Table of Contents

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, 20212022

OR

OR

oTransition 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 classEach Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

EVOL

The Nasdaq Capital MarketEVOL

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 definitionthe 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 Filerfiler x

Smaller Reporting Companyreporting company x

Emerging growth company Emerging Growth Companyo

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 ActAct. 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 12,257,24610,831,992 shares outstanding of Registrant’s Common Stock (par value $0.001 per share).


EVOLVING SYSTEMS, INC.

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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

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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

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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

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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

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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

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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

8


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SYMBOLIC LOGIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization On December 31, 2021, Symbolic Logic, Inc. (the “Company” or “Symbolic Logic”) f/k/a Evolving Systems, Inc. (“Evolving Systems”) closed on the terms of the Equity Purchase Agreement (the “Company”“Equity Purchase Agreement”) is a providerand 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 solutionsOctober 15, 2021, with subsidiaries and servicesaffiliates of software solutionsPartnerOne Capital, Inc. (the “Purchasers”). The Purchase Agreements provided for the sale and servicestransfer of substantially all of Evolving Systems’ operating subsidiaries and all of its assets to the wireless carrierPurchasers 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 manyconditions, 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 solutionsdirectors and services for real-time analytics, customer acquisitionexecutives have an extensive background in mergers and activation, customer value managementacquisitions (“M&A”) activity. The Company plans to use its cash assets and loyalty for the telecom industry promoting partnerships into retail and financial services.

Acquisitionsnetwork 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, optimizationconsider 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 varietythe symbolic tagging and organizing of channels. It enables our clientsphysical objects. The Company continues to engage with their customers at all stage of their lifecycle, providing interactive dialogueselectively 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 supportwork remotely resulting in limited effect on our day-to-dayday 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 inabilityNASDAQ staff requested certain information from the Company regarding its on-going business. We provided a response to travel has delayed interactionsthe 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 clientsthe Secretary of State of Delaware Certificate of Amendment to amend its Certificate of Incorporation to change the Company’s name from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” effective as of April 12, 2022. The Company also amended and restated its Bylaws to change all Company references from “Evolving Systems, Inc.” to “Symbolic Logic, Inc.” No other amendments were made to the Certificate of Incorporation or Bylaws.

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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 projectsNasdaq. 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 modesCompany’s total shares of sales development. We continually work with existing and new clients exploring new wayscommon 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 causedJuly 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 inCompany. 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 ongoinginvestments 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, 20212022 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, 20202021 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

9


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.

10


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.

11


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.

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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.

11

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

12


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 Taxes2021-04—Earnings Per Share (ASC 740) — Simplifying260), 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 simplifyamendments 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 exceptionsmodification or exchange. The amendments that relate to the general principlesrecognition 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 evaluatedRecently 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 pronouncementsinstruments. For receivables, loans and does not believeother instruments, entities will be required to use a new forward-looking “expected loss” model that anygenerally will result in the earlier recognition of these pronouncementsallowance 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 significantcontractual 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.

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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 statementsbalance 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 ofbusiness 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.

13

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

(1)Includes foreign currency translation adjustment of less than $0.1 million.

13Table of Contents


Amortization expense of identifiable intangible assets was $0.2 million for eachThe following table presents the financial results of the three months ended June 30, 2021 and 2020discontinued 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.

14

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)

14


Weighted average options to purchase of approximately 0.30.1 million shares and 0.40.3 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 COMPENSATIONINVESTMENTS

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.

15

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.

16

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, 20212022 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, 20212022 and December 31, 2020,2021, 0 shares were available for grant under the 2007 Stock Plan, as amended. At June 30, 20212022 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 and0 restricted shares were issued and outstanding under the 2007 Stock Plan as amended, respectively.

At June 30, 20212022 and December 31, 2020,2021, there were approximately 0.50.4 million and 0.6 million shares available for grant under the 2016 Stock Plan, respectively. At June 30, 20212022 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 expensingexpense is equal to the closing price of our common stock on the date of grant. The restrictionsrestricted shares for stock awards generallyvest in three tranches: the first tranche vests immediately; and the second and third tranches vest over fourthe 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, 20212022

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, 20212022

1

150


15


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 options2022, and 0 restricted stock vested inawards 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.

Forrestricted 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 of2022 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.

17

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.

16


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, 20212022 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, 20212022 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 andin net tax expense of $0.3 millionfrom 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 20172018 through 20192020 and income tax examinations from various other jurisdictions for the years 20152016 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

17


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 108 — COMMITMENTS AND CONTINGENCIES

(a)

(a)Lease Commitments

Under TopicASC 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, 20212022 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 adoptionWe 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.


18


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 sheetgreater than 12 months as of June 30, 2021, for the following five fiscal years2022 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, 20212022 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, 20212022 or December 31, 2020.2021.

18

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 thatThe Manager will receive compensation for performance under the software will be freeManagement Agreement consisting of material defects and will operate in accordance witha 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 provisionsAssets 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 ofsix 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

19


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 seekssought $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 wasthe employer burden which had not been remitted. The Company has objected to the release of any funds related to the consolidations of duplicative functionsclaim 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.

19


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 SystemsOn 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 growthservices in the areas of real-time analytics, customer acquisition and activation, extend customer lifetime and increase customer value and revenue through analyticsmanagement and loyalty programsfor 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, financialEquity 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 providesconditions, including an upgrade pathadjustment 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, allthe 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 portfoliofollowing the closing of the transactions contemplated under the Purchase Agreements, will consist primarily of cash and 25 yearscash equivalents. The board of expertisedirectors 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, activationthe performance of its duties.

Following the sale of its assets in real-time digital engagement solutions and retention. Enhancementsservices in December 2021, the Company has decided to our technology further expands our managed services platform for delivering on-tapevaluate 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.

20

COVID-19

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 supportwork remotely resulting in limited effect on our day to day operations.

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 inabilityCompany also amended and restated its Bylaws to travel has delayed interactionschange 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 clientsthe Securities and Exchange Commission on projectsMonday, 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 modesprice 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 waysexpenses. The total of using our products and services to enhance their business. On-going travel restrictions has caused1,501,192 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 operationsthe 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.

21

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.


RESULTS OF OPERATIONS

The following table presents the unauditedour 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)

%

22

    

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

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 were consistent at $1.4 million for the three months ended June 30, 2021 and 2020, respectively. As a percentage of total revenue, sales and marketing expenses decreased

23


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, 20212022 from $1.1$0.7 million for the three months ended June 30, 2020. The2021. 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 costs2022 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. The2021. There was an increase of $0.7 million of professional fees and $0.1 million in generalcontractor fees related to use of third party services in bookkeeping and product development expense is primarily duepreparation 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

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 $0.2 million for each of the three

24


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

23

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 percentage2022 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

Interestand 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 includesrelated to potential claim by the amortization of debt issuance costs and interest expense from our term loans. Interest expense for each ofPurchaser 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 2020other income of $0.5 million. There was less than $0.1 million. Asmillion in interest income or other income for the six months ended June 30, 2021. The increase was a percentageresult 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, 20212022, 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, 20212022.

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 incomeUnrealized loss on investments, net increased $1.7 million, or 100% for the three months ended June 30, 2021 was $0.62022 and $1.6 million comparedfor 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 otherthe 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 other2022 and 2021 respectively. We also recorded net income is primarily due to the forgivenesstax benefit from continuing operations of the Paycheck Protection Program Loan$0.1 million and a foreign research and developmentnet 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 ofexpense from continuing operations less than $0.1 million for the six months ended June 30, 2020. The income recorded2022 and 2021, respectively.

We use a recognition threshold and a measurement attribute for the forgivenessfinancial statement recognition and measurement of the Paycheck Protection Program Loan and foreign research and development credit was offsettax 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 CEOtaxing 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, andwe had no liability for unrecognized tax expense of $0.3 million forbenefits. 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 endingnext twelve months.

Discontinued Operations

On December 31, 2021, the expense is determined using an estimateCompany 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 relatedreflect 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 effectswireless carriers throughout the world. This included the Company’s portfolio of foreign currency exchange realized transaction gains or lossessolutions 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, 2021telecom industry promoting partnerships into retail and 2020, respectively.financial services.

24

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 increaseddecreased by $0.1$8.5 million to $5.6$29.2 million as of June 30, 20212022 from $5.5$37.7 million as of December 31, 2020.

CONTRACTUAL OBLIGATIONS

There have been no material changes2021. 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 growthexpansion 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 willmay 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, 20212022 was $2.0 million due to net loss of $2.7 million plus an increase in prepaid and 2020 was $2.5other 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. Cashincrease 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 collectedcredit.

Net cash used in a future period.

Cash provided by operatinginvesting activities for the six months ended June 30, 20202022 of $17.1 million was primarily due to the net losspurchase of $0.1investments of $18.4 million, (offset noncash chargestransaction 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-progressproceeds on sale of $1.9 million and prepaids and other assetsinvestments of $0.6$2.0 million.

Net cash used in investing activities duringfor 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 investingfinancing activities duringfor the six months ended June 30, 20202022 of $0.2$2.5 million was due to the purchaseretirement 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

26


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.

25

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.

27


26

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 companiescompanies.

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 applicableapplicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicableapplicable.

ITEM 5. OTHER INFORMATION

Not applicable.

Not applicable

27

ITEMItem 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, 2014April 15, 2022 and incorporated herein by reference.

28


28

32.232.2**

**

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.

29

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)

30