December 31, 2021

(the "Reporting Period")

As of December 31, 2021, the number of shares outstanding of our Common Stock was: 1,704,745

As of September 30, 2021, the number of shares outstanding of our Common Stock was: 1,704,745

As of December 31, 2020, the number of shares outstanding of our Common Stock was: 1,704,745

Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934):

Yes: ☐

No: ☒

Indicate by check mark whether the company's shell status has changed since the previous reporting period:

Yes: ☐

No: ☒

Indicate by check mark whether a Change in Control of the company has occurred over this reporting period:

Yes: ☐

No: ☒

PARAGON TECHNOLOGIES, INC.

Annual Report

For the Year Ended December 31, 2021

1. Name and address(es) of the issuer and its predecessors (if any)
   The name of the issuer is Paragon Technologies, Inc. ("Paragon" or the "Company").
   The Company was originally incorporated in Pennsylvania on June 18, 1958 as SI Handling Systems, Inc.
   On April 5, 2000, SI Handling Systems, Inc. changed its name to Paragon Technologies, Inc.
   The Company changed its state of incorporation from Pennsylvania to Delaware on November 21, 2001. The Company is active and in good standing in Delaware.

Describe any trading suspension orders issued by the SEC concerning the issuer or its predecessors since inception:

None

List any stock split, stock dividend, recapitalization, merger, acquisition, spin-off or reorganization either currently anticipated or that occurred within the past 12 months:

None

The address(es) of the issuer's principal executive office:

The Company's principal executive office is located at 101 Larry Holmes Drive, Suite 500, Easton, PA 18042.

The address(es) of the issuer's principal place of business:

Check box if principal executive office and principal place of business are the same address: ☒

Has the issuer or any of its predecessors been in bankruptcy, receivership, or any similar proceeding in the past five years?

Yes: ☐	No: ☒
2) Security Information
Trading symbol:		PGNT
Exact title and class of securities outstanding:	Common Stock
CUSIP:		69912T108
Par or stated value:		$1.00 per share

Total shares authorized:	4,000,000	as of December 31, 2021
Total shares outstanding:	1,704,745	as of December 31, 2021
Number of shares in the Public Float:	760,866	as of March 24, 2021
Total number of shareholders of record:	174	as of March 24, 2021

Transfer Agent

Broadridge Shareholder Services

Toll-free: [phone]

Toll: [phone]

Email: [e-mail]

Address: P.O. Box 1342, Brentwood, NY 11717

Is the Transfer Agent registered under the Exchange Act?

Yes: ☒

No: ☐

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PARAGON TECHNOLOGIES, INC.

Annual Report

For the Year Ended December 31, 2021

3) Issuance History

1. Changes to the Number of Outstanding Shares
   Check this box to indicate there were no changes to the number of outstanding shares within the past two completed fiscal years and any subsequent periods: ☒
2. Debt Securities, Including Promissory and Convertible Notes
   Check this box if there are no outstanding promissory, convertible notes or debt arrangements: ☐

Date of note	Outstanding	Principal	Interest	Maturity date	Conversion terms (e.g.	Name of noteholder	Reason for
issuance	balance ($)	amount at	accrued ($)		pricing mechanism for	(entities must have	issuance (e.g.
		issuance ($)			determining conversion	individual with voting /	loan, services,
					of instrument to	investment control	etc.)
					shares)	disclosed).
January 17,	750,000	750,000	-	October 1,	N/A	Rebell Enterprises LLC	Loan
2021(1)	2023
January 17,	750,000	750,000	-	October 1,	N/A	Rebell Enterprises LLC	Loan
2021(1)	2024

1. 1. In January 2021, Ohana entered into purchase agreements for two residential properties in Las Vegas, Nevada, one for a purchase price of $900,000 and another for a purchase price of $894,000, consisting of an initial down payment of $150,000 and $144,000, respectively, and a promissory note for each in the amount of $750,000. For one of the properties, a down payment of $150,000 was due and paid by March 1, 2021 and a promissory note for $750,000 was executed. The interest rate on the promissory note is 0.0% and is to be repaid in eight equal installments of $93,750, with the first payment due on the first day of January 2022 and payments continuing the same day of each consecutive quarter, until October 1, 2023. The payment due on January 1, 2022 was paid on December 31, 2021. For the second property, a down payment of $144,000 was due and paid by December 1, 2021 and a promissory note for $750,000 was executed. The interest rate on the promissory note is 0.0% and is to be repaid in eight equal installments of $93,750, with the first payment due on the first day of January 2023 and payments continuing the same day of each consecutive quarter, until October 1, 2024.
2. Financial Statements

1. The following financial statements were prepared in accordance with:
2. • U.S. GAAP

• IFRS

B. The financial statements for this reporting period were prepared by: Name: Deborah R. Mertz

Title: Chief Financial Officer

Relationship to Issuer: Chief Financial Officer

The audited financial statements for the year ended December 31, 2021 are incorporated by reference and can be found at the end of this Annual Report. The financial statements as of and for the year ended December 31, 2021 include: (1) consolidated balance sheets, (2) consolidated statements of operations, (3) consolidated statements of comprehensive income, (4) consolidated statements of changes in stockholders' equity, (5) consolidated statements of cash flows, (6) notes to consolidated financial statements, and (7) the independent auditor's report.

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PARAGON TECHNOLOGIES, INC.

Annual Report

For the Year Ended December 31, 2021

1. Issuer's Business, Products, and Services A. Summary of the issuer's business operations
   Business

Paragon Technologies and its subsidiaries engage in diverse business activities including material handling, distribution and real estate services.

Automation

SI Systems, LLC (SI Systems) is a leading supply chain and logistics manufacturer and software engineering company providing solutions to distribution centers, manufacturers, and warehouses worldwide. SI Systems provides material handling solutions that increase productivity and provide safety enhancements. Our product lines include complete order fulfillment, assembly, and product advancing systems. SI Systems also offers subsystem technologies that are easily integrated with other solutions and provides software and services for automated material handling and order processing applications.

SI Systems has two major product lines. Our Production and Assembly (PAS) product line consists of our Towline conveyance and automated guided vehicles (AGVs), which are used in manufacturing of heavy industrial products and used in warehouses to move large products. Our Order Fulfillment Solutions (OFS) product line represents our order fulfillment technologies composed of our patented A-Frame and Mobile-Matic robotic picking systems. Our OFS solutions support automated picking solutions that optimize our clients' supply chain by reducing labor expenses, increasing order picking volume and significantly improving inventory fulfillment accuracy.

SI Systems' markets are diverse. SI Systems' customers and prospects represent leading manufacturer brands and supply chain partners in the logistics services space. SI Systems sells its products directly and through integration partners.

Approximately 61% to 70% of SI Systems' business revenue was derived from new material handling system sales during the most recent three calendar years. The system sales are generally large contracts and SI Systems' dependence on these contracts can cause unexpected fluctuations in sales volume. Various external factors affect customers' decision-making process on expanding or upgrading their current production or distribution sites. SI Systems believes that its business is not subject to seasonality, although the rate of new orders can vary substantially from month to month. Since the Company recognizes revenue using a cost-to-cost method based on the continuous transfer of control to the customer over time for its systems contracts, fluctuations in SI Systems' sales and earnings occur with increases or decreases in major installations.

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PARAGON TECHNOLOGIES, INC.

Annual Report

For the Year Ended December 31, 2021

5) Issuer's Business, Products, and Services (Continued)

1. Summary of the issuer's business operations (Continued)
   Distribution

SED International de Colombia, S.A.S. (SEDC) distributes IT hardware products from 27 top worldwide leading IT manufacturers such as Hewlett Packard, Lenovo, Dell, Samsung, LG, Epson, Hitachi, and others. SEDC's business is divided into four main business units: Value, Transactional, Consumer Electronics, and Integrated Services.

The Value business unit focuses on enterprise sales and business projects, typically selling more specialized products that usually carry higher margins. The top products distributed by the Value unit include servers, workstations, storage, networking, high-end printers, high-end audio visual and power protection systems.

The Transactional business unit focuses on the consumer business (retail resellers / e-tailers), as well as run rate products for Value Added Resellers selling to small and medium businesses. The top products distributed by the Transactional business unit include notebook computers, desktop computers, printers, projectors, gaming, and accessories.

The Consumer Electronics business unit began in July 2019 and covers a similar segment of the market as the Transactional business unit; however, the product profile is different. Although the Consumer Electronics business unit also focuses on resellers and e-tailers, the products distributed by this business unit are not IT products, but instead televisions, sound bars, audio/visual equipment, video games, refrigerators, washers, dryers, microwaves, and cellular phones.

The services provided by the Integrated Services business unit include managed services, Everything as a Service, printing outsourcing, electronic documents management, electronic invoicing, the internet of things, and Hitachi high capacity storage solutions products.

Real Estate

Ohana Home Services, LLC (Ohana), a wholly owned subsidiary of Paragon, acquires residential real estate for income and capital appreciation purposes. Ohana intends to lease its real estate to generate positive cash flow for the foreseeable future and may seek to monetize its real estate holdings during favorable market conditions.

Investments

Paragon invests in businesses and securities under the Investment Management Policy. The Investment Management Policy sets forth the parameters and restrictions under which a portion of Paragon's cash balance may be invested in marketable securities, including U.S. Treasuries, equities of publicly traded companies, bonds, money market instruments, and other securities. Investment decisions under the parameters of the Investment Management Policy are made by Hesham Gad, Chairman and Chief Executive Officer.

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