Communications Systems, Inc. Announces Updated $32.0 Million Equity Financing To Close Concurrently With CSI–Pineapple Merger

Communications Systems, Inc. (Nasdaq: JCS) (“CSI” or the “Company”) announced today that it has entered into an amended and restated securities purchase agreement with a group of institutional investors (the “PIPE Investors”) 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 (“Pineapple”). 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’s shareholders. This amended and restated securities purchase agreement replaces a $25.0 million original securities purchase agreement dated June 28, 2021.

CSI and one of the original PIPE Investors, CrowdOut Capital LLC (“CrowdOut”), 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 “Debt Transaction”) to be provided by CrowdOut to the Company to assist the combined CSI-Pineapple company fund the acquisitions of Hawaii Energy Connection (“HEC”) and E- GEAR, which are expected to close concurrently with the CSI-Pineapple merger. CrowdOut’s 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.

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.