What changed in this filing

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Item 1A. Risk Factors

2022-03-14 compared with 2021-03-31 · 603 added, 422 removed, 18 unchanged (98% of the section changed)

Forward Looking Statements

Certain statements contained in this Annual

Report on Form 10-K are “forward-looking”

statements within the meaning of and in reliance on the Private Securities

Litigation Reform Act of 1995, which provides a “safe harbor”

for forward-looking statements.

Actual events and results

may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors.

The principal

important risk factors that could cause our actual performance and future events and actions to differ materially from these forward-looking

statements include, but are not limited to, the risk factors discussed below.

Risks Related to announced merger with Pineapple Energy

(“Pineapple”)

Company’s planned merger with Pineapple Energy, announced on March 2, 2021, would change the Company’s

strategy from a focus on computer network infrastructure and managed services solutions to residential solar, and presents considerable

challenges and risks including:

● The Company’s ability to obtain shareholder approval for the merger agreement and related transactions;

● The ability of Pineapple to successfully close its announced acquisitions and integrate these businesses into its operations;

● The ability of the combined company to successfully maintain a Nasdaq Capital Market listing;

● The ability of the combined company to successfully access the capital markets, identify and acquire appropriate acquisition

targets and successfully integrate these companies into its operations, and operate profitably;

● The Company’s ability to successfully sell its existing operating business assets and its real estate assets and distribute

these proceeds to its existing shareholder base;

● Conditions to the closing of the merger may not be satisfied or the merger may involve unexpected costs, liabilities or delays;

● The occurrence of any other risks to consummation of the merger, including the risk that the merger will not be consummated

within the expected time period or any event, change or other circumstances that could give rise to the termination of the merger

● Risks that the merger disrupts current CSI plans and operations or that the business or stock price of CSI may suffer as a

result of uncertainty surrounding the merger;

● The outcome of any legal proceedings related to the merger;

● CSI or Pineapple Energy may be adversely affected by other economic, business, or competitive factors.

Risks Related to Our Traditional Business

The primary markets we serve are highly competitive, and

our ability to compete requires continual focus on delivering high-quality, competitively priced products and services and the

regular introduction of new products and services that meet evolving customer requirements.

Competition in the markets for enterprise

networks and voice and data communications products is intense.

Our ability to compete with other manufacturers and marketers of

these products depends primarily on our engineering, OEM/ODM relationships, manufacturing, and marketing skills;

the price, quality

and reliability of our products;

our delivery and service capabilities;

and our control of operating expenses.

Our JDL subsidiary

experiences intense competition from other providers of IT products and services.

We have experienced, and anticipate continuing

to experience, pricing pressures from our customers as well as our competitors.

The markets we serve are characterized by rapid

technological advances and evolving industry standards.

These markets can be significantly affected by new product introductions

and marketing activities of industry participants.

Some of our current competitors and potential competitors have greater financial,

technological, manufacturing, marketing, and personnel resources than we possess.

These current and future competitors may be able

to identify new markets and develop new products that are superior to those we develop.

They may also adapt new technologies faster,

devote greater resources to research and development, promote products more aggressively, and price products more competitively.

We cannot ensure that competition will not intensify or that we will be able to compete effectively in the markets in which we

Our gross margins have fluctuated year to year, and we

face many challenges in maintaining acceptable margins.

Gross margins among our products and services

vary and are subject to fluctuation from quarter to quarter and year to year.

The factors that may affect our gross margins adversely

are numerous and include:

As described in this Annual Report on Form 10-K, on March 1, 2021, CSI, Helios Merger Co., a Minnesota corporation and a wholly-owned subsidiary of CSI (“Merger Sub”), and Pineapple Energy LLC, a Delaware limited liability company (“Pineapple”), entered into a merger agreement, pursuant to which Merger Sub will merge with and into Pineapple, with Pineapple surviving the merger as a wholly-owned subsidiary of CSI.

The merger and the other transactions contemplated by the merger agreement are referred to collectively as the “Pineapple Merger Transaction.” Following the merger, CSI will be renamed “Pineapple Holdings, Inc.” and is sometimes referred to herein as the “combined company.” As consideration for the merger, CSI will issue shares of its common stock to the members of Pineapple and the members of Pineapple will become the majority owners of CSI’s outstanding common stock upon the closing of the merger.

The Pineapple Merger Transaction is subject to approval by the CSI shareholders at a special meeting of shareholders that has been scheduled for Wednesday, March 16, 2022, at 10:00 a.m.

Central Time.

If the merger is approved by CSI shareholders and the merger is consummated, the combined company will be subject to the risks set forth under “ Risks Related to the Combined Company Following Consummation of the Merger .”

If the merger is not approved by CSI shareholders or the merger is not consummated for any other reason, CSI will be subject to the risks set forth under “ Risks Related to CSI Following Termination of the Merger .”

Certain statements contained in this Annual Report on Form 10-K are “forward-looking” statements within the meaning of and in reliance on the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for forward-looking statements.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors, including those factors discussed below.

Risks Related to the Combined Company Following Consummation of the Merger

Risks Relating to the Combined Company’s Business

The combined company’s growth strategy depends on the continued origination of solar service agreements.

The combined company may be unable to originate additional solar service agreements and related solar energy systems in the numbers or at the pace the combined company currently expects for a variety of reasons, including, but not limited to, the following:

 demand for solar energy systems failing to develop sufficiently or taking longer than expected to develop;

 residential solar energy technology being unavailable at economically attractive prices as a result of factors outside of the combined company’s control, including utility prices not rising as quickly as anticipated;

 issues related to financing, construction, permitting, the environment, governmental approvals and the negotiation of solar service agreements;

 a reduction in government incentives or adverse changes in policy and laws for the development or use of solar energy, including net metering, solar renewable energy credits (“SRECs”) and tax credits;

 other government or regulatory actions that could adversely affect the combined company’s business model;

 supply chain issues considering most residential solar panels are manufactured outside the US;

 negative developments in public perception of the solar energy industry;

 competition from other solar companies following a similar business plan to that contemplated by the company and other energy technologies, including the emergence of alternative renewable energy technologies.

If the challenges of originating solar service agreements increase, the combined company’s pool of available opportunities may be limited, which could have a material adverse effect on its business, financial condition, cash flows and results of operations.

If sufficient additional demand for residential solar energy systems does not develop or takes longer to develop than the combined company anticipates, its ability to originate solar service agreements may decrease.

The distributed residential solar energy market is at a relatively early stage of development in comparison to fossil fuel-based electricity generation.

If additional demand for distributed residential solar energy systems fails to develop sufficiently or takes longer to develop than the combined company anticipates, it may be unable to originate additional solar service agreements and related solar energy systems to grow its business.

In addition, demand for solar energy systems in the combined company’s targeted markets may not develop to the extent it anticipates.

As a result, the combined company may be unsuccessful in broadening its customer base through origination of solar service agreements and related solar energy systems within its current markets or in new markets it may enter.

Many factors may affect the demand for solar energy systems, including, but not limited to, the following:

 availability, substance and magnitude of solar support programs, including government targets,

 subsidies, incentives, renewable portfolio standards and residential net metering rules;

 the relative pricing of other conventional and non-renewable energy sources, such as natural gas, coal, oil and other fossil fuels, wind, utility-scale solar, nuclear, geothermal and biomass;

 performance, reliability and availability of energy generated by solar energy systems compared to conventional and other non-solar renewable energy sources;

 availability and performance of energy storage technology, the ability to implement this technology for use in conjunction with solar energy systems and the cost competitiveness this technology provides to customers as compared to costs for those customers that rely solely on the conventional electrical grid;

 general economic conditions, supply chain conditions and the level of interest rates.

The residential solar energy industry is constantly evolving, which makes it difficult to evaluate the combined company’s prospects.

The combined company cannot be certain if historical growth rates reflect future opportunities or whether it will achieve the growth it anticipates.

The failure of distributed residential solar energy to achieve, or its being significantly delayed in achieving, widespread adoption could have a material adverse effect on the combined company’s business, financial condition and results of operations.

If the combined company fails to manage its operations and growth effectively, it may be unable to execute its business plan, maintain high levels of customer service or adequately address competitive challenges.

The combined company will be focused on achieving significant revenue growth in the future measured by its number of customers and it intends to continue its efforts to expand its business within existing and new markets.

This growth may place a strain on the combined company’s management, operational and financial infrastructure.

The combined company’s growth requires management to devote a significant amount of time and effort to maintain and expand its relationships with customers and third parties, attract new customers, arrange financing for its growth and manage its expansion into additional markets.

In addition, the combined company’s current and planned operations, personnel, information technology and other systems and procedures might be inadequate to support future growth and may require it to make additional unanticipated investments in its infrastructure.

The combined company’s success and ability to further scale its business will depend, in part, on its ability to manage these changes in a cost-effective and efficient manner.

If the combined company cannot manage its operations and growth, it may be unable to meet its or others’ expectations regarding growth, opportunity and financial targets, take advantage of market opportunities, execute its business strategies or respond to competitive pressures.

This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties.

Any failure to effectively manage the combined company’s operations and growth could adversely impact its reputation, business, financial condition, cash flows and results of operations.

A material reduction in the retail price of electricity charged by electric utilities or other retail electricity providers could harm the combined company’s business, financial condition and results of operations.

Decreases in the retail price of electricity from electric utilities or from other retail electric providers, including other renewable energy sources such as larger-scale solar energy systems, could make the combined company’s offerings less economically attractive.

The price of electricity from utilities could decrease for any one or more reasons, including but not limited to:

 the construction of a significant number of new power generation plants, whether generated by natural gas, nuclear power, coal or renewable energy;

 the construction of additional electric transmission and distribution lines;

 a reduction in the price of natural gas or other natural resources as a result of increased supply due to new drilling techniques or other technological developments,

 a relaxation of associated regulatory standards or broader economic or policy developments;

 less demand for electricity due to energy conservation technologies and public initiatives to reduce electricity consumption or to recessionary economic conditions;

 development of competing energy technologies that provide less expensive energy.

A reduction in electric utilities’ rates or changes to peak hour pricing policies or rate design (such as the adoption of a fixed or flat rate or adding fees to homeowners that have residential solar systems) could also make the combined company’s offerings less competitive with the price of electricity from the electrical grid.

If the cost of energy available from electric utilities or other providers were to decrease relative to solar energy generated from residential solar energy systems or if similar events affecting the economics of the combined company’s offerings were to occur, it may have difficulty attracting new customers or existing customers may default or seek to terminate, cancel or otherwise avoid the obligations under their solar service agreements.

For example, large utilities in California have started transitioning customers to time-of-use rates and also have adopted a shift in the peak period for time-of-use rates to later in the day.

Unless grandfathered under a different rate, residential customers with solar energy systems may be required to take service under time-of-use rates with the later peak period.

Moving utility customers to time-of-use rates or the shift in the timing of peak rates for utility-generated electricity to include times of day when solar energy generation is less efficient or non-operable could also make the combined company’s offerings less competitive.

Time-of-use rates could also result in higher costs for the combined company’s customers whose electricity requirements are not fully met during peak periods by the combined company’s solar systems.

Additionally, the price of electricity from utilities may grow less quickly than the price escalator feature in certain of the combined company’s solar service agreements, which could also make its solar energy systems less competitive with the price of electricity from the electrical grid and result in a material adverse effect on the combined company’s business, financial condition and results of operations.

The combined company needs to obtain substantial additional financing arrangements to provide working capital and growth capital and if financing is not available to it on acceptable terms when needed, its ability to continue to grow its business would be materially adversely impacted.

Distributed residential solar power is a capital-intensive business that relies heavily on the availability of debt and equity financing sources to fund solar energy system purchase, design, engineering and other capital expenditures.

The combined company’s future success depends in part on its ability to raise capital from third-party investors and commercial sources, such as banks and other lenders, on competitive terms to help finance the deployment of its solar energy systems.

The combined company seeks to minimize its cost of capital to improve profitability and maintain the price competitiveness of the electricity produced by, the payments for and the cost of its solar energy systems.

Although the combined company relies on access to capital to cover the costs related to bringing its solar energy systems in service, its customers ultimately bear responsibility for those costs pursuant to the solar service agreements.

To meet the capital needs of the combined company’s growing business, it will need to obtain additional debt or equity financing from current and new investors.

If any of the combined company’s current debt or equity investors decide not to invest in it in the future for any reason, or decide to invest at levels inadequate to support its anticipated needs or materially change the terms under which they are willing to provide future financing, it will need to identify new investors and financial institutions to provide financing and negotiate new financing terms.

In addition, the combined company’s ability to obtain additional financing through the asset-backed securities market or other secured debt markets is subject to the combined company having sufficient assets eligible for securitization as well as the combined company’s ability to obtain and maintain appropriate credit ratings.

If the combined company is unable to raise additional capital in a timely manner, its ability to meet its capital needs and fund future growth may be limited.

Delays in obtaining financing could cause delays in expanding in existing markets or entering into new markets and hiring additional personnel.

Any future delays in capital raising could similarly cause the combined company to delay deployment of a substantial number of solar energy systems for which it has signed solar service agreements with customers.

The combined company’s future ability to obtain additional financing depends on banks’ and other financing sources’ continued confidence in its business model and the renewable energy industry as a whole.

It could also be impacted by the liquidity needs of such financing sources themselves.

The combined company faces intense competition from a variety of other companies, technologies and financing structures for such limited investment capital.

If the combined company is unable to continue to offer a competitive investment profile, it may lose access to these funds or they may only be available to it on terms less favorable than those received by its competitors.

For example, if the combined company experiences higher customer default rates than it has historically experienced, it could be more difficult or costly to attract future financing.

Any inability to secure financing could lead the combined company to cancel planned installations, impair its ability to accept new customers or increase its borrowing costs, any of which could have a material adverse effect on its business, financial condition and results of operations.

The combined company’s business prospects are dependent in part on a continuing decline in the cost of solar energy system components and the combined company’s business may be adversely affected to the extent the cost of these components stabilize or increase in the future.

The market for residential solar energy systems has benefitted from the declining cost of solar energy system components and to the extent these costs stabilize, decline at a slower rate or increase, the combined company’s future growth rate may be negatively affected.

The declining cost of solar energy system components and the raw materials necessary to manufacture them has been a key driver in the price of solar energy systems, the prices charged for electricity and customer adoption of solar energy.

Solar energy system component and raw material prices may not continue to decline at the same rate as they have over the past several years or at all.

In addition, growth in the solar industry and the resulting increase in demand for solar energy system components and the raw materials necessary to manufacture them may also put upward pressure on prices.

An increase of solar energy system components and raw materials prices could slow the combined company’s growth and cause its business and results of operations to suffer.

Further, the cost of solar energy system components and raw materials has increased and could increase in the future due to tariff penalties, duties, the loss of or changes in economic governmental incentives or other factors.

The combined company faces competition from centralized electric utilities, retail electric providers, independent power producers and renewable energy companies.

The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large centralized electric utilities.

The combined company will compete with these centralized electric utilities primarily based on price (cents per kWh), predictability of future prices (by providing pre-determined annual price escalations) and the ease by which customers can switch to electricity generated by its solar energy systems.

The combined company may also compete based on other value-added benefits, such as reliability and carbon-friendly power.

If the combined company cannot offer compelling value to its customers based on these factors, its business may not grow.

Centralized electric utilities generally have substantially greater financial, technical, operational and other resources than the combined company does.

As a result, these competitors may be able to devote more resources to the research, development,

promotion and sale of their products or services or respond more quickly to evolving industry standards and changes in market conditions than the combined company can.

Centralized electric utilities could also offer other value-added products or services that could help them to compete with the combined company, even if the cost of electricity they offer is higher than the combined company’s.

In addition, a majority of utilities’ sources of electricity is non-solar, which may allow utilities to sell electricity more cheaply than electricity generated by the combined company’s solar energy systems.

Centralized electric utilities could also offer customers the option of purchasing electricity obtained from renewable energy resources, including solar, which would compete with the combined company’s offerings.

The combined company will also compete with retail electric providers and independent power producers that are not regulated like centralized electric utilities but that have access to the centralized utilities’ electricity transmission and distribution infrastructure pursuant to state, territorial and local pro-competition and consumer choice policies.

These retail electric providers and independent power producers are able to offer customers electricity supply-only solutions that are competitive with the combined company’s solar energy system options on both price and usage of renewable energy technology while avoiding the longer-term agreements and physical installations the combined company’s business model requires.

This may limit the combined company’s ability to acquire new customers, particularly those who wish to avoid long-term agreements or have an aesthetic or other objection to putting solar panels on their roofs.

The combined company will also compete with solar companies with business models similar to its own, who market to similar potential customers.

Some of these competitors specialize in the distributed residential solar energy market and some may provide energy at lower costs than it does.

Some of the combined company’s competitors offer or may offer similar services and products as the combined company.

Many of the combined company’s competitors also have significant brand name recognition and have extensive knowledge of its target markets.

The combined company will also compete with solar companies that offer community solar products and utility companies that provide renewable power purchase programs.

Some customers might choose to subscribe to a community solar project or renewable subscriber programs instead of installing a solar energy system on their home, which could affect the combined company’s sales.

Additionally, some utility companies (and some utility-like entities, such as community choice aggregators in California) have generation portfolios that are increasingly renewable in nature.

In California, for example, due to recent legislation, utility companies and community choice aggregators in that state are required to have generation portfolios comprised of 60% renewable energy by 2030 and state regulators are planning for utility companies and community choice aggregators to sell 100% greenhouse gas free electricity to retail customers by 2045.

As utility companies offer increasingly renewable portfolios to retail customers, those customers might be less inclined to install a solar energy system at their home, which could adversely affect the combined company’s growth.

The combined company will compete with companies who sell solar energy systems and services in the commercial, industrial and government markets, in addition to the residential market, in the U.S.

and foreign markets.

There is intense competition in the residential solar energy sector in the markets in which the combined company operates.

As new entrants continue to enter into these markets, the combined company may be unable to grow or maintain its operations and it may be unable to compete with companies that earn revenue in both the residential market and non-residential markets.

Further, because Pineapple, HEC and E-Gear currently provide services primarily to residential customers, the combined company will have a less diverse market presence and will be more exposed to potential adverse changes in the residential market than its competitors that sell solar energy systems and services in the commercial, industrial, government and utility markets.

As the solar industry grows and evolves, the combined company will also face new competitors and technologies who are not currently in the market.

The combined company’s industry is characterized by low technological barriers to entry and well-capitalized companies, including utilities and integrated energy companies, could choose to enter the market and compete with us.

The combined company’s failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit its growth and will have a material adverse effect on its business, financial condition and results of operations.

Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for the combined company’s offerings.

Significant developments in technology, such as advances in distributed solar power generation, energy storage solutions such as batteries, energy storage management systems, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of distributed or centralized power production may materially and adversely affect demand for the combined company’s offerings and otherwise affect its business.

Future technological advancements may result in reduced prices to consumers or more efficient solar energy systems than those available today, either of which may result in current customer dissatisfaction.

The combined company may not be able to adopt these new technologies as quickly as its competitors or on a cost-effective basis.

It is possible that the solar energy system deployed on a customer’s residence may be outdated prior to the expiration of the term of the related solar service agreement, reducing the likelihood of renewal of the combined company’s solar service agreement at the end

of the applicable term and possibly increasing the occurrence of customers seeking to terminate or cancel their solar service agreements or defaults.

If current customers become dissatisfied with the price they pay for their solar energy system under the combined company’s solar service agreements relative to prices that may be available in the future or if customers become dissatisfied by the output generated by their solar energy systems relative to future solar energy system production capabilities, or both, this may lead to customers seeking to terminate or cancel their solar service agreements or higher rates of customer default, which would adversely affect the combined company’s business, financial condition and results of operations.

Additionally, recent technological advancements may affect the combined company’s business in ways it does not currently anticipate.

Any failure by the combined company to adopt or have access to new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence or the loss of competitiveness of and decreased consumer interest in its solar energy services, which could have a material adverse effect on its business, financial condition and results of operations.

The combined company will depend on a limited number of suppliers of solar energy system components and technologies to adequately meet demand for its solar energy systems.

The combined company will purchase solar panels, inverters, energy storage systems and other system components and instruments from a limited number of suppliers making it susceptible to quality issues, shortages and price changes.

If one or more of the suppliers the combined company relies upon to meet anticipated demand ceases or reduces production due to its financial condition, acquisition by a competitor or otherwise, is unable to increase production as industry demand increases or is otherwise unable to allocate sufficient production to it, it may be difficult to quickly identify alternative suppliers or to qualify alternative products on commercially reasonable terms and the combined company’s ability to satisfy this demand may be adversely affected.

There are a limited number of suppliers of solar energy system components, instruments and technologies.

While the combined company believes there are other available sources of supply for these products, its need to transition to a new supplier may result in additional costs and delays in originating solar service agreements and deploying its related solar energy systems, which in turn may result in additional costs and delays in its acquisition of such solar service agreements and related solar energy systems.

These issues could have a material adverse effect on the combined company’s business, financial condition and results of operations.

There have also been periods of industry-wide shortages of key components and instruments, including batteries and inverters, in times of rapid industry growth.

The manufacturing infrastructure for some of these components has a long lead-time, requires significant capital investment and relies on the continued availability of key commodity materials, which could potentially result in an inability to meet demand for these components.

The solar industry is currently experiencing rapid growth and, as a result, shortages of key components or instruments, including solar panels, may be more likely to occur, which in turn may result in price increases for such components.

Even if industry-wide shortages do not occur, manufacturers and suppliers experiencing high demand or insufficient production capacity for key components may allocate these key components to customers other than the combined company or its suppliers.

The combined company’s ability to originate solar service agreements and related solar energy systems would be reduced as a result of the allocation of key components by manufacturers and suppliers.

The combined company’s supply chain and operations could be subject to natural disasters and other events beyond its control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, power outages or other natural disasters, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties.

Human rights and forced labor issues in foreign countries and the U.S.

government’s response to them could disrupt the combined company’s supply chain and its operations could be adversely impacted.

Additionally, if the impacts of the COVID-19 outbreak, including the accompanying travel restrictions and business closures, continue for an extended period of time or worsen, the supply and pricing of the combined company’s inverters and other goods and therefore its ability to install new solar energy systems could be adversely affected.

The extent of the impact of COVID-19 on the combined company’s business and operations will depend on, among other factors, the duration and severity of the outbreak, travel restrictions and business closures imposed and its ability to contract for supply from other sources on acceptable terms.

Increases in the cost of the combined company’s solar energy systems due to tariffs imposed by the U.S.

government could have a material adverse effect on its business, financial condition and results of operations.

China is a major producer of solar cells and other solar products.

Certain solar cells, modules, laminates and panels from China are subject to various U.S.

antidumping and countervailing duty rates, depending on the exporter supplying the product, imposed by the U.S.

government as a result of determinations that the U.S.

was materially injured as a result of such imports being sold at less than fair value and subsidized by the Chinese government.

If alternative sources are not available on competitive terms in the future, the combined company may seek to purchase these products from manufacturers in China.

In addition, tariffs on solar cells, modules and inverters in China may put upward pressure on prices of these products in other jurisdictions from which the combined company currently purchases equipment, which could reduce its ability to offer competitive pricing to potential customers.

The combined company cannot predict what, if any, additional actions the U.S.

may adopt with respect to tariffs or other trade regulations or what actions may be taken by other countries in retaliation for such measures.

If additional measures are imposed or other negotiated outcomes occur, the combined company’s ability to purchase these products on competitive terms or to access

specialized technologies from other countries could be further limited, which could adversely affect its business, financial condition and results of operations.

The combined company’s operating results and its ability to grow may fluctuate from quarter to quarter and year to year, which could make its future performance difficult to predict and could cause its operating results for a particular period to fall below expectations.

The combined company’s quarterly and annual operating results are difficult to predict and may fluctuate significantly in the future.

In addition to the other risks described in this “ Risks Related to the Combined Company Following Consummation of the Merger ” section, the following factors could cause the combined company’s operating results to fluctuate:

 expiration or initiation of any governmental rebates or incentives;

 significant fluctuations in customer demand for the combined company’s solar energy services and solar energy systems;

 the availability, terms and costs of suitable financing;

 the amount, timing of sales and potential decreases in value of SRECs;

 our ability to continue to expand the combined company’s operations and the amount and timing of expenditures related to this expansion;

 announcements by the combined company or its competitors of significant acquisitions,

 strategic partnerships, joint ventures or capital-raising activities or commitments;

 changes in the combined company’s pricing policies or terms or those of its competitors, including centralized electric utilities;

 actual or anticipated developments in the combined company’s competitors’ businesses,

 technology or the competitive landscape;

 natural disasters or other weather or meteorological conditions.

For these or other reasons, past performance of Pineapple, HEC or E-Gear should not be relied upon as indications of the combined company’s future performance.

If the combined company is unable to make acquisitions on economically acceptable terms, its future growth would be limited, and any acquisitions it may make could reduce, rather than increase, its cash flows.

The combined company intends to acquire solar energy systems, energy storage systems and related businesses and joint ventures.

The consummation and timing of any future acquisitions will depend upon, among other things, whether the combined company is able to:

 identify attractive acquisition candidates;

 negotiate economically acceptable purchase agreements;

 obtain any required governmental or third-party consents;

 obtain financing for these acquisitions on economically acceptable terms,

 which may be more difficult at times when the capital markets are less accessible;

 outbid any competing bidders.

Additionally, any acquisition involves potential risks, including, among other things:

 mistaken assumptions about assets, revenues and costs of the acquired company,

 including synergies and potential growth;

 an inability to secure adequate customer commitments to use the acquired systems or facilities;

 an inability to successfully integrate the assets or businesses the combined company acquires;

 coordinating geographically disparate organizations, systems and facilities;

 the assumption of unknown liabilities for which the combined company is not

 indemnified or for which its indemnity is inadequate;

 mistaken assumptions about the acquired company’s suppliers or other vendors;

 the diversion of management’s and employees’ attention from other business concerns;

 unforeseen difficulties operating in new geographic areas and business lines;

 customer or key employee losses at the acquired business;

 poor quality assets or installation.

If the combined company consummates any future acquisitions, its capitalization, results of operations and future growth may change significantly and its shareholders may not have the opportunity to evaluate the economic, financial and other relevant information considered in deciding to engage in these future acquisitions.

Product liability and property damage claims against the combined company or accidents could result in adverse publicity and potentially significant monetary damages.

It is possible that the combined company’s solar energy systems could injure its customers or other third parties or its solar energy systems could cause property damage as a result of product malfunctions, defects, improper installation, fire or other causes.

Any product liability claim the combined company faces could be expensive to defend and may divert management’s attention.

The successful assertion of product liability claims against the combined company could result in potentially significant monetary damages, potential increases in insurance expenses, penalties or fines, subject it to adverse publicity, damage its reputation and competitive position and adversely affect sales of solar energy systems.

In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions to the industry as a whole and may have an adverse effect on the combined company’s ability to expand its portfolio of solar service agreements and related solar energy systems, thus affecting its business, financial condition and results of operations.

The combined company will not be able to insure against all potential risks and it may become subject to higher insurance premiums.

The combined company will be exposed to numerous risks inherent in the operation of solar energy systems, including equipment failure, manufacturing defects, natural disasters such as hurricanes, fires and earthquakes, terrorist attacks, sabotage, vandalism and environmental risks.

Furthermore, components of the combined company’s solar energy systems, such as panels, inverters and batteries, could be damaged by severe weather, such as tsunamis, hurricanes, tornadoes, hailstorms or lightning.

If the combined company’s solar energy systems are damaged in the event of a natural disaster beyond its control, losses could be outside the scope of insurance policies or exceed insurance policy limits and it could incur unforeseen costs that could harm its business and financial condition.

The combined company may also incur significant additional costs in taking actions in preparation for, or in reaction to, such events.

The combined company’s insurance policies will also cover legal and contractual liabilities arising out of bodily injury, personal injury or property damage to third parties and are subject to policy limits.

The combined company will also maintain coverage for physical damage to its solar energy assets.

However, these policies do not cover all potential losses and coverage is not always available in the insurance market on commercially reasonable terms.

Furthermore, the receipt of insurance proceeds may be delayed, requiring the combined company to use cash or incur financing costs in the interim.

To the extent the combined company experiences covered losses under its insurance policies, the limit of its coverage for potential losses may be decreased or the insurance rates it has to pay increased.

Furthermore, the losses insured through commercial insurance are subject to the credit risk of those insurance companies.

The combined company may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates.

The insurance coverage the combined company does obtain may contain large deductibles or fail to cover certain risks or all potential losses.

In addition, the combined company’s insurance policies will be subject to annual review by its insurers and may not be renewed on similar or favorable terms, including coverage, deductibles or premiums, or at all.

If a significant accident or event occurs for which the combined company is not fully insured or it suffers losses due to one or more of its insurance carriers defaulting on their obligations or contesting their coverage obligations, it could have a material adverse effect on its business, financial condition and results of operations.

Damage to the combined company’s brand and reputation or change or loss of use of its brand could harm its business and results of operations.

The combined company will depend significantly on its reputation for high-quality products, excellent customer service and brand name to attract new customers and grow its business.

If the combined company fails to continue to deliver its solar energy systems within the planned timelines, if its offerings do not perform as anticipated or if it damages any of its customers’ properties or delay or cancel projects, its brand and reputation could be significantly impaired.

Future technological improvements may allow the combined company to offer lower prices or offer new technology to new customers;

however, technical limitations in its current solar energy systems may prevent it from offering such lower prices or new technology to the combined company’s existing customers.

The inability of the combined company’s current customers to benefit from technological improvements could cause its existing customers to lower the value they perceive the combined company’s existing products offer and impair its brand and reputation.

In addition, given the sheer number of interactions the combined company’s personnel will have with customers and potential customers, it is inevitable that some customers’ and potential customers’ interactions with it will be perceived as less than satisfactory.

If the combined company cannot manage its hiring and training processes to avoid or minimize these issues to the extent possible, its reputation may be harmed and its ability to attract new customers would suffer.

The installation and operation of solar energy systems depends heavily on suitable solar and meteorological conditions.

If meteorological conditions are unexpectedly unfavorable, the electricity production from the combined company’s solar energy systems may be substantially below its expectations and its ability to timely deploy new solar energy systems may be adversely impacted.

The energy produced and the revenue and cash flows generated by a solar energy system depend on suitable solar, atmospheric and weather conditions, all of which are beyond the combined company’s control.

If the solar energy systems underperform expectations for any reason, the combined company’s business could suffer.

These solar, atmospheric and weather conditions, and other factors, can delay the timing of when solar energy systems can be installed and when the combined company can originate and begin to generate revenue from solar energy systems.

This may increase the combined company’s expenses and decrease revenue and cash flows in the relevant periods.

Furthermore, prevailing weather patterns could materially change in the future, making it harder to predict the average annual amount of sunlight striking each location where the combined company installs a solar energy system.

This could make the combined company’s solar energy systems less economical overall or make individual solar energy systems less economical.

Any of these events or conditions could harm the combined company’s business, financial condition and results of operations.

The loss of one or more members of the combined company’s senior management or key employees may adversely affect its ability to implement its strategy.

The combined company will depend on its experienced management team and the loss of one or more key executives could have a negative impact on its business.

The combined company may be unable to replace key members of its management team and key employees if it loses their services.

Integrating new employees into the combined company’s team could prove disruptive to the combined company’s operations, require substantial resources and management attention and ultimately prove unsuccessful.

An inability to attract and retain sufficient managerial personnel who have critical industry experience and relationships could limit or delay the combined company’s strategic efforts, which could have a material adverse effect on its business, financial condition and results of operations.

The combined company’s inability to protect its intellectual property could adversely affect its business.

The combined company may also be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require it to pay significant damages and could limit its ability to use certain technologies.

Any failure to protect the combined company’s proprietary rights adequately could result in its competitors offering similar residential solar technology more quickly than anticipated, potentially resulting in the loss of some of its competitive advantage and a decrease in its revenue that would adversely affect its business prospects, financial condition and operating results.

The combined company’s success depends, at least in part, on its ability to protect its core technology and intellectual property.

The combined company will rely on intellectual property laws, primarily a combination of copyright and trade secret laws in the U.S., as well as license agreements and other contractual provisions, to protect its proprietary technology and brand.

The combined company cannot be certain its agreements and other contractual provisions will not be breached, including a breach involving the use or disclosure of its trade secrets or know-how, or that adequate remedies will be available in the event of any breach.

In addition, the combined company’s trade secrets may otherwise become known or lose trade secret protection.

The combined company cannot be certain its products and its business do not or will not violate the intellectual property rights of a third party.

Third parties, including the combined company’s competitors, may own patents or other intellectual property rights that cover aspects of its technology or business methods.

These parties may claim the combined company has misappropriated, misused,

violated or infringed third-party intellectual property rights and if it gains greater recognition in the market, it faces a higher risk of being the subject of claims it has violated others’ intellectual property rights.

Any claim the combined company has violated a third party’s intellectual property rights, whether with or without merit, could be time-consuming, expensive to settle or litigate and could divert its management’s attention and other resources, all of which could adversely affect its business, results of operations, financial condition and cash flows.

If the combined company does not successfully settle or defend an intellectual property claim, it could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content or brands.

To avoid a prohibition, the combined company could seek a license from third parties, which could require it to pay significant royalties, increasing its operating expenses.

If a license is not available at all or not available on commercially reasonable terms, the combined company may be required to develop or license a non-violating alternative, either of which could adversely affect its business, results of operations, financial condition and cash flows.

The combined company may be subject to interruptions or failures in its information technology systems.

The combined company will rely on information technology systems and infrastructure to support its business.

Any of these systems may be susceptible to damage or interruption due to fire, floods, power loss, telecommunication failures, usage errors by employees, computer viruses, cyberattacks or other security breaches or similar events.

A compromise of the combined company’s information technology systems or those with which it interacts could harm its reputation and expose it to regulatory actions and claims from customers and other persons, any of which could adversely affect its business, financial condition, cash flows and results of operations.

If the combined company’s information systems are damaged, fail to work properly or otherwise become unavailable, it may incur substantial costs to repair or replace them and it may experience a loss of critical information, customer disruption and interruptions or delays in its ability to perform essential functions.

The combined company’s information technology systems may be exposed to various cybersecurity risks and other disruptions that could impair its ability to operate, adversely affect its business, and damage its brand and reputation.

The combined company will rely extensively on its information technology systems or on third parties for services including its enterprise resource planning (“ERP”) system, banking, payroll, shipping, and e-mail systems to conduct business.

The combined company also collects, stores and transmits sensitive data, including proprietary business information and personally identifiable information of its customers, suppliers and employees.

Despite the combined company’s information technology systems and data security program, the implementation of security measures to protect its data and infrastructure against breaches and other cyber threats, and its use of internal processes and controls designed to protect the security and availability of its systems, its information technology and communication systems may be vulnerable to cybersecurity risks such as computer viruses, hacking, malware, denial of service attacks, cyber terrorism, circumvention of security systems, malfeasance, breaches due to employee error, natural disasters, telecommunications failure, at its facilities or at third-party locations.

Complying with the varying cybersecurity and data privacy regulatory requirements could cause the combined company to incur substantial costs or require it to change its business practices in a manner adverse to its business.

Any failure, or perceived failure, by the combined company to comply with any regulatory requirements or international privacy or consumer protection-related laws and regulations could result in proceedings or actions against it by governmental entities or others, subject it to significant penalties and negative publicity and adversely affect us.

In addition, as noted above, the combined company is subject to the possibility of security breaches, which themselves may result in a violation of these laws.

Any failure, breach or unauthorized access to the combined company’s or third-party systems could result in the loss of confidential, sensitive or proprietary information, interruptions in its service or production or otherwise its ability to conduct business operations, and could result in potential reductions in revenue and profits, damage to its reputation or liability.

Given that the combined company will receive, store and use personal information of its customers, including names, addresses, e-mail addresses, credit information, credit card and financial account information and other housing and energy use information, this risk is amplified.

There can be no assurance that the combined company’s protective measures will prevent or timely detect security breaches that could have a significant impact on its business, reputation, operating results and financial condition.

If a cyberattack or other security incident were to allow unauthorized access to or modification of the combined company’s customers’ data or its own data, whether due to a failure with its systems or related systems operated by third parties, it could suffer damage to its brand and reputation.

The costs the combined company would incur to address and fix these incidents would increase its expenses.

These types of security incidents could also lead to lawsuits, regulatory investigations and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Further, as regulatory focus on privacy and data security issues continues to increase and worldwide laws and regulations concerning the protection of information become more complex, the potential risks and costs of compliance to the combined company’s business will intensify.

Terrorist or cyberattacks against centralized utilities could adversely affect the combined company’s business.

Assets owned by utilities such as substations and related infrastructure have been physically attacked in the past and will likely be attacked in the future.

These facilities are often protected by limited security measures, such as perimeter fencing.

Any such attacks may result in interruption to electricity flowing on the grid and consequently could interrupt service to the combined company’s solar energy systems, which could adversely affect its operations.

Furthermore, cyberattacks, whether by individuals or nation states, against utility companies could severely disrupt their business operations and result in loss of service to customers, which would adversely affect the combined company’s operations.

For example, the May 2021 ransomware attack on the owners of the Colonial Pipeline system forced a shutdown of its operations for multiple days, requiring significant capital outlays and concerns by customers and regulators of the reliability of the electricity provision.

In the event the combined company was plagued by similar cyberattacks, customers could choose other sources for electricity, which would adversely affect the combined company’s operations.

Increased cyberattacks generally may also materially increase the combined company’s defense costs, which would adversely affect our profitability.

The ongoing COVID-19 pandemic could adversely affect the combined company’s business, financial condition and results of operations.

The ongoing COVID-19 pandemic continues to be a rapidly evolving situation, including due to the recent surge in COVID-19 variants such as the Delta and Omicron variants.

The COVID-19 pandemic and efforts to respond to it have resulted in and may continue to result in widespread adverse impacts on the global economy.

If there are additional outbreaks of the COVID-19 virus or other viruses or more stringent health and safety guidelines are adopted, the combined company’s ability to perform installations and service calls may be adversely affected.

A significant or extended decline in new contract origination may have a material adverse effect on the combined company’s business, cash flows, liquidity, financial condition and results of operations.

The combined company cannot predict the full impact the COVID-19 pandemic or the significant disruption and volatility currently being experienced in the capital markets will have on its business, cash flows, liquidity, financial condition and results of operations at this time due to numerous uncertainties.

The ultimate impact will depend on future developments, including, among other things, the ultimate duration of the COVID-19 virus, the distribution, acceptance and efficacy of the vaccine, the depth and duration of the economic downturn and other economic effects of the COVID-19 pandemic, the consequences of governmental and other measures designed to prevent the spread of the COVID-19 virus, actions taken by governmental authorities, customers and other third parties, the combined ability and the ability of customers and potential customers to adapt to operating in a changed environment and the timing and extent to which normal economic and operating conditions resume.

Combined Company Regulatory Risks

The combined company will not be regulated as an electric public utility under applicable law, but may be subject to regulation as an electric utility in the future.

Immediately following the closing of the merger, the combined company will not be regulated as an electric public utility in the U.S.

under applicable national, state or other local regulatory regimes where it conducts business.

As a result, the combined company will not be subject to the various federal, state and local standards, restrictions and regulatory requirements applicable to centralized public utilities.

Any federal, state or local law or regulations that cause the combined company to be treated as an electric utility or to otherwise be subject to a similar regulatory regime of commission-approved operating tariffs, rate limitations and related mandatory provisions, could place significant restrictions on its ability to operate its business and execute its business plan by prohibiting, restricting or otherwise regulating its sale of electricity.

If the combined company were subject to the same state or federal regulatory authorities as centralized electric utilities in the U.S.

and its territories or if new regulatory bodies were established to oversee its business in the U.S.

and its territories or in foreign markets it enters, its operating costs would materially increase or it might have to change its business in ways that could have a material adverse effect on its business, financial condition and results of operations.

Electric utility policies and regulations, including those affecting electric rates, may present regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for electricity from the combined company’s solar energy systems and adversely impact its ability to originate new solar service agreements.

Federal, state and local government regulations and policies concerning the electric utility industry, utility rates and rate structures and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services.

These regulations and policies often relate to electricity pricing.

Policies and regulations that promote renewable energy and distributed energy generation have been challenged by centralized electric utilities and questioned by those in government and others arguing for less governmental spending and involvement in the energy market.

To the extent these views are reflected in government policies and regulations, the changes in such policies and regulations could adversely affect the combined company’s business, financial condition and results of operations.

Furthermore, any effort to overturn federal and state laws, regulations or policies that support solar energy generation or that remove costs or other limitations on other types of energy generation that compete with solar energy projects could materially and adversely affect the combined company’s business.

The combined company will rely on net metering and related policies to offer competitive pricing to its customers in most of its current markets and changes to policies governing net metering may significantly reduce demand for electricity from residential solar energy systems.

Net metering is one of several key policies that have enabled the growth of distributed generation solar energy systems in the U.S., providing significant value to customers for electricity generated by their residential solar energy systems, but not directly consumed on-site.

Net metering allows a homeowner to pay his or her local electric utility for power usage net of production from the solar energy system or other distributed generation source.

Homeowners receive a credit for the energy an interconnected solar energy system generates in excess of that needed by the home to offset energy purchases from the centralized utility made at times when the solar energy system is not generating sufficient energy to meet the customer’s demand.

In many markets, this credit is equal to the residential retail rate for electricity and in other markets, such as Hawaii, where the rate is less than the retail rate and may be set, for example, as a percentage of the retail rate or based upon a valuation of the excess electricity.

In some states and utility territories, customers are also reimbursed by the centralized electric utility for net excess generation on a periodic basis.

Net metering programs have been subject to legislative and regulatory scrutiny in certain states and territories.

These jurisdictions, by statute, regulation, administrative order or a combination thereof, have recently adopted or are considering new restrictions and additional changes to net metering programs either on a state-wide basis or within specific utility territories.

Many of these measures were introduced and supported by centralized electric utilities.

These measures vary by jurisdiction and may include a reduction in the rates or value of the credits customers are paid or receive for the power they deliver back to the electrical grid, caps or limits on the aggregate installed capacity of generation in a state or utility territory eligible for net metering, expiration dates for and phasing out of net metering programs, replacement of net metering programs with alternative programs that may provide less compensation and limits on the capacity size of individual distributed generation systems that can qualify for net metering.

Net metering and related policies concerning distributed generation also received attention from federal legislators and regulators.

If net metering caps in certain jurisdictions are met, if the value of the credit that customers receive for net metering is significantly reduced, if net metering is discontinued or replaced by a different regime that values solar energy at a lower rate or if other limits or restrictions on net metering are imposed, current and future customers may be unable to recognize the same level of cost savings associated with net metering.

The absence of favorable net metering policies or of net metering entirely, or the imposition of new charges that only or disproportionately impact customers that use net metering would likely significantly limit customer demand for distributed residential solar energy systems and the electricity they generate and result in an increased rate of defaults, terminations or cancelations under customer agreements.

The combined company’s ability to lease, finance and sell its solar energy systems and services or sell the electricity generated from its solar energy systems may be adversely impacted by the failure to expand existing limits on the amount of net metering in states that have implemented it, the failure to adopt a net metering policy where it currently is not in place or reductions in the amount or value of credit customers receive through net metering.

This could adversely impact the combined company’s ability to expand its portfolio of solar service agreements and related solar energy systems, its business, financial condition and results of operations.

Additionally, distributed residential solar customers in certain jurisdictions may be subject to higher charges from centralized electric utilities than non-solar customers and such charges should be evaluated together with the net metering policies in place.

If such charges are imposed, the cost savings associated with switching to solar energy may be significantly reduced and the combined company’s ability to expand its portfolio of solar service agreements and related solar energy systems and compete with centralized electric utilities could be impacted.

The combined company’s business will depend in part on the availability of rebates, tax credits and other financial incentives.

The expiration, elimination or reduction of these rebates, credits or incentives or its ability to monetize them could adversely impact its business.

The combined company’s business will depend in part on current government policies that promote and support solar energy and enhance the economic viability of distributed residential solar.

federal, state and local governments established various incentives and financial mechanisms to reduce the cost of solar energy and to accelerate the adoption of solar energy.

These incentives come in various forms, including rebates, tax credits and other financial incentives such as payments for renewable energy credits associated with renewable energy generation, exclusion of solar energy systems from property tax assessments or other taxes and system performance payments.

However, these programs may expire on a particular date, end when the allocated funding is exhausted or be reduced or terminated as solar energy adoption rates increase.

The value of SRECs in a market tends to decrease over time as the supply of SREC-producing solar energy systems installed in that market increases.

If the combined company overestimates the future value of these incentives, it could adversely impact its business, results of operations and financial results.

A loss or reduction in such incentives could decrease the attractiveness of new solar energy systems to customers, which could adversely impact the combined company’s business and its access to capital.

The economics of purchasing a solar energy system are also improved by eligibility for accelerated depreciation, also known as the modified accelerated cost recovery system (“MACRS”), which allows for the depreciation of equipment according to an accelerated schedule set forth by the IRS.

This accelerated schedule

allows a taxpayer to recognize the depreciation of tangible solar property on a five-year basis even though the useful life of such property is generally greater than five years.

To the extent these policies are changed in a manner that reduces the incentives that benefit the combined company’s business, it may experience reduced revenues and reduced economic returns, experience increased financing costs and encounter difficulty obtaining financing.

Applicable authorities may adjust or decrease incentives from time to time or include provisions for minimum domestic content requirements or other requirements to qualify for these incentives.

Reductions in, eliminations or expirations of or additional application requirements for governmental incentives could adversely impact its results of operations and ability to compete in the combined company’s industry by increasing its cost of capital, causing distributed residential solar power companies to increase the prices of their energy and solar energy systems and reducing the size of its addressable market.

In addition, this would adversely impact the combined company’s ability to attract investment partners and lenders and its ability to expand its portfolio of solar service agreements and related solar energy systems.

Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly reduce the combined company’s ability to sell electricity from its solar energy systems in certain markets or delay interconnections and customer in-service dates, harming its growth rate and customer satisfaction.

Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may curb or slow the combined company’s growth in key markets.

Utilities throughout the country follow different rules and regulations regarding interconnection and regulators or utilities have or could cap or limit the amount of solar energy that can be interconnected to the grid.

The combined company’s solar energy systems generally do not provide power to homeowners until they are interconnected to the grid.

With regard to interconnection limits, the Federal Energy Regulatory Commission, (FERC), in promulgating the first form of small generator interconnection procedures, recommended limiting customer-sited intermittent generation resources, such as the combined company’s solar energy systems, to a certain percentage of peak load on a given electrical feeder circuit.

Similar limits have been adopted by many states as a de facto standard and could constrain the combined company’s ability to market to customers in certain geographic areas where the concentration of solar installations exceeds this limit.

Furthermore, in certain areas, the combined company benefits from policies that allow for expedited or simplified procedures related to connecting solar energy systems to the electrical grid.

The combined company also is required to obtain interconnection permission for each solar energy system from the local utility.

In many states and territories, by statute, regulations or administrative order, there are standardized procedures for interconnecting distributed residential solar energy systems to the electric utility’s local distribution system.

However, approval from the local utility could be delayed as a result of a backlog of requests for interconnection or the local utility could seek to limit the number of customer interconnections or the amount of solar energy on the grid.

In some states, certain utilities such as municipal utilities or electric cooperatives are exempt from certain interconnection requirements.

If expedited or simplified interconnection procedures are changed or cease to be available, if interconnection approvals from the local utility are delayed or if the local utility seeks to limit interconnections, this could decrease the attractiveness of new solar energy systems to distributed residential solar power companies, including us, and the attractiveness of solar energy systems to customers.

Delays in interconnections could also harm the combined company’s growth rate and customer satisfaction scores.

Such limitations or delays could also adversely impact the combined company’s access to capital and reduce its willingness to pursue solar energy systems due to higher operating costs or lower revenues from solar service agreements.

These limitations would negatively affect the combined company’s business, results of operations, future growth and cash flows.

As adoption of solar distributed generation rises, along with the increased operation of utility-scale solar generation (such as in key markets including California), the amount of solar energy being contributed to the electrical grid may surpass the capacity anticipated to be needed to meet aggregate demand.

Some centralized public utilities claim in less than five years, solar generation resources may reach a level capable of producing an over-generation situation, which may require some existing solar generation resources to be curtailed to maintain operation of the electrical grid.

In the event such an over-generation situation were to occur, it could also result in a prohibition on the addition of new solar generation resources.

The adverse effects of such a curtailment or prohibition without compensation could adversely impact the combined company’s business, results of operations, future growth and cash flows.

Compliance with occupational safety and health requirements and best practices can be costly and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity.

The installation and ongoing operations and maintenance of solar energy systems requires individuals hired by the combined company or third-party contractors, potentially including the combined company’s employees, to work at heights with complicated and potentially dangerous electrical systems.

The evaluation and modification of buildings as part of the installation process requires these individuals to work in locations that may contain potentially dangerous levels of asbestos, lead, mold or other materials known or believed to be hazardous to human health.

There is substantial risk of serious injury or death if proper safety procedures are not followed.

The combined company’s operations will be subject to regulation under OSHA, DOT regulations and equivalent state and local laws.

Changes to OSHA or DOT requirements, or stricter interpretation or enforcement of existing laws or regulations, could

result in increased costs.

If the combined company fails to comply with applicable OSHA or DOT regulations, even if no work-related serious injury or death occurs, it may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures or suspend or limit operations.

Individuals hired by or on behalf of the combined company may have workplace accidents and receive citations from OSHA regulators for alleged safety violations, resulting in fines.

Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject the combined company to adverse publicity, damage its reputation and competitive position and adversely affect its business.

Risks Related to the Combined Company’s Common Stock

The combined company does not intend to pay cash dividends on its common stock and, consequently, your only opportunity to achieve a return on your investment in the combined company is if the price of its common stock appreciates.

The combined company does not plan to declare dividends on shares of its common stock in the foreseeable future.

Consequently, if the Pineapple merger is consummated, your opportunity to achieve a return on the shares of the combined company you own after the merger will be if you sell your common stock.

In addition, CSI shareholders of record as of the close of the business day immediately preceding the closing of the merger will receive CVRs and as a CVR holder, will be entitled to payments in respect of such CVRs when, as and if these payments are made in accordance with the terms of the CVR agreement.

CVR holders are not entitled, as such, to participate in dividends, if any, of the combined company.

There is no guarantee the price of the combined company’s common stock that will prevail in the market will ever exceed the price you paid for it or otherwise achieve a price that represents an attractive return on your investment in the combined company.

The ownership of the combined company common stock is expected to be highly concentrated, which may prevent you and other shareholders from influencing significant corporate decisions.

Pineapple member Lake Street Solar LLC is expected to beneficially own approximately 33.4% of the outstanding shares of the combined company common stock following the closing of the merger.

Accordingly, as shareholders of the combined company, the former Pineapple members and Lake Street Solar in particular will have substantial influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the combined company assets or any other significant corporate transactions.

These shareholders may also delay or prevent a change of control of the combined company, even if such a change of control would benefit the other shareholders of the combined company.

Future sales of combined company shares could cause the combined company’s stock price to decline.

If existing shareholders of CSI or future shareholders of the combined company, including those who acquire CSI common stock in the merger or the PIPE Offering, sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after the merger, the trading price of the common stock of the combined company could decline.

All of shares of CSI common stock issued in the merger and all of the shares of CSI common stock that may be issued in connection with the PIPE Offering will be freely tradable, without restriction, in the public market, subject to SEC restrictions on the sale of stock held by affiliates.

Additionally, all shares of CSI common stock outstanding prior to the merger will be similarly freely tradable, without restriction, in the public market except that the PIPE Offering requires 30-day lock-up agreements of CSI common stock by certain combined company officers, directors and major shareholders following the closing.

In addition, upon conversion of the CSI Series A convertible preferred stock and exercise of the common stock warrants issued in the PIPE Offering or the issuance of the Earnout Consideration, the number of shares outstanding of the combined company’s common stock could increase substantially.

Dilution and potential dilution, the availability of a large number of shares for sale, and the possibility of additional issuances and sales of the combined company’s common stock may negatively affect both the trading price and liquidity of the combined company’s common stock.

The continuing costs and burdens associated with being a public company will constitute a significant percentage of the combined company’s annual revenue.

The combined company will remain a public company and will continue to be subject to Nasdaq Stock Market listing standards and SEC rules and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002.

Although all public companies face the costs and burdens associated with being public companies, the costs and burden of being a public company will be a significant portion of the revenue of the combined company, which will be solely derived from the Pineapple, HEC and E-Gear businesses.

If the combined company fails to put in place appropriate and effective internal control over financial reporting, it may suffer harm to its reputation and investor confidence levels.

As a privately held company, Pineapple was not required to implement or maintain a system of internal control over financial reporting or evaluate its internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404 of the Sarbanes-Oxley Act.

As a public company, the combined company will have significant requirements for enhanced financial reporting and internal controls as compared to Pineapple.

The process of designing and implementing and maintaining effective internal controls for the Pineapple, HEC and E-Gear businesses is expected to require significant resources of the combined company.

If the combined company is unable to establish or maintain appropriate internal financial controls and procedures, it could cause the combined company to fail to meet its reporting obligations on a timely basis, result in material misstatements in its consolidated financial statements, and harm its operating results.

In addition, the process for designing and implementing and maintaining an effective internal control environment for the combined company will divert management’s attention from revenue generating or other important business activities.

In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, the combined company may identify deficiencies and may encounter problems or delays in completing the remediation of any deficiencies.

The existence of deficiencies in internal control over financial reporting may require management to devote significant time and incur significant expense to remediate any such deficiencies.

If the combined company fails to design and implement and maintain effective internal controls over financial reporting for the Pineapple, HEC and E-Gear businesses in the required timeframe, it may be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq.

Furthermore, if the combined company is unable to conclude that its internal controls over financial reporting are effective, it could lose investor confidence in the accuracy and completeness of its financial reports, the market price of the combined company’s securities could decline, and it could be subject to sanctions or investigations by regulatory authorities.

Failure to implement or maintain effective internal control over financial reporting and disclosure controls and procedures required of public companies could also restrict the combined company’s future access to the capital markets.

The price of the combined company’s common stock may be volatile and may decline in value.

The market price for the company’s common stock has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of public companies.

The trading volume and prices of the CSI common stock, prior to the announcement of the merger, have been, and following consummation of the merger, may continue to be volatile and could fluctuate widely due to factors both within and beyond the combined company’s control.

During 2021, the sale price of CSI common stock ranged from $2.20 to $11.45 per share, and our daily trading volume ranged from 1,100 to approximately 89.5 million shares.

This volatility may, in part, be the result of broad market and industry factors.

Future fluctuations in the trading price or liquidity of the combined company’s common stock may harm the value of the investment of the combined company’s shareholders in the combined company’s common stock following the merger.

Factors that may have a significant impact on the market price and marketability of the combined company’s common stock include, among others:

 public reaction to the combined company’s press releases, announcements and filings with the SEC;

 the combined company’s operating and financial performance;

 fluctuations in broader securities market prices and volumes, particularly among securities of technology and solar companies;

 changes in market valuations of similar companies;

 departures of key personnel;

 commencement of or involvement in litigation;

 variations in the combined company’s quarterly results of operations or those of other technology and solar companies;

 changes in general economic conditions, financial markets or the technology and solar industries;

 announcements by the combined company or its competitors of significant acquisitions or other transactions;

 changes in accounting standards, policies, guidance, interpretations or principles;

 speculation in the press or investment community;

 actions by the combined company’s shareholders, particularly relating to the combined company’s common stock;

 the failure of securities analysts to cover the combined company’s common stock or changes in their recommendations and estimates of its financial performance;

 future sales of the combined company’s common stock;

 the delisting of the combined company’s common stock or halting or suspension of trading in its common stock by the Nasdaq Stock Market;

 economic and other external factors, such as the COVID-19 pandemic;

 general market conditions;

 the other factors described in these “ Risks Related to the Combined Company Following Consummation of the Merger .”

The combined company may issue additional common stock resulting in stock ownership dilution.

At the closing of the merger, we expect to issue an aggregate of 20,025,000 shares of our common stock as Base Consideration and as Earnout Consideration relating to the funding-related closing condition (as described in the merger agreement).

Pursuant to the merger agreement, we may be obligated to issue up to an additional 10,000,000 shares as Earnout Consideration and additional shares in connection with the Convertible Note Financing (as defined in the merger agreement).

Additionally, if approved by our shareholders, there will be 3,000,000 shares reserved for future awards under the Pineapple Holdings, Inc.

2022 Equity Incentive Plan.

Accordingly, our shareholders may experience future dilution, which may be substantial, due to issuance of shares under the merger agreement and 2022 Equity Incentive Plan.

Additionally, in the PIPE Offering, we will issue shares of its Series A convertible preferred stock that will initially be convertible into 9,411,764 shares of our common stock and will issue warrants that will initially be exercisable for 9,411,764 shares of our common stock, each case at an initial price of $3.40 per share, which is subject to adjustment .

If the Series A convertible preferred stock or warrants are converted or exercised into shares of our common stock, our shareholders will experience additional dilution.

If the anti-dilution adjustment provisions in Series A convertible preferred stock or warrants are triggered, a substantial number of additional shares of our common stock may become issuable, which would further dilute the ownership interests of our shareholders.

In addition, we may raise additional capital through the sale of equity or convertible debt securities, which would further dilute the ownership interests of our shareholders.

Anti-takeover provisions in the combined company’s organizational documents and agreements may discourage or prevent a change in control, even if a sale of the combined company could be beneficial to the combined company’s shareholders, which could cause its stock price to decline and prevent attempts by the combined company shareholders to replace or remove its current management.

Several provisions of the combined company’s governing documents, in addition to provisions of Minnesota law, could make it difficult for the combined company’s shareholders to change the composition of the combined company’s board of directors following the merger, preventing them from changing the composition of management.

In addition, several provisions of our articles and bylaws may discourage, delay or prevent a merger or acquisition that our shareholders may consider favorable.

These provisions include:

 We have shares of common stock and preferred stock available for issuance without shareholder approval.

The existence of unissued and unreserved common stock and preferred stock may enable the board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management.

 Shares of our common stock do not have cumulative voting rights in the election of directors, so our shareholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors.

Additionally, Pineapple member, Lake Street Solar LLC, is expected to beneficially own approximately 33.4% of the outstanding shares of the combined company common stock following the closing of the merger.

 Special meetings of the shareholders may be called only by the board of directors, the chairman of the board of directors or the chief executive officer.

 The board of directors may adopt, alter, amend or repeal some provisions of the bylaws of the combined company without shareholder approval.

 Unless otherwise provided by law, any newly created directorship or any vacancy occurring on the board of directors for any cause may be filled by the affirmative vote of a majority of the remaining members of the board of directors even if such majority is less than a quorum, and any director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified.

 The affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, is required to amend or repeal certain provisions of our articles and bylaws relating to advance notice of nominations for election and advance notice of shareholder proposals .

 Unless amended by the CSI shareholders at a special meeting by the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of our capital stock, Article IX of our articles of incorporation relating to “Business Combinations” and related matters have an anti-takeover effect that is in addition to the provisions of Minnesota law.

 Shareholders must follow advance notice procedures to submit nominations of candidates for election to the Board of Directors at an annual or special meeting of our shareholders and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our shareholders.

These anti-takeover provisions could substantially impede the ability of our shareholders to benefit from a change in control and, as a result, could materially adversely affect the market price of our common stock and the ability of our shareholders to realize any potential change-in-control premium.

The combined company board of directors is authorized to issue and designate shares of preferred stock without shareholder approval.

The combined company’s articles of incorporation authorize the board of directors, without the approval of the combined company shareholders, to issue up to 3,000,000 shares of preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of the articles of incorporation, as shares of preferred stock in series, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

The powers, preferences and rights of these series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.

The combined company’s inability to comply with the continued listing requirements of the Nasdaq Stock Market could result in its common stock being delisted, which could affect its market price and liquidity and reduce the combined company’s ability to raise capital.

The combined company will be required to meet certain qualitative and quantitative requirements to maintain the listing of its common stock on the Nasdaq Stock Market.

If the combined company does not maintain compliance with the continued listing requirements for the Nasdaq Stock Market within specified periods and subject to permitted extensions, its common stock may be recommended for delisting (subject to any appeal the combined company may file).

No assurance can be provided that the combined company will continue to comply with these continued listing requirements.

If the combined company’s common stock were delisted, it could be more difficult to buy or sell its common stock and to obtain accurate quotations, and the price of its stock could suffer a material decline.

Delisting would also impair the combined company’s ability to raise capital.

Risks Related to CSI Following Termination of the Merger

Risks Relating to CSI Strategic Alternatives Following Termination of the Merger

CSI may not be successful in implementing any strategic alternative following termination of the merger.

If the merger agreement is terminated for any reason, it is expected that the CSI board of directors will consider the full range of strategic alternatives regarding the use of its remaining cash and other assets, the S&S Segment business, and the future of CSI, with a view to maximizing value for CSI shareholders under the circumstances.

These strategic alternatives may include pursuing an alternative transaction to the merger, retaining some or all of the cash or other assets, the acquisition of a new business or an investment in the S&S Segment business, adoption of a plan of liquidation, or a combination of these.

CSI may not execute any plan for strategic alternatives successfully because of errors in planning or timing, challenges that CSI fails to overcome in a timely fashion, or lack of appropriate resources.

CSI’s failure to successfully execute on the strategic alternative approved by the CSI board of directors, even if the strategy is sound, could result in loss of value of the CSI common stock.

Additionally, if CSI does not effectively communicate the plan for strategic alternatives to our investors and stakeholders, CSI may not realize the full benefits for CSI shareholders that it would otherwise gain through successful execution of that strategy.

There is no assurance that any of these strategic alternatives will result in dividends or distributions to the CSI shareholders, the return of any particular value to the CSI shareholders, or value that is equal to the value that may be realized by the CSI shareholders through the Pineapple Merger Transaction.

Additionally, in the execution of any plan, CSI must commit significant resources to the strategic alternatives selected by the CSI board of directors before knowing whether this alternative will result in the operational, financial or other benefits we expect or intend.

The shareholder return on a strategic alternative may be lower, or may develop more slowly, than CSI expects.

Additionally, the previously announced $6.8 million (net) sale of the CSI corporate headquarters building requires a 5-year lease with an ongoing operating business to close.

Accordingly, there is no assurance that any strategic plan selected by the CSI board of directors will satisfy the closing conditions of the sale of the CSI corporate headquarters or that this sale will occur at any particular time or price, if at all.

Many of the transaction expenses relating to the Pineapple Merger Transaction will be payable by CSI regardless of whether the Pineapple Merger Transaction is completed.

These fees and expenses are currently estimated at $3.4 million, of which CSI has incurred approximately $2.3 million through December 31, 2021.

If the merger agreement is terminated for any reason, CSI will be responsible for its transaction related expenses and none of these expenses will be reimbursed to CSI.

Additionally, absent an agreement with a third party to the contrary, CSI will be responsible for the cost and expense associated with the execution of any strategic alternative approved by the CSI board of directors.

Any transaction costs associated with pursuit of a strategic alternative and the continued cost of operating the S&S segment and maintaining CSI’s other assets will reduce the potential return to the CSI shareholders through any strategic alternative the CSI board of directors approves.

CSI will face challenges in identifying another private company for a similar reverse merger transaction and accordingly, the strategic alternatives available to the CSI board of directors following termination of the merger may be limited.

If the merger agreement were terminated, t he CSI board of directors will consider the full range of strategic alternatives, including the possibility of pursuing an alternative transaction to the merger.

However, there is no assurance that CSI would be able to identify any other private company interested in a similar reverse merger transaction or that such a transaction would result in comparable value to the CSI shareholders as the Pineapple Merger Transaction.

In particular, CSI will face competition from SPACs and other public companies to attract a private company for a similar reverse merger transaction and these SPACs and other public companies may offer cash resources, access to financing or transaction terms that would be more favorable that what CSI could offer.

Additionally, CSI’s ability to attract another private company for a similar reverse merger transaction may be hampered by the perception that CSI shareholders would not support a similar reverse merger transaction if the Pineapple Merger Proposal is not approved.

The strategic alternatives available to the CSI board of directors following termination of the merger may be limited as a practical matter by these factors.

If CSI pursues acquisitions following the termination of the merger, CSI may not successfully close these acquisitions and, if these acquisitions are completed, CSI may have difficulty integrating the acquired businesses profitably with its existing operations or otherwise obtaining the strategic benefits of the acquisition.

If the merger agreement were terminated, t he CSI board of directors will consider the full range of strategic alternatives, including the possibility of pursuing the acquisition of a new business or an investment in the S&S segment business.

CSI cannot, however, ensure that it will be able to find appropriate candidates for acquisitions, reach agreement to acquire them, or obtain any required shareholder or regulatory approvals needed to close strategic acquisitions, despite the effort and management attention invested.

The impact of future acquisitions on the CSI business, operating results and financial condition is uncertain.

In the case of businesses CSI may acquire in the future, CSI may have difficulty assimilating these businesses and their products, services, technologies and personnel into CSI’s existing operations.

These difficulties could disrupt CSI’s ongoing business, distract its management and workforce, increase CSI’s expenses and materially adversely affect CSI’s operating results and financial condition.

Also, CSI may not be able to retain key management and other critical employees after an acquisition.

CSI may also acquire unanticipated liabilities.

Additionally, CSI cannot ensure that the expected benefits of any acquisition will be realized or will be realized within the time frames we expect.

Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close which could impact CSI’s operating results, financial condition, or cash flows.

Additionally, after the acquisition, unforeseen issues could arise which adversely affect the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price.

The price CSI pays for a business or product line may exceed the value it realizes, and CSI cannot provide assurance that CSI will obtain the expected revenues, anticipated synergies and strategic benefits of any acquisition within the time it expects or at all.

The continuing costs and burdens associated with being a public company will constitute a much larger percentage of CSI’s revenue from the remaining S&S business following termination of the merger.

If the merger is terminated, CSI will remain a public company and will continue to be subject to Nasdaq Stock Market listing standards and SEC rules and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002.

Although all public companies face the costs and burdens associated with being public companies, the costs and burden of being a public company will be a significant portion of the revenue of CSI, which will be derived solely from its remaining S&S Segment business until the CSI board of directors determines and executes on a strategic alternative.

Risks Relating to CSI’s Common Stock Following Termination of the Merger

The price of the CSI common stock may be volatile and may decline in value.

The market price for CSI’s common stock has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of public companies.

The trading volume and prices of the CSI common stock, prior to the announcement of the merger, have been and may continue to be, following termination of the merger, volatile and could fluctuate widely due to factors both within and beyond CSI’s control.

During 2021, the sale price of CSI common stock ranged from $2.20 to $11.45 per share, and our daily trading volume ranged from 1,100 to approximately 89.5 million shares.

This volatility may be the result of broad market and industry factors.

Future fluctuations in the trading price or liquidity of CSI’s common stock may harm the value of the investment of CSI’s shareholders in CSI’s common stock following the termination of the merger.

Factors that may have a significant impact on the market price and marketability of CSI’s common stock following the termination of the merger include, among others:

 public reaction to the termination of the merger and the announcement of any future strategic alternatives;

 fluctuations in broader securities market prices and volumes;

 changes in market valuations of similar companies;

 departures of key personnel;

 commencement of or involvement in litigation, including any litigation relating to the termination of the merger;

 CSI’s operating and financial performance or variations in CSI’s quarterly results of operations;

 changes in general economic conditions, financial markets or the industry in which CSI operates;

 announcements by CSI of significant acquisitions or other transactions;

 changes in accounting standards, policies, guidance, interpretations or principles;

 speculation in the press or investment community;

 actions by CSI’s shareholders, particularly volatility or trading in CSI common stock;

 future sales of CSI’s common stock;

 the delisting of CSI’s common stock or halting or suspension of trading in its common stock by the Nasdaq Stock Market;

 economic and other external factors, such as the COVID-19 pandemic;

 general market conditions;

 the other factors described in these “ Risks Related to CSI Following Termination of the Merger .”

Anti-takeover provisions in CSI’s organizational documents and agreements may discourage or prevent a change in control, even if a sale of CSI could be beneficial to CSI’s shareholders, which could cause its stock price to decline and prevent attempts by CSI shareholders to replace or remove its current management.

Several provisions of CSI’s governing documents, in addition to provisions of Minnesota law, could make it difficult for CSI’s shareholders to change the composition of CSI’s board of directors if the merger were terminated, preventing them from changing the composition of management.

In addition, several provisions of CSI’s articles and bylaws may discourage, delay or prevent a merger or acquisition that CSI shareholders may consider favorable.

These provisions include:

 CSI has shares of common stock and preferred stock available for issuance without shareholder approval.

 Special meetings of the shareholders may be called only by the CSI board of directors, the chairman of the board of directors or the chief executive officer.

 The board of directors may adopt, alter, amend or repeal some provisions of the CSI bylaws without shareholder approval.

 Shareholders must follow advance notice procedures to submit nominations of candidates for election to the CSI board of directors at an annual or special meeting of CSI shareholders and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our shareholders.

These anti-takeover provisions could substantially impede the ability of CSI shareholders to benefit from a change in control and, as a result, could materially adversely affect the market price of CSI’s common stock and the ability of CSI shareholders to realize any potential change-in-control premium.

CSI board of directors is authorized to issue and designate shares of preferred stock without shareholder approval.

CSI’s articles of incorporation authorize the CSI board of directors, without the approval of CSI shareholders, to issue up to 3,000,000 shares of preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of the articles of incorporation, as shares of preferred stock in series, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

The powers, preferences and rights of these series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.

CSI’s inability to comply with the continued listing requirements of the Nasdaq Stock Market could result in its common stock being delisted, which could affect its market price and liquidity and limit CSI’s strategic alternatives following the termination of the merger.

Following termination of the merger, CSI will be required to continue to meet certain qualitative and quantitative requirements to maintain the listing of its common stock on the Nasdaq Stock Market.

If CSI does not maintain compliance with the continued listing requirements for the Nasdaq Stock Market within specified periods and subject to permitted extensions, its common stock may be recommended for delisting (subject to any appeal CSI may file).

No assurance can be provided that CSI will continue to comply with these continued listing requirements.

If CSI’s common stock were delisted, it could be more difficult to buy or sell its common stock and to obtain accurate quotations, and the price of its stock could suffer a material decline.

Additionally, CSI’s ability to pursue certain strategic alternatives, such as a reverse merger, acquisition of another company for stock or sales of CSI equity securities, would also be impaired if CSI’s common stock were delisted.

Risks Relating to the S&S Segment Business Operations Following Termination of the Merger

CSI is dependent upon our senior management and other critical employees.

The success of the execution of any strategic plan approved by the CSI board of directors, the future success of the S&S business and the success of CSI generally depends on the efforts and abilities of our senior management personnel and other critical employees, including those in sales, marketing and product development functions.

Our inability to retain or attract qualified personnel could have a significant negative effect on our execution of any strategic plan approved by the CSI board of directors or a negative effect on the S&S business, which may diminish the value of the S&S segment business and negatively impact a strategic plan involving the S&S business segment.

The primary markets we serve are highly competitive, and our ability to compete requires continual focus on delivering high-quality, competitively priced products and services and the regular introduction of new products and services that meet evolving customer requirements.

Our S&S business experiences intense competition from other providers of IT products and services.

We have experienced, and anticipate continuing to experience, pricing pressures from our customers as well as our competitors.

The markets we serve are characterized by rapid technological advances and evolving industry standards.

These markets can be significantly affected by new product introductions and marketing activities of industry participants.

Some of our current competitors and potential competitors have greater financial, technological, manufacturing, marketing, and personnel resources than we possess.

These current and future competitors may be able to identify new markets and develop new products that are superior to those we develop.

They may also adapt new technologies faster, devote greater resources to research and development, promote products more aggressively, and price products more competitively.

We cannot ensure that competition will not intensify or that we will be able to compete effectively in the markets in which we compete.

Our gross margins have fluctuated year to year, and we face many challenges in maintaining acceptable margins.

Gross margins among our products and services vary and are subject to fluctuation from quarter to quarter and year to year.

The factors that may affect our gross margins adversely are numerous and include:

 Changes in customer, geographic, or product mix;

 Our ability to reduce product costs

● Royalties related to technology licensing

● Increases in material or labor costs

● Expediting costs incurred to meet customer delivery requirements

● Excess inventory and inventory carrying charges

 Increases in labor costs

 Tariffs on imported products

● Obsolescence charges

● Changes in shipment volume

● Changes in component pricing

 Changes in OEM/ODM pricing

 Increased price competition

● Changes in distribution channels

● Lower margins on competitive-bid contracts

● Increased warranty cost and

● Our ability to manage the impact of foreign currency exchange rate fluctuations.

Consolidation among our customers has occurred and further

consolidation may occur, resulting in the loss of some customers and reducing revenue during the pendency of business combinations

and related integration activities.

We believe future consolidation may occur

among our customers as they attempt to increase market share and achieve greater economies of scale.

Consolidation has affected

our business as our customers focus on completing business combinations and integrating their operations.

In some instances, customers

integrating large-scale acquisitions have reduced their purchases of our products as they integrate.

The business effect on us of significant

customer mergers is likely to be unclear until sometime after these transactions are completed.

After a consolidation occurs, a

customer may choose to reduce the number of vendors from which it purchases equipment and services and may choose one of our competitors

as its preferred vendor.

We cannot ensure that we will continue to supply equipment to the surviving communications service provider

after a business combination is completed.

In the event the Pineapple transaction does not close,

we cannot guarantee the ability of the Special Committee of our Board of Directors to develop strategic options for the Company

and the Company’s ability to implement these strategies.

In May of 2018 the Company announced it

had appointed a special committee of the board to perform a strategic review of the Company’s businesses to explore opportunities

for enhancing shareholder value and had engaged an investment banking firm to advise it in this process.

The disposition of the

Suttle operations, the Ecessa and IVDesk acquisitions, and the proposed Pineapple merger have been the primary outcomes of this

In the event the Pineapple merger does not close, and the Company retains its traditional businesses, the failure to

develop an alternative growth strategy, the failure to maintain positive operating income or invest in technology ventures that

enhance value or that we can incorporate into our products, could result in operating losses and lack of shareholder confidence,

which could negatively impact cash flow and the trading price of our common stock.

Our information technology systems may be exposed to various

cybersecurity risks and other disruptions that could impair our ability to operate, adversely affect our business, and damage our

brand and reputation.

Risks are particularly acute in the cloud-based technologies that we and other third parties operate and

that form a part of our solutions.

We rely extensively on our information technology

systems or on third parties for services including our enterprise resource planning (“ERP”) system, banking, payroll,

shipping, and e-mail systems to conduct business.

We also collect, store and transmit sensitive data, including proprietary business

information and personally identifiable information of our customers, suppliers and employees.

Despite our investment in our information

technology systems and data security program, the implementation of security measures to protect our data and infrastructure against

breaches and other cyber threats, and our use of internal processes and controls designed to protect the security and availability

of our systems, our information technology and communication systems may be vulnerable to cybersecurity risks such as computer

viruses, hacking, malware, denial of service attacks, cyber terrorism, circumvention of security systems, malfeasance, breaches

due to employee error, natural disasters, telecommunications failure, at our facilities or at third-party locations.

The General Data Protection Regulation,

or GDPR, took effect on May 25, 2018, in the European Union and introduced direct compliance obligations for data controllers and

data processors.

National Data Protection Agencies, or NDPAs, are now able to impose fines for violations ranging from 2% to 4%

of annual worldwide turnover, or 10 million to 20 million euro, whichever is greater.

NDPAs have the power to carry out audits,

request information, and obtain access to premises.

Businesses must be able to demonstrate that the personal data of any data subject

can be lawfully processed on one of the six specified grounds.

The GDPR adopts a risk-based approach to compliance, under which

businesses bear responsibility for assessing the degree of risk that their processing activities pose to data subjects.

are required to perform data protection impact assessments before any processing that uses new technology and is likely to result

in a high risk to data subjects.

The GDPR requires businesses to maintain records of their processing activities.

The GDPR establishes

clear rules around data breach notifications and the processing of personal data in such a manner that the personal data can no

longer be attributed to a specific individual have been set out by the GDPR.

In addition, under the GDPR, data subjects have new

rights, for example, the right to request that businesses delete their personal data (the right to be forgotten);

their personal data being processed;

and to obtain a copy of their personal data within a set time frame.

Similar to the GDPR, the California Consumer

Privacy Act of 2018 (“CCPA”), which became effective January 1, 2020, grants California residents with several new

rights relating to their personal information.

The CCPA applies to businesses that conduct business in California and satisfies

one of three financial conditions, including a business that has a gross revenue greater than $25 million.

The CCPA sets forth

several data protection obligations for applicable businesses, including the obligation to inform a consumer, at or before collection,

of the purpose and intended use of the collection, and the obligation to delete a consumer’s personal information upon request.

 Lower margins on competitive-bid contracts, and

 Increased warranty cost.

Consolidation among our S&S customers has occurred and further consolidation may occur, resulting in the loss of some S&S customers and reduced revenue during the pendency of business combinations and related integration activities.

We believe future consolidation may occur among our S&S customers as they attempt to increase market share and achieve greater economies of scale.

Consolidation has affected our S&S business as these customers focus on completing business combinations and integrating their operations.

In some instances, customers integrating large-scale acquisitions have reduced their purchases of our S&S products and services as they integrate.

The effect on the S&S business of significant customer mergers is likely to be unclear until sometime after these transactions are completed.

After a consolidation occurs, a customer may choose to reduce the number of vendors from which it purchases equipment and services and may choose one of our competitors as its preferred vendor.

CSI cannot ensure that the S&S business will continue to deliver services to the surviving company after a business combination is completed.

Our information technology systems may be exposed to various cybersecurity risks and other disruptions that could impair our ability to operate, adversely affect our business, and damage our brand and reputation.

Risks are particularly acute in the cloud-based technologies that we and other third parties operate and that form a part of our solutions.

We rely extensively on our information technology systems or on third parties for services including our enterprise resource planning (“ERP”) system, banking, payroll, shipping, and e-mail systems to conduct business.

We also collect, store and transmit sensitive data, including proprietary business information and personally identifiable information of our customers, suppliers and employees.

Despite our investment in our information technology systems and data security program, the implementation of security measures to protect our data and infrastructure against breaches and other cyber threats, and our use of internal processes and controls designed to protect the security and availability of our systems, our information technology and communication systems may be vulnerable to cybersecurity risks such as computer viruses, hacking, malware, denial of service attacks, cyber terrorism, circumvention of security systems, malfeasance, breaches due to employee error, natural disasters, telecommunications failure, at our facilities or at third-party locations.

The California Consumer Privacy Act of 2018 (“CCPA”), which became effective January 1, 2020, grants California residents with several new rights relating to their personal information.

The CCPA applies to businesses that conduct business in California and satisfies one of three financial conditions, including a business that has a gross revenue greater than $25 million.

The CCPA sets forth several data protection obligations for applicable businesses, including the obligation to inform a consumer, at or before collection, of

the purpose and intended use of the collection, and the obligation to delete a consumer’s personal information upon request.

The CCPA establishes a private right of action that allows consumers the right to seek damages for serious data breaches.

also allows the California Attorney General to bring actions against non-compliant businesses with fines of $2,500 per violation

or, if intentional, up to $7,500 per violation.

Any failure by us to comply with the GDPR or the CCPA could have a material adverse

effect on our business, results of operations or financial condition.

Complying with these varying requirements

could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

failure, or perceived failure, by us to comply with any regulatory requirements or international privacy or consumer protection-related

laws and regulations could result in proceedings or actions against us by governmental entities or others, subject us to significant

penalties and negative publicity and adversely affect us.

In addition, as noted above, we are subject to the possibility of security

breaches, which themselves may result in a violation of these laws.

Any failure, breach or unauthorized access

to our or third-party systems could result in the loss of confidential, sensitive or proprietary information, interruptions in

our service or production or otherwise our ability to conduct business operations, and could result in potential reductions in

revenue and profits, damage to our reputation or liability.

There can be no assurance that our protective measures will prevent

or timely detect security breaches that could have a significant impact on our business, reputation, operating results and financial

In addition, our JDL Technologies subsidiary

provides IT services for the Company internally and for third-party customers.

As we continue to direct a portion of our JDL sales

efforts toward Cloud solutions, we expect to store, convey and potentially process increasing amounts of data produced by customer

This data may include confidential or proprietary information, intellectual property or personally identifiable information

of our customers or other third parties with whom they do business.

It is important that we maintain solutions and related infrastructure

that are perceived by our customers and other parties with whom we do business as providing a reasonable level of reliability and

Despite any available security measures and other precautions that we deploy, the infrastructure and transmission methods

we use directly or through third parties, may be vulnerable to interception, attack or other disruptive problems.

Continued high-profile

data breaches at other companies evidence an external environment that is becoming increasingly hostile to information security.

Improper disclosure of data or perception that our data security is insufficient could harm our reputation, give rise to legal

proceedings, and subject our company to liability under laws that protect data, any of which could result in increased costs and

loss of revenue.

If a cyberattack or other security incident

were to allow unauthorized access to or modification of our customers’

data or our own data, whether due to a failure with our

systems or related systems operated by third parties, we could suffer damage to our brand and reputation.

The costs we would incur

to address and fix these incidents would increase our expenses.

These types of security incidents could also lead to lawsuits,

regulatory investigations and increased legal liability, including in some cases contractual costs related to customer notification

and fraud monitoring.

Further, as regulatory focus on privacy and data security issues continues to increase and worldwide laws

and regulations concerning the protection of information become more complex, the potential risks and costs of compliance to our

business will intensify.

Our financial results could be adversely affected if one

or more of our key customers substantially reduces orders for our products.

Traditionally, we have derived a large portion

of our revenues from a relatively small number of customers, with our top ten customers accounting for 74% of net sales for both

2020 and 2019.

In fiscal 2020, two E&S customers accounted for 19% and 17% of consolidated sales.

In fiscal 2019, two E&S

customers accounted for 21% and 16% of consolidated sales.

The loss of or a substantial reduction in purchases by any one or more

of our top customers could have a material adverse effect on our business, financial position and results of operations.

Our market is subject to rapid technological change and,

to compete effectively, we must continually introduce new products that achieve market acceptance.

The enterprise network and communications

equipment industry is characterized by rapid technological changes, evolving industry standards, changing market conditions, short

product life cycles, rapidly changing customer requirements, and frequent new product and service introductions and enhancements.

The introduction of products using new technologies or the adoption of new industry standards can make our existing products, or

products under development, obsolete or unmarketable.

Our future success will depend on our ability to enhance our existing products,

to introduce new products to meet changing customer requirements and emerging technologies, and to demonstrate the performance

advantages and cost-effectiveness of our products over competing products.

Our failure to modify our products to support alternative

technologies or failure to achieve widespread customer acceptance of these modified products could cause us to lose market share

and cause our revenues to decline.

We may not predict technological trends

or the success of new products in the enterprise network and communications equipment markets accurately.

New product development

often requires forecasting of market trends, development and implementation of new technologies and processes and capital commitments.

We do not know whether other new products we develop will gain market acceptance or result in profitable sales.

Some competitors have greater engineering

and product development resources.

Although we expect to continue to invest significant resources in product development activities,

our efforts to achieve and maintain profitability will require us to be selective and focused with our research and development

expenditures.

If we fail to anticipate or respond in a cost-effective and timely manner to technological developments, changes

in industry standards or customer requirements, or if we experience any significant delays in product development or introduction,

our business, operating results and financial condition could be affected adversely.

We may experience delays in developing and

marketing product enhancements or new products that respond to technological change, evolving industry standards and changing customer

requirements.

Specifically as we attempt to develop more software products and continue to expand our existing product set, we

cannot ensure that we will not experience difficulties that could delay or prevent the successful development, introduction, and

marketing of these products or product enhancements, or that our new products, including software-based products, and product enhancements

will adequately meet the requirements of the marketplace and achieve any significant or sustainable degree of market acceptance

in existing or additional markets.

In addition, the future introductions or announcements of products by us or one of our competitors

embodying new technologies or changes in industry standards or customer requirements could render our then-existing products obsolete

or unmarketable.

We cannot ensure that the introduction or announcement of new product offerings by us or one or more of our competitors

will not cause customers to defer their purchase of our existing products, which could cause our revenues to decline.

Our business segments are dependent upon federal government

Our E&S and S&S business segments

are involved in projects that receive much of their funding from the United States federal government.

To the extent that federal

government spending is delayed or curtailed by government actions, our revenues and operating results may be adversely affected.

We evaluate and frequently pursue acquisitions, but we

may not successfully close these acquisitions and, if these acquisitions are completed, we may have difficulty integrating the

acquired businesses profitably with our existing operations.

We regularly consider the acquisition of

complementary companies and product lines.

We cannot, however, ensure that we will be able to find appropriate candidates for acquisitions,

reach agreement to acquire them, or obtain any required shareholder or regulatory approvals needed to close strategic acquisitions,

despite the effort and management attention invested.

The impact of future acquisitions on our

business, operating results and financial condition is uncertain.

In the case of businesses we may acquire in the future, we may

have difficulty assimilating these businesses and their products, services, technologies and personnel into our operations.

difficulties could disrupt our ongoing business, distract our management and workforce, increase our expenses and materially adversely

affect our operating results and financial condition.

Also, we may not be able to retain key management and other critical employees

after an acquisition.

We may also acquire unanticipated liabilities.

In addition to these risks, we may not realize all of the

anticipated benefits of these acquisitions.

Our operating results fluctuate from quarter to quarter.

Our operating results are difficult to predict

and may fluctuate significantly from quarter to quarter.

Fluctuations in our quarterly operating results may be caused by many

factors, including the following:

The CCPA also allows the California Attorney General to bring actions against non-compliant businesses with fines of $2,500 per violation or, if intentional, up to $7,500 per violation.

Any failure by us to comply with the CCPA could have a material adverse effect on our business, results of operations or financial condition.

Complying with these varying requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Any failure, or perceived failure, by us to comply with any regulatory requirements or international privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by governmental entities or others, subject us to significant penalties and negative publicity and adversely affect us.

In addition, as noted above, we are subject to the possibility of security breaches, which themselves may result in a violation of these laws.

Any failure, breach or unauthorized access to our or third-party systems could result in the loss of confidential, sensitive or proprietary information, interruptions in our service or production or otherwise our ability to conduct business operations, and could result in potential reductions in revenue and profits, damage to our reputation or liability.

There can be no assurance that our protective measures will prevent or timely detect security breaches that could have a significant impact on our business, reputation, operating results and financial condition.

In addition, our S&S business provides IT services for the Company internally and for third-party customers.

As we continue to direct a portion of our sales efforts toward Cloud solutions, we expect to store, convey and potentially process increasing amounts of data produced by customer devices.

This data may include confidential or proprietary information, intellectual property or personally identifiable information of our customers or other third parties with whom they do business.

It is important that we maintain solutions and related infrastructure that are perceived by our customers and other parties with whom we do business as providing a reasonable level of reliability and security.

Despite any available security measures and other precautions that we deploy, the infrastructure and transmission methods we use directly or through third parties, may be vulnerable to interception, attack or other disruptive problems.

Continued high-profile data breaches at other companies evidence an external environment that is becoming increasingly hostile to information security.

Improper disclosure of data or perception that our data security is insufficient could harm our reputation, give rise to legal proceedings, and subject our company to liability under laws that protect data, any of which could result in increased costs and loss of revenue.

If a cyberattack or other security incident were to allow unauthorized access to or modification of our customers’ data or our own data, whether due to a failure with our systems or related systems operated by third parties, we could suffer damage to our brand and reputation.

The costs we would incur to address and fix these incidents would increase our expenses.

Our S&S operating results fluctuate from quarter to quarter.

Our S&S operating results are difficult to predict and may fluctuate significantly from quarter to quarter due to the fluctuations in that segment’s operations.

Fluctuations in the S&S quarterly operating results may be caused by many factors, including the following:

 the volume and timing of customer orders and our ability to fulfill those orders in a timely manner

 the overall level of capital expenditures by our customers

● factors such as the coronavirus (COVID-19), which may affect our supply stream, our employee work force, our customers, or

the general United States and world economy

 factors such as the coronavirus (COVID-19), which may affect our supply stream, our employee work force, our customers, or the general United States and world economy

 work stoppages and other developments affecting the operations of our customers

5 unchanged sentences

 variations in the mix of products and services we sell

● the timing of federal and state government funding of projects

 the location and utilization of our production capacity and employees and

 the availability and cost of key components of our products.

Our expense levels are based in part on

expectations of future revenues.

If revenue levels in a particular quarter are lower than expected, our operating results will

be affected adversely.

We depend on OEM/ODM relationships and on limited-source

suppliers and any disruptions in these relationships may cause damage to our customer relationships.

We procure all parts and certain services

involved in the production of our products from, and subcontract much of our product manufacturing to outside firms that specialize

in these services.

Although most of the components of our products are available from multiple vendors, we have several single-source

supplier relationships, either because alternative sources are not available or because the relationship is advantageous to us.

We cannot ensure that our suppliers will be able to meet our future requirements for products and components in a timely fashion.

In addition, the availability of many of these components to us is dependent in part on our ability to provide our suppliers with

accurate forecasts of our future requirements.

Delays or lost sales could be caused by other factors beyond our control, including

defects in the quality of components or products supplied by others.

We are dependent upon our senior management and other

critical employees.

Like all companies, our success depends

on the efforts and abilities of our senior management personnel and other critical employees, including those in sales, marketing

and product development functions.

Our ability to attract, retain and motivate these employees is critical to our success.

because we may acquire one or more businesses in the future, our success may depend, in part, upon our ability to retain and integrate

our own personnel with personnel from acquired entities that are necessary to the continued success or the successful integration

of the acquired businesses.

Managing our inventory is complex and may include write-downs

of excess or obsolete inventory.

Managing our inventory of components and

finished products is complicated by a number of factors, including the need to maintain a significant inventory of finished goods

for orders we anticipate but do not receive.

These issues may cause us to purchase and maintain significant amounts of inventory.

If this inventory is not used as expected based on anticipated requirements, it may become excess or obsolete.

The existence of

excess or obsolete inventory can result in sales price reductions or inventory write-downs, which could adversely affect our business

and results of operations.

We face risks associated with expanding our sales outside

of the United States.

We believe that our future growth depends

in part upon our ability to increase sales in international markets.

These sales are subject to a variety of risks, including fluctuations

in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements,

longer accounts receivable payment cycles, potentially adverse tax consequences, and export license requirements.

we are subject to the risks inherent in conducting business internationally, including political and economic instability and unexpected

changes in diplomatic and trade relationships.

We cannot ensure that one or more of these factors will not have a material adverse

effect on our business strategy and financial condition.

Our failure to achieve and maintain

effective internal controls could limit our ability to detect and prevent fraud and thereby adversely affect our business and stock

We have incurred, and expect to continue

to incur, significant continuing costs, including accounting fees and staffing costs, to maintain compliance with the internal

control requirements of the Sarbanes-Oxley Act of 2002.

Expansion of our business, particularly internationally, would require

ongoing changes to our internal control systems, processes and information systems.

In addition, if we complete future acquisitions,

our ability to integrate operations of the acquired company could affect our continued compliance with the internal control requirements

of the Sarbanes-Oxley Act.

We maintain internal controls to generate

reliable financial reports.

All internal control systems, no matter how well designed, have inherent limitations.

Even those systems

determined to be effective can provide only reasonable assurance with respect to the consolidated financial system preparation

and presentation.

Our inability to maintain an effective control environment may cause investors to lose confidence in our reported

financial information, which could in turn have a material adverse effect on our stock price.

Product defects or the failure of our

products to meet specifications could cause us to lose customers and revenue or to incur unexpected expenses.

If our products do not meet our customers’

performance requirements, our customer relationships may suffer.

Also, our products may contain defects or fail to meet product

specifications.

Any failure or poor performance of our products could result in:

● delayed market acceptance of our products

● delayed product shipments

● unexpected expenses and diversion of resources to replace defective products or identify and correct the source of errors

● damage to our reputation and our customer relationships

● delayed recognition of sales or reduced sales, and

● product liability claims or other claims for damages that may be caused by any product defects or performance failures.

Our sales and operations may continue to be adversely

affected by current global economic conditions.

Over the past several years, financial markets

globally have experienced periods of extreme disruption.

These have included, among other things, extreme volatility in securities

prices, severely diminished liquidity and credit availability, ratings downgrades of some investments and declining valuations

of others, tariffs on imports and exports.

The frequency, severity and duration of these disruptions in the financial markets and

the global economy are unknown.

We cannot ensure that there will not be a further deterioration in financial markets and in business

conditions generally.

These economic developments have adversely affected our business in a number of ways and will likely continue

to adversely affect our business during the foreseeable future.

Our sales and operations may be adversely affected by

the coronavirus (COVID-19) epidemic.

experienced supply chain and demand disruptions during 2020 and expect the disruption to our supply to continue into 2021, as well

as to incur higher logistics and operational costs due to the COVID-19 pandemic.

We also saw delays in orders as some projects

have been pushed out due to the inability to access locations due to the shutdowns.

We may also see a slowdown in our business

if one or more of our major customers or suppliers delays its purchase or supplies due to uncertainty in its business operations,

encounters difficulties in its production due to employee safety or workforce concerns, is unable to obtain materials or labor

from third parties that it needs to complete its projects, and may see a slowdown in our collection of receivables if our customers

encounter cash flow difficulties or delay payments to preserve their cash resources.

We are continuing to actively monitor the

effects and potential impacts of the COVID-19 pandemic on all aspects of our business, liquidity and capital resources.

to which the COVID-19 pandemic may materially impact our financial condition, liquidity or results of operations is uncertain at

Risks Related to Our Common Stock

Our stock price has been volatile historically and the

price of our common stock may fluctuate significantly in the future.

The trading price of our common stock has

been and may continue to be subject to wide fluctuations.

Our stock price may fluctuate in response to a number of events and factors,

such as quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors,

the operating and stock price performance of other companies that investors may deem comparable to us, and new reports relating

to trends in our markets or general economic conditions.

In addition, the stock market in general,

and prices for companies in our industry in particular, have experienced extreme volatility that often has been unrelated to the

operating performance of these companies.

These broad market and industry fluctuations may adversely affect the price of our common

stock, regardless of our operating performance.

Anti-takeover provisions in our charter documents and

Minnesota law could prevent or delay a change in control of our company.

Provisions of our articles of incorporation

and bylaws and Minnesota law may discourage, delay or prevent a merger or acquisition that a shareholder may consider favorable,

and could limit the price that investors are willing to pay for our common stock.

These provisions include the following:

● advance notice requirements for shareholder proposals

● authorization for our Board of Directors to issue preferred stock without shareholder approval

● limitations on business combinations with interested shareholders and

● a super majority vote by shareholders is required to approve certain corporate actions, including merger transactions.

Some of these provisions may discourage

a future acquisition of our company even though our shareholders would receive an attractive value for their shares, or a significant

number of our shareholders believe such a proposed transaction would be in their best interest.

The payment and amount of future dividends and number

of shares we repurchase in the future under our Stock Repurchase Program is subject to Board of Director discretion and to various

risks and uncertainties.

We currently do not pay a quarterly dividend.

The payment and amount of future quarterly dividends is within the discretion of

the Board of Directors and will depend on factors the Board deems relevant at the time declaration of a dividend is considered.

These factors include, but are not limited to:

available cash;

management’s expectations regarding future performance and

free cash flow;

alternative uses of cash to fund R&D expenditures and capital expenditures required to fund future growth;

and, the effect of various risks and uncertainties described in this “Risk Factors”

In addition, we adopted

a Stock Repurchase Program in 2019.

Our ability to continue this program or conduct future stock repurchase programs will depend

on some of these same factors.

As discussed above, to the extent Dispositions

of our current operating assets occur prior to the Pineapple merger, CSI expects to declare a cash dividend that distributes a

portion of the proceeds from these Dispositions to its shareholders as of a Pre-Closing Record Date.

CSI’s expense levels are based in part on expectations of future revenues.

If S&S revenue levels in a particular quarter are lower than expected, CSI’s operating results will be affected adversely.

Our S&S sales and operations may be adversely affected by the coronavirus (COVID-19) epidemic.

CSI experienced supply chain and demand disruptions during 2021 and expect the disruption to global supply chains and CSI supply chains to continue into 2022, as well as to incur higher logistics and operational costs due to the COVID-19 pandemic.

CSI also experienced delays in orders as some projects have been pushed out due to the inability to access locations due to the shutdowns.

CSI may also see a slowdown in our business if one or more of our major customers or suppliers delays its purchase or supplies due to uncertainty in its business operations, encounters difficulties in its production due to employee safety or workforce concerns, is unable to obtain materials or labor from third parties that it needs to complete its projects, and may see a slowdown in our collection of receivables if our customers encounter cash flow difficulties or delay payments to preserve their cash resources.

CSI is continuing to actively monitor the effects and potential impacts of the COVID-19 pandemic on all aspects of the S&S business, liquidity and capital resources.

The extent to which the COVID-19 pandemic may materially impact CSI’s financial condition, liquidity or results of operations is uncertain at this time.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors