UNITED STATES
‎

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

~~FORM 10-Q~~

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

For the quarterly period ~~ended~~ ended: June 30, ~~2021~~2022

o☐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:~~ Number 001-34261

SYMBOLIC LOGIC, INC.

f/k/a Evolving Systems, Inc.

~~EVOLVING SYSTEMS, INC.~~

(Exact name of registrant as specified in its charter)

Delaware

84-1010843

~~Delaware~~

~~84-1010843~~

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

9800 Pyramid Court, Suite 400 Englewood, CO	~~(I.R.S. Employer Identification No.)~~	80112

~~9800 Pyramid Court, Suite 400~~ ~~Englewood, Colorado~~		~~80112~~
(Address of principal executive offices)			(Zip ~~Code)~~code)

~~(303)~~ (303) 802-1000

(Registrant’s telephone number, including area code)

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


Title of ~~each class~~Each Class		Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	~~EVOL~~	~~The Nasdaq Capital Market~~EVOL	NONE

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 x☒ No o☐

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 ~~for~~ such shorter period that the registrant was required to submit such files). Yes x☒ No o☐

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 ~~definition~~the definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act.~~Act:

Large accelerated filer ☐
~~Large~~ Accelerated ~~Filer~~ filer o		~~Accelerated Filer~~ o
		☐
Non-accelerated ~~Filer~~filer x☒		Smaller ~~Reporting Company~~reporting company x☒

Emerging growth company ~~Emerging Growth Company~~o		☐

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~~Act. o

☐

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

As of August ~~10, 2021,~~9, 2022, there were ~~12,257,246~~10,831,992 shares outstanding of Registrant’s Common Stock (par value $0.001 per share).

Table of Contents

~~EVOLVING SYSTEMS, INC.~~

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
~~PART I — FINANCIAL INFORMATION~~
~~Item 1~~	~~Financial Statements (Unaudited)~~		3
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Operations		4
	Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss~~)		5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity		6
	Condensed Consolidated Statements of Cash Flows		8
	Notes to Unaudited Condensed Consolidated Financial Statements		9
Item 22.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2120
Item 33.	Quantitative and Qualitative Disclosures About Market Risk		2725
Item 44.	Controls and Procedures	26
	27
	PART II - OTHER INFORMATION
~~PART II — OTHER INFORMATION~~
Item 11.	Legal Proceedings		2827
Item 1A1A.	Risk Factors		2827
Item 62.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits		28

Signatures			30

2Table of Contents

PART I —- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SYMBOLIC LOGIC, INC.

~~EVOLVING SYSTEMS, INC.~~

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)


	June 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	17,821	$	39,445
Prepaid and other current assets		881		106
Fixed maturity securities, available for sale, fair value		3,828		—
Equity securities, fair value		5,363		0
Debt securities, available for sale, fair value		2,575		—
Total current assets		30,468		39,551
Property and equipment, net		5		4
Investments, at cost		1,000		—
Total assets	$	31,473	$	39,555

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	634	$	1,252
Escrow liability		172		—
Income taxes payable		386		575
Other liabilities		45		—
Total current liabilities		1,237		1,827
Total liabilities		1,237		1,827

Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, $0.001 par value; 40,000,000 shares authorized; 11,010,881 shares issued and 10,831,992 shares outstanding as of June 30, 2022 and 12,437,073 shares issued and 12,258,184 shares outstanding as of December 31, 2021		11		12
Additional paid-in capital		97,760		100,024
Treasury stock, 178,889 shares as of June 30, 2022 and December 31, 2021, at cost		(1,253)		(1,253)
Accumulated other comprehensive loss		(2,574)		0
Accumulated deficit		(63,708)		(61,055)
Total stockholders’ equity		30,236		37,728
Total liabilities and stockholders’ equity	$	31,473	$	39,555

June 30, 2021
December 31, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
4,896
$
2,763
Contract receivables, net of allowance for doubtful accounts of $784 and $780
at June 30, 2021 and December 31, 2020, respectively
4,739
5,681
Unbilled work-in-progress
4,183
3,365
Prepaid and other current assets
1,550
1,828
Income taxes receivable
739
270
Total current assets
16,107
13,907
Property and equipment, net
510
532
Amortizable intangible assets, net
2,310
2,769
Operating leases — right-of-use assets, net
1,121
915
Long-term assets – other
257
—
Deferred income taxes, net
954
953
Total assets
$
21,259
$
19,076
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Term loan - current portion
$
—
$
142
Accounts payable and accrued liabilities
4,642
4,305
Lease obligations — operating leases
332
294
Unearned revenue
5,540
3,713
Total current liabilities
10,514
8,454
Long-term liabilities:
Term loan, net of current portion
—
319
Lease obligations - operating leases, net of current portion
782
613
Total liabilities
11,296
9,386
Commitments and contingencies (Note 10)
—
—
Stockholders' equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding
—
—
Common stock, $0.001 par value; 40,000,000 shares authorized; 12,436,135 shares issued and 12,257,246 shares outstanding as of June 30, 2021 and 12,374,798 shares issued and 12,195,909 shares outstanding as of December 31, 2020
12
12
Additional paid-in capital
99,990
99,776
Treasury stock, 178,889 shares as of June 30, 2021 and December 31, 2020,
‎at cost
(1,253)
(1,253)
Accumulated other comprehensive loss
(10,323)
(10,345)
Accumulated deficit
(78,463)
(78,500)
Total stockholders' equity
9,963
9,690
Total liabilities and stockholders' equity
$
21,259
$
19,076

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

Table of Contents

~~EVOLVING SYSTEMS,~~SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021

Revenue	$	0	$	0	$	0	$	0

OPERATING EXPENSES
General and administrative		936		726		2,088		1,658
Depreciation		1		0		1		1
Total operating expenses		937		726		2,089		1,659

Loss from operations		(937)		(726)		(2,089)		(1,659)

Other income (expense)
Interest income		243		2		579		2
Interest expense		0		0		(2)		0
Other income (expense), net		(105)		318		(91)		(1)
Realized gain on investments, net		291		0		394		0
Unrealized loss on investments, net		(1,660)		0		(1,558)		0
Other income (expense), net		(1,231)		320		(678)		1

Loss from continuing operations before income taxes		(2,168)		(406)		(2,767)		(1,658)
Income tax expense (benefit)		(6)		24		(65)		8
Net loss from continuing operations		(2,162)		(430)		(2,702)		(1,666)

Income from discontinued operations before income taxes		0		1,505		0		1,916
Income tax expense (benefit) from discontinued operations		0		122		(49)		213
Net income from discontinued operations		0		1,383		49		1,703

Net (loss) income	$	(2,162)	$	953	$	(2,653)	$	37

Basic loss per common share from continuing operations	$	(0.18)	$	(0.04)	$	(0.22)	$	(0.14)
Basic earnings per common share from discontinued operations	$	0	$	0.11	$	0	$	0.14

Diluted loss per common share from continuing operations	$	(0.18)	$	(0.04)	$	(0.22)	$	(0.14)
Diluted earnings per common share from discontinued operations	$	0	$	0.11	$	0	$	0.14

Weighted average basic shares outstanding		12,300		12,257		12,308		12,232
Weighted average diluted shares outstanding		12,300		12,257		12,308		12,232

~~(unaudited)~~

For the Three Months
For the Six Months
Ended June 30,
Ended June 30,
2021
2020
2021
2020
REVENUE
License fees
$
8
$
97
$
186
$
304
Services
6,986
6,232
13,268
12,310
Total revenue
6,994
6,329
13,454
12,614
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of revenue, excluding depreciation and
‎ amortization
2,185
2,188
4,425
4,324
Sales and marketing
1,415
1,444
2,756
3,005
General and administrative
1,395
1,109
2,840
2,523
Product development
1,284
1,011
2,588
2,074
Depreciation
64
50
126
100
Amortization
240
233
478
468
Restructuring
61
—
61
—
Total costs of revenue and operating expenses
6,644
6,035
13,274
12,494
Income from operations
350
294
180
120
Other income (expense)
Interest income
3
1
4
3
Interest expense
—
(18)
(1)
(65)
Other income, net
578
16
287
19
Foreign currency exchange income (loss)
168
(36)
(212)
347
Other income (expense), net
749
(37)
78
304
Income from operations before income taxes
1,099
257
258
424
Income tax expense
146
305
221
504
Net income (loss)
$
953
$
(48)
$
37
$
(80)
Basic earnings (loss) per common share
$
0.08
$
(0.00)
$
0.00
$
(0.01)
Diluted earnings (loss) per common share
$
0.08
$
(0.00)
$
0.00
$
(0.01)
Weighted average basic shares outstanding
12,257
12,179
12,232
12,179
Weighted average diluted shares outstanding
12,258
12,179
12,258
12,179

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

Table of Contents

~~EVOLVING SYSTEMS,~~SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

(in thousands)

(unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net (loss) income	$	(2,162)	$	953	$	(2,653)	$	37

Other comprehensive (loss) income
Foreign currency translation (loss) income		0		(147)		0		22
Unrealized loss on available-for-sale investments		(2,034)		—		(2,574)		—
Comprehensive (loss) income	$	(4,196)	$	806	$	(5,227)	$	59

~~(unaudited)~~

For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Net income (loss)
$
953
$
(48)
$
37
$
(80)
Other comprehensive (loss) income
Foreign currency translation (loss) income
(147)
(99)
22
(622)
Comprehensive income (loss)
$
806
$
(147)
$
59
$
(702)

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

Table of Contents

~~EVOLVING SYSTEMS,~~SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

Six Months Ended June 30, 2022


								Accumulated
				Additional				other				Total
	Common Stock			paid-in		Treasury		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		stock		loss		deficit		equity
Balance at January 1, 2022	12,258,184	$	12	$	100,024	$	(1,253)	$	0	$	(61,055)	$	37,728
Restricted stock vested	75,000		—		—		—		—		—		—
Stock-based compensation expense	—		—		205		—		—		—		205
Retirement of common stock	(1,501,192)		(1)		(2,469)		—		—		—		(2,470)
Net loss	—		—		—		—		—		(2,653)		(2,653)
Unrealized loss on available-for-sale investments	—		—		—		—		(2,574)		—		(2,574)
Balance at June 30, 2022	10,831,992	$	11	$	97,760	$	(1,253)	$	(2,574)	$	(63,708)	$	30,236

Six Months Ended June 30, 2021

~~(unaudited)~~


								Accumulated
				Additional				other				Total
	Common Stock			paid-in		Treasury		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		stock		loss		deficit		equity
Balance at January 1, 2021	12,195,909	$	12	$	99,776	$	(1,253)	$	(10,345)	$	(78,500)	$	9,690
Restricted stock vested	61,337		—		—		—		—		—		—
Stock-based compensation expense	—		—		214		—		—		—		214
Net income	—		—		—		—		—		37		37
Foreign currency translation gain	—		—		—		—		22		—		22
Balance at June 30, 2021	12,257,246	$	12	$	99,990	$	(1,253)	$	(10,323)	$	(78,463)	$	9,963

Six Months Ended June 30, 2021
Accumulated
Additional
other
Total
Common stock
paid-in
Treasury
comprehensive
Accumulated
stockholders'
Shares
Amount
capital
stock
loss
deficit
equity
Balance at January 1, 2021
12,195,909
$
12
$
99,776
$
(1,253)
$
(10,345)
$
(78,500)
$
9,690
Restricted stock vested
61,337
—
—
—
—
—
—
Stock-based compensation
‎ expense
—
—
214
—
—
—
214
Net income
—
—
—
—
—
37
37
Foreign currency translation
income
—
—
—
—
22
—
22
Balance at June 30, 2021
12,257,246
$
12
$
99,990
$
(1,253)
$
(10,323)
$
(78,463)
$
9,963

Six Months Ended June 30, 2020
Accumulated
Additional
other
Total
Common stock
paid-in
Treasury
comprehensive
Accumulated
stockholders'
Shares
Amount
capital
stock
loss
deficit
equity
Balance at January 1, 2020
12,163,834
$
12
$
99,555
$
(1,253)
$
(10,053)
$
(79,143)
$
9,118
Restricted stock vested
31,137
—
—
—
—
—
—
Stock-based compensation
‎ expense
—
—
67
—
—
—
67
Net loss
—
—
—
—
—
(80)
(80)
Foreign currency translation
‎ loss
—
—
—
—
(622)
—
(622)
Balance at June 30, 2020
12,194,971
$
12
$
99,622
$
(1,253)
$
(10,675)
$
(79,223)
$
8,483

‎

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

Table of Contents

SYMBOLIC LOGIC, INC.

~~EVOLVING SYSTEMS, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

Three Months Ended June 30, 2022


								Accumulated
				Additional				other				Total
	Common Stock			paid-in		Treasury		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		stock		loss		deficit		equity
Balance at March 31, 2022	12,333,184	$	12	$	100,192	$	(1,253)	$	(540)	$	(61,546)	$	36,865
Stock-based compensation expense	—		—		37		—		—		—		37
Retirement of common stock	(1,501,192)		(1)		(2,469)		—		—		—		(2,470)
Net loss	—		—		—		—		—		(2,162)		(2,162)
Unrealized loss on available-for-sale investments	—		—		—		—		(2,034)		—		(2,034)
Balance at June 30, 2022	10,831,992	$	11	$	97,760	$	(1,253)	$	(2,574)	$	(63,708)	$	30,236

Three Months Ended June 30, 2021

~~(unaudited)~~


								Accumulated
				Additional				other				Total
	Common Stock			paid-in		Treasury		comprehensive		Accumulated		stockholders’
	Shares	Amount		capital		stock		loss		deficit		equity
Balance at March 31, 2021	12,226,577	$	12	$	99,973	$	(1,253)	$	(10,176)	$	(79,416)	$	9,140
Restricted stock vested	30,669		—		—		—		—		—		—
Stock-based compensation expense	—		—		17		—		—		—		17
Net income	—		—		—		—		—		953		953
Foreign currency translation loss	—		—		—		—		(147)		—		(147)
Balance at June 30, 2021	12,257,246	$	12	$	99,990	$	(1,253)	$	(10,323)	$	(78,463)	$	9,963

Three Months Ended June 30, 2021
Accumulated
Additional
other
Total
Common stock
paid-in
Treasury
comprehensive
Accumulated
stockholders'
Shares
Amount
capital
stock
loss
deficit
equity
Balance at March 31, 2021
12,226,577
$
12
$
99,973
$
(1,253)
$
(10,176)
$
(79,416)
$
9,140
Restricted stock vested
30,669
—
—
—
—
—
—
Stock-based compensation
‎ expense
—
—
17
—
—
—
17
Net income
—
—
—
—
—
953
953
Foreign currency translation
‎ loss
—
—
—
—
(147)
—
(147)
Balance at June 30, 2021
12,257,246
$
12
$
99,990
$
(1,253)
$
(10,323)
$
(78,463)
$
9,963

Three Months Ended June 30, 2020
Accumulated
Additional
other
Total
Common stock
paid-in
Treasury
comprehensive
Accumulated
stockholders'
Shares
Amount
capital
stock
loss
deficit
equity
Balance at March 31, 2020
12,194,502
$
12
$
99,613
$
(1,253)
$
(10,576)
$
(79,175)
$
8,621
Restricted stock vested
469
—
—
—
—
—
—
Stock-based compensation
‎ expense
—
—
9
—
—
—
9
Net loss
—
—
—
—
—
(48)
(48)
Foreign currency translation
‎ loss
—
—
—
—
(99)
—
(99)
Balance at June 30, 2020
12,194,971
$
12
$
99,622
$
(1,253)
$
(10,675)
$
(79,223)
$
8,483

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

Table of Contents

~~EVOLVING SYSTEMS,~~SYMBOLIC LOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Six Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,653)	$	37
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation		1		126
Amortization of intangible assets		0		478
Amortization of operating leases — right of use assets		0		211
Stock-based compensation expense		205		214
Foreign currency transaction loss, net		0		88
Provision for deferred income taxes		0		7
Loan origination income		(2)		—
Gain on PPP Loan forgiveness		0		(319)
Realized gains on investments		(394)		—
Unrealized losses on investments		1,558		0
Change in operating assets and liabilities:
Contract receivables		0		970
Unbilled work-in-progress		0		(789)
Prepaid and other assets		(743)		266
Accounts payable and accrued liabilities		28		343
Escrow liability		172		—
Income taxes receivable		0		(460)
Income taxes payable		(189)		0
Unearned revenue		0		1,776
Long-term assets - other		0		(256)
Lease obligations — operating leases		0		(213)
Net cash (used in) provided by operating activities		(2,017)		2,479

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2)		(108)
Purchases of investments		(18,445)		0
Proceeds on sale of investments		1,956		0
Transaction fees related to prior period disposition		(646)		—
Net cash used in investing activities		(17,137)		(108)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable		0		(143)
Retirement of common stock		(2,470)		—
Net cash used in financing activities		(2,470)		(143)

Effect of exchange rate changes on cash and cash equivalents		0		(95)

Net (decrease) increase in cash and cash equivalents		(21,624)		2,133
Cash and cash equivalents at beginning of period		39,445		2,763
Cash and cash equivalents at end of period	$	17,821	$	4,896

Supplemental disclosure of cash and non-cash transactions:
Interest paid	$	2	$	4
Income taxes paid, net of refunds	$	82	$	456
Deferred loan origination income	$	45	$	—
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets	$	0	$	370

~~(unaudited)~~

For the Six Months Ended June 30,
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
37
$
(80)
Adjustments to reconcile net income (loss) to net cash provided by
‎operating activities:
Depreciation
126
100
Amortization of intangible assets
478
468
Amortization of debt issuance costs
—
3
Amortization of operating leases — right of use assets
211
154
Stock-based compensation expense
214
67
Foreign currency transaction loss (income), net
88
(347)
Bad debt recoveries
—
(11)
Provision for deferred income taxes
7
366
PPP Loan forgiveness
(319)
—
Change in operating assets and liabilities:
Contract receivables
970
2,338
Unbilled work-in-progress
(789)
(1,868)
Prepaid and other assets
266
(605)
Accounts payable and accrued liabilities
343
899
Income taxes receivable
(460)
152
Unearned revenue
1,776
397
Lease obligations — operating leases
(213)
(154)
Long-term assets – other
(256)
—
Net cash provided by operating activities
2,479
1,879
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(108)
(188)
Net cash used in investing activities
(108)
(188)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
(143)
(526)
Proceeds from loan
—
319
Net cash used in financing activities
(143)
(207)
Effect of exchange rate changes on cash and cash equivalents
(95)
(289)
Net increase in cash and cash equivalents
2,133
1,195
Cash and cash equivalents at beginning of period
2,763
3,076
Cash and cash equivalents at end of period
$
4,896
$
4,271
Supplemental disclosure of cash and non-cash transactions:
Interest paid
$
4
$
51
Income taxes paid
$
456
$
101
Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use
‎ assets
$
370
$
—

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

Table of Contents

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 ~~“Company”~~“Equity Purchase Agreement”) ~~is a provider~~and 2 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 ~~real-time digital engagement solutions~~October 15, 2021, with subsidiaries and ~~services~~affiliates of ~~software solutions~~PartnerOne Capital, Inc. (the “Purchasers”). The Purchase Agreements provided for the sale and ~~services~~transfer of substantially all of Evolving Systems’ operating subsidiaries and all of its assets to the ~~wireless carrier~~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 ~~consumer financial services markets. We maintain long-standing relationships with many~~conditions, including an adjustment to the purchase price based on Evolving Systems’ cash and cash equivalents on hand as of the ~~largest wireless companies worldwide.~~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 ~~portfolio includes market-leading solutions~~directors and ~~services for real-time analytics, customer acquisition~~executives have an extensive background in mergers and ~~activation, customer value management~~acquisitions (“M&A”) activity. The Company plans to use its cash assets and ~~loyalty for the telecom industry promoting partnerships into retail and financial services~~.

~~Acquisitions~~network of BLS Limited (“EVOL BLS”), four Lumata Holdings subsidiaries, Lumata France SAS, Lumata Spain S.L., Lumata UK Ltd and Lumata Deutschland GmbH (collectively, “Lumata Entities”) in 2017, along with the acquisition of RateIntegration d/b/a Sixth Sense Media (“SSM”) in 2015, expanded our footprint in the digital marketing space. Each of these acquisitions had their own platform which we still maintain today. Through the extensive work of our product development team, we have launched the Evolution platform featuring the best of these legacy platforms on cutting edge technology. Evolution is usedrelationships to ~~operate the most innovative large-scale loyalty programs,~~seek to acquire businesses and/or assets as well as ~~providing unique mechanics enabling gamification, optimization~~consider strategic partners.

Following the sale of its assets in December 2021, the Company began to evaluate two initial areas of product focus, each of which are in a research-oriented pre-release mode. The two areas of focus relate to the application of self-learning algorithms and ~~personalization across a variety~~the symbolic tagging and organizing of ~~channels. It enables our clients~~physical objects. The Company continues to ~~engage with their customers at all stage of their lifecycle, providing interactive dialogue~~selectively seek new opportunities whether through potential mergers, acquisitions, joint ventures, strategic partnerships, and smart recommendations through all available traditional and digital channels. The platform seamlessly integrates within the service provider’s IT infrastructure, either on-premise or on a private cloud. It can be operated or managed as a service depending on the market needs.future product development.

As a supplier of real-time digital engagement solutions and services, we drive growth in customer acquisition and activation, extend customer lifetime and increase customer value and revenue in the converging mobile, entertainment, financial and retail services eco-system. Our platforms, together with our team of experienced industry experts, help service providers increase their customer lifetime value (“CLV”) over the course the customer lifecycle.

~~Evolving Systems provides software solutions and services throughout the world.~~ The COVID-19 global outbreak ~~has~~ caused instability and volatility in multiple markets ~~where our clients conduct business.~~throughout the world. We have leveraged our ability to ~~provide support~~work remotely resulting in limited effect on our ~~day-to-day~~day to day operations.

On December 9, 2021, the Company received a letter from the Nasdaq Capital Market (“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 ~~inability~~NASDAQ staff requested certain information from the Company regarding its on-going business. We provided a response to ~~travel has delayed interactions~~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 ~~our clients~~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.

Table of Contents

On April 13, 2022, Symbolic Logic, Inc. f/k/a Evolving Systems, Inc. notified the NASDAQ of its intention to voluntarily withdraw its common stock, par value $0.001 per share (the “Common Stock”), from listing on ~~projects~~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.

On May 23, 2022, the Company announced a modified Dutch auction tender offer to purchase with cash up to $9.6 million of shares of its common stock which expired on June 23, 2022. Based on the final count by the depository for the tender offer, a total of 1,501,192 shares of common stock were validly tendered and not validly withdrawn at or below the price of $1.55 per share. The Company accepted all of these shares of common stock for purchase at the purchase price of $1.55 per share, for a total cost of $2.5 million, including $0.2 million in fees and expenses. The total of 1,501,192 shares of common stock accepted for purchase represents approximately 12.2 % of the ~~traditional modes~~Company’s total shares of ~~sales development. We continually work with existing and new clients exploring new ways~~common stock outstanding.

CCUR Holdings Inc. filed a schedule 13D on August 1st, 2022, announcing that as of ~~using our products and services to enhance their business. On-going travel restrictions has caused~~July 28, 2022, they have acquired in total 6,396,174 common shares of the ~~business to interact with clients in new ways and reduced certain costs. The long-term effects on how we conduct business in~~Company. This represents 59% beneficial ownership of the ~~future is still undetermined but we continue to evolve to meet client needs.~~outstanding shares of the Company.

We believe our current liquidity ~~and funds~~ from our ~~ongoing~~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 ~~$4.9~~$17.8 million in cash and cash equivalents and our ~~$5.6~~$29.2 million in working capital at June 30, ~~2021, along with our ability to generate positive cash flows from operations for the six months ended June 30, 2021 and year ended December 31, 2020.~~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 (“SEC”).~~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 and six months ended June 30, ~~2021~~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, ~~2020~~2021 included in our Annual Report on Form 10-K as filed with the SEC on ~~March 17, 2021.~~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 ~~revenue and~~ expenses during the reporting period. We made estimates with respect to ~~revenue recognition for progress toward completion and direct profit or loss on contracts, allowance for doubtful accounts,~~ income tax valuation ~~allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful~~

~~lives for property, equipment and intangible assets, business combinations, capitalization of internal software development costs~~ and fair value of investments and stock-based compensation amounts. Actual results could differ from these estimates.

~~Foreign Currency~~ — Our reporting currency is the U.S. dollar. The functional currency of our foreign operations, generally, is the respective local currency for each foreign subsidiary. Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. Our condensed consolidated statements of operations are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive loss in stockholders’ equity. Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in other income (expense) in the period in which they occur.

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

~~Revenue Recognition~~ — The majority of our license fees and services revenue is generated from fixed-price contracts, this provides for licenses to our software products and services that customize such software to meet our customers’ needs. In most instances, customization services are determined to be essential to the functionality of the delivered software. Under Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contacts with Customers (“ASC 606”), revenue is recognized when the Company completes its performance obligations in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on consideration specified in a contract with a customer and exclude any sales incentives. Furthermore, we recognize revenue when we satisfy a performance obligation by transferring control over the service to our customer.

A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. Losses on fixed-price projects are recorded when identified. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.

~~Nature of goods and services~~

The following is a description of our products and services from which we generate revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

~~i. License Revenue~~

License fees represent the fees we receive from the licensing of our software products. In most instances, customization services are determined to be essential to the functionality of the delivered software. The license along with the customization services are transferred to our customers over time. In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when the license agreement has been approved and the software has been delivered. We can identify each party’s rights, payment terms, and commercial substance of the content. Where applicable, we identify multiple performance obligations and record as revenue as the performance obligations are fulfilled based on their estimated allocated standalone selling price. The selection of the method to measure progress towards completion requires judgment and is based on the extent of progress towards completion of the performance obligation. We recognize revenue using the input method of accounting based on labor hours.

~~ii. Customer Support Revenue~~

Customer support services includes annual support fees, recurring maintenance fees, and minor product upgrades generally as a single performance obligation. The warranty support fees represent a separate performance obligation that is provided for up to a year with initial license purchase. The Company allocates the contract transaction price related to warranty support fees based on pricing consistent with what we would offer to other market participants. Upon the conclusion of the warranty period, the customer can choose to continue to receive support and maintenance services via our customer support offerings. We recognize revenue from our support ratably over the service contract period.

~~iii. Services Revenue~~

We recognize revenue from fixed-price service contracts using the input method of accounting based on labor hours. These contracts generally include a single performance obligation. Under the input method, revenue is recognized on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. We recognize revenue from professional services provided pursuant to time-and-materials based contracts and training services as the services are performed, as that is when our performance obligation to our customers under such arrangements is fulfilled.

~~iv. Managed Services~~

We recognize revenue from our managed services contracts primarily over the service contract period generally as a single performance obligation. On occasion, our managed services contracts will contain a specified number of hours to work over the term of the contract or other services that would be separate performance obligations. Revenue for this type of managed service contract is recognized using the input method of accounting, as previously described.

~~Disaggregation of revenue~~

~~In the following table, revenue is disaggregated by primary geographical market, major products/service lines, and timing of revenue recognition (in thousands):~~

For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Primary geographical markets
United Kingdom
$
1,391
$
1,103
$
2,526
$
2,293
Other
5,603
5,226
10,928
10,321
$
6,994
$
6,329
$
13,454
$
12,614
Major products/service lines
License revenue
$
8
$
97
$
186
$
304
Customer support, including warranty support fees
1,946
1,952
3,928
4,085
Services
2,525
1,792
4,581
3,359
Managed services
2,515
2,488
4,759
4,866
Total services
6,986
6,232
13,268
12,310
$
6,994
$
6,329
$
13,454
$
12,614
Timing of revenue recognition
Products transferred at a point in time
$
—
$
93
$
169
$
228
Products and services transferred over time
6,994
6,236
13,285
12,386
$
6,994
$
6,329
$
13,454
$
12,614

~~Contract balances~~

~~The following table provides information about receivables, assets, and liabilities from contracts with customers (in thousands):~~

June 30, 2021
December 31, 2020
Assets
Contract receivables, net
$
4,739
$
5,681
Unbilled work-in-progress, net
$
4,183
$
3,365
Liabilities
Unearned revenue
$
5,540
$
3,713

Contract receivables are recorded at the invoiced amount and do not bear interest. Credit is extended based on the evaluation of a customer’s financial condition and collateral is not required. Unbilled work-in-progress is revenue which has been earned but not invoiced. The contract assets are transferred to the receivables when invoiced.

Management expects that incremental commission fees paid to employees and intermediaries as a result of obtaining contracts are recoverable and therefore the Company capitalized them as contract costs in the amount of $0.1 million and $0.2 million at June 30, 2021 and December 31, 2020, respectively.

Capitalized commission fees are amortized based on the transfer of services to which the assets relate which may range from 2 to 3 years and are included in sales and marketing. In each of the three month periods ended June 30, 2021 and 2020, the amount of amortization was less than $0.1 million and there was 0 impairment loss in relation to the costs capitalized. In each of the six month periods ended June 30, 2021 and 2020, the amount of amortization was $0.1 million and $0.2 million, respectively, and there was no impairment loss in relation to the costs capitalized. Applying the practical expedient in ASC 606 paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in sales and marketing.

~~The contract liabilities primarily relate to unearned revenue. Amounts billed in advance of performance obligations being satisfied are recognized as unearned revenue.~~

For the three months ended June 30, 2021 and 2020, we recognized revenue of $1.5 million and $2.1 million, respectively, which was included in the corresponding contract liability balance at the beginning of the period. For the six months ended June 30, 2021 and 2020, we recognized revenue of $2.6 million and $2.9 million, respectively, which was included in the corresponding contract liability balance at the beginning of the period.

~~Transaction price allocated to the remaining performance obligations~~

Remaining performance obligations represent the transaction price of firm orders for which work has not been completed as of the period end date and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity). As of June 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations with lives greater than one-year totaled $14 million. The Company expects approximately 64% of remaining performance obligations to be recognized into revenue within the next twelve months, with the remaining 36% recognized thereafter.

We apply the practical expedient in paragraph ASC 606-10-50-14 and do not disclose information about remaining performance obligations that have original expected durations of one-year or less. We apply the transition practical expedient in paragraph ASC 606-10-65-1(f)(3) and do not disclose the amount of the transaction price allocated to the remaining performance obligations and an explanation of when we expect to recognize that amount as revenue.

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.

Table of Contents

Investments — Investments in entities where the Company owns less than twenty percent of the voting stock of the individual entity, does not exercise significant influence over operating and financial policies of the entity, and the investment does not have a readily determinable fair value, are accounted for using the cost method. Under the cost method of accounting, the investment is carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may have an effect on the fair value of the investment. Under this method, the Company’s share of the earnings or losses of such investee companies is not included in the consolidated balance sheet or consolidated statements of operations. As of June 30, 2022, the Company held one cost method investment for $1,000,000 (see Note 5, "Investments").

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:

●

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities;

●

Level 2 — Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

●

Level 3 — Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which include the use of management estimates.

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 fixed maturity securities and debt 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 investments, net in the condensed consolidated statements of operations. 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.

Investments in equity investments that do not have readily determinable fair values (non-marketable) are accounted for at cost minus impairment, if any, and any 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 investments, 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.

Table of Contents

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


	Fair value at June 30, 2022
	Total		Level 1		Level 2		Level 3
Money market funds	$	68	$	68	$	0	$	0
Cash and cash equivalents	$	68	$	68	$	0	$	0

Common stock and common stock options	$	5,363	$	5,363	$	0	$	0
Equity securities	$	5,363	$	5,363	$	0	$	0

Debt securities	$	2,575	$	0	$	2,575	$	0
Debt securities	$	2,575	$	0	$	2,575	$	0

Corporate bonds	$	3,828	$	0	$	3,828	$	0
Fixed maturity securities	$	3,828	$	0	$	3,828	$	0

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.

~~Segment Information~~ — We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We have identified our Chief Executive Officer and Senior Vice President of Finance as our chief operating decision-makers. These chief operating decision makers review revenues by segment and review overall results of operations.

We currently operate our business as 1 operating segment which includes 2 revenue types: license fees revenue and services revenue (as shown on the condensed consolidated statements of operations). License fees revenue represents the fees received

from the license of software products. Services revenue includes services directly related to the delivery of the licensed products, such as fees for custom development, integration services, SaaS services, managed services, annual support fees, recurring maintenance fees, fees for maintenance upgrades and warranty services. Warranty services that are similar to software maintenance services are typically bundled with a license sale.

Recently Adopted Accounting Pronouncements — In ~~December 2019,~~May 2021, the FASB issued ~~Accounting Standards Update (“ASU”)~~ ASU ~~2019-12, Income Taxes~~2021-04—Earnings Per Share (ASC ~~740) — Simplifying~~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 ~~Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 modifies ASC 740 to simplify~~amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the ~~accounting for income taxes and eliminates certain exceptions~~modification or exchange. The amendments that relate to the ~~general principles~~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 ~~740.~~260, Earnings Per Share. The ASU removes certain exceptions for recognizing deferred taxes for investments, performing the incremental approach for intra-period allocation where there is a loss from continuing operations, and income or a gain from other items, and the general methodology for calculating income taxesamendments in interim periods when a year-to-date loss exceeds the anticipated loss for the year. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill, reporting the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the first interim period that includes the enactment date, and allocating taxes to members of a consolidated group. ASU 2019-12 isthis update are effective for ~~annual periods,~~fiscal years beginning after December 15, 2021, including interim periods within those ~~annual periods, beginning after December 15, 2020.~~fiscal years. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements.

~~Management has evaluated~~Recently Issued Accounting Pronouncements — In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other ~~recently issued accounting pronouncements~~instruments. For receivables, loans and ~~does not believe~~other instruments, entities will be required to use a new forward-looking “expected loss” model that ~~any~~generally will result in the earlier recognition of ~~these pronouncements~~allowance for losses. In addition, an entity will have to disclose significantly more information about allowances and credit quality indicators. The new standard is effective for the Company for fiscal years beginning after December 15, 2022. The Company is currently in the process of assessing the impact of this new standard on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (ASC 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The new standard clarifies that a ~~significant~~contractual restriction on the sale of an equity security should not be considered in measuring the fair value of the security. The new standard also requires certain disclosures related to equity securities with contractual sale restrictions. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied prospectively. The Company is currently in the process of assessing the impact of this new standard on its consolidated financial statements.

Table of Contents

NOTE 2 — DISCONTINUED OPERATIONS

On December 31, 2021, Evolving Systems, Inc. and certain of its subsidiaries completed the Equity Purchase Agreement and 2 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 ~~financial statements~~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 ~~disclosures.~~

~~NOTE 2 — INTANGIBLE ASSETS~~

~~We amortize identifiable intangible assets on a straight-line basis over their estimated useful lives. As of~~business operations sold for June 30, 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, ~~2020, identifiable intangibles were as follows (in thousands):~~2021 presented have been reclassified in the condensed consolidated balance sheets.

June 30, 2021
Gross Amount
Accumulated Amortization
Net Carrying Amount
Purchased software
$
2,943
$
(2,106)
$
837
Trademarks and tradenames
313
(285)
28
Non-competition
40
(40)
—
Customer relationships
4,413
(2,968)
1,445
$
7,709
⁽¹⁾
$
(5,399)
⁽¹⁾
$
2,310

December 31, 2020
Gross Amount
Accumulated Amortization
Net Carrying Amount
Purchased software
$
2,932
$
(1,907)
$
1,025
Trademarks and tradenames
311
(272)
39
Non-competition
40
(40)
—
Customer relationships
4,396
(2,691)
1,705
$
7,679
⁽¹⁾
$
(4,910)
⁽¹⁾
$
2,769

~~Amortization expense of identifiable intangible assets was $0.2 million for each~~The following table presents the financial results of the ~~three months ended June 30, 2021 and 2020~~discontinued operations:


	For the Three		For the Six
	Months Ended		Months Ended
	June 30,		June 30,
	2021		2021
Revenue	$	6,994	$	13,454
Costs of revenue		(2,185)		(4,425)
Sales and marketing		(1,415)		(2,756)
General and administrative		(669)		(1,182)
Product development		(1,284)		(2,588)
Depreciation		(64)		(125)
Amortization		(240)		(478)
Restructuring		(61)		(61)
Interest expense		(2)		(3)
Interest income		3		4
Other income		260		288
Foreign currency exchange gain		168		(212)
Income tax expense		(122)		(213)
Net income from discontinued operations	$	1,383	$	1,703

~~and $0.5 million~~

Cash flow information relating to the discontinued operations for ~~each of~~ the six months ended June 30, 2021 ~~and 2020. Expected future amortization expense related to identifiable intangibles based on our carrying amount as of June 30, 2021~~ is as ~~follows (in thousands):~~follows:


	For the Six
	Months Ended
	June 30,
	2021
Operating cash flow data:
Depreciation	$	125
Amortization of intangible assets	$	478
Amortization of operating leases — right of use assets	$	211
Provision for deferred income taxes	$	7
Investing cash flow data:
Purchases of property and equipment	$	(108)

For the trailing twelve months ending June 30,
2022
$
903
2023
534
2024
273
2025
112
2026
94
Thereafter
394
$
2,310

NOTE 3 — BALANCE SHEET COMPONENTS

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


	June 30,		December 31,
	2022		2021
Accounts payable and accrued liabilities:
Accounts payable	$	157	$	83
Accrued compensation and related expenses		12		538
Accrued liabilities		465		631
	$	634	$	1,252

June 30, 2021
December 31, 2020
Accounts payable and accrued liabilities:
Accounts payable
$
730
$
878
Accrued compensation and related expenses
2,147
2,180
Accrued liabilities
1,765
1,247
$
4,642
$
4,305

NOTE 4 — EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing income ~~or loss~~ 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.

Table of Contents

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):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Basic earnings (loss) per common share:
Net loss from continuing operations	$	(2,162)	$	(430)	$	(2,702)	$	(1,666)
Net income from discontinued operations		—		1,383		49		1,703
Basic weighted average shares outstanding		12,300		12,257		12,308		12,232
Basic loss per common share from continuing operations	$	(0.18)	$	(0.04)	$	(0.22)	$	(0.14)
Basic earnings per common share from discontinued operations	$	0	$	0.11	$	0	$	0.14

Diluted earnings (loss) per common share:
Net loss from continuing operations	$	(2,162)	$	(430)	$	(2,702)	$	(1,666)
Net income from discontinued operations		—		1,383		49		1,703
Weighted average shares outstanding		12,300		12,257		12,308		12,232
Effect of dilutive securities		0		0		0		0
Diluted weighted average shares outstanding		12,300		12,257		12,308		12,232
Diluted loss per common share from continuing operations	$	(0.18)	$	(0.04)	$	(0.22)	$	(0.14)
Diluted earnings per common share from discontinued operations	$	0	$	0.11	$	0	$	0.14

For the Three Months Ended June 30,
For the Six Months Ended June 30,
2021
2020
2021
2020
Basic earnings (loss) per common share:
Net income (loss)
$
953
$
(48)
$
37
$
(80)
Basic weighted average shares outstanding
12,257
12,179
12,232
12,179
Basic earnings (loss) per common share:
$
0.08
$
(0.00)
$
0.00
$
(0.01)
Diluted earnings (loss) per common share:
Net income (loss)
$
953
$
(48)
$
37
$
(80)
Weighted average shares outstanding
12,257
12,179
12,232
12,179
Effect of dilutive securities - options and restricted stock
1
—
26
—
Diluted weighted average shares outstanding
12,258
12,179
12,258
12,179
Diluted earnings (loss) per common share:
$
0.08
$
(0.00)
$
0.00
$
(0.01)

Weighted average options to purchase of approximately ~~0.3~~0.1 million shares and ~~0.4~~0.3 million shares of common stock equivalents for the three and six months ended June 30, 2022 and 2021, respectively, were excluded from the computation of diluted weighted average shares outstanding ~~for the three and six months ended June 30, 2021, and 2020, respectively,~~ 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 — ~~STOCK-BASED COMPENSATION~~INVESTMENTS

Fixed-Maturity, Debt and Equity Securities Investments

On June 13, 2022, the Company entered into a line of credit to loan a counterparty 1,000,000 United States Dollar Coin (“USDC”) for a 30 day period. USDC is fully backed by the United States Dollar (“USD”) and is not subject to market fluctuations, and the Company plans to convert the USDC to USD immediately upon maturity. The loan bears interest at a rate of 4.0% per annum and had a term of one month. The entire principal balance of the loan was outstanding as of June 30, 2022.

On June 14, 2022, the Company purchased a promissory note with a second counterparty for $1,575,000 in conjunction with CCUR Holdings, Inc. The note bears interest at a rate of 15.0% per annum and has a term of one year and payment in full of the outstanding principal balance becomes due. The loan is collateralized by the counterparty’s and its subsidiaries’ assets including cash and intellectual property. If the counterparty incurs no event of default and has made all accrued interest payments, the counter party may extend the term by 2 additional six-month extension periods. The entire principal balance of the loan was outstanding as of June 30, 2022.

Table of Contents

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 June 30, 2022. There were 0 investments as of December 31, 2021.


			Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Equity securities
Common stock and common stock options	$	6,921	$	46	$	(1,604)	$	5,363
Total equity securities	$	6,921	$	46	$	(1,604)	$	5,363


			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
Debt securities
Available for sale	$	2,575	$	0	$	0	$	2,575
Total debt securities	$	2,575	$	0	$	0	$	2,575


			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
Fixed-maturity securities
Corporate bonds	$	6,402	$	0	$	(2,574)	$	3,828
Total fixed-maturity securities	$	6,402	$	0	$	(2,574)	$	3,828

The Company sold equity securities investments for proceeds of $1.5 million, and $2.0 million for the three and six months ended June 30, 2022, respectively, resulting in realized gains on investments, net of $0.3 million and $0.4 million, respectively. The Company also had unrealized losses on equity securities, net of $1.7 million and $1.6 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, the Company did not consider any of the fixed-maturity securities to be other-than-temporarily impaired. The Company does not intend to sell, nor believe it is more likely than not that the Company will be required to sell, any of the securities in an unrealized loss position. When evaluating investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer, the ability and intent to hold the security to maturity and whether it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis.

Maturities of Debt Securities and Fixed-Maturity Securities Available-for-Sale

The amortized cost and fair values of debt securities and fixed-maturity securities available for sale as of June 30, 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.


	Amortized Cost		Fair Value
Due within one year through three years	$	2,575	$	2,575
Due after three years through five years		6,402		3,828
Due after five years through ten years		0		0
Total debt securities and fixed-maturity securities	$	8,977	$	6,403

Cost Method Investment

In May 2022, the Company purchased a minority equity interest through a private placement in the amount of $1.0 million in BH3 Slate, LLC (“BH3”). As of June 30, 2022, the Company holds a 3.75% ownership interest. Distributions of available cash made by BH3 will first be made to us equal to our interest until the Internal Rate of Return is 8%, second to the manager until Internal Rate of Return of 5%, thereafter with 75% going to member and 25% to the manager. There were no indicators of impairment during the three and six months ended June 30, 2022.

Table of Contents

NOTE 6 — STOCK-BASED COMPENSATION

We recognized less than $0.1 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 June 30, 2022 and 2021, and ~~2020, and~~ $0.2 ~~million and less than $0.1~~ million for the six months ended June 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

~~The following table summarizes stock-based compensation expenses recorded in the condensed consolidated statements of operations (in thousands):~~

For the Three Months Ended June 30,
For the Six Months Ended June 30,
2021
2020
2021
2020
Cost of revenue, excluding
depreciation and amortization
$
2
$
11
$
14
$
23
Sales and marketing
6
6
12
12
General and administrative
9
(8)
186
38
Product development
—
—
2
(6)
Total stock-based compensation
$
17
$
9
$
214
$
67

Stock Incentive Plans

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 0 shares were available for grant under the 2007 Stock Plan, as amended. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 0.03 million options and 0 restricted shares, and 0.1 million options and ~~restricted shares and 0.2 million options and~~0 restricted shares were issued and outstanding under the 2007 Stock Plan as amended, respectively.

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were approximately ~~0.5~~0.4 million and 0.6 million shares available for grant under the 2016 Stock Plan, respectively. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 0.1 million options and 0.2 million restricted shares and 0.1 million options and 0 restricted shares were issued and outstanding under the 2016 Stock Plan, respectively.

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

The following is a summary of restricted stock activity under the plans for the six months ended June 30, ~~2021:~~2022:


		Restricted Stock
		Number of Shares
	~~Restricted~~	(in thousands)
	~~Stock~~
	~~Number of~~
	~~Shares~~
	~~(in thousands)~~
Unvested restricted stock at January 1, ~~2021~~2022	63	0
Add restricted stock granted		225
Less restricted stock vested	~~(62)~~	(75)
Less restricted stock forfeited/expired		0
Unvested restricted stock at June 30, ~~2021~~2022	1
	150

‎

The following is a summary of stock option activity under the plans for the six months ended June 30, ~~2021:~~2022:


				Weighted
				Average
	Number of	Weighted-		Remaining	Aggregate
	Shares	Average		Contractual	Intrinsic Value
	(in thousands)	Exercise Price		Term (Years)	(in thousands)
Options outstanding at January 1, 2022	287	$	6.11	4.37	$	0
Less options forfeited/cancelled	(205)		4.11	—		—
Less options expired	0		0	—		—
Options outstanding at June 30, 2022	82	$	5.71	4.35	$	0

Options exercisable at June 30, 2022	82	$	5.71	4.35		0

Weighted-
Average
Weighted-
Remaining
Aggregate
Number of
Average
Contractual
Intrinsic
Shares
Exercise
Term
Value
(in thousands)
Price
(Years)
(in thousands)
Options outstanding at January 1, 2021
343
$
5.82
5.62
$
—
Less options forfeited/cancelled
(14)
3.72
Options outstanding at June 30, 2021
329
$
5.91
5.06
$
—
Options exercisable at June 30, 2021
309
$
5.99
4.98
$
—

There were 225,000 restricted shares granted and 0 stock options granted during the six months ended June 30, ~~2021 or 2020. The total fair value of stock options~~2022, and 0 restricted stock ~~vested in~~awards or options granted during the six months ended June 30, ~~2021 and 2020 was $0.3 million and $0.2 million, respectively.~~

~~NOTE 6 — CONCENTRATION OF CREDIT RISK~~

~~For the three months ended June 30, 2021 and 2020 1 significant customer (defined as contributing at least 10%) accounted for 10% and 10%~~2021. The total fair value of ~~revenue from operations, respectively. The significant customer is a large telecommunications operator in Europe.~~

~~For~~restricted shares granted during the six months ended June 30, 2021 and 2020 1 significant customer (defined as contributing at least 10%) accounted for 10% and 10% of revenue from operations, respectively. The significant customer is a large telecommunications operator in Europe.

~~As of~~2022 was $0.4 million. NaN restricted shares were granted during the six months ended June 30, ~~2021 and December 31, 2020, we did 0t have a significant customer that accounted for approximately 10%~~2021.

Table of ~~contract receivables and unbilled work-in-progress.~~Contents

NOTE 7 — ~~LONG-TERM DEBT~~

On August 16, 2017, we entered into a Term Loan Facility Agreement with East West Bank as lender in the amount of $4.7 million (the “Lumata Facility”). The Lumata Facility requires the Company to make monthly principal payments of approximately $0.1 million that commenced on July 31, 2018 and interest at the greater of (a) 3.5% or (b) the variable rate of interest that appears in the Wall Street Journal on a monthly measurement date plus in either case 1.5%. We used the full amount of the Lumata Facility to fund the acquisition of the Lumata companies. The Lumata Facility is secured by all of the assets of EVOL Holdings and the Original Guarantors in accordance with the terms of a Debenture entered into by EVOL Holdings and the Original Guarantors in favor of East West Bank. EVOL Holdings, EVOL Inc. and the Original Guarantors also entered into a Subordination Deed whereby each of the parties agreed to subordinate all loans by and among each other to East West Bank. Lumata France SAS and Lumata UK Ltd are also bound to adhere to the finance documents as additional obligors.

The Lumata Facility required the Company to pay an Arrangement Fee (“Origination Fee”) of $23,650, payable in 4 equal installments, with the first payment due on the date of the Lumata Facility and the remaining three payments on the first, second and third anniversary thereof. The Company also agreed to pay East West Bank’s legal fees in connection with the transaction. The Company may prepay the Lumata Facility at any time, in a minimum amount of $250,000 and increments of $50,000, subject to a prepayment fee of 2% of the amount prepaid, on any prepayment made before the second anniversary date of the Agreement.

On September 24, 2019 the Company agreed in principle to the terms of a new amendment and on October 4, 2019, we entered into the First Amendment (“First Amendment”) to the Lumata Facility. The purpose of the First Amendment was to waive certain events of non-compliance with respect to covenants not achieved in prior periods and to amend future covenant requirements. The First Amendment also required Evolving Systems to make an advance payment of principal of $666,667. The remaining terms and conditions of the Lumata Facility and payment schedule remain unchanged. The Company also agreed to pay East West Bank’s legal fees in connection with the transaction.

Financial covenants previously included in the credit facilities were amended and replaced by a minimum consolidated cash balance of no less than the total bank debt outstanding and a minimum trailing three month consolidated EBITDA fixed dollar amount mutually agreed to by the Company and East West Bank in the amendments.

On July 1, 2020, we entered into the Amendment and Waiver Letter (“Second Amendment”) to the Lumata Facility. The purpose of the Second Amendment was to waive certain events of non-compliance with respect to covenants not achieved in prior periods and to amend future covenant requirements. Financial covenants previously included in the amended credit facilities had been replaced by a monthly minimum consolidated cash balance of no less than $1.5 million and a fiscal quarter consolidated EBITDA fixed dollar amount mutually agreed to by the Company and East West Bank in the amendments. The Company also agreed to pay East West Bank’s legal fees in connection with the transaction. The Second Amendment adjusted the loan amortization accelerating the final payment date and fixed the interest rate at 5% on the remaining principal. The remaining terms and conditions of the Lumata Facility unchanged. Monthly payments were $0.1 million, and the Company also made an advance payment of $44,000 on June 1, 2020. The last payment was transacted on January 11, 2021.

~~Paycheck Protection Program Loan~~

On April 15, 2020, the Company received loan proceeds in the amount of $318,900 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after a period of 8 to 24 weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.

We have met the conditions of the PPP Loan forgiveness program. As authorized by section 1106 of the CARES Act, United States Small Business Administration (“SBA”) has forgiven the PPP loan on May 20, 2021. The forgiveness amount was $318,900 in principal and $3,543 in Interest. We have recorded the forgiveness amount as other income. We had used the loan proceeds for purposes consistent with the PPP, including paying for Company wages.

~~NOTE 8 —~~ INCOME TAXES

The income tax provision for the fiscal year ending December 31, ~~2021~~2022 interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to ~~the effects of foreign currency exchange realized transaction gains or losses and foreign taxes withheld.~~unrealized gains. At June 30, ~~2021~~2022 the Company is currently estimating an annual effective tax rate of approximately ~~9.2%.~~9.7%, resulting in a net tax benefit from continuing operations of $0.1 million for the six months ended June 30, 2022. The Company recorded a tax expense of less than $0.1 million from continuing operations for the six months ended June 30, 2021. For the six months ended June 30, 2022, the Company recorded a less than $0.1 million income tax benefit from discontinued operations and recorded $0.2 million in tax expense from discontinued operations for the six months ended June 30, 2021.

For the three months ended June 30, 2022, we recorded less than $0.1 million in net tax benefit from continuing operations. For the three months ended June 30, 2021, we recorded less than $0.1 million in net ~~income~~ tax expense offrom continuing operations. The Company recorded $0.1 million ~~and~~in net tax expense ~~of $0.3 million~~from discontinued operations for the three months ended June 30, 2020. For the three months ended June 30, 2021, the Company recorded an annual effective tax rate accrual inclusive of the impact of discrete items that resulted in a net tax expense effect of approximately $0.1 million. Our effective tax rate was 13% and 119% for the three months ended June 30, 2021 and 2020, respectively.2021.

For the six months ended June 30, 2021, the Company recorded an annual effective tax rate accrual inclusive of the impact of discrete items that resulted in a net income tax expense effect of approximately $0.2 million. For the six months ended June 30, 2020, the Company recorded a net income tax expense of $0.5 million. The Company’s recorded effective income tax rate was 86% including effect of discrete items for the six months ended June 30, 2021 compared to an effective tax rate of 119% for the six months ended June 30, 2020.

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 ~~and foreign~~ jurisdictions. As of June 30, ~~2021,~~2022, the Company is subject to U.S. Federal income tax examinations for the years ~~2017~~2018 through ~~2019~~2020 and income tax examinations from various other jurisdictions for the years ~~2015~~2016 through 2019. In July 2021, the Company was notified that the French tax authorities will be conducting a review of the tax years ended December 31, 2018, 2019, and 2020 on one of our French subsidiaries. At this time, we expect no change or no additional tax liability related to the outcome of this review.2020.

~~Transfer Pricing Adjustments, net~~

The Company’s tax positions include the Company’s intercompany transfer pricing policies and the associated taxable income and deductions arising from intercompany charges between subsidiaries within the consolidated group. During fiscal year 2018 and update each year subsequently, the Company finalized a transfer pricing plan with Evolving Systems and its subsidiaries. This transfer pricing plan determined the amount of income which is taxable in each respective jurisdiction. The Company applied this methodology in accordance with the transfer pricing plan and the adjustments necessary to reflect the reduction in U.S. pre-tax income

resulted in an increase in domestic income before income tax expense of $1.1 million and $2.2 million and a corresponding decrease in foreign income before income tax expense in the three and six months ended June 30, 2021, respectively.

NOTE ~~9 —GEOGRAPHICAL INFORMATION~~

We are headquartered in Englewood, a suburb of Denver, Colorado. We use customer locations as the basis for attributing revenue to individual countries. We provide products and services on a global basis through our U.K.-based subsidiaries. Additionally, personnel in Cluj -Napoca, Romania; Grenoble, France; and Bangalore and Kolkata, India; provide software development services and support to our global operations. Financial information relating to U.S. based companies and by international geographic region exceeding the threshold (defined as contributing at least 10%) of revenue from operations is as follows (in thousands):

June 30, 2021
December 31, 2020
Long-lived assets, net
United States
$
1,005
$
1,352
United Kingdom
1,436
1,578
Other
1,500
1,286
$
3,941
$
4,216

~~NOTE 10~~8 — COMMITMENTS AND CONTINGENCIES

(a)

~~(a)~~Lease Commitments

Under ~~Topic~~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 to nine years.~~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, London, England, Bangalore and Kolkata India, Johannesburg, South Africa, Kuala Lumpur, Malaysia, Échirolles, France, Cluj-Napoca, Romania and Madrid, Spain. The Company entered into 1 new nine year lease in Échirolles, France that contributed $0.3 million to our right-of-use asset/operating lease liability in the six months ended June 30, 2021.York. Total rent expense consisted of ~~operating lease expense of $0.1 million and~~ short-term lease expense of less than $0.1 million for ~~each of~~ the three ~~months ended June 30, 2021~~ and ~~2020. Total rent expense consisted of operating lease expense of $0.2 million and short-term lease expense of $0.1 million for each of the~~ six months ended June 30, 2022 and 2021, ~~and 2020.~~respectively. There was 0 sublease rental income for the ~~six months ended June 30, 2021 and 2020. We paid $0.2 million and $0.3 million against Lease obligations — operating leases in each of the~~ three and six months ended June 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. ~~For lease agreements entered into or reassessed after the adoption~~We did not have leases that had terms of ~~Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right-of-use (“ROU”) assets.~~

Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.

‎

~~ROU lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheet as follows (in thousands):~~

As of
June 30, 2021
Operating leases - right of use assets
$
1,121
Operating lease current
$
332
Lease obligations — operating leases, net of current portion
782
Total lease liability
$
1,114
Weighted average remaining lease term (in years)
4.8
Weighted average discount rate
6.07%

~~Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet~~greater than 12 months as of June 30, ~~2021, for the following five fiscal years~~2022 and ~~thereafter were as follows (in thousands):~~December 31, 2021.

(b)

For the year ending
December 31,
2021 - Remaining
$
186
2022
353
2023
219
2024
122
2025
122
Thereafter
257
Total future minimum lease payments
1,259
Present value adjustment
145
Total
$
1,114

~~(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 0 liabilities recorded for these agreements as of June 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

We enter into standard indemnification terms with ~~customers and suppliers,~~outside consultants, in the ~~ordinary~~ course of business, for third party claims arising under our contracts. ~~In addition, as we may subcontract the development of deliverables under customer contracts, we could be required to indemnify customers for work performed by subcontractors.~~ 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 may be able to recover damages from a subcontractor or other supplier if the indemnification results from the subcontractor’s or supplier’s failure to perform. To the extent we are unable to recover damages from a subcontractor or other supplier, we could be required to reimburse the indemnified party for the full amount. 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 0no liabilities recorded for these agreements as of June 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Table of Contents

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.

~~Our standard license agreements contain product warranties that~~The Manager will receive compensation for performance under the ~~software will be free~~Management Agreement consisting of ~~material defects and will operate in accordance with~~a management fee of 2% of the ~~stated requirements for a limited period of time. The product warranty provisions require us to cure any defects through any reasonable means. We believe the estimated~~ fair market value of the ~~product warranty provisions~~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. NaN stock appreciation rights have been awarded in the ~~license agreements in place with our customers is minimal. Accordingly, there were 0 liabilities recorded for these product warranty provisions as of~~six months ended June 30, ~~2021 or December 31, 2020.~~2022.

(c)Litigation

Our software arrangements generally include a product indemnification provision whereby we will indemnify and defend a customer in actions brought against the customer for claims that our products infringe upon a copyright, trade secret, or valid patent of

a third party. We have not historically incurred any significant costs related to product indemnification claims. Accordingly, there were 0 liabilities recorded for these indemnification provisions as of June 30, 2021 or December 31, 2020.

~~(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 ~~seeks~~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 ~~and~~ 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 six months ended June 30, 2021.

(d)Paycheck Protection Program Loan

On April 15, 2020, the Company received loan proceeds in the amount of $0.3 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after a period of eight to twenty-four weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. We have met the conditions of the PPP Loan forgiveness program. As authorized by section 1106 of the CARES Act, United States Small Business Administration (“SBA”) forgave the full amount of PPP loan on May 20, 2021. We recorded the forgiveness amount as other income. We had used the loan proceeds for purposes consistent with the PPP, including paying for Company wages.

(e)Potential Claim on Escrow Account

The Company has been served notice by the Purchasers making a claim for indemnification under the Equity Purchase Agreement related to a failure to file returns, make require remittances, and pay taxes to the Irish Revenue Service with respect to an employee for pre-closing periods. The Company has recorded a liability in the amount of ~~$0.3 million as of June 30, 2021, such amount is included in other expenses, in our unaudited statement of operations. Settlement was paid in full in July 2021.~~

~~NOTE 11 — RESTRUCTURING~~

~~During the second quarter of 2021, a reduction in workforce involving the termination of employee resulted in an expense of less than $0.1~~$0.2 million related to ~~severance. This change was~~the employer burden which had not been remitted. The Company has objected to the release of any funds related to the ~~consolidations of duplicative functions~~claim until the final amount can be agreed upon by the parties. The Company intends to defend this matter rigorously and ~~alignment of staff with ongoing business activity.~~the additional amounts in the claim is not estimable or determinable at this time.

~~There was no restructuring liability as of June 30, 2021 or December 31, 2020.~~

20Table of Contents

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 ~~Evolving Systems’~~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, ~~2020,~~2021, as filed with the SEC on ~~March 17, 2021,~~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

~~OVERVIEW~~

~~Evolving Systems~~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. ~~is a supplier~~(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. We drive growth~~services in the areas of real-time analytics, customer acquisition and activation, ~~extend customer lifetime and increase~~ customer value ~~and revenue through analytics~~management and loyalty ~~programs~~for the telecom industry to the Purchasers for an aggregate purchase price of $40 million (subject to adjustment as set forth in the ~~converging mobile, entertainment, financial~~Equity Purchase Agreement). The Purchase Agreements included customary terms and retail services eco-system. Our platforms, together with our team of experienced industry experts, help service providers increase their customer lifetime value (“CLV”) over the course the customer lifecycle.

~~In 2019, we released Evolution, the new platform that supersedes and provides~~conditions, including an ~~upgrade path~~adjustment to the former loyalty and CLV platforms from both Evolving and its acquired companies — BLS, Lumata and SSM. Evolution was built by combining, integrating, and improving upon the best components and features of those previous platforms. We believe that Evolution provides a unique capability, and we expect to continue our focus on selling and promoting this significant new product. Our experienced team and the new technology provide actionable insights and relevant offerspurchase price based on ~~customer data, all~~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, ~~greatly complements our software portfolio~~following the closing of the transactions contemplated under the Purchase Agreements, will consist primarily of cash and ~~25 years~~cash equivalents. The board of ~~expertise~~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 ~~customer acquisition, activation~~the performance of its duties.

Following the sale of its assets in real-time digital engagement solutions and ~~retention. Enhancements~~services in December 2021, the Company has decided to ~~our technology further expands our managed services platform for delivering on-tap~~evaluate new areas of business which included two initial areas of product focus. 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 ~~and tactical solutions.~~partnerships.

RECENT DEVELOPMENTS

We reported a net loss from continuing operations of $2.2 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively and $2.7 million and $1.7 million for the six months ended June 30, 2022 and 2021, respectively.

Table of Contents

COVID-19

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 ~~inability~~Company also amended and restated its Bylaws to ~~travel has delayed interactions~~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 Capital Market (“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 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 ~~our clients~~the Securities and Exchange Commission on ~~projects~~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.

TENDER OFFERING

On May 23, 2022, the Company announced a modified Dutch auction tender offer to purchase with cash up to $9.6 million of shares of its common stock which expired on June 23, 2022. Based on the final count by the depository for the tender offer, a total of 1,501,192 shares of common stock were validly tendered and innot validly withdrawn at or below the ~~traditional modes~~price of ~~sales development. We continue to work with existing~~$1.55 per share. The Company accepted all of these shares of common stock for purchase at the purchase price of $1.55 per share, for a total cost of $2.3 million, excluding fees and ~~new clients exploring new ways~~expenses. The total of ~~using our products and services to enhance their business. On-going travel restrictions has caused~~1,501,192 shares of common stock accepted for purchase represents approximately 12.2 % of the business to interact with clients in new ways and reduced certain costs. The long-term effects on how we conduct business in the future is still undetermined but the company continues to evolve to meet client needs.Company’s total shares of common stock outstanding.

GOING CONCERN

We believe our current liquidity ~~and funds~~ from ~~our ongoing operations~~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 ~~$4.9~~$17.8 million in cash and cash equivalents and our ~~$5.6~~$29.2 million in working capital at June 30, ~~2021, along with our ability to generate positive cash flows from operations for the six months ended June 30, 2021 and year ended December 31, 2020.~~2022.

Consolidated revenue was $7.0 million and $6.3 million for the three months ended June 30, 2021 and 2020, respectively and $13.5 million for the six months ended June 30, 2021 compared to $12.6 million for the same period in 2020, respectively. The increases are primarily related to new projects and upgrades to existing and new clients partially offset by a reduction in work hours as projects near or come to completion.

‎

21Table of Contents

RESULTS OF OPERATIONS

The following table presents ~~the unaudited~~our condensed consolidated statements of operations ~~reflected as a percentage of total revenue:~~in comparative format:


	For the Three Months Ended June 30,
	2022		2021		Change		%

	(in thousands, except percentages)
Revenue	$	—	$	—	$	—	0.00	%

OPERATING EXPENSES
General and administrative		936		726		210	28.93	%
Depreciation		1		—		1	0.00	%
Total operating expenses		937		726		211	29.06	%

Loss from operations		(937)		(726)		(211)	29.06	%

Other income (expense)
Interest income		243		2		241	12050.00	%
Interest expense		—		—		—	(100.00)	%
Other income (expense), net		(105)		318		(423)	(133.02)	%
Realized gain on investments, net		291		—		291	100.00	%
Unrealized loss on investments, net		(1,660)		—		(1,660)	100.00	%
Other income (expense), net		(1,231)		320		(1,551)	(484.69)	%

Loss from continuing operations before income taxes		(2,168)		(406)		(1,762)	433.99	%
Income tax expense (benefit)		(6)		24		(30)	(125.00)	%
Net loss from continuing operations		(2,162)		(430)		(1,732)	402.79	%
Income from discontinued operations before income taxes		—		1,505		(1,505)	(100.00)	%
Income tax expense (benefit) from discontinued operations		—		122		(122)	(100.00)	%
Net income from discontinued operations		—		1,383		(1,383)	(100.00)	%
Net (loss) income	$	(2,162)	$	953	$	(3,115)	(326.86)	%

Table of Contents


	For the Six Months Ended June 30,
	2022		2021		Change		%

	(in thousands, except percentages)
Revenue	$	—	$	—	$	—	100.00	%

OPERATING EXPENSES
General and administrative		2,088		1,658		430	25.93	%
Depreciation		1		1		—	0.00	%
Total operating expenses		2,089		1,659		430	25.92	%

Loss from operations		(2,089)		(1,659)		(430)	25.92	%

Other income (expense)
Interest income		579		2		577	28850.00	%
Interest expense		(2)		—		(2)	(100.00)	%
Other income (expense), net		(91)		(1)		(90)	9000.00	%
Realized gain on investments, net		394		—		394	100.00	%
Unrealized loss on investments, net		(1,558)		—		(1,558)	100.00	%
Other income (expense), net		(678)		1		(679)	(67900.00)	%

Loss from continuing operations before income taxes		(2,767)		(1,658)		(1,109)	66.89	%
Income tax expense (benefit)		(65)		8		(73)	(912.50)	%
Net loss from continuing operations		(2,702)		(1,666)		(1,036)	62.18	%
Income from discontinued operations before income taxes		—		1,916		(1,916)	(100.00)	%
Income tax expense (benefit) from discontinued operations		(49)		213		(262)	(123.00)	%
Net income from discontinued operations		49		1,703		(1,654)	(97.12)	%
Net (loss) income	$	(2,653)	$	37	$	(2,690)	7270.27	%

For the Three Months Ended June 30,
For the Six Months Ended June 30,
2021
2020
2021
2020
REVENUE
License fees
—%
2%
1%
2%
Services
100%
98%
99%
98%
Total revenue
100%
100%
100%
100%
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of revenue, excluding depreciation and amortization
31%
35%
33%
34%
Sales and marketing
20%
23%
20%
24%
General and administrative
20%
18%
21%
20%
Product development
18%
16%
19%
16%
Depreciation
1%
1%
1%
1%
Amortization
3%
4%
4%
4%
Restructuring and other recovery
1%
—%
—%
—%
Total costs of revenue and operating expenses
94%
97%
98%
99%
Income from operations
6%
3%
2%
1%
Other income (expense)
Interest income
—%
—%
—%
—%
Interest expense
—%
—%
—%
(1%)
Other income, net
8%
—%
2%
—%
Foreign currency exchange income (loss)
2%
(1%)
(2%)
3%
Other income (expense), net
10%
(1%)
—%
2%
Income from operations before income taxes
16%
2%
2%
3%
Income tax expense
2%
5%
2%
4%
Net income (loss)
14%
(3%)
—%
(1%)

22Expenses from Continuing Operations

~~Revenue~~

Revenue is comprised of license fees and services. License fees represent the fees we receive from the licensing of our software products. Services revenue are directly related to the delivery of the licensed product as well as integration services, managed services, SaaS services, time and materials work and customer support services. Customer support services include annual support fees, recurring maintenance fees, minor product upgrades and warranty fees. Warranty fees are typically deferred and recognized over the warranty period.

~~License Fees~~

License fees revenue was less than $0.1 million and $0.1 million for the three months ended June 30, 2021 and 2020, respectively. The decrease of $0.1 million is attributable to one time licensing fees from a client in the prior year not repeating this year.

License fees revenue was $0.2 million and $0.3 million for the six months ended June 30, 2021 and 2020, respectively. The decrease of $0.1 million is attributable to one time license fees from one client in the prior year was offset by new one time license fee with a different client.

~~Services~~

Services revenue increased $0.8 million, or 13%, to $7.0 million for the three months ended June 30, 2021 from $6.2 million for the three months ended June 30, 2020. The increase is related to upgrades and new project revenues with existing clients of $0.6 million, new client project of $0.6 million, and increase in hours worked on existing clients of $0.4 million partially offset by decrease in hours as projects are completed or near completion of $0.7 million, and a reduction of orders from existing clients of $0.1 million as compared to the corresponding three month period in the prior year.

Services revenue increased $1.0 million, or 8%, to $13.3 million for the six months ended June 30, 2021 from $12.3 million for the six months ended June 30, 2020. The increase is related to upgrades and new project revenues with existing clients of $1.0 million, new client project of $0.9 million, and increase in hours worked on existing clients of $0.9 million partially offset by decrease in hours as projects are completed or near completion of $1.2 million, a reduction of orders from existing clients of $0.4 million, and one client termination of $0.2 million as compared to the corresponding six month period in the prior year.

~~Costs of Revenue, Excluding Depreciation and Amortization~~

Costs of revenue, excluding depreciation and amortization, consist primarily of personnel costs and other direct costs associated with these personnel, facilities costs, costs of third-party software and partner commissions. Costs of revenue includes product development expenses related to certain software features requested for deployment by the customer and are funded by customers as part of a managed service offering. Costs of revenue, excluding depreciation and amortization was $2.2 million and $2.2 million for the three months ended June 30, 2021 and 2020, respectively. Costs remained consistent as slight salary increases were offset by a reduction in other costs. As a percentage of revenue, costs of revenue, excluding depreciation and amortization, decreased 4% to 31% for the three months ended June 30, 2021 from 35% for the three months ended June 30, 2020, as costs were approximately constant as revenue increased due to delivering higher margin work on the new projects and upgrades.

Costs of revenue, excluding depreciation and amortization, consist primarily of personnel costs and other direct costs associated with these personnel, facilities costs, costs of third-party software and partner commissions. Costs of revenue includes product development expenses related to certain software features requested for deployment by the customer and are funded by customers as part of a managed service offering. Costs of revenue, excluding depreciation and amortization was $4.4 million and $4.3 million for the six months ended June 30, 2021 and 2020, respectively. The increase is related to additional resource costs of $0.4 million offset by a decrease in travel and entertainment costs of $0.2 million due to travel restrictions of the global pandemic and a reduction of $0.1 million in third party hardware and software maintenance costs. As a percentage of revenue, costs of revenue, excluding depreciation and amortization, decreased 1% to 33% for the six months ended June 30, 2021 from 34% for the six months ended June 30, 2020, as costs were approximately constant as revenue increased due to delivering higher margin work on the new projects and upgrades.

~~Sales and Marketing~~

~~3% to 20% for the three months ended June 30, 2021 from 23% for the three months ended June 30, 2020, this is primarily due to the increase in revenues.~~

Sales and marketing expenses primarily consist of compensation costs, including incentive compensation and commissions, travel expenses, advertising, marketing and facilities expenses. Sales and marketing expenses decreased $0.2 million or 7% to $2.8 million for the six months ended June 30, 2021 from $3.0 million for the six months ended June 30, 2020. The decrease is related to the reduction of $0.1 million in lower travel and entertainment costs due to travel restrictions during the global pandemic as well as reduction of $0.1 million in resource costs. As a percentage of total revenue, sales and marketing expenses decreased 4% to 20% for the three months ended June 30, 2021 from 24% for the six months ended June 30, 2020, this is primarily due aforementioned lower expenses and the increase in revenues.

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~~$0.2 million, or ~~27%~~29% to ~~$1.4~~$0.9 million for the three months ended June 30, ~~2021~~2022 from ~~$1.1~~$0.7 million for the three months ended June 30, ~~2020. The~~2021. There was an increase of ~~$0.3~~$0.4 million of professional fees in bookkeeping and preparation of SEC reports, and fees to our third party asset manager. These costs were partially offset by a $0.2 million decrease of salaries and benefits related to increased professional fees related to R&D tax credits along with local statutory audit costs, increase costs related to third party software, and increased staff costs. As a percentage of revenue, general and administrative expenses increased 2% to 20% for the three months ended June 30, 2021 as compared to 18% for the three months ended June 30, 2020. The increase in general and administrative expense is primarily due to the aforementioned higher expenses.employee departures.

General and administrative expenses increased ~~$0.3~~$0.4 million, or ~~12%~~24% to $2.8 million for the six months ended June 30, 2021 from $2.5 million for the six months ended June 30, 2020. Increase of $0.3 million related to increased professional fees of $0.2 million related to R&D tax credits along with local statutory audit costs and legal work, increase in equity compensation of $0.1 million, and increase costs related to third party software of $0.1 million. Partially offset by a decrease in incentive compensation of $0.1 million. As a percentage of revenue, general and administrative expenses increased 1% to 21% for the six months ended June 30, 2021 as compared to 20% for the three months ended June 30, 2020. The increase in general and administrative expense is primarily due to the aforementioned higher expenses.

~~Product Development~~

Product development expenses consist primarily of employee-related costs and subcontractor expenses. Product development expenses increased $0.3 million, or 30%, to $1.3 million for the three months ended June 30, 2021 from $1.0 million for the three months ended June 30, 2020. The increase is primarily related to the additional resource costs from additional resources and an increase in hours worked on product development projects by delivery staff. As a percentage of revenue, product development expenses increased 2% to 18% for the three months ended June 30, 2021 from 16% for the three months ended June 30, 2020. The increase in general and product development expense is primarily due to the aforementioned higher expenses.

~~Product development expenses increased $0.5 million, or 24%, to $2.6 million for the six months ended June 30, 2021 from~~ $2.1 million for the six months ended June 30, ~~2020. The increase is primarily related to the additional resource costs~~2022 from ~~additional resources and an increase in hours worked on product development projects by delivery staff. As a percentage of revenue, product development expenses increased 3% to 19%~~$1.7 million for the six months ended June 30, ~~2021 from 16% for the six months ended June 30, 2020. The~~2021. There was an increase of $0.7 million of professional fees and $0.1 million in ~~general~~contractor fees related to use of third party services in bookkeeping and ~~product development expense is primarily due~~preparation of SEC reports, and fees to ~~the aforementioned higher expenses.~~our third party asset manager. These costs were partially offset by a $0.3 million decrease of salaries and benefits related to employee departures.

Depreciation

~~Depreciation~~

Depreciation expense consists of depreciation of long-lived property and equipment. Depreciation expense was less than $0.1 million for each of the three months ended June 30, 2021 and 2020. As a percentage of total revenue, depreciation expense for each of the three months ended June 30, 2021 and 2020 was 1%.

Depreciation expense consists of depreciation of long-lived property and equipment. Depreciation expense was $0.1 million for each of the six months ended June 30, 2021 and 2020. As a percentage of total revenue, depreciation expense for each of the six months ended June 30, 2021 and 2020 was 1%.

~~Amortization~~

~~months ended June 30, 2021 and 2020. As a percentage of total revenue, amortization expense was 3% and 4% for each of three months ended June 30, 2021 and 2020, respectively.~~

Amortization expense consists of amortization of identifiable intangibles related to our acquisitions of Evolving Systems Labs, Evolving Systems NC, EVOL BLS, and the Lumata Entities. Amortization expense was $0.5 million for each of the six months ended June 30, 2021 and 2020. As a percentage of total revenue, amortization expense was 4% for each of six months ended June 30, 2021 and 2020.

~~Restructuring~~

Restructuring expense includes the costs associated with a reduction in workforce due to the consolidation of duplicative functions and alignment of staff with ongoing business activity. Restructuring expense wasremained constant at less than $0.1 million for the three ~~months~~ and six months ended June 30, 2022 and 2021. ~~There was no restructuring~~

Table of Contents

Non-Operating Income and Expenses

Interest Expense

Interest expense remained constant at less than $0.1 million in interest expense for the three and six months ended June 30, ~~2020. As a percentage~~2022 and 2021.

Interest Income and Total Other Income (Expense), net

There was interest income and other income of ~~total revenue, restructuring expense was 1% and 0%~~$0.1 million for the three ~~and six~~ months ended June 30, ~~2021, respectively.~~

2022. Interest ~~Expense~~

~~Interest~~and other income was $0.3 million for the three months ended June 30, 2021. The decrease was the result of $0.2 million in expense ~~includes~~related to potential claim by the ~~amortization of debt issuance costs and interest expense from our term loans. Interest expense for each of~~Purchaser on the escrow account. For the three months ended June 30, 2021, the other income of $0.3 million was related to forgiveness of the Paycheck Protection Program Loan.

For the six months ended June 30, 2022, there was interest income and ~~2020~~other income of $0.5 million. There was less than $0.1 ~~million. As~~million in interest income or other income for the six months ended June 30, 2021. The increase was a ~~percentage~~result of ~~revenue,~~ interest earned on investments entered into during 2022, partially offset by $0.2 million in expense ~~was 0%~~related to potential claim by the Purchaser on the escrow account.

Realized Gain on Investments, net

Realized gain on investments, net consists of available for sale and equity securities. Realized gain on investments, net increased $0.3 million, or 100% for the three months ended June 30, ~~2021~~2022, and ~~2020.~~

~~Interest expense for each of the six months ended June 30, 2021 and 2020 was less than $0.1 million. As a percentage of revenue, interest expense was 0% and 1%~~$0.4 million for the six months ended June 30, ~~2021 and 2020, respectively.~~

~~Foreign Currency Exchange Income (Loss)~~

~~Foreign currency exchange income (loss) resulted from transactions denominated in a currency other than the functional currency of the respective subsidiary~~ ~~and~~ ~~increased $0.2 million to $0.2 million income for~~ ~~the three months ended~~ ~~June 30, 2021~~ ~~from a foreign currency loss of less than $0.1 million for the three months ended~~ ~~June 30, 2020~~.2022. The increase was a result of investments sold by the ~~remeasurement of certain non-functional currency denominated financial assets and liabilities of our foreign subsidiaries~~.

~~Foreign currency exchange income (loss) resulted from transactions denominated in a currency other than the functional currency of the respective subsidiary~~ ~~and~~ ~~decreased $0.6 million or 161% to a $0.2 million loss for~~ Company during the six months ended June 30, ~~2021~~2022.

~~from foreign currency income of $0.3 million for the six months ended~~ ~~June 30, 2020. The decrease was a result of the remeasurement of certain non-functional currency denominated financial assets and liabilities of our foreign subsidiaries.~~Unrealized Loss on Investments, net

~~Interest Income and Total Other Income (Expense), Net~~

~~Other income~~Unrealized loss on investments, net increased $1.7 million, or 100% for the three months ended June 30, ~~2021 was $0.6~~2022 and $1.6 million ~~compared~~for the six months ended June 30, 2022. Our unrealized gains and losses on investments each period are a function of changes in the fair value of the investments that we hold as of the current reporting period balance sheet date relative to ~~other~~the preceding balance sheet date. Our unrealized losses during the current period were attributable to decreases in the fair value of our investment holdings during the period.

Income Taxes

We recorded net income tax benefit from continuing operations of less than $0.1 million and net income tax expense from continuing operations less than $0.1 million for the three months ended June 30, ~~2020. The increase in other~~2022 and 2021 respectively. We also recorded net income ~~is primarily due to the forgiveness~~tax benefit from continuing operations of ~~the Paycheck Protection Program Loan~~$0.1 million and ~~a foreign research and development~~net income tax ~~credit for our French subsidiary that will be applied or refunded in future years.~~

~~Other income was $0.3 million for the six months ended June 30, 2021 compared to other income of~~expense from continuing operations less than $0.1 million for the six months ended June 30, ~~2020. The income recorded~~2022 and 2021, respectively.

We use a recognition threshold and a measurement attribute for the ~~forgiveness~~financial statement recognition and measurement of ~~the Paycheck Protection Program Loan and foreign research and development credit was offset~~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 ~~expense due to the estimated litigation settlement costs recorded as a liability in relation to the lawsuit filed by a former CEO~~taxing authorities. As of ~~the Company. See Note 10 to the financial statements for additional information.~~

~~Income Taxes~~

~~We recorded net income tax expense of $0.1 million for three months ended~~ June 30, 2022, and 2021, ~~and~~we had no liability for unrecognized tax ~~expense of $0.3 million for~~benefits. We do not believe there will be any material changes to our unrecognized tax positions over the ~~three months ended June 30, 2020. For interim periods during fiscal year ending~~next twelve months.

Discontinued Operations

On December 31, 2021, the ~~expense is determined using an estimate~~Company closed on the terms for the sale and transfer of substantially all of the ~~annual effective tax rate, adjusted for discrete items,~~Company’s operating subsidiaries and all of its assets. The financial results of discontinued operations primarily ~~related~~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 ~~effects~~wireless carriers throughout the world. This included the Company’s portfolio of ~~foreign currency exchange realized transaction gains or losses~~solutions and foreign taxes withheld. For the three months ended June 30, 2021 the Company recorded an annual effective tax rate accrual inclusive of the impact of discrete items that resulted in a net tax expense effect of approximately $0.1 million. The net expense during the three months ended June 30, 2020 consisted of income tax primarily from our U.K. subsidiary, Nigerianservices for real-time analytics, customer acquisition and ~~Indian based operations as well as foreign taxes withheld. Our effective tax rate was 13%~~activation, customer value management and ~~119%~~loyalty for the ~~three months ended June 30, 2021~~telecom industry promoting partnerships into retail and ~~2020, respectively.~~financial services.

25Table of Contents

We recorded net income tax expense of $0.2 million and net income tax expense $0.5 million for the six months ended June 30, 2021 and 2020, respectively. For interim periods during fiscal year ending December 31, 2021, the expense is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to the effects of foreign currency exchange realized transaction gains or losses and foreign taxes withheld. For the six months ended June 30, 2021 the Company recorded an annual effective tax rate accrual inclusive of the impact of discrete items that resulted in a net tax expense effect of approximately $0.2 million. The net expense during the six months ended June 30, 2020 consisted of income tax primarily from our U.K. subsidiary, Nigerian and Indian based operations as well as foreign taxes withheld. Our effective tax rate was 86% and 119% for the six months ended June 30, 2021 and 2020, respectively.

FINANCIAL CONDITION

Our working capital position ~~increased~~decreased by ~~$0.1~~$8.5 million to ~~$5.6~~$29.2 million as of June 30, ~~2021~~2022 from ~~$5.5~~$37.7 million as of December 31, ~~2020.~~

~~CONTRACTUAL OBLIGATIONS~~

~~There have been no material changes~~2021. The decrease in working capital is related to the ~~contractual obligations as disclosed in our 2020 Annual Report on Form 10-K.~~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 researched two initial areas of product focus, each were in research-oriented pre-release mode. The two areas of focus were in the application of self-learning algorithms as well as the symbolic tagging and organizing of physical objects. At June 30, ~~2021,~~2022, our principal source of liquidity was ~~$4.9~~$17.8 million in cash and cash ~~equivalents and $4.7 million in contract receivables, net of allowances.~~equivalents. Our anticipated uses of cash in the future will be to fund the ~~growth~~expansion of our business through both ~~organically and by expanding our customer base internationally.~~organic product development, as well as, possible acquisition activities. Other uses of cash ~~will~~may include ~~product development,~~investments, capital expenditures, and technology ~~expansion, and capital expenditures.~~expansion.

Net cash ~~provided/~~used in operating activities for the six months ended June 30, ~~2021~~2022 was $2.0 million due to net loss of $2.7 million plus an increase in prepaid and ~~2020 was $2.5~~other assets of $0.7 million related primarily to accrued interest, and a decrease in income taxes payable of $0.2 million, partially offset by noncash charges of $1.4 million, an increase in accounts payable and accrued liabilities of less than $0.1 million, and ~~$1.9 million, respectively. Cash~~increase of escrow liability of $0.2 million. Net cash provided by operating activities for the six months ended June 30, 2021 was ~~primarily~~$2.5 million due to the net income of less than $0.1 million (offset noncash charges of $0.8 million), increase in unearned revenue of $1.8 million and an increase in accounts payable and accrued liabilities of $0.3 million as well as a decrease in contract receivable of $1.0 million, partially offset by the increase in unbilled work in progress of $0.8 million and income taxes receivable of $0.5 million and an increase in other assets long term of $0.3 million related to the foreign tax ~~credit to be collected~~credit.

Net cash used in ~~a future period.~~

~~Cash provided by operating~~investing activities for the six months ended June 30, ~~2020~~2022 of $17.1 million was primarily due to the ~~net loss~~purchase of ~~$0.1~~investments of $18.4 million, ~~(offset noncash charges~~transaction fees related to prior period disposition of ~~$0.8 million), a decrease in contract receivable of $2.3~~$0.6 million, ~~and an increase of $0.9 million in accounts payable and accrued liabilities, partially~~ offset by ~~the increase in unbilled work-in-progress~~proceeds on sale of ~~$1.9 million and prepaids and other assets~~investments of ~~$0.6~~$2.0 million.

Net cash used in investing activities ~~during~~for the six months ended June 30, 2021 ofwas $0.1 million and was due to the purchase of property and equipment.

Net cash used in ~~investing~~financing activities ~~during~~for the six months ended June 30, ~~2020~~2022 of ~~$0.2~~$2.5 million was due to the ~~purchase~~retirement of ~~property and equipment.~~

common stock. Net cash used in financing activities was $0.1 million for the six months ended June 30, 2021 and was primarily related to the final principal payments on our term loan. Net cash used in financing activities was $0.2 million for the six months ended June 30, 2020 was related to principal payments on our term loan offset by the proceeds received with the Payroll Protection Program.

Evolving Systems provides software solutions and services throughout the world. The recent COVID-19 global outbreak has caused instability and volatility in multiple markets where our clients conduct business, or we have employees working. The pandemic has delayed certain projects or the closing of new orders as customer interactions have been altered or postponed. At this time, we have seen only limited disruptions to our ability to continue delivery to our clients.

In January 2021, we made our last principal and interest payment on the term loan payable to East West Bank (“EWB”) that required us to maintain specified financial requirements that are defined in the loan agreements. 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 June 30, 2022 of $17.8 million; and

●

Our working capital balance at June 30, 2022 of $29.2 million

Off-Balance Sheet Arrangements

~~Our cash and cash equivalents balance at June 30, 2021 of $4.9 million;~~

~~Our working capital balance at June 30, 2021 of $5.6 million; and~~

~~Our ability to generate positive cash flows from operations of $2.5 million for the six months ended June 30, 2021, and~~ ~~$1.4 million and $1.1 million for the full years ended December 31, 2020 and 2019, respectively.~~

We are exposed to foreign currency rate risks which impact the carrying amount of our foreign subsidiaries and our consolidated equity, as well as our consolidated cash position due to translation adjustments. For the six months ended June 30, 2021 and 2020, the effect of exchange rate changes resulted in a decrease of $0.1 million and an decrease of $0.3 million, respectively. We do not currently hedge our foreign currency exposure, but we monitor rate changes and may hedge our exposures if we see significant negative trends in exchange rates.

~~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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Senior Vice President of Finance, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Senior Vice President of Finance, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Senior Vice President of Finance have concluded that our disclosure controls and procedures were effective as of June 30, ~~2021.~~2022.

In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

During the three months ended June 30, ~~2021,~~2022, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II — - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding reportable legal proceedings is contained in Part I, Item 3, “Legal Proceedings,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes to the legal proceedings previously disclosed in the Annual Report on Form 10-K, which are incorporated by reference herein. From time to time, we are involved in various legal matters arising in the normal course of business. 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 seeks $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.

ITEM 1A. RISK FACTORS

Not required under Regulation S-K for smaller reporting ~~companies~~companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases of common stock made by the Company during the second quarter 2022:


				Total number of	Approximate dollar
				shares purchased as	value of shares that
	Total number of			part of publicly	may yet be purchased
	shares purchased	Average price		announced plans (in	under the plan (in
	(in thousands)	paid per share		thousands)	thousands)
April 1, 2022 to April 30, 2022	—	$	—	—	$	—
May 1, 2022 to May 31, 2022	—		—	—		—
June 1, 2022 to June 30, 2022*	1,501		1.55	1,501		—
Total	1,501	$	1.55	1,501	$	—

*On May 23, 2022, the Company announced a modified Dutch auction tender offer to purchase with cash up to $9.6 million of shares of common stock, at a price per share of not less than $1.30 and not more of $1.55 per share. The tender offer expired one minute after 4:59 P.M. Eastern Daylight Time on June 23, 2022.

~~None~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not ~~applicable~~applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not ~~applicable~~applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

~~Not applicable~~

Table of Contents

~~ITEM~~Item 6. EXHIBITS


Exhibit No.		Description of Document
~~Exhibit No.~~2.1		~~Description of Document~~
~~2.1~~		Asset Purchase Agreement, dated as of April 21, 2011, by and between Evolving Systems, Inc. and NeuStar, Inc., as filed as Exhibit 2.1 to the Registrant’s Form 8-K filed on April 21, 2011 and incorporated herein by reference.
2.2		Agreement and Plan of Merger by and among Evolving Systems, Inc., Topaz Merger Sub, Inc., Telespree Communications and Gill Cogan as the exclusive representative of the Effective Time Shareholders and Change in Control Payment Recipients, as filed as Exhibit 2.1 to the Registrant’s Form 8-K filed on October 25, 2013 and incorporated herein by reference.
2.3		Merger Agreement dated as of September 30, 2015, by and among Evolving Systems, Inc., Evolving Systems NC, Inc., a wholly owned subsidiary of Evolving Systems, RateIntegration, Inc. and a representative of the stockholders and change in control payment recipients of RateIntegration, Inc., as filed as Exhibit 2.1 to the Registrant’s Form 8-K filed September 30, 2015 and incorporated herein by reference.
2.4	~~3.1~~	Evolving Systems, Inc., and Evolving Systems Holdings Ltd., ETI-NET Inc., Investissements Riv Europe Ltee, a Quebec corporation and Said Hini, as filed as Exhibit 2.1 to the Registrant’s Form 8-K filed October 18, 2021 and incorporated herein by reference.
2.5		Software Purchase Agreement, dated as of October 15, 2021, by and among Evolving Systems, Inc., Evolving Systems NC, Inc., and ETI-NET Inc., as filed as Exhibit 2.2 to the Registrant’s Form 8-K filed October 18, 2021 and incorporated herein by reference.
2.6		Software Purchase Agreement, dated as of October 15, 2021, by and among Evolving Systems, Inc., Evolving Systems Limited, and ETI-NET Inc. as filed as Exhibit 2.3 to the Registrant’s Form 8-K filed October 18, 2021 and incorporated herein by reference.
2.7		Equity Purchase Agreement, dated as of October 15, 2021, by and among Evolving Systems, Inc. and Evolving Systems Holdings Ltd., ETI-NET Inc., Investissements Riv Europe Ltee, a Quebec corporation, and Said Hini and incorporated herein by reference.
3.1		Restated Certificate of Incorporation, as filed as an exhibit to the Registrant’s registration statement on Form S-1 filed January 9, 1998 and incorporated herein by reference.
3.2		Certificate of Designation for the Series B Convertible Preferred Stock, as filed as Exhibit 3.1 to the Registrant’s Form 8-K filed November 10, 2004 and incorporated herein by reference.
3.3		Certificate of Amendment to Certificate of Designation of Series B Convertible Preferred Stock filed as Exhibit 3.1(c) to the Registrant’s Form 8-K filed November 17, 2005 and incorporated herein by reference.
3.4		Certificate of Amendment to Certificate of Designation of Series B Convertible Preferred Stock filed as Exhibit 3.01 to the Registrant’s Form 8-K filed May 4, 2007 and incorporated herein by reference.
3.5		Certificate of Amendment to the Restated Certificate of Incorporation of Evolving Systems, Inc., as filed as Exhibit 3.1 to the Registrant’s Form 8-K filed on July 21, 2009 and incorporated herein by reference.
3.6		Certificate of Amendment to Amended and Restated Certificate of Incorporation of Evolving Systems, Inc. as filed as Exhibit 3(i) to the Registrant’s Form 8-K filed on June 16, 2011 and incorporated herein by reference.
3.7		Amended and Restated Bylaws of Evolving Systems, Inc., as filed as Exhibit ~~3(ii)~~3.2 to the Registrant’s Form 8-K filed on ~~July 31, 2014~~April 15, 2022 and incorporated herein by reference.

3.8	~~10.1~~	Certificate of Amendment to the Company’s Certificate of Incorporation as filed as Exhibit 3.1 to the Registrant’s Form 8-K filed on April 15, 2022 and incorporated herein by reference.
10.1		Amendment and Waiver Letter to Term Loan Facility Agreement entered into by and among Evolving Systems, Inc. as Parent Guarantor, Evolving Systems Holdings Limited, as Original Borrower, Evolving Systems Limited and Evolving Systems BLS Limited, as further Original Guarantors, Evolving Systems Lumata Limited, and East West Bank as Lender, as filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on July 7, 2020 and incorporated herein by reference.
10.2	~~31.1~~	*Management Agreement by and between the Company and CIDM II LLC, dated as of January 21, 2022 filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on January 24, 2022 and incorporated by reference.
31.1*		Certification of Chief Executive Officer and Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
~~31.2~~31.2*	*	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
~~32.1~~32.1**	**	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Securities Exchange Act, as amended, and 18 U.S.C. Section 1350.

Table of Contents

~~32.2~~32.2**	**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(furnished herewith).
101.INS*	~~101.INS~~	*	101 XBRL Instance Document.
101.SCH*	~~101.SCH~~	*	101 XBRL Taxonomy Extension Schema Document.
101.CAL*	~~101.CAL~~	*	101 XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	~~101.DEF~~	*	101 XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	~~101.LAB~~	*	101 XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	~~101.PRE~~	*	101 XBRL Taxonomy Extension Presentation Linkbase Document.
104	~~104~~		Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

*	Filed herewith.

**	Furnished herewith.

*~~Filed herewith.~~

**~~Furnished herewith.~~

29Table of Contents

SIGNATURES

~~SIGNATURE~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SYMBOLIC LOGIC, INC.

By:	/s/ Matthew Stecker		Chief Executive Officer and Executive Chairman	August 11, 2022
~~Date: August 12, 2021~~	Matthew Stecker		(Principal Executive Officer)	~~/s/ Mark P. Szynkowski~~
		~~Mark P. Szynkowski~~
		~~Senior Vice President of Finance and Secretary~~ ~~(Principal Financial and Accounting Officer)~~


	June 30, 2021		December 31, 2020
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,896	$	2,763
Contract receivables, net of allowance for doubtful accounts of $784 and $780
at June 30, 2021 and December 31, 2020, respectively		4,739		5,681
Unbilled work-in-progress		4,183		3,365
Prepaid and other current assets		1,550		1,828
Income taxes receivable		739		270
Total current assets		16,107		13,907
Property and equipment, net		510		532
Amortizable intangible assets, net		2,310		2,769
Operating leases — right-of-use assets, net		1,121		915
Long-term assets – other		257		—
Deferred income taxes, net		954		953
Total assets	$	21,259	$	19,076

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Term loan - current portion	$	—	$	142
Accounts payable and accrued liabilities		4,642		4,305
Lease obligations — operating leases		332		294
Unearned revenue		5,540		3,713
Total current liabilities		10,514		8,454
Long-term liabilities:
Term loan, net of current portion		—		319
Lease obligations - operating leases, net of current portion		782		613
Total liabilities		11,296		9,386

Commitments and contingencies (Note 10)		—		—

Stockholders' equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, $0.001 par value; 40,000,000 shares authorized; 12,436,135 shares issued and 12,257,246 shares outstanding as of June 30, 2021 and 12,374,798 shares issued and 12,195,909 shares outstanding as of December 31, 2020		12		12
Additional paid-in capital		99,990		99,776
Treasury stock, 178,889 shares as of June 30, 2021 and December 31, 2020, ‎at cost		(1,253)		(1,253)
Accumulated other comprehensive loss		(10,323)		(10,345)
Accumulated deficit		(78,463)		(78,500)
Total stockholders' equity		9,963		9,690
Total liabilities and stockholders' equity	$	21,259	$	19,076



	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
		2021		2020		2021		2020
REVENUE
License fees	$	8	$	97	$	186	$	304
Services		6,986		6,232		13,268		12,310
Total revenue		6,994		6,329		13,454		12,614

COSTS OF REVENUE AND OPERATING EXPENSES
Costs of revenue, excluding depreciation and ‎ amortization		2,185		2,188		4,425		4,324
Sales and marketing		1,415		1,444		2,756		3,005
General and administrative		1,395		1,109		2,840		2,523
Product development		1,284		1,011		2,588		2,074
Depreciation		64		50		126		100
Amortization		240		233		478		468
Restructuring		61		—		61		—
Total costs of revenue and operating expenses		6,644		6,035		13,274		12,494

Income from operations		350		294		180		120

Other income (expense)
Interest income		3		1		4		3
Interest expense		—		(18)		(1)		(65)
Other income, net		578		16		287		19
Foreign currency exchange income (loss)		168		(36)		(212)		347
Other income (expense), net		749		(37)		78		304

Income from operations before income taxes		1,099		257		258		424
Income tax expense		146		305		221		504
Net income (loss)	$	953	$	(48)	$	37	$	(80)

Basic earnings (loss) per common share	$	0.08	$	(0.00)	$	0.00	$	(0.01)

Diluted earnings (loss) per common share	$	0.08	$	(0.00)	$	0.00	$	(0.01)

Weighted average basic shares outstanding		12,257		12,179		12,232		12,179
Weighted average diluted shares outstanding		12,258		12,179		12,258		12,179



	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
		2021		2020		2021		2020
Net income (loss)	$	953	$	(48)	$	37	$	(80)

Other comprehensive (loss) income
Foreign currency translation (loss) income		(147)		(99)		22		(622)
Comprehensive income (loss)	$	806	$	(147)	$	59	$	(702)



Six Months Ended June 30, 2021

									Accumulated
					Additional				other				Total
	Common stock				paid-in		Treasury		comprehensive		Accumulated		stockholders'
	Shares	Amount			capital		stock		loss		deficit		equity
Balance at January 1, 2021	12,195,909	$	12	$	99,776	$	(1,253)	$	(10,345)	$	(78,500)	$	9,690
Restricted stock vested	61,337		—		—		—		—		—		—
Stock-based compensation ‎ expense	—		—		214		—		—		—		214
Net income	—		—		—		—		—		37		37
Foreign currency translation income	—		—		—		—		22		—		22
Balance at June 30, 2021	12,257,246	$	12	$	99,990	$	(1,253)	$	(10,323)	$	(78,463)	$	9,963



Six Months Ended June 30, 2020

									Accumulated
					Additional				other			Total
	Common stock				paid-in		Treasury		comprehensive		Accumulated	stockholders'
	Shares	Amount			capital		stock		loss		deficit	equity
Balance at January 1, 2020	12,163,834	$	12	$	99,555	$	(1,253)	$	(10,053)	$	(79,143)	$	9,118
Restricted stock vested	31,137		—		—		—		—		—		—
Stock-based compensation ‎ expense	—		—		67		—		—		—		67
Net loss	—		—		—		—		—		(80)		(80)
Foreign currency translation ‎ loss	—		—		—		—		(622)		—		(622)
Balance at June 30, 2020	12,194,971	$	12	$	99,622	$	(1,253)	$	(10,675)	$	(79,223)	$	8,483



Three Months Ended June 30, 2021

									Accumulated
					Additional				other				Total
	Common stock				paid-in		Treasury		comprehensive		Accumulated		stockholders'
	Shares	Amount			capital		stock		loss		deficit		equity
Balance at March 31, 2021	12,226,577	$	12	$	99,973	$	(1,253)	$	(10,176)	$	(79,416)	$	9,140
Restricted stock vested	30,669		—		—		—		—		—		—
Stock-based compensation ‎ expense	—		—		17		—		—		—		17
Net income	—		—		—		—		—		953		953
Foreign currency translation ‎ loss	—		—		—		—		(147)		—		(147)
Balance at June 30, 2021	12,257,246	$	12	$	99,990	$	(1,253)	$	(10,323)	$	(78,463)	$	9,963



Three Months Ended June 30, 2020

									Accumulated
					Additional				other			Total
	Common stock				paid-in		Treasury		comprehensive		Accumulated	stockholders'
	Shares	Amount			capital		stock		loss		deficit	equity
Balance at March 31, 2020	12,194,502	$	12	$	99,613	$	(1,253)	$	(10,576)	$	(79,175)	$	8,621
Restricted stock vested	469		—		—		—		—		—		—
Stock-based compensation ‎ expense	—		—		9		—		—		—		9
Net loss	—		—		—		—		—		(48)		(48)
Foreign currency translation ‎ loss	—		—		—		—		(99)		—		(99)
Balance at June 30, 2020	12,194,971	$	12	$	99,622	$	(1,253)	$	(10,675)	$	(79,223)	$	8,483



	For the Six Months Ended June 30,
		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	37	$	(80)
Adjustments to reconcile net income (loss) to net cash provided by ‎operating activities:
Depreciation		126		100
Amortization of intangible assets		478		468
Amortization of debt issuance costs		—		3
Amortization of operating leases — right of use assets		211		154
Stock-based compensation expense		214		67
Foreign currency transaction loss (income), net		88		(347)
Bad debt recoveries		—		(11)
Provision for deferred income taxes		7		366
PPP Loan forgiveness		(319)		—
Change in operating assets and liabilities:
Contract receivables		970		2,338
Unbilled work-in-progress		(789)		(1,868)
Prepaid and other assets		266		(605)
Accounts payable and accrued liabilities		343		899
Income taxes receivable		(460)		152
Unearned revenue		1,776		397
Lease obligations — operating leases		(213)		(154)
Long-term assets – other		(256)		—
Net cash provided by operating activities		2,479		1,879

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(108)		(188)
Net cash used in investing activities		(108)		(188)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable		(143)		(526)
Proceeds from loan		—		319
Net cash used in financing activities		(143)		(207)

Effect of exchange rate changes on cash and cash equivalents		(95)		(289)

Net increase in cash and cash equivalents		2,133		1,195
Cash and cash equivalents at beginning of period		2,763		3,076
Cash and cash equivalents at end of period	$	4,896	$	4,271

Supplemental disclosure of cash and non-cash transactions:
Interest paid	$	4	$	51
Income taxes paid	$	456	$	101
Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use ‎ assets	$	370	$	—



	June 30, 2021
		Gross Amount			Accumulated Amortization			Net Carrying Amount
Purchased software	$	2,943		$	(2,106)		$	837
Trademarks and tradenames		313			(285)			28
Non-competition		40			(40)			—
Customer relationships		4,413			(2,968)			1,445
	$	7,709	⁽¹⁾	$	(5,399)	⁽¹⁾	$	2,310



For the trailing twelve months ending June 30,
2022	$	903
2023		534
2024		273
2025		112
2026		94
Thereafter		394
	$	2,310




	For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020
Basic earnings (loss) per common share:
Net income (loss)	$	953	$	(48)	$	37	$	(80)
Basic weighted average shares outstanding		12,257		12,179		12,232		12,179
Basic earnings (loss) per common share:	$	0.08	$	(0.00)	$	0.00	$	(0.01)

Diluted earnings (loss) per common share:
Net income (loss)	$	953	$	(48)	$	37	$	(80)
Weighted average shares outstanding		12,257		12,179		12,232		12,179
Effect of dilutive securities - options and restricted stock		1		—		26		—
Diluted weighted average shares outstanding		12,258		12,179		12,258		12,179
Diluted earnings (loss) per common share:	$	0.08	$	(0.00)	$	0.00	$	(0.01)