10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________________________________________

FORM 10-Q

(Mark One)

[X]           Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,

For the quarterly period ended October 2, 2015

or

[   ]           Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,

For the transition period from _____ to _____

Commission file number 001-14677

__________________________________________________

EVANS & SUTHERLAND COMPUTER CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Utah (State or Other Jurisdiction of Incorporation or Organization)	87-0278175 (I.R.S. Employer Identification No.)
770 Komas Drive, Salt Lake City, Utah (Address of Principal Executive Offices)	84108 (Zip Code)
Registrant's Telephone Number, Including Area Code:  (801) 588-1000

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 ____

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 ___

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

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]   (Do not check if a smaller reporting company)	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 ___ No   X   

The number of shares of the registrant’s Common Stock (par value $0.20 per share) outstanding on November 5, 2015 was 11,177,316.

FORM 10-Q

Evans & Sutherland Computer Corporation

Quarter Ended October 2, 2015

		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of October 2, 2015 and	3
	December 31, 2014 (Unaudited)
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended October 2, 2015 and September 26, 2014 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended October 2, 2015 and September 26, 2014 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4.	Controls and Procedures	17
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 6.	Exhibits	18
SIGNATURE		19

2

PART I – FINANCIAL INFORMATION

Item 1.                      FINANCIAL STATEMENTS

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands, except share and per share data)

	October 2,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	3,660		$	7,038
Restricted cash		600			711
Accounts receivable, net		6,598			4,586
Costs and estimated earnings in excess of billings on
uncompleted contracts		3,045			1,699
Inventories, net		5,023			4,163
Prepaid expenses and deposits		773			635
Total current assets		19,699			18,832
Property and equipment, net		4,689			4,803
Goodwill		635			635
Intangible assets, net		37			68
Other assets		1,056			1,118
Total assets	$	26,116		$	25,456
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,025		$	710
Accrued liabilities		1,652			1,142
Billings in excess of costs and estimated earnings on
uncompleted contracts		4,980			5,176
Customer deposits		4,002			4,081
Current portion of retirement obligations		435			535
Current portion of pension settlement obligation		534			-
Current portion of long-term debt		197			2,362
Total current liabilities		12,825			14,006
Pension and retirement obligations, net of current portion		4,207			40,076
Pension settlement obligation, net of current portion		5,624			-
Long-term debt, net of current portion		2,009			-
Deferred rent obligation		1,759			2,077
Total liabilities		26,424			56,159
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, no par value: 10,000,000 shares authorized;
no shares outstanding		-			-
Common stock, $0.20 par value: 30,000,000 shares authorized;
11,441,666 shares issued		2,288			2,288
Additional paid-in-capital		53,423			54,500
Common stock in treasury, at cost, 264,350 shares		(3,532	)		(4,709	)
Accumulated deficit		(50,833	)		(49,157	)
Accumulated other comprehensive loss		(1,654	)		(33,625	)
Total stockholders’ deficit		(308	)		(30,703	)
Total liabilities and stockholders’ deficit	$	26,116		$	25,456

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

3

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) (In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	October 2,			September 26,			October 2,			September 26,
	2015			2014			2015			2014
Sales	$	9,375		$	7,656		$	27,666		$	20,040
Cost of sales		(6,049	)		(4,371	)		(17,956	)		(12,669	)
Gross profit		3,326			3,285			9,710			7,371
Operating expenses:
Selling, general and administrative		(1,535	)		(1,637	)		(5,132	)		(5,211	)
Research and development		(563	)		(537	)		(1,702	)		(1,608	)
Pension		(49	)		(359	)		(473	)		(777	)
Pension settlement		-			-			(3,620	)		-
Total operating expenses		(2,147	)		(2,533	)		(10,927	)		(7,596	)
Operating income (loss)		1,179			752			(1,217	)		(225	)
Other expense, net		(231	)		(192	)		(404	)		(567	)
Income (loss) before income tax benefit (provision)		948			560			(1,621	)		(792	)
Income tax benefit (provision)		(27	)		79			(55	)		12
Net income (loss)	$	921		$	639		$	(1,676	)	$	(780	)
Net income (loss) per common share – basic and diluted	$	0.08		$	0.06		$	(0.15	)	$	(0.07	)
Weighted average common shares outstanding – basic		11,177			11,089			11,141			11,089
Weighted average common shares outstanding – diluted		11,705			11,435			11,141			11,089
Comprehensive income (loss), net of tax:
Net income (loss)	$	921		$	639		$	(1,676	)	$	(780	)
Other comprehensive income (loss):
Reclassification of pension expense to net income (loss)		-			101			195			305
Pension settlement		-			-			31,776			-
Other comprehensive income		-			101			31,971			305
Total comprehensive income (loss)	$	921		$	740		$	30,295		$	(475	)

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

4

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Nine Months Ended
	October 2,			September 26,
	2015			2014
Cash flows from operating activities:
Net loss	$	(1,676	)	$	(780	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization		216			376
Amortization of deferred pension costs		195			305
Pension settlement charge		3,620			-
Provision for excess and obsolete inventory		76			-
Other		72			294
Changes in assets and liabilities:
Decrease in restricted cash		111			289
Decrease (increase) in accounts receivable		(2,054	)		726
Increase in inventories		(936	)		(1,104	)
Decrease (increase) in costs and estimated earnings in
excess of billings on uncompleted contracts, net		(1,542	)		516
Decrease (increase) in prepaid expenses and other assets		(76	)		402
Increase (decrease) in accounts payable		315			(596	)
Increase (decrease) in accrued liabilities		510			(21	)
Decrease in accrued pension and retirement liabilities		(100	)		(54	)
Decrease in pension settlement obligation		(1,485	)		-
Increase (decrease) in customer deposits		(79	)		445
Decrease in deferred rent obligation		(318	)		-
Net cash provided by (used in) operating activities		(3,151	)		798
Cash flows from investing activities:
Purchases of property and equipment		(71	)		(289	)
Proceeds from sale of marketable securities		-			229
Net cash used in investing activities		(71	)		(60	)
Cash flows from financing activities:
Principal payments on long-term debt		(156	)		(131	)
Net cash used in financing activities		(156	)		(131	)
Net increase (decrease) in cash and cash equivalents		(3,378	)		607
Cash and cash equivalents as of beginning of the period		7,038			3,376
Cash and cash equivalents as of end of the period	$	3,660		$	3,983
Supplemental disclosures of non-cash investing and financing
activities:
Settlement of pension liability	$	35,870		$	-
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	126		$	390
Income taxes		12			45

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

5

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

All dollar amounts (except share and per share amounts) in thousands.

1. GENERAL

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”).  This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive income (loss), and statements of cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows.  The results of operations for the three and nine months ended October 2, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.

Revenue Recognition

Sales include revenues from system hardware and the related integrated software, database products and service contracts.  The following methods are used to determine revenue recognition:

Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method.  In applying this method,  the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract.   This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract.  The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made.  Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets.

In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above.

Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method.  Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured.

Multiple Element Arrangements.  Some contracts include multiple elements.  Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements.  Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements.  Relative fair values of elements are generally determined based on actual and estimated selling price.  Delivery times of such contracts typically occur within a three to six-month time period.

Other.  Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element.  Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract.

6

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Anticipated Losses.  For contracts with anticipated losses at completion, a provision is recorded when the loss is probable.  After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal and offsetting amounts as contract costs are incurred.

Stock-Based Compensation

Compensation cost for all stock-based awards is measured at fair value on the date of grant and is recognized over the service period for awards expected to vest.  Determining the fair value of share-based awards at the grant date requires judgment, including estimating the value of share-based awards that are expected to be forfeited. Actual results and future estimates may differ from the Company’s current estimates.

Net Loss Per Common Share

Basic net loss per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net loss per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share.

Inventories, net

Inventories consisted of the following:

	October 2,			December 31,
	2015			2014
Raw materials	$	6,992		$	5,468
Work in process		1,106			1,678
Finished goods		217			233
Reserve for obsolete inventory		(3,292	)		(3,216	)
Inventories, net	$	5,023		$	4,163

Liquidity

The Company has experienced recurring annual losses since 2007, except for 2013. In order to preserve the liquid resources required to operate the business, the Company stopped making cash payments due to the trust for the Company’s defined benefit pension plan (the “Pension Plan”) beginning in October 2012. In January 2013, the Company initiated an application process for the distress termination of the Pension Plan in accordance with provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) with the goal of settling  its Pension Plan liabilities on terms that are feasible for the Company to continue in business as a going concern. On April 21, 2015, the Company executed an agreement (the “Settlement Agreement”) which terminated the Pension Plan and settled the Pension Plan’s liabilities in exchange for an obligation to pay to the Pension Benefit Guaranty Corporation (“PBGC”) $10,500 over twelve years and issue to the PBGC 88,117 shares of E&S treasury stock (see Note 3). In addition, the Settlement Agreement has led to a new banking relationship and improved credit capacity. Aided by prior cost reduction efforts and improved sales volume, for the nine months ended October 2, 2015, the Company has generated profitable results before recording the pension expense and a charge for the settlement of the Pension Plan. The Company is no longer incurring expenses related to the terminated Pension Plan but is responsible for fixed annual installment payments of $750 to the PBGC. The Company’s unrestricted cash balances totaling $3,660 as of October 2, 2015, improved credit capacity and forecasted operations indicate sufficient resources will be available to meet its obligations, including the terms of the Settlement Agreement, through at least September 30, 2016.

7

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2. STOCK OPTION PLAN

As of October 2, 2015, options to purchase 1,312,613 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant.  A summary of activity in the stock option plan for the nine months ended October 2, 2015 follows (shares in thousands):

				Weighted-
				Average
	Number			Exercise
	of Shares			Price
Outstanding as of beginning of the period		1,333		$	2.08
Granted		211			0.36
Exercised		-			-
Forfeited or expired		(83	)		7.26
Outstanding as of end of the period		1,461			1.53
Exercisable as of end of the period		1,063		$	2.02

As of October 2, 2015, options exercisable and options outstanding had a weighted average remaining contractual term of 3.63 and 5.03 years, respectively, and had an aggregate intrinsic value of $307 and $555, respectively.

The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2015, were based on estimates as of the date of grant as follows:

Risk-free interest rate	0.91	%
Dividend yield	0.00	%
Volatility	343	%
Expected life	3.5 years

Expected option life and volatility are based on historical data of the Company.   The risk-free interest rate is calculated based on the average US Treasury bill rate that corresponds with the option life.  Historically, the Company has not declared dividends and there are no foreseeable plans to do so.

As of October 2, 2015, there was approximately $37 of total unrecognized share-based compensation cost related to grants under the stock option plan that will be recognized over a weighted-average period of 2.1 years.

Share-based compensation expense included in selling, general and administrative expense in the statements of comprehensive income (loss) for each of the nine-month periods ended October 2, 2015 and September 26, 2014 was $30 and $12, respectively.  Share-based compensation expense included in selling, general and administrative expense in the statements of comprehensive income (loss) for each of the three-month periods ended October 2, 2015 and September 26, 2014 was $10 and $4, respectively.

3. EMPLOYEE RETIREMENT BENEFIT PLANS

 Settlement of Pension Plan Liabilities

On January 7, 2013, the Company submitted a PBGC Form 600 Distress Termination, Notice of Intent to Terminate, to the PBGC. The notice filing initiated an application process by the Company with the PBGC for the distress termination of the Pension Plan. The Pension Plan benefits are guaranteed by the ERISA Title IV insurance fund, which is administered by the PBGC. The Company proposed a termination date of March 8, 2013. Through the application process, the Company’s intent was to demonstrate to the PBGC that it qualified for a distress termination of the Pension Plan under either of two of the criteria of Section 4041(c)(2) of ERISA (inability to continue in business absent termination and unreasonably increased pension costs) and applicable PBGC regulations. To satisfy the criteria, the Company and its wholly owned subsidiary each had to demonstrate to the satisfaction of the PBGC that, unless the termination occurred, the Company would be unable to pay its debts when they come due and would be unable to continue in business, or that the costs of the Pension Plan had become unreasonably burdensome solely as a result of a decline in the workforce covered by the Pension Plan. A distress termination under Section 4041(c)(2) of ERISA transfers the Pension Plan’s benefit obligations to the PBGC, up to ERISA guaranteed limits, without requiring reorganization under bankruptcy law. The Pension Plan’s actuary informed the Company that following termination of the Pension Plan and subject to the PBGC’s review of participant benefits, all of the benefits earned by participants as of the date of plan termination are expected to fall within ERISA guaranteed limits.

8

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s goal in seeking a distress termination of the Pension Plan was to ensure that the pension benefits of all Pension Plan participants are paid up to federally guaranteed limits and that the Company continues to operate as a going concern while avoiding the costly damage and disruption to the business which would result from reorganization.

Pursuant to a determination by the PBGC that the requirements of the distress termination of the Pension Plan had been met, on April 21, 2015, the Company, as the administrator of the Pension Plan, and the PBGC entered into an Agreement For Appointment of Trustee and Termination of Plan (the “Termination Agreement”) (a) terminating the Plan, (b) establishing March 8, 2013 as the Plan’s termination date and (c) appointing the PBGC as statutory trustee of the Plan.

In connection with the Termination Agreement, on April 21, 2015, the Company entered into the Settlement Agreement (the “Settlement Agreement”) with the PBGC to settle all liabilities of the Pension Plan including any termination premium resulting from the Pension Plan termination (the “Settled ERISA Liabilities”). Pursuant to the Settlement Agreement, the Company agreed to (a) pay to the PBGC a total of $10,500, with $1,500 due within ten days following the effective date of the Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015 (the “Pension Settlement Obligation”) and (b) issue within ten days following the effective date of the Settlement Agreement 88,117 shares of the Company’s treasury stock in the name of the PBGC. On April 23, 2015, the Company issued to the PBGC the 88,117 shares of stock and on May 1, 2015 it paid the initial $1,500 amount due to the PBGC. On October 22, 2015, the Company made the first of the twelve annual installments.  The Settlement Agreement further provides that the PBGC will be deemed to have released the Company from all Settled ERISA Liabilities upon payment of the Pension Settlement Obligation. In the event of a default by the Company of its obligations under the Settlement Agreement or the underlying agreements which secure the Pension Settlement Obligation, the PBGC may enforce payment of the Settled ERISA Liabilities, which would accrue interest at various rates until payment is made and be reduced by any payments made by the Company pursuant to the Settlement Agreement.  The estimated total Settled ERISA Liabilities as of the settlement date is $46,000.

To secure the Company’s obligations under the Settlement Agreement, on April 21, 2015, the Company also entered into a Security Agreement with the PBGC (the “Security Agreement”), and executed an Open-End Mortgage in favor of the PBGC (the “Mortgage”) on certain real property owned by the Company’s subsidiary, Spitz, Inc. (“Spitz”). The Security Agreement and Mortgage grant to the PBGC a security interest on all of the Company’s presently owned and after-acquired property and proceeds thereof, free and clear of all liens and other encumbrances, except those described therein (the “Senior Liens”). The PBGC’s security interest in the Company’s property is subordinate to the Company’s two senior lenders pursuant to the Security Agreement and agreements between the PBGC and the lenders (the “Intercreditor Agreements”). The Intercreditor Agreements provide for the lenders to extend credit to the Company, secured by the Senior Liens, up to specified limits. The Intercreditor Agreement between the lender of the mortgage notes and line of credit (see Note 4) provides for total aggregate loans of up to $6,500 secured by Senior Liens on Spitz assets. The second Intercreditor Agreement between another lender and the PBGC provides for up to $3,000 of letter of credit indebtedness secured by Senior Liens on cash deposits. The Settlement Agreement also required that the PBGC withdraw all lien notices with respect to the statutory liens it previously perfected on behalf of the Pension Plan with respect to all real and personal property of the Company as soon as reasonably practicable after the 91st day after the perfection of all consensual liens granted to the PBGC by the Security Agreement and Mortgage.  In August 2015, the PBGC’s lien notices with respect to the statutory liens were withdrawn.

9

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The termination of the Pension Plan and settlement of its underlying liabilities enables the Company to satisfy the previously disclosed unfunded liability attributable to the Pension Plan by the issuing to the PBGC the 88,117 shares of stock from treasury and making the fixed installment payments of the Pension Settlement Obligation. As of the date of the Settlement Agreement, the balance of the unfunded liability attributable to the Pension Plan, which was previously reported with Pension and Retirement Obligations, was $35,870, of which $31,776 was attributable to accumulated other comprehensive loss. The market value of the 88,117 shares of stock issued to the PBGC from treasury on April 23, 2015 was $71. The Pension Settlement Obligation was recorded as a liability of the Company as of April 21, 2015 in the amount of $7,643, reflecting the present value of the installments at an interest rate 7%, which the Company believes represents the fair market interest rate for junior secured debt with similar secured terms of the Security Agreement. The unfunded Pension Plan liability of $35,870 exceeded the $7,714 combined value of the stock issued to the PBGC and the Pension Settlement Obligation by $28,156. There are no income tax consequences of the settlement since no tax deduction was taken for the pension expense that gave rise to the Pension Plan liability. Accordingly, the settlement of the Pension Plan Liabilities was recorded as of April 21, 2015 as follows:

Unfunded Pension Plan Liability	$	35,870
Market value of common shares issued from treasury		(71	)
Pension Settlement Obligation		(7,643	)
Total consideration to PBGC		(7,714	)
Total gain from settlement of  Pension Plan Liabilities	$	28,156
Gain recorded as:
Charge to statement of operations	$	(3,620	)
Other comprehensive Income		31,776
Contribution to total comprehensive income	$	28,156

After applying the first $1,500 installment made on May 1, 2015 and recording imputed interest expense at 7%, the balance of the Pension Settlement Obligation is recorded with liabilities on the Balance Sheet as follows as of October 2, 2015:

Current portion of pension settlement obligation	$	534
Pension settlement obligation, net of current portion		5,624
Total Pension Settlement Obligation	$	6,158

As a result of the settlement of Pension Plan liabilities on April 21, 2015, the Company’s only remaining pension obligation is the Supplemental Executive Retirement Plan (“SERP”). The Company recorded expense of $326 related to the Pension Plan for the first quarter prior to the Termination Agreement executed on April 21, 2015.

Employer Contributions

Through September 15, 2012, the Company’s funding policy was to contribute to the Pension Plan trust amounts sufficient to satisfy regulatory funding standards, based upon independent actuarial valuations. Beginning in October 2012, the Company discontinued this policy in order to preserve the necessary liquidity for its operations. As a result, a lien in favor of the PBGC was placed against the assets of the Company to secure aggregate unpaid contributions which amounted to $6,979, including interest, as of January 15, 2015, which is the date the most recent contribution was due. However, under the Settlement Agreement all of the Pension Plan’s liabilities, including the unpaid contributions were settled for an amount substantially less than the total and the PBGC lien was withdrawn in favor of new consensual liens which are subordinate to the Company’s senior lenders (see Settlement of Pension Plan Liabilities above).

10

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company is not currently required to fund the SERP.  All benefit payments are made by the Company directly to those who receive benefits from the SERP.  As such, these payments are treated as both contributions and benefits paid for reporting purposes. The Company expects to contribute and pay SERP benefits of approximately $435 in the next 12 months.

Components of Net Periodic Benefit Expense

							Supplemental Executive
	Pension Plan						Retirement Plan
	October 2,			September 26,			October 2,			September 26,
For the three months ended:	2015			2014			2015			2014
Service cost	$	-		$	-		$	-		$	-
Interest cost		-			569			44			55
Expected return on assets		-			(574	)		-			-
Amortization of actuarial loss		-			101			17			12
Amortization of prior year service cost		-			-			(12	)		(12	)
Net periodic benefit expense		-			96			49			55
Insurance premium due PBGC		-			208			-			-
	$	-		$	304		$	49		$	55
							Supplemental Executive
	Pension Plan						Retirement Plan
	October 2,			September 26,			October 2,			September 26,
For the nine months ended:		2015			2014			2015			2014
Service cost	$	-		$	-		$	-		$	-
Interest cost		617			1,706			132			164
Expected return on assets		(585	)		(1,724	)		-			-
Amortization of actuarial loss		195			304			51			37
Amortization of prior year service cost		-			-			(36	)		(36	)
Net periodic benefit expense		227			286			147			165
Insurance premium due PBGC		99			326			-			-
	$	326		$	612		$	147		$	165

For the three-month periods ended October 2, 2015 and September 26, 2014, the Company reclassified $0 and $101, respectively, of actuarial loss from accumulated other comprehensive loss that was included in pension expense in the statements of comprehensive loss for the same periods.  For the nine-month periods ended October 2, 2015 and September 26, 2014, the Company reclassified $195 and $305, respectively, of actuarial loss from accumulated other comprehensive loss that was included in pension expense in the statements of comprehensive loss for the same periods.

11

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4. Debt

Mortgage Notes

On October 3, 2014, the holder of the mortgage notes, a commercial bank, notified the Company that the liens placed on the Company’s assets by the Pension Plan constituted an event of default under the mortgage note agreements. The commercial bank agreed to forbear from exercising any further remedies, other than suspension of advances under the working capital line of credit, until August 31, 2015 by which time the process of withdrawing the Pension Plan liens was completed in accordance with terms of the Settlement Agreement (see Note 3) curing the default.  The agreement to forbear from exercising any further remedies was subject to the Company continuing to make debt service payments under the mortgage note agreements, the occurrence of no further adverse events in the condition of the Company and the Company’s agreement to the incorporation of the financial covenants in the line of credit agreement as additional covenants in the mortgage note agreements effective immediately and continuing until the mortgage notes are paid in full. One of the covenants requires Spitz to maintain tangible net worth of at least $6,000 measured upon issuance of quarterly and annual financial statements. As of the end of the second and third quarters of 2014, Spitz’s tangible net worth measured $5,914 and $5,801, respectively. As of December 31, 2014, Spitz’s tangible net worth measured $5,744.  The commercial bank granted a waiver of the event of default for the failure to maintain Spitz’s tangible net worth of at least $6,000 as of the end of the second and third quarters of 2014 and as of December 31, 2014. At the end of each fiscal quarter of 2015 Spitz tangible net worth exceeded the $6,000 covenant compliance threshold.  The Company believes that it will be in compliance with the additional covenants in future periods based on forecasts and management of intercompany accounts payable and receivable.

Lines of Credit

Because of cross default provisions, the October 3, 2014 notice of default under the mortgage notes included notification by the commercial bank that it is no longer obligated to make advances under its line-of-credit agreement with Spitz and its election to suspend future advances.  In September 2015 the bank confirmed that the defaults were cured as a result of the settlement of the pension liabilities. As of October 2, 2015, there were no borrowings outstanding under the credit agreement and there have been no borrowings outstanding since February 2011.

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Item 2.                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company,”  “E&S,” “we,” “us” and “our”) included in Item 1 of Part I of this quarterly report on Form 10-Q.  In addition to the historical information contained herein, this quarterly report on Form 10-Q includes certain "forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the fact they use words such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements are likely to relate to, among other things, the Company’s goals, plans and projections regarding its financial position, results of operations, cash flows, market position, product development, sales efforts, expenses, performance or results of current and anticipated products and the outcome of contingencies such as legal proceedings and financial results, which are based on current expectations that involve inherent risks and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years.

Although the Company believes it has been prudent in its plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. The Company undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise.

All dollar amounts are in thousands.

Executive Summary

On April 21, 2015, the Company executed the Settlement Agreement to terminate its pension plan and to settle the underlying pension liabilities. This is a major milestone and completes a process that began over two years ago.  The Company’s goal in seeking a distress termination of the Pension Plan was to ensure that the pension benefits of all Pension Plan participants are paid up to federally guaranteed limits and that the Company continues to operate as a going concern while avoiding the costly damage and disruption to the business which would result from bankruptcy reorganization. We believe the Settlement Agreement has achieved that goal.

The third quarter of 2015 reported improved sales volume and $921 of net income compared to the third quarter of 2014, which reported a net income of $639.  Although sales volume improved, the gross profit contribution was comparable to the third quarter of 2014 due to unfavorable margins on some large unrelated projects in 2015. Reduced operating expenses, primarily pension related, contributed to the higher net income in the third quarter of 2015 compared to 2014. The first nine months of 2015 reported improved sales volume and $9,710 of gross profit as compared to the first nine months of 2014, which reported gross profit of $7,371.  The stronger sales and improved gross profit in 2015 was attributable to stronger sales bookings over the prior year. The sales backlog remained healthy at the end of the third quarter of 2015 which supports an encouraging outlook for the remainder of 2015 and into 2016. Operating expenses, except for a $3,620 charge for the settlement of the pension liabilities, were lower for the periods presented primarily due to decreased pension expense in the period. The charge for the settlement of the pension liabilities is not a recurring expense item. Absent this charge, results would have been profitable for both the three- and nine-month periods ended October 2, 2015. Also, we were profitable in each of the first three quarters of 2015 before the non-recurring pension related charges.  With the healthy backlog and sales prospects, we anticipate sales at levels that should continue to yield profitable results for the remainder of 2015.

We continue to expect variable but reasonably consistent future sales and gross profits from our current product line at annual levels sufficient to cover or exceed operating expenses.  Although we reported net income for the third quarter, we had a net loss for the first nine months of 2015 due to the pension settlement charge of $3,620. However, the pension settlement contributed largely to total comprehensive income which amounted to $30,295 for the first nine months of 2015. This nearly eliminated our stockholders deficit, which was reduced from $30,703 as of December 31, 2014 to $308 as of October 2, 2015. With the settlement of the Pension Plan liabilities, we expect an improved financial position that may present opportunities for better results through the availability of credit and stronger qualification for customer projects.

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Critical Accounting Policies

Certain accounting policies are considered by management to be critical to an understanding of our condensed consolidated financial statements.  Their application requires significant management judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain.  A summary of critical accounting policies can be found in our Form 10-K for the year ended December 31, 2014.  For all of these policies, management cautions that future results rarely develop exactly as forecasted, and the best estimates routinely require modification.

Results of Operations

Sales and Backlog

The following table summarizes our sales:

	Three Months Ended				Nine Months Ended
	October 2, 2015		September 26, 2014		October 2, 2015		September 26, 2014
Sales	$	9,375	$	7,656	$	27,666	$	20,040

Sales for the third quarter of 2015 were 22% higher than the same period in 2014. Sales for the first nine months of 2015 were 38% higher than the same period in 2014.  The higher 2015 sales were attributable to progress and deliveries on larger customer contracts as compared to the same period of 2014.

Revenue backlog improved to $29,152 as of October 2, 2015, compared to $28,173 as of December 31, 2014.  Sales for the first nine months of 2015 have already exceeded total sales during all of 2014 and we expect a healthy volume of sales in the fourth quarter of 2015 to add to this improvement.  Sales prospects support the outlook for maintaining a strong revenue backlog through the end of 2015.

Gross Profit

The following table summarizes our gross profit and the gross profit as a percentage of total sales:

	Three Months Ended						Nine Months Ended
	October 2, 2015			September 26, 2014			October 2, 2015			September 26, 2014
Gross profit	$	3,326		$	3,285		$	9,710		$	7,371
Gross profit percentage		35	%		43	%		35	%		37	%

Gross profit for the three and nine months ended October 2, 2015 was unfavorably affected by higher than expected cost to complete two theme park projects. This unfavorable effect on gross profit was offset by higher sales volume which improved the absorption of fixed overhead and by favorable margins on other sales projects.

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Operating Expenses

The following table summarizes our operating expenses:

	Three Months Ended				Nine Months Ended
	October 2, 2015		September 26, 2014		October 2, 2015		September 26, 2014
Selling, general and
administrative	$	1,535	$	1,637	$	5,132	$	5,211
Research and development		563		537		1,702		1,608
Pension		49		359		473		777
Pension settlement		-		-		3,620		-
Total operating expenses	$	2,147	$	2,533	$	10,927	$	7,596

Selling, general and administrative expenses for the three and nine months ended October 2, 2015 were slightly lower compared to 2014. This was primarily due to the reduction of selling related travel expense and professional fees associated with the pension settlement.

Research and development expenses for the three and nine months ended October, 2015 were higher compared to the same periods in 2014 due primarily to increased labor costs and expenditures on product improvement projects.

Pension expense declined in the third quarter and first nine months of 2015 due to the termination of the Pension Plan.  The third quarter pension expenses in 2015 are attributable to the SERP. With the termination of the Pension Plan, future pension expense will be reduced to the expenses attributable to the SERP.

The $3,620 charge to operating expense reported in the first nine months of 2015 is related to the settlement of pension liabilities.

Other Expense, net

The following table summarizes our other expense:

	Three Months Ended				Nine Months Ended
	October 2, 2015		September 26, 2014		October 2, 2015		September 26, 2014
Total other expense, net	$	231	$	192	$	404	$	567

The changes in other expense, net, for the periods presented were attributable to interest expense. For the three-month period ended October 2, 2015, interest expense was greater than the prior year period due to interest on the pension settlement obligation recorded in 2015.  For the nine-month period of 2015, interest expense was less than the prior year period due to 2014 interest expense on a financing lease obligation which was extinguished in October 2014.

Settlement of Pension Plan Liabilities

The settlement of Pension Plan liabilities resulted in a charge to the statement of operations of $3,620 which was offset by other comprehensive income of $31,776 for a total gain of $28,156 recorded in the second quarter of 2015. This was the primary contribution to the total comprehensive income of $30,295 reported for the nine-month period presented for 2015.

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Liquidity and Capital Resources

Outlook

As discussed above in the executive summary and the notes to the condensed consolidated financial statements, we have made significant progress in our effort to reverse our long history of operating losses.  We believe that the termination of the Pension Plan together with the settlement of the underlying pension liabilities achieved our goal of reducing our obligations to levels that allow the business to be viable. As a result, we believe existing liquidity resources and funds generated from forecasted revenue will be sufficient to meet our current and long-term obligations. We continue to operate in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures.

Cash Flows

In the first nine months of 2015, $3,151 of cash used in operating activities was attributable to $2,503 of cash from the net loss for the period, after the effect of $4,179 of non-cash items, mostly related to the pension settlement, less an unfavorable change to working capital of $5,654. The cash effect of the change to working capital was driven primarily by the timing of customer progress payments, payment on the pension settlement obligation and, to a lesser degree, the acquisition of inventory for upcoming customer deliveries.

In the first nine months of 2014, $798 of cash provided by operating activities was attributable to a favorable change in working capital of $603, in addition to $195 provided by the net loss of $780 after the effect of $975 of non-cash expense items.

Cash used in investing activities was $71 for the nine months ended October 2, 2015 compared to $60 for the same period of 2014.  The Company had purchases of property and equipment of $71 in 2015 and no proceeds from sale of marketable securities.  The Company had purchases of property and equipment of $289 in 2014 which were largely offset by $229 in proceeds from marketable securities.

For the first nine months of 2015, financing activities used $156 of cash compared to $131 in 2014 for principal payments on mortgage notes.

Line of Credit

The Company is a party to a line-of-credit agreement with a commercial bank which permits borrowings of up to $1,100 to fund Spitz working capital requirements. Under the line of credit agreement, interest is charged on amounts borrowed at the Wall Street Journal Prime Rate.  Any borrowings under the Credit Agreement are secured by Spitz real and personal property and all of the outstanding shares of Spitz common stock. The line-of-credit agreement and mortgage notes (with the same commercial bank) contain cross default provisions whereby a default on either agreement will result in a default on both agreements. On October 3, 2014, the commercial bank notified the Company that it is no longer obligated to make advances under the line-of-credit agreement and elected to suspend future advances because of events of default on loan covenants resulting from the liens placed on the Company’s assets by the Pension Plan. In September 2015 the bank confirmed that the defaults were cured as a result of the settlement of the pension liabilities. There were no borrowings outstanding under the line-of-credit agreement as of October 2, 2015.

Letters of Credit

Underthe terms of financing arrangements for letters of credit, the Company is required to maintain a balance in a specific cash account equal to or greater than the outstanding value of all letters of credit issued, plus other amounts necessary to adequately secure obligations with the financial institutions who issue the letters of credit.  As of October 2, 2015, there were outstanding letters of credit and bank guarantees of $600, which are scheduled to expire during the year ending December 31, 2016.

Mortgage Notes

As of October 2, 2015, Spitz had obligations totaling $2,206 under its two mortgage notes payable.

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Item 4.                      CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at the reasonable assurance level such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company are detected.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with the evaluation of disclosure controls and procedures discussed above that occurred during the quarter ended October 2, 2015, or subsequent to that date, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

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PART II - OTHER INFORMATION

Item 1.                 LEGAL PROCEEDINGS

In the normal course of business, we become involved in various legal proceedings.  Although the final outcome of such proceedings cannot be predicted with certainty, we believe the ultimate disposition of any such proceedings will not have a material adverse effect on our consolidated financial position, liquidity, or results of operations.

Item 6.                 EXHIBITS

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, filed herewith.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, filed herewith.

32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101 The following materials from this Quarterly Report on Form 10-Q for the periods ended October 2, 2015, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

18

SIGNATURE

Pursuant to the requirements 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.

		EVANS & SUTHERLAND COMPUTER CORPORATION
Date:	November 9, 2015	By:     /s/ Paul Dailey
		Paul Dailey, Chief Financial Officer
		and Corporate Secretary
		(Authorized Officer)
		(Principal Financial and Accounting Officer)

19

EX-31.1

Exhibit 31.1

Rule 13a-14 Certification

CERTIFICATIONS*

I, David H. Bateman, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Evans & Sutherland Computer Corporation;

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 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 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: November 9, 2015

/s/ David H. Bateman

David H. Bateman

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14 Certification

CERTIFICATIONS*

I, Paul L. Dailey, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Evans & Sutherland Computer Corporation;

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 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 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: November 9, 2015

/s/ Paul L. Dailey

Paul L. Dailey

 Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. 1350,

 as Adopted Pursuant Section 906 of the

Sarbanes-Oxley Act of 2002

I, David H. Bateman, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of Evans & Sutherland Computer Corporation for the quarter ended October 2, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

Date: November 9, 2015	By:     /s/ David H. Bateman
	David H. Bateman
	Chief Executive Officer

I, Paul L. Dailey, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of Evans & Sutherland Computer Corporation for the quarter ended October 2, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

Date: November 9, 2015	By:     /s/ Paul L. Dailey
	Paul L. Dailey
	Chief Financial Officer

The foregoing certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

4. Debt

9 Months Ended

Oct. 02, 2015

Notes

4. Debt

4.     Debt

Mortgage Notes

On October 3, 2014, the holder of the mortgage notes, a commercial bank, notified the Company that the liens placed on the Company’s assets by the Pension Plan constituted an event of default under the mortgage note agreements. The commercial bank agreed to forbear from exercising any further remedies, other than suspension of advances under the working capital line of credit, until August 31, 2015 by which time the process of withdrawing the Pension Plan liens was completed in accordance with terms of the Settlement Agreement (see Note 3) curing the default.  The agreement to forbear from exercising any further remedies was subject to the Company continuing to make debt service payments under the mortgage note agreements, the occurrence of no further adverse events in the condition of the Company and the Company’s agreement to the incorporation of the financial covenants in the line of credit agreement as additional covenants in the mortgage note agreements effective immediately and continuing until the mortgage notes are paid in full. One of the covenants requires Spitz to maintain tangible net worth of at least $6,000 measured upon issuance of quarterly and annual financial statements. As of the end of the second and third quarters of 2014, Spitz’s tangible net worth measured $5,914 and $5,801, respectively. As of December 31, 2014, Spitz’s tangible net worth measured $5,744.  The commercial bank granted a waiver of the event of default for the failure to maintain Spitz’s tangible net worth of at least $6,000 as of the end of the second and third quarters of 2014 and as of December 31, 2014. At the end of each fiscal quarter of 2015 Spitz tangible net worth exceeded the $6,000 covenant compliance threshold.  The Company believes that it will be in compliance with the additional covenants in future periods based on forecasts and management of intercompany accounts payable and receivable.

Lines of Credit

Because of cross default provisions, the October 3, 2014 notice of default under the mortgage notes included notification by the commercial bank that it is no longer obligated to make advances under its line-of-credit agreement with Spitz and its election to suspend future advances.  In September 2015 the bank confirmed that the defaults were cured as a result of the settlement of the pension liabilities. As of October 2, 2015, there were no borrowings outstanding under the credit agreement and there have been no borrowings outstanding since February 2011.

XML

3. Employee Retirement Benefit Plans

9 Months Ended

Oct. 02, 2015

Notes

3. Employee Retirement Benefit Plans

3.     EMPLOYEE RETIREMENT BENEFIT PLANS

 Settlement of Pension Plan Liabilities

On January 7, 2013, the Company submitted a PBGC Form 600 Distress Termination, Notice of Intent to Terminate, to the PBGC. The notice filing initiated an application process by the Company with the PBGC for the distress termination of the Pension Plan. The Pension Plan benefits are guaranteed by the ERISA Title IV insurance fund, which is administered by the PBGC. The Company proposed a termination date of March 8, 2013. Through the application process, the Company’s intent was to demonstrate to the PBGC that it qualified for a distress termination of the Pension Plan under either of two of the criteria of Section 4041(c)(2) of ERISA (inability to continue in business absent termination and unreasonably increased pension costs) and applicable PBGC regulations. To satisfy the criteria, the Company and its wholly owned subsidiary each had to demonstrate to the satisfaction of the PBGC that, unless the termination occurred, the Company would be unable to pay its debts when they come due and would be unable to continue in business, or that the costs of the Pension Plan had become unreasonably burdensome solely as a result of a decline in the workforce covered by the Pension Plan. A distress termination under Section 4041(c)(2) of ERISA transfers the Pension Plan’s benefit obligations to the PBGC, up to ERISA guaranteed limits, without requiring reorganization under bankruptcy law. The Pension Plan’s actuary informed the Company that following termination of the Pension Plan and subject to the PBGC’s review of participant benefits, all of the benefits earned by participants as of the date of plan termination are expected to fall within ERISA guaranteed limits.

The Company’s goal in seeking a distress termination of the Pension Plan was to ensure that the pension benefits of all Pension Plan participants are paid up to federally guaranteed limits and that the Company continues to operate as a going concern while avoiding the costly damage and disruption to the business which would result from reorganization.

Pursuant to a determination by the PBGC that the requirements of the distress termination of the Pension Plan had been met, on April 21, 2015, the Company, as the administrator of the Pension Plan, and the PBGC entered into an Agreement For Appointment of Trustee and Termination of Plan (the “Termination Agreement”) (a) terminating the Plan, (b) establishing March 8, 2013 as the Plan’s termination date and (c) appointing the PBGC as statutory trustee of the Plan.

In connection with the Termination Agreement, on April 21, 2015, the Company entered into the Settlement Agreement (the “Settlement Agreement”) with the PBGC to settle all liabilities of the Pension Plan including any termination premium resulting from the Pension Plan termination (the “Settled ERISA Liabilities”). Pursuant to the Settlement Agreement, the Company agreed to (a) pay to the PBGC a total of $10,500, with $1,500 due within ten days following the effective date of the Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015 (the “Pension Settlement Obligation”) and (b) issue within ten days following the effective date of the Settlement Agreement 88,117 shares of the Company’s treasury stock in the name of the PBGC. On April 23, 2015, the Company issued to the PBGC the 88,117 shares of stock and on May 1, 2015 it paid the initial $1,500 amount due to the PBGC. On October 22, 2015, the Company made the first of the twelve annual installments.  The Settlement Agreement further provides that the PBGC will be deemed to have released the Company from all Settled ERISA Liabilities upon payment of the Pension Settlement Obligation. In the event of a default by the Company of its obligations under the Settlement Agreement or the underlying agreements which secure the Pension Settlement Obligation, the PBGC may enforce payment of the Settled ERISA Liabilities, which would accrue interest at various rates until payment is made and be reduced by any payments made by the Company pursuant to the Settlement Agreement.  The estimated total Settled ERISA Liabilities as of the settlement date is $46,000.

To secure the Company’s obligations under the Settlement Agreement, on April 21, 2015, the Company also entered into a Security Agreement with the PBGC (the “Security Agreement”), and executed an Open-End Mortgage in favor of the PBGC (the “Mortgage”) on certain real property owned by the Company’s subsidiary, Spitz, Inc. (“Spitz”). The Security Agreement and Mortgage grant to the PBGC a security interest on all of the Company’s presently owned and after-acquired property and proceeds thereof, free and clear of all liens and other encumbrances, except those described therein (the “Senior Liens”). The PBGC’s security interest in the Company’s property is subordinate to the Company’s two senior lenders pursuant to the Security Agreement and agreements between the PBGC and the lenders (the “Intercreditor Agreements”). The Intercreditor Agreements provide for the lenders to extend credit to the Company, secured by the Senior Liens, up to specified limits. The Intercreditor Agreement between the lender of the mortgage notes and line of credit (see Note 4) provides for total aggregate loans of up to $6,500 secured by Senior Liens on Spitz assets. The second Intercreditor Agreement between another lender and the PBGC provides for up to $3,000 of letter of credit indebtedness secured by Senior Liens on cash deposits. The Settlement Agreement also required that the PBGC withdraw all lien notices with respect to the statutory liens it previously perfected on behalf of the Pension Plan with respect to all real and personal property of the Company as soon as reasonably practicable after the 91st day after the perfection of all consensual liens granted to the PBGC by the Security Agreement and Mortgage.  In August 2015, the PBGC’s lien notices with respect to the statutory liens were withdrawn.

The termination of the Pension Plan and settlement of its underlying liabilities enables the Company to satisfy the previously disclosed unfunded liability attributable to the Pension Plan by the issuing to the PBGC the 88,117 shares of stock from treasury and making the fixed installment payments of the Pension Settlement Obligation. As of the date of the Settlement Agreement, the balance of the unfunded liability attributable to the Pension Plan, which was previously reported with Pension and Retirement Obligations, was $35,870, of which $31,776 was attributable to accumulated other comprehensive loss. The market value of the 88,117 shares of stock issued to the PBGC from treasury on April 23, 2015 was $71. The Pension Settlement Obligation was recorded as a liability of the Company as of April 21, 2015 in the amount of $7,643, reflecting the present value of the installments at an interest rate 7%, which the Company believes represents the fair market interest rate for junior secured debt with similar secured terms of the Security Agreement. The unfunded Pension Plan liability of $35,870 exceeded the $7,714 combined value of the stock issued to the PBGC and the Pension Settlement Obligation by $28,156. There are no income tax consequences of the settlement since no tax deduction was taken for the pension expense that gave rise to the Pension Plan liability. Accordingly, the settlement of the Pension Plan Liabilities was recorded as of April 21, 2015 as follows:

Unfunded Pension Plan Liability	$35,870
Market value of common shares issued from treasury	(71)
Pension Settlement Obligation	(7,643)
Total consideration to PBGC	(7,714)
Total gain from settlement of  Pension Plan Liabilities	$28,156
Gain recorded as:
Charge to statement of operations	$(3,620)
Other comprehensive Income	31,776
Contribution to total comprehensive income	$28,156

After applying the first $1,500 installment made on May 1, 2015 and recording imputed interest expense at 7%, the balance of the Pension Settlement Obligation is recorded with liabilities on the Balance Sheet as follows as of October 2, 2015:

Current portion of pension settlement obligation	$534
Pension settlement obligation, net of current portion	5,624
Total Pension Settlement Obligation	$6,158

As a result of the settlement of Pension Plan liabilities on April 21, 2015, the Company’s only remaining pension obligation is the Supplemental Executive Retirement Plan (“SERP”). The Company recorded expense of $326 related to the Pension Plan for the first quarter prior to the Termination Agreement executed on April 21, 2015.

Employer Contributions

Through September 15, 2012, the Company’s funding policy was to contribute to the Pension Plan trust amounts sufficient to satisfy regulatory funding standards, based upon independent actuarial valuations. Beginning in October 2012, the Company discontinued this policy in order to preserve the necessary liquidity for its operations. As a result, a lien in favor of the PBGC was placed against the assets of the Company to secure aggregate unpaid contributions which amounted to $6,979, including interest, as of January 15, 2015, which is the date the most recent contribution was due. However, under the Settlement Agreement all of the Pension Plan’s liabilities, including the unpaid contributions were settled for an amount substantially less than the total and the PBGC lien was withdrawn in favor of new consensual liens which are subordinate to the Company’s senior lenders (see Settlement of Pension Plan Liabilities above).

The Company is not currently required to fund the SERP.  All benefit payments are made by the Company directly to those who receive benefits from the SERP.  As such, these payments are treated as both contributions and benefits paid for reporting purposes. The Company expects to contribute and pay SERP benefits of approximately $435 in the next 12 months.

Components of Net Periodic Benefit Expense

			Supplemental Executive
	Pension Plan		Retirement Plan
	October 2,	September 26,	October 2,	September 26,
For the three months ended:	2015	2014	2015	2014
Service cost	$-	$-	$-	$-
Interest cost	-	569	44	55
Expected return on assets	-	(574)	-	-
Amortization of actuarial loss	-	101	17	12
Amortization of prior year service cost	-	-	(12)	(12)
Net periodic benefit expense	-	96	49	55
Insurance premium due PBGC	-	208	-	-
	$-	$304	$49	$55

			Supplemental Executive
	Pension Plan		Retirement Plan
	October 2,	September 26,	October 2,	September 26,
For the nine months ended:	2015	2014	2015	2014
Service cost	$-	$-	$-	$-
Interest cost	617	1,706	132	164
Expected return on assets	(585)	(1,724)	-	-
Amortization of actuarial loss	195	304	51	37
Amortization of prior year service cost	-	-	(36)	(36)
Net periodic benefit expense	227	286	147	165
Insurance premium due PBGC	99	326	-	-
	$326	$612	$147	$165

For the three-month periods ended October 2, 2015 and September 26, 2014, the Company reclassified $0 and $101, respectively, of actuarial loss from accumulated other comprehensive loss that was included in pension expense in the statements of comprehensive loss for the same periods.  For the nine-month periods ended October 2, 2015 and September 26, 2014, the Company reclassified $195 and $305, respectively, of actuarial loss from accumulated other comprehensive loss that was included in pension expense in the statements of comprehensive loss for the same periods.

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Oct. 02, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 3,660	$ 7,038
Restricted cash	600	711
Accounts receivable, net	6,598	4,586
Costs and estimated earnings in excess of billings on uncompleted contracts	3,045	1,699
Inventories, net	5,023	4,163
Prepaid expenses and deposits	773	635
Total current assets	19,699	18,832
Property and equipment, net	4,689	4,803
Goodwill	635	635
Intangible assets, net	37	68
Other assets	1,056	1,118
Total assets	26,116	25,456
Current liabilities:
Accounts payable	1,025	710
Accrued liabilities	1,652	1,142
Billings in excess of costs and estimated earnings on uncompleted contracts	4,980	5,176
Customer deposits	4,002	4,081
Current portion of retirement obligations	435	535
Current portion of pension settlement obligation	534
Current portion of long-term debt	197	2,362
Total current liabilities	12,825	14,006
Pension and retirement obligations, net of current portion	4,207	40,076
Pension settlement obligation, net of current portion	5,624
Long-term debt, net of current portion	2,009
Deferred rent obligation	1,759	2,077
Total liabilities	$ 26,424	$ 56,159
Commitments and contingencies
Stockholders' deficit:
Preferred stock, no par value: 10,000,000 shares authorized; no shares outstanding
Common stock, $0.20 par value: 30,000,000 shares authorized; 11,441,666 shares issued	$ 2,288	$ 2,288
Additional paid-in-capital	53,423	54,500
Common stock in treasury, at cost, 264,350 shares	(3,532)	(4,709)
Accumulated deficit	(50,833)	(49,157)
Accumulated other comprehensive loss	(1,654)	(33,625)
Total stockholders' deficit	(308)	(30,703)
Total liabilities and stockholders' deficit	$ 26,116	$ 25,456

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1. General

9 Months Ended

Oct. 02, 2015

Notes

1. General

1.     GENERAL

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”).  This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive income (loss), and statements of cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows.  The results of operations for the three and nine months ended October 2, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.

Revenue Recognition

Sales include revenues from system hardware and the related integrated software, database products and service contracts.  The following methods are used to determine revenue recognition:

Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method.  In applying this method,  the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract.   This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract.  The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made.  Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets.

In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above.

Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method.  Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured.

Multiple Element Arrangements.  Some contracts include multiple elements.  Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements.  Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements.  Relative fair values of elements are generally determined based on actual and estimated selling price.  Delivery times of such contracts typically occur within a three to six-month time period.

Other.  Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element.  Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract.

Anticipated Losses.  For contracts with anticipated losses at completion, a provision is recorded when the loss is probable.  After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal and offsetting amounts as contract costs are incurred.

Stock-Based Compensation

Compensation cost for all stock-based awards is measured at fair value on the date of grant and is recognized over the service period for awards expected to vest.  Determining the fair value of share-based awards at the grant date requires judgment, including estimating the value of share-based awards that are expected to be forfeited. Actual results and future estimates may differ from the Company’s current estimates.

Net Loss Per Common Share

Basic net loss per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net loss per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share.

Inventories, net

Inventories consisted of the following:

	October 2,	December 31,
	2015	2014
Raw materials	$6,992	$5,468
Work in process	1,106	1,678
Finished goods	217	233
Reserve for obsolete inventory	(3,292)	(3,216)
Inventories, net	$5,023	$4,163

Liquidity

The Company has experienced recurring annual losses since 2007, except for 2013. In order to preserve the liquid resources required to operate the business, the Company stopped making cash payments due to the trust for the Company’s defined benefit pension plan (the “Pension Plan”) beginning in October 2012. In January 2013, the Company initiated an application process for the distress termination of the Pension Plan in accordance with provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) with the goal of settling  its Pension Plan liabilities on terms that are feasible for the Company to continue in business as a going concern. On April 21, 2015, the Company executed an agreement (the “Settlement Agreement”) which terminated the Pension Plan and settled the Pension Plan’s liabilities in exchange for an obligation to pay to the Pension Benefit Guaranty Corporation (“PBGC”) $10,500 over twelve years and issue to the PBGC 88,117 shares of E&S treasury stock (see Note 3). In addition, the Settlement Agreement has led to a new banking relationship and improved credit capacity. Aided by prior cost reduction efforts and improved sales volume, for the nine months ended October 2, 2015, the Company has generated profitable results before recording the pension expense and a charge for the settlement of the Pension Plan. The Company is no longer incurring expenses related to the terminated Pension Plan but is responsible for fixed annual installment payments of $750 to the PBGC. The Company’s unrestricted cash balances totaling $3,660 as of October 2, 2015, improved credit capacity and forecasted operations indicate sufficient resources will be available to meet its obligations, including the terms of the Settlement Agreement, through at least September 30, 2016.

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4. Debt (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014
Debt Instrument, Covenant Description	One of the covenants requires Spitz to maintain tangible net worth of at least $6,000 measured upon issuance of quarterly and annual financial statements
Spitz, Inc.
Tangible Net Worth		$ 5,744	$ 5,801	$ 5,914

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2. Stock Option Plan

9 Months Ended

Oct. 02, 2015

Notes

2. Stock Option Plan

2.     STOCK OPTION PLAN

As of October 2, 2015, options to purchase 1,312,613 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant.  

A summary of activity in the stock option plan for the nine months ended October 2, 2015 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,333	$2.08
Granted	211	0.36
Exercised	-	-
Forfeited or expired	(83)	7.26
Outstanding as of end of the period	1,461	1.53
Exercisable as of end of the period	1,063	$2.02

As of October 2, 2015, options exercisable and options outstanding had a weighted average remaining contractual term of 3.63 and 5.03 years, respectively, and had an aggregate intrinsic value of $307 and $555, respectively.

The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2015, were based on estimates as of the date of grant as follows:

Risk-free interest rate	0.91%
Dividend yield	0.00%
Volatility	343%
Expected life	3.5 years

Expected option life and volatility are based on historical data of the Company.   The risk-free interest rate is calculated based on the average US Treasury bill rate that corresponds with the option life.  Historically, the Company has not declared dividends and there are no foreseeable plans to do so.

As of October 2, 2015, there was approximately $37 of total unrecognized share-based compensation cost related to grants under the stock option plan that will be recognized over a weighted-average period of 2.1 years.

Share-based compensation expense included in selling, general and administrative expense in the statements of comprehensive income (loss) for each of the nine-month periods ended October 2, 2015 and September 26, 2014 was $30 and $12, respectively.  Share-based compensation expense included in selling, general and administrative expense in the statements of comprehensive income (loss) for each of the three-month periods ended October 2, 2015 and September 26, 2014 was $10 and $4, respectively.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Oct. 02, 2015	Dec. 31, 2014
Statement of Financial Position
Preferred Stock, par value
Preferred Stock, shares authorized	10,000,000	10,000,000
Preferred Stock, shares outstanding
Common Stock, par value	$ 0.20	$ 0.20
Common Stock, shares authorized	30,000,000	30,000,000
Common Stock, shares issued	11,441,666	11,441,666
Common stock in treasury, shares	264,350	264,350

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2. Stock Option Plan (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2015	Sep. 26, 2014	Oct. 02, 2015	Sep. 26, 2014
Options Exercisable, Weighted Average Remaining Contractual Term			3 years 7 months 17 days
Options, Outstanding, Weighted Average Remaining Contractual Term			5 years 11 days
Options, Exercisable, Aggregate Intrinsic Value	$ 307		$ 307
Options, Outstanding, Aggregate Intrinsic Value	555		$ 555
Method Used			Black-Scholes option-pricing model
Risk-free interest rate			0.91%
Dividend yield			0.00%
Volatility			343.00%
Expected life			3 years 6 months
Total unrecognized share-based compensation cost	37		$ 37
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			2 years 1 month 6 days
Allocated Share-based Compensation Expense	$ 10	$ 4	$ 30	$ 12
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,312,613		1,312,613

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Document and Entity Information - shares	9 Months Ended
	Oct. 02, 2015	Nov. 05, 2015
Document and Entity Information:
Entity Registrant Name	EVANS & SUTHERLAND COMPUTER CORPORATION
Document Type	10-Q
Document Period End Date	Oct. 02, 2015
Amendment Flag	false
Entity Central Index Key	0000276283
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		11,177,316
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	escc

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2. Stock Option Plan: Schedule of Stock Option Plan Activity (Details) shares in Thousands	9 Months Ended
	Oct. 02, 2015 $ / shares shares
Details
Outstanding as of the beginning of the period	1,333
Outstanding as of the beginning of the period, weighted average exercise price | $ / shares	$ 2.08
Granted	211
Granted, weighted average exercise price | $ / shares	$ 0.36
Exercised	0
Exercised, weighted average exercise price | $ / shares	$ 0
Forfeited or expired	(83)
Forfeited or expired, weighted average exercise price | $ / shares	$ 7.26
Outstanding as of the end of the period	1,461
Outstanding as of the end of the period, weighted average exercise price | $ / shares	$ 1.53
Exercisable as of the end of the period	1,063
Exercisable as of the end of the period, weighted average exercise price | $ / shares	$ 2.02

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2015	Sep. 26, 2014	Oct. 02, 2015	Sep. 26, 2014
Statement of Comprehensive Income
Sales	$ 9,375	$ 7,656	$ 27,666	$ 20,040
Cost of sales	(6,049)	(4,371)	(17,956)	(12,669)
Gross profit	3,326	3,285	9,710	7,371
Operating expenses:
Selling, general and administrative	(1,535)	(1,637)	(5,132)	(5,211)
Research and development	(563)	(537)	(1,702)	(1,608)
Pension	(49)	(359)	(473)	(777)
Pension settlement			(3,620)
Total operating expenses	(2,147)	(2,533)	(10,927)	(7,596)
Operating income (loss)	1,179	752	(1,217)	(225)
Other expense, net	(231)	(192)	(404)	(567)
Income (loss) before income tax benefit (provision)	948	560	(1,621)	(792)
Income tax benefit (provision)	(27)	79	(55)	12
Net income (loss)	$ 921	$ 639	$ (1,676)	$ (780)
Net income (loss) per common share - basic and diluted	$ 0.08	$ 0.06	$ (0.15)	$ (0.07)
Weighted average common shares outstanding - basic	11,177	11,089	11,141	11,089
Weighted average common shares outstanding - diluted	11,705	11,435	11,141	11,089
Comprehensive income (loss), net of tax:
Net income (loss)	$ 921	$ 639	$ (1,676)	$ (780)
Other comprehensive income (loss):
Reclassification of pension expense to net income (loss)	0	101	195	305
Pension settlement			31,776
Other comprehensive income		101	31,971	305
Total comprehensive income (loss)	$ 921	$ 740	$ 30,295	$ (475)

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2. Stock Option Plan: Schedule of Stock Option Plan Activity (Tables)

9 Months Ended

Oct. 02, 2015

Tables/Schedules

Schedule of Stock Option Plan Activity

A summary of activity in the stock option plan for the nine months ended October 2, 2015 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,333	$2.08
Granted	211	0.36
Exercised	-	-
Forfeited or expired	(83)	7.26
Outstanding as of end of the period	1,461	1.53
Exercisable as of end of the period	1,063	$2.02

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1. General: Inventories, Net: Schedule of Inventory (Tables)

9 Months Ended

Oct. 02, 2015

Tables/Schedules

Schedule of Inventory

Inventories consisted of the following:

	October 2,	December 31,
	2015	2014
Raw materials	$6,992	$5,468
Work in process	1,106	1,678
Finished goods	217	233
Reserve for obsolete inventory	(3,292)	(3,216)
Inventories, net	$5,023	$4,163

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3. Employee Retirement Benefit Plans (Details) - USD ($) $ in Thousands			3 Months Ended		9 Months Ended
	May. 01, 2015	Apr. 23, 2015	Oct. 02, 2015	Sep. 26, 2014	Oct. 02, 2015	Sep. 26, 2014	Apr. 21, 2015	Jan. 15, 2015
Pension Plan Settlement Agreement, Amount Payable							$ 10,500
Pension Plan Settlement Agreement, Payment Schedule					$1,500 due within ten days following the effective date of the Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015
Pension Plan Settlement Agreement, Stock Payable							88,117
Stock issued pursuant to Pension Plan Settlement Agreement		88,117
Pension Contributions	$ 1,500
Settled ERISA Liabilities							$ 46,000
Stock Issued During Period, Value, Other		$ 71
Pension Settlement Obligation, Interest Rate							7.00%
Lien against assets of the company for unpaid pension contributions								$ 6,979
Reclassification of pension expense to net income (loss)			$ 0	$ 101	$ 195	$ 305
Supplemental Executive Retirement Plan
Expected Future Benefit Payments, Next Twelve Months			435		435
Intercreditor Agreement
Line of Credit Facility, Maximum Borrowing Capacity			6,500		6,500
Second Intercreditor Agreement
Line of Credit Facility, Maximum Borrowing Capacity			$ 3,000		$ 3,000

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1. General: Inventories, Net: Schedule of Inventory (Details) - USD ($) $ in Thousands	Oct. 02, 2015	Dec. 31, 2014
Details
Raw Materials	$ 6,992	$ 5,468
Work in process	1,106	1,678
Finished goods	217	233
Reserve for obsolete inventory	(3,292)	(3,216)
Inventories, net	$ 5,023	$ 4,163

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3. Employee Retirement Benefit Plans: Schedule of Settlement of Pension Plan Liabilities (Tables)

9 Months Ended

Oct. 02, 2015

Tables/Schedules

Schedule of Settlement of Pension Plan Liabilities

settlement of the Pension Plan Liabilities was recorded as of April 21, 2015 as follows:

Unfunded Pension Plan Liability	$35,870
Market value of common shares issued from treasury	(71)
Pension Settlement Obligation	(7,643)
Total consideration to PBGC	(7,714)
Total gain from settlement of  Pension Plan Liabilities	$28,156
Gain recorded as:
Charge to statement of operations	$(3,620)
Other comprehensive Income	31,776
Contribution to total comprehensive income	$28,156

After applying the first $1,500 installment made on May 1, 2015 and recording imputed interest expense at 7%, the balance of the Pension Settlement Obligation is recorded with liabilities on the Balance Sheet as follows as of October 2, 2015:

Current portion of pension settlement obligation	$534
Pension settlement obligation, net of current portion	5,624
Total Pension Settlement Obligation	$6,158

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3. Employee Retirement Benefit Plans: Schedule of Net Periodic Benefit Expense (Tables)

9 Months Ended

Oct. 02, 2015

Tables/Schedules

Schedule of Net Periodic Benefit Expense

Components of Net Periodic Benefit Expense

			Supplemental Executive
	Pension Plan		Retirement Plan
	October 2,	September 26,	October 2,	September 26,
For the three months ended:	2015	2014	2015	2014
Service cost	$-	$-	$-	$-
Interest cost	-	569	44	55
Expected return on assets	-	(574)	-	-
Amortization of actuarial loss	-	101	17	12
Amortization of prior year service cost	-	-	(12)	(12)
Net periodic benefit expense	-	96	49	55
Insurance premium due PBGC	-	208	-	-
	$-	$304	$49	$55

			Supplemental Executive
	Pension Plan		Retirement Plan
	October 2,	September 26,	October 2,	September 26,
For the nine months ended:	2015	2014	2015	2014
Service cost	$-	$-	$-	$-
Interest cost	617	1,706	132	164
Expected return on assets	(585)	(1,724)	-	-
Amortization of actuarial loss	195	304	51	37
Amortization of prior year service cost	-	-	(36)	(36)
Net periodic benefit expense	227	286	147	165
Insurance premium due PBGC	99	326	-	-
	$326	$612	$147	$165

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1. General (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2015	Apr. 21, 2015	Dec. 31, 2014	Sep. 26, 2014	Dec. 31, 2013
Details
Pension Plan Settlement Agreement, Amount Payable		$ 10,500
Pension Plan Settlement Agreement, Stock Payable		88,117
Pension Plan Settlement Agreement, Payment Schedule	The Company is no longer incurring expenses related to the terminated Pension Plan but is responsible for fixed annual installment payments of $750 to the PBGC
Cash and cash equivalents	$ 3,660		$ 7,038	$ 3,983	$ 3,376

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3. Employee Retirement Benefit Plans: Schedule of Net Periodic Benefit Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2015	Sep. 26, 2014	Oct. 02, 2015	Sep. 26, 2014
Pension Expenses for the period	$ 49	$ 359	$ 473	$ 777
Pension Plan
Service cost	0	0	0	0
Interest cost	0	569	617	1,706
Expected return on assets	0	(574)	(585)	(1,724)
Amortization of actuarial loss	0	101	195	304
Amortization of prior year service cost	0	0	0	0
Net periodic benefit cost	0	96	227	286
Insurance premium due PBGC	0	208	99	326
Pension Expenses for the period	0	304	326	612
Supplemental Executive Retirement Plan
Service cost	0	0	0	0
Interest cost	44	55	132	164
Expected return on assets	0	0	0	0
Amortization of actuarial loss	17	12	51	37
Amortization of prior year service cost	(12)	(12)	(36)	(36)
Net periodic benefit cost	49	55	147	165
Insurance premium due PBGC	0	0	0	0
Pension Expenses for the period	$ 49	$ 55	$ 147	$ 165

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2015	Sep. 26, 2014
Cash flows from operating activities:
Net loss	$ (1,676)	$ (780)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	216	376
Amortization of deferred pension costs	195	305
Pension settlement charge	3,620
Provision for excess and obsolete inventory	76
Other	72	294
Changes in assets and liabilities:
Decrease in restricted cash	111	289
Decrease (increase) in accounts receivable	(2,054)	726
Increase in inventories	(936)	(1,104)
Decrease (increase) in costs and estimated earnings in excess of billings on uncompleted contracts, net	(1,542)	516
Decrease (increase) in prepaid expenses and other assets	(76)	402
Increase (decrease) in accounts payable	315	(596)
Increase (decrease) in accrued liabilities	510	(21)
Decrease in accrued pension and retirement liabilities	(100)	(54)
Decrease in pension settlement obligation	(1,485)
Increase (decrease) in customer deposits	(79)	445
Decrease in deferred rent obligation	(318)
Net cash provided by (used in) operating activities	(3,151)	798
Cash flows from investing activities:
Purchases of property and equipment	(71)	(289)
Proceeds from sale of marketable securities		229
Net cash used in investing activities	(71)	(60)
Cash flows from financing activities:
Principal payments on long-term debt	(156)	(131)
Net cash used in financing activities	(156)	(131)
Net increase (decrease) in cash and cash equivalents	(3,378)	607
Cash and cash equivalents as of beginning of the period	7,038	3,376
Cash and cash equivalents as of end of the period	3,660	3,983
Supplemental disclosures of non-cash investing and financing activities:
Settlement of pension liability	35,870
Supplemental disclosures of cash flow information:
Cash paid during the period for: Interest	126	390
Cash paid during the period for: Income taxes	$ 12	$ 45

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1. General (Policies)

9 Months Ended

Oct. 02, 2015

Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”).  This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive income (loss), and statements of cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows.  The results of operations for the three and nine months ended October 2, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.

Revenue Recognition

Revenue Recognition

Sales include revenues from system hardware and the related integrated software, database products and service contracts.  The following methods are used to determine revenue recognition:

Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method.  In applying this method,  the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract.   This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract.  The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made.  Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets.

In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above.

Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method.  Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured.

Multiple Element Arrangements.  Some contracts include multiple elements.  Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements.  Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements.  Relative fair values of elements are generally determined based on actual and estimated selling price.  Delivery times of such contracts typically occur within a three to six-month time period.

Other.  Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element.  Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract.

Anticipated Losses.  For contracts with anticipated losses at completion, a provision is recorded when the loss is probable.  After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal and offsetting amounts as contract costs are incurred.

Stock-based Compensation

Stock-Based Compensation

Compensation cost for all stock-based awards is measured at fair value on the date of grant and is recognized over the service period for awards expected to vest.  Determining the fair value of share-based awards at the grant date requires judgment, including estimating the value of share-based awards that are expected to be forfeited. Actual results and future estimates may differ from the Company’s current estimates.

Net Income (loss) Per Common Share

Net Loss Per Common Share

Basic net loss per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net loss per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share.

Inventories, Net

Inventories, net

Inventories consisted of the following:

	October 2,	December 31,
	2015	2014
Raw materials	$6,992	$5,468
Work in process	1,106	1,678
Finished goods	217	233
Reserve for obsolete inventory	(3,292)	(3,216)
Inventories, net	$5,023	$4,163

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3. Employee Retirement Benefit Plans: Schedule of Settlement of Pension Plan Liabilities (Details) - USD ($) $ in Thousands		9 Months Ended
	Apr. 21, 2015	Oct. 02, 2015	Jul. 03, 2015
Details
Unfunded Pension Plan Liability	$ 35,870
Market value of common shares issued from treasury	(71)
Pension Settlement Obligation	(7,643)		$ (6,158)
Total consideration to PBGC	(7,714)
Total gain from settlement of Pension Plan Liabilities	28,156
Pension settlement	(3,620)	$ (3,620)
Other Comprehensive Income	31,776	31,776
Contribution to total comprehensive income	28,156
Current portion of pension settlement obligation		534	534
Pension settlement obligation, net of current portion		$ 5,624	5,624
Pension Settlement Obligation	$ 7,643		$ 6,158