On 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. The amended and restated securities purchase agreement provides that the agreement may be terminated by any PIPE Investor with respect to that PIPE Investor’s obligation if the CSI-Pineapple merger transaction has not closed by March 31, 2022. Comments About the Pineapple Merger Transaction
The 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’s outstanding common stock immediately following the closing of the PIPE Offering, representing approximately 27% of CSI’s 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’s outstanding Common Stock after giving effect to the issuance of shares in the merger and exercise of the warrants. Under 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 “PIPE Offering”). 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 (“CVRs”) to be issued to pre- merger CSI shareholders in the CSI-Pineapple merger.
The 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. Story continues
About Communications Systems, Inc. Communications 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’ homes. We 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,” concluded Mr. Lacey.
Mark Fandrich, the Company’s Chief Financial Officer added, “Concurrently 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.” CSI Chairman and Interim Chief Executive Officer Roger H.D. Lacey commented, “On 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.”
The News Highlights
- Communications Systems, Inc. announces upgraded $32.0 million equity financing to close concurrently with CSI-Pineapple merger
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