{"id":538451,"date":"2021-09-15T08:03:22","date_gmt":"2021-09-15T12:03:22","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/communications-systems-inc-announces-updated-32-0-million-equity-financing-to-close-concurrently-with-csi-pineapple-merger\/"},"modified":"2021-09-15T08:03:22","modified_gmt":"2021-09-15T12:03:22","slug":"communications-systems-inc-announces-updated-32-0-million-equity-financing-to-close-concurrently-with-csi-pineapple-merger","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/communications-systems-inc-announces-updated-32-0-million-equity-financing-to-close-concurrently-with-csi-pineapple-merger\/","title":{"rendered":"Communications Systems, Inc. Announces Updated $32.0 Million Equity Financing To Close Concurrently With CSI\u2013Pineapple Merger"},"content":{"rendered":"

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Communications Systems, Inc. Announces Updated $32.0 Million Equity Financing To Close Concurrently With CSI\u2013Pineapple Merger<\/b><\/p>\n

MINNETONKA, Minn.–(BUSINESS WIRE<\/a>)–
\nCommunications Systems, Inc. (Nasdaq: JCS) (\u201cCSI\u201d or the \u201cCompany\u201d) announced today that it has entered into an amended and restated securities purchase agreement with a group of institutional investors (the \u201cPIPE Investors\u201d) to make a $32.0 million private placement investment in CSI in connection with the closing of the previously announced merger between CSI and Pineapple Energy, LLC (\u201cPineapple\u201d). Proceeds of this investment will be used primarily to fund Pineapple strategic initiatives following consummation of the merger. The closing of the PIPE financing is subject to approval of CSI\u2019s shareholders. This amended and restated securities purchase agreement replaces a $25.0 million original securities purchase agreement dated June 28, 2021.\n<\/p>\n

\nCSI and one of the original PIPE Investors, CrowdOut Capital LLC (\u201cCrowdOut\u201d), had agreed that CrowdOut would purchase $9.0 million of the original $25.0 million of Series A Convertible Preferred Stock, and also entered into a non-binding letter of intent for a $20.0 million term loan (the \u201cDebt Transaction\u201d) to be provided by CrowdOut to the Company to assist the combined CSI-Pineapple company fund the acquisitions of Hawaii Energy Connection (\u201cHEC\u201d) and E- GEAR, which are expected to close concurrently with the CSI-Pineapple merger. CrowdOut\u2019s obligation to consummate the transactions in the PIPE Offering was expressly conditioned on CrowdOut closing and funding the Debt Transaction pursuant to fully executed credit documents that were mutually acceptable to CSI and CrowdOut. On September 14, 2021, CSI and CrowdOut terminated discussions for CrowdOut to provide debt financing and participate in the PIPE offering. The amended and restated securities purchase agreement replaces CrowdOut with new investors and has increased to $32.0 million. The Company is also exploring new debt financing for the combined company.\n<\/p>\n

\nUnder the terms of the amended and restated securities purchase agreement, the PIPE Investors have agreed to purchase $32.0 million in newly authorized CSI Series A Convertible Preferred Stock convertible at a price of $3.40 per share into CSI common stock, with five-year warrants to purchase an additional $32.0 million of common shares at that same price (the \u201cPIPE Offering\u201d). The PIPE Offering is expected to close immediately following the consummation of the CSI-Pineapple merger, thus PIPE Investors will invest in the post-merger company. Therefore, the PIPE Investors will not be entitled to receive any cash dividends paid prior to closing and will not receive the Contingent Value Rights (\u201cCVRs\u201d) to be issued to pre- merger CSI shareholders in the CSI-Pineapple merger.\n<\/p>\n

\nThe Series A Convertible Preferred Stock will have no liquidation or dividend preference over CSI common stock and no voting rights until after converted into CSI common stock. Assuming conversion of the Series A Convertible Preferred Stock, the PIPE Investors would own approximately 9.41 million shares of the Company\u2019s outstanding common stock immediately following the closing of the PIPE Offering, representing approximately 27% of CSI\u2019s outstanding Common Stock after giving effect to the issuance of shares in the merger, and approximately 18.82 million shares assuming exercise of all the warrants for cash, representing approximately 43% of CSI\u2019s outstanding Common Stock after giving effect to the issuance of shares in the merger and exercise of the warrants.\n<\/p>\n

\nThe Series A Convertible Preferred Stock and warrants will have anti-dilution provisions that would increase the number of shares issuable upon conversion or exercise, and lower the conversion or exercise price, if CSI issues equity securities at a price less than the conversion or exercise price at the time of such issuance. The securities purchase agreement also prohibits the combined company from conducting a new equity offering within 45 days of the closing, gives the PIPE Investors in the aggregate the right to purchase up to 25% of the equity securities in future CSI-Pineapple offerings within one year of closing of the securities purchase agreement and requires 30-day lock-up agreements of CSI common stock by certain CSI-Pineapple officers, directors and major shareholders following the closing. In connection with the transaction, CSI has agreed to file a registration statement on behalf of the PIPE Investors allowing them to resell the common stock into which the Series A Convertible Preferred Stock is convertible and the warrants are exercisable immediately after issuance. Closing is subject to the effectiveness of this registration statement, consummation of the CSI-Pineapple merger and other customary closing conditions.\n<\/p>\n

\nThe amended and restated securities purchase agreement provides that the agreement may be terminated by any PIPE Investor with respect to that PIPE Investor\u2019s obligation if the CSI-Pineapple merger transaction has not closed by March 31, 2022.\n<\/p>\n

\nOn September 13, 2021, CSI issued a press release announcing that its board of directors had declared a special dividend of $3.50 per share payable on October 15, 2021, to CSI shareholders of record at the close of business on September 30, 2021. CSI has been notified by Nasdaq that the ex-dividend date with respect to the special dividend will be October 18, 2021, the first business day after the payment date. Any shareholders with questions should contact their broker-dealer, or investment adviser or Nasdaq.\n<\/p>\n

Comments About the Pineapple Merger Transaction<\/b><\/p>\n

\nCSI Chairman and Interim Chief Executive Officer Roger H.D. Lacey commented, \u201cOn March 2, 2021, we announced the Pineapple merger transaction as a means by which the CSI shareholders could retain the opportunity for long-term share appreciation in a transformed company, with a new business focused on the Pineapple Energy, Hawaii Energy Corporation and E-Gear residential solar businesses. Over the last several months, even while completing the sale of the Electronics & Software Segment to Lantronix, and declaring the $34.0 million dividend, we have been steadily working on the Pineapple merger transaction and positioning the transformed company for future success.\u201d\n<\/p>\n

\nMark Fandrich, the Company\u2019s Chief Financial Officer added, \u201cConcurrently with all of these activities, CSI and Pineapple have been working with their respective legal, accounting and tax advisors to develop the information required to be included in the Form S-4 Registration Statement CSI will be filing with the SEC to solicit CSI shareholder approval for the CSI-Pineapple merger transaction, the PIPE financing and other related matters. Both parties are devoting significant efforts to resolve these matters.\u201d\n<\/p>\n

\nWe appreciate the patience of the CSI shareholders during this time as we diligently pursue the Pineapple merger transaction. We look forward to providing additional updates to you on the Pineapple merger transaction as it becomes available,\u201d concluded Mr. Lacey.\n<\/p>\n

About Communications Systems, Inc.<\/b><\/p>\n

\nCommunications Systems, Inc. (Nasdaq: JCS), which has operated as an IoT intelligent edge products and services company, has announced its planned merger transaction with Pineapple Energy. After the Pineapple merger transaction, the Company will be positioned to grow organically and to acquire and grow leading local and regional solar, storage, and energy services companies nationwide. The vision is to power the energy transition through grass-roots growth of solar electricity paired with battery storage on consumers\u2019 homes.\n<\/p>\n

Website Information<\/b><\/p>\n

\nCSI routinely posts important information for investors on its website, www.commsystems.com<\/a>, in the \u201cInvestor Resources\u201d section. CSI uses this website as a means of disclosing material information in compliance with its disclosure obligations under SEC Regulation FD. Accordingly, investors should monitor the \u201cInvestor Resources\u201d section of CSI\u2019s website, in addition to following its press releases, SEC filings, future public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, CSI\u2019s website is not incorporated by reference into, and is not a part of, this document.\n<\/p>\n

Forward Looking Statements<\/b><\/strong><\/p>\n

\nThis press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Communications Systems\u2019 current expectations or beliefs and are subject to uncertainty and changes in circumstances. There can be no guarantee that the proposed transactions described in this document will be completed, or that they will be completed as currently proposed, or at any particular time. Actual results may vary materially from those expressed or implied by the statements here due to changes in economic, business, competitive or regulatory factors, and other risks and uncertainties affecting the operation of Communications Systems\u2019 business. These risks, uncertainties and contingencies are presented in the Company\u2019s Annual Report on Form 10-K and, from time to time, in the Company\u2019s other filings with the Securities and Exchange Commission. The information set forth herein should be read considering such risks. Further, investors should keep in mind that the Company\u2019s financial results in any period may not be indicative of future results. Communications Systems is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether because of new information, future events, changes in assumptions or otherwise. In addition to these factors, there are a number of additional factors, including:\n<\/p>\n