Symbolic Logic, Inc. - Quarter Report: 2022 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2022

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from          to         

Commission File Number 001-34261

SYMBOLIC LOGIC, INC.

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f/k/a Evolving Systems, Inc.

(Exact name of registrant as specified in its charter)

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(303) 802-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2022., there were 12,333,184 shares outstanding of Registrant’s Common Stock (par value $0.001 per share).

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

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The accompanying notes are an integral part of these condensed consolidated financial statements

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SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

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The accompanying notes are an integral part of these condensed consolidated financial statements

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SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

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The accompanying notes are an integral part of these condensed consolidated financial statements

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SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

Three Months Ended March 31, 2022

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Three Months Ended March 31, 2021

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The accompanying notes are an integral part of these condensed consolidated financial statements

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SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

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The accompanying notes are an integral part of these condensed consolidated financial statements

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SYMBOLIC LOGIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization — On December 31, 2021, Symbolic Logic, Inc. (the “Company” or “Symbolic Logic”) f/k/a Evolving Systems, Inc. (“Evolving Systems”) closed on the terms of the Equity Purchase Agreement (the “Equity Purchase Agreement”) and two Software Purchase Agreements (the “Software Purchase Agreements” and, together with the Equity Purchase Agreement and the other transaction documents described therein, the “Purchase Agreements”) dated as of October 15, 2021, with subsidiaries and affiliates of PartnerOne Capital, Inc. (the “Purchasers”). The Purchase Agreements provided for the sale and transfer of substantially all of Evolving Systems’ operating subsidiaries and all of its assets to the Purchasers for an aggregate purchase price of $40 million (subject to adjustment as set forth in the Equity Purchase Agreement). The Purchase Agreements included customary terms and conditions, including an adjustment to the purchase price based on Evolving Systems’ cash and cash equivalents on hand as of the closing date and provisions that require Evolving Systems to indemnify the Purchasers for certain losses that it incurs as a result of a breach by Evolving Systems of its representations and warranties in the Purchase Agreements and certain other matters. Evolving Systems received cash proceeds of $36,032,899 and may receive up to an additional $2,500,000 in consideration pursuant to the terms of an escrow agreement entered into in connection with the Equity Purchase Agreement.

Results of the sold subsidiaries are retrospectively reported as discontinued operations in the accompanying condensed consolidated financial statements for all periods presented. Prior year information has been adjusted to conform to the current year presentation. Unless otherwise stated, the information disclosed in the footnotes accompanying the condensed consolidated financial statements refers to continuing operations. See Note 2 “Discontinued Operations” for more information regarding results from discontinued operations.

Simultaneously with the approval by the board of directors of the Company to execute the Purchase Agreements, the board formed a subcommittee of the board (the “Investment Committee”) to evaluate options to maximize the value of the Company’s assets, which, following the closing of the transactions contemplated under the Purchase Agreements, consists primarily of cash and cash equivalents. The board of directors has authorized the Investment Committee to retain such counsel, experts, consultants or other professionals as the Investment Committee shall deem appropriate from time to time to aid the Investment Committee in the performance of its duties. The Company’s directors and executives have an extensive background in mergers and acquisitions (“M&A”) activity. The Company plans to use its cash assets and network of relationships to seek to acquire businesses and/or assets as well as consider strategic partners.

Following the sale of its assets in December 2021, the Company is currently a research and development organization with two initial areas of product focus, each of which are in a research-oriented pre-release mode. The two areas of focus are in the application of self-learning algorithms as well as the symbolic tagging and organizing of physical objects.

Evolving Systems previously provided software solutions and services throughout the world. The COVID-19 global outbreak caused instability and volatility in multiple markets where our clients conduct business. We leveraged our ability to provide support remotely resulting in limited effect on our day to day operations. The inability to travel had delayed interactions with our clients on projects and in the traditional modes of sales development as well as limited our interactions with prospective M&A targets.

On December 9, 2021, the Company received a letter from the NASDAQ regarding the Equity Purchase Agreement and the two Software Purchase Agreements entered into by the Company pursuant to which we sold all of our assets. The NASDAQ staff requested certain information from the Company regarding its on-going business. We provided a response to the staff on January 7, 2022. We received a follow up request from the NASDAQ for additional information and we provided a response to the staff on February 15, 2022.

On April 12, 2022, Evolving Systems, Inc. filed with the Secretary of State of Delaware Certificate of Amendment to amend its Certificate of Incorporation to change the Company’s name from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” effective as of April 12, 2022. The Company also amended and restated its Bylaws to change all Company references from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” No other amendments were made to the Certificate of Incorporation or Bylaws.

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On April 13, 2022, Symbolic Logic, Inc. f/k/a Evolving Systems, Inc. notified The Nasdaq Capital Market (“Nasdaq”) of its intention to voluntarily withdraw its common stock, par value $0.001 per share (the “Common Stock”), from listing on Nasdaq. The Company filed a Form 25 with the Securities and Exchange Commission (the “SEC”) on Monday, April 25, 2022, relating to delisting the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to be effective ten days thereafter. After delisting, the Common Stock may be quoted on the OTC Pink Open Market.

We believe our current liquidity from our investments and future operations will be sufficient to fund operations and meet the Company’s cash needs for future working capital and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. In making this assessment, we considered our $28.1 million in cash and cash equivalents and our $30.9 million in working capital at March 31, 2022.

Interim Condensed Consolidated Financial Statements — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these condensed consolidated financial statements are adequate to make the information presented not misleading. The condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with US GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2022 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K as filed with the SEC on April 11, 2022.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP), requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements, as well as the reported amounts of expenses during the reporting period. We made estimates with respect to income tax valuation and fair value of investments and stock-based compensation amounts. Actual results could differ from these estimates.

Principles of Consolidation — The unaudited condensed consolidated financial statements include the accounts of Symbolic Logic and subsidiaries, all of which are wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation.

Stock-based Compensation — We account for stock-based compensation by applying a fair-value-based measurement method to account for stock-based payment transactions with employees, non-employees and directors. We record compensation costs associated with the vesting of unvested options on a straight-line basis over the vesting period. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock instead of settling such obligations with cash payments. We use the Black-Scholes model to estimate the fair value of each option grant on the date of grant. This model requires the use of estimates for expected term of the options and expected volatility of the price of our common stock. We recognize forfeitures as they occur rather than estimating them at the time of the grant.

Fair Value Measurements — Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, we consider the most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability.

ASC Topic 820, Fair Value Measurements and Disclosures, requires certain disclosures around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

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Our investment portfolio consists of money market funds, equity securities, and corporate debt. All highly liquid investments with original maturities of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost less any unamortized premium or discount, which approximates fair value. All investments with original maturities of more than three months when purchased are classified as available-for-sale, trading, or held-to-maturity investments. Our marketable securities, other than equity securities, are classified as available-for-sale, and are reported at fair value, with unrealized gains and losses, net of tax, reported in the accompanying condensed consolidated balance sheets in stockholders’ equity as a component of accumulated other comprehensive income or loss. Investments in equity securities with readily determinable fair values (marketable) are measured at fair value, with changes in the fair value recognized as a component of unrealized gain on equity securities, net in the condensed consolidated statements of operations. Investments in equity investments that do not have readily determinable fair values (non-marketable) are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, also referred to as the measurement alternative. Any adjustments to the carrying value of these investments are recorded in unrealized gain on equity securities, net in the condensed consolidated statements of operations. Interest on securities is reported in the accompanying condensed consolidated statements of operations in interest income. Dividends paid by securities are reported in the accompanying condensed consolidated statements of operations in other income. Realized gains or losses are reported in the accompanying condensed consolidated statements of operations in net realized gain on investments. Realized gains or losses on available-for-sale investments are reclassified from other comprehensive income (loss) to net income (loss) in the condensed consolidated statements of operations.

The following table presents the fair value hierarchy for those assets and liabilities the Company measured at fair value on a recurring basis:

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Income Taxes — We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating losses and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized.

We use a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

Recently Adopted Accounting Pronouncements — In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (ASC 260), Debt—Modifications and Extinguishments (ASC 470-50), Compensation—Stock Compensation (ASC 718) and Derivatives and Hedging—Contracts in Entity’s Own Equity (ASC 815-40). The amendments in this update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in ASC 260, Earnings Per Share. The amendments in this update

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are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements.

NOTE 2 — DISCONTINUED OPERATIONS

On December 31, 2021, Evolving Systems, Inc. and certain of its subsidiaries completed the Equity Purchase Agreement and two Software Purchase Agreements with subsidiaries and affiliates of PartnerOne Capital, Inc. The Purchase Agreements contemplate the sale and transfer of substantially all of the Company’s operating subsidiaries and all of its assets to the Purchasers for an aggregate purchase price of $40 million (subject to adjustment as set forth in the Equity Purchase Agreement). The Purchase Agreements include customary terms and conditions, including an adjustment to the purchase price based on the Company’s cash and cash equivalents on hand and other adjustments as of the closing date and provisions that require the Company to indemnify the Purchasers for certain losses that it incurs as a result of a breach by the Company of its representations and warranties in the Purchase Agreements and certain other matters.

Proceeds from the sale will be payable to the Company as follows: (1) a $37.5 million payment to the Company in cash on the closing date of December 31, 2021 (adjusted as set forth in the Equity Purchase Agreement), and (2) $2.5 million placed in escrow on the closing date as security for the Company’s indemnification obligations to the Purchasers under the Purchase Agreements, which amount will be released to the Company on or before the date that is twelve months from the closing date (less any portion of the escrow used to make indemnification payments to the Purchasers). The Company received cash proceeds of $36.0 million and may receive up to an additional $2.5 million in consideration pursuant to the terms of an escrow agreement entered into in connection with the Equity Purchase Agreement and included in the cash and cash equivalents in our condensed consolidated balance sheets.

The Purchase Agreements contain customary representations and warranties of each of the parties. The Purchase Agreements contain indemnification rights in favor of the Company following closing for (i) breaches of any of the representations or warranties by the Purchasers including, but not limited to, breaches related to organization, authorization, and governmental authorization, and (ii) breaches of the covenants or agreements of the Purchasers in the Purchase Agreements. In addition, the Purchase Agreements contain indemnification rights in favor of the Purchasers following closing for (i) breaches of certain fundamental representations and warranties by the Company, including breaches related to organization, authorization, capitalization, title to purchased assets, and finders’ fees, (ii) breaches of any of the representations and warranties by the Company, and (iii) breaches of the covenants or agreements of the Company in the Purchase Agreements.

Accordingly, the operating results of its operations in the entities and related business operations sold for March 31, 2021 presented have been reclassified in the condensed consolidated statements of operations as “income from discontinued operations”. Interest expense that is specifically identifiable to debt related to the entities sold qualifies as discontinued operations and is allocated to interest expense from discontinued operations in the Company’s condensed consolidated financial statements. Additionally, the carrying amounts of the assets and liabilities for the entities sold as of December 31, 2021 presented have been reclassified in the condensed consolidated balance sheets.

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The following table presents the financial results of the discontinued operations:

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Cash flow information relating to the discontinued operations for the for the three months ended March 31, 2021 is as follows:

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NOTE 3 — BALANCE SHEET COMPONENTS

The components of accounts payable and accrued liabilities are as follows (in thousands):

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NOTE 4 — EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period, including common stock issuable under participating securities. Diluted earnings (loss) per share is computed using the weighted average number of shares of common stock outstanding, plus all potentially dilutive common stock equivalents using the treasury stock method. Common stock equivalents consist of stock options and restricted stock.

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The following is the reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations (in thousands except per share data):

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Weighted average options to purchase approximately 0.3 million shares and 0.3 million shares of common stock equivalents for the three months ended March 31, 2022 and 2021, respectively, were excluded from the computation of diluted weighted average shares outstanding because the effect would have been anti-dilutive since their exercise prices were greater than the average market value of our common stock for the period. Earnings per share calculations use basic weighted average shares outstanding, when in a net loss position.

NOTE 5 — INVESTMENTS

Fixed-Maturity and Equity Securities Investments

The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following as of March 31, 2022. There were no investments as of December 31, 2021.

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The Company sold investments for proceeds of $0.5 million for the three months ended March 31, 2022, resulting in realized gains on investments, net of $0.1 million. The Company also had unrealized gains on equity securities, net of $0.1 million for the three months ended March 31, 2022.

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Maturities of Fixed-Maturity Securities Available-for-Sale

The amortized cost and fair values of fixed-maturity securities available for sale as of March 31, 2022 are shown by contractual maturity in the table below. Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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NOTE 6 — STOCK-BASED COMPENSATION

We recognized $0.2 million and $0.2 million of compensation expense within general and administrative expense in the condensed consolidated statements of operations, with respect to our stock-based compensation plans for the three months ended March 31, 2022 and 2021, respectively.

Stock Incentive Plans

At March 31, 2022 and December 31, 2021, no shares were available for grant under the 2007 Stock Plan, as amended. At March 31, 2022 and December 31, 2021, 0.1 million options and no restricted shares, and 0.1 million options and restricted shares were issued and outstanding under the 2007 Stock Plan as amended, respectively.

At March 31, 2022 and December 31, 2021, there were approximately 0.3 million and 0.6 million shares available for grant under the 2016 Stock Plan, respectively. At March 31, 2022 and December 31, 2021, 0.2 million options and 0.2 million restricted shares and 0.1 million options and no restricted shares were issued and outstanding under the 2016 Stock Plan, respectively.

The fair value of restricted shares for stock-based compensation expense is equal to the closing price of our common stock on the date of grant. The restricted shares for stock awards vest in three tranches: the first tranche vests immediately; and the second and third tranches vest over the following two years for senior management and the board of directors.

The following is a summary of restricted stock activity under the plans for the three months ended March 31, 2022:

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The following is a summary of stock option activity under the plans for the three months ended March 31, 2022:

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There were 225,000 restricted shares and no stock options granted during the three months ended March 31, 2022 and 2021, respectively. The total fair value of restricted shares granted during the three months ended March 31, 2022 and 2021 was $0.4 million and $—, respectively.

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NOTE 7 — INCOME TAXES

The income tax provision for the fiscal year ending December 31, 2022 interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to unrealized gains. At March 31, 2022 the Company is currently estimating an annual effective tax rate of approximately 9.7%, resulting in a net tax benefit from continuing operations of less than $0.1 million for the three months ended March 31, 2022. The Company recorded a tax benefit of $0.1 million from continuing operations for the three months ended March 31, 2021. For the three months ended March 31, 2022, the Company recorded an income tax benefit of less than $0.1 million from discontinued operations related to an adjustment to the tax liability recorded for the year ended December 31, 2021, and less than $0.1 million tax expense from discontinued operations for the three months ended March 31, 2021. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors.

The Company and its subsidiaries are subject to U.S. Federal income tax, as well as income tax of multiple state jurisdictions. As of March 31, 2022, the Company is subject to U.S. Federal income tax examinations for the years 2018 through 2020 and income tax examinations from various other jurisdictions for the years 2016 through 2020.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

(a)Lease Commitments

Under ASC 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases primarily consisting of facilities with remaining lease terms of less than one year. We lease office and operating facilities under non-cancelable operating leases. Current facility leases include our offices in Englewood, Colorado and New York, New York. Total rent expense consisted of short-term lease expense of less than $0.1 million for the three months ended March 31, 2022 and 2021, respectively. There was no sublease rental income for the three months ended March 31, 2022 and 2021.

Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. We did not have leases that had terms of greater than 12 months as of March 31, 2022 and December 31, 2021.

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(b)Other Commitments

As permitted under Delaware law, we have agreements with officers and directors under which we agree to indemnify them for certain events or occurrences while the officer or director is, or was, serving at our request in this capacity. The term of the indemnification period is indefinite. There is no limit on the amount of future payments we could be required to make under these indemnification agreements; however, we maintain Director and Officer insurance policies, as well as an Employment Practices Liability Insurance Policy, that may enable us to recover a portion of any amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, there were no liabilities recorded for these agreements as of March 31, 2022 or December 31, 2021.

We enter into standard indemnification terms with outside consultants, in the course of business, for third party claims arising under our contracts. Depending upon the nature of the indemnification, the potential amount of future payments we could be required to make under these indemnification agreements may be unlimited. We have never incurred costs to defend lawsuits or settle claims relating to an indemnification. As a result, we believe the estimated fair value of these agreements is minimal. Accordingly, there were no liabilities recorded for these agreements as of March 31, 2022 or December 31, 2021.

Management Agreement with CIDM II LLC

On January 21, 2022, the Company entered into a Management Agreement (the “Management Agreement”) with CIDM II LLC (the “Manager”). Pursuant to the Management Agreement, the Manager will, subject to the Company’s Board of Directors (“Board”) and the Investment Committee of the Board, (i) provide the Company with advisory services with respect to the management and allocation of investments in equity and debt securities (“Assets”) of the Company and its subsidiaries and (ii) exercise discretionary management authority over the Company’s trading portfolio of publicly traded securities.

The Manager will receive compensation for performance under the Management Agreement consisting of a management fee of 2% of the fair market value of the Assets and a performance fee in respect of each performance period shall be equal to 20% of the appreciation of end-of-year net asset value. The management fee and performance fee may be paid through the issuance of stock appreciation rights of the Company’s common stock or in cash payment to the Manager. The Manager is also entitled to payment or reimbursement of certain administrative costs and expenses incurred in connection with the management of the Assets, such as custodial fees, brokerage commissions and similar fees and expenses. The Manager shall be responsible for all of its operating expenses. The Management Agreement may be terminated by either party upon thirty days written notice. No stock appreciation rights have been awarded in the three months ended March 31, 2022.

(c)Litigation

From time to time, we are involved in various legal matters arising in the normal course of business. We do not expect the outcome of such proceedings, either individually or in the aggregate, to have a material effect on our financial position, cash flows or results of operations.

On October 15, 2019, the Company’s former Chief Executive Officer filed a lawsuit in the Superior Court of New Jersey against us. That suit sought $3.5 million for claims of libel, harm of lost employment opportunities, severance payments and benefits that he would have been entitled to receive had he been terminated without cause. The Company engaged legal counsel through its insurance carrier. The Company decided that it was prudent to avoid further legal fees and disruption to the business caused by an on-going litigation claim. Therefore, to resolve amicably and discontinue disputes regarding all claims arising from the lawsuit and with the denial of every allegation of wrongdoing, in June 2021, a settlement and mutual general release was agreed to that included payment of $0.6 million by the Company. Our insurance carrier has agreed to contribute $0.3 million toward the settlement. Settlement was paid in full in July 2021 and is included in Other (expense) income, net, on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2021.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about Symbolic Logic’s industry, management’s beliefs, and certain assumptions made by management. Forward-looking statements include our expectations regarding product, services, and maintenance revenue, annual savings associated with the organizational changes effected in prior years, and short- and long-term cash needs. In some cases, words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “estimates,” variations of these words, and similar expressions are intended to identify forward-looking statements. In addition, statements about the potential effects of the COVID-19 pandemic on the Company’s businesses, results of operations and financial condition may constitute forward-looking statements. The statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any forward-looking statements. Risks and uncertainties of our business include those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 11, 2022, under “Item 1A. Risk Factors” as well as additional risks in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

OVERVIEW

On December 31, 2021, the Company closed on the terms of the Equity Purchase Agreement (the “Equity Purchase Agreement”) and two Software Purchase Agreements (the “Software Purchase Agreements” and, together with the Equity Purchase Agreement and the other transaction documents described therein, the “Purchase Agreements”) dated as of October 15, 2021, with subsidiaries and affiliates of PartnerOne Capital, Inc. (the “Purchasers”). The Purchase Agreements provided for the sale and transfer of substantially all of the Company’s operating subsidiaries and all of its assets that provided real-time digital engagement solutions and services in the areas of real-time analytics, customer acquisition and activation, customer value management and loyalty for the telecom industry to the Purchasers for an aggregate purchase price of $40 million (subject to adjustment as set forth in the Equity Purchase Agreement). The Purchase Agreements included customary terms and conditions, including an adjustment to the purchase price based on the Company’s cash and cash equivalents on hand as of the closing date and provisions that require the Company to indemnify the Purchasers for certain losses that it incurs as a result of a breach by the Company of its representations and warranties in the Purchase Agreements and certain other matters. The Company received cash proceeds of $36.0 million and may receive up to an additional $2.5 million in consideration pursuant to the terms of an escrow agreement entered into in connection with the Equity Purchase Agreement.

Simultaneously with the approval by the board of directors of the Company to execute the Purchase Agreements, the board formed a subcommittee of the board (the “Investment Committee”) to evaluate options to maximize the value of the Company’s assets, which, following the closing of the transactions contemplated under the Purchase Agreements, will consist primarily of cash and cash equivalents. The board of directors has authorized the Investment Committee to retain such counsel, experts, consultants or other professionals as the Investment Committee shall deem appropriate from time to time to aid the Investment Committee in the performance of its duties.

Following the sale of its assets in real-time digital engagement solutions and services in December 2021, the Company has decided to evaluate new areas of business and is currently a research and development organization with two initial areas of product focus, each of which are in a research-oriented pre-release mode. The two areas of focus are in the application of self-learning algorithms as well as the symbolic tagging and organizing of physical objects. Additionally, the Company maintains an extensive background in mergers and acquisitions ("M&A") activity. The Company plans to use cash assets, and network of relationships to acquire businesses and/or assets, as well as consider strategic partnerships.

RECENT DEVELOPMENTS

We reported a net loss from continuing operations of $0.5 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively.

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COVID-19

Symbolic Logic f/k/a Evolving Systems provided software solutions and services throughout the world in the prior year. The COVID-19 global outbreak caused instability and volatility in multiple markets where our clients conduct business. We leveraged our ability to provide support remotely, resulting in limited effect on our day to day operations. Any future restrictions caused by the pandemic on travel or ability to meet in person might delay our interactions with prospective partners or M&A targets.

NAME CHANGE

On April 12, 2022, Evolving Systems, Inc. filed with the Secretary of State of Delaware Certificate of Amendment to amend its Certificate of Incorporation to change the Company’s name from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” effective as of April 12, 2022. The Company also amended and restated its Bylaws to change all Company references from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” No other amendments were made to the Certificate of Incorporation or Bylaws.

NASDAQ

On December 9, 2021, we received a letter from the NASDAQ regarding the Equity Purchase Agreement and the two Software Purchase Agreements entered into by the Company pursuant to which we sold all of our assets. The staff requested certain information from the Company regarding its on-going business. We provided a response to the staff on January 7, 2022. We received a follow up request from the NASDAQ for additional information and we provided a response to the staff on February 15, 2022.

On April 13, 2022, Symbolic Logic Inc. f/k/a Evolving Systems, Inc. notified The Nasdaq Capital Market (“Nasdaq”) of its intention to voluntarily withdraw its common stock, par value $0.001 per share (the “Common Stock”), from listing on Nasdaq. The Company filed a Form 25 with the Securities and Exchange Commission on Monday, April 25, 2022, relating to delisting the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended, to be effective ten days thereafter. After delisting, the Common Stock may be quoted on the OTC Pink Open Market.

GOING CONCERN

We believe our current liquidity from the Purchase Agreements will be sufficient to fund operations and meet the Company’s cash needs for future working capital and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. In making this assessment, we considered our $28.1 million in cash and cash equivalents and our $30.9 million in working capital at March 31, 2022.

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RESULTS OF OPERATIONS

The following table presents our condensed consolidated statements of operations in comparative format: