Communications Systems, Inc. Announces Updated $32.0 Million Equity Financing To Close Concurrently With CSI–Pineapple Merger - Seite 2

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.

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.

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.

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.