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 June 28, 2013

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 August 2, 2013 was 11,089,199.

FORM 10-Q

Evans & Sutherland Computer Corporation

Quarter Ended June 28, 2013

		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 28, 2013 and December 31, 2012	3
	Condensed Consolidated Statements of Comprehensive Loss       for the Three and Six Months Ended June 28, 2013 and   June 29, 2012	4
	Condensed Consolidated Statements of Cash Flows for the         Six Months Ended June 28, 2013 and June 29, 2012	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 4.	Controls and Procedures	16
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 6.	Exhibits	17
SIGNATURE		18

2

PART I – FINANCIAL INFORMATION

Item 1.                      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	June 28,			December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	2,647		$	2,111
Restricted cash		1,150			705
Marketable securities		464			712
Accounts receivable, less allowances for doubtful receivables of $214
and $324, respectively		3,979			3,972
Costs and estimated earnings in excess of billings on uncompleted contracts		1,468			2,474
Inventories, net		3,508			3,125
Prepaid expenses and deposits		484			453
Total current assets		13,700			13,552
Property, plant and equipment, net		7,471			7,735
Goodwill		635			635
Definite-lived intangible assets, net		142			168
Other assets		1,533			2,160
Total assets	$	23,481		$	24,250
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	788		$	1,197
Accrued liabilities		1,343			1,274
Billings in excess of costs and estimated earnings on uncompleted contracts		4,481			2,531
Customer deposits		2,616			3,180
Current portion of retirement obligations		485			517
Current portion of long-term debt		172			167
Total current liabilities		9,885			8,866
Pension and retirement obligations, net of current portion		32,994			33,369
Long-term debt, net of current portion		5,160			5,148
Deferred rent obligation		1,505			1,511
Total liabilities		49,544			48,894
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		54,477			54,466
Common stock in treasury, at cost: 352,467 shares		(4,709	)		(4,709	)
Accumulated deficit		(50,807	)		(49,025	)
Accumulated other comprehensive loss		(27,312	)		(27,664	)
Total stockholders' deficit		(26,063	)		(24,644	)
Total liabilities and stockholders' deficit	$	23,481		$	24,250

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

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EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

	Three Months Ended						Six Months Ended
	June 28,			June 29,			June 28,			June 29,
	2013			2012			2013			2012
Sales	$	5,212		$	4,746		$	9,919		$	12,563
Cost of sales		3,480			3,540			6,877			8,088
Gross profit		1,732			1,206			3,042			4,475
Operating expenses:
Selling, general and administrative (excluding pension)		1,181			1,279			2,746			2,751
Research and development		674			660			1,344			1,264
Pension		161			554			369			1,109
Total operating expenses		2,016			2,493			4,459			5,124
Operating loss		(284	)		(1,287	)		(1,417	)		(649	)
Other expense, net		(141	)		(184	)		(355	)		(401	)
Loss before income tax provision		(425	)		(1,471	)		(1,772	)		(1,050	)
Income tax provision		-			(13	)		(10	)		(74	)
Net loss	$	(425	)	$	(1,484	)	$	(1,782	)	$	(1,124	)
Net loss per common share – basic and diluted	$	(0.04	)	$	(0.13	)	$	(0.16	)	$	(0.10	)
Weighted average common shares outstanding – basic and diluted		11,089			11,089			11,089			11,089
Comprehensive Loss
Net loss	$	(425	)	$	(1,484	)	$	(1,782	)	$	(1,124	)
Other comprehensive income (loss):
Amortization of deferred pension expense		182			-			364			-
Unrealized gain (loss) on marketable securities		(18	)		(64	)		(11	)		104
Comprehensive loss	$	(261	)	$	(1,548	)	$	(1,429	)	$	(1,020	)

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

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EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Six Months Ended
	June 28,			June 29,
	2013			2012
Cash flows from operating activities:
Net loss	$	(1,782	)	$	(1,124	)
Adjustments to reconcile net loss to net cash provided by (used in)  operating activities:
Depreciation and amortization		318			392
Other		644			439
Change in assets and liabilities:
Decrease (increase) in restricted cash		(445	)		283
Decrease (increase) in accounts receivable, net		(21	)		574
Increase in inventories		(565	)		(81	)
Decrease (increase) in costs and estimated earnings in excess of billings         on uncompleted contracts		2,956			(1,779	)
Decrease (increase) in prepaid expenses and deposits		596			(406	)
Decrease in accounts payable		(409	)		(497	)
Increase (decrease) in accrued liabilities		63			(266	)
Increase (decrease) in pension and retirement obligations		(407	)		114
Increase (decrease) in customer deposits		(564	)		521
Net cash provided by (used in) operating activities		384			(1,830	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(28	)		(64	)
Proceeds from sale of marketable securities		262			275
Net cash provided by investing activities		234			211
Cash flows from financing activities:
Principal payments on long-term debt		(82	)		(76	)
Net cash used in financing activities		(82	)		(76	)
Net increase (decrease) in cash and cash equivalents		536			(1,695	)
Cash and cash equivalents at beginning of the period		2,111			3,932
Cash and cash equivalents at end of the period	$	2,647		$	2,237
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	265		$	272
Cash paid for income taxes		24			38
Non-cash investing and financing activities:
Unrealized gain (loss) on marketable securities	$	(11	)	$	104

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

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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” and “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, 2012.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive 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 period ended June 28, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the calendar 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) to its estimate of total anticipated costs.   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.  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, 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 income (loss) per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net income (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. Potentially dilutive securities from stock options are discussed in Note 3.

Inventories, net

Inventories consisted of the following:

	June 28,			December 31,
	2013			2012
Raw materials	$	5,192		$	5,255
Work in process		988			287
Finished goods		180			253
Reserve for obsolete inventory		(2,852	)		(2,670	)
Inventories, net	$	3,508		$	3,125

Liquidity

As of June 28, 2013 the total stockholders’ deficit was $26,063 as compared to $24,644 as of December 31, 2012.  While the Company believes existing sources of liquidity and expected results of operations will be adequate to fund its obligations through 2013 and at least the first six months of 2014, it also believes that it must restructure its pension and retirement obligations to sustain operations for the long term.  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 (“ERISA”). If the distress termination is approved, the ERISA Title IV insurance fund, which is administered by the Pension Benefit Guaranty Corporation (“PBGC”), would take possession of the assets in the pension plan trust and pay future pension plan benefits (see Note 4). Through this process, the Company will seek to negotiate, with the PBGC, a settlement of its pension plan liabilities on terms that are feasible for the Company to continue in business as a going concern through 2014 and beyond, which is consistent with the purposes of the provisions of ERISA. As more fully described in Note 4, on July 15, 2013 a lien in favor of the PBGC has arisen against the assets of the Company to secure approximately $1,410 of aggregate unpaid contributions to the pension plan trust, with interest. The Company believes that the lien on its assets will not have a significant adverse effect on its existing contractual agreements. The Company also believes that the current revenue backlog and liquid resources are sufficient to satisfy the debt secured by the PBGC lien and sustain operations through at least the middle of 2014; however, it believes that by not paying the pension contributions, it is preserving liquid resources to continue operating beyond June 2014 and until the total pension plan liabilities can be settled through the completion of the distress termination process. There can be no assurance that the Company will be successful in these efforts.  The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

7

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2.           FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs according to valuation methodologies used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

that the Company has the ability to access at the measurement date.

Level 2—Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices

in less active markets, or other observable inputs that can be corroborated by observable market data.

Level 3—Unobservable inputs which are supported by little or no market activity.

The Company’s marketable securities are classified within Level 1 because the underlying investments have readily available market prices.  Marketable securities measured at fair value on a recurring basis are summarized below:

June 28, 2013	Total		Level 1		Level 2		Level 3
Mutual funds – equity securities	$	-	$	-	$	-	$	-
Mutual funds – debt securities		422		422		-		-
Money market mutual funds		42		42		-		-
Total	$	464	$	464	$	-	$	-

December 31, 2012	Total		Level 1		Level 2		Level 3
Mutual funds – equity securities	$	367	$	367	$	-	$	-
Mutual funds – debt securities		298		298		-		-
Money market mutual funds		47		47		-		-
Total	$	712	$	712	$	-	$	-

8

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3.           STOCK OPTION PLAN

As of June 28, 2013, options to purchase 1,534,113 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 six months ended June 28, 2013 follows (shares in thousands):

				Weighted-
				Average
	Number			Exercise
	of Shares			Price
Outstanding as of beginning of the period		1,169		$	3.19
Granted		150			0.03
Exercised		-			-
Forfeited or expired		(79	)		5.75
Outstanding as of end of the period		1,240			2.64
Exercisable as of the end of the period		979		$	3.29

As of June 28, 2013, options exercisable and options outstanding had a weighted average remaining contractual term of 4.0 and 5.1 years, respectively, and aggregate intrinsic value of $0 and $4, 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 six months of 2013, were based on estimates as of the date of grant as follows:

Risk-free interest rate	0.39%
Dividend yield	0.00%
Volatility	377%
Expected life (in years)	3.50

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 June 28, 2013, there was approximately $13 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 2.3 years.

Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of comprehensive loss for each of the three and six month periods ended June 28, 2013 was $4 and $10, respectively.  Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of comprehensive loss for each of the three and six month periods ended June 29, 2012 was $7 and $17, respectively.

4.EMPLOYEE RETIREMENT BENEFIT PLANS

Distress Termination of Pension Plan

On January 7, 2013, the Company submitted a PBGC Form 600 Distress Termination, Notice of Intent to Terminate, to the PBGC. The notice filing initiates an application process by the Company with the PBGC for the distress termination of the pension plan. The pension plan is a defined benefit pension plan sponsored by the Company whose benefits are guaranteed by the ERISA Title IV insurance fund, which is administered by the PBGC.  In the

9

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

application process, the Company intends to demonstrate to the PBGC that it qualifies 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 must demonstrate to the satisfaction of the PBGC that, unless the termination occurs, the Company will be unable to pay its debts when they come due and will be unable to continue in business, or that the costs of the pension plan have become unreasonably burdensome solely as a result of a decline in the workforce covered by the Plan. A distress termination under Section 4041(c)(2) of ERISA would transfer 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 has informed the Company that following termination of the 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 unfunded pension and retirement obligation of the pension plan, as reported on the Company’s financial statements was $28,087 as of June 28, 2013. The Company believes business operations could produce adequate funds to meet the contributions to the pension plan trust in sufficient amounts to satisfy regulatory funding standards through the first six months of 2014 but has stopped making such contributions beginning in October 2012 in order to maintain adequate working capital levels for business operations through 2014. The Company also believes it will not be able to continue to meet the estimated contributions to the pension plan trust required to satisfy regulatory funding standards through the end of 2014, as well as the total contributions that will be required beyond 2014 to satisfy the total pension plan obligation.

If the distress termination application is approved by the PBGC, the PBGC will take possession of the assets in the pension plan trust and pay future pension plan benefits beginning upon trusteeship of the pension plan, up to ERISA guaranteed limits. In this event, the Company’s unfunded obligation of the pension plan would be replaced by a new pension plan termination liability to the PBGC, determined by the pension plan’s underfunding on a termination basis pursuant to ERISA, PBGC regulations, and other applicable legal authority, along with an ERISA special termination premium.  The Company would also be liable for any unpaid contributions to the pension plan (which in substance is a subset of plan termination liability) and annual insurance premiums for the pension plan, along with any interest and penalties. While the full pension plan termination and other pension related liabilities to the PBGC would likely be greater than the unfunded obligation of the pension plan as currently reported in the Company’s financial statements, the Company will seek to negotiate a settlement of such liabilities on terms that are feasible for the Company to continue in business as a going concern, which is consistent with the purposes of the statute.

The Company’s goal in seeking a distress termination of the pension plan is 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. The Company has proposed a termination date of March 8, 2013 and intends to pursue a conclusion of the process and settlement with the PBGC of any resulting liabilities as quickly as feasible.  The proposed termination date that was selected was the earliest possible date that was legally available as determined by the date of notification provided to participants and beneficiaries and the PBGC that an application was being filed with the PBGC to terminate the Plan.  The proposed date of plan termination, if adopted by the PBGC, would be the effective date upon which the Plan ended. The Company is unable to determine the timing or the ultimate outcome as of the date of this filing.

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 to sustain the business through 2014.  Payments of future contributions to satisfy regulatory funding standards likely will be affected by the application process to the PBGC for the distress termination of the pension plan.

Independent actuarial valuations have determined that contributions before additional interest, totaling $2,077 are due through the end of 2013 in order to satisfy regulatory funding standards. By the Company’s not making the contributions to satisfy regulatory funding standards where periodically required unpaid contributions plus interest exceed $1,000, by operation of law a lien arises against the assets of the Company.   On July 15, 2013, the aggregate

10

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

unpaid contributions with interest reached approximately $1,410, requiring a payment of over $410 as of that date for unpaid contributions to stay under the $1,000 threshold and avoid a lien. The Company chose not to make the payment in order to preserve liquidity for the operation of the business. As a result, the PBGC is entitled by law to enforce the lien that has arisen. The amounts secured by the lien increase and are subject to updated filings if there are additional future unpaid contributions. The Company’s legal counsel has advised that the PBGC typically files tax lien notices to perfect such liens and, in discussions with the Company’s legal counsel, the PBGC has indicated that it plans to perfect the lien that has arisen as of July 15, 2013. The Company’s legal counsel has also advised that the PBGC usually does not take any additional enforcement action while it is still considering the application for the distress termination; however, there can be no assurance that the PBGC will not take additional action to enforce the lien. 

The Company is not currently required to fund the Supplemental Executive Retirement Plan (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 $485 in the next 12 months.

Components of Net Periodic Benefit Expense

	Pension Plan						Supplemental Executive Retirement Plan
For the three months ended:	June 28, 2013			June 29, 2012			June 28, 2013			June 29, 2012
Service cost	$	-		$	-		$	-		$	-
Interest cost		398			467			41			52
Expected return on assets		(460	)		(454	)		-			-
Amortization of actuarial loss		177			170			17			14
Amortization of prior year service cost		-			-			(12	)		(12	)
Settlement charge		-			317			-			-
Net periodic benefit expense	$	115		$	500		$	46		$	54

	Pension Plan						Supplemental Executive Retirement Plan
For the six months ended:	June 28, 2013			June 29, 2012			June 28, 2013			June 29, 2012
Service cost	$	-		$	-		$	-		$	-
Interest cost		796			933			82			104
Expected return on assets		(920	)		(907	)		-			-
Amortization of actuarial loss		354			341			34			28
Amortization of prior year service cost		-			-			(24	)		(24	)
Settlement charge		-			634			-			-
Net periodic benefit expense	$	230		$	1,001		$	92		$	108

Pension expense for the six-month period ended June 28, 2013 included net periodic benefit expense of $230 for the pension, $92 for the SERP and an additional $47 of insurance premium due to the PBGC. For the three- and six- month periods ended June 28, 2013, the Company reclassified $182 and $364 of actuarial loss from accumulated other comprehensive loss, respectively, that was included in pension expense on the statement of comprehensive loss for the same periods.

11

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 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 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

Sales for the second quarter of 2013 were slightly higher than the comparable period of 2012 but still lower than average quarterly sales in recent years.  Sales for the first six months of 2013 were lower than the comparable period of 2012 and also lower than comparable periods of recent years. The low 2013 sales are the result of low 2012 sales bookings and the timing of customer deliveries. New customer bookings improved in the first six months of 2013 and as a result, the sales backlog increased to $21,900 as of June 28, 2013 compared to $15,511 as of December 31, 2012. The forecasted bookings and customer deliveries indicate that sales levels for the remainder of the year will improve. The gross profit percentage for the second quarter of 2013 improved as expected but remained lower for the first six months of 2013 than the comparable period of 2012.  The low sales volume for the first six months of 2013 contributed to the lower gross profit percentage. We expect the gross profit percentage for the remainder of 2013 to improve with the higher expected sales. The sales volume and lower gross profit for the first six months of 2013 illustrate the short-term fluctuations that can occur in our business. We do not believe this is an indication of any long term trend. For the long term, we believe the existing markets we serve will yield annual sales at variable levels comparable to the sales reported from 2009 through 2012. We have found it challenging to find opportunities for significant sales growth from new markets due to our current resource limitations and the worldwide economic environment.

Total operating expenses in the second quarter and first six months of 2013 decreased compared to the same period in 2012 due primarily to a decrease in pension expense. The reduction in pension expense was attributable to high settlement charges for 2012 lump sum distributions.  Since filing the application for distress termination in January 2013, the pension plan is prohibited from making lump sum distributions. Otherwise operating expenses were comparable in the periods presented.

A lower amount of sales was the primary contributor to the net losses reported for the second quarter and first six months of 2013. The net loss of $425 reported for the second quarter of 2013 was lower than the $1,484 net loss for the comparable period of 2012 due to the improved 2013 quarterly gross profit and lower pension expense. The net loss of $1,782 for the first six months of 2013 was higher than the $1,124 net loss for the comparable period of 2012 due to higher sales and gross profit concentrated in the first quarter of 2012 which offset higher 2012 pension expense.  With our expectations for improved sales levels for the remainder of 2013, we expect improved results

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that may fluctuate between the remaining two quarters. We do not expect annual net income for 2013. For the long term we continue to expect variable but reasonably consistent future sales and gross profit from our current product line at annual levels sufficient to cover or exceed operating expenses, excluding the pension expense.

As a result of the net loss for the first half of 2013, our stockholders’ deficit increased to $26,063 as of June 28, 2013 compared to $24,644 as of December 31, 2012. We continue to believe we can manage this deficit for the short term; however for the long term, we believe we can overcome the deficit only with a reasonable settlement of our pension liabilities. The Company continues to pursue a reasonable settlement of its pension liabilities through the distress termination application process. However, the Company is unable to determine the timing or the ultimate outcome as of the date of this filing.

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, 2012.  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:

	For the Three Months Ended				For the Six Months Ended
	June 28, 2013		June 29, 2012		June 28, 2013		June 29, 2012
Sales	$	5,212	$	4,746	$	9,919	$	12,563

Sales for the first six months of 2013 were 21% lower than the same period in 2012 while sales for the second quarter of 2013 were 10% higher than the second quarter in 2012. The contrasting comparison of the two periods is attributable to strong sales for the first quarter of 2012. Otherwise sales for the first six months of 2013 and both second quarters presented were lower than average sales in the comparable periods of recent years.  The low 2013 sales reflect a slowdown in new customer orders that occurred during 2012 as well as the timing of customer deliveries.

We have seen a significant improvement in new customer orders in 2013, as evidenced by the change in our revenue backlog which increased to $21,900 as of June 28, 2013, compared to $15,511 as of December 31, 2012.  We expect sales for the remainder of 2013 to improve based on customer delivery schedules and the improved revenue backlog along with strong sales prospects.

Gross Profit

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

	For the Three Months Ended						For the Six Months Ended
	June 28, 2013			June 29, 2012			June 28, 2013			June 29, 2012
Gross profit	$	1,732		$	1,206		$	3,042		$	4,475
Gross profit percentage		33	%		25	%		31	%		36	%

Gross profit for the second quarter of 2013 was slightly higher than the prior year.  Gross profit for both quarters was adversely affected by the under-absorption of overhead and inefficiencies associated with low sales which result in fixed overhead costs becoming a higher percentage of sales. The second quarter of 2013 included some customer projects that were completed at below the estimated costs offsetting much of the adverse effects of the low sales and resulting in a higher gross margin than the second quarter of 2012.

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Our gross profit for the first six months of 2013 was lower than the same period in 2012 primarily due to the under-absorption of overhead and inefficiencies from lower sales. Also customer projects that contributed to sales in the first quarter of 2013 yielded average to low gross margins without any significant improvements in project costs which sometimes occur as in the second quarter of 2013.

Operating Expenses

The following table summarizes our operating expenses:

	For the Three Months Ended				For the Six Months Ended
	June 28, 2013		June 29, 2012		June 28, 2013		June 29, 2012
Selling, general and     administrative (excluding     pension)	$	1,181	$	1,279	$	2,746	$	2,751
Research and development		674		660		1,344		1,264
Pension		161		554		369		1,109
Total operating expenses	$	2,016	$	2,493	$	4,459	$	5,124

Selling, general and administrative expenses (excluding pension) were reduced in 2013 by a credit from the receipt of $320 in the second quarter for settlement of a claim against a subcontractor for damages on a customer project. The Company has been pursuing the claim for a few years and the settlement served to recover expenses incurred in pursuit of the claim.  As a result, selling, general and administrative expenses (excluding pension) were comparable for the six month periods ended 2013 and 2012 but were slightly lower for the second quarter of 2013 compared to the same period in 2012. Research and development expenses were comparable for both periods presented although slightly higher for the first six months of 2013. The slightly higher research and development expenses in 2013 were attributable to show production resources being used for research and development activities as opposed to capitalized show creation.  Pension expense in 2013 for both the three- and six-month periods was substantially lower than 2012 due primarily to settlement charges incurred in 2012 resulting from lump-sum distributions.

Other Expense, net

The following table summarizes our other expense:

	For the Three Months Ended				For the Six Months Ended
	June 28, 2013		June 29, 2012		June 28, 2013		June 29, 2012
Total other expense, net	$	141	$	184	$	355	$	401

For the three- and six-month periods ended June 28, 2013, other expense, net, was slightly lower than for the same periods in 2012 due to higher realized gain from marketable securities, lower currency loss and lower bank fees.

Liquidity and Capital Resources

Cash Flows

In the first six months of 2013, $384 of cash provided by operating activities was primarily attributable to a favorable change to working capital of $1,204, offset by $820 of cash used in the net loss for the period, after the effect of $962 of non-cash items.  The change to working capital was driven by improvement in progress payments from customer contracts, reflecting our increase to customer orders and revenue backlog in the second quarter of 2013.

In the first six months of 2012, the $1,830 of cash used in operating activities was attributable to $1,537 of cash absorbed by changes in working capital and $293 absorbed by the net loss for the period, after the effect of $831 of non-cash items. Most of the cash absorbed by changes in working capital was driven by customer contract activity as progress payments did not keep pace with cost and earnings reported during the period.

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Cash provided by investing activities was $234 in the first six months of 2013 compared to $211 for the same period of 2012, representing cash provided by the sale of marketable securities, offset by purchases of property, plant and equipment of $28 and $64 in 2013 and 2012, respectively.

In the first six months of 2013, financing activities used $82 of cash compared to $76 in 2012, for principal payments on mortgage notes.

Credit Facilities

The Company is a party to a credit agreement with a commercial bank which permits borrowings of up to $1,100 to fund working capital requirements.  Interest is charged on amounts borrowed at the lender’s prime rate. As of June 28, 2013, there were no borrowings outstanding under the credit agreement.

The Company has a finance arrangement which facilitates the issuance of letters of credit and bank guarantees. Under the terms of the arrangement, we are required to maintain a balance in a specific bank account equal to or greater than the outstanding value of all letters of credit issued, plus other amounts necessary to adequately secure our obligations with the financial institution.  As of June 28, 2013, we had outstanding letters of credit totaling $1,240.  The cash collateral for these letters of credit was classified as $1,150 of restricted cash and $90 of restricted cash included in other assets.

Mortgage Notes

As of June 28, 2013, our wholly owned Spitz subsidiary had obligations totaling $2,624 under its two mortgage notes payable.

Sale-Leaseback Financing

As of June 28, 2013, the principal balance on the debt obligation recorded from the sale-leaseback financing transaction was $2,708.  The cash payment required to repurchase the property on June 28, 2013 was $2,727 consisting of $2,852 repurchase price under the agreement less a credit for the $125 security deposit.  Accordingly, if we had exercised our option to repurchase the property on June 28, 2013, we would have recorded a premium of approximately 1% in the amount of $19 over the $2,708 balance of the debt.

Pension obligation

As more fully described in Note 4 to the condensed consolidated financial statements, the Company believes it will not be able to satisfy the total obligation of a defined benefit pension plan sponsored by the Company and is seeking to negotiate a settlement of such liabilities through an application process for a distress termination of the pension plan in accordance with provisions of ERISA. The amount of the unfunded pension obligation as reported on the balance sheet totaled $28,087 as of June 28, 2013. Payments related to the obligation totaling approximately $1,410 became past due as of July 15, 2013.  As a result, a lien in favor of the pension plan has arisen against the assets of the Company to secure the $1,410 amount past due. The Company believes that the lien on its assets will not have a significant adverse effect on its existing contractual agreements. The Company also believes that the current revenue backlog and liquid resources are sufficient to satisfy the obligation secured by the PBGC lien and sustain operations through at least June 2014; however, it believes that by not paying the pension contributions, it is preserving liquid resources to continue operating beyond June 2014. A reasonable settlement of our pension liabilities is critical to ensure we have adequate liquidity and capital resources to operate for the long term.  We believe our distress termination application is meritorious and that it will lead to a reasonable settlement of our pension liabilities resulting in adequate liquidity and capital resources to operate for the long term. However, there can be no assurance that the Company will be successful in these efforts.

Trademarks Used In This Form 10-Q

ESLP is a registered trademark of Evans & Sutherland Computer Corporation.  All other products, services, or trade names or marks are the properties of their respective owners.

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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 June 28, 2013, 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 31.2 32.1 101 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. 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. 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. The following materials from this Quarterly Report on Form 10-Q for the periods ended June 28, 2013, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Loss, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.

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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

	EVANS & SUTHERLAND COMPUTER CORPORATION
Date:            August 2, 2013	By:	/s/ Paul Dailey
		Paul Dailey, Chief Financial Officer
		and Corporate Secretary
		(Authorized Officer)
		(Principal Financial and Accounting Officer)

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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: August 2, 2013

/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: August 2, 2013

/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 June 28, 2013, 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: August 2, 2013                                                                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 June 28, 2013 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: August 2, 2013                                                                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.

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General: Liquidity (Details) (USD $) In Thousands, unless otherwise specified	Jun. 28, 2013	Dec. 31, 2012
Details
Total stockholders' deficit	$ 26,063	$ 24,644
Unpaid pension plan trust contributions lien	$ 1,410

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2013	Jun. 29, 2012	Jun. 28, 2013	Jun. 29, 2012
Income Statement
Sales	$ 5,212	$ 4,746	$ 9,919	$ 12,563
Cost of sales	3,480	3,540	6,877	8,088
Gross profit	1,732	1,206	3,042	4,475
Operating expenses:
Selling, general and administrative (excluding pension)	1,181	1,279	2,746	2,751
Research and development	674	660	1,344	1,264
Pension	161	554	369	1,109
Total operating expenses	2,016	2,493	4,459	5,124
Operating loss	(284)	(1,287)	(1,417)	(649)
Other expense, net	(141)	(184)	(355)	(401)
Loss before income tax provision	(425)	(1,471)	(1,772)	(1,050)
Income tax provision		(13)	(10)	(74)
Net loss	(425)	(1,484)	(1,782)	(1,124)
Net loss per common share - basic and diluted	$ (0.04)	$ (0.13)	$ (0.16)	$ (0.10)
Weighted average common shares outstanding - basic and diluted	11,089	11,089	11,089	11,089
Comprehensive Loss
Net loss	(425)	(1,484)	(1,782)	(1,124)
Other comprehensive income (loss):
Amortization of deferred pension expense	182		364
Unrealized gain (loss) on marketable securities	(18)	(64)	(11)	104
Comprehensive loss	$ (261)	$ (1,548)	$ (1,429)	$ (1,020)

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General (Policies)

6 Months Ended

Jun. 28, 2013

Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” and “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, 2012.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive 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 period ended June 28, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the calendar 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) to its estimate of total anticipated costs.   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.  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, 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 Loss Per Common Share

Net Loss Per Common Share

Basic net income (loss) per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net income (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. Potentially dilutive securities from stock options are discussed in Note 3.

Inventories, Net

Inventories, net

Inventories consisted of the following:

	June 28,	December 31,
	2013	2012
Raw materials	$5,192	$5,255
Work in process	988	287
Finished goods	180	253
Reserve for obsolete inventory	(2,852)	(2,670)
Inventories, net	$3,508	$3,125

Liquidity

Liquidity

As of June 28, 2013 the total stockholders’ deficit was $26,063 as compared to $24,644 as of December 31, 2012.  While the Company believes existing sources of liquidity and expected results of operations will be adequate to fund its obligations through 2013 and at least the first six months of 2014, it also believes that it must restructure its pension and retirement obligations to sustain operations for the long term.  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 (“ERISA”). If the distress termination is approved, the ERISA Title IV insurance fund, which is administered by the Pension Benefit Guaranty Corporation (“PBGC”), would take possession of the assets in the pension plan trust and pay future pension plan benefits (see Note 4). Through this process, the Company will seek to negotiate, with the PBGC, a settlement of its pension plan liabilities on terms that are feasible for the Company to continue in business as a going concern through 2014 and beyond, which is consistent with the purposes of the provisions of ERISA. As more fully described in Note 4, on July 15, 2013 a lien in favor of the PBGC has arisen against the assets of the Company to secure approximately $1,410 of aggregate unpaid contributions to the pension plan trust, with interest. The Company believes that the lien on its assets will not have a significant adverse effect on its existing contractual agreements. The Company also believes that the current revenue backlog and liquid resources are sufficient to satisfy the debt secured by the PBGC lien and sustain operations through at least the middle of 2014; however, it believes that by not paying the pension contributions, it is preserving liquid resources to continue operating beyond June 2014 and until the total pension plan liabilities can be settled through the completion of the distress termination process. There can be no assurance that the Company will be successful in these efforts.  The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Fair Value Measurements: Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 28, 2013	Dec. 31, 2012
Marketable securities	$ 464	$ 712
Equity Securities
Marketable securities		367
Debt Securities
Marketable securities	422	298
Money Market Funds
Marketable securities	42	47
Fair Value, Inputs, Level 1
Marketable securities	464	712
Fair Value, Inputs, Level 1 | Equity Securities
Marketable securities		367
Fair Value, Inputs, Level 1 | Debt Securities
Marketable securities	422	298
Fair Value, Inputs, Level 1 | Money Market Funds
Marketable securities	$ 42	$ 47

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General

6 Months Ended

Jun. 28, 2013

Notes

General

1.         GENERAL

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” and “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, 2012.

The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive 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 period ended June 28, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the calendar 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) to its estimate of total anticipated costs.   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.  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, 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 income (loss) per common share is computed based on the weighted-average number of common shares outstanding during the period.  Diluted net income (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. Potentially dilutive securities from stock options are discussed in Note 3.

Inventories, net

Inventories consisted of the following:

	June 28,	December 31,
	2013	2012
Raw materials	$5,192	$5,255
Work in process	988	287
Finished goods	180	253
Reserve for obsolete inventory	(2,852)	(2,670)
Inventories, net	$3,508	$3,125

Liquidity

As of June 28, 2013 the total stockholders’ deficit was $26,063 as compared to $24,644 as of December 31, 2012.  While the Company believes existing sources of liquidity and expected results of operations will be adequate to fund its obligations through 2013 and at least the first six months of 2014, it also believes that it must restructure its pension and retirement obligations to sustain operations for the long term.  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 (“ERISA”). If the distress termination is approved, the ERISA Title IV insurance fund, which is administered by the Pension Benefit Guaranty Corporation (“PBGC”), would take possession of the assets in the pension plan trust and pay future pension plan benefits (see Note 4). Through this process, the Company will seek to negotiate, with the PBGC, a settlement of its pension plan liabilities on terms that are feasible for the Company to continue in business as a going concern through 2014 and beyond, which is consistent with the purposes of the provisions of ERISA. As more fully described in Note 4, on July 15, 2013 a lien in favor of the PBGC has arisen against the assets of the Company to secure approximately $1,410 of aggregate unpaid contributions to the pension plan trust, with interest. The Company believes that the lien on its assets will not have a significant adverse effect on its existing contractual agreements. The Company also believes that the current revenue backlog and liquid resources are sufficient to satisfy the debt secured by the PBGC lien and sustain operations through at least the middle of 2014; however, it believes that by not paying the pension contributions, it is preserving liquid resources to continue operating beyond June 2014 and until the total pension plan liabilities can be settled through the completion of the distress termination process. There can be no assurance that the Company will be successful in these efforts.  The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Stock Option Plan

6 Months Ended

Jun. 28, 2013

Notes

Stock Option Plan

3.           STOCK OPTION PLAN

As of June 28, 2013, options to purchase 1,534,113 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 six months ended June 28, 2013 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,169	$3.19
Granted	150	0.03
Exercised	-	-
Forfeited or expired	(79)	5.75
Outstanding as of end of the period	1,240	2.64
Exercisable as of the end of the period	979	$3.29

As of June 28, 2013, options exercisable and options outstanding had a weighted average remaining contractual term of 4.0 and 5.1 years, respectively, and aggregate intrinsic value of $0 and $4, 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 six months of 2013, were based on estimates as of the date of grant as follows:

Risk-free interest rate	0.39%
Dividend yield	0.00%
Volatility	377%
Expected life (in years)	3.50

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 June 28, 2013, there was approximately $13 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 2.3 years.

Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of comprehensive loss for each of the three and six month periods ended June 28, 2013 was $4 and $10, respectively.  Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of comprehensive loss for each of the three and six month periods ended June 29, 2012 was $7 and $17, respectively.

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General: Inventories, Net: Inventories, net (Tables)

6 Months Ended

Jun. 28, 2013

Tables/Schedules

Inventories, net

Inventories consisted of the following:

	June 28,	December 31,
	2013	2012
Raw materials	$5,192	$5,255
Work in process	988	287
Finished goods	180	253
Reserve for obsolete inventory	(2,852)	(2,670)
Inventories, net	$3,508	$3,125

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Employee Retirement Benefit Plans

6 Months Ended

Jun. 28, 2013

Notes

Employee Retirement Benefit Plans

4.         EMPLOYEE RETIREMENT BENEFIT PLANS

Distress Termination of Pension Plan

On January 7, 2013, the Company submitted a PBGC Form 600 Distress Termination, Notice of Intent to Terminate, to the PBGC. The notice filing initiates an application process by the Company with the PBGC for the distress termination of the pension plan. The pension plan is a defined benefit pension plan sponsored by the Company whose benefits are guaranteed by the ERISA Title IV insurance fund, which is administered by the PBGC.  In the application process, the Company intends to demonstrate to the PBGC that it qualifies 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 must demonstrate to the satisfaction of the PBGC that, unless the termination occurs, the Company will be unable to pay its debts when they come due and will be unable to continue in business, or that the costs of the pension plan have become unreasonably burdensome solely as a result of a decline in the workforce covered by the Plan. A distress termination under Section 4041(c)(2) of ERISA would transfer 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 has informed the Company that following termination of the 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 unfunded pension and retirement obligation of the pension plan, as reported on the Company’s financial statements was $28,087 as of June 28, 2013. The Company believes business operations could produce adequate funds to meet the contributions to the pension plan trust in sufficient amounts to satisfy regulatory funding standards through the first six months of 2014 but has stopped making such contributions beginning in October 2012 in order to maintain adequate working capital levels for business operations through 2014. The Company also believes it will not be able to continue to meet the estimated contributions to the pension plan trust required to satisfy regulatory funding standards through the end of 2014, as well as the total contributions that will be required beyond 2014 to satisfy the total pension plan obligation.

If the distress termination application is approved by the PBGC, the PBGC will take possession of the assets in the pension plan trust and pay future pension plan benefits beginning upon trusteeship of the pension plan, up to ERISA guaranteed limits. In this event, the Company’s unfunded obligation of the pension plan would be replaced by a new pension plan termination liability to the PBGC, determined by the pension plan’s underfunding on a termination basis pursuant to ERISA, PBGC regulations, and other applicable legal authority, along with an ERISA special termination premium.  The Company would also be liable for any unpaid contributions to the pension plan (which in substance is a subset of plan termination liability) and annual insurance premiums for the pension plan, along with any interest and penalties. While the full pension plan termination and other pension related liabilities to the PBGC would likely be greater than the unfunded obligation of the pension plan as currently reported in the Company’s financial statements, the Company will seek to negotiate a settlement of such liabilities on terms that are feasible for the Company to continue in business as a going concern, which is consistent with the purposes of the statute.

The Company’s goal in seeking a distress termination of the pension plan is 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. The Company has proposed a termination date of March 8, 2013 and intends to pursue a conclusion of the process and settlement with the PBGC of any resulting liabilities as quickly as feasible.  The proposed termination date that was selected was the earliest possible date that was legally available as determined by the date of notification provided to participants and beneficiaries and the PBGC that an application was being filed with the PBGC to terminate the Plan.  The proposed date of plan termination, if adopted by the PBGC, would be the effective date upon which the Plan ended. The Company is unable to determine the timing or the ultimate outcome as of the date of this filing.

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 to sustain the business through 2014.  Payments of future contributions to satisfy regulatory funding standards likely will be affected by the application process to the PBGC for the distress termination of the pension plan.

Independent actuarial valuations have determined that contributions before additional interest, totaling $2,077 are due through the end of 2013 in order to satisfy regulatory funding standards. By the Company’s not making the contributions to satisfy regulatory funding standards where periodically required unpaid contributions plus interest exceed $1,000, by operation of law a lien arises against the assets of the Company.   On July 15, 2013, the aggregate unpaid contributions with interest reached approximately $1,410, requiring a payment of over $410 as of that date for unpaid contributions to stay under the $1,000 threshold and avoid a lien. The Company chose not to make the payment in order to preserve liquidity for the operation of the business. As a result, the PBGC is entitled by law to enforce the lien that has arisen. The amounts secured by the lien increase and are subject to updated filings if there are additional future unpaid contributions. The Company’s legal counsel has advised that the PBGC typically files tax lien notices to perfect such liens and, in discussions with the Company’s legal counsel, the PBGC has indicated that it plans to perfect the lien that has arisen as of July 15, 2013. The Company’s legal counsel has also advised that the PBGC usually does not take any additional enforcement action while it is still considering the application for the distress termination; however, there can be no assurance that the PBGC will not take additional action to enforce the lien. 

The Company is not currently required to fund the Supplemental Executive Retirement Plan (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 $485 in the next 12 months.

Components of Net Periodic Benefit Expense

	Pension Plan		Supplemental Executive Retirement Plan
For the three months ended:	June 28, 2013	June 29, 2012	June 28, 2013	June 29, 2012
Service cost	-	-	-	-
Interest cost	398	467	41	52
Expected return on assets	(460)	(454)	-	-
Amortization of actuarial loss	177	170	17	14
Amortization of prior year service cost	-	-	(12)	(12)
Settlement charge	-	317	-	-
Net periodic benefit expense	$115	$500	$46	$54

	Pension Plan		Supplemental Executive Retirement Plan
For the six months ended:	June 28, 2013	June 29, 2012	June 28, 2013	June 29, 2012
Service cost	-	-	-	-
Interest cost	796	933	82	104
Expected return on assets	(920)	(907)	-	-
Amortization of actuarial loss	354	341	34	28
Amortization of prior year service cost	-	-	(24)	(24)
Settlement charge	-	634	-	-
Net periodic benefit expense	$230	$1,001	$92	$108

Pension expense for the six-month period ended June 28, 2013 included net periodic benefit expense of $230 for the pension, $92 for the SERP and an additional $47 of insurance premium due to the PBGC. For the three- and six- month periods ended June 28, 2013, the Company reclassified $182 and $364 of actuarial loss from accumulated other comprehensive loss, respectively, that was included in pension expense on the statement of comprehensive loss for the same periods.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 28, 2013	Dec. 31, 2012
Statement of financial position
Preferred Stock, par value	$ 0	$ 0
Preferred Stock, shares authorized	10,000,000	10,000,000
Preferred Stock, shares outstanding	0	0
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
Accounts receivable, allowances for doubtful receivables	$ 214	$ 324
Common stock in treasury, shares	352,467	352,467

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Stock Option Plan: Stock Options Valuation Assumptions Table, Black Scholes Option Pricing Model (Tables)

6 Months Ended

Jun. 28, 2013

Tables/Schedules

Stock Options Valuation Assumptions Table, Black Scholes Option Pricing Model

Risk-free interest rate	0.39%
Dividend yield	0.00%
Volatility	377%
Expected life (in years)	3.50

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 28, 2013	Jun. 29, 2012
Cash flows from operating activities:
Net loss	$ (1,782)	$ (1,124)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	318	392
Other	644	439
Decrease (increase) in restricted cash	(445)	283
Decrease (increase) in accounts receivable, net	(21)	574
Increase in inventories	(565)	(81)
Decrease (increase) in costs and estimated earnings in excess of billings on uncompleted contracts	2,956	(1,779)
Decrease (increase) in prepaid expenses and deposits	596	(406)
Decrease in accounts payable	(409)	(497)
Increase (decrease) in accrued liabilities	63	(266)
Increase (decrease) in pension and retirement obligations	(407)	114
Increase (decrease) in customer deposits	(564)	521
Net cash provided by (used in) operating activities	384	(1,830)
Cash flows from investing activities:
Purchases of property, plant and equipment	(28)	(64)
Proceeds from sale of marketable securities	262	275
Net cash provided by investing activities	234	211
Cash flows from financing activities:
Principal payments on long-term debt	(82)	(76)
Net cash used in financing activities	(82)	(76)
Net increase (decrease) in cash and cash equivalents	536	(1,695)
Cash and cash equivalents at beginning of the period	2,111	3,932
Cash and cash equivalents at end of the period	2,647	2,237
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	265	272
Cash paid for income taxes	24	38
Non-cash investing and financing activities:
Unrealized gain (loss) on marketable securities	$ (11)	$ 104

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 28, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 2,647	$ 2,111
Restricted cash	1,150	705
Marketable securities	464	712
Accounts receivable, less allowances for doubtful receivables of $214 and $324, respectively	3,979	3,972
Costs and estimated earnings in excess of billings on uncompleted contracts	1,468	2,474
Inventories, net	3,508	3,125
Prepaid expenses and deposits	484	453
Total current assets	13,700	13,552
Property, plant and equipment, net	7,471	7,735
Goodwill	635	635
Definite-lived intangible assets, net	142	168
Other assets	1,533	2,160
Total assets	23,481	24,250
Current liabilities:
Accounts payable	788	1,197
Accrued liabilities	1,343	1,274
Billings in excess of costs and estimated earnings on uncompleted contracts	4,481	2,531
Customer deposits	2,616	3,180
Current portion of retirement obligations	485	517
Current portion of long-term debt	172	167
Total current liabilities	9,885	8,866
Pension and retirement obligations, net of current portion	32,994	33,369
Long-term debt, net of current portion	5,160	5,148
Deferred rent obligation	1,505	1,511
Total liabilities	49,544	48,894
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	54,477	54,466
Common stock in treasury, at cost: 352,467 shares	(4,709)	(4,709)
Accumulated deficit	(50,807)	(49,025)
Accumulated other comprehensive loss	(27,312)	(27,664)
Total stockholders' deficit	(26,063)	(24,644)
Total liabilities and stockholders' deficit	$ 23,481	$ 24,250

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Employee Retirement Benefit Plans: Components of Net Periodic Benefit Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2013	Jun. 29, 2012	Jun. 28, 2013	Jun. 29, 2012
Pension Plans, Defined Benefit
Interest cost	$ 398	$ 467	$ 796	$ 933
Expected return on assets	(460)	(454)	(920)	(907)
Amortization of actuarial loss	177	170	354	341
Settlement charge		317		634
Net periodic benefit expense	115	500	230	1,001
Supplemental Executive Retirement Plan
Interest cost	41	52	82	104
Amortization of actuarial loss	17	14	34	28
Amortization of prior year service cost	(12)	(12)	(24)	(24)
Net periodic benefit expense	$ 46	$ 54	$ 92	$ 108

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Stock Option Plan: Stock Option Plan Activity (Tables)

6 Months Ended

Jun. 28, 2013

Tables/Schedules

Stock Option Plan Activity

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,169	$3.19
Granted	150	0.03
Exercised	-	-
Forfeited or expired	(79)	5.75
Outstanding as of end of the period	1,240	2.64
Exercisable as of the end of the period	979	$3.29

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General: Inventories, Net: Inventories, net (Details) (USD $) In Thousands, unless otherwise specified	Jun. 28, 2013	Dec. 31, 2012
Details
Raw Materials	$ 5,192	$ 5,255
Work-in-process	988	287
Finished goods	180	253
Reserve for obsolete inventory	(2,852)	(2,670)
Inventories, net	$ 3,508	$ 3,125

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Fair Value Measurements: Fair Value Measurements (Tables)

6 Months Ended

Jun. 28, 2013

Tables/Schedules

Fair Value Measurements

June 28, 2013	Total	Level 1	Level 2	Level 3
Mutual funds – equity securities	-	-	-	-
Mutual funds – debt securities	422	422	-	-
Money market mutual funds	42	42	-	-
Total	$464	$464	-	-

December 31, 2012	Total	Level 1	Level 2	Level 3
Mutual funds – equity securities	$367	$367	-	-
Mutual funds – debt securities	298	298	-	-
Money market mutual funds	47	47	-	-
Total	$712	$712	-	-

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Fair Value Measurements

6 Months Ended

Jun. 28, 2013

Notes

Fair Value Measurements

2.           FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs according to valuation methodologies used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

that the Company has the ability to access at the measurement date.

Level 2—Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices

in less active markets, or other observable inputs that can be corroborated by observable market data.

Level 3—Unobservable inputs which are supported by little or no market activity.

The Company’s marketable securities are classified within Level 1 because the underlying investments have readily available market prices.  Marketable securities measured at fair value on a recurring basis are summarized below:

June 28, 2013	Total	Level 1	Level 2	Level 3
Mutual funds – equity securities	-	-	-	-
Mutual funds – debt securities	422	422	-	-
Money market mutual funds	42	42	-	-
Total	$464	$464	-	-

December 31, 2012	Total	Level 1	Level 2	Level 3
Mutual funds – equity securities	$367	$367	-	-
Mutual funds – debt securities	298	298	-	-
Money market mutual funds	47	47	-	-
Total	$712	$712	-	-

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Stock Option Plan (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 28, 2013	Jun. 29, 2012	Jun. 28, 2013	Jun. 29, 2012
Details
Shares authorized for future grant	1,534,113		1,534,113
Options exercisable, weighted average remaining contractual term			4 years
Options outstanding, weighted average remaining contractual term			5 years 1 month 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 0		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	4		4
Fair Value Assumptions, Method Used			Black-Scholes option-pricing model
Total unrecognized share-based compensation cost	13		13
Unrecognized share-based compensation cost, weighted average period to be recognized			2 years 3 months 18 days
Share-based compensation expense	$ 4	$ 7	$ 10	$ 17

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Employee Retirement Benefit Plans: Components of Net Periodic Benefit Expense (Tables)

6 Months Ended

Jun. 28, 2013

Tables/Schedules

Components of Net Periodic Benefit Expense

Components of Net Periodic Benefit Expense

	Pension Plan		Supplemental Executive Retirement Plan
For the three months ended:	June 28, 2013	June 29, 2012	June 28, 2013	June 29, 2012
Service cost	-	-	-	-
Interest cost	398	467	41	52
Expected return on assets	(460)	(454)	-	-
Amortization of actuarial loss	177	170	17	14
Amortization of prior year service cost	-	-	(12)	(12)
Settlement charge	-	317	-	-
Net periodic benefit expense	$115	$500	$46	$54

	Pension Plan		Supplemental Executive Retirement Plan
For the six months ended:	June 28, 2013	June 29, 2012	June 28, 2013	June 29, 2012
Service cost	-	-	-	-
Interest cost	796	933	82	104
Expected return on assets	(920)	(907)	-	-
Amortization of actuarial loss	354	341	34	28
Amortization of prior year service cost	-	-	(24)	(24)
Settlement charge	-	634	-	-
Net periodic benefit expense	$230	$1,001	$92	$108

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Employee Retirement Benefit Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 28, 2013	Jun. 28, 2013
Unfunded obligation of the Pension Plan	$ 28,087	$ 28,087
Remaining employer contributions not paid	2,077	2,077
Defined Benefit Contributions, unpaid contributions lien trigger amount		1,000
Unpaid pension plan trust contributions lien	1,410	1,410
Defined Benefit Plan, Other Costs		47
Amortization of deferred pension expense	182	364
Supplemental Executive Retirement Plan
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months	$ 485	$ 485

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Stock Option Plan: Stock Option Plan Activity (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 28, 2013
Details
Outstanding at beginning of period	1,169
Outstanding at beginning of the period, weighted average exercise price	$ 3.19
Granted	150
Granted, weighted average exercise price	$ 0.03
Forfeited or expired	(79)
Forfeited or expired, weighted average exercise price	$ 5.75
Outstanding at end of the period	1,240
Outstanding at end of the period, weighted average exercise price	$ 2.64
Exercisable at end of the period	979
Exercisable at end of the period, weighted average exercise price	$ 3.29

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Document and Entity Information	6 Months Ended
	Jun. 28, 2013	Aug. 02, 2013
Document and Entity Information:
Entity Registrant Name	EVANS & SUTHERLAND COMPUTER CORPORATION
Document Type	10-Q
Document Period End Date	Jun. 28, 2013
Amendment Flag	false
Entity Central Index Key	0000276283
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		11,089,199
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	2013
Document Fiscal Period Focus	Q2

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Stock Option Plan: Stock Options Valuation Assumptions Table, Black Scholes Option Pricing Model (Details)	6 Months Ended
	Jun. 28, 2013
Details
Risk-free interest rate	0.39%
Dividend yield	0.00%
Volatility	377.00%
Expected life (in years)	3 years 6 months