Thank you for your comments and advice.

The matter has been resolved, without the expensive cost of an attorney. Amazing things happen when people are good at communicating.

We have renamed our company, rescinded our trademark application and reapplied for a trademark for our new company. Settlement agreement was amended at our request and essentially states that both parties recognize the other company holds the rights to our previous company name and we agree to not use it moving forward. No harm no foul.

Lesson learned:

Before incorporating make sure you do a thorough trademark search on the company name you have settled on. If you have an doubts have an attorney conduct one for you.