10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2015

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: 001-34261

EVOLVING SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1010843
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
9777 Pyramid Court, Suite 100, Englewood, Colorado	80112
(Address of principal executive offices)	(Zip Code)

(303) 802-1000

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Common Stock, Par Value $0.001 Per Share	The Nasdaq Capital Market
(Title of Class)	(Name of exchange on which registered)

Securities registered under Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o  No x

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

The aggregate market value of the Common Stock held by non-affiliates of the registrant, based upon the last sale price of the Common Stock reported on the Nasdaq Capital Market, was approximately $71.1 million as of June 30, 2015.

The number of shares of Common Stock outstanding was 11,795,331 as of March 9, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to portions of the registrant’s definitive proxy statement for the 2016 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the close of the 2015 year.  Except as expressly incorporated by reference, the Proxy Statement shall not be deemed to be a part of this report on Form 10-K.

EVOLVING SYSTEMS, INC.

Annual Report on Form 10-K

For the year ended December 31, 2015

Table of Contents

		Page
	PART I
Item 1	Business	1
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	17
Item 2	Properties	18
Item 3	Legal Proceedings	18
Item 4	Mine Safety Disclosures	18
	PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6	Selected Financial Data	19
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	31
Item 8	Financial Statements and Supplementary Data	33
	Reports of Independent Registered Public Accounting Firm	33
	Consolidated Balance Sheets	34
	Consolidated Statements of Income	35
	Consolidated Statements of Comprehensive Income	36
	Consolidated Statements of Changes in Stockholders’ Equity	37
	Consolidated Statements of Cash Flows	38
	Notes to Consolidated Financial Statements	39
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	60
Item 9A	Controls and Procedures	60
Item 9B	Other Information	61
	PART III
Item 10	Directors, Executive Officers and Corporate Governance	61
Item 11	Executive Compensation	61
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	61
Item 13	Certain Relationships and Related Transactions, and Director Independence	61
Item 14	Principal Accounting Fees and Services	61
	PART IV
Item 15	Exhibits, Financial Statement Schedules	62
	Signatures	64

FORWARD-LOOKING STATEMENTS

Except for the historical information contained in this document, this report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995, including estimates, projections, statements relating to our business plans, objectives and expected operating results and assumptions. These forward-looking statements generally are identified by the words “believes,” “goals,” “projects,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” variations of these words and similar expressions. Forward-looking statements are based on current expectations, estimates, projections and assumptions regarding product, services, and customer support revenue; our expectations associated with Evolving Systems Labs, Evolving Systems India, Evolving Systems U.K. and Evolving Systems NC, Inc., and short- and long-term cash needs, and are subject to risks and uncertainties which may cause our actual results to differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to those discussed in the sections entitled “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1.    BUSINESS

INTRODUCTION

Evolving Systems is a provider of software solutions for service enablement, on-device activation and management of services for connected devices for network operators around the world. Our customers rely on us to develop, deploy, integrate, enhance and maintain software solutions supporting their traditional and next generation network technologies, convergent service offerings, and advanced wireless and other broadband networks. We maintain long-standing relationships with many major carriers worldwide.  Included among our more than 75 network operator customers are many tier-1 wireless carriers.

We offer software products and solutions in five core areas:

·Mobile Analytics, Engagement and Advertising enables carrier marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time;

·Service activation solutions used to activate complex bundles of voice, video and data services for traditional and next generation wireless, wireline and cable networks;

·SIM (Subscriber Identity Module) card activation and management solutions that improve the end user experience and dynamically allocate and assign resources to a wireless device when it is first used;

·Connected device solutions used to manage and activate machine-to-machine or M2M devices, such as e-readers, smart meters, gaming consoles, as well as other SIM-based industry specific devices;

·Number inventory and management solutions, used by telecom operators to manage the receipt of number ranges from regulatory bodies, efficient allocation of numbers to subscribers, and rapid recycling of unused numbers.

We generate revenue by licensing, and supporting our software products to customers in either a traditional premise-based implementation or through a cloud-based software-as-a-service (SaaS) solution as well as via a managed service offering. We report the operations of our business as two operating segments based on revenue type: license and services revenue and customer support revenue.  We report geographic information based upon revenue and long-lived assets in the United States, United Kingdom and all other foreign countries as a group.  Further information regarding our operating segments and geographical information is contained in Note 12 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

COMPANY BACKGROUND

Evolving Systems was founded in 1985 to provide software and services to the U.S. telecommunications industry.  During our early years our product focus was on solutions that supported number management and number porting. In November 2004, we expanded our product set and geographical reach with the acquisition of Tertio Telecoms Ltd. (“Evolving Systems U.K.”), a supplier of Operations Support Systems (“OSS”) software solutions for service activation and mediation to communication carriers throughout Europe, the Middle East, Africa and Asia. With this acquisition we not only expanded our markets beyond North America, we also added service activation and billing mediation solutions to our product portfolio. The acquisition significantly expanded our product and service capabilities, allowing us to address a larger portion of our customers’ OSS application needs with a balanced mix of products as well as services.  We currently focus primarily on the wireless markets in the areas of mobile marketing analytics, subscriber activation, SIM card management and activation, self—service mobile applications, data enablement solutions, connected device activation and management of services.

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On July 1, 2011, we sold our numbering solutions business to NeuStar, Inc. for $39.4 million in cash and the assumption of certain liabilities (the “Asset Sale”). As a result of the Asset Sale we no longer sell local number portability or number management solution products in North America.

On October 24, 2013 we acquired privately held Telespree Communications (“Telespree”), now known as Evolving Systems Labs, Inc. (“Evolving Systems Labs”), for an initial payment of approximately $1.6 million, comprised of approximately $0.8 million in cash and approximately $0.8 million in stock.  There is an earn-out provision whereby we may potentially make additional payments in cash on the achievement of certain financial targets for the period from October 25, 2013 through October 24, 2016.  In addition, there is a final payment of $0.5 million to be made subject to reduction for certain claims.  The final payment has not been made as of the date of this Form 10-K was filed.  The acquisition included technology used in the delivery and management of mobile data services and a portfolio of SaaS based solutions.

On September 30, 2015, we acquired privately held RateIntegration, Inc. d/b/a Sixth Sense Media (“SSM”), now known as Evolving Systems NC, Inc. (“Evolving Systems NC”) for an initial cash payment totaling approximately $9.75 million, plus customary working capital adjustments, and we agreed to make a payment of $250,000 on the one year anniversary of the transaction, with such payment being available to secure SSM’s representations and warranties under the acquisition agreement. The acquisition included SSM’s software solution, Real-time Lifecycle Marketing™ (“RLM”), a platform which enables carrier marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time.

INDUSTRY DYNAMICS

The market for mobile marketing analytics, communications activation and provisioning solutions is constantly changing. Several key factors are driving carrier demand for next generation solutions, supporting growth for specific products within the sector:

·Carriers seeking to further monetize their customer relationships and associated demographic, behavioral, location and contextual information to up-sell their network services and open new channels for optimized and personalized third-party service revenues;

·Rapid adoption of smart phones and network-attached devices, driving increased usage of mobile data;

·On-going network investment to provide vastly improved delivery speeds and capacity (Long Term Evolution, or “LTE”/4G);

·Pricing pressure within the telecom industry driven by relatively flat subscriber growth, network upgrade costs, subscriber churn, and increased competition from traditional and new market entrants such as Over-the-Top (“OTT”) services both in the developed and emerging markets; and

·Adoption of the connected device and M2M markets.

Today, carriers are compelled to offer a growing array of services to deliver personalized and differentiated user experiences, reduce subscriber churn and maintain or grow market share. These value-added services have to be delivered to the market in ever shorter windows as competitive pressure has increased the velocity at which carriers deliver new products and services. To achieve these objectives, operators are increasingly reliant on flexible service enablement solutions that offer a myriad of options for their subscribers.

As network migrations to 4G/LTE accelerate and subscribers continue to drive growth in mobile solutions, the SIM card has emerged as a vital link in the telecom value chain. Capability, such as that provided by Evolving Systems’ Dynamic SIM Allocation™ (“DSA”) solution for dynamically activating and managing the SIM card, is becoming an important component in the operators’ infrastructure, both to reduce operating costs associated with the provisioning of SIM cards, as well as to improve the end-user experience.

We are a pioneer and leader in this market and believe we are well-positioned to maintain our leadership role in this emerging growth segment. To date our DSA solution has activated almost half a billion SIM cards, and in 2015 alone we activated in excess of 170 million SIM cards, providing enhanced functionality and significant operator savings.  Our Mobile Marketing solution is installed in 15 carriers connecting with over 250 Million subscribers around the world.

PRODUCT PORTFOLIO

Real-Time Lifecycle Marketing ™

Our Real-time Lifecycle Marketing platform empowers marketing departments to create and deploy highly personalized, location and contextually relevant, interactive customer engagement campaigns. The platform monitors customer events and

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behavioural patterns in real-time, building a profile of each subscriber. When the right conditions are met, the platform pushes the best match or a personalized offer or ad to the customer.

Compared with many other marketing campaign management systems, RLM more accurately targets marketing messages and campaigns that drive incremental revenue more quickly.

The RLM solution is comprised of a number of components:

·The Profiling Engine of the RLM platform supports static as well as ongoing dynamic profiling of subscribers. It fully supports any real-time or micro segmentation requirements as needed by the business. The Profile Engine is a rules-driven flexible aggregator of subscriber baseline and usage data. It has been designed to handle any data model, including any data representation that may be available within the carrier’s legacy billing and Customer Relationship Management (“CRM”) environment.

·The Campaign Manager fulfills the RLM platform’s campaign and offering requirements. It includes a business friendly dashboard allows for rapidly configuring, testing and launching new business campaigns. Through the dashboard the business user can target specific subscribers, define offers and rewards, and create the personalized messages per campaign, interaction and subscriber. The dashboard provides a real-time view on each campaign’s effectiveness and impact.

·Campaign Modules provide predefined templates for specific types of real-time mobile marketing tactics, including marketing and loyalty for digital services such as mobile money and content, data package upsell and top-up accelerators.

Dynamic SIM Allocation™

We introduced our Dynamic SIM Allocation™ solution, or “DSA,” in 2007. DSA offers carriers a dramatically improved alternative to the inefficient traditional SIM distribution and activation practices.

The SIM card is central to the provisioning of wireless access and services for most networks used today by wireless operators world-wide, as well as next generation 4G LTE technologies.  Typically, SIM cards are pre-provisioned before they are distributed to the retail environment. Pre-provisioning SIM cards requires that network resources (e.g., mobile numbers) be allocated well in advance of the wireless device becoming available for sale.  This leads to poor utilization of numbers and other network resources, increases unnecessary network costs, and delivers a poor user experience.

DSA’s core technological innovation, on which we have several US patents, enables new SIM cards that have not been pre-provisioned to be detected on first use, triggering an efficient, dynamic provisioning process and eliminating the need for pre-provisioning and thus lowering the operator’s costs. The SIM activation occurs only when a SIM card is first used.

During the activation process, the solution enables an on-device interaction with the end-user, delivering a differentiated user-experience, reducing customer churn and boosting revenue for the carrier.

The DSA solution offers a number of benefits including:

·Increased revenue and market share: Our DSA solution supports the search, selection and payment for “vanity numbers” and allows a carrier the opportunity to monetize these numbers where, for example, each number can have a different price. Allowing new subscribers to select their number is a market differentiator that will attract more subscribers. In addition, subscribers who select their own number are more likely to keep the number, which may result in greater subscriber lifespan and reduced churn.

·Improved user experience at lower cost: Carriers have various customer care processes, like those for mobile number portability, or replacing lost or stolen SIM cards.  These processes can be inefficient and have high operational costs. Our DSA solution helps carriers provide more customer self-care for an improved user experience at lower costs.

·Choice and Personalization on the device: Prepaid subscribers have traditionally been offered few choices at time of activation. With our solution, prepaid subscribers have an on-device language choice, a choice of product, package or tariff, the ability to select a number from a database of available numbers, including vanity number search and free or chargeable numbers, and the ability to select from a carrier’s promotions and value added services. In addition, on-device

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personalization is not limited to the point of first use. Using our DSA solution, subscribers can make changes to their service at any time.

·Improved efficiency and utilization: SIM cards that are never activated for a revenue-generating subscriber result in increased costs and waste. Activating SIM cards dynamically on first use makes the SIM distribution process more efficient and flexible. SIM cards are not linked with any product or region until they are first used, allowing SIM stock to be moved freely to meet demand. The number of SIM types a carrier has to support is greatly reduced, resulting in less packaging cost and waste.  Finally, by removing the need for SIM cards to be pre-provisioned, costly resources, such as numbers and network database capacity, are used only when needed.

·Availability to meet demand: Carriers can find it difficult to effectively and reliably manage their SIM inventory, especially when multiple SIM card variants and profiles are needed. Our DSA solution helps carriers to ensure new SIM cards and numbers are always available to meet demand.

DSA is an integrated solution comprised of several components:

·First Use Register (“FUR”) is responsible for the integration with the network, via SS7/SIGTRAN for 3G networks and DIAMETER for LTE. It detects the first use of a SIM card, enabling the update of the card, and facilitating any optional dialogue with the subscriber in a highly secure manner. It triggers the provisioning process, including the allocation of a definitive International Mobile Subscriber Identity, or “IMSI,” and the Mobile Subscriber Integrated Services Digital Network-Number, or “MSISDN”. The IMSI identifies the SIM, while the MSISDN is used for routing calls to the subscriber.

·Task Management is a module that controls the process flow of tasks involved with completing the subscriber’s activation process. The module orchestrates the overall process, providing robust capabilities for processing high volume, low latency, and mission critical transactions.

·Resource Management is a component that records and controls the management and assignment of specific inventory elements and resources. The component allocates the resources used by the DSA solution, including IMSI and MSISDN values.

·Menu Server is a module that defines and controls the menu dialogue with a subscriber. The Menu Server provides carriers with the ability to customize the end user experience on the device. Working with a SIM applet, Menu Server allows the wireless carrier to quickly and easily customize the end user screens on their phones or other devices.

·Smartphone Welcome Portal allows DSA to support activation processes through a rich browser-based dialogue, as well as a dialogue through menus on a phone screen. With the Mobile Broadband Module, carriers can offer a customized experience for subscribers who are activating new SIM cards in smart phones and/or a wide variety of connected devices.  As part of this experience, DSA can promote smartphone apps on behalf of the network operator or third parties, offering a new way to acquire app users in markets where SIM-only sales are dominant.

·Promotions Engine enables DSA to offer dynamic promotions to end users as part of the on-device activation experience. Dynamic promotions are those which are selected as relevant to a specific user based on their device type, location, the time/date they activate their SIM, and other choices they make during the activation process.

·In-Life Interaction Engine enables many of the personalization options such as number and tariff choice, or promotions, to be offered to users via their device after first use, as well as during the first use period.

·Operational Dashboard is a module that assists operators in the administration, operation, and maintenance of the DSA platform. Operational Dashboard offers carriers a powerful reporting tool and a flexible, easy-to-use tool that provides visibility into the performance of DSA.

·Direct Authentication is an extension module to the First Use Register which can generate Global System for Mobile Communication, or “GSM” SIM and Universal Mobile Telecommunications System, or “UMTS” SIM authentication. This removes the need to dedicate an Authentication Center (“AUC”) to perform this function for the First Use Register.

·SIM Reservation Portal™ extends the personalization capabilities of DSA to more of an operator’s customers. Working alongside DSA’s on-device personalization, it offers personalization in advance of SIM purchase, through a web portal that can be deployed on the public internet, or in a store kiosk.

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·Smart Dealer provides SIM retailers with a tool set that enables them to sell SIM cards efficiently and effectively. With Smart Dealer, the operator is able to communicate and guide dealers towards using the latest promotions, enabling instant reactions to competitor activities.  New offers can be trialed through split-testing, varying offers by region, time, day, or device. Smart Dealer captures subscriber details for “Know Your Customer”  prepaid registration using standard, low cost devices.

Tertio Service Activation

Our service activation solution, Tertio®, is used by carriers to activate a new subscriber or to add a new service to an existing subscriber.  Our Tertio product provides a flexible operating environment for carriers to manage their voice, data, and content service needs for both their traditional and broadband IP networks.  Our solution is deployed as the service activation engine for approximately 30 networks around the world, including two of the world’s largest wireless carriers.

Tertio Service Activation is an integrated, scalable and flexible solution with a graphical interface and is comprised of several components:

·Tertio Service Composer is a modeling tool that simplifies the creation of new services.

·Tertio Content Connector is a tool used for activation of next-generation services.

·Tertio Activation Designer is a tool designed to speed network feature activation.

·Tertio Service Verification is a module that allows carriers to verify that the services implemented in the network match those that were in the original service order.  By providing this capability, carriers can continually check the accuracy of their order/activation processes.

Our Tertio solution addresses the entire service lifecycle, allowing carriers to introduce new network technologies and easing the burden of integration with existing devices and systems. Service providers who use our Tertio solution can better plan, manage and execute the introduction of new services.

Number Inventory and Management

Our number inventory solution, Total Number Management™ (“TNM”), is a scalable and fully automated solution that enables operators to reliably and efficiently manage their telephone numbers (i.e. SIMs, MSISDNs, IMSIs, Integrated Circuit Card Identifiers (“ICCIDs”) and Internet Protocols (“IPs”) as well as other communication identifiers such as Uniform Resource Locators or (“URLs”) and email addresses. TNM focuses on the automation of all number resource management processes, allowing operators to adhere to regulatory requirements and effectively manage the lifecycle of telephone numbers, as well as benefit from time savings and reduced costs.

The major components of TNM are:

·Number management: TNM maintains a clean number resource inventory, ensuring accurate status information and avoiding number conflicts.

·Vanity/Golden number support: TNM provides the capability to mark numbers as ‘Golden’ or ‘Vanity’ numbers based on user defined criteria. Golden numbers are then protected from the general assignment rules and may only be allocated when specifically requested.

·SIM management: TNM provides full lifecycle SIM management to include a standardized SIM card profile and templates, as well as an automated interface to the SIM manufacturer’s system, which reduces cumbersome processes associated with sending orders.

PROFESSIONAL AND INTEGRATION SERVICES

Our Professional and Integration Services team provides expert consulting services and advice for the customization, integration and deployment of our products.  The team works closely with our Product Development and Engineering teams to ensure that our deployed products meet our customers’ requirements and that our products continue to evolve to meet future requirements.  Our services cover all aspects of the project lifecycle, including system architecture, design, software development and customization, system integration, testing, live deployment and production support, program and project level management, post-implementation maintenance and domain and product expertise.  We also provide managed services. Our teams work closely with customers and

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integration partners and have established long-term relationships with operators in the Americas, Europe, the Middle East, Africa and Asia Pacific regions.

ON-PREMISE OR SAAS IMPLEMENTATIONS

Our applications are available through the purchase of an on-premises software license or via subscription to our SaaS offerings that we host, manage and support. Regardless of the deployment model selected, our solutions are designed to reduce risk, cost and complexity while supporting customer choice with flexible deployment models that readily enable agility, compatibility and extendibility.

PRODUCT DEVELOPMENT

We develop most of our products and services internally, conducting research to identify specific industry and customer business needs as well as market requirements and we use that information to determine our investment in product development (“PD”). We evaluate the market for new products and we leverage our existing product capabilities with enhancements of existing products.  Our product “roadmap” helps us identify which modifications and enhancements are most important and when they should be implemented. We build investment plans for our principal product areas and we make other investments in tools and product extensions to accelerate the development, implementation and integration process for customer solutions.

PD is expensed as incurred.  For the years ended December 31, 2015, 2014 and 2013, we expensed $3.8 million, $3.6 million and $3.0 million, respectively, in PD costs.  The majority of PD investments in 2015 went into the further development and enhancement of our DSA solution.

SALES AND MARKETING

Our sales force is primarily a field organization structured to focus on specific geographical territories around the world: The Americas (North, Central and South), Europe, Middle East and Africa, the Commonwealth of Independent States (comprised of Russia and other former Soviet Republics) and Asia Pacific. Our sales activities cover both direct sales to carrier customers as well as sales through partners such as Gemalto, Oberthur, and Ericsson, who include our products as part of their wider solution offerings, and systems integrators such as Accenture and IBM who license our technology to customers as part of their delivery engagements.

Our solutions and our customers’ infrastructures are complex, and require a high degree of consultative selling which often results in a long sales cycle in excess of twelve months. In addition, our business relies on incremental revenue from existing customers, which requires regular interaction with customers to discuss enhancements to our existing solutions as well as the introduction of new features and functionality. The sales team is also responsible for making proactive proposals to prospects, as well as managing and delivering responses to competitive tenders. This complex, highly interactive approach results a long sales cycle, requiring us to invest a considerable amount of time developing business opportunities without guaranteed sales.

Our marketing organization supports our sales activities by identifying markets for our products and establishing an awareness of our offerings in those markets through a combination of direct marketing, web marketing, and participation in shows, conferences, and industry bodies. The marketing organization is responsible for maintaining our web site and creating electronic and print-based sales collateral to support our sales activities.

COMPETITION

The market for telecommunications OSS products and mobile analytics and advertising is competitive and is subject to rapid technological change, changing industry standards, regulatory developments and consolidation. We face increasing demand for improved product performance, enhanced functionality, rapid integration capabilities coupled with pricing pressures. Our existing and potential competitors include many large domestic and international companies that often have substantially greater financial, technological, marketing, distribution and other resources, larger installed customer bases and longer-standing relationships with telecommunications customers. The market for telecommunications OSS software and services is extremely large and we currently hold only a small portion of total market share.  We believe our work to establish the dynamic SIM allocation market has resulted in our achieving a measurable and reasonable market share in those areas.

Our principal competitors for our Tertio Service Activation solution are Comptel, Amdocs and Oracle.  In the area of dynamic SIM allocation, we believe we hold a significant leadership position; however, we see occasional competition from Giesecke & Devrient GmbH and HP, as well as a few other smaller regional competitors. In addition, some of the network equipment manufacturers’ next generation solutions address some of the benefits provided by our DSA solution.  For our TNM solution competition comes from a variety of billing vendors and vendors such as Telcordia/Ericsson.  Competitors for our RLM solution

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include specialist vendors such as Knowesis, Pontis and Business Logic Systems, as well as some products in general CRM suites from vendors such as SAS and Oracle.

For all of our products, our ability to compete successfully depends on a wide range of factors.  We deliver value by offering competitively priced quality solutions, tailored specifically to our customers’ network topography. After a customer implements our products, we often receive subsequent orders for enhancements to add functionality or increase capacity.  Complex solutions tailored to customers’ needs are expensive and time consuming to replace our software, thus providing us with an incumbent advantage.  Furthermore, many of our customer relationships span five years or more.  We believe all of these factors give us a competitive advantage and can be a barrier to entry for potential competitors.

SIGNIFICANT CUSTOMERS

For the year ended December 31, 2015, no significant customer exceeded the threshold (defined as contributing at least 10%) of revenue from continuing operations.  For the year ended December 31, 2014, two significant customers accounted for 24% (13% and 11%) of revenue from continuing operations.  These customers are large telecommunications operators in Europe and Mexico. For the year ended December 31, 2013 one significant customer accounted for 12% of revenue from continuing operations.  This customer is a large telecommunications operator in Europe.

INTELLECTUAL PROPERTY

We rely on a combination of patents, copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and protect our proprietary rights. We have patents in the U.S. on elements of our DSA and mobile broadband enablement products and patents pending in other countries on elements of our DSA and other products.

BACKLOG

We define backlog as sales orders that are anticipated to be delivered and recognized in revenue over the next twelve months. As of December 31, 2015 and 2014, our backlog was approximately $12.1 million and $10.6 million, respectively.  Our backlog at December 31, 2015 was comprised of license fees and services of $6.1 million and customer support of $6.0 million compared to license fees and services of $5.6 million and customer support of $5.0 million at December 31, 2014.

EMPLOYEES

As of December 31, 2015, we employed 242 people including 32 in the United States, 50 in the United Kingdom and 160 in India.  Of our worldwide staff, 83% are involved in product delivery, development, support and professional services, 10% in sales and marketing, and 7% in general administration.

AVAILABLE INFORMATION

You can find out more information about us at our Internet website located at www.evolving.com. The information on or accessible through our website is not incorporated into this Annual Report on Form 10-K. Our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K and any amendments to those reports are available free of charge on our Internet website as soon as reasonably practicable after we electronically file or furnish such material with the SEC. Additionally, these reports are available at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or on the SEC’s website at www.sec.gov.  Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

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ITEM 1A.    RISK FACTORS

General Risk Statement

Our operations and financial results are subject to various risks and uncertainties, many of which are driven by factors we cannot control or predict.  An investment in our common stock involves a high degree of risk.  The risks that we have highlighted here represent the material risks known to us, but they are not the only ones that we face. If any of the risks actually occur, our business, financial condition, results of operation and cash flows could be negatively affected. You should carefully consider these risks and uncertainties before investing in our securities.

Risks Related to Our Business and Industry

We operate a global business that exposes us to currency, economic, regulatory and tax risks.

A substantial portion of our revenue comes from international sales and our growth strategy is largely focused on emerging markets.  Our success delivering solutions and competing in international markets is subject to our ability to manage various risks and difficulties, including, but not limited to:

·our ability to effectively staff and manage operations in multiple countries;

·fluctuations in currency exchange rates;

·timely collecting of accounts receivable from customers located outside of the U.S.;

·our ability to repatriate cash from foreign locations;

·trade restrictions, political instability, disruptions in financial markets, and deterioration of economic conditions;

·compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-bribery laws and regulations;

·variations and changes in laws applicable to our operations in different jurisdictions, including enforceability of intellectual property and contract rights;

·compliance with export regulations, tariffs and other barriers;

·our ability to provide sufficient levels of technical support in different locations; and

·potentially adverse tax consequences in connection with repatriating funds.

Approximately 40% of our revenue is transacted in non-U.S. dollar denominated currencies (e.g. British Pound Sterling, Swiss Franc and Euro).  As a result, when the U.S. dollar strengthens, our revenue, when converted to U.S. dollars, is reduced.  At the same time, approximately 70% of our operating expenses originate overseas, the strengthening dollar conversely lowers expenses outside of the U.S. Although this has provided some defense against currency fluctuations for our bottom line results, we may not be able to maintain this ratio of revenue to expense in the future.  In addition, we may not be able to sustain or increase our international revenue or repatriate cash without incurring substantial risks involving floating currency exchange rates, our ability to recover or apply withholding taxes remitted to foreign governments, and income tax expenses.  Any of the foregoing factors may have a material adverse impact on our international operations and, therefore, our business, financial condition and results of operations.  In addition, there have been proposals to change U.S. tax laws that would significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we cannot predict whether or in what form any proposed legislation may pass, if enacted it could have a material adverse impact on our tax expense and cash flow.

Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could adversely affect our results of operations and financial condition.

Our business is impacted by the length of our sales cycles.  Our customers have relatively complex businesses and the purchase of large communications solutions used for enterprise-wide, mission-critical purposes, involve significant capital expenditures and lengthy implementation plans. Prospective customers often take a long period of time to evaluate our products and services and require us to spend substantial time, effort and money educating them about our solutions. The purchase of the types of products and services we offer typically also requires coordination and agreement across many departments within a potential customer’s organization. This process often results in a lengthy sales cycle, typically ranging between three and twelve months. The lengthening of our sales cycle could reduce growth in our revenue and contribute to an increased cost of sales, thereby reducing our profitability.

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Mergers and acquisitions of large communications companies, as well as the formation of new alliances, have resulted in a constantly changing marketplace for our products and services. Purchasing delays and pricing pressures associated with these changes are common. In addition, many of the companies in the communications industry have kept capital expenditures at historically low levels in response to changes in the communications marketplace; some companies have declared bankruptcy, cancelled contracts, delayed payments to their suppliers or delayed additional purchases.

We depend on a limited number of significant customers for a substantial portion of our revenue, and the loss of one or more of these customers, or a delay in a large order, could adversely affect our business.

We earn a significant portion of our revenue from a small number of customers in the communications industry. The loss of any significant customer, delays in delivery or acceptance of any of our products by a customer, delays in the performance of services for a customer, or delays in collection of customer receivables could harm our business and operating results to a greater degree than other companies with a broader customer base.

Customers’ budgetary constraints and internal acceptance reviews may cause potential customers to delay or forego a purchase, making it difficult for us to forecast the timing and size of our contracts. In addition, our sales opportunities in any given quarter and year typically include a few high value opportunities. The delay or failure to close one or more large orders could have a material adverse effect on our results of operations and financial condition and cause our results to vary significantly from quarter to quarter and year to year.

We incurred debt in connection with our recent acquisition of SSM which could adversely affect our financial condition and restrict our operating flexibility.

In connection with our acquisition of SSM in September 2015, we entered into a Third Amendment with East West Bank, increasing our revolving credit facility from $5.0 million to $10.0 million (the “Revolving Facility”) and we used the full amount of the Revolving Facility to fund the acquisition. The Revolving Facility is secured by substantially all of the Company’s assets, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of the Company.  There is no mandated borrowing required against the Revolving Facility.  To take an advance under the Revolving Facility, the Company must have a balance of $4.0 million in cash on deposit with East West Bank, a minimum current ratio and a specified ratio of Total Liabilities to Tangible Net Worth, which are both as defined in the Revolving Facility. The Revolving Facility requires the Company to pay monthly payments of interest, with the unpaid balance due on October 22, 2016.

On February 29, 2016, we entered into the Fifth Amendment to the Loan and Security Agreement with East West Bank to enter into a Term Loan (the “Term Loan”) for $6.0 million.  The $6.0 million will bear interest at a floating rate equal to the U.S. Prime Rate plus 1.0%. The Term Loan is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems.  Interest shall accrue from the date the Term Loan is made at the aforementioned rate and shall be payable monthly.  The Term Loan shall be repaid in 36 equal monthly installments of principal, plus accrued but unpaid interest, commencing on January 1, 2017 and continuing on the first day of each month thereafter through and including January 1, 2020.  On the Term Loan maturity date, the outstanding principal amount of the Term Loan and all accrued and unpaid interest thereon shall be immediately due and payable.  The Term Loan, once repaid, may not be reborrowed. We must maintain a minimum current ratio, a specified ratio of Total Liabilities to EBITDA and a minimum fixed charge coverage ratio which are as defined in the Term Loan. The Term Loan requires us to pay two annual credit facility fees of $18,750 and legal fee equal to $1,000. The Term Loan agreement required us to use the term loans proceeds and $4.0 million from our cash balances to pay off the two existing Revolving Facilities totaling $10.0 million.  The Term Loan matures on January 1, 2020.

The Revolving Facility includes negative covenants that place restrictions on the Company’s ability to, among other things:  incur additional indebtedness; create liens or other encumbrances on assets; make loans, enter into letters of credit, guarantees, investments and acquisitions; sell or otherwise dispose of assets; cause or permit a change of control; merge or consolidate with another entity; make negative pledges; enter into affiliate transactions; and change the nature of its business materially. Outstanding amounts under the Revolving Facility may be accelerated by notice from East West Bank upon the occurrence and continuance of certain events of default, including without limitation:  payment defaults, breach of covenants beyond applicable grace periods, breach of representations and warranties, bankruptcy and insolvency defaults, and the occurrence of a material adverse effect (as defined).  Acceleration is automatic upon the occurrence of certain bankruptcy and insolvency defaults.

Our debt and related obligations, including interest payments, covenants and restrictions, could have important consequences, including the following:

·reserving cash in order to satisfy the obligations relating to our debt could adversely affect the amount or timing of investments to grow our business, impairing our ability to invest in and successfully grow our business;

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·our existing debt could limit our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, acquisitions, debt obligations and other general corporate requirements;

·our debt may increase our vulnerability to general economic downturns, competition and industry conditions, which could place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore we may be unable to take advantage of opportunities that our leverage prevents us from exploiting; and

·the Revolving Facility imposes restrictions on the manner in which we conduct our business, including restrictions on our ability to pay dividends, incur additional debt and sell assets.

The occurrence of any one of these events could have an adverse effect on our business, financial condition, operating results or cash flows and ability to satisfy our obligations under our indebtedness. Our failure to comply with the covenants under the Revolving Facility could result in an event of default and the acceleration of any debt then outstanding. Any declaration of an event of default could significantly harm our business and prospects and could cause our stock price to decline.  Insufficient funds may require us to delay, scale back, or eliminate some or all of our activities.

Acquisitions present many risks and we may not realize the financial and strategic goals that were contemplated at the time of a transaction.

We recently acquired SSM and we expect to continue making acquisitions or entering into strategic alliances as part of our long-term business strategy.  We cannot be sure that these transactions will ultimately enhance our products or strengthen our competitive position.  These transactions involve significant challenges and risks, including that the transaction does not advance our business strategy, that we get no satisfactory return on our investment, that we have difficulty integrating operations, new technologies, products or employees, or that the transaction distracts management and employees from our other businesses. Furthermore, we may fail to identify or assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring a company or technology, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. The success of these transactions will depend in part on our ability to leverage them to enhance our existing products and services or develop compelling new ones. It may take longer than expected to realize the full benefits from these transactions, such as increased revenue, enhanced efficiencies, or increased market share, or the benefits may ultimately be smaller than we expected. In addition, future acquisitions could result in potentially dilutive issuances of equity securities, the reduction of cash available for operations and the incurrence of debt. The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions.

Our periodic workforce restructurings can be disruptive.

We have in the past restructured our workforce in response to management changes, acquisitions, product changes, performance issues or other considerations. These types of restructurings have resulted in increased restructuring costs and temporary reduced productivity while our staff adjusted to their new roles and responsibilities. There is no certainty that we will achieve the expected cost savings benefits of these restructurings, or do so within the expected timeframe. These effects could recur in connection with future acquisitions and other adjustments to our business and our revenues and other results of operations could be negatively affected.

Our products are complex and have a lengthy implementation process; unanticipated difficulties or delays in the customer acceptance process could result in higher costs and delayed payments.

Implementing our solutions can be a relatively complex and lengthy process since we typically customize these solutions for each customer’s unique environment. Often our customers also require rapid deployment of our software solutions, resulting in pressure on us to meet demanding delivery and implementation schedules. Inability to meet these demanding schedules, or quality issues resulting from accelerated delivery schedules, may result in customer dissatisfaction and/or damage our reputation, which could materially harm our business.

The majority of our existing contracts provide for acceptance testing by the customer, which can be a lengthy process. Unanticipated difficulties or delays in the customer acceptance process could result in higher costs, delayed payments, and deferral of revenue recognition. In addition, if our software contains defects or we otherwise fail to satisfy acceptance criteria within prescribed times, the customer may be entitled to liquidated damages or to cancel its contract and receive a refund of all or a portion of amounts paid or other amounts as damages, which could exceed related contract revenue and which could result in a future charge to earnings. Any failure or delay in achieving final acceptance of our software and services could harm our business, financial condition, results of operations and cash flows.

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The success of our business depends on continued growth in the wireless services industry and growth in demand for connected devices and mobile advertising.

The future success of our business depends upon continued new subscriber growth and growth in demand for connected devices.  If there is a slowdown in subscriber growth in the wireless services industry or the demand for connected devices were to stabilize or decline, our business and results of operations may be adversely affected.

We are a relatively small company with a limited number of products and staff.  Sales fluctuations and employee turnover may adversely affect our business.

We are a relatively small company.  Consequently, compared to larger companies, sales fluctuations could have a greater impact on our revenue and profitability on a quarter-to-quarter and year-to-year basis and a delayed contract could cause our operating results to vary significantly from quarter to quarter and year-to-year.  In addition, as a small company we have limited staff and are heavily reliant on certain key personnel to operate our business. If a key employee were to leave the company it could have a material impact on our business and results of operations as we might not have sufficient depth in our staffing to fill the role that was previously being performed.  A delay in filling the vacated position could put a strain on existing personnel or result in a failure to satisfy our contractual obligations or to effectively implement our internal controls, and materially harm our business.

Because our quarterly and annual operating results are difficult to predict and may fluctuate, the market price for our stock may be volatile.

Our operating results have fluctuated significantly in the past and may continue to fluctuate significantly in the future from quarter-to-quarter and year-to-year. These quarterly and annual fluctuations may result from a number of factors, including:

·the size of new contracts and when we are able to recognize the related revenue;

·our rate of progress under our contracts;

·foreign exchange fluctuations;

·budgeting cycles of our customers;

·changes in the terms and rates related to the renewal of support agreements;

·the mix of products and services sold;

·the timing of third-party contractors’ delivery of software and hardware;

·level and timing of expenses for product development and sales, general and administrative expenses;

·changes in our strategy;

·general economic conditions.

As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful nor do they indicate what our future performance will be.  Furthermore, we base our operating expenses and capital investment budgets on expected sales and revenue and many of our expenses, such as lease expenses and personnel costs, are relatively fixed in the short term. Variations in the rate and timing of conversion of our sales prospects into actual revenue could cause us to plan or budget inaccurately and we may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenue. Any significant shortfall from anticipated levels of demand for our products and services could adversely affect our business, financial condition, results of operations and cash flows and the market price of our common stock.

The market for our service activation products is mature and the markets for our DSA and RLM products are evolving.  The industry in which we compete is subject to rapid technological change and if we do not adapt to rapid technological change, we could lose customers or market share.

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The market for our service activation product is mature.  Customer demand for our DSA and RLM products and enhancements to these products are evolving. Our industry is characterized by rapid technological change, evolving industry standards, changes in carrier requirements and preferences and frequent new service offerings. The introduction of products that incorporate new technologies and the emergence of new industry standards can make existing products obsolete and unmarketable. To compete successfully, we must continue to design, develop and sell enhancements to existing products and new products that provide higher levels of performance and reliability in a timely manner, take advantage of technological advancements and changes in industry standards and respond to new customer requirements. Developing new technologies is complex and time-consuming. It can require long development and testing periods. Significant delays in new releases or significant problems in creating new products or services could adversely affect our revenue.

Our cloud strategy, or Software as a Service (SaaS), and our managed services offerings may not be successful.

We offer some of our products as a SaaS implementation or a managed service and we intend to offer more of our solutions in this manner in the future.  Our cloud and managed services strategies will continue to evolve and we may not be able to compete effectively, generate significant revenues or maintain profitability. Whether we are successful in providing our solutions as cloud solutions or as managed services depends on our execution in a number of areas, which may or may not be within our control, including continuing to innovate and bring to market compelling cloud-based and managed services offerings, continued growth and demand for cloud-based and managed services offerings and ensuring that our  services meet the reliability expectations of our customers and maintain the security of their data.  Our cloud and managed services strategies also may fail to achieve success if other companies offering cloud-based and managed services experience data loss, security breaches or service reliability issues that cause consumers to become less willing to accept cloud-based and managed services in general.

If we are unable to properly supervise our software development staff in India, or if political or other uncertainties interfere, we may be unable to satisfactorily perform our customer contracts.

In 2004, we formed Evolving Systems India, a wholly owned subsidiary of Evolving Systems, Inc. and as a result of our 2015 acquisition of SSM, we acquired two additional Indian subsidiaries. We have experienced a high level of turnover with our Indian development staff as a result of strong competition for technology-based personnel in India. In addition, salary levels in India are steadily increasing, reducing the competitive advantages associated with offshore labor. If we are unable to effectively manage the Evolving Systems India development staff and/or we continue to experience high levels of staff turnover, we may fail to provide quality software in a timely fashion, which could negatively affect our ability to satisfy our customer contracts. Furthermore, political changes and uncertainties in India could negatively impact the business climate there.  As a result, we may be unable to satisfactorily perform our customer contracts and our business, financial condition and results of operations could be materially harmed.

Changes or challenges to the regulations of the communication industry could hurt the market for our products and services.

Our customers may require, or we may find it necessary or advisable, to modify our products or services to address actual or anticipated changes in regulations affecting our customers. This could materially harm our business, financial condition, results of operations, and cash flows.  We are also subject to numerous regulatory requirements of foreign jurisdictions.  Any compliance failures or changes in such regulations could, likewise, materially harm our business, financial condition, results of operations and cash flows.

Consolidation in the communications industry may impact our financial performance.

The global communications industry has experienced and continues to experience significant consolidation.  These consolidations have caused us to lose customers and may result in fewer potential customers requiring our solutions in the future.  In addition, combining companies may re-evaluate their solutions and their capital expenditures and may choose a competitive solution used by one of the combining companies.  As our customers become larger, they generally have stronger purchasing power, which can result in reduced prices for our products, lower margins on our products and longer sales cycles.  All of these factors can have a negative impact on our financial performance, particularly in any fiscal quarter.

Many of our products and services are sold on a fixed-price basis.  If we incur budget overruns this may reduce our profitability.

A large portion of our revenue currently is, and historically has been, derived from fixed-price contracts and we expect this will continue. These contracts specify certain obligations and deliverables we must meet regardless of the actual costs we incur. Projects done on a fixed-price basis are subject to budget overruns. On occasion, we have experienced budget overruns, resulting in

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lower than anticipated margins. We may incur similar budget overruns in the future, including overruns that result in losses on these contracts. If we incur budget overruns, our margins may be harmed, thereby affecting our overall profitability.

Percentage-of-completion accounting used for most of our projects can result in overstated or understated profits or losses.

The revenue for most of our contracts is accounted for on the percentage-of-completion method of accounting.  This method of accounting requires us to calculate revenue and profits to be recognized in each reporting period for each project based on our predictions of future outcomes, including our estimates of the total cost to complete the project, project schedule and completion date, the percentage of the project that is completed and the amounts of any probable unapproved change orders.  Our failure to accurately estimate these often subjective factors could result in reduced profits or losses for certain contracts.

The communications industry is highly competitive and if our products do not satisfy customer demand for performance or price, our customers could purchase products and services from our competitors.

Our primary markets are intensely competitive and we face continuous demand for improved product performance, new product features and reduced prices, as well as intense pressure to accelerate the release of new products and product enhancements. Our existing and potential competitors include many large domestic and international companies, including some competitors that have substantially greater resources, larger installed customer bases and longer-standing relationships with customers than we do. In addition, some network equipment manufacturers’ next generation solutions address some of the benefits provided by our DSA solution.

Customers also may offer competitive products or services in the future since customers who have purchased solutions from us are not precluded from competing with us. Many telecommunications companies have large internal development organizations, which develop software solutions and provide services similar to the products and services we provide.

We believe that our ability to compete successfully depends on numerous factors, including the quality and price competitiveness of our products and services compared to those of our competitors, the emergence of new industry standards and technical innovations and our ability to respond to those changes. Some of these factors are within our control, and others are not. A variety of potential actions by our competitors, including a reduction of product prices or increased marketing and promotion, accelerated introduction of new or enhanced products, or cooperative relationships among competitors and their strategic partners, could negatively impact the sales of our products and we may have to reduce the prices we charge for our products.  Revenue and operating margins may consequently decline. We may not be able to compete successfully with existing or new competitors or to properly identify and address the demands of new markets. This is particularly true in new markets where standards are not yet established. Our failure to adapt to emerging market demands, respond to regulatory and technological changes or compete successfully with existing and new competitors would materially harm our business, financial condition, results of operations and cash flows.

Our business depends largely on our ability to attract and retain talented employees.

Our business is based on successfully attracting and retaining talented employees and the market for skilled workers in our industry is very competitive. We may not be able to retain personnel or to hire additional personnel on a timely basis, if at all. Because of the complexity of our software solutions, a significant time lag exists between the hiring date of technical and sales personnel and the time when they become fully productive. We have at times experienced high employee turnover and difficulty in recruiting and retaining technical personnel. Our failure to retain personnel or to hire qualified personnel on a timely basis could adversely affect our business by impacting our ability to develop new products, to complete our projects and secure new contracts.

Our products are complex and may have errors that are not detected until deployment.  Resolving warranty and product liability claims could be expensive and could negatively affect our reputation and profitability.

The provisions of our agreements with our customers are designed to limit our exposure to potential liability for damages arising out of the use of, or defects in, our products, which vary from customer to customer. It is possible that the nature of the damages is not subject to limitations or that these limitations of liability provisions are not effective. Although we carry errors and omissions insurance, to the extent that any successful product liability claim is not covered by our errors and omissions insurance or exceeds the coverage under our policy, we may be required to pay for a claim. This could be expensive, particularly since our software products may be used in critical business applications. As we may subcontract the development of deliverables under customer contracts, we could also be required to indemnify customers for work performed by our subcontractors. We may be able to recover from a subcontractor the amounts we are required to pay to customers due to the subcontractor’s failure to perform but there is no guarantee that we will be able to do so.  Defending against a product liability claim, regardless of its merits, could be expensive and

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require the time and attention of key management personnel, either of which could materially harm our business, financial condition and results of operations. In addition, our business reputation could be harmed by product liability claims, regardless of their merit or the eventual outcome of these claims.

Our business practices with respect to handling personal information or disclosure of confidential information could give rise to liabilities.

During the course of providing our products and services we may collect names, addresses, telephone numbers, credit card data and other personal identification information, or “PII”. This could give rise to potential risks related to data collection and use as regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the handling of personal information become more complex.  We strive to limit the amount of PII we collect and/or store and we have implemented steps designed to protect against unauthorized access to such information but because of the inherent risks and complexities involved in protecting this information, particularly if we store such information in a cloud implementation, the steps we have taken may not be sufficient to prevent the misappropriation or improper disclosure of such PII. In addition, third party vendors that we engage to perform services for us may unintentionally release PII or otherwise fail to comply with applicable laws and regulations. Some countries have passed or are considering passing legislation that requires data to remain localized in their boundaries and are also imposing monetary fines for privacy violations.  This imposes financial costs if we are required to implement special operational processes and store data in jurisdictions not of our choosing. Any failure by us to comply with laws and regulations regulating privacy, data security, or consumer protection could result in lost or restricted business, actions or fines brought against us or levied by governmental entities or others, or could adversely affect our business and harm our reputation.

Our measures to protect our intellectual property may not be adequate.

Our success and ability to compete are dependent to a significant degree on our proprietary technology. Protecting our global intellectual property rights is difficult.  We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and protect our proprietary rights. We have 16 patents in the U.S. on elements of our DSA and mobile broadband enablement products and patents pending in other countries on elements of our DSA and IMC products. In addition, we have registered or filed for registration of certain of our trademarks. Our patent portfolio is relatively small and given the cost of obtaining patent protection, we may choose not to patent certain inventions that later become important. There is also the possibility that our means of protecting our proprietary rights may not be adequate; a third party may copy or otherwise obtain and use our products or technology without authorization or may develop similar technology independently or design around our patents. In addition, the laws of some foreign countries may not adequately protect our proprietary rights.

We may not be able to protect our source code from copying if there is an unauthorized disclosure of source code. Source code, the detailed program commands for our software programs, is critical to our business. If a significant portion of our source code leaks, we might lose future trade secret protection for that source code. It may become easier for third parties to compete with our products by copying functionality.

If our intellectual property protection proves inadequate, we may lose our competitive advantage and our future financial results may suffer.

Third parties may claim we are infringing their intellectual property rights, or that we have not complied with their license requirements and we may incur significant expenses in resolving these claims.

It is possible that our business activities may infringe upon the proprietary rights of others, or that other parties may assert infringement claims against us. Those claims may involve patent holding companies or other adverse patent owners who have no relevant product revenue of their own, and against whom our own patents may provide little or no deterrence. We could incur substantial costs in defending against any infringement claim and we could be required to develop non-infringing technology, obtain licenses, or to cease selling the applications that contain the infringing intellectual property. Adverse publicity related to any intellectual property litigation also could harm the sale of our products and damage our competitive position.

Certain software we develop or use may include so called “open source” software made available under a license which may impose obligations on us in the event we distribute derivative works based on the open source software.  Certain licenses impose obligations that could require us to make source code for a derivative work available to the public or license the derivative work under a particular type of open source software license, rather than the license terms we customarily use to protect our software.

There is little or no legal precedent for interpreting the terms of certain of these open source licenses, including the terms addressing the extent to which software incorporating open source software may be considered a derivative work subject to these licenses.  We believe we have complied with our obligations under the various applicable open source licenses.  However, if the

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owner of any open source software were to successfully establish that we had not complied with the terms of an open source license for a particular product that includes such open source software, we may be forced to release the source code for that derivative work to the public or cease distribution of that work.

Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position.

Increased sophistication and activities of perpetrators of cyber-attacks have resulted in an increase in information security risks in recent years. Hackers develop and deploy viruses, worms, and other malicious software programs that attack products and services and gain access to networks and data centers. A substantial portion of our software development and customer support is provided out of our India facility, which may be subject to increased risk of power loss, telecommunications failure, terrorist attacks and similar events. If we were to experience difficulties maintaining existing systems or implementing new systems, we could incur significant losses due to disruptions in our operations. Additionally, these systems contain valuable proprietary and confidential information and may contain personal data of our customers’ subscribers and a security breach could result in disruptions of our internal systems and business applications, impairment of our ability to provide services to our customers, product development delays, harm to our competitive position from the compromise of confidential business information, or subject us to liability under laws that protect personal data. Although we believe that we have robust information security procedures and other safeguards in place, many of our services do not have fully redundant systems or a formal disaster recovery plan, and we may not have adequate business interruption insurance to compensate us for losses that occur from a system outage. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.  Any of these consequences would adversely affect our revenue and margins.

Disruptions from terrorist activities, geopolitical conditions or military actions may disrupt our business.

The continued threat of terrorism within the U.S. and throughout the world and acts of war may cause significant disruption to commerce throughout the world. Abrupt political changes and armed conflict pose a risk of economic disruption in affected countries, which may increase our operating costs and add uncertainty to the timing and budget for technology investment decisions by our customers. Our business and results of operations could be materially and adversely affected to the extent that such disruptions result in delays or cancellations of customer orders, delays in collecting cash, a general decrease in corporate spending on information technology, or our inability to effectively market, manufacture or ship our products. We are unable to predict whether war, political unrest and the threat of terrorism will result in any long-term commercial disruptions or if such activities will have any long-term material adverse effect on our business, results of operations, financial condition or cash flows.

We face risks associated with doing business through local partners.

In some countries, because of local customs and regulations or for language reasons, we do business with our customers through local partners who resell our products and services, with or without value-added services.  This can cause delays in closing contracts because of the increased complexity of having another party involved in negotiations.  In addition, where the local partner provides additional software, hardware and/or services to the end-user customer, our products and services may only be a small portion of the total solution.  As a result, payments made to us, as well as conditions surrounding acceptance, may be impacted by factors that are out of our control.  There may also be delays in getting payments made by the end-user customer through the reseller.  We have experienced delays in closing contracts through partners and collecting from resellers and this situation may arise again in the future, negatively impacting our cash flows.  Doing business through local partners may also increase our risks under anti-bribery regulations, discussed below.

Our international operations subject us to potential liability under anti-corruption laws and regulations.

Our international business operations are subject to the Foreign Corrupt Practices Act (“FCPA”), which generally prohibits U.S. companies and their intermediaries from paying or offering anything of value to foreign government officials for the purpose of obtaining or keeping business, or otherwise receiving discretionary favorable treatment of any kind.  To the extent we do business through Evolving Systems UK, we are also subject to the U.K. Bribery Act of 2010.  In addition, many countries in which we do business have their own anti-bribery rules and regulations. Under these regulations, we may be held liable for actions taken by our local partners and agents, even if such parties act without our knowledge.  Any determination that we have violated the FCPA or the Bribery Act of 2010 (whether directly or through acts of others, intentionally or through inadvertence) or other anti-bribery legislation could result in sanctions that could have a material adverse effect on our business.  While we have procedures and controls in place to monitor compliance, situations outside of our control may arise that could potentially put us in violation of anti-bribery legislation inadvertently and thus negatively impact our business.

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Sales of large blocks of our stock may result in the reduction in the market price of our stock and make it more difficult to raise funds in the future.

If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. The perception among investors that such sales will occur could also produce this effect. We currently have several stockholders who own large percentages of our stock. To the extent we continue to have one or more stockholders who own a large percentage of our stock and those stockholders chose to liquidate their holdings, it may have a dramatic impact on the market price of our stock. These factors also could make it more difficult to raise funds through future offerings of common stock.

As a result of operating as a smaller public company, we may experience challenges in complying with rules and regulations of federal, state and financial market exchange entities, and our management is required to devote substantial time to comply with new and ongoing regulatory initiatives.

Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded.  These entities, including the Public Company Accounting Oversight Board, the SEC and NASDAQ, have issued requirements and regulations and continue to adopt additional regulations and requirements in response to laws enacted by Congress.  Establishment of effective internal controls is further complicated because we are a relatively small company with global operations, and multiple locations and IT systems.  Our management and other personnel have, and will continue to devote a substantial amount of time to these compliance initiatives.

Changes in, or interpretations of, accounting principles or tax rules and regulations, could adversely affect our results of operations.

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). It is possible that future requirements could change our current application of U.S. GAAP, resulting in a material adverse impact on our financial positions or results of operation. In addition, our future effective tax rates could be unfavorably affected by changes in tax laws or the interpretation of tax laws or by changes in the valuation of our deferred tax assets and liabilities.  We regularly assess our implementation of applicable accounting principles and the adequacy of our provision for income taxes, but we are a relatively small company and our business is complex; the final determination of any tax authority, upon examination of our income tax returns, could have an adverse effect on our operating results and financial position.

Certain provisions of our charter documents, employment arrangements and Delaware law may discourage, delay or prevent an acquisition of us, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could continue to make it difficult for a third party to acquire us, even if doing so would benefit our stockholders.  In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.  Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.  These provisions include the following:

·our stockholders cannot take action by written consent;

·we have advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at stockholder meetings;

·our stockholders can only remove directors without cause by supermajority vote; and

·our stockholders can only amend our bylaws or certain Board of Directors-related provisions of our amended and restated certificate of incorporation by a supermajority vote.

In addition, we are subject to the anti-takeover provisions of Section 203 of Delaware General Corporation Law, which prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the prescribed manner. The application of Section 203 and certain provisions of our restated certificate of incorporation may have the effect of delaying or preventing changes in control of our management, which could adversely affect the market price of our common stock by discouraging or preventing takeover attempts that might result in the payment of a premium price to our stockholders.

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Our named executive officers have entered into agreements with us that contain a change in control provision. These agreements generally provide for acceleration on vesting of options, 50% upon a change in control (as defined in such agreement) if the executive officer remains employed with the new entity, or 100% in the event the executive officer’s employment is terminated. The acceleration of vesting of options upon a change in control may be viewed as an anti-takeover measure and may have the effect of discouraging a merger proposal, tender offer or other attempt to gain control of us.

Our Amended and Restated Stock Option Plan provides for acceleration of vesting under certain circumstances. Upon certain changes in control of us, vesting on some options awarded to directors may be accelerated. In addition, the successor corporation may assume outstanding stock awards or substitute equivalent stock awards. If the successor corporation refuses to do so, such stock awards will become fully vested and exercisable for a period of 15 days after notice from us but the options will terminate if not exercised during that period. As noted above, the acceleration on vesting of options upon a change in control may be viewed as an anti-takeover measure.

Adverse economic or market conditions may harm our business.

Unsettled financial markets, higher interest rates, inflation, levels of unemployment and worsening economic conditions could adversely affect demand for our products and services as consumers and businesses may postpone spending in response to these conditions.  Challenging economic and market conditions may also result in:

·difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective customers;

·pricing pressure that may adversely affect revenue and gross margin;

·lengthening sales cycles and slowing deployments;

·increased competition for fewer projects and sales opportunities;

·increased risk of charges relating to write off of goodwill and other intangible assets; and

·customer and reseller financial difficulty and greater difficulty collecting accounts receivable.

We may not continue to pay dividends on our common stock, and cash used to pay dividends will not be available for other corporate purposes

In 2015, our Board of Directors declared quarterly dividends of $0.11 per share. The decision to pay dividends in the future will depend on general business conditions, the impact of such payment on our financial condition and other factors our Board of Directors may consider to be relevant.  In addition, our revolving credit facility limits our ability to pay dividends by establishing a maximum amount that can be paid per quarter and prohibiting payment of dividends when an event of default has occurred.  If we elect to pay future dividends, this could reduce our cash reserves to levels that may be inadequate to fund expansions to our business plan or unanticipated contingent liabilities.

Our stock price could become more volatile and your investment could lose value.

All of the factors discussed in this section could affect our stock price. A significant drop in our stock price could also expose us to the risk of securities class actions lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely affect our business.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.     PROPERTIES

We lease office space at various locations which are shown below.

Location	Square Footage	Lease Expiration
Englewood, Colorado (Headquarters)	5,092	11/30/17
Durham, North Carolina	2,860	7/31/18
Bath, England	2,751	9/26/20
London, England	2,200	3/02/20
Bangalore, India	12,300	8/18/18
Kolkata, India	1,575	10/31/18
Kolkata, India	2,708	10/14/18
Kuala Lumpur, Malaysia	1,042	7/14/16
Bucharest, Romania	732	9/30/16

We believe that our facilities are adequate for our current and near-term needs, and that we will be able to locate additional facilities as needed.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, we are involved in various legal matters arising in the normal course of business.  We do not believe that any such matters, either individually or in the aggregate, will have a material impact on our results of operations and financial position.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Capital Market under the symbol “EVOL.”  The following table sets forth the high and low sale prices of our common stock for the periods indicated.

	For the Years Ended December 31,
	2015				2014
	High		Low		High		Low
First Quarter	$	9.45	$	8.01	$	11.11	$	8.42
Second Quarter	$	9.98	$	8.44	$	9.28	$	7.78
Third Quarter	$	9.27	$	5.30	$	10.50	$	8.99
Fourth Quarter	$	6.17	$	5.32	$	11.38	$	8.94

As of March 11, 2016, there were approximately 69 holders of record of our common stock.

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Dividends

Our Board of Directors declared a cash dividend of $0.11 per share during each of the four quarters of 2015.  In 2014, our Board of Directors declared a cash dividend of $0.10 per share during the first and second quarters and a cash dividend of $0.11 per share during the third and fourth quarters. There can be no guarantee that we will continue to pay dividends. The decision to declare dividends in the future will depend on general business conditions, the impact of such payment on our financial condition and other factors our Board of Directors may consider to be relevant. In addition, our revolving credit facility limits our ability to pay dividends by establishing a maximum amount that can be paid per quarter and prohibiting payment of dividends when an event of default has occurred.  Payment of future dividends can also affect our business as this could reduce our cash reserves to levels that may be inadequate to fund expansions to our business plan or unanticipated contingent liabilities.

Stock Performance Graph

The following graph compares the cumulative 5-year total return provided to shareholders on Evolving Systems, Inc.’s common stock relative to the cumulative total returns of the NASDAQ Composite index, the RDG Software Composite index and the DJ US MicroCap Total Stock Market Software index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on 12/31/2010 and its relative performance is tracked through 12/31/2015.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Evolving Systems, Inc., the NASDAQ Composite Index, the RDG Software Composite Index,
and DJ US MicroCap Total Stock Market Software Index

ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data set forth below for each of the years in the five-year period ended December 31, 2015, has been derived from our consolidated financial statements. The following selected financial data should be read in conjunction with “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the consolidated financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K.

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	For the Years Ended December 31,
	2015			2014			2013		2012		2011
	(in thousands, except per share amounts)
Revenue	$	25,576		$	29,680		$	25,093	$	26,247	$	19,023
Costs of Revenue and Operating Expenses:
Cost of revenue, excluding depreciation and amortization	6,449			7,648			7,164		8,236		7,419
Sales and marketing	5,844			5,734			5,364		5,070		6,238
General and administrative	4,003			3,638			3,644		3,613		3,650
Product development	3,847			3,643			2,956		3,069		2,484
Depreciation	314			246			155		268		342
Amortization	266			95			211		400		560
Restructuring and other expense	533			237			558		—		1,100
Income (loss) from operations	4,320			8,439			5,041		5,591		(2,770		)
Interest and other income (expense), net	(109		)	(34		)	39		842		791
Interest and other income, related parties, net	—			—			—		532		619
Income tax expense (benefit)	915			2,797			1,274		1,401		(405		)
Income (loss) from continuing operations	3,296			5,608			3,806		5,564		(955		)
Income from discontinued operations, net of tax (1)	—			—			—		—		33,264
Net income	$	3,296		$	5,608		$	3,806	$	5,564	$	32,309
Basic income per common share - net income	$	0.28		$	0.48		$	0.33	$	0.49	$	2.97
Diluted income per common share - net income	$	0.28		$	0.47		$	0.32	$	0.48	$	2.88
Weighted average basic shares outstanding	11,693			11,642			11,459		11,278		10,871
Weighted average diluted shares outstanding	11,935			11,926			11,756		11,529		11,202
Cash dividend declared per common share (2) (3)	$	0.44		$	0.42		$	0.36	$	2.00	$	2.15
Working capital (4)	$	3,656		$	15,794		$	14,699	$	13,894	$	11,672
Total assets	50,429			44,232			43,184		36,593		75,042
Stockholders’ equity	$	32,162		$	34,052		$	32,735	$	30,836	$	44,712

(1)On July 1, 2011, we completed the Asset Sale of our Numbering Solutions Business for $39.4 million in cash and the assumption of certain liabilities to the buyer. The Asset Sale qualified for treatment as discontinued operations during the second quarter of 2011 upon receipt of shareholder approval at a special meeting of shareholders on June 23, 2011. This divested business is reflected in these consolidated financial statements as discontinued operations and historical information related to the divested business has been reclassified accordingly.

(2)On November 10, 2011, our Board of Directors declared a special cash dividend of $2.00 per share or approximately $22.3 million in total, net of treasury stock, payable on January 3, 2013, to stockholders of record December 12, 2011. The dividend was accrued as of December 31, 2011 for $22.3 million and paid on January 3, 2012. During 2011, our Board of Directors declared and paid a first, second and third quarter cash dividend of $.05 per share each.

(3)During 2012, our Board of Directors declared and paid a first, third and fourth quarter cash dividend of $0.05 per share each and a second and fourth quarter special cash dividend of $1.70 and $0.15 per share, respectively.  There were no accrued dividends as of December 31, 2012.  In addition, the special cash dividend declared in the fourth quarter 2011 of $2.00 per share was paid in January 2012.

(4)On September 30, 2015, we completed the acquisition of SSM for an initial cash payment totaling approximately $9.75 million, plus customary working capital adjustments, and we agreed to make a payment of $250,000 on the one year anniversary of the transaction, with such payment being available to secure SSM’s representations and warranties under the acquisition agreement.  The initial payment was financed through our revolving line of credit, which requires monthly payments of interest, with the unpaid balance due on October 22, 2016.  As this debt is due in twelve months, it reduced our

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working capital as of December 31, 2015 by $10.0 million.  On February 29, 2016, we entered into the Fifth Amendment to the Loan and Security Agreement to enter into a Term Loan for $6.0 million.  Interest shall accrue from the date the Term Loan is made and shall be payable monthly.  The Term Loan shall be repaid in 36 equal monthly installments of principal, plus accrued but unpaid interest, commencing on January 1, 2017 and continuing on the first day of each month thereafter through and including January 1, 2020.  The Term Loan agreement required us to use the term loans proceeds and $4.0 million from our cash balances to pay off the two existing Revolving Facilities totaling $10.0 million.  The Term Loan matures on January 1, 2020.  Due to the Term Loan, our working capital balances will increase in 2016 as a result of paying off the two existing Revolving Facilities totaling $10.0 million.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations 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’ industry, management’s beliefs, and certain assumptions made by management. Forward-looking statements include our expectations regarding product, services, and customer support revenue; our expectations associated with Evolving Systems India, Evolving Systems U.K. and Evolving Systems NC 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. The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in this section and in “Item 1A - Risk Factors.”

OVERVIEW

Evolving Systems, Inc. is a leading provider of software solutions and services to the wireless, wireline and cable markets. We maintain long-standing relationships with many of the largest wireline, wireless and cable companies worldwide. Our customers rely on us to develop, deploy, enhance, maintain and integrate complex, reliable software solutions for a range of Operations Support Systems (“OSS”).  Our activation solution is the leading packaged solution for activation in the wireless industry.

We recognize revenue in accordance with the prescribed accounting standards for software revenue recognition under generally accepted accounting principles. As a result, our license fees and services revenue fluctuate from period to period as a result of the timing of revenue recognition on existing projects.

RECENT DEVELOPMENTS

We reported net income of $3.3 million, $5.6 million and $3.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. Our ending backlog at December 31, 2015 was $12.1 million, consisting of $6.1 million of license and services and $6.0 million of customer support compared to total backlog of $10.6 million at December 31, 2014.

On September 30, 2015 we acquired privately held SSM, now known as Evolving Systems NC, Inc., a provider of real time analytics and marketing solutions to wireless carriers, for an initial payment of approximately $9.75 million and a $0.5 million working capital adjustment.  We also agreed to make a payment on the one year anniversary of the transaction of $250,000, with such payment being available to secure SSM’s representations and warranties in the agreement.  SSM’s software solution platform, RLM, enables carriers’ marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time.  RLM is included as a component of our Mobile Marketing Solutions (“MMS”) product suite in license fees and service revenue and customer support revenue.

We declared and paid a $0.11 cash dividend per share in each of the four quarters of 2015.

We have operations in foreign countries where the local currency is used to prepare the financial statements which are translated into our reporting currency, U.S. dollars. Changes in the exchange rates between these currencies and our reporting currency are partially responsible for some of the changes from period to period in our financial statement amounts. The majority of the changes in 2015 and 2014 are a result of the U.S. dollar strengthening on average versus the British Pound Sterling. The chart below summarizes what the effects on our revenue and expenses would be on a constant currency basis. The constant currency basis assumes that the exchange rate was constant for the periods presented (in thousands).

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	For the Years ended December 31,
	2015 vs. 2014			2014 vs. 2013
Revenue	$	(954	)	$	404
Costs of revenue and operating expenses	(1,219		)	460
Operating gain (loss)	$	265		$	(56	)

The net effect of our foreign currency translations for the year ended December 31, 2015 was a $1.0 million decrease in revenue and a $1.2 million decrease in operating expenses versus the year ended December 31, 2014. The net effect of our foreign currency translations for the year ended December 31, 2014 was a $0.4 million increase in revenue and a $0.5 million increase in operating expenses versus the year ended December 31, 2013 due to a weaker U.S. dollar on average during the year 2014.

RESULTS OF OPERATIONS

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

	For the Years Ended December 31,									For the Years Ended December 31,
	2015			2014			Change			2014			2013			Change
REVENUE
License fees and services	$	15,584		$	19,738		$	(4,154	)	$	19,738		$	15,998		$	3,740
Customer support	9,992			9,942			50			9,942			9,095			847
Total revenue	25,576			29,680			(4,104		)	29,680			25,093			4,587
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of license fees and services, excluding depreciation and amortization	4,881			5,782			(901		)	5,782			5,565			217
Costs of customer support, excluding depreciation and amortization	1,568			1,866			(298		)	1,866			1,599			267
Sales and marketing	5,844			5,734			110			5,734			5,364			370
General and administrative	4,003			3,638			365			3,638			3,644			(6		)
Product development	3,847			3,643			204			3,643			2,956			687
Depreciation	314			246			68			246			155			91
Amortization	266			95			171			95			211			(116		)
Restructuring	533			237			296			237			558			(321		)
Total costs of revenue and operating expenses	21,256			21,241			15			21,241			20,052			1,189
Income (loss) from operations	4,320			8,439			(4,119		)	8,439			5,041			3,398
Interest income	18			19			(1		)	19			11			8
Interest expense	(121		)	(17		)	(104		)	(17		)	(20		)	3
Other income (expense)	—			(27		)	27			(27		)	87			(114		)
Foreign currency exchange loss	(6		)	(9		)	3			(9		)	(39		)	30
Other (expense) income, net	(109		)	(34		)	(75		)	(34		)	39			(73		)
Income before income taxes	4,211			8,405			(4,194		)	8,405			5,080			3,325
Income tax expense	915			2,797			(1,882		)	2,797			1,274			1,523
Net income	$	3,296		$	5,608		$	(2,312	)	$	5,608		$	3,806		$	1,802

The following table presents our consolidated statements of operations reflected as a percentage of total revenue.

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	For the Years Ended December 31,
	2015		2014		2013
REVENUE
License fees and services	61	%	67	%	64	%
Customer support	39	%	33	%	36	%
Total revenue	100	%	100	%	100	%
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of license fees and services, excluding depreciation and amortization	19	%	19	%	22	%
Costs of customer support, excluding depreciation and amortization	6	%	6	%	6	%
Sales and marketing	23	%	19	%	21	%
General and administrative	16	%	12	%	15	%
Product development	15	%	12	%	12	%
Depreciation	1	%	1	%	1	%
Amortization	1	%	0	%	1	%
Restructuring and other recovery	2	%	1	%	2	%
Total costs of revenue and operating expenses	83	%	70	%	80	%
Income from operations	17	%	30	%	20	%
Other income (expense)
Interest income	0	%	0	%	0	%
Interest expense	(1	)%	(0	)%	(0	)%
Other (expense) income	—	%	(1	)%	0	%
Foreign currency exchange loss	(0	)%	(0	)%	(0	)%
Other (expense) income, net	(1	)%	(1	)%	0	%
Income before income taxes	16	%	29	%	20	%
Income tax expense	3	%	10	%	5	%
Net income	13	%	19	%	15	%

Revenue

Revenue is comprised of license fees and services and customer support.  License fees and services revenue represent the fees we receive from the licensing of our software products and those services directly related to the delivery of the licensed product as well as integration services, SaaS services and time and materials work.  Customer support revenue includes annual support fees, recurring maintenance fees, minor product upgrades and warranty fees.  Warranty fees are typically bundled with a license sale and the related revenue, based on Vendor Specific Objective Evidence (“VSOE”), is deferred and recognized ratably over the warranty period.

License Fees and Services

License fees and services revenue decreased 21%, or $4.1 million to $15.6 million for the year ended December 31, 2015 compared to $19.7 million for the year ended December 31, 2014.  The decrease in license fee and services revenue is due to less MMS revenue primarily related to decreased First User Activations (“FUAs”) and lower revenue from our Tertio Service Activation (“TSA”) products.

License fees and services revenue increased 23%, or $3.7 million to $19.7 million for the year ended December 31, 2014 compared to $16.0 million for the year ended December 31, 2013.  The increase in license fee and services revenue is due to an increase in DSA revenue primarily related to increased FUAs and revenue generated from Evolving Systems Labs, which we acquired in October 2013.

Customer Support

Customer support revenue increased 1%, or $50,000, to $10.0 million for the year ended December 31, 2015 from $9.9 million for the year ended December 31, 2014.  The increase in customer support revenue is primarily due to the acquisition of Evolving Systems NC in the third quarter of 2015 offset by a decline in our TSA customer support revenue.

Customer support revenue increased 9%, or $0.8 million, to $9.9 million for the year ended December 31, 2014 from $9.1 million for the year ended December 31, 2013.  The increase in customer support revenue is primarily due to an increase in our installed customer base for DSA.

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Costs of Revenue, excluding depreciation and amortization

Costs of revenue consist primarily of personnel costs, facilities costs, the costs of third-party software and all other direct costs associated with these personnel. Costs of revenue, excluding depreciation and amortization were $6.4 million, $7.6 million and $7.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Costs of License Fees and Services, excluding depreciation and amortization

Costs of revenue for license fees and services decreased 16%, or $0.9 million, to $4.9 million for the year ended December 31, 2015 from $5.8 million for the year ended December 31, 2014.  The decrease in costs was primarily the result of lower embedded software expense, fewer service project hours, incentive compensation and travel, all of which resulted from a decline in revenue partially offset by expenses related to Evolving Systems NC, which was acquired on September 30, 2015.  As a percentage of license fees and services revenue, costs of license fees and services, excluding depreciation and amortization, increased to 31% for the year ended December 31, 2015 from 29% for the year ended December 31, 2014.  The increase in costs as a percentage of license fees and services revenue is primarily related to the decreased revenue during the period.

Costs of revenue for license fees and services increased 4%, or $0.2 million, to $5.8 million for the year ended December 31, 2014 from $5.6 million for the year ended December 31, 2013.  The increase in costs was primarily the result of increases in travel, subcontractor and incentive compensation, all of which resulted from revenue growth.  As a percentage of license fees and services revenue, costs of license fees and services, excluding depreciation and amortization, decreased to 29% for the year ended December 31, 2014 from 35% for the year ended December 31, 2013.  The decrease in costs as a percentage of license fees and services revenue is primarily related to the increased revenue during the period.

Costs of Customer Support, excluding depreciation and amortization

Costs of revenue for customer support decreased 16%, or $0.3 million, to $1.6 million for the year ended December 31, 2015 from $1.9 million for the year ended December 31, 2014.  The decrease in costs is related to embedded software maintenance and fewer customer support project hours partially offset by expenses related to Evolving Systems NC. As a percentage of customer support revenue, costs of customer support revenue, excluding depreciation and amortization, decreased to 16% for the year ended December 31, 2015 from 19% for the year ended December 31, 2014. The decrease in costs as a percentage of customer support revenue is due primarily to the aforementioned reduction in costs during the period.

Costs of revenue for customer support increased 17%, or $0.3 million, to $1.9 million for the year ended December 31, 2014 from $1.6 million for the year ended December 31, 2013.  The increase in costs is related to embedded software maintenance and subcontracted support services. As a percentage of customer support revenue, costs of customer support revenue, excluding depreciation and amortization, increased slightly to 19% for the year ended December 31, 2014 from 18% for the year ended December 31, 2013. The increase in costs as a percentage of customer support revenue is due primarily to the aforementioned increase in costs during the period.

Sales and Marketing

Sales and marketing expenses primarily consist of compensation costs, including incentive compensation and commissions, other employee related costs, travel expenses, advertising and occupancy expenses.  Sales and marketing expenses increased 2%, or $0.1 million, to $5.8 million for the year ended December 31, 2015 from $5.7 million for the year ended December 31, 2014.  The increase in costs is primarily related to partner fees and Evolving Systems NC sales and marketing costs, offset by lower travel expenses due to more regional sales representatives.  As a percentage of total revenue, sales and marketing expenses for the year ended December 31, 2015 increased to 23% from 19% for the year ended December 31, 2014.  The increase as a percentage of revenue is due to the aforementioned increased expenses and lower revenue.

Sales and marketing expenses increased 7%, or $0.3 million, to $5.7 million for the year ended December 31, 2014 from $5.4 million for the year ended December 31, 2013.  The increase in costs is primarily related to increased headcount and travel expenses.  As a percentage of total revenue, sales and marketing expenses for the year ended December 31, 2014 decreased to 19% from 21% for the year ended December 31, 2013.  The decrease as a percentage of revenue is due to increased revenue.

General and Administrative

General and administrative expenses consist principally of employee related costs, professional fees and occupancy costs for the following departments: facilities, finance, legal, human resources and executive management.  General and administrative expenses increased 10%, or $0.4 million, to $4.0 million for the year ended December 31, 2015 from $3.6 million for the year ended

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December 31, 2014.  The increase for the year ended December 31, 2015 was due primarily to higher professional fees and additional general and administrative costs relating to the acquisition of Evolving Systems NC offset by lower incentive compensation.  As a percentage of total revenue, general and administrative expenses increased to 16% for the year ended December 31, 2015 from 12% for the year ended December 31, 2014.  The increase in expenses as a percentage of revenue is related to the aforementioned increase of expenses and lower revenue during the period.

General and administrative expenses for each of the years ended December 31, 2014 and 2013, was $3.6 million.  Expenses for the year ended December 31, 2014 were affected primarily by higher incentive compensation but were offset by decreased professional fees.  As a percentage of total revenue, general and administrative expenses decreased to 12% for the year ended December 31, 2014 from 15% for the year ended December 31, 2013.  The decrease in expenses as a percentage of revenue is related to the increased revenue during the period.

Product Development

Product development expenses consist primarily of employee-related costs for product development.  Product development expenses increased 6%, or $0.2 million, to $3.8 million for the year ended December 31, 2015 from $3.6 million for the year ended December 31, 2014.  The increase in costs was related to additional hours spent on research and development projects and Evolving Systems NC product development expenses offset by lower incentive compensation.  As a percentage of total revenue, product development expenses increased to 15% for the year ended December 31, 2015 from 12% for the year ended December 31, 2014.  The increase in expenses as a percentage of revenue is related to the aforementioned increase of expenses and lower revenue during the period.

Product development expenses increased 23%, or $0.6 million, to $3.6 million for the year ended December 31, 2014 from $3.0 million for the year ended December 31, 2013.  The increase in costs was related to additional hours spent on research and development projects and higher incentive compensation.  As a percentage of total revenue, product development expenses were 12% for the years ended December 31, 2014 and 2013.

Depreciation

Depreciation expense consists of depreciation of long-lived property and equipment.  Depreciation expenses increased 28%, or $0.1 million, to $0.3 million for the year ended December 31, 2015 from $0.2 million for the year ended December 31, 2014.  The increase of expense was due to capital improvements on internal systems in 2015.  As a percentage of revenue, depreciation expense remained at 1% for the years ended December 31, 2015 and 2014.

Depreciation expenses were $0.2 million for the years ended December 31, 2014 and 2013.  As a percentage of revenue, depreciation expense remained at 1% for the years ended December 31, 2014 and 2013.

Amortization

Amortization expense consists of amortization of identifiable intangibles related to our acquisitions of Evolving Systems U.K., Evolving Systems Labs and Evolving Systems NC.  Amortization expense increased 180%, to $0.3 million for the year ended December 31, 2015 from $0.1 million for the year ended December 31, 2014.  The increase in amortization expense was due to intangible assets relating to the acquisition of Evolving Systems NC on September 30, 2015.  As a percentage of revenue, amortization expense increased to 1% for the year ended December 31, 2015 from less than 1% for the year ended December 31, 2014.  The increase of amortization expense as a percentage of total revenue is due to the aforementioned increase of expense.

Amortization expense decreased 55%, to $0.1 million for the year ended December 31, 2014 from $0.2 million for the year ended December 31, 2013.  The decrease in amortization expense was due to intangible assets relating to the acquisition of Evolving Systems U.K. becoming fully amortized as of June 30, 2013.  As a percentage of revenue, amortization expense decreased to less than 1% for the year ended December 31, 2014 from 1% for the year ended December 31, 2013.  The decrease of amortization expense as a percentage of total revenue is due increased revenue and to the aforementioned decrease of expense.

Restructuring

Restructuring expense includes the costs associated with a reduction in workforce involving the termination of employees.  Restructuring increased to $0.5 million for the year ended December 31, 2015 from $0.2 million for the year ended December 31, 2014.  Restructuring expense for the year ended December 31, 2015 related to the acquisition of Evolving Systems NC and for the year ended December 31, 2014 was a result of the acquisition of Evolving Systems, Labs.  As a percentage of revenue, restructuring expense increased to 2% for the year ended December 31, 2015 from 1% for the year ended December 31, 2014.  The increase of restructuring expense as a percentage of total revenue is due the aforementioned increase of expense and lower revenue.

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Restructuring decreased to $0.2 million for the year ended December 31, 2014 from $0.6 million for the year ended December 31, 2013.  Restructuring expense for both years was a result of the acquisition of Evolving Systems, Labs.  As a percentage of revenue, restructuring expense decreased to 1% for the year ended December 31, 2014 from 2% for the year ended December 31, 2013.  The decrease of restructuring expense as a percentage of total revenue is due increased revenue and to the aforementioned decrease of expense.

Interest Income

Interest income includes interest income earned on cash, cash equivalents and long-term investments.  Interest income decreased 5%, or $1,000, to $18,000 for the year ended December 31, 2015 from $19,000 for the year ended December 31, 2014.

Interest income increased 73%, or $8,000, to $19,000 for the year ended December 31, 2014 from $11,000 for the year ended December 31, 2013.

Interest Expense

Interest expense includes interest expense on our revolving line of credit and capital lease obligations as well as amortization of debt issuance costs.  Interest expense for the year ended December 31, 2015 increased 612%, or $0.1 million, to $0.1 million as compared to $17,000 for the year ended December 31, 2014.  This increase was due to the interest expense from our revolving line of credit for the initial payment of the acquisition of Evolving Systems NC.  Refer to Note 5, Revolving Line of Credit, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the Revolving Line of Credit.

Interest expense for the year ended December 31, 2014 decreased 15%, or $3,000, to $17,000 as compared to $20,000 for the year ended December 31, 2013.  This decrease was primarily due to the amortized costs related to our Loan and Security Agreement and interest expense from our capital leases.  Refer to Note 5, Revolving Line of Credit, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the Loan and Security Agreement.

Loss on Foreign Exchange Transactions

Loss on foreign exchange transactions consists of realized and unrealized foreign currency transaction gains and losses.  Foreign currency transaction gains and losses result from transactions denominated in a currency other than the functional currency of the respective subsidiary.  The foreign currency transaction loss of $6,000 for the year ended December 31, 2015 compared to a $9,000 loss for the year ended December 31, 2014 resulted in a year over year gain of 33% or $3,000.  The net loss was generated through the re-measurement of certain non-functional currency denominated financial assets and liabilities of our Evolving Systems U.K. and India subsidiaries.

The foreign currency transaction loss of $9,000 for the year ended December 31, 2014 compared to a $39,000 loss for the year ended December 31, 2013 resulted in a year over year decrease of 77% or $30,000.  The net loss was generated through the re-measurement of certain non-functional currency denominated financial assets and liabilities of our Evolving Systems U.K. and India subsidiaries.

Income Tax Expense

We recorded income tax expense of $0.9 million, $2.8 million and $1.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.  The net expense during year ended December 31, 2015 consisted of current income tax expense of $2.0 million and a net deferred tax benefit of ($1.1) million. The current tax expense consists primarily of income tax from our U.S., U.K. and India based operations and unrecoverable foreign withholding tax in the U.K.  U.S. income taxes payable of $0.8 million were offset due to realization of Net Operating Losses (“NOL”) comprised of windfall tax benefits related to stock-based compensation. Unused windfall tax benefits may not be recorded as an asset on our Consolidated Balance Sheets but are recorded as a reduction to our taxes payable when realized, with a corresponding credit to additional paid in capital.  The deferred tax benefit was related primarily to foreign tax credits incurred for the years 2012 through 2014 which we recorded as a deferred tax asset in the amount of $3.7 million offset by a partial valuation allowance. Refer to Note 6, Income Taxes, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the foreign tax credit.

The net expense during year ended December 31, 2014 consisted of current income tax expense of $3.1 million and a net deferred tax benefit of ($0.3) million. The current tax expense consists primarily of income tax from our U.S., U.K. and India based operations, Alternative Minimum Tax (“AMT”) and unrecoverable foreign withholding tax in the U.S.  U.S. income taxes payable of $1.4 million were offset due to realization of NOL comprised of windfall tax benefits related to stock-based compensation. Unused windfall tax benefits may not be recorded as an asset on our Consolidated Balance Sheets but are recorded as a reduction to our taxes payable when realized, with a corresponding credit to additional paid in capital.  The deferred tax benefit was related primarily to the

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increase of certain net deferred tax assets in the U.S.  In addition, we had a deferred tax expense from our U.K.-based operations and Evolving Systems Labs related to a decrease in net deferred tax assets including intangible assets.

The net expense during year ended December 31, 2013 consisted of current income tax expense of $1.6 million and a net deferred tax benefit of ($0.3) million. The current tax expense consists primarily of income tax from our U.S., U.K. and India based operations, AMT and unrecoverable foreign withholding tax in the U.S. and U.K.  U.S. income taxes payable of $0.4 million were offset due to realization of NOL comprised of windfall tax benefits related to stock-based compensation. Unused windfall tax benefits may not be recorded as an asset on our Consolidated Balance Sheets but are recorded as a reduction to our taxes payable when realized, with a corresponding credit to additional paid in capital.  The foreign withholding taxes are typically used to offset our income tax liability, but we did not have enough taxable income to utilize the foreign withholding taxes during the year. The deferred tax benefit was related primarily to the increase of certain net deferred tax assets in the U.S. and the utilization of Minimum Alternative Tax (“MAT”) assets in India.  In addition, we had a tax benefit related to intangible assets from our U.K.-based operations and Evolving Systems Labs.

Our effective tax rates for the years ended December 31, 2015, 2014 and 2013 were 22%, 33% and 25%, respectively. The effective tax rate decreased during 2015 due to the aforementioned foreign tax credits and lower profits. The effective tax rate increased in 2014 primarily attributable to higher profits from our U.K. subsidiary.

In conjunction with the acquisition of Evolving Systems Labs in October 2013, we recorded certain identifiable intangible assets of $0.7 million.  These assets are amortizable for both book and tax purposes.  Identifiable intangible assets in the amount of $4.6 million were recorded in conjunction with the acquisition of Evolving Systems NC.  These assets are amortizable for book purposes but not tax purposes.

The Company has the intent and current ability to indefinitely reinvest profits of Evolving Systems India for the year ended December 31, 2015. Undistributed foreign earnings for the year ended December 31, 2015 are approximately $1.0 million. Repatriation to the U.S. in the form of dividend distributions from the India controlled foreign subsidiary would give rise to taxation.

We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.  As of December 31, 2015 and 2014, we had no liability for unrecognized tax benefits.  We do not believe there will be any material changes to our unrecognized tax positions over the next twelve months.

FINANCIAL CONDITION

Our working capital position of $3.7 million at December 31, 2015 reflects a decrease of $12.1 million from our working capital position of $15.8 million at December 31, 2014.  The decrease is primarily related to the $10.0 million borrowed on our short term revolving line of credit to fund the initial payment of the acquisition of Evolving Systems NC and decreases in our accounts receivable and unbilled work-in-progress offset by a decrease in our deferred revenue and tax liabilities.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed operations through cash flows from operations as well as debt and equity transactions.  At December 31, 2015, our principal sources of liquidity were $8.4 million in cash and cash equivalents and $7.7 million in contract receivables, net of allowances.

Net cash provided by (used in) operating activities for the year ended December 31, 2015, 2014 and 2013 was $2.2 million, ($0.4) million and $8.6 million, respectively.  The increase in cash provided by operating activities for the year ended December 31, 2015 was primarily due to a decrease in contract receivables and unbilled work-in-progress partially offset by decreases in accounts payable and accrued liabilities and unearned revenue.

The decrease in cash provided by operating activities for the year ended December 31, 2014 compared to 2013 was primarily due to a decrease in unearned revenue and an increase unbilled work-in-progress and contract receivables.

Net cash used in investing activities was $9.2 million, $0.6 million and $0.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Cash used in investing activities for the year ended December 31, 2015 was related to the acquisition of Evolving Systems NC and purchase of property and equipment.  During 2015, 2014 and 2013, we purchased $0.2 million, $0.6 million and $0.3 million in property and equipment to support operations, respectively.  Historically, capital expenditures have been financed by cash from operating activities.  Refer to Note 2, Acquisition, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the acquisition.

Net cash used in investing activities for the year ended December 31, 2014 was $0.6 million compared to net cash used in the year ended December 31, 2013 of $0.6 million.  The 2014 use of cash related to the purchase of property and equipment.  An initial payment of $0.4 million, net of cash received was paid in 2013 for the acquisition of Evolving Systems Labs.

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Net cash provided by (used in) financing activities was $5.9 million, ($3.2) million and ($3.2) million for the years ended December 31, 2015, 2014 and 2013, respectively.  The net cash provided by financing activities as of December 31, 2015 is due to proceeds from the revolving line of credit of $10.0 million for the initial payment of the acquisition of Evolving Systems NC, $0.8 million in windfall tax benefits from stock-based compensation and $0.3 million in proceeds from the exercise of stock options offset by payments of $5.1 million for dividends.

In 2014, the net cash used in financing activities is due primarily to payments of $4.9 million in dividends offset by a $1.4 million in windfall tax benefits from stock-based compensation and $0.3 million in proceeds from the exercise of stock options. The net cash used in financing activities during 2013 is due to payments of $4.1 million in dividends offset by a $0.4 million in windfall tax benefits from stock-based compensation and $0.5 million in proceeds from the exercise of stock options.

We believe that our current cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, debt extinguishment and capital expenditure requirements for at least the next twelve months. In making this assessment, we considered the following:

·Our cash and cash equivalents balance at December 31, 2015 of $8.4 million;

·Our working capital balance of $3.7 million;

·Our ability to historically generate positive operating cash flows;

·The declaration of our quarterly cash dividends of $0.11 per share during 2015 and the possibility of future dividends;

·Our backlog of approximately $12.1 million, including $6.1 million in license fees and services and $6.0 million in customer support at December 31, 2015; and

·Our planned capital expenditures of less than $1.0 million during 2016.

·The repayment of our Revolving Credit Facility with a long term debt facility.

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 years ended December 31, 2015, 2014 and 2013, the effect of exchange rate changes resulted in a ($0.3) million decrease,  $0.2 million increase and a $0.2 million increase to consolidated cash, respectively.  We do not currently hedge our foreign currency exposure, but we closely monitor the rate changes and may hedge our exposures in the future.

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, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Contractual Obligations and Commercial Commitments

The following summarizes our significant contractual obligations as of December 31, 2015, which are comprised of a capital lease and operating leases (in thousands).

	Payments due by period
	Total		2016		2017		2018		2019		2020
Capital lease	$	7	$	6	$	1	$	—	$	—	$	—
Operating leases	2,019		656		626		438		243		56
Total commitments	$	2,026	$	662	$	627	$	438	$	243	$	56

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are disclosed in Note 1 of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.  The following discussion addresses our most critical accounting policies, which are those that are

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both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.

Revenue Recognition

We recognize revenue when an agreement is signed, the fee is fixed or determinable and collectability is reasonably assured. We recognize revenue from two primary sources: license fees and services, and customer support.  The majority of our license fees and services revenue is generated from fixed-price contracts, which provide for licenses to our software products and services to customize such software to meet our customers’ use.  When the customization services are determined to be essential to the functionality of the delivered software, we recognize revenue using the percentage-of-completion method of accounting. In these types of arrangements, we do not typically have vendor specific objective evidence (“VSOE”) of fair value on the license fee/services portion (services are related to customizing the software) of the arrangement due to the large amount of customization required by our customers; however, we do have VSOE for the warranty/maintenance services based on the renewal rate of the first year of maintenance in the arrangement. The license/services portion is recognized using the percentage-of-completion method of accounting and the warranty/maintenance services are separated based on the renewal rate in the contract and recognized ratably over the warranty or maintenance period. We estimate the percentage-of-completion for each contract based on the ratio of direct labor hours incurred to total estimated direct labor hours and recognize revenue based on the percent complete multiplied by the contract amount allocated to the license fee/services.  Since estimated direct labor hours, and changes thereto, can have a significant impact on revenue recognition, these estimates are critical and we review them regularly. If the arrangement includes a customer acceptance provision, the hours to complete the acceptance testing are included in the total estimated direct labor hours; therefore, the related revenue is recognized as the acceptance testing is performed. Revenue is not recognized in full until the customer has provided proof of acceptance on the arrangement.  Generally, our contracts are accounted for individually. However, when certain criteria are met, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. We record amounts billed in advance of services being performed as unearned revenue. Unbilled work-in-progress represents revenue earned but not yet billable under the terms of the fixed-price contracts. All such amounts are expected to be billed and collected within 12 months.

We may encounter budget and schedule overruns on fixed-price contracts caused by increased labor or overhead costs. We make adjustments to cost estimates in the period in which the facts requiring such revisions become known. We record estimated losses, if any, in the period in which current estimates of total contract revenue and contract costs indicate a loss. If revisions to cost estimates are obtained after the balance sheet date but before the issuance of the interim or annual financial statements, we make adjustments to the interim or annual financial statements accordingly.

In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when a license agreement has been signed, delivery and acceptance have occurred, the fee is fixed or determinable and collectability is reasonably assured. Where applicable, we unbundle and record as revenue fees from multiple element arrangements as the elements are delivered to the extent that VSOE of fair value of the undelivered elements exist. If VSOE for the undelivered elements does not exist, we defer fees from such arrangements until the earlier of the date that VSOE does exist on the undelivered elements or all of the elements have been delivered.

We recognize revenue from fixed-price service contracts using the proportional performance method of accounting, which is similar to the percentage-of-completion method described above. 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 obligation to our customers under such arrangements is fulfilled.

We recognize revenue from our Mobile Data Enablement (“MDE”) contracts based on the number of transactions per month multiplied by a factor based on a unique table for transaction volumes relating to each account at a rate for the particular Tier level attained.

We recognize customer support, including maintenance revenue, ratably over the service contract period. When maintenance is bundled with the original license fee arrangement, its fair value, based upon VSOE, is deferred and recognized during the periods when services are provided.

Allowance for Doubtful Accounts

We make judgments related to our ability to collect outstanding accounts receivable and unbilled work-in-progress. We provide allowances for receivables when their collection becomes doubtful by recording an expense. We determine the allowance based on our assessment of the realization of receivables using historical information and current economic trends, including assessing the probability of collection from customers. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments owed to us, an increase in the allowance for doubtful accounts would be required. We evaluate the

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adequacy of the allowance regularly and make adjustments accordingly. Adjustments to the allowance for doubtful accounts could materially affect our results of operations.

Income Taxes

Significant judgment is required in determining our provision for income taxes. We assess the likelihood that our deferred tax asset will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we establish a valuation allowance. We consider future taxable income projections, historical results and ongoing tax planning strategies in assessing the recoverability of deferred tax assets. However, adjustments could be required in the future if we determine that the amount to be realized is less or greater than the amount that we recorded. Such adjustments, if any, could have a material impact on our results of our operations.

We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.  The Company uses the incremental approach to recognizing excess tax benefits associated with equity compensation.

Goodwill

Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.  Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.

We performed our annual goodwill impairment test as of July 31, 2015, at which time we had $17.0 million of goodwill included in the following reporting units, License and Services (“L&S”) - U.S. of $1.1 million, U.K. of $7.2 million and Customer Support (“CS”) - U.K. of $8.7 million. The fair value of each reporting unit was estimated using both market and income based approaches. Specifically, we incorporated observed market multiple data from selected guideline public companies and values arrived at through the application of discounted cash flow analyses which in turn were based upon our financial projections as of the valuation date. We believe that a market participant would weigh both possibilities without a bias to one or the other. Consequently, we gave equal consideration to both. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. If the carrying value of a reporting unit were to exceed its fair value, we would then compare the fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. If the projected future performance of either of our segments as estimated in the income valuation approach is adjusted downward or is lower than expected in the future, we could be required to record a goodwill impairment charge.  As a result of the first step of the 2015 goodwill impairment analysis, the fair value of each reporting unit exceeded its carrying value.  Therefore the second step was not necessary.

As a result of the acquisition of Evolving Systems NC, Inc., $6.9 million of goodwill was acquired during the period, of which $5.4 million was assigned to the license and service segment and $1.5 million was assigned to the customer support segment.  We will perform a goodwill impairment test of Evolving Systems NC, Inc.’s goodwill during our annual test as of July 31, 2016.

Intangible Assets

Amortizable intangible assets consist primarily of purchased software and licenses, customer contracts and relationships, trademarks and tradenames, and business partnerships acquired in conjunction with our acquisition of Evolving Systems U.K., Evolving Systems Labs and Evolving Systems NC.  These definite life assets are amortized using the straight-line method over their estimated lives.

We assess the impairment of identifiable intangibles if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

If we determine that the carrying value of intangibles and/or long-lived assets may not be recoverable, we compare the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition to the asset’s carrying amount. If an amortizable intangible or long-lived asset is not deemed to be recoverable, we recognize an impairment loss representing the excess of the asset’s carrying value over its estimated fair value.

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Capitalization of Internal Software Development Costs

We expend amounts on product development, particularly for new products and/or for enhancements of existing products. For internal development of software products that are to be licensed by us, we expense the cost of developing software prior to establishing technological feasibility and those costs are capitalized once technological feasibility has been established. Capitalization ceases upon general release of the software. The determination of whether internal software development costs are subject to capitalization is, by its nature, highly subjective and involves significant judgments. This decision could significantly affect earnings during the development period.  Further, once capitalized, the software costs are generally amortized on a straight-line basis over the estimated economic life of the product. The determination of the expected useful life of a product is highly judgmental. Finally, capitalized software costs must be assessed for impairment if facts and circumstances warrant such a review.

We did not capitalize any internal software development costs during the years ended December 31, 2015, 2014, or 2013. In addition, we did not have any capitalized internal software development costs included in our December 31, 2015 and 2014 Consolidated Balance Sheets. We believe that during these periods no material internal software development costs were required to be capitalized. Our conclusion is primarily based on the fact that the feature-rich, pre-integrated, and highly-scalable nature of our products requires that our development efforts include complex design, coding and testing methodologies, which include next generation software languages and development tools. Development projects of this nature carry a high degree of development risk.

Substantially all of our internal software development efforts are of this nature, and therefore, we believe the period between achieving technological feasibility and the general release of the software to operations is so short that any costs incurred during this period are not material.

Stock-based Compensation

We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with employees and directors and record compensation cost for all stock awards granted after January 1, 2006 and awards modified, repurchased, or cancelled after that date. 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.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, we are exposed to certain market risks, including changes in foreign currency exchange rates and interest rates. Uncertainties that are either non-financial or non-quantifiable such as political, economic, tax, other regulatory, or credit risks are not included in the following assessment of market risks.

Interest Rate Risks

Our cash balances are subject to interest rate fluctuations and as a result, interest income amounts may fluctuate from current levels.  As of December 31, 2015 we had $10 million outstanding under our revolving credit facility, which under the facility bears interest at variable rates.

Foreign Currency Risk

We are exposed to fluctuations of the U.S. dollar (our functional currency) against the currencies of our operating subsidiaries. Any increase (decrease) in the value of the U.S. dollar against any foreign currency that is the functional currency of one of our operating subsidiaries will cause the parent company to experience unrealized foreign currency translation losses (gains) with respect to amounts already invested in such foreign currencies.  In addition, we and our operating subsidiaries are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our respective functional currencies, such as revenue and related accounts receivable (including intercompany amounts) that are denominated in a currency other than their own functional currency. Changes in exchange rates with respect to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. In addition, we are exposed to foreign exchange rate fluctuations related to our operating subsidiaries’ monetary assets and liabilities and the financial results of foreign subsidiaries and affiliates when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. We record cumulative translation adjustments in accumulated other comprehensive income (loss) as a separate component of equity. As a result of foreign currency risk, we may experience economic loss and a negative impact on earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations.

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The relationship between the British Pound Sterling, Indian rupee and the U.S. dollar, which is our functional currency, is shown below, per one U.S. dollar:

	December 31,	December 31,
Spot rates:	2015	2014
British pound sterling	0.67495	0.64169
Indian rupee	66.15844	63.13131

	For the Years Ended December 31,
Average rates:	2015	2014	2013
British pound sterling	0.65442	0.60724	0.63921
Indian rupee	64.14862	61.14301	58.62059

At the present time, we do not hedge our foreign currency exposure or use derivative financial instruments that are designed to reduce our long-term exposure to foreign currency exchange risk.  We continually monitor our foreign currency exchange risk and we may consider various options to reduce this risk in the future.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Evolving Systems, Inc.

We have audited the accompanying consolidated balance sheets of Evolving Systems, Inc. (a Delaware corporation, the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Evolving Systems, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Evolving Systems, Inc. as of December 31, 2015, and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

/s/ FRIEDMAN LLP

East Hanover, New Jersey

March 15, 2016

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EVOLVING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share data)

	December 31,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	8,400		$	9,781
Contract receivables, net of allowance for doubtful accounts of $83 and $43 at December 31, 2015 and December 31, 2014, respectively	7,727			9,182
Unbilled work-in-progress, net of allowance of $0 and $306 at December 31, 2015 and December 31, 2014, respectively	4,158			4,995
Prepaid and other current assets	1,459			1,331
Deferred income taxes	—			80
Total current assets	21,744			25,369
Property and equipment, net	560			659
Amortizable intangible assets, net	4,983			608
Goodwill	23,142			17,010
Long-term deferred income taxes	—			586
Total assets	$	50,429		$	44,232
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations	$	5		$	5
Revolving Line of credit	10,000			—
Accounts payable and accrued liabilities	4,429			4,460
Income taxes payable	324			1,227
Unearned revenue	3,330			3,883
Total current liabilities	18,088			9,575
Long-term liabilities:
Capital lease obligations, net of current portion	1			7
Contingent earn-out obligation	178			178
Unearned revenue - Long term	—			420
Total liabilities	18,267			10,180
Commitments and contingencies:
Stockholders’ equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of December 31, 2015 and December 31, 2014	—
Common stock, $0.001 par value; 40,000,000 shares authorized; 11,970,731 shares issued and 11,791,842 outstanding as of December 31, 2015 and 11,843,564 shares issued and 11,664,675 outstanding as of December 31, 2014	12			12
Additional paid-in capital	97,418			96,005
Treasury stock 178,889 shares, at December 31, 2015 and December 31, 2014, at cost	(1,253		)	(1,253		)
Accumulated other comprehensive loss	(5,999		)	(4,534		)
Accumulated deficit	(58,016		)	(56,178		)
Total stockholders’ equity	32,162			34,052
Total liabilities and stockholders’ equity	$	50,429		$	44,232

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

34

EVOLVING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share data)

	For the Years Ended December 31,
	2015			2014			2013
REVENUE
License fees and services	$	15,584		$	19,738		$	15,998
Customer support	9,992			9,942			9,095
Total revenue	25,576			29,680			25,093
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of license fees and services, excluding depreciation and amortization	4,881			5,782			5,565
Costs of customer support, excluding depreciation and amortization	1,568			1,866			1,599
Sales and marketing	5,844			5,734			5,364
General and administrative	4,003			3,638			3,644
Product development	3,847			3,643			2,956
Depreciation	314			246			155
Amortization	266			95			211
Restructuring	533			237			558
Total costs of revenue and operating expenses	21,256			21,241			20,052
Income from operations	4,320			8,439			5,041
Other income (expense)
Interest income	18			19			11
Interest expense	(121		)	(17		)	(20		)
Other (expense) income	—			(27		)	87
Foreign currency exchange loss	(6		)	(9		)	(39		)
Other (expense) income, net	(109		)	(34		)	39
Income before income taxes	4,211			8,405			5,080
Income tax expense	915			2,797			1,274
Net income	$	3,296		$	5,608		$	3,806
Basic income per common share - net income	$	0.28		$	0.48		$	0.33
Diluted income per common share - net income	$	0.28		$	0.47		$	0.32
Cash dividends declared per common share	$	0.44		$	0.42		$	0.36
Weighted average basic shares outstanding	11,693			11,642			11,459
Weighted average diluted shares outstanding	11,935			11,926			11,756

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

35

EVOLVING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	For the Years Ended December 31,
	2015			2014			2013
Net income	$	3,296		$	5,608		$	3,806
Other comprehensive income:
Foreign currency translation gain (loss)	(1,465		)	(1,518		)	281
Comprehensive income	$	1,831		$	4,090		$	4,087

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

36

EVOLVING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

										Accumulated
					Additional					Other						Total
	Common Stock				Paid-in		Treasury			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Income (Loss)			(Deficit)			Equity
Balance at December 31, 2012	11,387,220		$	11	$	91,957	$	(1,253	)	$	(3,297	)	$	(56,582	)	$	30,836
Stock option exercises	123,179		1		487		—			—			—			488
Common Stock issued pursuant to the Employee Stock Purchase Plan	1,582		—		6		—			—			—			6
Stock-based compensation expense	—		—		288		—			—			—			288
Issuance of common stock related to acquisition	71,387		—		741		—			—			—			741
Excess tax benefits from stock-based compensation	—		—		416		—			—			—			416
Restricted stock issuance, net of cancellations	17,250		—		—		—			—			—			—
Common stock cash dividends	—		—		—		—			—			(4,127		)	(4,127		)
Net income	—		—		—		—			—			3,806			3,806
Foreign currency translation adjustment	—		—		—		—			281			—			281
Balance at December 31, 2013	11,600,618		$	12	$	93,895	$	(1,253	)	$	(3,016	)	$	(56,903	)	$	32,735
Stock option exercises	56,186		—		245		—			—			—			245
Common Stock issued pursuant to the Employee Stock Purchase Plan	7,352		—		55		—			—			—			55
Stock-based compensation expense	—		—		401		—			—			—			401
Issuance of common stock related to acquisition	1,832		—		19		—			—			—			19
Excess tax benefits from stock-based compensation	—		—		1,390		—			—			—			1,390
Restricted stock issuance, net of cancellations	(1,313	)	—		—		—			—			—			—
Common stock cash dividends	—		—		—		—			—			(4,883		)	(4,883		)
Net income	—		—		—		—			—			5,608			5,608
Foreign currency translation adjustment	—		—		—		—			(1,518		)	—			(1,518		)
Balance at December 31, 2014	11,664,675		$	12	$	96,005	$	(1,253	)	$	(4,534	)	$	(56,178	)	$	34,052
Stock option exercises	99,897		—		243		—			—			—			243
Common Stock issued pursuant to the Employee Stock Purchase Plan	8,302		—		57		—			—			—			57
Stock-based compensation expense	—		—		317		—			—			—			317
Excess tax benefits from stock-based compensation	—		—		796		—			—			—			796
Restricted stock issuance, net of cancellations	18,968		—		—		—			—			—			—
Common stock cash dividends	—		—		—		—			—			(5,134		)	(5,134		)
Net income	—		—		—		—			—			3,296			3,296
Foreign currency translation adjustment	—		—		—		—			(1,465		)	—			(1,465		)
Balance at December 31, 2015	11,791,842		$	12	$	97,418	$	(1,253	)	$	(5,999	)	$	(58,016	)	$	32,162

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

37

EVOLVING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	2015			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,296		$	5,608		$	3,806
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	314			246			155
Amortization of intangible assets	266			95			211
Amortization of debt issuance costs	14			15			18
Stock based compensation	317			401			288
Unrealized foreign currency transaction losses, net	6			9			39
Provision for doubtful accounts	41			—			—
Provision for unbilled work-in-progress allowance	—			—			114
Benefit from deferred income taxes	(1,123		)	(282		)	(257		)
Change in operating assets and liabilities:
Contract receivables	2,202			(3,398		)	(1,514		)
Unbilled work-in-progress	721			(2,977		)	2,444
Prepaid and other assets	(120		)	(214		)	(28		)
Accounts payable and accrued liabilities	(2,305		)	985			(204		)
Unearned revenue	(1,404		)	(888		)	3,543
Net cash provided by (used in) operating activities	2,225			(400		)	8,615
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(198		)	(588		)	(270		)
Business combinations, net of cash	(9,014		)	—			(412		)
Restricted cash	—			24			53
Net cash used in investing activities	(9,212		)	(564		)	(629		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease payments	(5		)	(8		)	(5		)
Proceeds from revolving line of credit	10,000			—			—
Common stock cash dividends	(5,143		)	(4,883		)	(4,127		)
Excess tax benefits from stock-based compensation	797			1,390			416
Proceeds from the issuance of stock	300			300			494
Net cash provided by (used in) financing activities	5,949			(3,201		)	(3,222		)
Effect of exchange rate changes on cash	(343		)	161			177
Net (decrease) increase in cash and cash equivalents	(1,381		)	(4,004		)	4,941
Cash and cash equivalents at beginning of year	9,781			13,785			8,844
Cash and cash equivalents at end of year	$	8,400		$	9,781		$	13,785
Supplemental disclosure of cash and non-cash investing and financing transactions:
Interest paid	$	107		$	1		$	2
Income taxes paid	2,089			182			69
Common stock dividends declared	5,221			4,966			4,191
Property and equipment purchased and included in accounts payable	1			191			—
Final cash payment related to acquisition	—			—			494
Issuance of common stock related to acquisition	—			19			761
Contingent consideration related to acquisition	—			—			178

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

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EVOLVING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization — We are a provider of software solutions and services to the wireless, wireline and cable markets. We maintain long-standing relationships with many of the largest wireless, wireline and cable companies worldwide. Our customers rely on us to develop, deploy, enhance and maintain software solutions that provide a variety of service activation and provisioning functions.  Our service activation solution, Tertio® (“TSA”) is used to activate bundles of voice, video and data services for wireless, wireline and cable network operators; our SIM card activation solution, Dynamic SIM Allocation TM (“DSA”) is used to dynamically allocate and assign resources to Mobile Network Operators (“MNOs”) devices that rely on SIM cards; our Mobile Data Enablement TM (“MDE”) solution provides a data consumption and policy management solution for wireless carriers and Mobile Virtual Network Operators (“MVNOs”) that monitor the usage and consumption of data services; our Total Number Management™ (“TNM”) product is a scalable and fully automated database solution that enables operators to reliably and efficiently manage their telephone numbers as well as other communication identifiers (i.e. SIMs, MSISDNs, IMSIs, ICCIDs, IPs). Our solutions can be deployed on premise or offered as a Software-as-a-Service (“SaaS”).

On September 30, 2015 we announced the acquisition of privately held RateIntegration, Inc., d/b/a Sixth Sense Media (“SSM”), a provider of real time analytics and marketing solutions to wireless carriers.  SSM’s software solution platform, Real-time Lifecycle Marketing™ (“RLM”), enables carriers’ marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time.

We believe the addition of SSM’s RLM product to our existing service activation and data enablement products will produce a powerful platform for wireless carriers. A product suite which we refer to as our Mobile Marketing Solutions (“MMS”) will provide sophisticated, highly tailored mobile campaigns which can be executed based on critical subscriber data captured during the initial activation experience (DSA and RLM) as well as in-life subscriber usage via MDE.  We see the opportunity to leverage our technology to provide MNOs with sophisticated mobile marketing campaigns that will extend beyond voice, text and data usage campaigns and provide marketing services that will assist MNOs to market services that include retail mobile marketing, gaming, streaming video as well as social media based campaigns.

Business Combination - On September 30, 2015 we acquired SSM, now known as Evolving Systems NC.  This business combination is reflected in these consolidated financial statements since the acquisition date.  Refer to Note 2, Acquisition, for more information regarding the acquisition.

We account for business combinations in accordance with the acquisition method. The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition.  The excess of the purchase price over the fair value of assets acquired is recognized as goodwill. Certain adjustments to the assessed fair values of the assets and liabilities made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income.  Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition.

The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income in periods following a business combination. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on the characteristics of the asset and the availability of information.

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

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 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 estimated hours to complete projects accounted for

39

using the percentage-of-completion method, allowance for doubtful accounts, income tax valuation allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful lives for property, equipment and intangible assets, business combinations, capitalization of internal software development costs and fair value of stock-based compensation amounts.  Actual results could differ from these estimates.

Foreign Currency — Our functional 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 consolidated balance sheets are translated at the spot rate of exchange during the applicable period.  Our 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 income (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 (loss) in the period in which they occur.

Goodwill - Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.  Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. For purposes of the goodwill evaluation, we compare the fair value of each of our reporting units to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, we would then compare the fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying amount over the fair value would be charged to operations as an impairment loss.

Intangible Assets - Amortizable intangible assets consist primarily of purchased software and licenses, customer contracts and relationships, trademarks and tradenames, and business partnerships acquired in conjunction with our purchase of Evolving Systems Labs and Evolving Systems NC.  These assets are amortized using the straight-line method over their estimated lives.

We assess the impairment of identifiable intangibles if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

If we determine that the carrying value of intangibles and/or long-lived assets may not be recoverable, we compare the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition to the asset’s carrying amount. If an amortizable intangible or long-lived asset is not deemed to be recoverable, we recognize an impairment loss representing the excess of the asset’s carrying value over its estimated fair value.

Fair Value Measurements - Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash and Cash Equivalents - All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.

Revenue Recognition - We recognize revenue when an agreement is signed, the fee is fixed or determinable and collectability is reasonably assured. We recognize revenue from two primary sources: license fees and services, and customer support.  The majority of our license fees and services revenue is generated from fixed-price contracts, which provide for licenses to our software products and services to customize such software to meet our customers’ use.  When the customization services are determined to be essential to the functionality of the delivered software, we recognize revenue using the percentage-of-completion method of accounting. In these types of arrangements, we do not typically have vendor specific objective evidence (“VSOE”) of fair value on the license fee/services portion (services are related to customizing the software) of the arrangement due to the large amount of customization required by our customers; however, we do have VSOE for the warranty/maintenance services based on the renewal rate of the first year of maintenance in the arrangement. The license/services portion is recognized using the percentage-of-completion

40

method of accounting and the warranty/maintenance services are separated based on the renewal rate in the contract and recognized ratably over the warranty or maintenance period. We estimate the percentage-of-completion for each contract based on the ratio of direct labor hours incurred to total estimated direct labor hours and recognize revenue based on the percent complete multiplied by the contract amount allocated to the license fee/services.  Since estimated direct labor hours, and changes thereto, can have a significant impact on revenue recognition, these estimates are critical and we review them regularly. If the arrangement includes a customer acceptance provision, the hours to complete the acceptance testing are included in the total estimated direct labor hours; therefore, the related revenue is recognized as the acceptance testing is performed. Revenue is not recognized in full until the customer has provided proof of acceptance on the arrangement.  Generally, our contracts are accounted for individually. However, when certain criteria are met, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. We record amounts billed in advance of services being performed as unearned revenue. Unbilled work-in-progress represents revenue earned but not yet billable under the terms of the fixed-price contracts. All such amounts are expected to be billed and collected within 12 months.

We may encounter budget and schedule overruns on fixed-price contracts caused by increased labor or overhead costs. We make adjustments to cost estimates in the period in which the facts requiring such revisions become known. We record estimated losses, if any, in the period in which current estimates of total contract revenue and contract costs indicate a loss. If revisions to cost estimates are obtained after the balance sheet date but before the issuance of the interim or annual financial statements, we make adjustments to the interim or annual financial statements accordingly.

In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when a license agreement has been signed, delivery and acceptance have occurred, the fee is fixed or determinable and collectability is reasonably assured. Where applicable, we unbundle and record as revenue fees from multiple element arrangements as the elements are delivered to the extent that VSOE of fair value of the undelivered elements exist. If VSOE for the undelivered elements does not exist, we defer fees from such arrangements until the earlier of the date that VSOE does exist on the undelivered elements or all of the elements have been delivered.

We recognize revenue from fixed-price service contracts using the proportional performance method of accounting, which is similar to the percentage-of-completion method described above. 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 obligation to our customers under such arrangements is fulfilled.

We recognize revenue from our MDE contracts based on the number of transactions per month multiplied by a factor based on a unique table for transaction volumes relating to each account.

We recognize customer support, including maintenance revenue, ratably over the service contract period. When maintenance is bundled with the original license fee arrangement, its fair value, based upon VSOE, is deferred and recognized during the periods when services are provided.

Stock-based Compensation - We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with 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.

Comprehensive Income - Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency and unrealized gains and losses on marketable securities categorized as available-for-sale.

Restricted Cash — As of December 31, 2015 we no longer had restricted cash.  As of December 31, 2013, we had $24,000 of restricted cash related to securing a letter of credit for our San Francisco, California lease which has since expired.

Contract Receivables, Unbilled Work-in-Progress and Allowance for Doubtful Accounts — 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.  An allowance is placed against accounts receivable or unbilled work in progress for our best estimate of the amount of probable credit losses. We determine the allowance based on historical write-off experience and information received during collection efforts. We review our allowances monthly and past due balances over 90 days are reviewed individually for collectability.  Account balances are charged

41

against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers.

The following table reflects the activity in the allowance for doubtful accounts:

									Effects of
						Write-Offs			Foreign
		Balance at		Bad Debt		Charged			Currency			Balance at
Fiscal		Beginning		Expense/		to			Exchange			End of
Year	Description	of Period		(Recovery)		Allowance			Rates			Period
2015	Allowance for doubtful accounts	$	43	$	41	$	—		$	(1	)	$	83
2014	Allowance for doubtful accounts	$	73	$	—	$	(25	)	$	(5	)	$	43
2013	Allowance for doubtful accounts	$	70	$	—	$	—		$	3		$	73
The following table reflects the activity in the allowance for unbilled work-in-progress:
				Unbilled					Effects of
				Work-in-		Write-Offs			Foreign
		Balance at		Progress		Charged			Currency			Balance at
Fiscal		Beginning		Allowance/		to			Exchange			End of
Year	Description	of Period		(Recovery)		Allowance			Rates			Period
2015	Allowance for unbilled work-in-progress	$	306	$	—	$	(306	)	$	—		$	—
2014	Allowance for unbilled work-in-progress	$	317	$	—	$	—		$	(11	)	$	306
2013	Allowance for unbilled work-in-progress	$	295	$	114	$	(114	)	$	22		$	317

Long Term Deferred Revenue — Long term deferred revenue are amounts which revenue will not be recognized within twelve months of the balance sheet date.  As of December 31, 2015 and 2014, we had $0 and $0.4 million, respectively, reported in the accompanying consolidated balance sheets.

Concentration of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk consist primarily of contract receivables and unbilled work-in-progress. We perform on-going evaluations of customers’ financial condition and, generally, require no collateral from customers.

A substantial portion of our revenue is from a limited number of customers, all in the telecommunications industry.

For the year ended December 31, 2015, no significant customer exceeded the threshold (defined as contributing at least 10%) of revenue from continuing operations.  For the year ended December 31, 2014, two significant customers accounted for 24% (13% and 11%) of revenue from continuing operations.  These customers are large telecommunications operators in Europe and Mexico. For the year ended December 31, 2013 one significant customer accounted for 12% of revenue from continuing operations.  This customer is a large telecommunications operator in Europe.

As of December 31, 2015, two significant customers accounted for approximately 36% (25% and 11%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa and Europe.  As of December 31, 2014, three significant customers accounted for approximately 55% (26%, 16% and 13%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa, Mexico and Europe.

We are subject to concentration of credit risk with respect to our cash and cash equivalents, which we attempt to minimize by maintaining our cash and cash equivalents with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”).

Our funds not under any FDIC program were $7.3 million and $9.3 million as of December 31, 2015 and 2014, respectively.

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Sales, Use and Other Value Added Tax — Revenue is recorded net of applicable state, use and other value added taxes.

Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred. Advertising costs totaled approximately $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013.

Capitalization of Internal Software Development Costs — We expend amounts on product development, particularly for new products and/or for enhancements of existing products. For internal development of software products that are to be licensed by us, we expense the cost of developing software prior to establishing technological feasibility and those costs are capitalized once technological feasibility has been established. Capitalization ceases upon general release of the software. The determination of whether internal software development costs are subject to capitalization is, by its nature, highly subjective and involves significant judgments. This decision could significantly affect earnings during the development period.  Further, once capitalized, the software costs are generally amortized on a straight-line basis over the estimated economic life of the product. The determination of the expected useful life of a product is highly judgmental. Finally, capitalized software costs must be assessed for impairment if facts and circumstances warrant such a review. We did not capitalize any internal software development costs during the three years ended December 31, 2015. In addition, we did not have any capitalized internal software development costs included in our December 31, 2015 and 2014 Consolidated Balance Sheets. We believe that during these periods no material internal software development costs were required to be capitalized. Our conclusion is primarily based on the fact that the feature-rich, pre-integrated, and highly-scalable nature of our products requires that our development efforts include complex design, coding and testing methodologies, which include next generation software languages and development tools. Development projects of this nature carry a high degree of development risk. Substantially all of our internal software development efforts are of this nature, and therefore, we believe the period between achieving technological feasibility and the general release of the software to operations is so short that any costs incurred during this period are not material.

Property and Equipment and Long-Lived Assets — Property and equipment are stated at cost or estimated fair value if acquired in an acquisition, less accumulated depreciation, and are depreciated over their estimated useful lives, or the lease term, if shorter, using the straight-line method. Leasehold improvements are stated at cost, less accumulated amortization, and are amortized over the shorter of the lease term or estimated useful life of the asset. Maintenance and repair costs are expensed as incurred.

We review our long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. We evaluate the recoverability of an asset or asset group by comparing its carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, we recognize an impairment charge as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

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 consolidated balance sheets, as well as operating loss 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 the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

Recent Accounting Pronouncements —In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” Topic 606.  This Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this Update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. This ASU is effective retrospectively for fiscal years, and interim periods within those years beginning after December 15, 2016 for public companies and 2017 for non-public entities, however the FASB has deferred the effective date by one year. We do not expect the adoption of this standard to have a significant impact on the Company’s financial position and results of operations.

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In August 2014, the FASB issued ASU 2014-15 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  Management of public and private companies will be required to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. Management will be required to make this evaluation for both annual and interim reporting periods, if applicable. The standard is effective for annual and interim periods ending after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not expect the adoption of this ASU to impact the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to put most leases on their balance sheets by recognizing a lessee’s rights and obligations, while expenses will continue to be recognized in a similar manner to today’s legacy lease accounting guidance. This ASU could also significantly affect the financial ratios used for external reporting and other purposes, such as debt covenant compliance. This ASU will be effective for us on January 1, 2019, with early adoption permitted. We are currently in the process of assessing the impact of this ASU on our consolidated financial statements.

NOTE 2 — ACQUISITION

On September 30, 2015 we acquired privately held RateIntegration, Inc. d/b/a Sixth Sense Media (“SSM”), now known as Evolving Systems NC for an initial payment of approximately $9.75 million and a $0.5 million working capital adjustment.  We also agreed to make a payment on the one year anniversary of the transaction of $250,000, with such payment being available to secure SSM’s representations and warranties in the agreement.

We accounted for this business combination by applying the acquisition method, and accordingly, the purchase price was allocated to the assets and liabilities assumed based upon their fair values at the acquisition date. The excess of the purchase price over the net assets and liabilities, approximately $6.9 million, was recorded as goodwill. The Company is in the process of finalizing the purchase allocation, thus the provisional measures of deferred income taxes, intangibles and goodwill are subject to change. The Company expects the purchase price allocation will be finalized in 2016. The results of SSM’s operations have been included in the consolidated financial statements since the acquisition date.

We believe this acquisition complements our activation and SIM management products. Combining SSM’s real-time analytics and campaign capabilities with our DSA and MDE solutions will allow the company to offer global wireless carriers solutions that utilize the highly valuable contextual data captured from the subscribers’ initial welcome experience via DSA, their network usage via RLM and their on-device app usage via MDE. The combined solutions will create a highly personalized experience that engages subscribers in real time from the first time subscribers power on their new devices right through their day-to-day usage.

Our strategic focus is primarily on the wireless markets in the areas of subscriber activation, SIM card management and activation, self—service mobile applications, data enablement solutions, connected device activation, mobile marketing campaigns, advertising and analytics and management of services.

Total purchase price is summarized as follows (in thousands):

	September 30, 2015
Cash Consideration
Initial Cash Purchase Price	$	9,750
Cash/Working Capital Adjustment	535
Total Cash Consideration	$	10,285
Assumed Liabilities	250
Total purchase price	$	10,535

The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date (in thousands):

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	September 30, 2015
Cash and cash equivalents	$	1,521
Contract receivables	1,057
Unbilled work-in-progress	89
Intangible assets	4,642
Prepaid and other current assets	68
Deferred tax asset	—
Other assets, non-current	32
Total identifiable assets acquired	$	7,409
Accounts payable and accrued liabilities	$	1,506
Deferred tax liability	1,760
Deferred revenue	557
Total identifiable liabilities acquired	$	3,823
Net identifiable assets acquired	3,586
Goodwill	6,949
Net assets acquired	$	10,535

We recorded $4.6 million in intangible assets as of the acquisition date with a weighted-average amortization period of approximately seven years and are amortizing the value of the trade name, technology, non-competition and customer relationships over an estimated useful life of 2, 8, 2 and 7 years, respectively.  We recorded $0.2 million of amortization expense related to the acquired intangible assets was recorded during the period ended December 31, 2015.

The $5.4 million of goodwill was assigned to the license and service segment and $1.5 million was assigned to the customer support segment.  The goodwill recognized is attributed primarily to expected synergies and the assembled workforce of SSM.  As of the date of this report there were no changes in the recognized amounts of goodwill resulting from the acquisition of SSM.

Intangible assets related to the Evolving Systems NC’s acquisition as of December 31, 2015 were as follows (in thousands):

	December 31, 2015
	Gross Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Amortization Period
Purchased software	$	1,679	$	53	$	1,626	8 yrs
Trademarks and tradenames	122		15		107		2 yrs
Non-competition	33		4		29		2 yrs
Customer relationships	2,808		100		2,708		7 yrs
	$	4,642	$	172	$	4,470	7.19 yrs

Evolving Systems NC’s contributed revenue and earnings for the period of October 1, 2015 to December 31, 2015 as follows (in thousands):

Revenue and earnings included in the

Consolidated Statement of Operations from

October 1, 2015 through December 31, 2015

Revenue	$	1,367
Net Income	306

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Pro Forma

The following unaudited pro forma financial information reflects the consolidated results of operations of as if the acquisition of SSM had taken place on January 1, 2015 and 2014. The pro forma information includes adjustments for the amortization of intangible assets. The following unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date (in thousands).

	Year Ended December 31,
	2015		2014
	(unaudited)		(unaudited)
Revenue	$	30,190	$	35,782
Earnings	3,645		5,718

SSM did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.

NOTE 3 — GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by reporting unit were as follows (in thousands):

	License and Services									Customer Support						Total
	U.S.			India			UK			U.S.			UK			Goodwill
Balance as of December 31, 2013	$	1,097		$	—		$	7,532		$	—		$	9,307		$	17,936
Effects of changes in foreign currency exchange rates (1)	—			—			(414		)	—			(512		)	(926		)
Balance as of December 31, 2014	$	1,097		$	—		$	7,118		$	—		$	8,795		$	17,010
Goodwill acquired during the year	5,209			184						1,556						6,949
Acquired goodwill adjusted during the year	(25		)							(7		)				(32		)
Effects of changes in foreign currency exchange rates (1)	—			(0		)	(351		)	—			(434		)	(785		)
Balance as of December 31, 2015	$	6,281		$	184		$	6,767		$	1,549		$	8,361		$	23,142

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(1)Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

We performed our annual goodwill impairment test as of July 31, 2015, which we had $17.0 million of goodwill included the following reporting units, License and Services (“L&S”) — US,  Evolving Systems Labs of $1.1 million and Evolving Systems U.K. of $7.2 million and Customer Support (“CS”) — UK of $8.7 million. The fair value of each reporting unit was estimated using both market and income based approaches. Specifically, we incorporated observed market multiple data from selected guideline public companies and values arrived at through the application of discounted cash flow analyses which in turn were based upon our financial projections as of the valuation date. In our analysis, we weighted the application of discounted cash flow analysis at 70% and observed market multiple data from selected guideline public companies at 30%.  This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. If the carrying value of a reporting unit were to exceed its fair value, we would then be required to perform a second step of the impairment analysis which could lead to goodwill impairment should the carrying amount exceed the fair value.  The excess of carrying amount over fair value would be charged to operations as an impairment loss. If the projected future performance of either of our segments as estimated in the income valuation approach is adjusted downward or is lower than expected in the future, we could be required to record a goodwill impairment charge.  As a result of the first step of the 2015 goodwill impairment analysis, the fair value of each reporting unit exceeded its carrying value.  Therefore the second step was not necessary.  However, a hypothetical decrease of approximately 20% due to lower than estimated future cash flows in the estimated fair value of our L&S-U.S. Evolving Systems Labs, Inc. reporting unit would result in its carrying value exceeding its estimated fair value and therefore require the second step, which could result in impairment for that reporting unit. From July 31, 2015 through the date of this report, no events have occurred that we believe may have impaired goodwill.

As a result of the acquisition of SSM, $6.9 million of goodwill was acquired during the period, of which $5.4 million was assigned to the license and service segment and $1.5 million was assigned to the customer support segment.

We amortized identifiable intangible assets for Evolving Systems Labs and Evolving Systems NC on a straight-line basis over their estimated lives ranging from one to eight years.  As of December 31, 2015 and December 31, 2014, identifiable intangibles were as follows (in thousands):

	December 31, 2015						December 31, 2014						Weighted-
	(2) Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount		Average Amortization Period
Purchased software	$	2,118	$	171	$	1,947	$	439	$	64	$	375	7.3 yrs
Trademarks and tradenames	185		43		142		63		15		48		2.6 yrs
Non-competition	33		4		29		—		—		—		2.0 yrs
Customer relationships	3,024		159		2,865		216		31		185		6.8 yrs
	$	5,360	$	377	$	4,983	$	718	$	110	$	608	6.8 yrs

(2)Changes in intangible values as of December 31, 2015 compared to December 31, 2014 are the direct result of the acquisition of Evolving Systems NC in the third quarter of 2015.

Amortization expense of identifiable intangible assets was $0.3 million, $0.1 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Expected future amortization expense related to identifiable intangibles based on our carrying amount as of December 31, 2015 was as follows (in thousands):

Year ending December 31,
2016	$	783
2017	764
2018	703
2019	693
2020	693
Thereafter	1,347
	$	4,983

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NOTE 4 — BALANCE SHEET COMPONENTS

The components of certain balance sheet line items are as follows (in thousands):

	December 31,
	2015			2014
Property and equipment:
Computer equipment and purchased software	$	4,814		$	4,796
Furniture, fixtures and leasehold improvements	1,155			1,078
	5,969			5,874
Less accumulated depreciation	(5,409		)	(5,215		)
	$	560		$	659

	December 31,
	2015			2014
Assets acquired under capital lease:
Original book value	$	24		$	24
Accumulated amortization	(18		)	(13		)
Net book value	$	6		$	11

Depreciation expense was $0.3 million, $0.2 million and $0.2 million for each of the years ended December 31, 2015, 2014 and 2013, respectively.

Included in computer equipment and purchased software at December 31, 2015 and 2014 are assets under capital lease. Depreciation expense related to assets under capital leases was $5,000, $5,000 and $4,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

	December 31,
	2015		2014
Accounts payable and accrued liabilities:
Accounts payable	$	716	$	729
Accrued liabilities	2,520		2,366
Accrued compensation and related expenses	1,193		1,365
	$	4,429	$	4,460

NOTE 5 — REVOLVING LINE OF CREDIT

On September 28, 2015, we entered into the Third Amendment to the Loan and Security Agreement with East West Bank to increase the current revolving credit facility from $5.0 million to $10.0 million (the “Revolving Facility”).  The additional $5.0 million (“Revolving Line II”) will bear interest at a floating rate equal to the U.S. Prime Rate plus 2.25%; the existing $5.0 million credit facility (“Revolving Line”) will continue to bear interest at the greater of 2.75% or the U.S. Prime Rate minus one half of one percent (0.50%).  The Revolving Facility is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems.  There is no mandated borrowing required against the Revolving Facility.  To take an advance under the Revolving Facility, the Company must have a balance of $4.0 million in cash on deposit with East West Bank, a minimum current ratio and a specified ratio of Total Liabilities to Tangible Net Worth, which are both as defined in the Revolving Facility. The Revolving Facility requires the Company to pay a one-time credit facility fee of $10,000 for extension of Revolving Line II, an annual credit facility fee of $10,000 and monthly payments of interest, with the unpaid balance due on October 22, 2016.

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The Revolving Facility includes negative covenants that place restrictions on the Company’s ability to, among other things:  restrict distributions to its shareholders in the aggregate amount not to exceed $1.8 million in any fiscal quarter, incur additional indebtedness; create liens or other encumbrances on assets; make loans, enter into letters of credit, guarantees, investments and acquisitions; sell or otherwise dispose of assets; cause or permit a change of control; merge or consolidate with another entity; make negative pledges; enter into affiliate transactions; and change the nature of its business materially. Outstanding amounts under the Revolving Facility may be accelerated by notice from East West Bank upon the occurrence and continuance of certain events of default, including without limitation:  payment defaults, breach of covenants beyond applicable grace periods, breach of representations and warranties, bankruptcy and insolvency defaults, and the occurrence of a material adverse effect (as defined).  Acceleration is automatic upon the occurrence of certain bankruptcy and insolvency defaults.

As of December 31, 2015, we are in compliance with the covenants and have borrowed $10.0 million against the Revolving Facility.  The proceeds from the borrowings against the facilities were used for the initial payment for the SSM acquisition agreement on September 30, 2015.

Refer to Note 15, Subsequent Events, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for information regarding the Fifth Amendment to the Loan and Security Agreement with East West Bank.

NOTE 6 - INCOME TAXES

The pre-tax income from continuing operations on which the provision for income taxes was computed is as follows (in thousands):

	For the Years Ended December 31,
	2015			2014			2013
Domestic	$	(2,948	)	$	(1,274	)	$	(1,347	)
Foreign	7,159			9,679			6,427
Total	$	4,211		$	8,405		$	5,080

The expense (benefit) from continuing operations for income taxes consists of the following (in thousands):

	For the Years Ended December 31,
	2015			2014			2013
Current:
Federal	$	789		$	1,468		$	441
Foreign	1,174			1,637			1,015
State	76			(26		)	70
Total current	2,039			3,079			1,526
Deferred:
Federal	(1,023		)	(301		)	(66		)
Foreign	16			19			(178		)
State	(117		)	0			(8		)
Total deferred	(1,124		)	(282		)	(252		)
Total	$	915		$	2,797		$	1,274

As of December 31, 2014, we had federal Net Operating Loss (“NOL”) carryforwards of approximately $2.3 million.  As of December 31, 2015 we had no NOL carryforwards remaining.  As of December 31, 2015 and 2014, we had state NOL’s of approximately $17.4 million and $17.1 million, respectively.  The state NOL carryforwards expire at various times beginning in 2018 and ending in 2033.  In addition, we have research and experimentation credit carryforwards of approximately $0.3 million which may expire in 2018 and Alternative Minimum Tax (“AMT”) credits of $0.8 million which may expire at various times beginning in 2028 and ending in 2034.

In our U.S. Federal income tax returns we historically deducted income taxes paid to various countries. In our 2014 U.S. Federal income tax return we had $2.3 million of NOL carryforwards.  Our income tax calculations have historically been under the regular and AMT regimes found in U.S. tax laws.  The U.S. tax system contains rules to alleviate the burden of double taxation on income generated in foreign countries and subject to tax in such countries.  The U.S. allows for either a deduction or credit of such foreign taxes against U.S. taxable income.  An election to either claim a deduction or credit on such foreign income taxes can be made

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each tax year, independent from elections made in other years.  A credit reduces a company’s actual U.S. income tax on a dollar-for-dollar basis, while a deduction reduces only the company’s income subject to tax.  We made a comparison of our foreign dividends paid by our foreign subsidiary for which we deducted foreign taxes claimed versus claiming a Foreign Tax Credit (“FTC”) on the dividend paid by the foreign subsidiary.  The dividends received were grossed-up with its corresponding foreign taxes.  The U.S. law requires the offset of taxable income with NOL prior to applying the FTC rules.  We determined it was beneficial for the company to gross-up the foreign dividends paid by the foreign subsidiary for the years 2012 through 2014 and make the election to claim a FTC.  By doing so we fully utilized our December 31, 2014, $2.3 million balance of the federal NOL.  As a result, the company has approximately $2.8 million of FTC’s to carryforward into 2015 and subsequent years as a deferred tax asset.  In 2015, our deferred tax asset balance was increased by approximately $0.9 million of FTC’s.

The Company uses the incremental approach to recognizing excess tax benefits associated with equity compensation.  Our $2.3 million of federal NOL’s are primarily windfall excess tax benefit related to stock compensation expense, the benefit of which, if realized, will be an increase to Additional Paid-in Capital (“APIC”) as opposed to a reduction in tax expense.  Due to the aforementioned election to claim a FTC, during the year 2015 $0.8 million of the federal NOL was realized, with a corresponding increase in additional paid-in capital.

Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax assets and liabilities are as follows (in thousands):

	As of December 31,
	2015			2014
Deferred tax assets:
Foreign tax credits carryforwards	$	3,667		$	—
Net operating loss carryforwards - State	540			555
Research and development credits	303			303
Equity compensation	686			661
AMT credit	770			942
Depreciable assets	110			107
Intangibles	—			203
Accrued liabilities and reserves	340			607
Total deferred tax assets	6,416			3,378
Deferred tax liabilities:
Intangibles	(1,512		)	—
Undistributed foreign earnings	(666		)	(897		)
Accrued liabilities and reserves	(23		)	(16		)
Total deferred tax liability	(2,201		)	(913		)
Net deferred tax assets, before valuation allowance	4,215			2,465
Valuation allowance	(4,215		)	(1,799		)
Net deferred tax asset	$	—		$	666
Financial statement classification:
Current deferred tax asset	$	—		$	80
Long-term tax (liability) asset	—			586
	$	—		$	666

In conjunction with the acquisition of Evolving Systems Labs in October 2013, we recorded certain identifiable intangible assets. We established a deferred tax asset of $0.1 million at the acquisition date for the expected difference between what would be expensed for financial reporting purposes and what would be deductible for income tax purposes. In September 2015, we established a deferred tax liability of $1.8 million as a result of the acquisition of Evolving Systems NC. As of December 31, 2015 and 2014, there was a net deferred tax liability of ($1.5) million and a net deferred tax asset of $0.2 million, respectively. This net deferred tax liability will be recognized as the identifiable intangibles are amortized.

We continue to maintain a full valuation allowance on the domestic net deferred tax asset, with the exception of our FTC which has a partial valuation allowance, as we have determined it is more likely than not that we will not realize our domestic deferred

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tax assets. Such assets primarily consist of certain net state operating loss carryforwards, AMT credits and research and development credits.  We assessed the realizability of our domestic deferred tax assets using all available evidence. In particular, we considered both historical results and projections of profitability for the reasonably foreseeable future periods. We are required to reassess our conclusions regarding the realization of our deferred tax assets at each financial reporting date. A future evaluation could result in a conclusion that all or a portion of the valuation allowance is no longer necessary which could have a material impact on our results of operations and financial position.

The benefit for income taxes differs from the amount computed by applying the U.S. federal income tax rate of 34% to income before income taxes as follows (in thousands):

	For the Years Ended December 31,
	2015			2014			2013
U.S. federal income tax expense at statutory rates	$	2,392		$	4,595		$	2,143
State income tax expense, net of federal impact	—			542			46
Foreign Tax Credit	(3,667		)	—			—
Foreign rate differential	(449		)	(1,452		)	(332		)
Foreign deemed dividends	939			1,783			871
Undistributed foreign earnings	(221		)	—			—
Change in valuation allowance	2,415			(1,971		)	(492		)
Research and development expenses	(1,096		)	(867		)	(859		)
Foreign taxes	314			53			93
Section 78 Gross-UP	371			—			—
Permanent differences and other, net	(83		)	114			(196		)
Total tax expense	$	915		$	2,797		$	1,274

The Company recognizes the tax benefit from an uncertain tax position when it determines that it is more likely than not that the position would be sustained upon examination by taxing authorities.

As of December 31, 2015 and 2014, we had no liability for unrecognized tax benefits.  We do not believe there will be any material changes to our unrecognized tax positions over the next twelve months.  Interest and penalties related to income tax liabilities are included as a component of income tax expense (benefit) in the accompanying statements of operations.

Our income taxes payable may be reduced by the AMT tax benefits from employee stock plan awards. We had no net excess tax benefits from employee stock plan awards for the years ended December 31, 2015 and 2014, which would be reflected as an increase to additional paid-in capital.

We conduct business globally and, as a result, Evolving Systems Inc. or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  In the normal course of business, we are subject to examination by taxing authorities throughout the world, namely the United Kingdom, Germany and India.  Although carryovers can always be subject to review by taxing authorities, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.

During 2004, we formed Evolving Systems India, a wholly owned subsidiary of Evolving Systems which is used primarily for product development and customer service and support.  The Company has the intent and current ability to indefinitely reinvest profits of Evolving Systems India for the year ended December 31, 2015. Undistributed foreign earnings for the year ended December 31, 2015 are approximately $1.0 million. Repatriation to the U.S. in the form of dividend distributions from the India controlled foreign subsidiary would give rise to taxation.

Section 382 of the Internal Revenue Code imposes an annual limitation on the amount of certain tax attributes, including NOL and tax credit carryovers, available to be utilized following an “Ownership Change” triggered by a shift of greater than 50% in stock ownership over a three year testing period. We believe that SSM may have had one or more such Ownership Changes prior to its acquisition by Evolving Systems, Inc.  However, the amount of the applicable limitation is not known, and has not been estimated at this time.  Accordingly, because of this uncertainty, the Company has not recorded as part of its initial purchase accounting a deferred tax asset associated with the NOL carryforward of SSM.  We intend to review the ownership history of SSM to determine the utilizable portion of its tax attributes as soon as practicable, and if appropriate, adjust the deferred tax assets and purchase accounting upon the conclusion of its assessment.

Two Indian subsidiaries of SSM, were acquired pursuant to the terms of the Agreement and Plan of Merger dated September 30, 2015.  We have reason to believe there is uncertainty related to the lack of historical US International reporting for

51

these two foreign subsidiaries, and are in the process of determining whether either or both of these subsidiaries are controlled foreign corporations (“CFCs”) within the meaning of the Internal Revenue Code and related Regulations, or if a “check-the-box” election has taken place to effectively treat one or both of these subsidiaries as disregarded entities for US federal tax reporting purposes. The Company is in the process of obtaining pertinent information to assess the degree of uncertainty and to quantify related costs or liabilities.

NOTE 7 - STOCKHOLDERS’ EQUITY

Common Stock Dividends

Our Board of Directors declared a cash dividend of $0.11 per share for each of the four quarters of 2015.  There were no accrued dividends as of December 31, 2015.

Any determination to declare a future quarterly dividend, as well as the amount of any cash dividend which may be declared, will be based on our financial position, earnings, earnings outlook and other relevant factors at that time, including applicable limits under our revolving credit facility or any other credit facility then in effect.

Treasury Stock

Beginning on May 20, 2011, and continuing through December 31, 2013, we had the ability through our stock purchase program to re-purchase our common stock at prevailing market prices either in the open market or through privately negotiated transactions up to $5.0 million.  The size and timing of such purchases, if any, was based on market and business conditions as well as other factors.  We were not obligated to purchase any shares.  The re-purchase program expired on December 31, 2013.

From the inception of the plan through December 31, 2013, we purchased 178,889 shares of our common stock for $1.3 million or an average price of $6.97 per share.

Certain Anti-Takeover Provisions/Agreements with Stockholders

Our restated certificate of incorporation allows the board of directors to issue up to 2,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desired flexibility in connection with possible acquisitions and other corporate purposes could make it more difficult for a third party to acquire a majority of our outstanding voting stock. As of December 31, 2015 and December 31, 2014, no shares of preferred stock were outstanding.

In addition, we are subject to the anti-takeover provisions of Section 203 of Delaware General Corporation Law which prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the prescribed manner. The application of Section 203 may have the effect of delaying or preventing changes in control of our management, which could adversely affect the market price of our common stock by discouraging or preventing takeover attempts that might result in the payment of a premium price to our stockholders.

NOTE 8 — SHARE-BASED COMPENSATION

We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with employees and directors, and record compensation cost for all stock awards granted after January 1, 2006 and awards modified, repurchased, or cancelled after that date, using the modified prospective method. We record compensation costs associated with the vesting of unvested options on a straight-line basis over the vesting period. We recognized $0.3 million, $0.4 million and $0.3 million for the years ended December 31, 2015, 2014 and 2013, respectively, of compensation expense in the consolidated statements of operations, with respect to our stock-based compensation plans.  The following table summarizes stock-based compensation expenses recorded in the statement of operations (in thousands):

	For the Years Ended December 31,
	2015		2014		2013
Cost of license fees and services, excluding depreciation and amortization	$	72	$	73	$	29
Cost of customer support, excluding depreciation and amortization	10		8		4
Sales and marketing	36		31		24
General and administrative	112		181		207
Product development	87		108		24
Total share based compensation	$	317	$	401	$	288

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Stock Option/Incentive Plans

In January 1996, our stockholders approved an Amended and Restated Stock Option Plan (the “Option Plan”).  Under the Option Plan, as amended, 4,175,000 shares were reserved for issuance.  Options issued under the Option Plan were at the discretion of the Board of Directors, including the vesting provisions of each stock option granted. Options were granted with an exercise price equal to the closing price of our common stock on the date of grant, generally vest over four years and expire no more than ten years from the date of grant. The Option Plan terminated on January 18, 2006; options granted before that date were not affected by the plan termination.  At December 31, 2015 and 2014, no options remained and 0.1 million options remained outstanding under the Option Plan, respectively.

In June 2007, our stockholders approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) with a maximum of 1,000,000 shares reserved for issuance. In June 2010, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 1,250,000.  In June 2013, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 1,502,209.  In June 2015, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 2,002,209.  Awards permitted under the 2007 Stock Plan include:  Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards and Other Stock-Based Awards.  Awards issued under the 2007 Stock Plan are at the discretion of the Board of Directors.  As applicable, awards are granted with an exercise price equal to the closing price of our common stock on the date of grant, generally vest over four years for employees and one year for directors and, with respect to stock option grants expire no more than ten years from the date of grant.  At December 31, 2015 and 2014, there were approximately 0.3 million and 0.1 million shares, respectively, available for grant under the 2007 Stock Plan.  Of the shares available as of December 31, 2015, 0.2 million shares were reserved for acquisitions.  At December 31, 2015 and 2014, 0.8 million and 0.6 million options were issued and outstanding under the 2007 Stock Plan, respectively.

During the year ended December 31, 2015 we awarded a total of 20,000 shares of restricted stock to members of our Board of Directors and senior management. No shares of restricted stock were awarded during the year ended December 31, 2014.  During the years ended December 31, 2015 and 2014, approximately 94 and 8,000 shares of restricted stock vested, respectively.  There were forfeitures of approximately 1,000 shares of restricted stock during years ended December 31, 2015 and 2014. The fair market value for stock-based compensation expense is equal to the closing price of our common stock on the date of grant.  The restrictions on the stock award are released generally over four years for senior management and over one year for board members.  Stock-based compensation expense includes $8,000, $0.1 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively for restricted stock.

The weighted-average assumptions used in the fair value calculations are as follows:

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	6.0		5.9		6.1
Risk-free interest rate	1.37	%	1.69	%	1.31	%
Expected volatility	42.01	%	55.88	%	59.17	%
Expected dividend yield	6.4	%	4.0	%	4.1	%

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The following is a summary of stock option activity under the stock option plans for the years ended December 31, 2015 and 2014:

					Weighted-
					Average
			Weighted-		Remaining	Aggregate
	Number of		Average		Contractual	Intrinsic
	Shares		Exercise		Term	Value
	(in thousands)		Price		(Years)	(in thousands)
Options outstanding at December 31, 2013	676		$	5.11	4.76	$	3,491
Options granted	168		$	10.15
Less options forfeited	(132	)	$	12.20
Less options exercised	(82	)	$	5.31
Options outstanding at December 31, 2014	630		$	4.94	5.69	$	2,959
Options granted	331		$	7.13
Less options forfeited	(27	)	$	9.39
Less options exercised	(100	)	$	2.43
Options outstanding at December 31, 2015	834		$	5.97	6.94	$	957
Options exercisable at December 31, 2015	463		$	4.74	5.11	$	954

The following is a summary of stock options outstanding under the plans as of December 31, 2015:

									Stock Options
Stock Options Outstanding									Exercisable
						Weighted Avg.
					Number of	Remaining	Weighted Avg.		Number of	Weighted Avg.
Range of					Shares	Contractual Life	Exercise		Shares	Exercise
Exercise Prices					(in thousands)	(years)	Price		(in thousands)	Price
$	0.01	-	$	1.34	145	2.41	$	0.80	145	$	0.80
$	2.80	-	$	2.86	30	3.19	$	2.84	30	$	2.84
$	3.20	-	$	3.72	86	4.02	$	3.69	86	$	3.70
$	4.09	-	$	5.45	37	6.12	$	4.44	35	$	4.45
$	6.00	-	$	6.63	247	9.31	$	6.09	32	$	6.52
$	7.70	-	$	10.90	289	8.55	$	9.65	135	$	9.73
					834	6.94	$	5.97	463	$	4.74

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 was $1.60, $3.80 and $3.16 respectively.

As of December 31, 2015, there were approximately $0.8 million of total unrecognized compensation costs related to unvested stock options and restricted stock.  These costs are expected to be recognized over a weighted average period of 2.9 years.

The total intrinsic value of stock option exercises for the years ended December 31, 2015, 2014 and 2013 was $0.3 million, $0.4 million and $0.6 million, respectively.  The total fair value of stock awards vested during the years ended December 31, 2015, 2014 and 2013 was $0.3 million, $0.3 million and $0.1 million, respectively.

The deferred income tax benefits from stock options expense related to Evolving Systems U.K. totaled approximately $19,000, $15,000 and $15,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

Cash received from stock option exercises was $0.2 million, $0.2 million and $0.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.

During the year ended December 31, 2014, we had net settlement exercises of stock options, whereby the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market

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price on the date of exercise. Net settlement exercises during the year ended December 31, 2014, resulted in approximately 7,094 shares issued and 26,376 options cancelled in settlement of shares issued.  There were no net settlement exercises during the years ended December 31, 2015 or 2013.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (“ESPP”), we are authorized to issue up to 550,000 shares of our common stock to full-time employees, nearly all of whom are eligible to participate. Under the terms of the ESPP, employees may elect to have up to 15% of their gross compensation withheld through payroll deduction to purchase our common stock, capped at $25,000 annually and no more than 10,000 shares per offering period. The purchase price of the stock is 85% of the lower of the market price at the beginning or end of each three-month participation period. As of December 31, 2015, there were approximately 53,000 shares available for purchase. For the years ended December 31, 2015, 2014 and 2013, we recorded compensation expense of $13,000, $17,000 and $2,000, respectively, associated with grants under the ESPP which includes the fair value of the look-back feature of each grant as well as the 15% discount on the purchase price. This expense fluctuates each period primarily based on the level of employee participation.

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	0.25		0.25		0.25
Risk-free interest rate	0.07	%	0.03	%	0.05	%
Expected volatility	39.58	%	40.92	%	44.36	%
Expected dividend yield	6.3	%	4.5	%	4.0	%

Cash received from employee stock plan purchases was approximately $53,000, $68,000 and $8,000 for the years ended December 31, 2015, 2014 and 2013, respectively.  We issued shares related to the ESPP of approximately 9,000, 9,000 and 1,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

NOTE 9 — BENEFIT PLANS

We have established a defined contribution retirement plan for our employees under section 401(k) of the Internal Revenue Code (the “401(k) Plan”) that is available to all U.S. employees 21 years of age or older with a month of service. Beginning in 2012, we adopted a Safe Harbor 401(k) requiring us to contribute 3% of the employee’s compensation for each eligible employee, regardless of whether the employee chooses to participate in the plan. All employee contributions are fully vested immediately and employer contributions vest over a period of three years.  Evolving Systems U.K. has established a defined contribution pension scheme that is available to all employees in their first full month of employment.  Employees may contribute a percentage of their earnings, the amount of which is dependent upon the age of the employee, not to exceed the maximum statutory contribution amount.  We match 5% of employee contributions.  All contributions are immediately vested in their entirety.

During 2015, 2014 and 2013, we recorded a consolidated expense of $0.4 million, $0.4 million and $0.3 million, under the aforementioned plans, respectively.

NOTE 10 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS 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. The following is the reconciliation of the numerators and denominators of the basic and diluted EPS computations (in thousands except per share data):

	For the Years Ended December, 31
	2015		2014		2013
Basic income per share:
Net income	$	3,296	$	5,608	$	3,806
Basic weighted average shares outstanding	11,693		11,642		11,459
Basic income per share:
Net Income	$	0.28	$	0.48	$	0.33
Diluted income per share:
Net income	$	3,296	$	5,608	$	3,806
Weighted average shares outstanding	11,693		11,642		11,459
Effect of dilutive securities - options	242		284		297
Diluted weighted average shares outstanding	11,935		11,926		11,756
Diluted income per share:
Net Income	$	0.28	$	0.47	$	0.32

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Weighted average options to purchase approximately 0.3 million, 0.1 million and 0.1 million shares of common stock equivalents were excluded from the computation of diluted weighted average shares outstanding for the years ended December 31, 2015, 2014 and 2013, 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.

NOTE 11  — COMMITMENTS AND CONTINGENCIES

(a)Lease Commitments

We lease office and operating facilities and equipment under non-cancelable operating leases. Current facility leases include our headquarters in Englewood, Colorado, Durham, North Carolina, London and Bath, England, Bangalore and Kolkata, India, Kuala Lumpur, Malaysia and Bucharest, Romania.  Rent expense was $0.6 million, $0.6 million and $0.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Rent expense is net of sublease rental income.  There were was no sublease rental income for the years ended December 31, 2015, 2014 and 2013.

Our headquarters facility lease extends for the term through November 30, 2017.  The lease contains a clause that adjusts the lease rate every year. The lease rate increases annually as of December 1. Our London, England facility contains a clause which gives us six months free rent over the five year term. We account for the effect of such escalating lease payments as if the lease rate were consistent over the lease term. Future minimum commitments under non-cancelable operating leases and capital leases gross of sublease payments as of December 31, 2015 are as follows (in thousands):

	Operating Leases		Capital Leases
2016	$	656	$	6
2017	626		1
2018	438		—
2019	243		—
2020	56		—
Total minimum lease payments	$	2,019	7
Less: Amount representing interest			(1		)
Principal balance of capital lease obligations			6
Less: Current portion of capital lease obligations			(5		)
Long-term portion of capital lease obligations			$	1

(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. Accordingly, we did not record any liabilities for these agreements as of December 31, 2015 and 2014.

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We enter into standard indemnification terms with customers and suppliers, as discussed below, in the ordinary course of business.  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 customer 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 if the indemnification to customers results from the subcontractor’s failure to perform. To the extent we are unable to recover damages from a subcontractor, 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 indemnification arising out of subcontractors’ failure to perform. We did not record any liabilities for these agreements as of December 31, 2015 and 2014.

Our standard license agreements contain product warranties that the software will be free of material defects and will operate in accordance with 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 value of the product warranty provisions in the license agreements in place with our customers is minimal.  Accordingly, we did not record any liabilities for these product warranty provisions as of December 31, 2015 and 2014.

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. We have not historically incurred any significant costs related to product indemnification claims. Accordingly, we did not record any liabilities for these indemnification provisions as of December 31, 2015 and 2014.

In connection with our acquisition of Telespree on October 24, 2013, we agreed to make a cash payment of $0.5 million on the one year anniversary of the closing.  This payment was subject to reduction for certain claims and has not been paid to date.  We have made claims against this payment which are currently under dispute.  Once settled the final payment will be released.

(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.

NOTE 12  — 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 Chief Financial Officer decision-makers (“CODM”). These chief operating decision makers review revenue by segment and review overall results of operations.

We currently operate our business as two operating segments based on revenue type:  license fees and services revenue and customer support revenue (as shown on the consolidated statements of operations).  License fees and services (“L&S”) revenue represents the fees received from the license of software products and those services directly related to the delivery of the licensed products, such as fees for custom development, integration services and SaaS service.  Customer support (“CS”) revenue includes 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. Total assets by segment have not been disclosed as the information is not available to the chief operating decision-makers.

Revenue information by segments was as follows (in thousands):

	For the Years Ended December 31,
	2015			2014			2013
Revenue
License fees and services	$	15,584		$	19,738		$	15,998
Customer support	9,992			9,942			9,095
Total revenue	25,576			29,680			25,093
Revenue less costs of revenue, excluding depreciation and amortization
License fees and services	10,703			13,956			10,433
Customer support	8,424			8,076			7,496
	19,127			22,032			17,929
Unallocated Costs
Other operating expenses	13,694			13,015			11,964
Depreciation and amortization	580			341			366
Restructuring	533			237			558
Interest income	(18		)	(19		)	(11		)
Interest expense	121			17			20
Other (expense) income	—			27			(87		)
Foreign currency exchange (gain) loss	6			9			39
Income from operations before income taxes	$	4,211		$	8,405		$	5,080

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Geographic Regions

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 office in Colorado, North Carolina and U.K.-based Evolving Systems U.K. subsidiary.  Additionally, personnel in Bangalore and Kolkata, India, provide software development services to our global operations.  Financial information relating to operations by geographic region is as follows (in thousands):

	For the Year Ended December 31, 2015
	L&S		CS		Total
Revenue
United Kingdom	$	2,191	$	1,765	$	3,956
Other	13,393		8,227		21,620
Total revenues	$	15,584	$	9,992	$	25,576

	For the Year Ended December 31, 2014
	L&S		CS		Total
Revenue
United Kingdom	$	3,551	$	2,017	$	5,568
Nigeria	2,954		473		3,427
Mexico	2,478		722		3,200
Other	10,755		6,730		17,485
Total revenues	$	19,738	$	9,942	$	29,680

	For the Year Ended December 31, 2013
	L&S		CS		Total
Revenue
United Kingdom	$	3,018	$	1,903	$	4,921
Other	12,980		7,192		20,172
Total revenues	$	15,998	$	9,095	$	25,093

	December 31,		December 31,
	2015		2014
Long-lived assets, net
United States	$	13,026	$	1,998
United Kingdom	15,318		16,091
Other	341		188
	$	28,685	$	18,277

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NOTE 13 — RESTRUCTURING

During the fourth quarter of 2015, we undertook a reduction in workforce involving the termination of employees resulting in an expense of $0.5 million primarily related to severance for the affected employees. The reduction in workforce was related to the consolidation of duplicative functions and alignment of staff with ongoing business activity as a result of the acquisition of Evolving Systems NC in the third quarter of 2015.  Restructuring expense of $0.2 million and $0.6 million was recorded for the years ending December 31, 2014 and 2013, respectively, due to severance for a reduction in workforce.  The reduction in workforce was related to the acquisition of Evolving Systems Labs in the fourth quarter of 2013.

As of December 31, 2015, $0.5 million has been paid.  The restructuring liability was $25,000 and $0 as of December 31, 2015 and 2014, respectively.

NOTE 14 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information is as follows (in thousands, except per share data):

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Year Ended December 31, 2015
Total revenue	$	6,660	$	6,071	$	5,773	$	7,072
Less: cost of revenue and operating expenses	5,238		5,130		4,819		6,069
Income from operations	1,422		941		954		1,003
Income before income taxes	1,299		1,093		712		1,107
Net income	$	860	$	780	$	570	$	1,086
Net income per common share:
Basic income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
Diluted income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
Year Ended December 31, 2014
Total revenue	$	6,582	$	7,939	$	7,560	$	7,599
Less: cost of revenue and operating expenses	5,555		5,322		5,241		5,123
Income from operations	1,027		2,617		2,319		2,476
Income before income taxes	929		2,514		2,506		2,456
Net income	$	651	$	1,676	$	1,679	$	1,602
Net income per common share:
Basic income per common share - net income	$	0.06	$	0.14	$	0.14	$	0.14
Diluted income per common share - net income	$	0.05	$	0.14	$	0.14	$	0.13

NOTE 15 — SUBSEQUENT EVENTS

On March 15, 2016, our Board of Directors declared a first quarter cash dividend of $0.11 per share, payable April 1, 2016, to stockholders of record on March 28, 2016.

On January 1, 2016, our Board of Directors adopted a resolution promoting Thomas Thekkethala from President of the Company, to the position of Chief Executive Officer.  Mr. Thekkethala joined the Company on September 30, 2015 in connection with the Company’s acquisition of SSM and serves on the Company’s Board.

Thaddeus Dupper, who has served as the CEO of the Company since 2007, stepped down as the CEO effective January 1, 2016, and will continue to serve as the Company’s non-executive Chairman of the Board. The Company entered into a Consulting Agreement with Mr. Dupper to provide consulting services to the Company on an as-needed basis.  Mr. Dupper will be paid severance in accordance with his employment agreement.

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The Board also promoted Daniel J. Moorhead, Vice President of Finance & Administration to Chief Financial Officer and entered into an employment agreement with Mr. Moorhead.

In February 2016, we undertook a reduction in workforce involving the termination of employees resulting in an expense of approximately $0.6 million primarily related to severance for the affected employees. The reduction in workforce was related to the consolidations of duplicative functions and alignment of staff with ongoing business activity as a result of the acquisition of Evolving Systems NC, Inc. in the third quarter of 2015.

On February 29, 2016, we entered into the Fifth Amendment to the Loan and Security Agreement with East West Bank to enter into a Term Loan (the “Term Loan”) for $6.0 million.  The $6.0 million will bear interest at a floating rate equal to the U.S.A. Prime Rate plus 1.0%. The Term Loan is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems.  Interest shall accrue from the date the Term Loan is made at the aforementioned rate and shall be payable monthly.  The Term Loan shall be repaid in 36 equal monthly installments of principal, plus accrued but unpaid interest, commencing on January 1, 2017 and continuing on the first day of each month thereafter through and including January 1, 2020.  On the Term Loan maturity date, the outstanding principal amount of the Term Loan and all accrued and unpaid interest thereon shall be immediately due and payable.  The Term Loan, once repaid, may not be reborrowed. We must maintain a minimum current ratio, a specified ratio of Total Liabilities to EBITDA and a minimum fixed charge coverage ratio which are as defined in the Term Loan. The Term Loan requires us to pay two annual credit facility fees of $18,750 and legal fee equal to $1,000. The Term Loan agreement required us to use the term loans proceeds and $4.0 million from our cash balances to pay off the two existing Revolving Facilities totaling $10.0 million.  The Term Loan matures on January 1, 2020.  Refer to Note 5, Revolving Line of Credit, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the Loan and Security Agreement.

On March 1, 2016, John Spirtos provided notice to Evolving Systems that he is resigning from the board of directors effective March 4, 2016 and will not stand for election at Evolving Systems’ next annual shareholders’ meeting.  Mr. Spirtos had served on the Company’s Board of Directors since December 2009 and was the Chairman of the Investment and Nominating & Governance Committees and a member of the Audit Committee.  There are no disagreements with the Company.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.     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) and 15d-15(f) 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 Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of such period.

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, we are required to apply 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.

Management’s report on internal control over financial reporting.  Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Under the supervision and with

60

the participation of our management, including our Chief Executive Officer and Vice President, Finance & Administration, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework set forth in the report entitled Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2015.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in internal control over financial reporting.  During the quarter ended December 31, 2015, there was no change in our internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.OTHER INFORMATION

None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Incorporated by reference to the sections of Evolving Systems, Inc. 2015 Proxy Statement, anticipated to be filed within 120 days of December 31, 2015, entitled “Proposal No. 1-Election of Directors,” “Management” and “Information Regarding the Board and Its Committees.”

ITEM 11.EXECUTIVE COMPENSATION

Incorporated by reference to the section of Evolving Systems, Inc. 2015 Proxy Statement, anticipated to be filed within 120 days of December 31, 2015, entitled “Executive Compensation.”

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference to the section of the Evolving Systems, Inc. 2015 Proxy Statement, anticipated to be filed within 120 days of December 31, 2015, entitled “Information Regarding Beneficial Ownership of Principal Stockholders, Directors, and Management.”

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference to the sections of the Evolving Systems, Inc. 2015 Proxy Statement, anticipated to be filed within 120 days of December 31, 2015, entitled “Certain Relationships and Related Transactions” and “Information Regarding the Board and Its Committees.”

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

Incorporated by reference to the section of the Evolving Systems, Inc. 2015 Proxy Statement, anticipated to be filed within 120 days of December 31, 2015, entitled “Proposal No. 3-Ratification of Selection of Independent Registered Public Accounting Firm.”

61

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   The following documents are filed as part of this Annual Report on Form 10-K:

Consolidated Financial Statements.

Consolidated Financial Statement Schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedules or because the required information is provided in the Consolidated Financial Statements or Notes thereto.

EXHIBIT INDEX

Exhibit No.	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.
3.1†	Restated Certificate of Incorporation.
3.1(a)	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 11, 2004 and incorporated herein by reference.
3.1(b)	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.
3.1(c)	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.
3.1(d)	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.
3.1(e)	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.
3.2†	Amended and Restated Bylaws.
3(ii)(1)	Amended and Restated Bylaws of Evolving Systems, Inc., as filed as Exhibit 3(ii) to the Registrant’s Form 8-K filed on July 31, 2014 and incorporated herein by reference.
4.1†	Reference is made to Exhibits 3.1 and 3.2.
4.1 (a)*	James E. King Equity Incentive Plan, as filed as Exhibit 4.1 to the Registrant’s Form S-8 filed March 22, 2007 and incorporated herein by reference.
4.1 (b)	Evolving Systems, Inc. Amended and Restated 2007 Stock Incentive Plan, as filed as Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 30, 2015 and incorporated herein by reference.
4.2†	Specimen stock certificate representing shares of Common Stock.
10.1 *	Form of Indemnification Agreement, entered into by the Registrant and each of its directors and executive officers, as filed as Exhibit 10.2 to the Registrant’s Form 8-K filed on July 31, 2014 and incorporated herein by reference.
10.2† *	Amended and Restated Stock Option Plan.
10.2 (a)	Standstill Agreement between Evolving Systems, Inc. and Karen Singer, Trustee of the Singer Children’s Management Trust, as filed as Exhibit 10.2 to the Registrant’s Form 8-K filed February 27, 2008 and incorporated herein by reference.
10.3† *	Employee Stock Purchase Plan.
10.4	Form of Change in Control Agreement, as filed as Exhibit 10.3 to the Registrant’s Form 8-K filed January 3, 2008 and incorporated herein by reference.
10.5	Letter from Singer Children’s Management Trust, as filed as Exhibit 10.1 to the Registrant’s Form 8-K filed December 14, 2010 and incorporated herein by reference.
10.6†	Software Development Agreement, by and between the Registrant and American Telephone and Telegraph Company, dated as of May 1, 1993. (The division of American Telephone & Telegraph Company responsible for this Agreement has split off from AT&T and is now known as Lucent Technologies, Inc.).
10.7*	Amendment to Management Change in Control Agreement — Thaddeus Dupper, as filed as Exhibit 10.20(a) to the Registrant’s Form 10-Q filed May 11, 2007 and incorporated herein by reference.

62

10.8	Fifth Amendment to Office Building Lease Agreement, as filed as Exhibit 10.21 to the Registrant’s Form 10-Q filed May 11, 2007 and incorporated herein by reference.
10.9	Agreement entered into with Singer Children’s Management Trust, as filed as Exhibit 10.1 to the Company’s Form 8-K filed April 20, 2011 and incorporated herein by reference.
10.10*	Employment Agreement entered into between Evolving Systems, Inc. and Thaddeus Dupper, as filed as Exhibit 99.1 to the Registrant’s Form 8-K filed on May 19, 2011 and incorporated herein by reference.
10.11*	Consulting Agreement between Evolving Systems, Inc. and Anita T. Moseley, as filed as Exhibit 99.1 to the Registrant’s Form 8-K filed on July 1, 2011 and incorporated herein by reference.
10.12	Loan and Security Agreement between Evolving Systems, Inc. and East West Bank, as filed as Exhibit 10.1(a) to the Registrant’s Form 8-K filed on October 25, 2012 and incorporated herein by reference.
10.13	Amendment to Loan and Security Agreement between Evolving Systems, Inc. and East West Bank, as filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on November 6, 2014 and incorporated herein by reference.
10.14	Third Amendment to Loan and Security Agreement between Evolving Systems, Inc. and East West Bank, as filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on September 30, 2015 and incorporated herein by reference.
10.15	Fourth Amendment to Loan and Security Agreement between Evolving Systems, Inc. and East West Bank, as filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on November 10, 2015 and incorporated herein by reference.
10.16*	Employment Agreement dated September 30, 2015, entered into between Evolving Systems, Inc. and Thomas Thekkethala, as filed as Exhibit 10.2 to the Registrant’s Form 8-K filed on September 30, 2015 and incorporated herein by reference.
21(a)	Subsidiaries of the Registrant (filed herewith).
23.1	Consent of Friedman LLP, Independent Registered Public Accounting Firm related to Registration Statements on Forms S-8 (filed herewith).
24.1	Power of Attorney (included on signature page)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
Exhibit 101	The following financial information from the annual report on Form 10-K of Evolving Systems, Inc. for the year ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2015 and 2014 (ii) Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013 (iii) Consolidated Statements of Other Comprehensive Income for the years ended December 31, 2015, 2014 and 2013 (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013 (v) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 and (vi) Notes to the Consolidated Financial Statements.

†Incorporated by reference to the Registrant’s Registration Statement on Form S-1 No. 333-43973.

*Identifies each management contract or compensatory plan or arrangement.

63

SIGNATURES

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.

EVOLVING SYSTEMS, INC.

By:	/s/ THOMAS THEKKETHALA	Chief Executive Officer, President and Director	March 15, 2016
	Thomas Thekkethala

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas Thekkethala, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connections therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title	Date
By:	/s/ THOMAS THEKKETHALA	President and Chief Executive Officer	March 15, 2016
	Thomas Thekkethala	(Principal Executive Officer)
By:	/s/ DANIEL J. MOORHEAD	Chief Financial Officer	March 15, 2016
	Daniel J. Moorhead	(Principal Financial and Accounting Officer)
By:	/s/ THADDEUS DUPPER	Chairman and Director	March 15, 2016
	Thaddeus Dupper
By:	/s/ DAVID J. NICOL	Director	March 15, 2016
	David J. Nicol
By:	/s/ RICHARD R. RAMLALL	Director	March 15, 2016
	Richard R. Ramlall
By:	/s/ DAVID S. OROS	Director	March 15, 2016
	David S. Oros
By:	/s/ JULIAN D. SINGER	Director	March 15, 2016
	Julian D. Singer

64

EX-21.(A)

Exhibit 21(a)

SUBSIDIARIES OF THE REGISTRANT

Evolving Systems Networks India Private Limited

Evolving Systems Holdings Limited (formerly Tertio Telecoms Holdings Limited)

Evolving Systems Limited (formerly Tertio Telecoms Limited)

Evolving Systems GmbH (formerly Tertio Telecoms Limited GmbH)

Evolving Systems Labs, Inc. (formerly Telespree Communications)

Evolving Systems NC, Inc. (formerly RateIntegration, Inc. d/b/a Sixth Sense Media)

RateIntegration Technologies PVT LTD

RateIntegration Software Technologies PVT LTD

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements of Evolving Systems, Inc. on Forms S-8 (File No. 333-205795, File No. 333-191046, File No. 333-167858, File No. 333-144852, and File No. 333-116085) of our report dated March 15, 2016, with respect to the consolidated financial statements of Evolving Systems, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2015.

/s/ FRIEDMAN LLP

East Hanover, New Jersey

March 15, 2016

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Thomas Thekkethala, certify that:

1.I have reviewed this Annual Report on Form 10-K of Evolving Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2016

/s/ Thomas Thekkethala

Thomas Thekkethala

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Daniel J. Moorhead, certify that:

1.I have reviewed this Annual Report on Form 10-K of Evolving Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2016

/s/ Daniel J. Moorhead

Daniel J. Moorhead

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas Thekkethala, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Annual Report of Evolving Systems, Inc. on Form 10-K for the annual period ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Evolving Systems, Inc.

	/s/ Thomas Thekkethala
Thomas Thekkethala
President and Chief Executive Officer
March 15, 2016

This certification is furnished with this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel J. Moorhead, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Annual Report of Evolving Systems, Inc. on Form 10-K for the annual period ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Evolving Systems, Inc.

	/s/ Daniel J. Moorhead
Daniel J. Moorhead
Chief Financial Officer
March 15, 2016

This certification is furnished with this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference.

XML

Document And Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Mar. 09, 2016	Jun. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2015
Entity Registrant Name	EVOLVING SYSTEMS INC
Trading Symbol	evol
Entity Central Index Key	0001052054
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 71.1
Entity Common Stock, Shares Outstanding		11,795,331

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 8,400	$ 9,781
Contract receivables, net of allowance for doubtful accounts of $83 and $43 at December 31, 2015 and December 31, 2014, respectively	7,727	9,182
Unbilled work-in-progress, net of allowance of $0 and $306 at December 31, 2015 and December 31, 2014, respectively	4,158	4,995
Prepaid and other current assets	1,459	1,331
Deferred income taxes		80
Total current assets	21,744	25,369
Property and equipment, net	560	659
Amortizable intangible assets, net	4,983	608
Goodwill	23,142	17,010
Long-term deferred income taxes		586
Total assets	50,429	44,232
Current liabilities:
Current portion of capital lease obligations	5	5
Revolving Line of credit	10,000
Accounts payable and accrued liabilities	4,429	4,460
Income taxes payable	324	1,227
Unearned revenue	3,330	3,883
Total current liabilities	18,088	9,575
Long-term liabilities:
Capital lease obligations, net of current portion	1	7
Contingent earn-out obligation	178	178
Unearned revenue - Long term		420
Total liabilities	$ 18,267	$ 10,180
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of December 31, 2015 and December 31, 2014
Common stock, $0.001 par value; 40,000,000 shares authorized; 11,970,731 shares issued and 11,791,842 outstanding as of December 31, 2015 and 11,843,564 shares issued and 11,664,675 outstanding as of December 31, 2014	$ 12	$ 12
Additional paid-in capital	97,418	96,005
Treasury stock 178,889 shares, at December 31, 2015 and December 31, 2014, at cost	(1,253)	(1,253)
Accumulated other comprehensive loss	(5,999)	(4,534)
Accumulated deficit	(58,016)	(56,178)
Total stockholders' equity	32,162	34,052
Total liabilities and stockholders' equity	$ 50,429	$ 44,232

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Consolidated Balance Sheets [Abstract]
Allowance for doubtful accounts receivable	$ 83	$ 43
Unbilled work-in-progress, allowance	$ 0	$ 306
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	11,970,731	11,843,564
Common stock, shares outstanding	11,791,842	11,664,675
Treasury Stock, Shares	178,889	178,889

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
REVENUE
License fees and services	$ 15,584	$ 19,738	$ 15,998
Customer support	9,992	9,942	9,095
Total revenue	25,576	29,680	25,093
COSTS OF REVENUE AND OPERATING EXPENSES
Costs of license fees and services, excluding depreciation and amortization	4,881	5,782	5,565
Costs of customer support, excluding depreciation and amortization	1,568	1,866	1,599
Sales and marketing	5,844	5,734	5,364
General and administrative	4,003	3,638	3,644
Product development	3,847	3,643	2,956
Depreciation	314	246	155
Amortization	266	95	211
Restructuring	533	237	558
Total costs of revenue and operating expenses	21,256	21,241	20,052
Income from operations	4,320	8,439	5,041
Other income (expense)
Interest income	18	19	11
Interest expense	(121)	(17)	(20)
Other (expense) income		(27)	87
Foreign currency exchange loss	(6)	(9)	(39)
Other (expense) income, net	(109)	(34)	39
Income before income taxes	4,211	8,405	5,080
Income tax expense	915	2,797	1,274
Net income	$ 3,296	$ 5,608	$ 3,806
Basic income per common share - net income	$ 0.28	$ 0.48	$ 0.33
Diluted income per common share - net income	0.28	0.47	0.32
Cash dividend declared per common share	$ 0.44	$ 0.42	$ 0.36
Weighted average basic shares outstanding	11,693	11,642	11,459
Weighted average diluted shares outstanding	11,935	11,926	11,756

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 3,296	$ 5,608	$ 3,806
Other comprehensive income:
Foreign currency translation (gain) loss	(1,465)	(1,518)	281
Comprehensive income	$ 1,831	$ 4,090	$ 4,087

XML

Consolidated Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated (Deficit) [Member]	Total
Balance at Dec. 31, 2012	$ 11	$ 91,957	$ (1,253)	$ (3,297)	$ (56,582)	$ 30,836
Balance, shares at Dec. 31, 2012	11,387,220
Stock option exercises	$ 1	487				488
Stock option exercises, shares	123,179
Common Stock issued pursuant to the Employee Stock Purchase Plan		6				6
Common Stock issued pursuant to the Employee Stock Purchase Plan, shares	1,582
Stock-based compensation		288				288
Issuance of common stock related to acquisition		741				741
Issuance of common stock related to acquisition, shares	71,387
Excess tax benefits from stock-based compensation		416				416
Restricted stock issuance, net of cancellations, shares	17,250
Common stock cash dividends					(4,127)	(4,127)
Net income					3,806	3,806
Foreign currency translation adjustment				281		281
Balance at Dec. 31, 2013	$ 12	93,895	(1,253)	(3,016)	(56,903)	32,735
Balance, shares at Dec. 31, 2013	11,600,618
Stock option exercises		245				$ 245
Stock option exercises, shares	56,186					82,000
Common Stock issued pursuant to the Employee Stock Purchase Plan		55				$ 55
Common Stock issued pursuant to the Employee Stock Purchase Plan, shares	7,352
Stock-based compensation		401				401
Issuance of common stock related to acquisition		19				19
Issuance of common stock related to acquisition, shares	1,832
Excess tax benefits from stock-based compensation		1,390				1,390
Restricted stock issuance, net of cancellations, shares	1,313
Common stock cash dividends					(4,883)	(4,883)
Net income					5,608	5,608
Foreign currency translation adjustment				(1,518)		(1,518)
Balance at Dec. 31, 2014	$ 12	96,005	(1,253)	(4,534)	(56,178)	34,052
Balance, shares at Dec. 31, 2014	11,664,675
Stock option exercises		243				$ 243
Stock option exercises, shares	99,897					100,000
Common Stock issued pursuant to the Employee Stock Purchase Plan		57				$ 57
Common Stock issued pursuant to the Employee Stock Purchase Plan, shares	8,302
Stock-based compensation		317				317
Excess tax benefits from stock-based compensation		796				796
Restricted stock issuance, net of cancellations, shares	18,968
Common stock cash dividends					(5,134)	(5,134)
Net income					3,296	3,296
Foreign currency translation adjustment				(1,465)		(1,465)
Balance at Dec. 31, 2015	$ 12	$ 97,418	$ (1,253)	$ (5,999)	$ (58,016)	$ 32,162
Balance, shares at Dec. 31, 2015	11,791,842

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Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,296	$ 5,608	$ 3,806
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	314	246	155
Amortization of intangible assets	266	95	211
Amortization of debt issuance costs	14	15	18
Stock based compensation	317	401	288
Unrealized foreign currency transaction losses, net	6	9	39
Provision for doubtful accounts	41
Provision for unbilled work-in-progress allowance			114
Benefit from deferred income taxes	(1,123)	(282)	(257)
Change in operating assets and liabilities:
Contract receivables	2,202	(3,398)	(1,514)
Unbilled work-in-progress	721	(2,977)	2,444
Prepaid and other assets	(120)	(214)	(28)
Accounts payable and accrued liabilities	(2,305)	985	(204)
Unearned revenue	(1,404)	(888)	3,543
Net cash provided by (used in) operating activities	2,225	(400)	8,615
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(198)	(588)	(270)
Business combinations, net of cash	(9,014)		(412)
Restricted cash		24	53
Net cash used in investing activities	(9,212)	(564)	(629)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease payments	(5)	(8)	(5)
Proceeds from the revolving line of credit	10,000
Common stock cash dividends	(5,143)	(4,883)	(4,127)
Excess tax benefits from stock-based compensation	797	1,390	416
Proceeds from the issuance of stock	300	300	494
Net cash provided by (used in) financing activities	5,949	(3,201)	(3,222)
Effect of exchange rate changes on cash	(343)	161	177
Net (decrease) increase in cash and cash equivalents	(1,381)	(4,004)	4,941
Cash and cash equivalents at beginning of year	9,781	13,785	8,844
Cash and cash equivalents at end of year	8,400	9,781	13,785
Supplemental disclosure of cash and non-cash investing and financing transactions:
Interest paid	107	1	2
Income taxes paid	2,089	182	69
Common stock dividends declared	5,221	4,966	4,191
Property and equipment purchased and included in accounts payable	$ 1	191
Final cash payment related to acquisition			494
Issuance of common stock related to acquisition		$ 19	761
Contingent consideration related to acquisition			$ 178

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Organization And Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Organization And Summary Of Significant Accounting Policies [Abstract]

Organization And Summary Of Significant Accounting Policies

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization — We are a provider of software solutions and services to the wireless, wireline and cable markets. We maintain long-standing relationships with many of the largest wireless, wireline and cable companies worldwide. Our customers rely on us to develop, deploy, enhance and maintain software solutions that provide a variety of service activation and provisioning functions.  Our service activation solution, Tertio® (“TSA”) is used to activate bundles of voice, video and data services for wireless, wireline and cable network operators; our SIM card activation solution, Dynamic SIM Allocation TM (“DSA”) is used to dynamically allocate and assign resources to Mobile Network Operators (“MNOs”) devices that rely on SIM cards; our Mobile Data Enablement TM (“MDE”) solution provides a data consumption and policy management solution for wireless carriers and Mobile Virtual Network Operators (“MVNOs”) that monitor the usage and consumption of data services; our Total Number Management™ (“TNM”) product is a scalable and fully automated database solution that enables operators to reliably and efficiently manage their telephone numbers as well as other communication identifiers (i.e. SIMs, MSISDNs, IMSIs, ICCIDs, IPs). Our solutions can be deployed on premise or offered as a Software-as-a-Service (“SaaS”).

On September 30, 2015 we announced the acquisition of privately held RateIntegration, Inc., d/b/a Sixth Sense Media (“SSM”), a provider of real time analytics and marketing solutions to wireless carriers.  SSM’s software solution platform, Real-time Lifecycle Marketing™ (“RLM”), enables carriers’ marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time.

We believe the addition of SSM’s RLM product to our existing service activation and data enablement products will produce a powerful platform for wireless carriers. A product suite which we refer to as our Mobile Marketing Solutions (“MMS”) will provide sophisticated, highly tailored mobile campaigns which can be executed based on critical subscriber data captured during the initial activation experience (DSA and RLM) as well as in-life subscriber usage via MDE.  We see the opportunity to leverage our technology to provide MNOs with sophisticated mobile marketing campaigns that will extend beyond voice, text and data usage campaigns and provide marketing services that will assist MNOs to market services that include retail mobile marketing, gaming, streaming video as well as social media based campaigns.

Business Combination -On September 30, 2015 we acquired SSM, now known as Evolving Systems NC.  This business combination is reflected in these consolidated financial statements since the acquisition date.  Refer to Note 2, Acquisition, for more information regarding the acquisition.

We account for business combinations in accordance with the acquisition method. The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition.  The excess of the purchase price over the fair value of assets acquired is recognized as goodwill. Certain adjustments to the assessed fair values of the assets and liabilities made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income.  Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition.

 The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income in periods following a business combination. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on the characteristics of the asset and the availability of information.

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

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 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 estimated hours to complete projects accounted for using the percentage-of-completion method, allowance for doubtful accounts, income tax valuation allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful lives for property, equipment and intangible assets, business combinations, capitalization of internal software development costs and fair value of stock-based compensation amounts.  Actual results could differ from these estimates.

Foreign Currency — Our functional 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 consolidated balance sheets are translated at the spot rate of exchange during the applicable period.  Our 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 income (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 (loss) in the period in which they occur.

Goodwill − Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.  Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. For purposes of the goodwill evaluation, we compare the fair value of each of our reporting units to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, we would then compare the fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying amount over the fair value would be charged to operations as an impairment loss.

Intangible Assets − Amortizable intangible assets consist primarily of purchased software and licenses, customer contracts and relationships, trademarks and tradenames, and business partnerships acquired in conjunction with our purchase of Evolving Systems Labs and Evolving Systems NC.  These assets are amortized using the straight-line method over their estimated lives.

We assess the impairment of identifiable intangibles if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

If we determine that the carrying value of intangibles and/or long-lived assets may not be recoverable, we compare the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition to the asset’s carrying amount. If an amortizable intangible or long-lived asset is not deemed to be recoverable, we recognize an impairment loss representing the excess of the asset’s carrying value over its estimated fair value.

Fair Value Measurements − Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash and Cash Equivalents - All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.

Revenue Recognition − We recognize revenue when an agreement is signed, the fee is fixed or determinable and collectability is reasonably assured. We recognize revenue from two primary sources: license fees and services, and customer support.   The majority of our license fees and services revenue is generated from fixed-price contracts, which provide for licenses to our software products and services to customize such software to meet our customers’ use.   When the customization services are determined to be essential to the functionality of the delivered software, we recognize revenue using the percentage-of-completion method of accounting. In these types of arrangements, we do not typically have vendor specific objective evidence (“VSOE”) of fair value on the license fee/services portion (services are related to customizing the software) of the arrangement due to the large amount of customization required by our customers; however, we do have VSOE for the warranty/maintenance services based on the renewal rate of the first year of maintenance in the arrangement. The license/services portion is recognized using the percentage-of-completion method of accounting and the warranty/maintenance services are separated based on the renewal rate in the contract and recognized ratably over the warranty or maintenance period. We estimate the percentage-of-completion for each contract based on the ratio of direct labor hours incurred to total estimated direct labor hours and recognize revenue based on the percent complete multiplied by the contract amount allocated to the license fee/services.  Since estimated direct labor hours, and changes thereto, can have a significant impact on revenue recognition, these estimates are critical and we review them regularly. If the arrangement includes a customer acceptance provision, the hours to complete the acceptance testing are included in the total estimated direct labor hours; therefore, the related revenue is recognized as the acceptance testing is performed. Revenue is not recognized in full until the customer has provided proof of acceptance on the arrangement.  Generally, our contracts are accounted for individually. However, when certain criteria are met, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. We record amounts billed in advance of services being performed as unearned revenue. Unbilled work-in-progress represents revenue earned but not yet billable under the terms of the fixed-price contracts. All such amounts are expected to be billed and collected within 12 months.

We may encounter budget and schedule overruns on fixed-price contracts caused by increased labor or overhead costs. We make adjustments to cost estimates in the period in which the facts requiring such revisions become known. We record estimated losses, if any, in the period in which current estimates of total contract revenue and contract costs indicate a loss. If revisions to cost estimates are obtained after the balance sheet date but before the issuance of the interim or annual financial statements, we make adjustments to the interim or annual financial statements accordingly.

In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when a license agreement has been signed, delivery and acceptance have occurred, the fee is fixed or determinable and collectability is reasonably assured. Where applicable, we unbundle and record as revenue fees from multiple element arrangements as the elements are delivered to the extent that VSOE of fair value of the undelivered elements exist. If VSOE for the undelivered elements does not exist, we defer fees from such arrangements until the earlier of the date that VSOE does exist on the undelivered elements or all of the elements have been delivered.

We recognize revenue from fixed-price service contracts using the proportional performance method of accounting, which is similar to the percentage-of-completion method described above. 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 obligation to our customers under such arrangements is fulfilled.

We recognize revenue from our MDE contracts based on the number of transactions per month multiplied by a factor based on a unique table for transaction volumes relating to each account.

We recognize customer support, including maintenance revenue, ratably over the service contract period. When maintenance is bundled with the original license fee arrangement, its fair value, based upon VSOE, is deferred and recognized during the periods when services are provided.

Stock-based Compensation − We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with 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.

Comprehensive Income - Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency and unrealized gains and losses on marketable securities categorized as available-for-sale.

Restricted Cash — As of December 31, 2015 we no longer had restricted cash.  As of December 31, 2013, we had $24,000 of restricted cash related to securing a letter of credit for our San Francisco, California lease which has since expired.

Contract Receivables, Unbilled Work-in-Progress and Allowance for Doubtful Accounts — 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.  An allowance is placed against accounts receivable or unbilled work in progress for our best estimate of the amount of probable credit losses. We determine the allowance based on historical write-off experience and information received during collection efforts. We review our allowances monthly and past due balances over 90 days are reviewed individually for collectability.  Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers.

The following table reflects the activity in the allowance for doubtful accounts:

		Balance at	Bad Debt	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Expense/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for doubtful accounts	$             43	$             41	$                -	$             (1)	$             83
2014	Allowance for doubtful accounts	$             73	$                -	$           (25)	$             (5)	$             43
2013	Allowance for doubtful accounts	$             70	$                -	$                -	$               3	$             73

The following table reflects the activity in the allowance for unbilled work-in-progress:

		Balance at	Unbilled Work-in-Progress	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Allowance/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for unbilled work-in-progress	$           306	$                -	$          (306)	$                 -	$                 -
2014	Allowance for unbilled work-in-progress	$           317	$                -	$                 -	$            (11)	$            306
2013	Allowance for unbilled work-in-progress	$           295	$           114	$          (114)	$              22	$            317

Long Term Deferred Revenue — Long term deferred revenue are amounts which revenue will not be recognized within twelve months of the balance sheet date.  As of December 31, 2015 and 2014, we had $0 and $0.4 million, respectively, reported in the accompanying consolidated balance sheets.

Concentration of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk consist primarily of contract receivables and unbilled work-in-progress. We perform on-going evaluations of customers’ financial condition and, generally, require no collateral from customers.

A substantial portion of our revenue is from a limited number of customers, all in the telecommunications industry.

For the year ended December 31, 2015, no significant customer exceeded the threshold (defined as contributing at least 10%) of revenue from continuing operations.  For the year ended December 31, 2014, two significant customers accounted for 24%  (13% and 11%) of revenue from continuing operations.  These customers are large telecommunications operators in Europe and Mexico. For the year ended December 31, 2013 one significant customer accounted for 12% of revenue from continuing operations.  This customer is a large telecommunications operator in Europe.

As of December 31, 2015, two significant customers accounted for approximately 36% (25% and 11%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa and Europe.  As of December 31, 2014, three significant customers accounted for approximately 55%  (26%,  16% and 13%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa, Mexico and Europe.

We are subject to concentration of credit risk with respect to our cash and cash equivalents, which we attempt to minimize by maintaining our cash and cash equivalents with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”).

Our funds not under any FDIC program were $7.3 million and $9.3 million as of December 31, 2015 and 2014, respectively.

Sales, Use and Other Value Added Tax — Revenue is recorded net of applicable state, use and other value added taxes.

Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred. Advertising costs totaled approximately $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013.

Capitalization of Internal Software Development Costs — We expend amounts on product development, particularly for new products and/or for enhancements of existing products. For internal development of software products that are to be licensed by us, we expense the cost of developing software prior to establishing technological feasibility and those costs are capitalized once technological feasibility has been established. Capitalization ceases upon general release of the software. The determination of whether internal software development costs are subject to capitalization is, by its nature, highly subjective and involves significant judgments. This decision could significantly affect earnings during the development period.  Further, once capitalized, the software costs are generally amortized on a straight-line basis over the estimated economic life of the product. The determination of the expected useful life of a product is highly judgmental. Finally, capitalized software costs must be assessed for impairment if facts and circumstances warrant such a review. We did not capitalize any internal software development costs during the three years ended December 31, 2015. In addition, we did not have any capitalized internal software development costs included in our December 31, 2015 and 2014 Consolidated Balance Sheets. We believe that during these periods no material internal software development costs were required to be capitalized. Our conclusion is primarily based on the fact that the feature−rich, pre−integrated, and highly−scalable nature of our products requires that our development efforts include complex design, coding and testing methodologies, which include next generation software languages and development tools. Development projects of this nature carry a high degree of development risk. Substantially all of our internal software development efforts are of this nature, and therefore, we believe the period between achieving technological feasibility and the general release of the software to operations is so short that any costs incurred during this period are not material.

Property and Equipment and Long-Lived Assets — Property and equipment are stated at cost or estimated fair value if acquired in an acquisition, less accumulated depreciation, and are depreciated over their estimated useful lives, or the lease term, if shorter, using the straight-line method. Leasehold improvements are stated at cost, less accumulated amortization, and are amortized over the shorter of the lease term or estimated useful life of the asset. Maintenance and repair costs are expensed as incurred.

We review our long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. We evaluate the recoverability of an asset or asset group by comparing its carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, we recognize an impairment charge as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

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 consolidated balance sheets, as well as operating loss 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 the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

Recent Accounting Pronouncements  —In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” Topic 606.  This Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this Update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. This ASU is effective retrospectively for fiscal years, and interim periods within those years beginning after December 15, 2016 for public companies and 2017 for non-public entities, however the FASB has deferred the effective date by one year. We do not expect the adoption of this standard to have a significant impact on the Company’s financial position and results of operations.

In August 2014, the FASB issued ASU 2014-15 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  Management of public and private companies will be required to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. Management will be required to make this evaluation for both annual and interim reporting periods, if applicable. The standard is effective for annual and interim periods ending after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not expect the adoption of this ASU to impact the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to put most leases on their balance sheets by recognizing a lessee’s rights and obligations, while expenses will continue to be recognized in a similar manner to today’s legacy lease accounting guidance. This ASU could also significantly affect the financial ratios used for external reporting and other purposes, such as debt covenant compliance. This ASU will be effective for us on January 1, 2019, with early adoption permitted. We are currently in the process of assessing the impact of this ASU on our consolidated financial statements.

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Acquisition

12 Months Ended

Dec. 31, 2015

Acquisition [Abstract]

Acquisition

NOTE 2 — ACQUISITION

On September 30, 2015 we acquired privately held RateIntegration, Inc. d/b/a Sixth Sense Media (“SSM”), now known as Evolving Systems NC for an initial payment of approximately $9.75 million and a $0.5 million working capital adjustment.  We also agreed to make a payment on the one year anniversary of the transaction of $250,000, with such payment being available to secure SSM’s representations and warranties in the agreement.

We accounted for this business combination by applying the acquisition method, and accordingly, the purchase price was allocated to the assets and liabilities assumed based upon their fair values at the acquisition date. The excess of the purchase price over the net assets and liabilities, approximately $6.9 million, was recorded as goodwill. The Company is in the process of finalizing the purchase allocation, thus the provisional measures of deferred income taxes, intangibles and goodwill are subject to change. The Company expects the purchase price allocation will be finalized in 2016. The results of SSM’s operations have been included in the consolidated financial statements since the acquisition date.

We believe this acquisition complements our activation and SIM management products. Combining SSM’s real-time analytics and campaign capabilities with our DSA and MDE solutions will allow the company to offer global wireless carriers solutions that utilize the highly valuable contextual data captured from the subscribers’ initial welcome experience via DSA, their network usage via RLM and their on-device app usage via MDE. The combined solutions will create a highly personalized experience that engages subscribers in real time from the first time subscribers power on their new devices right through their day-to-day usage.

Our strategic focus is primarily on the wireless markets in the areas of subscriber activation, SIM card management and activation, self—service mobile applications, data enablement solutions, connected device activation, mobile marketing campaigns, advertising and analytics and management of services.  

Total purchase price is summarized as follows (in thousands):

	September 30, 2015
Cash Consideration
Initial Cash Purchase Price	$	9,750
Cash/Working Capital Adjustment		535
Total Cash Consideration	$	10,285
Assumed Liabilities		250
Total purchase price	$	10,535

The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date (in thousands):

	September 30, 2015
Cash and cash equivalents	$	1,521
Contract receivables		1,057
Unbilled work-in-progress		89
Intangible assets		4,642
Prepaid and other current assets		68
Deferred tax asset		-
Other assets, non-current		32
Total identifiable assets acquired	$	7,409
Accounts payable and accrued liabilities	$	1,506
Deferred tax liability		1,760
Deferred revenue		557
Total identifiable liabilities acquired	$	3,823
Net identifiable assets acquired		3,586
Goodwill		6,949
Net assets acquired	$	10,535

We recorded $4.6 million in intangible assets as of the acquisition date with a weighted-average amortization period of approximately seven years and are amortizing the value of the trade name, technology, non-competition and customer relationships over an estimated useful life of 2, 8, 2 and 7 years, respectively.  We recorded $0.2 million of amortization expense related to the acquired intangible assets was recorded during the period ended December 31, 2015.

The $5.4 million of goodwill was assigned to the license and service segment and $1.5 million was assigned to the customer support segment.  The goodwill recognized is attributed primarily to expected synergies and the assembled workforce of SSM.  As of the date of this report there were no changes in the recognized amounts of goodwill resulting from the acquisition of SSM.

Intangible assets related to the Evolving Systems NC’s acquisition as of December 31, 2015 were as follows (in thousands):

	December 31, 2015
		Gross Amount		Accumulated Amortization		Net Carrying Amount	Weighted-Average Amortization Period
Purchased software	$	1,679	$	53	$	1,626	8 yrs
Trademarks and tradenames		122		15		107	2 yrs
Non-competition		33		4		29	2 yrs
Customer relationships		2,808		100		2,708	7 yrs
	$	4,642	$	172	$	4,470	7.19 yrs

Evolving Systems NC’s contributed revenue and earnings for the period of October 1, 2015 to December 31, 2015 as follows (in thousands):

Revenue and earnings included in the
Consolidated Statement of Operations from
October 1, 2015 through December 31, 2015
Revenue	$	1,367
Net Income		306

Pro Forma

The following unaudited pro forma financial information reflects the consolidated results of operations of as if the acquisition of SSM had taken place on January 1, 2015 and 2014. The pro forma information includes adjustments for the amortization of intangible assets. The following unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date (in thousands).

	Year Ended December 31,
	2015		2014
		(unaudited)		(unaudited)
Revenue	$	30,190	$	35,782
Earnings		3,645		5,718

SSM did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.

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Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill And Intangible Assets [Abstract]

Goodwill And Intangible Assets

NOTE 3 — GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by reporting unit were as follows (in thousands):

	License and Services						Customer  Support					Total
		U.S.		India		UK		U.S.		UK		Goodwill
Balance as of December 31, 2013	$	1,097	$	-	$	7,532	$	-	$	9,307	$	17,936
Effects of changes in foreign
currency exchange rates (1)		-		-		(414)		-		(512)		(926)
Balance as of December 31, 2014	$	1,097	$	-	$	7,118	$	-	$	8,795	$	17,010
Goodwill acquired during the year		5,209		184				1,556				6,949
Acquired goodwill adjusted during the year		(25)						(7)				(32)
Effects of changes in foreign
currency exchange rates (1)		-		(0)		(351)		-		(434)		(785)
Balance as of December 31, 2015	$	6,281	$	184	$	6,767	$	1,549	$	8,361	$	23,142

(1)Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

We performed our annual goodwill impairment test as of July 31, 2015, which we had $17.0 million of goodwill included the following reporting units, License and Services (“L&S”) — US,  Evolving Systems Labs of $1.1 million and Evolving Systems U.K. of $7.2 million and Customer Support (“CS”) — UK of $8.7 million. The fair value of each reporting unit was estimated using both market and income based approaches. Specifically, we incorporated observed market multiple data from selected guideline public companies and values arrived at through the application of discounted cash flow analyses which in turn were based upon our financial projections as of the valuation date. In our analysis, we weighted the application of discounted cash flow analysis at 70% and observed market multiple data from selected guideline public companies at 30%.  This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. If the carrying value of a reporting unit were to exceed its fair value, we would then be required to perform a second step of the impairment analysis which could lead to goodwill impairment should the carrying amount exceed the fair value.  The excess of carrying amount over fair value would be charged to operations as an impairment loss. If the projected future performance of either of our segments as estimated in the income valuation approach is adjusted downward or is lower than expected in the future, we could be required to record a goodwill impairment charge.  As a result of the first step of the 2015 goodwill impairment analysis, the fair value of each reporting unit exceeded its carrying value.  Therefore the second step was not necessary.  However, a hypothetical decrease of approximately 20% due to lower than estimated future cash flows in the estimated fair value of our L&S-U.S. Evolving Systems Labs, Inc. reporting unit would result in its carrying value exceeding its estimated fair value and therefore require the second step, which could result in impairment for that reporting unit. From July 31, 2015 through the date of this report, no events have occurred that we believe may have impaired goodwill.

As a result of the acquisition of SSM, $6.9 million of goodwill was acquired during the period, of which $5.4 million was assigned to the license and service segment and $1.5 million was assigned to the customer support segment.

We amortized identifiable intangible assets for Evolving Systems Labs and Evolving Systems NC on a straight-line basis over their estimated lives ranging from one to eight years.  As of December 31, 2015 and December 31, 2014, identifiable intangibles were as follows (in thousands):

	December 31, 2015						December 31, 2014
		(2) Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount	Weighted-Average Amortization Period
Purchased software	$	2,118	$	171	$	1,947	$	439	$	64	$	375	7.3 yrs
Trademarks and tradenames		185		43		142		63		15		48	2.6 yrs
Non-competition		33		4		29		-		-		-	2.0 yrs
Customer relationships		3,024		159		2,865		216		31		185	6.8 yrs
	$	5,360	$	377	$	4,983	$	718	$	110	$	608	6.8 yrs

(2)Changes in intangible values as of December 31, 2015 compared to December 31, 2014 are the direct result of the acquisition of Evolving Systems NC in the third quarter of 2015.

Amortization expense of identifiable intangible assets was $0.3 million, $0.1 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Expected future amortization expense related to identifiable intangibles based on our carrying amount as of December 31, 2015 was as follows (in thousands):

Year ending December 31,
2016	$	783
2017		764
2018		703
2019		693
2020		693
Thereafter		1,347
	$	4,983

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Balance Sheet Components

12 Months Ended

Dec. 31, 2015

Balance Sheet Components [Abstract]

Balance Sheet Components

NOTE 4 — BALANCE SHEET COMPONENTS

The components of certain balance sheet line items are as follows (in thousands):

	December 31,
Property and equipment:	2015		2014
Computer equipment and purchased software	$	4,814	$	4,796
Furniture, fixtures and leasehold improvements		1,155		1,078
		5,969		5,874
Less accumulated depreciation		(5,409)		(5,215)
	$	560	$	659
	December 31,
Assets acquired under capital lease:	2015		2014
Original book value	$	24	$	24
Accumulated amortization		(18)		(13)
Net book value	$	6	$	11

Depreciation expense was $0.3 million, $0.2 million and $0.2 million for each of the years ended December 31, 2015, 2014 and 2013, respectively.

Included in computer equipment and purchased software at December 31, 2015 and 2014 are assets under capital lease. Depreciation expense related to assets under capital leases was $5,000, $5,000 and $4,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

	December 31,
Accounts payable and accrued liabilities:	2015		2014
Accounts payable	$	716	$	729
Accrued liabilities		2,520		2,366
Accrued compensation and related expenses		1,193		1,365
	$	4,429	$	4,460

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Revolving Line Of Credit

12 Months Ended

Dec. 31, 2015

Revolving Line Of Credit [Abstract]

Revolving Line Of Credit

NOTE 5 – REVOLVING LINE OF CREDIT

On September 28, 2015, we entered into the Third Amendment to the Loan and Security Agreement with East West Bank to increase the current revolving credit facility from $5.0 million to $10.0 million (the “Revolving Facility”).  The additional $5.0 million (“Revolving Line II”) will bear interest at a floating rate equal to the U.S. Prime Rate plus 2.25%; the existing $5.0 million credit facility (“Revolving Line”) will continue to bear interest at the greater of 2.75% or the U.S. Prime Rate minus one half of one percent (0.50%).  The Revolving Facility is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems.  There is no mandated borrowing required against the Revolving Facility.  To take an advance under the Revolving Facility, the Company must have a balance of $4.0 million in cash on deposit with East West Bank, a minimum current ratio and a specified ratio of Total Liabilities to Tangible Net Worth, which are both as defined in the Revolving Facility. The Revolving Facility requires the Company to pay a one-time credit facility fee of $10,000 for extension of Revolving Line II, an annual credit facility fee of $10,000 and monthly payments of interest, with the unpaid balance due on October 22, 2016.

The Revolving Facility includes negative covenants that place restrictions on the Company’s ability to, among other things:  restrict distributions to its shareholders in the aggregate amount not to exceed $1.8 million in any fiscal quarter, incur additional indebtedness; create liens or other encumbrances on assets; make loans, enter into letters of credit, guarantees, investments and acquisitions; sell or otherwise dispose of assets; cause or permit a change of control; merge or consolidate with another entity; make negative pledges; enter into affiliate transactions; and change the nature of its business materially. Outstanding amounts under the Revolving Facility may be accelerated by notice from East West Bank upon the occurrence and continuance of certain events of default, including without limitation:  payment defaults, breach of covenants beyond applicable grace periods, breach of representations and warranties, bankruptcy and insolvency defaults, and the occurrence of a material adverse effect (as defined).  Acceleration is automatic upon the occurrence of certain bankruptcy and insolvency defaults.

As of December 31, 2015, we are in compliance with the covenants and have borrowed $10.0 million against the Revolving Facility.  The proceeds from the borrowings against the facilities were used for the initial payment for the SSM acquisition agreement on September 30, 2015.

Refer to Note 15, Subsequent Events, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for information regarding the Fifth Amendment to the Loan and Security Agreement with East West Bank. 

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Taxes [Abstract]

Income Taxes

NOTE 6 − INCOME TAXES

The pre-tax income from continuing operations on which the provision for income taxes was computed is as follows (in thousands):

	For the Years Ended December 31,
		2015		2014		2013
Domestic	$	(2,948)	$	(1,274)	$	(1,347)
Foreign		7,159		9,679		6,427
Total	$	4,211	$	8,405	$	5,080

The expense (benefit) from continuing operations for income taxes consists of the following (in thousands):

	For the Years Ended December 31,
		2015		2014		2013
Current:
Federal	$	789	$	1,468	$	441
Foreign		1,174		1,637		1,015
State		76		(26)		70
Total current		2,039		3,079		1,526
Deferred:
Federal		(1,023)		(301)		(66)
Foreign		16		19		(178)
State		(117)		0		(8)
Total deferred		(1,124)		(282)		(252)
Total	$	915	$	2,797	$	1,274

As of December 31, 2014, we had federal Net Operating Loss (“NOL”) carryforwards of approximately $2.3 million.  As of December 31, 2015 we had no NOL carryforwards remaining.  As of December 31, 2015 and 2014, we had state NOL’s of approximately $17.4 million and $17.1 million, respectively.  The state NOL carryforwards expire at various times beginning in 2018 and ending in 2033.  In addition, we have research and experimentation credit carryforwards of approximately $0.3 million which may expire in 2018  and Alternative Minimum Tax (“AMT”) credits of $0.8 million which may expire at various times beginning in 2028 and ending in 2034. 

In our U.S. Federal income tax returns we historically deducted income taxes paid to various countries. In our 2014 U.S. Federal income tax return we had $2.3 million of NOL carryforwards.  Our income tax calculations have historically been under the regular and AMT regimes found in U.S. tax laws.  The U.S. tax system contains rules to alleviate the burden of double taxation on income generated in foreign countries and subject to tax in such countries.  The U.S. allows for either a deduction or credit of such foreign taxes against U.S. taxable income.  An election to either claim a deduction or credit on such foreign income taxes can be made each tax year, independent from elections made in other years.  A credit reduces a company’s actual U.S. income tax on a dollar-for-dollar basis, while a deduction reduces only the company’s income subject to tax.  We made a comparison of our foreign dividends paid by our foreign subsidiary for which we deducted foreign taxes claimed versus claiming a Foreign Tax Credit (“FTC”) on the dividend paid by the foreign subsidiary.  The dividends received were grossed-up with its corresponding foreign taxes.  The U.S. law requires the offset of taxable income with NOL prior to applying the FTC rules.  We determined it was beneficial for the company to gross-up the foreign dividends paid by the foreign subsidiary for the years 2012 through 2014 and make the election to claim a FTC.  By doing so we fully utilized our December 31, 2014, $2.3 million balance of the federal NOL.  As a result, the company has approximately $2.8 million of FTC’s to carryforward into 2015 and subsequent years as a deferred tax asset.  In 2015, our deferred tax asset balance was increased by approximately $0.9 million of FTC’s.

The Company uses the incremental approach to recognizing excess tax benefits associated with equity compensation.  Our $2.3 million of federal NOL’s are primarily windfall excess tax benefit related to stock compensation expense, the benefit of which, if realized, will be an increase to Additional Paid-in Capital (“APIC”) as opposed to a reduction in tax expense.  Due to the aforementioned election to claim a FTC, during the year 2015 $0.8 million of the federal NOL was realized, with a corresponding increase in additional paid-in capital. 

Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax assets and liabilities are as follows (in thousands):

	As of December 31,
	2015		2014
Deferred tax assets:
Foreign tax credits carryforwards	$	3,667	$	-
Net operating loss carryforwards - State		540		555
Research and development credits		303		303
Equity compensation		686		661
AMT credit		770		942
Depreciable assets		110		107
Intangibles		-		203
Accrued liabilities and reserves		340		607
Total deferred tax assets		6,416		3,378
Deferred tax liabilities:
Intangibles		(1,512)		-
Undistributed foreign earnings		(666)		(897)
Accrued liabilities and reserves		(23)		(16)
Total deferred tax liability		(2,201)		(913)
Net deferred tax assets, before valuation allowance		4,215		2,465
Valuation allowance		(4,215)		(1,799)
Net deferred tax  asset	$	-	$	666
Financial statement classification:
Current deferred tax asset	$	-	$	80
Long-term tax (liability) asset		-		586
	$	-	$	666

In conjunction with the acquisition of Evolving Systems Labs in October 2013, we recorded certain identifiable intangible assets. We established a deferred tax asset of $0.1 million at the acquisition date for the expected difference between what would be expensed for financial reporting purposes and what would be deductible for income tax purposes. In September 2015, we established a deferred tax liability of $1.8 million as a result of the acquisition of Evolving Systems NC. As of December 31, 2015 and 2014, there was a net deferred tax liability of ($1.5) million and a net deferred tax asset of $0.2 million, respectively. This net deferred tax liability will be recognized as the identifiable intangibles are amortized.

We continue to maintain a full valuation allowance on the domestic net deferred tax asset, with the exception of our FTC which has a partial valuation allowance, as we have determined it is more likely than not that we will not realize our domestic deferred tax assets. Such assets primarily consist of certain net state operating loss carryforwards, AMT credits and research and development credits.  We assessed the realizability of our domestic deferred tax assets using all available evidence. In particular, we considered both historical results and projections of profitability for the reasonably foreseeable future periods. We are required to reassess our conclusions regarding the realization of our deferred tax assets at each financial reporting date. A future evaluation could result in a conclusion that all or a portion of the valuation allowance is no longer necessary which could have a material impact on our results of operations and financial position.

The benefit for income taxes differs from the amount computed by applying the U.S. federal income tax rate of 34% to income before income taxes as follows (in thousands):

	For the Years Ended December 31,
		2015		2014		2013
U.S. federal income tax expense at statutory rates	$	2,392	$	4,595	$	2,143
State income tax expense, net of federal impact		-		542		46
Foreign Tax Credit		(3,667)		-		-
Foreign rate differential		(449)		(1,452)		(332)
Foreign deemed dividends		939		1,783		871
Undistributed foreign earnings		(221)		-		-
Change in valuation allowance		2,415		(1,971)		(492)
Research and development expenses		(1,096)		(867)		(859)
Foreign taxes		314		53		93
Section 78 Gross-UP		371		-		-
Permanent differences and other, net		(83)		114		(196)
Total tax expense	$	915	$	2,797	$	1,274

The Company recognizes the tax benefit from an uncertain tax position when it determines that it is more likely than not that the position would be sustained upon examination by taxing authorities.

As of December 31, 2015 and 2014, we had no liability for unrecognized tax benefits.  We do not believe there will be any material changes to our unrecognized tax positions over the next twelve months.  Interest and penalties related to income tax liabilities are included as a component of income tax expense (benefit) in the accompanying statements of operations.

Our income taxes payable may be reduced by the AMT tax benefits from employee stock plan awards. We had no net excess tax benefits from employee stock plan awards for the years ended December 31, 2015 and 2014, which would be reflected as an increase to additional paid-in capital.

We conduct business globally and, as a result, Evolving Systems Inc. or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  In the normal course of business, we are subject to examination by taxing authorities throughout the world, namely the United Kingdom, Germany and India.  Although carryovers can always be subject to review by taxing authorities, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012. 

During 2004, we formed Evolving Systems India, a wholly owned subsidiary of Evolving Systems which is used primarily for product development and customer service and support.  The Company has the intent and current ability to indefinitely reinvest profits of Evolving Systems India for the year ended December 31, 2015. Undistributed foreign earnings for the year ended December 31, 2015 are approximately $1.0 million. Repatriation to the U.S. in the form of dividend distributions from the India controlled foreign subsidiary would give rise to taxation.

Section 382 of the Internal Revenue Code imposes an annual limitation on the amount of certain tax attributes, including NOL and tax credit carryovers, available to be utilized following an "Ownership Change" triggered by a shift of greater than 50% in stock ownership over a three year testing period. We believe that SSM may have had one or more such Ownership Changes prior to its acquisition by Evolving Systems, Inc.  However, the amount of the applicable limitation is not known, and has not been estimated at this time.  Accordingly, because of this uncertainty, the Company has not recorded as part of its initial purchase accounting a deferred tax asset associated with the NOL carryforward of SSM.  We intend to review the ownership history of SSM to determine the utilizable portion of its tax attributes as soon as practicable, and if appropriate, adjust the deferred tax assets and purchase accounting upon the conclusion of its assessment.

Two Indian subsidiaries of SSM, were acquired pursuant to the terms of the Agreement and Plan of Merger dated September 30, 2015.  We have reason to believe there is uncertainty related to the lack of historical US International reporting for these two foreign subsidiaries, and are in the process of determining whether either or both of these subsidiaries are controlled foreign corporations (“CFCs”) within the meaning of the Internal Revenue Code and related Regulations, or if a “check-the-box” election has taken place to effectively treat one or both of these subsidiaries as disregarded entities for US federal tax reporting purposes. The Company is in the process of obtaining pertinent information to assess the degree of uncertainty and to quantify related costs or liabilities.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2015

Stockholders' Equity [Abstract]

Stockholders' Equity

NOTE 7 − STOCKHOLDERS’ EQUITY

Common Stock Dividends

Our Board of Directors declared a cash dividend of $0.11 per share for each of the four quarters of 2015.  There were no accrued dividends as of December 31, 2015. 

Any determination to declare a future quarterly dividend, as well as the amount of any cash dividend which may be declared, will be based on our financial position, earnings, earnings outlook and other relevant factors at that time, including applicable limits under our revolving credit facility or any other credit facility then in effect.

Treasury Stock

Beginning on May 20, 2011, and continuing through December 31, 2013, we had the ability through our stock purchase program to re-purchase our common stock at prevailing market prices either in the open market or through privately negotiated transactions up to $5.0 million.  The size and timing of such purchases, if any, was based on market and business conditions as well as other factors.  We were not obligated to purchase any shares.  The re-purchase program expired on December 31, 2013.

From the inception of the plan through December 31, 2013, we purchased 178,889 shares of our common stock for $1.3 million or an average price of $6.97 per share.

CertainAnti-Takeover Provisions/Agreements with Stockholders

Our restated certificate of incorporation allows the board of directors to issue up to 2,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desired flexibility in connection with possible acquisitions and other corporate purposes could make it more difficult for a third party to acquire a majority of our outstanding voting stock. As of December 31, 2015 and December 31, 2014, no shares of preferred stock were outstanding.

In addition, we are subject to the anti-takeover provisions of Section 203 of Delaware General Corporation Law which prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the prescribed manner. The application of Section 203 may have the effect of delaying or preventing changes in control of our management, which could adversely affect the market price of our common stock by discouraging or preventing takeover attempts that might result in the payment of a premium price to our stockholders.

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Share-Based Compensation

12 Months Ended

Dec. 31, 2015

Share-Based Compensation [Abstract]

Share-Based Compensation

NOTE 8 — SHARE-BASED COMPENSATION

We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with employees and directors, and record compensation cost for all stock awards granted after January 1, 2006 and awards modified, repurchased, or cancelled after that date, using the modified prospective method. We record compensation costs associated with the vesting of unvested options on a straight-line basis over the vesting period. We recognized $0.3 million, $0.4 million and $0.3 million for the years ended December 31, 2015, 2014 and 2013, respectively, of compensation expense in the consolidated statements of operations, with respect to our stock-based compensation plans.  The following table summarizes stock-based compensation expenses recorded in the statement of operations (in thousands):

	For the Years Ended December 31,
	2015		2014		2013
Cost of license fees and services, excluding
depreciation and amortization	$	72	$	73	$	29
Cost of customer support, excluding
depreciation and amortization		10		8		4
Sales and marketing		36		31		24
General and administrative		112		181		207
Product development		87		108		24
Total share based compensation	$	317	$	401	$	288

Stock Option/Incentive Plans

In January 1996, our stockholders approved an Amended and Restated Stock Option Plan (the “Option Plan”).  Under the Option Plan, as amended, 4,175,000 shares were reserved for issuance.  Options issued under the Option Plan were at the discretion of the Board of Directors, including the vesting provisions of each stock option granted. Options were granted with an exercise price equal to the closing price of our common stock on the date of grant, generally vest over four years and expire no more than ten years from the date of grant. The Option Plan terminated on January 18, 2006; options granted before that date were not affected by the plan termination.  At December 31, 2015 and 2014, no options remained and 0.1 million options remained outstanding under the Option Plan, respectively.

In June 2007, our stockholders approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) with a maximum of 1,000,000 shares reserved for issuance. In June 2010, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 1,250,000.  In June 2013, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 1,502,209.  In June 2015, our stockholders approved an amendment to the 2007 Stock Plan which increased the maximum shares that may be awarded under the plan to 2,002,209.    Awards permitted under the 2007 Stock Plan include:  Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards and Other Stock-Based Awards.  Awards issued under the 2007 Stock Plan are at the discretion of the Board of Directors.  As applicable, awards are granted with an exercise price equal to the closing price of our common stock on the date of grant, generally vest over four years for employees and one year for directors and, with respect to stock option grantsexpire no more than ten years from the date of grant.  At December 31, 2015 and 2014, there were approximately 0.3 million and 0.1 million shares, respectively, available for grant under the 2007 Stock Plan.  Of the shares available as of December 31, 2015, 0.2 million shares were reserved for acquisitions.  At December 31, 2015 and 2014, 0.8 million and0.6 million options were issued and outstanding under the 2007 Stock Plan, respectively.

During the year ended December 31, 2015 we awarded a total of 20,000 shares of restricted stock to members of our Board of Directors and senior management. No shares of restricted stock were awarded during the year ended December 31, 2014.  During the years ended December 31, 2015 and 2014, approximately 94 and 8,000 shares of restricted stock vested, respectively.  There were forfeitures of approximately 1,000 shares of restricted stock during years ended December 31, 2015 and 2014. The fair market value for stock-based compensation expense is equal to the closing price of our common stock on the date of grant.  The restrictions on the stock award are released generally over four years for senior management and over one year for board members.  Stock-based compensation expense includes $8,000, $0.1 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively for restricted stock.

The weighted-average assumptions used in the fair value calculations are as follows:

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	6.0		5.9		6.1
Risk-free interest rate	1.37	%	1.69	%	1.31	%
Expected volatility	42.01	%	55.88	%	59.17	%
Expected dividend yield	6.4	%	4.0	%	4.1	%

The following is a summary of stock option activity under the stock option plans for the years ended December 31, 2015 and 2014:

			Weighted-
			Average
		Weighted-	Remaining	Aggregate
	Number of	Average	Contractual	Intrinsic
	Shares	Exercise	Term	Value
	(in thousands)	Price	(Years)	(in thousands)
Options outstanding at December 31, 2013	676	$                5.11	4.76	$              3,491
Options granted	168	$              10.15
Less options forfeited	(132)	$              12.20
Less options exercised	(82)	$                5.31
Options outstanding at December 31, 2014	630	$                4.94	5.69	$              2,959
Options granted	331	$                7.13
Less options forfeited	(27)	$                9.39
Less options exercised	(100)	$                2.43
Options outstanding at December 31, 2015	834	$                5.97	6.94	$                 957
Options exercisable at December 31, 2015	463	$                4.74	5.11	$                 954

The following is a summary of stock options outstanding under the plans as of December 31, 2015:

								Stock Options
Stock Options Outstanding								Exercisable
						Weighted Avg.
					Number of	Remaining	Weighted Avg.	Number of	Weighted Avg.
Range of					Shares	Contractual Life	Exercise	Shares	Exercise
Exercise Prices					(in thousands)	(years)	Price	(in thousands)	Price
$	0.01	-	$	1.34	145	2.41	$                0.80	145	$                 0.80
$	2.80	-	$	2.86	30	3.19	$                2.84	30	$                 2.84
$	3.20	-	$	3.72	86	4.02	$                3.69	86	$                 3.70
$	4.09	-	$	5.45	37	6.12	$                4.44	35	$                 4.45
$	6.00	-	$	6.63	247	9.31	$                6.09	32	$                 6.52
$	7.70	-	$	10.90	289	8.55	$                9.65	135	$                 9.73
					834	6.94	$                5.97	463	$                 4.74

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 was $1.60, $3.80 and $3.16 respectively.

As of December 31, 2015, there were approximately $0.8 million of total unrecognized compensation costs related to unvested stock options and restricted stock.  These costs are expected to be recognized over a weighted average period of 2.9 years.

The total intrinsic value of stock option exercises for the years ended December 31, 2015, 2014 and 2013 was $0.3 million, $0.4 million and $0.6 million, respectively.  The total fair value of stock awards vested during the years ended December 31, 2015, 2014 and 2013 was $0.3 million, $0.3 million and $0.1 million, respectively.

The deferred income tax benefits from stock options expense related to Evolving Systems U.K. totaled approximately $19,000, $15,000 and $15,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

Cash received from stock option exercises was $0.2 million, $0.2 million and $0.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.

During the year ended December 31, 2014, we had net settlement exercises of stock options, whereby the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market price on the date of exercise. Net settlement exercises during the year ended December 31, 2014, resulted in approximately 7,094 shares issued and 26,376 options cancelled in settlement of shares issued.  There were no net settlement exercises during the years ended December 31, 2015 or 2013.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (“ESPP”), we are authorized to issue up to 550,000 shares of our common stock to full-time employees, nearly all of whom are eligible to participate. Under the terms of the ESPP, employees may elect to have up to 15% of their gross compensation withheld through payroll deduction to purchase our common stock, capped at $25,000 annually and no more than 10,000 shares per offering period. The purchase price of the stock is 85% of the lower of the market price at the beginning or end of each three-month participation period. As of December 31, 2015, there were approximately 53,000 shares available for purchase. For the years ended December 31, 2015, 2014 and 2013, we recorded compensation expense of $13,000, $17,000 and $2,000, respectively, associated with grants under the ESPP which includes the fair value of the look-back feature of each grant as well as the 15% discount on the purchase price. This expense fluctuates each period primarily based on the level of employee participation.

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	0.25		0.25		0.25
Risk-free interest rate	0.07	%	0.03	%	0.05	%
Expected volatility	39.58	%	40.92	%	44.36	%
Expected dividend yield	6.3	%	4.5	%	4.0	%

Cash received from employee stock plan purchases was approximately $53,000, $68,000 and $8,000 for the years ended December 31, 2015, 2014 and 2013, respectively.  We issued shares related to the ESPP of approximately 9,000,  9,000 and 1,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

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Benefit Plans

12 Months Ended

Dec. 31, 2015

Benefit Plans [Abstract]

Benefit Plans

NOTE 9 — BENEFIT PLANS

We have established a defined contribution retirement plan for our employees under section 401(k) of the Internal Revenue Code (the “401(k) Plan”) that is available to all U.S. employees 21 years of age or older with a month of service. Beginning in 2012, we adopted a Safe Harbor 401(k) requiring us to contribute 3% of the employee's compensation for each eligible employee, regardless of whether the employee chooses to participate in the plan. All employee contributions are fully vested immediately and employer contributions vest over a period of three years.  Evolving Systems U.K. has established a defined contribution pension scheme that is available to all employees in their first full month of employment.  Employees may contribute a percentage of their earnings, the amount of which is dependent upon the age of the employee, not to exceed the maximum statutory contribution amount.  We match 5% of employee contributions.  All contributions are immediately vested in their entirety.

During 2015, 2014 and 2013, we recorded a consolidated expense of $0.4 million, $0.4 million and $0.3 million, under the aforementioned plans, respectively.

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Earnings Per Common Share

12 Months Ended

Dec. 31, 2015

Earnings Per Common Share [Abstract]

Earnings Per Common Share

NOTE 10 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS 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. The following is the reconciliation of the numerators and denominators of the basic and diluted EPS computations (in thousands except per share data):

	For the Years Ended December, 31
	2015		2014		2013
Basic income per share:
Net income	$	3,296	$	5,608	$	3,806
Basic weighted average shares outstanding		11,693		11,642		11,459
Basic income per share:
Net Income	$	0.28	$	0.48	$	0.33
Diluted income per share:
Net income	$	3,296	$	5,608	$	3,806
Weighted average shares outstanding		11,693		11,642		11,459
Effect of dilutive securities - options		242		284		297
Diluted weighted average shares outstanding		11,935		11,926		11,756
Diluted income per share:
Net Income	$	0.28	$	0.47	$	0.32

Weighted average options to purchase approximately 0.3 million, 0.1 million and 0.1 million shares of common stock equivalents were excluded from the computation of diluted weighted average shares outstanding for the years ended December 31, 2015, 2014 and 2013, 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.

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2015

Commitments And Contingencies [Abstract]

Commitments And Contingencies

NOTE 11  — COMMITMENTS AND CONTINGENCIES

(a)Lease Commitments

We lease office and operating facilities and equipment under non-cancelable operating leases. Current facility leases include our headquarters in Englewood, Colorado, Durham, North Carolina, London and Bath, England, Bangalore and Kolkata, India, Kuala Lumpur, Malaysia and Bucharest, Romania.  Rent expense was $0.6 million, $0.6 million and $0.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.  Rent expense is net of sublease rental income.  There were was no sublease rental income for the years ended December 31, 2015, 2014 and 2013.

Our headquarters facility lease extends for the term through November 30, 2017.  The lease contains a clause that adjusts the lease rate every year. The lease rate increases annually as of December 1. Our London, England facility contains a clause which gives us six months free rent over the five year term. We account for the effect of such escalating lease payments as if the lease rate were consistent over the lease term. Future minimum commitments under non-cancelable operating leases and capital leases gross of sublease payments as of December 31, 2015 are as follows (in thousands):

	Operating Leases	Capital Leases
2016	$          656	$              6
2017	626	1
2018	438	-
2019	243	-
2020	56	-
Total minimum lease payments	$       2,019	7
Less: Amount representing interest		(1)
Principal balance of capital lease obligations		6
Less: Current portion of capital lease obligations		(5)
Long-term portion of capital lease obligations		$              1

(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. Accordingly, we did not record any liabilities for these agreements as of December 31, 2015 and 2014.

We enter into standard indemnification terms with customers and suppliers, as discussed below, in the ordinary course of business.  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 customer 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 if the indemnification to customers results from the subcontractor’s failure to perform. To the extent we are unable to recover damages from a subcontractor, 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 indemnification arising out of subcontractors’ failure to perform. We did not record any liabilities for these agreements as of December 31, 2015 and 2014.

Our standard license agreements contain product warranties that the software will be free of material defects and will operate in accordance with 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 value of the product warranty provisions in the license agreements in place with our customers is minimal.  Accordingly, we did not record any liabilities for these product warranty provisions as of December 31, 2015 and 2014.

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. We have not historically incurred any significant costs related to product indemnification claims. Accordingly, we did not record any liabilities for these indemnification provisions as of December 31, 2015 and 2014.

In connection with our acquisition of Telespree on October 24, 2013, we agreed to make a cash payment of $0.5 million on the one year anniversary of the closing.  This payment was subject to reduction for certain claims and has not been paid to date.  We have made claims against this payment which are currently under dispute.  Once settled the final payment will be released.

(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. 

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Segment Information

12 Months Ended

Dec. 31, 2015

Segment Information [Abstract]

Segment Information

NOTE 12  — 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 Chief Financial Officer decision-makers (“CODM”). These chief operating decision makers review revenue by segment and review overall results of operations.

We currently operate our business as two operating segments based on revenue type:  license fees and services revenue and customer support revenue (as shown on the consolidated statements of operations).  License fees and services (“L&S”) revenue represents the fees received from the license of software products and those services directly related to the delivery of the licensed products, such as fees for custom development, integration services and SaaS service.  Customer support (“CS”) revenue includes 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. Total assets by segment have not been disclosed as the information is not available to the chief operating decision-makers.

Revenue information by segments was as follows (in thousands):

	For the Years Ended December 31,
	2015		2014		2013
Revenue
License fees and services	$	15,584	$	19,738	$	15,998
Customer support		9,992		9,942		9,095
Total revenue		25,576		29,680		25,093
Revenue less costs of revenue, excluding
depreciation and amortization
License fees and services		10,703		13,956		10,433
Customer support		8,424		8,076		7,496
		19,127		22,032		17,929
Unallocated Costs
Other operating expenses		13,694		13,015		11,964
Depreciation and amortization		580		341		366
Restructuring		533		237		558
Interest income		(18)		(19)		(11)
Interest expense		121		17		20
Other (expense) income		-		27		(87)
Foreign currency exchange (gain) loss		6		9		39
Income from operations before income taxes	$	4,211	$	8,405	$	5,080

Geographic Regions

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 office in Colorado, North Carolina and U.K.-based Evolving Systems U.K. subsidiary.  Additionally, personnel in Bangalore and Kolkata, India, provide software development services to our global operations.  Financial information relating to operations by geographic region is as follows (in thousands):

	For the Year Ended December 31, 2015
Revenue		L&S		CS		Total
United Kingdom	$	2,191	$	1,765	$	3,956
Other		13,393		8,227		21,620
Total revenues	$	15,584	$	9,992	$	25,576
	For the Year Ended December 31, 2014
Revenue		L&S		CS		Total
United Kingdom	$	3,551	$	2,017	$	5,568
Nigeria		2,954		473		3,427
Mexico		2,478		722		3,200
Other		10,755		6,730		17,485
Total revenues	$	19,738	$	9,942	$	29,680
	For the Year Ended December 31, 2013
Revenue		L&S		CS		Total
United Kingdom	$	3,018	$	1,903	$	4,921
Other		12,980		7,192		20,172
Total revenues	$	15,998	$	9,095	$	25,093

		December 31,		December 31,
Long-lived assets, net		2015		2014
United States	$	13,026	$	1,998
United Kingdom		15,318		16,091
Other		341		188
	$	28,685	$	18,277

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Restructuring

12 Months Ended

Dec. 31, 2015

Restructuring [Abstract]

Restructuring

NOTE 13 — RESTRUCTURING

During the fourth quarter of 2015, we undertook a reduction in workforce involving the termination of employees resulting in an expense of $0.5 million primarily related to severance for the affected employees. The reduction in workforce was related to the consolidation of duplicative functions and alignment of staff with ongoing business activity as a result of the acquisition of Evolving Systems NC in the third quarter of 2015.  Restructuring expense of $0.2 million and $0.6 million was recorded for the years ending December 31, 2014 and 2013, respectively, due to severance for a reduction in workforce.  The reduction in workforce was related to the acquisition of Evolving Systems Labs in the fourth quarter of 2013.

As of December 31, 2015, $0.5 million has been paid.  The restructuring liability was $25,000 and $0 as of December 31, 2015 and 2014, respectively.

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Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information (Unaudited) [Abstract]

Quarterly Financial Information (Unaudited)

NOTE 14 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information is as follows (in thousands, except per share data):

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Year Ended December 31, 2015
Total revenue		$	6,660	$	6,071	$	5,773	$	7,072
	Less:  cost of revenue and operating expenses		5,238		5,130		4,819		6,069
Income from operations			1,422		941		954		1,003
Income before income taxes			1,299		1,093		712		1,107
Net income		$	860	$	780	$	570	$	1,086
Net income per common share:
	Basic income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
	Diluted income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
Year Ended December 31, 2014
Total revenue		$	6,582	$	7,939	$	7,560	$	7,599
	Less:  cost of revenue and operating expenses		5,555		5,322		5,241		5,123
Income from operations			1,027		2,617		2,319		2,476
Income before income taxes			929		2,514		2,506		2,456
Net income		$	651	$	1,676	$	1,679	$	1,602
Net income per common share:
	Basic income per common share - net income	$	0.06	$	0.14	$	0.14	$	0.14
	Diluted income per common share - net income	$	0.05	$	0.14	$	0.14	$	0.13

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Subsequent Events

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 15 — SUBSEQUENT EVENTS

On March 15, 2016, our Board of Directors declared a first quarter cash dividend of $0.11 per share, payable April 1, 2016, to stockholders of record on March 28, 2016.

On January 1, 2016, our Board of Directors adopted a resolution promoting Thomas Thekkethala from President of the Company, to the position of Chief Executive Officer.  Mr. Thekkethala joined the Company on September 30, 2015 in connection with the Company’s acquisition of SSM and serves on the Company’s Board.

Thaddeus Dupper, who has served as the CEO of the Company since 2007, stepped down as the CEO effective January 1, 2016, and will continue to serve as the Company’s non-executive Chairman of the Board. The Company entered into a Consulting Agreement with Mr. Dupper to provide consulting services to the Company on an as-needed basis.  Mr. Dupper will be paid severance in accordance with his employment agreement. 

The Board also promoted Daniel J. Moorhead, Vice President of Finance & Administration to Chief Financial Officer and entered into an employment agreement with Mr. Moorhead.

In February 2016, we undertook a reduction in workforce involving the termination of employees resulting in an expense of approximately $0.6 million primarily related to severance for the affected employees. The reduction in workforce was related to the consolidations of duplicative functions and alignment of staff with ongoing business activity as a result of the acquisition of Evolving Systems NC, Inc. in the third quarter of 2015.

On February 29, 2016, we entered into the Fifth Amendment to the Loan and Security Agreement with East West Bank to enter into a Term Loan (the “Term Loan”) for $6.0 million.  The $6.0 million will bear interest at a floating rate equal to the U.S.A. Prime Rate plus 1.0%. The Term Loan is secured by substantially all of the assets of Evolving Systems, including a pledge, subject to certain limitations with respect to stock of foreign subsidiaries, of the stock of the existing and future direct subsidiaries of Evolving Systems.  Interest shall accrue from the date the Term Loan is made at the aforementioned rate and shall be payable monthly.  The Term Loan shall be repaid in 36 equal monthly installments of principal, plus accrued but unpaid interest, commencing on January 1, 2017 and continuing on the first day of each month thereafter through and including January 1, 2020.  On the Term Loan maturity date, the outstanding principal amount of the Term Loan and all accrued and unpaid interest thereon shall be immediately due and payable.  The Term Loan, once repaid, may not be reborrowed. We must maintain a minimum current ratio, a specified ratio of Total Liabilities to EBITDA and a minimum fixed charge coverage ratio which are as defined in the Term Loan. The Term Loan requires us to pay two annual credit facility fees of $18,750 and legal fee equal to $1,000. The Term Loan agreement required us to use the term loans proceeds and $4.0 million from our cash balances to pay off the two existing Revolving Facilities totaling $10.0 million.  The Term Loan matures on January 1, 2020.Refer to Note 5, Revolving Line of Credit, of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information regarding the Loan and Security Agreement. 

On March 1, 2016, John Spirtos provided notice to Evolving Systems that he is resigning from the board of directors effective March 4, 2016 and will not stand for election at Evolving Systems’ next annual shareholders’ meeting. Mr. Spirtos had served on the Company’s Board of Directors since December 2009 and was the Chairman of the Investment and Nominating & Governance Committees and a member of the Audit Committee.  There are no disagreements with the Company.

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Organization And Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2015

Organization And Summary Of Significant Accounting Policies [Abstract]

Organization

Organization — We are a provider of software solutions and services to the wireless, wireline and cable markets. We maintain long-standing relationships with many of the largest wireless, wireline and cable companies worldwide. Our customers rely on us to develop, deploy, enhance and maintain software solutions that provide a variety of service activation and provisioning functions.  Our service activation solution, Tertio® (“TSA”) is used to activate bundles of voice, video and data services for wireless, wireline and cable network operators; our SIM card activation solution, Dynamic SIM Allocation TM (“DSA”) is used to dynamically allocate and assign resources to Mobile Network Operators (“MNOs”) devices that rely on SIM cards; our Mobile Data Enablement TM (“MDE”) solution provides a data consumption and policy management solution for wireless carriers and Mobile Virtual Network Operators (“MVNOs”) that monitor the usage and consumption of data services; our Total Number Management™ (“TNM”) product is a scalable and fully automated database solution that enables operators to reliably and efficiently manage their telephone numbers as well as other communication identifiers (i.e. SIMs, MSISDNs, IMSIs, ICCIDs, IPs). Our solutions can be deployed on premise or offered as a Software-as-a-Service (“SaaS”).

On September 30, 2015 we announced the acquisition of privately held RateIntegration, Inc., d/b/a Sixth Sense Media (“SSM”), a provider of real time analytics and marketing solutions to wireless carriers.  SSM’s software solution platform, Real-time Lifecycle Marketing™ (“RLM”), enables carriers’ marketing departments to innovate, execute and manage highly-personalized and contextually-relevant, interactive campaigns that engage consumers in real time.

We believe the addition of SSM’s RLM product to our existing service activation and data enablement products will produce a powerful platform for wireless carriers. A product suite which we refer to as our Mobile Marketing Solutions (“MMS”) will provide sophisticated, highly tailored mobile campaigns which can be executed based on critical subscriber data captured during the initial activation experience (DSA and RLM) as well as in-life subscriber usage via MDE.  We see the opportunity to leverage our technology to provide MNOs with sophisticated mobile marketing campaigns that will extend beyond voice, text and data usage campaigns and provide marketing services that will assist MNOs to market services that include retail mobile marketing, gaming, streaming video as well as social media based campaigns.

Business Combination

Business Combination -On September 30, 2015 we acquired SSM, now known as Evolving Systems NC.  This business combination is reflected in these consolidated financial statements since the acquisition date.  Refer to Note 2, Acquisition, for more information regarding the acquisition.

We account for business combinations in accordance with the acquisition method. The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition.  The excess of the purchase price over the fair value of assets acquired is recognized as goodwill. Certain adjustments to the assessed fair values of the assets and liabilities made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income.  Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition.

 The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income in periods following a business combination. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on the characteristics of the asset and the availability of information.

Principles Of Consolidation

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

Use Of Estimates

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 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 estimated hours to complete projects accounted for using the percentage-of-completion method, allowance for doubtful accounts, income tax valuation allowance, fair values of long-lived assets, valuation of intangible assets and goodwill, useful lives for property, equipment and intangible assets, business combinations, capitalization of internal software development costs and fair value of stock-based compensation amounts.  Actual results could differ from these estimates.

Foreign Currency

Foreign Currency — Our functional 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 consolidated balance sheets are translated at the spot rate of exchange during the applicable period.  Our 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 income (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 (loss) in the period in which they occur.

Goodwill

Goodwill − Goodwill is the excess of acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired.  Goodwill is not amortized, but tested for impairment annually or whenever indicators of impairment exist. These indicators may include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. For purposes of the goodwill evaluation, we compare the fair value of each of our reporting units to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, we would then compare the fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying amount over the fair value would be charged to operations as an impairment loss.

Intangible Assets

Intangible Assets − Amortizable intangible assets consist primarily of purchased software and licenses, customer contracts and relationships, trademarks and tradenames, and business partnerships acquired in conjunction with our purchase of Evolving Systems Labs and Evolving Systems NC.  These assets are amortized using the straight-line method over their estimated lives.

We assess the impairment of identifiable intangibles if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

If we determine that the carrying value of intangibles and/or long-lived assets may not be recoverable, we compare the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition to the asset’s carrying amount. If an amortizable intangible or long-lived asset is not deemed to be recoverable, we recognize an impairment loss representing the excess of the asset’s carrying value over its estimated fair value.

Fair Value Measurements

Fair Value Measurements − Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash And Cash Equivalents

Cash and Cash Equivalents - All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.

Revenue Recognition

Revenue Recognition − We recognize revenue when an agreement is signed, the fee is fixed or determinable and collectability is reasonably assured. We recognize revenue from two primary sources: license fees and services, and customer support.   The majority of our license fees and services revenue is generated from fixed-price contracts, which provide for licenses to our software products and services to customize such software to meet our customers’ use.   When the customization services are determined to be essential to the functionality of the delivered software, we recognize revenue using the percentage-of-completion method of accounting. In these types of arrangements, we do not typically have vendor specific objective evidence (“VSOE”) of fair value on the license fee/services portion (services are related to customizing the software) of the arrangement due to the large amount of customization required by our customers; however, we do have VSOE for the warranty/maintenance services based on the renewal rate of the first year of maintenance in the arrangement. The license/services portion is recognized using the percentage-of-completion method of accounting and the warranty/maintenance services are separated based on the renewal rate in the contract and recognized ratably over the warranty or maintenance period. We estimate the percentage-of-completion for each contract based on the ratio of direct labor hours incurred to total estimated direct labor hours and recognize revenue based on the percent complete multiplied by the contract amount allocated to the license fee/services.  Since estimated direct labor hours, and changes thereto, can have a significant impact on revenue recognition, these estimates are critical and we review them regularly. If the arrangement includes a customer acceptance provision, the hours to complete the acceptance testing are included in the total estimated direct labor hours; therefore, the related revenue is recognized as the acceptance testing is performed. Revenue is not recognized in full until the customer has provided proof of acceptance on the arrangement.  Generally, our contracts are accounted for individually. However, when certain criteria are met, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. We record amounts billed in advance of services being performed as unearned revenue. Unbilled work-in-progress represents revenue earned but not yet billable under the terms of the fixed-price contracts. All such amounts are expected to be billed and collected within 12 months.

We may encounter budget and schedule overruns on fixed-price contracts caused by increased labor or overhead costs. We make adjustments to cost estimates in the period in which the facts requiring such revisions become known. We record estimated losses, if any, in the period in which current estimates of total contract revenue and contract costs indicate a loss. If revisions to cost estimates are obtained after the balance sheet date but before the issuance of the interim or annual financial statements, we make adjustments to the interim or annual financial statements accordingly.

In arrangements where the services are not essential to the functionality of the delivered software, we recognize license revenue when a license agreement has been signed, delivery and acceptance have occurred, the fee is fixed or determinable and collectability is reasonably assured. Where applicable, we unbundle and record as revenue fees from multiple element arrangements as the elements are delivered to the extent that VSOE of fair value of the undelivered elements exist. If VSOE for the undelivered elements does not exist, we defer fees from such arrangements until the earlier of the date that VSOE does exist on the undelivered elements or all of the elements have been delivered.

We recognize revenue from fixed-price service contracts using the proportional performance method of accounting, which is similar to the percentage-of-completion method described above. 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 obligation to our customers under such arrangements is fulfilled.

We recognize revenue from our MDE contracts based on the number of transactions per month multiplied by a factor based on a unique table for transaction volumes relating to each account.

We recognize customer support, including maintenance revenue, ratably over the service contract period. When maintenance is bundled with the original license fee arrangement, its fair value, based upon VSOE, is deferred and recognized during the periods when services are provided.

Stock-Based Compensation

Stock-based Compensation − We account for stock-based compensation by applying a fair-value-based measurement method to account for share-based payment transactions with 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.

Comprehensive Income

Comprehensive Income - Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency and unrealized gains and losses on marketable securities categorized as available-for-sale.

Restricted Cash

Restricted Cash — As of December 31, 2015 we no longer had restricted cash.  As of December 31, 2013, we had $24,000 of restricted cash related to securing a letter of credit for our San Francisco, California lease which has since expired.

Contract Receivables, Unbilled Work-in-Progress And Allowance For Doubtful Accounts

Contract Receivables, Unbilled Work-in-Progress and Allowance for Doubtful Accounts — 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.  An allowance is placed against accounts receivable or unbilled work in progress for our best estimate of the amount of probable credit losses. We determine the allowance based on historical write-off experience and information received during collection efforts. We review our allowances monthly and past due balances over 90 days are reviewed individually for collectability.  Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers.

The following table reflects the activity in the allowance for doubtful accounts:

		Balance at	Bad Debt	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Expense/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for doubtful accounts	$             43	$             41	$                -	$             (1)	$             83
2014	Allowance for doubtful accounts	$             73	$                -	$           (25)	$             (5)	$             43
2013	Allowance for doubtful accounts	$             70	$                -	$                -	$               3	$             73

The following table reflects the activity in the allowance for unbilled work-in-progress:

		Balance at	Unbilled Work-in-Progress	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Allowance/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for unbilled work-in-progress	$           306	$                -	$          (306)	$                 -	$                 -
2014	Allowance for unbilled work-in-progress	$           317	$                -	$                 -	$            (11)	$            306
2013	Allowance for unbilled work-in-progress	$           295	$           114	$          (114)	$              22	$            317

Long Term Deferred Revenue

Long Term Deferred Revenue — Long term deferred revenue are amounts which revenue will not be recognized within twelve months of the balance sheet date.  As of December 31, 2015 and 2014, we had $0 and $0.4 million, respectively, reported in the accompanying consolidated balance sheets.

Concentration Of Credit Risk

Concentration of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk consist primarily of contract receivables and unbilled work-in-progress. We perform on-going evaluations of customers’ financial condition and, generally, require no collateral from customers.

A substantial portion of our revenue is from a limited number of customers, all in the telecommunications industry.

For the year ended December 31, 2015, no significant customer exceeded the threshold (defined as contributing at least 10%) of revenue from continuing operations.  For the year ended December 31, 2014, two significant customers accounted for 24%  (13% and 11%) of revenue from continuing operations.  These customers are large telecommunications operators in Europe and Mexico. For the year ended December 31, 2013 one significant customer accounted for 12% of revenue from continuing operations.  This customer is a large telecommunications operator in Europe.

As of December 31, 2015, two significant customers accounted for approximately 36% (25% and 11%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa and Europe.  As of December 31, 2014, three significant customers accounted for approximately 55%  (26%,  16% and 13%) of contract receivables and unbilled work-in-progress.  These customers are large telecommunications operators in Africa, Mexico and Europe.

We are subject to concentration of credit risk with respect to our cash and cash equivalents, which we attempt to minimize by maintaining our cash and cash equivalents with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”).

Our funds not under any FDIC program were $7.3 million and $9.3 million as of December 31, 2015 and 2014, respectively.

Sales, Use And Other Value Added Tax

Sales, Use and Other Value Added Tax — Revenue is recorded net of applicable state, use and other value added taxes.

Advertising And Promotion Costs

Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred. Advertising costs totaled approximately $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013.

Capitalization Of Internal Software Development Costs

Capitalization of Internal Software Development Costs — We expend amounts on product development, particularly for new products and/or for enhancements of existing products. For internal development of software products that are to be licensed by us, we expense the cost of developing software prior to establishing technological feasibility and those costs are capitalized once technological feasibility has been established. Capitalization ceases upon general release of the software. The determination of whether internal software development costs are subject to capitalization is, by its nature, highly subjective and involves significant judgments. This decision could significantly affect earnings during the development period.  Further, once capitalized, the software costs are generally amortized on a straight-line basis over the estimated economic life of the product. The determination of the expected useful life of a product is highly judgmental. Finally, capitalized software costs must be assessed for impairment if facts and circumstances warrant such a review. We did not capitalize any internal software development costs during the three years ended December 31, 2015. In addition, we did not have any capitalized internal software development costs included in our December 31, 2015 and 2014 Consolidated Balance Sheets. We believe that during these periods no material internal software development costs were required to be capitalized. Our conclusion is primarily based on the fact that the feature−rich, pre−integrated, and highly−scalable nature of our products requires that our development efforts include complex design, coding and testing methodologies, which include next generation software languages and development tools. Development projects of this nature carry a high degree of development risk. Substantially all of our internal software development efforts are of this nature, and therefore, we believe the period between achieving technological feasibility and the general release of the software to operations is so short that any costs incurred during this period are not material.

Property And Equipment And Long-Lived Assets

Property and Equipment and Long-Lived Assets — Property and equipment are stated at cost or estimated fair value if acquired in an acquisition, less accumulated depreciation, and are depreciated over their estimated useful lives, or the lease term, if shorter, using the straight-line method. Leasehold improvements are stated at cost, less accumulated amortization, and are amortized over the shorter of the lease term or estimated useful life of the asset. Maintenance and repair costs are expensed as incurred.

We review our long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. We evaluate the recoverability of an asset or asset group by comparing its carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, we recognize an impairment charge as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

Income Taxes

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 consolidated balance sheets, as well as operating loss 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 the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

Recent Accounting Pronouncements

Recent Accounting Pronouncements  —In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” Topic 606.  This Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this Update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. This ASU is effective retrospectively for fiscal years, and interim periods within those years beginning after December 15, 2016 for public companies and 2017 for non-public entities, however the FASB has deferred the effective date by one year. We do not expect the adoption of this standard to have a significant impact on the Company’s financial position and results of operations.

In August 2014, the FASB issued ASU 2014-15 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  Management of public and private companies will be required to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. Management will be required to make this evaluation for both annual and interim reporting periods, if applicable. The standard is effective for annual and interim periods ending after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not expect the adoption of this ASU to impact the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to put most leases on their balance sheets by recognizing a lessee’s rights and obligations, while expenses will continue to be recognized in a similar manner to today’s legacy lease accounting guidance. This ASU could also significantly affect the financial ratios used for external reporting and other purposes, such as debt covenant compliance. This ASU will be effective for us on January 1, 2019, with early adoption permitted. We are currently in the process of assessing the impact of this ASU on our consolidated financial statements.

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Organization And Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Organization And Summary Of Significant Accounting Policies [Abstract]

Activity In Allowance For Doubtful Accounts

		Balance at	Bad Debt	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Expense/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for doubtful accounts	$             43	$             41	$                -	$             (1)	$             83
2014	Allowance for doubtful accounts	$             73	$                -	$           (25)	$             (5)	$             43
2013	Allowance for doubtful accounts	$             70	$                -	$                -	$               3	$             73

Activity In Allowance For Unbilled Work-In-Progress

		Balance at	Unbilled Work-in-Progress	Write-Offs Charged	Effects of Foreign Currency	Balance at
Fiscal		Beginning	Allowance/	to	Exchange	End of
Year	Description	of Period	(Recovery)	Allowance	Rates	Period
2015	Allowance for unbilled work-in-progress	$           306	$                -	$          (306)	$                 -	$                 -
2014	Allowance for unbilled work-in-progress	$           317	$                -	$                 -	$            (11)	$            306
2013	Allowance for unbilled work-in-progress	$           295	$           114	$          (114)	$              22	$            317

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Acquisition (Tables)

12 Months Ended

Dec. 31, 2015

Acquisition [Abstract]

Summary Of Total Purchase Price

	September 30, 2015
Cash Consideration
Initial Cash Purchase Price	$	9,750
Cash/Working Capital Adjustment		535
Total Cash Consideration	$	10,285
Assumed Liabilities		250
Total purchase price	$	10,535

Schedule Of Assets Acquired and Liabilities Assumed At Acquisition Date

	September 30, 2015
Cash and cash equivalents	$	1,521
Contract receivables		1,057
Unbilled work-in-progress		89
Intangible assets		4,642
Prepaid and other current assets		68
Deferred tax asset		-
Other assets, non-current		32
Total identifiable assets acquired	$	7,409
Accounts payable and accrued liabilities	$	1,506
Deferred tax liability		1,760
Deferred revenue		557
Total identifiable liabilities acquired	$	3,823
Net identifiable assets acquired		3,586
Goodwill		6,949
Net assets acquired	$	10,535

Intangible Assets Related To Acquisition

	December 31, 2015
		Gross Amount		Accumulated Amortization		Net Carrying Amount	Weighted-Average Amortization Period
Purchased software	$	1,679	$	53	$	1,626	8 yrs
Trademarks and tradenames		122		15		107	2 yrs
Non-competition		33		4		29	2 yrs
Customer relationships		2,808		100		2,708	7 yrs
	$	4,642	$	172	$	4,470	7.19 yrs

Schedule Of Revenue And Earnings From October 1 Through December 31, 2015

Revenue and earnings included in the
Consolidated Statement of Operations from
October 1, 2015 through December 31, 2015
Revenue	$	1,367
Net Income		306

Schedule Of Pro Forma Information

	Year Ended December 31,
	2015		2014
		(unaudited)		(unaudited)
Revenue	$	30,190	$	35,782
Earnings		3,645		5,718

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Goodwill And Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2015

Goodwill And Intangible Assets [Abstract]

Summary Of Changes In Carrying Amount Of Goodwill

	License and Services						Customer  Support					Total
		U.S.		India		UK		U.S.		UK		Goodwill
Balance as of December 31, 2013	$	1,097	$	-	$	7,532	$	-	$	9,307	$	17,936
Effects of changes in foreign
currency exchange rates (1)		-		-		(414)		-		(512)		(926)
Balance as of December 31, 2014	$	1,097	$	-	$	7,118	$	-	$	8,795	$	17,010
Goodwill acquired during the year		5,209		184				1,556				6,949
Acquired goodwill adjusted during the year		(25)						(7)				(32)
Effects of changes in foreign
currency exchange rates (1)		-		(0)		(351)		-		(434)		(785)
Balance as of December 31, 2015	$	6,281	$	184	$	6,767	$	1,549	$	8,361	$	23,142

Summary Of Identifiable Intangible Assets

	December 31, 2015						December 31, 2014
		(2) Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount	Weighted-Average Amortization Period
Purchased software	$	2,118	$	171	$	1,947	$	439	$	64	$	375	7.3 yrs
Trademarks and tradenames		185		43		142		63		15		48	2.6 yrs
Non-competition		33		4		29		-		-		-	2.0 yrs
Customer relationships		3,024		159		2,865		216		31		185	6.8 yrs
	$	5,360	$	377	$	4,983	$	718	$	110	$	608	6.8 yrs

Summary Of Expected Future Amortization Expense Related To Identifiable Intangibles

Year ending December 31,
2016	$	783
2017		764
2018		703
2019		693
2020		693
Thereafter		1,347
	$	4,983

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Balance Sheet Components (Tables)

12 Months Ended

Dec. 31, 2015

Balance Sheet Components [Abstract]

Property And Equipment

	December 31,
Property and equipment:	2015		2014
Computer equipment and purchased software	$	4,814	$	4,796
Furniture, fixtures and leasehold improvements		1,155		1,078
		5,969		5,874
Less accumulated depreciation		(5,409)		(5,215)
	$	560	$	659

Assets Acquired Under Capital Lease

	December 31,
Assets acquired under capital lease:	2015		2014
Original book value	$	24	$	24
Accumulated amortization		(18)		(13)
Net book value	$	6	$	11

Accounts Payable And Accrued Liabilities

	December 31,
Accounts payable and accrued liabilities:	2015		2014
Accounts payable	$	716	$	729
Accrued liabilities		2,520		2,366
Accrued compensation and related expenses		1,193		1,365
	$	4,429	$	4,460

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Taxes [Abstract]

Pre-tax Income From Continuing Operations

	For the Years Ended December 31,
		2015		2014		2013
Domestic	$	(2,948)	$	(1,274)	$	(1,347)
Foreign		7,159		9,679		6,427
Total	$	4,211	$	8,405	$	5,080

Expense (Benefit) From Continuing operations For Income Taxes

	For the Years Ended December 31,
		2015		2014		2013
Current:
Federal	$	789	$	1,468	$	441
Foreign		1,174		1,637		1,015
State		76		(26)		70
Total current		2,039		3,079		1,526
Deferred:
Federal		(1,023)		(301)		(66)
Foreign		16		19		(178)
State		(117)		0		(8)
Total deferred		(1,124)		(282)		(252)
Total	$	915	$	2,797	$	1,274

Components Of Deferred Tax Assets And Liabilities

	As of December 31,
	2015		2014
Deferred tax assets:
Foreign tax credits carryforwards	$	3,667	$	-
Net operating loss carryforwards - State		540		555
Research and development credits		303		303
Equity compensation		686		661
AMT credit		770		942
Depreciable assets		110		107
Intangibles		-		203
Accrued liabilities and reserves		340		607
Total deferred tax assets		6,416		3,378
Deferred tax liabilities:
Intangibles		(1,512)		-
Undistributed foreign earnings		(666)		(897)
Accrued liabilities and reserves		(23)		(16)
Total deferred tax liability		(2,201)		(913)
Net deferred tax assets, before valuation allowance		4,215		2,465
Valuation allowance		(4,215)		(1,799)
Net deferred tax  asset	$	-	$	666
Financial statement classification:
Current deferred tax asset	$	-	$	80
Long-term tax (liability) asset		-		586
	$	-	$	666

Income Tax Expense Reconciliation

	For the Years Ended December 31,
		2015		2014		2013
U.S. federal income tax expense at statutory rates	$	2,392	$	4,595	$	2,143
State income tax expense, net of federal impact		-		542		46
Foreign Tax Credit		(3,667)		-		-
Foreign rate differential		(449)		(1,452)		(332)
Foreign deemed dividends		939		1,783		871
Undistributed foreign earnings		(221)		-		-
Change in valuation allowance		2,415		(1,971)		(492)
Research and development expenses		(1,096)		(867)		(859)
Foreign taxes		314		53		93
Section 78 Gross-UP		371		-		-
Permanent differences and other, net		(83)		114		(196)
Total tax expense	$	915	$	2,797	$	1,274

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Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary Of Stock-Based Compensation Expenses

	For the Years Ended December 31,
	2015		2014		2013
Cost of license fees and services, excluding
depreciation and amortization	$	72	$	73	$	29
Cost of customer support, excluding
depreciation and amortization		10		8		4
Sales and marketing		36		31		24
General and administrative		112		181		207
Product development		87		108		24
Total share based compensation	$	317	$	401	$	288

Summary Of Stock Option Activity

			Weighted-
			Average
		Weighted-	Remaining	Aggregate
	Number of	Average	Contractual	Intrinsic
	Shares	Exercise	Term	Value
	(in thousands)	Price	(Years)	(in thousands)
Options outstanding at December 31, 2013	676	$                5.11	4.76	$              3,491
Options granted	168	$              10.15
Less options forfeited	(132)	$              12.20
Less options exercised	(82)	$                5.31
Options outstanding at December 31, 2014	630	$                4.94	5.69	$              2,959
Options granted	331	$                7.13
Less options forfeited	(27)	$                9.39
Less options exercised	(100)	$                2.43
Options outstanding at December 31, 2015	834	$                5.97	6.94	$                 957
Options exercisable at December 31, 2015	463	$                4.74	5.11	$                 954

Summary Of Stock Option Outstanding By Exercise Price Ranges

								Stock Options
Stock Options Outstanding								Exercisable
						Weighted Avg.
					Number of	Remaining	Weighted Avg.	Number of	Weighted Avg.
Range of					Shares	Contractual Life	Exercise	Shares	Exercise
Exercise Prices					(in thousands)	(years)	Price	(in thousands)	Price
$	0.01	-	$	1.34	145	2.41	$                0.80	145	$                 0.80
$	2.80	-	$	2.86	30	3.19	$                2.84	30	$                 2.84
$	3.20	-	$	3.72	86	4.02	$                3.69	86	$                 3.70
$	4.09	-	$	5.45	37	6.12	$                4.44	35	$                 4.45
$	6.00	-	$	6.63	247	9.31	$                6.09	32	$                 6.52
$	7.70	-	$	10.90	289	8.55	$                9.65	135	$                 9.73
					834	6.94	$                5.97	463	$                 4.74

Stock Incentive Plans [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Assumptions For Weighted Average Fair Value Of Stock Options

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	6.0		5.9		6.1
Risk-free interest rate	1.37	%	1.69	%	1.31	%
Expected volatility	42.01	%	55.88	%	59.17	%
Expected dividend yield	6.4	%	4.0	%	4.1	%

Employee Stock Purchase Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Assumptions For Weighted Average Fair Value Of Stock Options

	For the Years Ended December 31,
	2015		2014		2013
Expected term (years)	0.25		0.25		0.25
Risk-free interest rate	0.07	%	0.03	%	0.05	%
Expected volatility	39.58	%	40.92	%	44.36	%
Expected dividend yield	6.3	%	4.5	%	4.0	%

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Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Common Share [Abstract]

Summary Of Basic And Diluted Earnings Per Share

	For the Years Ended December, 31
	2015		2014		2013
Basic income per share:
Net income	$	3,296	$	5,608	$	3,806
Basic weighted average shares outstanding		11,693		11,642		11,459
Basic income per share:
Net Income	$	0.28	$	0.48	$	0.33
Diluted income per share:
Net income	$	3,296	$	5,608	$	3,806
Weighted average shares outstanding		11,693		11,642		11,459
Effect of dilutive securities - options		242		284		297
Diluted weighted average shares outstanding		11,935		11,926		11,756
Diluted income per share:
Net Income	$	0.28	$	0.47	$	0.32

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Commitments And Contingencies (Tables)

12 Months Ended

Dec. 31, 2015

Commitments And Contingencies [Abstract]

Future minimum commitments

	Operating Leases	Capital Leases
2016	$          656	$              6
2017	626	1
2018	438	-
2019	243	-
2020	56	-
Total minimum lease payments	$       2,019	7
Less: Amount representing interest		(1)
Principal balance of capital lease obligations		6
Less: Current portion of capital lease obligations		(5)
Long-term portion of capital lease obligations		$              1

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2015

Segment Information [Abstract]

Segment Information

	For the Years Ended December 31,
	2015		2014		2013
Revenue
License fees and services	$	15,584	$	19,738	$	15,998
Customer support		9,992		9,942		9,095
Total revenue		25,576		29,680		25,093
Revenue less costs of revenue, excluding
depreciation and amortization
License fees and services		10,703		13,956		10,433
Customer support		8,424		8,076		7,496
		19,127		22,032		17,929
Unallocated Costs
Other operating expenses		13,694		13,015		11,964
Depreciation and amortization		580		341		366
Restructuring		533		237		558
Interest income		(18)		(19)		(11)
Interest expense		121		17		20
Other (expense) income		-		27		(87)
Foreign currency exchange (gain) loss		6		9		39
Income from operations before income taxes	$	4,211	$	8,405	$	5,080

Financial Information Relating To Operations By Geographic Region

	For the Year Ended December 31, 2015
Revenue		L&S		CS		Total
United Kingdom	$	2,191	$	1,765	$	3,956
Other		13,393		8,227		21,620
Total revenues	$	15,584	$	9,992	$	25,576
	For the Year Ended December 31, 2014
Revenue		L&S		CS		Total
United Kingdom	$	3,551	$	2,017	$	5,568
Nigeria		2,954		473		3,427
Mexico		2,478		722		3,200
Other		10,755		6,730		17,485
Total revenues	$	19,738	$	9,942	$	29,680
	For the Year Ended December 31, 2013
Revenue		L&S		CS		Total
United Kingdom	$	3,018	$	1,903	$	4,921
Other		12,980		7,192		20,172
Total revenues	$	15,998	$	9,095	$	25,093

Summary Of Long-lived Assets, Net

		December 31,		December 31,
Long-lived assets, net		2015		2014
United States	$	13,026	$	1,998
United Kingdom		15,318		16,091
Other		341		188
	$	28,685	$	18,277

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Quarterly Financial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information (Unaudited) [Abstract]

Schedule Of Quarterly Financial Information

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Year Ended December 31, 2015
Total revenue		$	6,660	$	6,071	$	5,773	$	7,072
	Less:  cost of revenue and operating expenses		5,238		5,130		4,819		6,069
Income from operations			1,422		941		954		1,003
Income before income taxes			1,299		1,093		712		1,107
Net income		$	860	$	780	$	570	$	1,086
Net income per common share:
	Basic income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
	Diluted income per common share - net income	$	0.07	$	0.07	$	0.05	$	0.09
Year Ended December 31, 2014
Total revenue		$	6,582	$	7,939	$	7,560	$	7,599
	Less:  cost of revenue and operating expenses		5,555		5,322		5,241		5,123
Income from operations			1,027		2,617		2,319		2,476
Income before income taxes			929		2,514		2,506		2,456
Net income		$	651	$	1,676	$	1,679	$	1,602
Net income per common share:
	Basic income per common share - net income	$	0.06	$	0.14	$	0.14	$	0.14
	Diluted income per common share - net income	$	0.05	$	0.14	$	0.14	$	0.13

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Organization And Summary Of Significant Accounting Policies (Narrative) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($) item customer	Dec. 31, 2014 USD ($) customer	Dec. 31, 2013 USD ($) customer
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of recognized sources for revenue | item	2
Unbilled work in progress billing period	12 months
Restricted cash	$ 0
Number of days for individual review of past due balances	90 days
Long-term deferred revenue		$ 420,000
Funds not under any FDIC program	$ 7,300,000	9,300,000
Advertising costs	100,000	$ 200,000	$ 200,000
Capitalized internal software development costs	$ 0
California Lease [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Restricted cash			$ 24,000
Customer Concentration Risk [Member] | Revenue From Continuing Operations [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of customers contributing to revenue from continuing operations | customer	0	2
Concentration risk, percentage	10.00%	24.00%
Customer Concentration Risk [Member] | Contract Receivables And Unbilled Worl-In-Progress [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of customers accounting for contract receivables and unbilled work-in-progress | customer	2	3
Concentration risk, percentage	36.00%	55.00%
Customer Concentration Risk [Member] | Europe [Member] | Revenue From Continuing Operations [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of customers contributing to revenue from continuing operations | customer			1
Concentration risk, percentage			12.00%
Significant Customer One [Member] | Africa [Member] | Contract Receivables And Unbilled Worl-In-Progress [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage	25.00%	26.00%
Significant Customer One [Member] | Europe [Member] | Revenue From Continuing Operations [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage		13.00%
Significant Customer Two [Member] | Mexico [Member] | Revenue From Continuing Operations [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage		11.00%
Significant Customer Two [Member] | Mexico [Member] | Contract Receivables And Unbilled Worl-In-Progress [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage		16.00%
Significant Customer Two [Member] | Europe [Member] | Contract Receivables And Unbilled Worl-In-Progress [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage	11.00%
Significant Customer Three [Member] | Europe [Member] | Contract Receivables And Unbilled Worl-In-Progress [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
Concentration risk, percentage		13.00%

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Organization And Summary Of Significant Accounting Policies (Activity In Allowance For Doubtful Accounts) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Organization And Summary Of Significant Accounting Policies [Abstract]
Allowance for doubtful account, Balance at Beginning of Period	$ 43	$ 73	$ 70
Allowance for doubtful account, Bad Debt Expense/(Recovery)	41
Allowance for doubtful account, Write-Offs Charged to Allowance		(25)
Allowance for doubtful account, Effects Of Foreign Currency Exchange Rates	(1)	(5)	3
Allowance for doubtful account, Balance at End of Period	$ 83	$ 43	$ 73

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Organization And Summary Of Significant Accounting Policies (Activity In Allowance For Unbilled Work-In-Progress) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Organization And Summary Of Significant Accounting Policies [Abstract]
Allowance for unbilled work-in-progress, Balance at Beginning of Period	$ 306	$ 317	$ 295
Allowance for unbilled work-in-progress, Unbilled Work-in-Progress Allowance/(Recovery)			114
Allowance for unbilled work-in-progress, Write-Offs Charged to Allowance	(306)		(114)
Allowance for unbilled work-in-progress, Effects of Foreign Currency Exchange Rates		(11)	22
Allowance for unbilled work-in-progress, Balance at End of Period	$ 0	$ 306	$ 317

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Acquisition (Narrative) (Details) - USD ($) $ in Thousands		12 Months Ended
	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Goodwill		$ 23,142	$ 17,010	$ 17,936
Contingent consideration related to acquisition				178
Amortization expense		$ 266	$ 95	$ 211
Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Initial payment	$ 9,750
Working capital adjustment	535
Cash payment on anniversary of the transaction	250
Goodwill	6,949
Intangible assets	4,642
Weighted average amortization period		7 years 2 months 9 days
License And Services [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Goodwill	5,400
Customer Support [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Goodwill	$ 1,500
Trademarks And Tradenames [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Weighted average amortization period		2 years
Purchased Software [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Weighted average amortization period		8 years
Non-competition [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Weighted average amortization period		2 years
Customer Relationships [Member] | Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Weighted average amortization period		7 years

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Acquisition (Summary Of Total Purchase Price) (Details) - Evolving Systems NC, Inc [Member] $ in Thousands	Sep. 30, 2015 USD ($)
Business Acquisition [Line Items]
Initial Cash Purchase Price	$ 9,750
Cash/Working Capital Adjustment	535
Total Cash Consideration	10,285
Assumed Liabilities	250
Total purchase price	$ 10,535

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Acquisition (Schedule Of Assets Acquired and Liabilities Assumed At Acquisition Date) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Goodwill	$ 23,142		$ 17,010	$ 17,936
Evolving Systems NC, Inc [Member]
Business Acquisition [Line Items]
Cash and cash equivalents		$ 1,521
Contract receivables		1,057
Unbilled work-in-progress		89
Intangible assets		4,642
Prepaid and other current assets		68
Other assets, non-current		32
Total identifiable assets acquired		7,409
Accounts payable and accrued liabilities		1,506
Deferred tax liability		1,760
Deferred revenue		557
Total identifiable liabilities acquired		3,823
Net identifiable assets acquired		3,586
Goodwill		6,949
Net assets acquired		$ 10,535

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Acquisition (Intangible Assets Related To Acquisition) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 4,983	$ 608
Evolving Systems NC, Inc [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Amount	4,642
Accumulated Amortization	172
Net Carrying Amount	$ 4,470
Weighted average amortization period	7 years 2 months 9 days
Evolving Systems NC, Inc [Member] | Purchased Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 1,679
Accumulated Amortization	53
Net Carrying Amount	$ 1,626
Weighted average amortization period	8 years
Evolving Systems NC, Inc [Member] | Trademarks And Tradenames [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 122
Accumulated Amortization	15
Net Carrying Amount	$ 107
Weighted average amortization period	2 years
Evolving Systems NC, Inc [Member] | Non-competition [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 33
Accumulated Amortization	4
Net Carrying Amount	$ 29
Weighted average amortization period	2 years
Evolving Systems NC, Inc [Member] | Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 2,808
Accumulated Amortization	100
Net Carrying Amount	$ 2,708
Weighted average amortization period	7 years

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Acquisition (Schedule Of Revenue And Earnings From October 1 Through December 31, 2015) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenues	$ 7,072	$ 5,773	$ 6,071	$ 6,660	$ 7,599	$ 7,560	$ 7,939	$ 6,582	$ 25,576	$ 29,680	$ 25,093
Net income	1,086	$ 570	$ 780	$ 860	$ 1,602	$ 1,679	$ 1,676	$ 651	$ 3,296	$ 5,608	$ 3,806
Evolving Systems NC, Inc [Member]
Revenues	1,367
Net income	$ 306

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Acquisition (Schedule Of Pro Forma Information) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Acquisition [Abstract]
Revenue	$ 30,190	$ 35,782
Earnings	$ 3,645	$ 5,718

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Goodwill And Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Jul. 31, 2015
Goodwill And Intangible Assets [Line Items]
Goodwill	$ 23,142	$ 17,010	$ 17,936
Goodwill aquired during the period	6,949
Amortization of intangible assets	$ 266	95	211
Annual Goodwill Impairment Test [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill				$ 17,000
Income Approach Valuation Technique [Member]
Goodwill And Intangible Assets [Line Items]
Fair value inputs, comparability adjustments	70.00%
Market Approach Valuation Technique [Member]
Goodwill And Intangible Assets [Line Items]
Fair value inputs, comparability adjustments	30.00%
License And Services [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill aquired during the period	$ 5,400
License And Services [Member] | United States [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill	6,281	1,097	1,097
Goodwill aquired during the period	5,209
License And Services [Member] | United Kingdom [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill	6,767	$ 7,118	$ 7,532
Customer Support [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill aquired during the period	1,500
Customer Support [Member] | United States [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill	1,549
Goodwill aquired during the period	1,556
Customer Support [Member] | United Kingdom [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill	$ 8,361	$ 8,795	$ 9,307
Customer Support [Member] | United Kingdom [Member] | Annual Goodwill Impairment Test [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill				8,700
Evolving Systems U.K. [Member] | License And Services [Member] | United Kingdom [Member] | Annual Goodwill Impairment Test [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill				7,200
Evolving Systems Labs [Member] | License And Services [Member] | United States [Member]
Goodwill And Intangible Assets [Line Items]
Percentage of hypothetical decrease in estimated fair value	20.00%
Evolving Systems Labs [Member] | License And Services [Member] | United States [Member] | Annual Goodwill Impairment Test [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill				$ 1,100

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Goodwill And Intangible Assets (Summary Of Changes In Carrying Amount Of Goodwill) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014
Goodwill And Intangible Assets [Line Items]
Beginning Balance		$ 17,010	$ 17,936
Goodwill aquired during the year		6,949
Acquired goodwill adjusted during the year		(32)
Effects of changes in foreign currency exchange rates	[1]	(785)	(926)
Ending Balance		23,142	17,010
License And Services [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill aquired during the year		5,400
Customer Support [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill aquired during the year		1,500
United States [Member] | License And Services [Member]
Goodwill And Intangible Assets [Line Items]
Beginning Balance		1,097	$ 1,097
Goodwill aquired during the year		5,209
Acquired goodwill adjusted during the year		$ (25)
Effects of changes in foreign currency exchange rates	[1]
Ending Balance		$ 6,281	$ 1,097
United States [Member] | Customer Support [Member]
Goodwill And Intangible Assets [Line Items]
Beginning Balance
Goodwill aquired during the year		$ 1,556
Acquired goodwill adjusted during the year		$ (7)
Effects of changes in foreign currency exchange rates	[1]
Ending Balance		$ 1,549
United Kingdom [Member] | License And Services [Member]
Goodwill And Intangible Assets [Line Items]
Beginning Balance		7,118	$ 7,532
Effects of changes in foreign currency exchange rates	[1]	(351)	(414)
Ending Balance		6,767	7,118
United Kingdom [Member] | Customer Support [Member]
Goodwill And Intangible Assets [Line Items]
Beginning Balance		8,795	9,307
Effects of changes in foreign currency exchange rates	[1]	(434)	(512)
Ending Balance		$ 8,361	$ 8,795
India [Member] | License And Services [Member]
Goodwill And Intangible Assets [Line Items]
Beginning Balance
Goodwill aquired during the year		$ 184
Acquired goodwill adjusted during the year
Effects of changes in foreign currency exchange rates	[1]
Ending Balance		$ 184

[1] Represents the impact of foreign currency translation for instances when goodwill is recorded in foreign entities whose functional currency is also their local currency. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end. Adjustments related to foreign currency translation are included in other comprehensive income.

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Goodwill And Intangible Assets (Summary Of Identifiable Intangible Assets) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2015		Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount		$ 4,983		$ 608
Evolving Systems Labs [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount		5,360	[1]	718
Accumulated Amortization		377		110
Net Carrying Amount		$ 4,983		608
Weighted-Average Amortization Period		6 years 9 months 18 days
Evolving Systems Labs [Member] | Purchased Software [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount		$ 2,118	[1]	439
Accumulated Amortization		171		64
Net Carrying Amount		$ 1,947		375
Weighted-Average Amortization Period		7 years 3 months 18 days
Evolving Systems Labs [Member] | Trademarks And Tradenames [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount		$ 185	[1]	63
Accumulated Amortization		43		15
Net Carrying Amount		$ 142		48
Weighted-Average Amortization Period		2 years 7 months 6 days
Evolving Systems Labs [Member] | Non-competition [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	[1]	$ 33
Accumulated Amortization		4
Net Carrying Amount		$ 29
Weighted-Average Amortization Period		2 years
Evolving Systems Labs [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount		$ 3,024	[1]	216
Accumulated Amortization		159		31
Net Carrying Amount		$ 2,865		$ 185
Weighted-Average Amortization Period		6 years 9 months 18 days

[1] Changes in intangible values as of December 31, 2015 compared to December 31, 2014 are the direct result of the acquisition of Evolving Systems NC in the third quarter of 2015.

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Goodwill And Intangible Assets (Summary Of Expected Future Amortization Expense Related To Identifiable Intangibles) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Goodwill And Intangible Assets [Abstract]
2016	$ 783
2017	764
2018	703
2019	693
2020	693
Thereafter	1,347
Net Carrying Amount	$ 4,983	$ 608

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Balance Sheet Components (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Balance Sheet Components [Line Items]
Depreciation	$ 314,000	$ 246,000	$ 155,000
Assets Held under Capital Leases [Member]
Balance Sheet Components [Line Items]
Depreciation	$ 5,000	$ 5,000	$ 4,000

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Balance Sheet Components (Property And Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 5,969	$ 5,874
Less accumulated depreciation	(5,409)	(5,215)
Property and equipment, Total	560	659
Computer Equipment And Purchased Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	4,814	4,796
Furniture, Fixtures And Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 1,155	$ 1,078

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Balance Sheet Components (Assets Acquired Under Capital Lease) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Balance Sheet Components [Abstract]
Original book value	$ 24	$ 24
Accumulated amortization	(18)	(13)
Net book value	$ 6	$ 11

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Balance Sheet Components (Accounts Payable And Accrued Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Balance Sheet Components [Abstract]
Accounts payable	$ 716	$ 729
Accrued liabilities	2,520	2,366
Accrued compensation and related expenses	1,193	1,365
Accounts payable and accrued liabilities	$ 4,429	$ 4,460

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Revolving Line Of Credit (Details)	12 Months Ended
	Dec. 31, 2015 USD ($)
Revolving Facility [Member]
Debt Instrument [Line Items]
Line of credit initiation date	Sep. 28, 2015
Line of credit facility, interest rate terms, description	The additional $5.0 million ("Revolving Line II") will bear interest at a floating rate equal to the U.S. Prime Rate plus 2.25%; the existing $5.0 million credit facility ("Revolving Line") will continue to bear interest at the greater of 2.75% or the U.S. Prime Rate minus one half of one percent (0.50%).
Line of credit facility, covenant terms	To take an advance under the Revolving Facility, the Company must have a balance of $4.0 million in cash on deposit with East West Bank, a minimum current ratio and a specified ratio of Total Liabilities to Tangible Net Worth, which are both as defined in the Revolving Facility. The Revolving Facility requires the Company to pay a one-time credit facility fee of $10,000 for extension of Revolving Line II, an annual credit facility fee of $10,000 and monthly payments of interest, with the unpaid balance due on October 22, 2016.
Line of credit facility, cash deposit requirements for advance	$ 4,000,000
Line of credit facility, one-time commitment fee	10,000
Line of credit facility, annual commitment fee	$ 10,000
Line of credit facility, interest payment frequency	monthly
Line of credit facility, maturity date	Oct. 22, 2016
Line of credit facility, amount outstanding	$ 10,000,000
Revolving Line II [Member] | East West Bank [Member]
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity	$ 5,000,000
Line of credit facility, interest rate	2.25%
Revolving Line [Member] | East West Bank [Member]
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity	$ 5,000,000
Line of credit facility, interest rate	2.75%
Discount on prime rate, percentage	0.50%
Minimum [Member] | East West Bank [Member]
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity	$ 5,000,000
Maximum [Member] | East West Bank [Member]
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity	10,000,000
Maximum [Member] | Revolving Facility [Member]
Debt Instrument [Line Items]
Restrict distributions to shareholders	$ 1,800,000

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Income Taxes (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2015 USD ($) entity
Income Taxes [Line Items]
Deferred tax assets		$ 666	$ 100
Federal net operating loss carryforwards	$ 0	2,300
State net operating loss carryforwards	17,400	17,100
Research and experimentation credit carryforwards	303	303
Alternative minimum tax credits	$ 770	942
U.S. federal income tax rate	34.00%
Excess tax benefit from employee stock plan awards	$ 0	0
Federal net operating loss, realized	800
Foreign tax credit carryforwards as a deferred tax asset	900	2,800
Deferred tax liability, intangibles	1,512
Deferred tax asset, intangibles		203
Unrecognized tax benefits	0	0
Undistributed foreign earnings	$ 666	$ 897
Stock ownership testing period	3 years
Number of Indian subsidiaries acquired pursuant to the merger terms | entity			2
Research And Experimentation [Member]
Income Taxes [Line Items]
Research and experimentation credit carryforwards expiration year	2018
Minimum [Member]
Income Taxes [Line Items]
Alternative minimum tax expiration year	2028
Percentage of tax utliziation under ownership change	50.00%
Minimum [Member] | State [Member]
Income Taxes [Line Items]
Operating loss carryforwards expiration year	2018
Maximum [Member]
Income Taxes [Line Items]
Alternative minimum tax expiration year	2034
Maximum [Member] | State [Member]
Income Taxes [Line Items]
Operating loss carryforwards expiration year	2033

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Income Taxes (Pre-Tax Income From Continuing Operations) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Abstract]
Domestic	$ (2,948)	$ (1,274)	$ (1,347)
Foreign	7,159	9,679	6,427
Total	$ 4,211	$ 8,405	$ 5,080

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Income Taxes (Expense (Benefit) From Continuing Operations For Income Taxes) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Abstract]
Current: Federal	$ 789	$ 1,468	$ 441
Current: Foreign	1,174	1,637	1,015
Current: State	76	(26)	70
Total current	2,039	3,079	1,526
Deferred: Federal	(1,023)	(301)	(66)
Deferred: Foreign	16	19	(178)
Deferred: State	(117)	0	(8)
Total deferred	(1,124)	(282)	(252)
Total tax expense	$ 915	$ 2,797	$ 1,274

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Income Taxes (Components Of Deferred Tax Assets And Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Deferred tax assets:
Foreign tax credits carryforwards	$ 3,667
Net operating loss carryforwards - State	540		$ 555
Research and development credits	303		303
Equity compensation	686		661
AMT credit	770		942
Depreciable assets	110		107
Intangibles			203
Accrued liabilities and reserves	340		607
Total deferred tax assets	6,416		3,378
Deferred tax liabilities:
Intangibles	(1,512)
Undistributed foreign earnings	(666)		(897)
Accrued liabilities and reserves	(23)		(16)
Total deferred tax liability	(2,201)		(913)
Net deferred tax assets, before valuation allowance	4,215		2,465
Valuation allowance	$ (4,215)		(1,799)
Net deferred tax asset		$ 100	666
Current deferred tax asset			80
Long-term tax (liability) asset			$ 586

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Income Taxes (Income Tax Expense Reconciliation) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Abstract]
U.S. federal income tax rate	34.00%
U.S. federal income tax expense at statutory rates	$ 2,392	$ 4,595	$ 2,143
State income tax expense, net of federal impact		542	46
Foreign Tax Credit	(3,667)
Foreign rate differential	(449)	(1,452)	(332)
Foreign deemed dividends	939	1,783	871
Undistributed foreign earnings	(221)
Change in valuation allowance	2,415	(1,971)	(492)
Research and development expenses	(1,096)	(867)	(859)
Foreign taxes	314	53	93
Section 78 Gross-UP	371
Permanent differences and other, net	(83)	114	(196)
Total tax expense	$ 915	$ 2,797	$ 1,274

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Stockholders' Equity (Details) - USD ($)	3 Months Ended				12 Months Ended			31 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2013
Stockholders' Equity [Abstract]
Cash dividend declared per common share	$ 0.11	$ 0.11	$ 0.11	$ 0.11	$ 0.44	$ 0.42	$ 0.36
Dividends payable	$ 0				$ 0
Authorized amount of stock repurchase							$ 5,000,000	$ 5,000,000
Number of shares repurchased during preiod								178,889
Value of purchased shares								$ 1,300,000
Average price per share of purchased common stock								$ 6.97
Preferred stock, shares authorized	2,000,000				2,000,000	2,000,000
Preferred stock, shares outstanding	0				0	0
Anti-takeover provisions period					3 years

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Share-Based Compensation (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2010	Jun. 30, 2007
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized compensation expense	$ 317,000	$ 401,000	$ 288,000
Options remained outstanding under option plan	834,000	630,000	676,000
Weighted-average grant-date fair value of stock options granted	$ 1.60	$ 3.80	$ 3.16
Total unrecognized compensation costs related to unvested stock options	$ 800,000
Weighted average recognition period	2 years 10 months 24 days
Intrinsic value of stock option exercises, total	$ 300,000	$ 400,000	$ 600,000
Fair value of stock options vested	300,000	300,000	100,000
Cash received from exercise of stock options	$ 200,000	$ 200,000	$ 500,000
Net settlement exercises shares issued	0	7,094	0
Net settlement exercises shares cancelled		26,376
2007 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		1,502,209		1,250,000	1,000,000
Shares available for grant	300,000	100,000
Shares reserved for acquisitions	200,000
Options issued and outstanding	800,000	600,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized	550,000
Cash received from exercise of stock options	$ 53,000	$ 68,000	$ 8,000
Maximum employee subscription rate	15.00%
Maximum value of shares per employee	$ 25,000
Maximum number of shares per employee	10,000
Purchase price of stock	85.00%
Shares available for purchase under ESPP	53,000
Discount on the purchase price of stock option	15.00%
Issued shares related to the ESPP	9,000	9,000	1,000
Employee stock purchase plan compensation expense	$ 13,000	$ 17,000	$ 2,000
Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance	4,175,000
Vesting period	4 years
Option plan termination date	Jan. 18, 2006
Options remained outstanding under option plan	0	100,000
Maximum [Member] | 2007 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period	10 years
Maximum [Member] | Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period	10 years
Employees [Member] | 2007 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Directors [Member] | 2007 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Senior Management [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Release period for restricted stock options	4 years
Board Members [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option shares of restricted stock vested	94	8,000
Forfeited restricted stock	1,000	1,000
Release period for restricted stock options	1 year
Board Members And Senior Management [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option awarded	20,000	0
Restricted stock-based compensation expense	$ 8,000	$ 100,000	200,000
Evolving Systems U.K. [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred income tax benefits from stock option expense	$ 19,000	$ 15,000	$ 15,000

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Share-Based Compensation (Summary Of Stock-Based Compensation Expenses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 317	$ 401	$ 288
Cost Of License Fees And Services, Excluding Depreciation And Amortization [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	72	73	29
Cost Of Customer Support, Excluding Depreciation And Amortization [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	10	8	4
Sales And Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	36	31	24
General And Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	112	181	207
Product Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 87	$ 108	$ 24

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Share-Based Compensation (Assumptions For Weighted Average Fair Value Of Stock Options) (Details)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Stock Incentive Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	6 years	5 years 10 months 24 days	6 years 1 month 6 days
Risk-free interest rate	1.37%	1.69%	1.31%
Expected volatility	42.01%	55.88%	59.17%
Expected dividend yield	6.40%	4.00%	4.10%
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	3 months	3 months	3 months
Risk-free interest rate	0.07%	0.03%	0.05%
Expected volatility	39.58%	40.92%	44.36%
Expected dividend yield	6.30%	4.50%	4.00%

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Share-Based Compensation (Summary Of Stock Option Activity) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-Based Compensation [Abstract]
Number of Shares, Options outstanding at beginning	630	676
Number of Shares, Options granted	331	168
Number of Shares, Less options forfeited	(27)	(132)
Number of Shares, Less options exercised	(100)	(82)
Number of Shares, Options outstanding at ending	834	630	676
Number of Shares, Option exercisable at December 31, 2015	463
Weighted-Average Exercise Price, Options outstanding at beginning	$ 4.94	$ 5.11
Weighted-Average Exercise Price, Options granted	7.13	10.15
Weighted Average Exercise Price, Less options forfeited	9.39	12.20
Weighted-Average Exercise Price, Less options exercised	2.43	5.31
Weighted-Average Exercise Price, Options outstanding at ending	5.97	$ 4.94	$ 5.11
Weighted-Average Exercise Price, Options exercisable at December 31, 2015	$ 4.74
Weighted-Average Remaining Contractual Term (Years), Options outstanding	6 years 11 months 9 days	5 years 8 months 9 days	4 years 9 months 4 days
Weighted-Average Remaining Contractual Term (Years), Option exercisable at December 31, 2015	5 years 1 month 10 days
Aggregate Intrinsic Value, Options outstanding at beginning	$ 2,959	$ 3,491
Aggregate Intrinsic Value, Options outstanding at ending	957	$ 2,959	$ 3,491
Aggregate Intrinsic Value, Options exercisable at December 31, 2015	$ 954

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Share-Based Compensation (Summary Of Stock Option Outstanding By Exercise Price Ranges) (Details) shares in Thousands	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Options Outstanding, Number of Shares | shares	834
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	6 years 11 months 9 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 5.97
Stock Options Exercisable, Number of Shares | shares	463
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 4.74
$ 0.01 - $1.34 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	0.01
Range of Exercise Prices, Upper Range	$ 1.34
Stock Options Outstanding, Number of Shares | shares	145
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	2 years 4 months 28 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 0.80
Stock Options Exercisable, Number of Shares | shares	145
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 0.80
$ 2.80 - $2.86 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	2.80
Range of Exercise Prices, Upper Range	$ 2.86
Stock Options Outstanding, Number of Shares | shares	30
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	3 years 2 months 9 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 2.84
Stock Options Exercisable, Number of Shares | shares	30
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 2.84
$ 3.20 - $3.72 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	3.20
Range of Exercise Prices, Upper Range	$ 3.72
Stock Options Outstanding, Number of Shares | shares	86
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	4 years 7 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 3.69
Stock Options Exercisable, Number of Shares | shares	86
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 3.70
$ 4.09 - $5.45 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	4.09
Range of Exercise Prices, Upper Range	$ 5.45
Stock Options Outstanding, Number of Shares | shares	37
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	6 years 1 month 13 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 4.44
Stock Options Exercisable, Number of Shares | shares	35
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 4.45
$ 6.00 - $6.63 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	6.00
Range of Exercise Prices, Upper Range	$ 6.63
Stock Options Outstanding, Number of Shares | shares	247
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	9 years 3 months 22 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 6.09
Stock Options Exercisable, Number of Shares | shares	32
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 6.52
$ 7.70 - $10.90 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices, Lower Range	7.70
Range of Exercise Prices, Upper Range	$ 10.90
Stock Options Outstanding, Number of Shares | shares	289
Stock Options Outstanding, Weighted Ave. Remaining Contractual Life (years)	8 years 6 months 18 days
Stock Options Outstanding, Weighted Ave. Exercise Price	$ 9.65
Stock Options Exercisable, Number of Shares | shares	135
Stock Options Exerciable, Weighted Ave. Exercise Price	$ 9.73

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Benefit Plans (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Benefit Plans [Abstract]
Employer contribution requirement, percentage	3.00%
Employer contribution vesting period	3 years
Employer matching contribution, percent	5.00%
Benefit plans recorded expense	$ 0.4	$ 0.4	$ 0.3

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Earnings Per Common Share (Summary Of Basic And Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Basic income per share:
Net income	$ 1,086	$ 570	$ 780	$ 860	$ 1,602	$ 1,679	$ 1,676	$ 651	$ 3,296	$ 5,608	$ 3,806
Basic weighted average shares outstanding									11,693	11,642	11,459
Basic income per share	$ 0.09	$ 0.05	$ 0.07	$ 0.07	$ 0.14	$ 0.14	$ 0.14	$ 0.06	$ 0.28	$ 0.48	$ 0.33
Diluted income per share:
Net income	$ 1,086	$ 570	$ 780	$ 860	$ 1,602	$ 1,679	$ 1,676	$ 651	$ 3,296	$ 5,608	$ 3,806
Weighted average shares outstanding									11,693	11,642	11,459
Effect of dilutive securities - options									242	284	297
Diluted weighted average shares outstanding									11,935	11,926	11,756
Diluted income per share	$ 0.09	$ 0.05	$ 0.07	$ 0.07	$ 0.13	$ 0.14	$ 0.14	$ 0.05	$ 0.28	$ 0.47	$ 0.32
Common stock excluded from dilutive stock calculation									300,000	100,000	100,000

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Commitments And Contingencies (Narrative) (Details) - USD ($) $ in Millions		12 Months Ended
	Oct. 24, 2013	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Other Commitments [Line Items]
Rent expense		$ 0.6	$ 0.6	$ 0.4
Sublease rental income		$ 0.0	$ 0.0	$ 0.0
Telespree [Member]
Other Commitments [Line Items]
Initial payment	$ 0.5

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Commitments And Contingencies (Future Minimum Commitments) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Commitments And Contingencies [Abstract]
Operating Leases, 2016	$ 656
Operating Leases, 2017	626
Operating Leases, 2018	438
Operating Leases, 2019	243
Operating Leases, 2020	56
Operating Lease, Total minimum lease payments	2,019
Capital Leases, 2016	6
Capital Leases, 2017	$ 1
Capital Leases, 2018
Capital Leases, 2019
Capital Leases, 2020
Capital Leases, Total minimum lease payments	$ 7
Less: Amount representing interest	(1)
Principal balance of capital lease obligations	6
Less: Current portion of capital lease obligations	(5)	$ (5)
Long-term portion of capital lease obligations	$ 1	$ 7

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Segment Information (Segment Information) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Revenue
Total revenue	$ 7,072	$ 5,773	$ 6,071	$ 6,660	$ 7,599	$ 7,560	$ 7,939	$ 6,582	$ 25,576	$ 29,680	$ 25,093
Revenue less costs of revenue, excluding depreciation and amortization
Revenue less costs of revenue, excluding depreciation and amortization									19,127	22,032	17,929
Unallocated Costs
Other operating expenses									13,694	13,015	11,964
Depreciation and amortization									580	341	366
Restructuring									533	237	558
Interest income									(18)	(19)	(11)
Interest expense									121	17	20
Other (expense) income										27	(87)
Foreign currency exchange (gain) loss									6	9	39
Income before income taxes	$ 1,107	$ 712	$ 1,093	$ 1,299	$ 2,456	$ 2,506	$ 2,514	$ 929	4,211	8,405	5,080
License And Services [Member]
Revenue
Total revenue									15,584	19,738	15,998
Revenue less costs of revenue, excluding depreciation and amortization
Revenue less costs of revenue, excluding depreciation and amortization									10,703	13,956	10,433
Customer Support [Member]
Revenue
Total revenue									9,992	9,942	9,095
Revenue less costs of revenue, excluding depreciation and amortization
Revenue less costs of revenue, excluding depreciation and amortization									$ 8,424	$ 8,076	$ 7,496

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Segment Information (Financial Information Relating To Operations By Geographic Region) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Total revenue	$ 7,072	$ 5,773	$ 6,071	$ 6,660	$ 7,599	$ 7,560	$ 7,939	$ 6,582	$ 25,576	$ 29,680	$ 25,093
United Kingdom [Member]
Segment Reporting Information [Line Items]
Total revenue									3,956	5,568	4,921
Nigeria [Member]
Segment Reporting Information [Line Items]
Total revenue										3,427
Mexico [Member]
Segment Reporting Information [Line Items]
Total revenue										3,200
Other [Member]
Segment Reporting Information [Line Items]
Total revenue									21,620	17,485	20,172
License And Services [Member]
Segment Reporting Information [Line Items]
Total revenue									15,584	19,738	15,998
License And Services [Member] | United Kingdom [Member]
Segment Reporting Information [Line Items]
Total revenue									2,191	3,551	3,018
License And Services [Member] | Nigeria [Member]
Segment Reporting Information [Line Items]
Total revenue										2,954
License And Services [Member] | Mexico [Member]
Segment Reporting Information [Line Items]
Total revenue										2,478
License And Services [Member] | Other [Member]
Segment Reporting Information [Line Items]
Total revenue									13,393	10,755	12,980
Customer Support [Member]
Segment Reporting Information [Line Items]
Total revenue									9,992	9,942	9,095
Customer Support [Member] | United Kingdom [Member]
Segment Reporting Information [Line Items]
Total revenue									1,765	2,017	1,903
Customer Support [Member] | Nigeria [Member]
Segment Reporting Information [Line Items]
Total revenue										473
Customer Support [Member] | Mexico [Member]
Segment Reporting Information [Line Items]
Total revenue										722
Customer Support [Member] | Other [Member]
Segment Reporting Information [Line Items]
Total revenue									$ 8,227	$ 6,730	$ 7,192

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Segment Information (Summary Of Long-lived Assets, Net) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Long-lived assets, net	$ 28,685	$ 18,277
United States [Member]
Segment Reporting Information [Line Items]
Long-lived assets, net	13,026	1,998
United Kingdom [Member]
Segment Reporting Information [Line Items]
Long-lived assets, net	15,318	16,091
Other [Member]
Segment Reporting Information [Line Items]
Long-lived assets, net	$ 341	$ 188

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Restructuring (Details) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Restructuring costs paid		$ 500,000
Restructuring liability	$ 25,000	$ 25,000	$ 0
Evolving Systems Labs [Member]
Restructuring expense			$ 200,000	$ 600,000
Evolving Systems NC, Inc [Member]
Expense of termination employees	$ 500,000

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Quarterly Financial Infomation (Unaudited) (Schedule Of Quarterly Financial Information) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information (Unaudited) [Abstract]
Total revenue	$ 7,072	$ 5,773	$ 6,071	$ 6,660	$ 7,599	$ 7,560	$ 7,939	$ 6,582	$ 25,576	$ 29,680	$ 25,093
Less: cost of revenue and operating expenses	6,069	4,819	5,130	5,238	5,123	5,241	5,322	5,555	21,256	21,241	20,052
Income from operations	1,003	954	941	1,422	2,476	2,319	2,617	1,027	4,320	8,439	5,041
Income before income taxes	1,107	712	1,093	1,299	2,456	2,506	2,514	929	4,211	8,405	5,080
Net income	$ 1,086	$ 570	$ 780	$ 860	$ 1,602	$ 1,679	$ 1,676	$ 651	$ 3,296	$ 5,608	$ 3,806
Basic income per common share - net income	$ 0.09	$ 0.05	$ 0.07	$ 0.07	$ 0.14	$ 0.14	$ 0.14	$ 0.06	$ 0.28	$ 0.48	$ 0.33
Diluted income per common share - net income	$ 0.09	$ 0.05	$ 0.07	$ 0.07	$ 0.13	$ 0.14	$ 0.14	$ 0.05	$ 0.28	$ 0.47	$ 0.32

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Subsequent Events (Details)			1 Months Ended	3 Months Ended				12 Months Ended
	Mar. 15, 2016 $ / shares	Feb. 29, 2016 USD ($) item	Feb. 29, 2016 USD ($) item	Dec. 31, 2015 $ / shares	Sep. 30, 2015 $ / shares	Jun. 30, 2015 $ / shares	Mar. 31, 2015 $ / shares	Dec. 31, 2015 $ / shares	Dec. 31, 2014 $ / shares	Dec. 31, 2013 $ / shares
Subsequent Event [Line Items]
Cash dividend declared per common share | $ / shares				$ 0.11	$ 0.11	$ 0.11	$ 0.11	$ 0.44	$ 0.42	$ 0.36
Subsequent Event [Member]
Subsequent Event [Line Items]
Dividend declared date								Mar. 15, 2016
Cash dividend declared per common share | $ / shares	$ 0.11
Dividends payable, payable date								Apr. 01, 2016
Dividends payable, record date								Mar. 28, 2016
Annual credit facility fees		$ 18,750
Legal fee		1,000	$ 1,000
Cash balances to pay off revolving facilities		$ 4,000,000
Subsequent Event [Member] | Term Loan [Member]
Subsequent Event [Line Items]
Maturity date		Jan. 01, 2020
Evolving Systems NC, Inc [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Expense of termination employees			600,000
East West Bank [Member] | Subsequent Event [Member] | Term Loan [Member]
Subsequent Event [Line Items]
Loan amount		$ 6,000,000	$ 6,000,000
Number of monthly installments of principal | item		36	36
East West Bank [Member] | Subsequent Event [Member] | Prime Rate [Member] | Term Loan [Member]
Subsequent Event [Line Items]
Interest rate		1.00%
Revolving Facility [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Two revolving facilities amount		$ 10,000,000	$ 10,000,000