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.
16
Table of Contents
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.
17
Table of Contents
RESULTS OF OPERATIONS
The following table presents our condensed consolidated statements of operations
in comparative format:
For the Three Months Ended March 31,
2022 2021 Change %
(in thousands, except percentages)
Revenue $ - $ - $ - 0.00 %
OPERATING EXPENSES
General and administrative 1,152 932 220 23.61 %
Depreciation - 1 (1) (100.00) %
Total operating expenses 1,152 933 219 23.47 %
Loss from operations (1,152) (933) (219) 23.47 %
Other income (expense)
Interest income 336 - 336 100.00 %
Interest expense (2) - (2) (100.00) %
Other income (expense), net 14 (319) 333 (104.39) %
Realized gain on investments, net 103 - 103 100.00 %
Unrealized gain on equity securities, net 102 - 102 100.00 %
Other income (expense), net 553 (319) 872 (273.35) %
Loss from continuing operations before income
taxes (599) (1,252) 653 (52.16) %
Income tax benefit (59) (16) (43) 268.75 %
Net loss from continuing operations (540) (1,236) 696 (56.31) %
Income from discontinued operations before
income taxes - 411 (411) (100.00) %
Income tax (benefit) expense from discontinued
operations (49) 91 (140) (153.85) %
Net income from discontinued operations 49 320 (271) (84.69) %
Net loss $ (491) $ (916) $ 425 (46.40) %
Expenses from Continuing Operations
General and Administrative
General and administrative expenses consist principally of employee-related
costs for the following departments: finance, human resources, and certain
executive management; facilities costs; and professional and legal fees. General
and administrative expenses increased $0.3 million, or 33% to $1.2 million for
the three months ended March 31, 2022 from $0.9 million for the three months
ended March 31, 2021. The increase of $0.3 million is due to professional fees
related to use of third party services in bookkeeping and preparation of SEC
reports and fee to our third party asset manager.
Depreciation
Depreciation expense consists of depreciation of long-lived property and
equipment. Depreciation expense remained constant at less than $0.1 million for
the three months ended March 31, 2022 and 2021, respectively.
Non-Operating Income and Expenses
Interest Expense
Interest expense remained constant at less than $0.1 million in interest expense
for the three months ended March 31, 2022 and 2021.
18
Table of Contents
Interest Income and Total Other Income (Expense), net
There was interest income and other income of $0.3 million for the three months
ended March 31, 2022. Other expense was $0.3 million for the three months ended
March 31, 2021. The increase was the result of interest income related to
purchase of bonds and dividend income from securities purchased in the three
months ended March 31, 2022. For the three months ended March 31, 2021, the
other expense of $0.3 million was related to litigation settlement costs
recorded as a liability in relation to the lawsuit filed by a former CEO of the
Company (see Note 8 to the financial statements for additional information).
Realized Gain on Investments, net
Realized gain on investments, net consists of available for sale and equity
securities. Realized gain on investments, net increased $0.1 million, or 100%
for the three months ended March 31, 2022. The increase was a result of
investments purchased by the Company for the three months ended March 31, 2022.
Unrealized Gain on Equity Securities, net
Unrealized gain on equity securities, net increased $0.1 million, or 100% for
the three months ended March 31, 2022. Our unrealized gains and losses on equity
securities each period are a function of changes in the fair value of the equity
securities that we hold as of the current reporting period balance sheet date
relative to the preceding balance sheet date. Our unrealized gains during the
current period were attributable to increases in the fair value of our equity
securities holdings during the period.
Income Taxes
We recorded net income tax benefit from continuing operations of $0.1 million
and less than $0.1 million for the three months ended March 31, 2022 and 2021
respectively.
We use a recognition threshold and a measurement attribute for the 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.
As of March 31, 2022, and 2021, we had no liability for unrecognized tax
benefits. We do not believe there will be any material changes to our
unrecognized tax positions over the next twelve months.
Discontinued Operations
On December 31, 2021, the Company closed on the terms for the sale and transfer
of substantially all of the Company's operating subsidiaries and all of its
assets. The financial results of discontinued operations primarily reflect the
results of our foreign operating subsidiaries conducting business as provider of
real-time digital engagement solutions and services of software solutions and
services to the wireless carriers throughout the world. This included the
Company's portfolio of solutions and services for real-time analytics, customer
acquisition and activation, customer value management and loyalty for the
telecom industry promoting partnerships into retail and financial services.
FINANCIAL CONDITION
Our working capital position decreased by $6.8 million to $30.9 million as of
March 31, 2022 from $37.7 million as of December 31, 2021. The decrease in
working capital is related to the purchase of investments.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed operations through cash flows from operations and
bank borrowings. On December 31, 2021, the Company closed on the terms of the
Purchase Agreements. Following the sale of its assets in December 2021, the
Company is currently conducting research and development in two initial areas of
product focus, each of which are in 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. At March 31, 2022, our
principal source of liquidity was $28.1 million in cash and cash equivalents.
Our anticipated uses of cash in the future will be to fund the expansion of our
business through both organic growth as well as possible acquisition activities.
Other uses of cash may include investments, capital expenditures and technology
expansion.
19
Table of Contents
Net cash used in operating activities for the three months ended March 31, 2022
was $1.2 million due to net loss of $0.5 million plus an increase in prepaid and
other assets of $0.4 million, a decrease in accounts payable and accrued
liabilities of 0.3 million and a decrease in income taxes payable of $0.1
million, partially offset by noncash charges of $0.1 million. Net cash provided
by operating activities for the three months ended March 31, 2021 was $1.7
million due to the increase in unearned revenue of $1.3 million and an increase
in accounts payable and accrued liabilities of $0.2 million as well as a
decrease in contract receivable of $0.9 million, partially offset by the
increase in unbilled work in progress of $0.2 million and income taxes
receivable of $0.5 million.
Net cash used in investing activities during the three months ended March 31,
2022 of $10.1 million was primarily due to the purchase of investments. Net cash
used in investing activities during the three months ended March 31, 2021 was
less than $0.1 million and was due to the purchase of property and equipment.
There was no net cash used in financing activities for the three months ended
March 31, 2022. Net cash used in financing activities was $0.1 million during
the three months ended March 31, 2021 and was primarily related to the final
principal payments on our term loan.
We believe that our current cash and cash equivalents, together with anticipated
cash flow from operations will be sufficient to meet our working capital and
capital expenditure requirements for at least the next twelve months from the
date of issuance of this Quarterly Report on Form 10-Q. In making this
assessment we considered the following:
? Our cash and cash equivalents balance at March 31, 2022 of $28.1 million; and
? Our working capital balance at March 31, 2022 of $30.9 million
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have a material current effect or
that are reasonably likely to have a material future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.
© Edgar Online, source Glimpses
SYMBOLIC LOGIC, INC. 
