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 September 27, 2019

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.20 par value	ESCC	Over-the-Counter Markets

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 every Interactive Data File required to be submitted 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 such files).      Yes  X  No __

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

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [X]	Smaller reporting company [X]
Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [  ]

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 October 28, 2019 was 11,482,516.

FORM 10-Q

Evans & Sutherland Computer Corporation

Quarter Ended September 27, 2019

Table of Contents

	PART I – FINANCIAL INFORMATION
		Page No.
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 27, 2019 and December 31, 2018 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 27, 2019 and September 28, 2018 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 27, 2019 and September 28, 2018 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 27, 2019 and September 28, 2018 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 4.	Controls and Procedures	22
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 6.	Exhibits	23
	SIGNATURE	24

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	September 27,		December 31,
	2019		2018
			(As Adjusted)
ASSETS
Current assets:
Cash and cash equivalents	$	6,024	$	8,365
Restricted cash		252		220
Accounts receivable, net		3,319		3,250
Current portion of lease receivable		274		262
Contract revenue in excess of billings		3,563		3,484
Inventories, net		2,615		3,072
Prepaid expenses and deposits		461		655
Total current assets		16,508		19,308
Long-term lease receivable, net of current portion		367		574
Operating lease right-of-use asset		2,592		187
Property and equipment, net		4,297		4,395
Goodwill		635		635
Other assets		2,009		2,249
Total assets	$	26,408	$	27,348
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,049	$	1,527
Accrued liabilities		1,428		1,059
Billings in excess of contract revenue		4,198		5,959
Current portion of operating lease liability		300		188
Current portion of retirement obligations		668		621
Current portion of pension settlement obligation		438		438
Current portion of long-term debt		247		237
Total current liabilities		8,328		10,029
Operating lease liability, net of current portion		2,268		-
Retirement obligations, net of current portion		3,430		3,601
Pension settlement obligation, net of current portion		4,042		4,042
Long-term debt, net of current portion		1,116		1,303
Total liabilities		19,184		18,975
Commitments and contingencies
Stockholders’ equity:
Preferred stock, no par value: 10,000,000 shares authorized;
no shares outstanding		-		-
Common stock, $0.20 par value: 30,000,000 shares authorized;
11,746,866 shares issued		2,349		2,323
Additional paid-in-capital		54,034		53,967
Common stock in treasury, at cost, 264,350 shares		(3,532)		(3,532)
Accumulated deficit		(43,651)		(42,409)
Accumulated other comprehensive loss		(1,976)		(1,976)
Total stockholders’ equity		7,224		8,373
Total liabilities and stockholders’ equity	$	26,408	$	27,348

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

3

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three Months Ended		Nine Months Ended
	September 27,	September 28,	September 27,		September 28,
	2019	2018	2019		2018
		(As Adjusted)			(As Adjusted)
Sales	$ 5,702	$ 12,200	$	20,873	$	28,653
Cost of sales	(4,053)	(7,528)		(13,631)		(18,224)
Gross profit	1,649	4,672		7,242		10,429
Operating expenses:
Selling, general and administrative	(1,615)	(1,640)		(5,632)		(5,125)
Research and development	(723)	(628)		(2,459)		(2,148)
Pension	(57)	(55)		(170)		(163)
Total operating expenses	(2,395)	(2,323)		(8,261)		(7,436)
Operating income (loss)	(746)	2,349		(1,019)		2,993
Other expense, net	(56)	(68)		(204)		(243)
Income (loss) before income tax provision	(802)	2,281		(1,223)		2,750
Income tax provision	-	(30)		(19)		(61)
Net income (loss)	$ (802)	$ 2,251	$	(1,242)	$	2,689
Net income (loss) per common share – basic	$ (0.07)	$ 0.20	$	(0.11)	$	0.24
Net income (loss) per common share – diluted	$ (0.07)	$ 0.19	$	(0.11)	$	0.22
Weighted average common shares outstanding – basic	11,483	11,353		11,457		11,353
Weighted average common shares outstanding – diluted	11,483	12,012		11,457		12,002

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

4

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited) (In thousands)

						Accumulated
			Additional			Other
	Common Stock		Paid-in	Treasury	Accumulated	Comprehensive
	Shares	Amount	Capital	Stock	Deficit	Loss	Total
Balance, December 31, 2017	11,617	$ 2,323	$ 53,818	$ (3,532)	$ (47,208)	$ (2,176)	$ 3,225
Balance at January 1, 2018, as
previously reported	11,617	2,323	53,818	(3,532)	(47,208)	(2,176)	3,225
Impact of change in accounting
policy Topic 606	-	-	-	-	683	-	683
Impact of change in accounting
policy Topic 842	-	-	-	-	808	-	808
Adjusted balance at January 1, 2018	11,617	2,323	53,818	(3,532)	(45,717)	(2,176)	4,716
Net income	-	-	-	-	2,689	-	2,689
Stock-based compensation	-	-	112	-	-	-	112
Balance, September 28, 2018 (as adjusted)	11,617	$ 2,323	$ 53,930	$ (3,532)	$ (43,028)	$ (2,176)	$ 7,517
						Accumulated
			Additional			Other
	CommonStock		Paid-in	Treasury	Accumulated	Comprehensive
	Shares	Amount	Capital	Stock	Deficit	Loss	Total
Balance, December 31, 2018  (as adjusted)	11,617	$ 2,323	$ 53,967	$ (3,532)	$ (42,409)	$ (1,976)	$ 8,373
Net loss	-	-	-	-	(1,242)	-	(1,242)
Exercise of stock options	130	26	(5)	-	-	-	21
Stock-based compensation	-	-	72	-	-	-	72
Balance, September 27, 2019	11,747	$ 2,349	$ 54,034	$ (3,532)	$ (43,651)	$ (1,976)	$ 7,224

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

5

EVANS & SUTHERLAND COMPUTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Nine Months Ended
	September 27,		September 28,
	2019		2018
			(As Adjusted)
Cash flows from operating activities:
Net income (loss)	$	(1,242)	$	2,689
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization		198		200
Bad debt expense		457		-
Provision for excess and obsolete inventory		-		219
Noncash lease expense		337		396
Other		30		136
Changes in operating assets (increases in parenthesis)
and liabilities (decreases in parenthesis):
Accounts receivable		(484)		(2,450)
Lease receivable		195		184
Inventories		457		315
Operating lease right-of-use asset		(44)		-
Contract revenue in excess of billings		(79)		(558)
Prepaid expenses and other assets		434		(116)
Accounts payable		(478)		418
Accrued liabilities		369		648
Accrued pension and retirement liabilities		(124)		(179)
Billings in excess of contract revenue		(1,761)		850
Operating lease liability		(318)		(393)
Net cash provided by (used in) operating activities		(2,053)		2,359
Cash flows from investing activities:
Purchases of property and equipment		(100)		(80)
Proceeds from sale of property and equipment		-		28
Net cash used in investing activities		(100)		(52)
Cash flows from financing activities:
Proceeds for shares issued on exercise of options		21		-
Principal payments on long-term debt		(177)		(167)
Net cash used in financing activities		(156)		(167)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(2,309)		2,140
Cash, cash equivalents, and restricted cash as of beginning of the period		8,585		5,588
Cash, cash equivalents, and restricted cash as of end of the period	$	6,276	$	7,728
Supplemental disclosures of non-cash investing and financing activities
New operating lease	$	2,698	$	-
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	65	$	74
Income taxes		46		103

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

6

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

1.GENERAL 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”).  This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018.

The accompanying unaudited condensed consolidated balance sheets, statements of operations, 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 nine months ended September 27, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.  The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.  

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). In accordance with Topic 606, the Company recognizes revenue at a point of time or over the time of performance depending on the nature of the obligation.

Stock-Based Compensation

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

Net Income (Loss) Per Common Share

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.

7

Inventories, net

Inventories consisted of the following:

	September 27,		December 31,
	2019		2018
Raw materials	$	5,387	$	5,979
Work in process		115		116
Finished goods		459		323
Reserve for obsolete inventory		(3,346)		(3,346)
Inventories, net	$	2,615	$	3,072

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) ("Topic 842"). Topic 842 changes the accounting for leases. In particular, lessees will recognize lease assets and lease liabilities for operating leases. Effective January 1, 2019, the Company implemented Topic 842 as described in Note 3.

8

2.    REVENUE

Disaggregation of Revenue

In the following tables, revenue reported for the periods presented is disaggregated by primary geographical market, major product line, timing of revenue recognition and product application.

Revenue for the three months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	2,529	$	351	$	-	$	2,880
Europe		747		24		-		771
Asia		1,095		118		-		1,213
Other		838		-		-		838
	$	5,209	$	493	$	-	$	5,702
Products:
Audio-Visual Systems	$	2,854	$	24	$	-	$	2,878
Domes		1,256		466		-		1,722
Show Content		448		-		-		448
Maintenance and Service		651		3		-		654
	$	5,209	$	493	$	-	$	5,702
Timing of revenue recognition:
Goods transferred at point in time	$	749	$	-	$	-	$	749
Goods and services transferred over time		4,460		493		-		4,953
	$	5,209	$	493	$	-	$	5,702

9

Revenue for the three months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	7,545	$	12	$	-	$	7,557
Europe		2,853		432		118		3,403
Asia		687		182		-		869
Other		371		-		-		371
	$	11,456	$	626	$	118	$	12,200
Products:
Audio-Visual Systems	$	8,718	$	360	$	-	$	9,078
Domes		1,842		266		118		2,226
Show Content		382		-		-		382
Maintenance and Service		514		-		-		514
	$	11,456	$	626	$	118	$	12,200
Timing of revenue recognition:
Goods transferred at point in time	$	472	$	-	$	-	$	472
Goods and services transferred over time		10,984		626		118		11,728
	$	11,456	$	626	$	118	$	12,200

10

Revenue for the nine months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	10,118	$	819	$	125	$	11,062
Europe		3,912		1,242		-		5,154
Asia		2,307		156		-		2,463
Other		2,194		-		-		2,194
	$	18,531	$	2,217	$	125	$	20,873
Products:
Audio-Visual Systems	$	11,978	$	804	$	-	$	12,782
Domes		3,056		1,337		125		4,518
Show Content		1,576		73		-		1,649
Maintenance and Service		1,921		3		-		1,924
	$	18,531	$	2,217	$	125	$	20,873
Timing of revenue recognition:
Goods transferred at point in time	$	2,078	$	73	$	-	$	2,151
Goods and services transferred over time		16,453		2,144		125		18,722
	$	18,531	$	2,217	$	125	$	20,873

11

Revenue for the nine months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	16,449	$	485	$	629	$	17,563
Europe		4,284		844		118		5,246
Asia		3,366		1,775		-		5,141
Other		703		-		-		703
	$	24,802	$	3,104	$	747	$	28,653
Products:
Audio-Visual Systems	$	16,713	$	772	$	-	$	17,485
Domes		4,725		2,332		747		7,804
Show Content		1,552		-		-		1,552
Maintenance and Service		1,812		-		-		1,812
	$	24,802	$	3,104	$	747	$	28,653
Timing of revenue recognition:
Goods transferred at point in time	$	2,031	$	-	$	-	$	2,031
Goods and services transferred over time		22,771		3,104		747		26,622
	$	24,802	$	3,104	$	747	$	28,653

12

Contract Balances

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers as of September 27, 2019 and December 31, 2018:

	September 27,   2019	December 31, 2018
Receivables reported as accounts receivable, net	$ 3,319	$ 3,250
Contract revenue in excess of billings	3,563	3,484
Billings in excess of contract revenue	4,198	5,959

Significant changes in the contract assets and the contract liabilities balances during the period are as follows:

	Contract Assets	Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period		$ (4,286)
Increases due to amounts billed to customers, excluding amounts recognized as revenue during the period		$ 2,525
Transferred to receivables from contract assets recognized at the beginning of the period	$ (2,679)
Increases as a result of revenue recognized, excluding amounts transferred to receivables during the period	$ 2,758

Contract assets arise when revenue recognized on a contract exceeds the cumulative progress billings. Contracts generally provide for an enforceable right to payment for performance completed to date but do not necessarily have a present right to consideration payment for performance completed until the event that triggers the progress billing. The contract assets are transferred to the receivables when the rights to payment occur and amounts are billed. Contract liabilities arise when progress billings on a contract exceed the revenue recognized. Contract liabilities are relieved as the performance obligation is completed and revenue is recognized. Progress billings vary among contracts and can be triggered by chronological milestones, performance events or other various measurements of performance.

13

Backlog of Remaining Customer Performance Obligations

The following table includes estimated revenue expected to be recognized and recorded as sales in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

	Remainder of 2019	2020	2021	2022	2023
Sales	$ 5,785	$ 8,453	$ 1,711	$ 945	$ 381

3.    OPERATING LEASE

The Company leases its office, shop and warehouse space in Salt Lake City, Utah under a non-cancellable operating lease agreement. The lease agreement had an amended term set to expire October 2019 (the “Previous Facility Lease”). On April 15, 2019, the Company signed an amendment to the Previous Facility Lease (the “Lease Amendment”).  The Lease Amendment effectively terminated, as of April 30, 2019, the Previous Facility Lease, and revised the terms whereby, effective May 1, 2019, the Company continues to lease 60% of the space, while the other 40% is leased from the Landlord by a third-party tenant (“New Facility Lease”).  The Company continues to pay 100% of the maintenance and utility costs for the buildings and grounds, of which approximately 40% is reimbursed by the third-party tenant in accordance with terms set by the New Facility Lease. The New Facility Lease has a seven-year term with two five-year renewal options with monthly base rent of $35 during the first year with a 3% escalation per year.    

As a result of the adoption of ASC 842, the Company recognized an operating lease liability with a corresponding right-of-use (“ROU”) asset of the same amount based on the present value of the minimum rental payments of the Previous Facility Lease as of January 1, 2018.  The discount rate used to compute the present value of the minimum rental payments of the Previous Facility Lease is the Company’s estimated borrowing rate of 7.5% as of the inception of the term of the Previous Facility Lease.  The operating lease expense was computed on the straight-line basis which amounted to $431 reported as rent expense in the nine-month period ended September 28, 2018 and $183 for the first four months of 2019 through the April 30, 2019 termination of the Previous Facility Lease.

For the New Facility Lease, the Company recognized an operating lease liability in the amount of $2,698 and a ROU asset in the amount of $2,742 as of May 1, 2019.  The operating lease liability consists of the present value of the minimum rental payments of the New Facility Lease.  The discount rate used to compute the present value of the minimum rental payments of the New Facility Lease is the Company’s estimated borrowing rate of 5.25% as of May 1, 2019.  The ROU asset consists of the lease liability plus an indirect cost of $44 attributable to negotiating and arranging the lease.  The operating lease expense is computed on the straight-line basis which amounts to $195 reported as rent expense for the five-month period ended September 27, 2019.

Balance sheet information related to Previous Facility Lease and New Facility Lease are as follows:

	September 27,		December 31,
	2019		2018
Operating lease right-of-use asset	$	2,592	$	187
Operating lease liability, current portion		300		188
Operating lease liability, net of current portion		2,268		-

14

The components of lease expense are as follows:

	September 27,		September 28,
	2019		2018
Amortization of right-of-use asset recorded as rent expense	$	329	$	405
Interest on lease liability included in other expense		49		26
Total lease cost	$	378	$	431

Maturities of the lease liability are as follows:

Future Minimum Lease Payments
2019	$	106
2020		431
2021		444
2022		457
2023		471
2024		485
Thereafter		666
Total future minimum lease payments		3,060
Less: amount representing interest		(492)
Present value of future payments		2,568
Current portion		300
Long-term portion	$	2,268

Other information related to the lease:

For the nine months ended:

	September 27,		September 28,
	2019		2018
Operating cashflows
Cash paid related to operating lease obligation	$	354	$	424
Remaining lease term (in years)
Operating lease		6.6		0.6

4.    CHANGES IN ACCOUNTING PRINCIPAL

As described in Note 3, the Company adopted Topic 842 Leases, effective January 1, 2019 resulting in the retrospective adjustment of the comparative 2018 periods presented. Prior to the application of Topic 842, the rent expense was recorded in the amount of the lease payments, adjusted on straight-line basis over the lease term, less the amortization of a deferred gain from a 2014 sale leaseback transaction.  Under Topic 842, this gain would be recognized at the time of the transaction and not deferred. As a result, there was an adjustment to eliminate the unamortized balance of the deferred gain for cumulative effect of the initial application which increased the opening balance of stockholders’ equity in the amount of $808 at January 1, 2018. The presented condensed consolidated statement of operations and condensed consolidated statement of cash flows for the nine-month period ended September 28, 2018 is adjusted to reflect an increase in rent expense in the amount of $330. The condensed consolidated balance sheet presented as of December 31, 2018 is adjusted to reflect the ROU asset and operating lease liability described in Note 3 along with an increase in stockholders’ equity of $369.

15

5.STOCK OPTION PLAN  

As of September 27, 2019, options to purchase 876,581 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant.  

A summary of activity in the stock option plan for the nine months ended September 27, 2019 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,597	$	0.65
Granted	165		0.80
Exercised	(130)		0.17
Forfeited or expired	(40)		0.66
Outstanding as of end of the period	1,592		0.71
Exercisable as of end of the period	1,523	$	0.61

As of September 27, 2019, options exercisable and options outstanding had a weighted average remaining contractual term of 5.2 and 6.0 years, respectively, and had an aggregate intrinsic value of $234.

The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2019, were based on estimates as of the date of grant as follows:

Risk-free interest rate	2.64 %
Dividend yield	0.00 %
Volatility	81.15 %
Expected life	3.5 years

Expected option life and volatility are based on historical data. 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.

The options exercised in the nine-month period ended September 27, 2019 had an intrinsic value of $69.

As of September 27, 2019, there was approximately $76 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 2.0 years.

Share-based compensation expense included in selling, general and administrative expense in the statements of operations for the nine-month periods ended September 27, 2019 and September 28, 2018 was $72 and $112, respectively.  

16

6.EMPLOYEE RETIREMENT BENEFIT PLANS  

Pension and Retirement Obligations

In 2015, the Company terminated a defined pension plan and settled the resulting liabilities in exchange for a fixed obligation secured by the Company’s assets (the “Pension Settlement Obligation”). The remaining payments due under the Pension Settlement Obligation consist of eight installments of $750 to the Pension Benefit Guaranty Corporation due annually on October 31. The Pension Settlement Obligation is recorded net of imputed interest expense at 7%, as a liability on the balance sheet.

The Company’s only remaining pension obligation is the Supplemental Executive Retirement Plan (“SERP”).

Employer Contributions

The Company is not currently required to fund the SERP.  All benefit payments are made by the Company directly to those who receive benefits from the SERP.  As such, these payments are treated as both contributions and benefits paid for reporting purposes. The Company expects to contribute and pay SERP benefits of approximately $668 in the next 12 months.  

Components of Net Periodic Benefit Expense

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the nine months ended:	2019		2018
Interest cost	$	110	$	103
Amortization of actuarial loss		60		60
Net periodic benefit expense	$	170	$	163

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the three months ended:	2019		2018
Interest cost	$	37	$	35
Amortization of actuarial loss		20		20
Net periodic benefit expense	$	57	$	55

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

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

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

All dollar amounts are in thousands.

EXECUTIVE SUMMARY

As described in the notes to the condensed consolidated financial statements, the Company adopted Topic 842, Leases, with a date of the initial application of January 1, 2018. The Company applied Topic 842 by retrospectively adjusting the 2018 financial statements presented for comparison in this Form 10-Q. The retrospective adjustment increased the rent expense by $110 per quarter. The balance sheet effect of this increase in expense was offset by an adjustment for the cumulative effect of the application that resulted in a net increase to stockholders’ equity of $369 as of December 31, 2018.

The results for the third quarter of 2019 produced a net loss of $802 on sales of $5,702 compared to net income of $2,251 on sales of $12,200 for the comparable period of 2018, as adjusted for the application of Topic 842 described above. The results for the first nine months of 2019 produced a net loss of $1,242 on sales of $20,873 compared to net income of $2,689 on sales of $28,653 for the comparable adjusted period of 2018. Sales for 2019 were lower due to the acceleration of customer deliveries in 2018 and a low volume of new customer orders. The low sales volume contributed to lower profit margins on sales due to the absorption of fixed overheard cost. Operating expenses in 2019 were higher than 2018 due to $457 of bad debt expense recorded in the second quarter of 2019 and increased research and development activities. The bad debt expense was the result of an increase in the allowance for doubtful accounts receivable for a customer in China. The Company has been evaluating possible collection efforts but recovery remains uncertain. The Company believes the increase in bad debt expense is an isolated occurrence. Although disappointed by the loss, the Company is encouraged by the progress from increased research and development activities made possible by the availability of resources due to a lower demand from customer contracts.

The sales backlog as of September 27, 2019 is $17,275 compared to $17,366 as of December 31, 2018. Although still low by historical comparison it is an improvement over the $13,024 reported as of June 28, 2019 due to a healthy volume of new orders in the third quarter of 2019. A continuing healthy volume of new orders to replenish

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the sales backlog will be critical to produce sales at sufficient levels for profitable results. We remain encouraged that the Company’s sales prospects will produce sufficient orders to sustain sales at profitable levels over the long term; however, we anticipate that the low backlog as of September 27, 2019 could continue to challenge profitability in 2019. Notwithstanding the loss in the first nine months of 2019, profitable results over the past few years have strengthened the Company’s financial position. This presents an opportunity in periods of low sales to redirect staff and resources, which would otherwise be working on customer projects, toward research and development activities to expand our products for future sales growth.

The Company continually evaluates its business for opportunities to reduce operating costs. These efforts led the Company to amend the lease for its facility in Salt Lake City effective May 1, 2019. Prior to the amendment the Company occupied 100% of two buildings totaling approximately 68,000 square feet. Upon review of its current requirements, the Company determined that its operations could be served efficiently with approximately 60% of its currently leased space. Under the Lease Amendment, effective May 1, 2019, the Company leases approximately 60% of the prior leased space, while the other 40% is leased from the Landlord by a third-party tenant. The initial annual rent payments are reduced $148 annually.  Also, the Company estimates that’s its utility and maintenance costs will be reduced by approximately $200 for a total estimated annual cost reduction of approximately $348.

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, 2018.  For all of these policies, management cautions that future results rarely develop exactly as forecasted, and the best estimates routinely require modification.  

RESULTS OF OPERATIONS

Sales and Backlog

The following table summarizes our sales:

	Three Months Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Sales	$	5,702	$	12,200	$	20,873	$	28,653

The lower sales in 2019 were attributable to the acceleration of customer deliveries in 2018 and a low volume of new customer orders.

Revenue backlog decreased slightly to $17,275 as of September 27, 2019, compared to $17,366 as of December 31, 2018. The decrease in the revenue backlog was minimal due to the low 2019 sales which were replenished by an improving volume of new orders in the third quarter of 2019.

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Gross Profit

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

	Three Months Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Gross profit	$	1,649	$	4,672	$	7,242	$	10,429
Gross profit percentage		29 %		38 %		35 %		36 %

The mix of products delivered and the types of customer contracts that contributed to the revenue in the periods presented, causes variability in the gross profit percentage. The lower 2019 gross profit percentage was mainly attributable to the low 2019 sales causing inefficiencies that increase overhead cost of as a percentage of sales. This contrasts with the high 2018 sales which resulted in efficiencies that lowered overhead cost as a percentage of sales. The lower sales had less effect on the gross profit percentage for the 2019 nine-month period because, in the second quarter of 2019, several projects were completed at costs lower than estimated as efforts to meet some customized product features and uncertain site conditions were less than anticipated. This resulted in high profit margins for the affected projects which offset much of the higher fixed overhead cost as a percentage of the lower 2019 sales.  

Operating Expenses

The following table summarizes our operating expenses:

	Three Months Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Selling, general and administrative	$	1,615	$	1,640	$	5,632	$	5,125
Research and development		723		628		2,459		2,148
Pension		57		55		170		163
Total operating expense	$	2,395	$	2,323	$	8,261	$	7,436

Selling, general and administrative expenses were lower for the three months ended September 27, 2019 compared to 2018 due to cost reductions including the effect of the Lease Amendment. For the nine-month periods presented, selling, general and administrative expenses in 2019 were higher compared to 2018, mainly due to a second quarter bad debt charge of $457 for a customer receivable in China.

Research and development expenses were higher in 2019 due to the deployment of more engineering resources to R&D activities made possible by lower customer delivery activities. Research and development expenses generally vary with use of engineering resources for product improvement projects and customer delivery activities.

Pension expense increased slightly in 2019 compared to 2018 due to an increase in the interest cost on the SERP.

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Other Expense, net

The following table summarizes our other expense:

	Three Months Ended				Nine Months Ended
	September 27,		September 28,		September 27,		September 28,
	2019		2018		2019		2018
Other expense, net	$	(56)	$	(68)	$	(204)	$	(243)

Other expense decreased in 2019 compared to 2018 mainly due to declining interest expense on the Pension Settlement Obligation and mortgage notes along with an increase in interest income from higher rates on temporary cash investments.   

LIQUIDITY AND CAPITAL RESOURCES

Outlook

As discussed above in the executive summary, we believe existing liquidity resources and funds generated from forecasted revenue will be sufficient to meet our current and long-term obligations. We continue to operate in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures.

Cash Flows

In the first nine months of 2019, $2,053 of cash used in operating activities was attributable to $220 of cash absorbed by the net loss for the period, after the effect of non-cash items of $1,022, and cash used by changes to working capital of $1,833. The significant uses of cash from changes to working capital were an increase in accounts receivable, a decrease in accounts payable and a decrease in billings in excess of contract revenue.  This was partially offset by a decrease in inventory and a decrease in prepaid expenses and other assets.  These changes are attributable to the timing of billings, customer payments and new customer orders.   

In the first nine months of 2018, $2,359 of cash provided by operating activities was attributable to $3,640 of cash provided by the net income for the period, after the effect of non-cash items of $951 which was offset by cash used by changes to working capital of $1,281. The significant uses of cash from changes to working capital were increases in accounts receivable and contract revenue in excess of billings.  This was partially offset by an increase in billings in excess of contract revenue resulting from advance billings to customers.  These changes are attributable to the timing of billings, customer payments and new customer orders.   

Cash used in investing activities was $100 for the nine months ended September 27, 2019 compared to $52 for the same period of 2018.  Investing activities for both periods presented consisted of property and equipment purchases. In 2018 investing activities included proceeds from the sale of equipment no longer being used.

For the nine months ended September 27, 2019, financing activities used $156 of cash compared to $167 in 2018 for principal payments on mortgage notes.  Proceeds of $21 for the sale of common stock pursuant to the exercise of employee stock options partially offset the principal payments on the mortgage notes in 2019.

Line of Credit

The Company is a party to a line-of-credit agreement with a commercial bank which permits borrowings of up to $1,100 to fund the working capital requirements of Spitz. Under the line of credit agreement, interest is charged on amounts borrowed at the lender’s prime rate less 0.25%.  Any borrowings under the Credit Agreement are secured by Spitz real and personal property and all of the outstanding shares of Spitz common stock. The line-of-credit agreement and mortgage notes (with the same commercial bank) contain cross default provisions whereby a default

21

on either agreement will result in a default on both agreements. There were no borrowings outstanding under the line-of-credit agreement as of September 27, 2019.

Letters of Credit

Under the terms of financing arrangements for letters of credit, the Company is required to maintain a balance in a specific cash account equal to or greater than the outstanding value of all letters of credit issued, plus other amounts necessary to adequately secure obligations with the financial institutions who issue the letters of credit.  As of September 27, 2019, there were outstanding letters of credit and bank guarantees of $252, most of which are scheduled to expire during the year ending December 31, 2019.  

Mortgage Notes

As of September 27, 2019, Spitz had obligations totaling $1,363 under its two mortgage notes payable.

Item 4.  CONTROLS AND PROCEDURES

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 nine months ended September 27, 2019, or subsequent to that date, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

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PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

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

Item 6.  EXHIBITS

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

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

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

101  The following materials from this Quarterly Report on Form 10-Q for the period ended September 27, 2019, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

23

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EVANS & SUTHERLAND COMPUTER CORPORATION
Date:	November 11, 2019	By:    /s/ Paul Dailey
		Paul Dailey, Chief Financial Officer
		and Corporate Secretary
		(Authorized Officer)
		(Principal Financial and Accounting Officer)

24

EX-31.1

Exhibit 31.1

Rule 13a-14 Certification

CERTIFICATIONS*

I, Jonathan Shaw, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 11, 2019

/s/ Jonathan Shaw
Jonathan Shaw
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14 Certification

CERTIFICATIONS*

I, Paul L. Dailey, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 11, 2019

/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, Jonathan Shaw, 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 September 27, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

Date: November 11, 2019By:     /s/ Jonathan Shaw        

Jonathan Shaw 

             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 September 27, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Evans & Sutherland Computer Corporation.

Date: November 11, 2019By:     /s/ Paul L. Dailey         

Paul L. Dailey 

             Chief Financial Officer 

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

XML

3. Operating Lease: Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Sep. 27, 2019	May 02, 2019	Dec. 31, 2018
Notes to Financial Statements
2019	$ 106
2020	431
2021	444
2022	457
2023	471
2024	485
Thereafter	666
Total future minimum lease payments	3,060
Less: amount representing interest	(492)
Present value of future payments	2,568	$ 2,698
Current portion	300		$ 188
Long-term portion	$ 2,268		$ 0

XML

2. Revenue: Schedule of backlog of performance obligations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Sales	$ 5,702	$ 12,200	$ 20,873	$ 28,653
Backlog in sales | 2019
Sales	5,785
Backlog in sales | 2020
Sales	8,453
Backlog in sales | 2021
Sales	1,711
Backlog in sales | 2022
Sales	945
Backlog in sales | 2023
Sales	$ 381

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2017	$ 2,323	$ 53,818	$ (3,532)	$ (47,208)	$ (2,176)	$ 3,225
Shares, Outstanding, Beginning Balance at Dec. 31, 2017	11,617
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance, Previously Reported	$ 2,323	53,818	(3,532)	(47,208)	(2,176)	3,225
Shares, Outstanding, Beginning Balance, Previously Reported	11,617
Impact of change in accounting policy topic 606				683		683
Impact of change in accounting policy topic 842				808		808
Stockholders' Equity Adjusted balance	$ 2,323	53,818	(3,532)	(45,717)	(2,176)	4,716
Shares Outstanding, Adjusted balance	11,617
Net income (loss)				2,689		2,689
Stock-based compensation		112				112
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Sep. 28, 2018	$ 2,323	53,930	(3,532)	(43,028)	(2,176)	7,517
Shares, Outstanding, Ending Balance at Sep. 28, 2018	11,617
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2018	$ 2,323	53,967	(3,532)	(42,409)	(1,976)	8,373
Shares, Outstanding, Beginning Balance at Dec. 31, 2018	11,617
Net income (loss)				(1,242)		(1,242)
Exercise of stock options	$ 26	(5)				21
Exercise of stock options, shares	130
Stock-based compensation		72				72
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Sep. 27, 2019	$ 2,349	$ 54,034	$ (3,532)	$ (43,651)	$ (1,976)	$ 7,224
Shares, Outstanding, Ending Balance at Sep. 27, 2019	11,747

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 27, 2019	Oct. 28, 2019
Text Block [Abstract]
Registrant Name	EVANS & SUTHERLAND COMPUTER CORPORATION
Registrant CIK	0000276283
SEC Form	10-Q
Period End date	Sep. 27, 2019
Fiscal Year End	--12-31
Tax Identification Number (TIN)	87-0278175
Number of common stock shares outstanding		11,482,516
Filer Category	Non-accelerated Filer
Current with reporting	Yes
Entity Small Business	true
Emerging Growth Company	false
Entity Shell Company	false
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity File Number	001-14677
Entity Incorporation, State or Country Code	UT
Entity Address, Address Line One	770 Komas Drive
Entity Address, City or Town	Salt Lake City
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84108
City Area Code	801
Local Phone Number	588-1000

XML

3. Operating Lease

9 Months Ended

Sep. 27, 2019

Notes to Financial Statements

3. Operating Lease

3. OPERATING LEASE

The Company leases its office, shop and warehouse space in Salt Lake City, Utah under a non-cancellable operating lease agreement. The lease agreement had an amended term set to expire October 2019 (the “Previous Facility Lease”). On April 15, 2019, the Company signed an amendment to the Previous Facility Lease (the “Lease Amendment”). The Lease Amendment effectively terminated, as of April 30, 2019, the Previous Facility Lease, and revised the terms whereby, effective May 1, 2019, the Company continues to lease 60% of the space, while the other 40% is leased from the Landlord by a third-party tenant (“New Facility Lease”). The Company continues to pay 100% of the maintenance and utility costs for the buildings and grounds, of which approximately 40% is reimbursed by the third-party tenant in accordance with terms set by the New Facility Lease. The New Facility Lease has a seven-year term with two five-year renewal options with monthly base rent of $35 during the first year with a 3% escalation per year.

As a result of the adoption of ASC 842, the Company recognized an operating lease liability with a corresponding right-of-use (“ROU”) asset of the same amount based on the present value of the minimum rental payments of the Previous Facility Lease as of January 1, 2018. The discount rate used to compute the present value of the minimum rental payments of the Previous Facility Lease is the Company’s estimated borrowing rate of 7.5% as of the inception of the term of the Previous Facility Lease. The operating lease expense was computed on the straight-line basis which amounted to $431 reported as rent expense in the nine-month period ended September 28, 2018 and $183 for the first four months of 2019 through the April 30, 2019 termination of the Previous Facility Lease.

For the New Facility Lease, the Company recognized an operating lease liability in the amount of $2,698 and a ROU asset in the amount of $2,742 as of May 1, 2019. The operating lease liability consists of the present value of the minimum rental payments of the New Facility Lease. The discount rate used to compute the present value of the minimum rental payments of the New Facility Lease is the Company’s estimated borrowing rate of 5.25% as of May 1, 2019. The ROU asset consists of the lease liability plus an indirect cost of $44 attributable to negotiating and arranging the lease. The operating lease expense is computed on the straight-line basis which amounts to $195 reported as rent expense for the five-month period ended September 27, 2019.

Balance sheet information related to Previous Facility Lease and New Facility Lease are as follows:

	September 27,		December 31,
	2019		2018
Operating lease right-of-use asset	$	2,592	$	187
Operating lease liability, current portion		300		188
Operating lease liability, net of current portion		2,268		-

The components of lease expense are as follows:

	September 27,		September 28,
	2019		2018
Amortization of right-of-use asset recorded as rent expense	$	329	$	405
Interest on lease liability included in other expense		49		26
Total lease cost	$	378	$	431

Maturities of the lease liability are as follows:

Future Minimum Lease Payments
2019	$	106
2020		431
2021		444
2022		457
2023		471
2024		485
Thereafter		666
Total future minimum lease payments		3,060
Less: amount representing interest		(492)
Present value of future payments		2,568
Current portion		300
Long-term portion	$	2,268

Other information related to the lease:

For the nine months ended:

	September 27,		September 28,
	2019		2018
Operating cashflows
Cash paid related to operating lease obligation	$	354	$	424
Remaining lease term (in years)
Operating lease		6.6		0.6

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5. Stock Option Plan: Schedule of Stock Options Valuation Assumptions (Details)	9 Months Ended
	Sep. 27, 2019
Text Block [Abstract]
Risk-free interest rate	2.64%
Dividend yield	0.00%
Volatility	81.15%
Expected life (in years)	3 years 6 months

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1. General: Inventories: Schedule of Inventory (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 31, 2018
Text Block [Abstract]
Raw Materials	$ 5,387	$ 5,979
Work-in-process	115	116
Finished goods	459	323
Reserve for obsolete inventory	(3,346)	(3,346)
Inventories, net	$ 2,615	$ 3,072

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2. Revenue (Tables)

9 Months Ended

Sep. 27, 2019

Table Text Block Supplement [Abstract]

Schedule of geographical revenues

In the following tables, revenue reported for the periods presented is disaggregated by primary geographical market, major product line, timing of revenue recognition and product application.

Revenue for the three months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	2,529	$	351	$	-	$	2,880
Europe		747		24		-		771
Asia		1,095		118		-		1,213
Other		838		-		-		838
	$	5,209	$	493	$	-	$	5,702
Products:
Audio-Visual Systems	$	2,854	$	24	$	-	$	2,878
Domes		1,256		466		-		1,722
Show Content		448		-		-		448
Maintenance and Service		651		3		-		654
	$	5,209	$	493	$	-	$	5,702
Timing of revenue recognition:
Goods transferred at point in time	$	749	$	-	$	-	$	749
Goods and services transferred over time		4,460		493		-		4,953
	$	5,209	$	493	$	-	$	5,702

Revenue for the three months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	7,545	$	12	$	-	$	7,557
Europe		2,853		432		118		3,403
Asia		687		182		-		869
Other		371		-		-		371
	$	11,456	$	626	$	118	$	12,200
Products:
Audio-Visual Systems	$	8,718	$	360	$	-	$	9,078
Domes		1,842		266		118		2,226
Show Content		382		-		-		382
Maintenance and Service		514		-		-		514
	$	11,456	$	626	$	118	$	12,200
Timing of revenue recognition:
Goods transferred at point in time	$	472	$	-	$	-	$	472
Goods and services transferred over time		10,984		626		118		11,728
	$	11,456	$	626	$	118	$	12,200

Revenue for the nine months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	10,118	$	819	$	125	$	11,062
Europe		3,912		1,242		-		5,154
Asia		2,307		156		-		2,463
Other		2,194		-		-		2,194
	$	18,531	$	2,217	$	125	$	20,873
Products:
Audio-Visual Systems	$	11,978	$	804	$	-	$	12,782
Domes		3,056		1,337		125		4,518
Show Content		1,576		73		-		1,649
Maintenance and Service		1,921		3		-		1,924
	$	18,531	$	2,217	$	125	$	20,873
Timing of revenue recognition:
Goods transferred at point in time	$	2,078	$	73	$	-	$	2,151
Goods and services transferred over time		16,453		2,144		125		18,722
	$	18,531	$	2,217	$	125	$	20,873

Revenue for the nine months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	16,449	$	485	$	629	$	17,563
Europe		4,284		844		118		5,246
Asia		3,366		1,775		-		5,141
Other		703		-		-		703
	$	24,802	$	3,104	$	747	$	28,653
Products:
Audio-Visual Systems	$	16,713	$	772	$	-	$	17,485
Domes		4,725		2,332		747		7,804
Show Content		1,552		-		-		1,552
Maintenance and Service		1,812		-		-		1,812
	$	24,802	$	3,104	$	747	$	28,653
Timing of revenue recognition:
Goods transferred at point in time	$	2,031	$	-	$	-	$	2,031
Goods and services transferred over time		22,771		3,104		747		26,622
	$	24,802	$	3,104	$	747	$	28,653

Schedule of contract balances

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers as of September 27, 2019 and December 31, 2018:

	September 27,    2019	December 31, 2018
Receivables reported as accounts receivable, net	$ 3,319	$ 3,250
Contract revenue in excess of billings	3,563	3,484
Billings in excess of contract revenue	4,198	5,959

Schedule of changes in the contract assets and the contract liabilities

Significant changes in the contract assets and the contract liabilities balances during the period are as follows:

	Contract Assets	Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period		$ (4,286)
Increases due to amounts billed to customers, excluding amounts recognized as revenue during the period		$ 2,525
Transferred to receivables from contract assets recognized at the beginning of the period	$ (2,679)
Increases as a result of revenue recognized, excluding amounts transferred to receivables during the period	$ 2,758

Schedule of backlog of performance obligations

The following table includes estimated revenue expected to be recognized and recorded as sales in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

	Remainder of 2019	2020	2021	2022	2023
Sales	$ 5,785	$ 8,453	$ 1,711	$ 945	$ 381

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5. Stock Option Plan

9 Months Ended

Sep. 27, 2019

Disclosure Text Block [Abstract]

5. Stock Option Plan

5.       STOCK OPTION PLAN

As of September 27, 2019, options to purchase 876,581 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant.

A summary of activity in the stock option plan for the nine months ended September 27, 2019 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,597	$	0.65
Granted	165		0.80
Exercised	(130)		0.17
Forfeited or expired	(40)		0.66
Outstanding as of end of the period	1,592		0.71
Exercisable as of end of the period	1,523	$	0.61

As of September 27, 2019, options exercisable and options outstanding had a weighted average remaining contractual term of 5.2 and 6.0 years, respectively, and had an aggregate intrinsic value of $234.

The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2019, were based on estimates as of the date of grant as follows:

Risk-free interest rate	2.64 %
Dividend yield	0.00 %
Volatility	81.15 %
Expected life	3.5 years

Expected option life and volatility are based on historical data. 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.

The options exercised in the nine-month period ended September 27, 2019 had an intrinsic value of $69.

As of September 27, 2019, there was approximately $76 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 2.0 years.

Share-based compensation expense included in selling, general and administrative expense in the statements of operations for the nine-month periods ended September 27, 2019 and September 28, 2018 was $72 and $112, respectively.

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6. Employee Retirement Benefit Plans (Details) $ in Thousands	9 Months Ended
	Sep. 27, 2019 USD ($)
Text Block [Abstract]
Pension Plan Settlement Agreement, Payment Schedule	Eight installments of $750 to the Pension Benefit Guaranty Corporation due annually on October 31.
Contribution by Employer	$ 668
Imputed interest expense rate	7.00%

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1. General (Tables)

9 Months Ended

Sep. 27, 2019

Table Text Block Supplement [Abstract]

Schedule of Inventory

Inventories consisted of the following:

	September 27,		December 31,
	2019		2018
Raw materials	$	5,387	$	5,979
Work in process		115		116
Finished goods		459		323
Reserve for obsolete inventory		(3,346)		(3,346)
Inventories, net	$	2,615	$	3,072

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4. Changes in Accounting Principal

9 Months Ended

Sep. 27, 2019

Notes to Financial Statements

4. Changes in Accounting Principal

4. Changes in accounting principal

As described in Note 3, the Company adopted Topic 842 Leases, effective January 1, 2019 resulting in the retrospective adjustment of the comparative 2018 periods presented. Prior to the application of Topic 842, the rent expense was recorded in the amount of the lease payments, adjusted on straight-line basis over the lease term, less the amortization of a deferred gain from a 2014 sale leaseback transaction. Under Topic 842, this gain would be recognized at the time of the transaction and not deferred. As a result, there was an adjustment to eliminate the unamortized balance of the deferred gain for cumulative effect of the initial application which increased the opening balance of stockholders’ equity in the amount of $808 at January 1, 2018. The presented condensed consolidated statement of operations and condensed consolidated statement of cash flows for the nine-month period ended September 28, 2018 is adjusted to reflect an increase in rent expense in the amount of $330. The condensed consolidated balance sheet presented as of December 31, 2018 is adjusted to reflect the ROU asset and operating lease liability described in Note 3 along with an increase in stockholders’ equity of $369.

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6. Employee Retirement Benefit Plans (Tables)

9 Months Ended

Sep. 27, 2019

Table Text Block Supplement [Abstract]

Schedule of Net Periodic Benefit Cost

Components of Net Periodic Benefit Expense

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the nine months ended:	2019		2018
Interest cost	$	110	$	103
Amortization of actuarial loss		60		60
Net periodic benefit expense	$	170	$	163

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the three months ended:	2019		2018
Interest cost	$	37	$	35
Amortization of actuarial loss		20		20
Net periodic benefit expense	$	57	$	55

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3. Operating Lease: Schedule of lease expense (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018
Notes to Financial Statements
Amortization of right-of-use asset recorded as rent expense	$ 329	$ 405
Interest on lease liability included in other expense	49	26
Total lease cost	$ 378	$ 431

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2. Revenue: Schedule of changes in the contract assets and the contract liabilities (Details) $ in Thousands	3 Months Ended
	Sep. 27, 2019 USD ($)
Contract revenue recognized
Increase (Decrease) in Contract with Customer, Liability	$ (4,286)
Increase (Decrease) in Contract with Customer, Asset	(2,679)
Contract receivables recorded
Increase (Decrease) in Contract with Customer, Asset	2,758
Contract amount billed
Increase (Decrease) in Contract with Customer, Liability	$ 2,525

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2. Revenue

9 Months Ended

Sep. 27, 2019

Disclosure Text Block [Abstract]

2. Revenue

2. Revenue

Disaggregation of Revenue

In the following tables, revenue reported for the periods presented is disaggregated by primary geographical market, major product line, timing of revenue recognition and product application.

Revenue for the three months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	2,529	$	351	$	-	$	2,880
Europe		747		24		-		771
Asia		1,095		118		-		1,213
Other		838		-		-		838
	$	5,209	$	493	$	-	$	5,702
Products:
Audio-Visual Systems	$	2,854	$	24	$	-	$	2,878
Domes		1,256		466		-		1,722
Show Content		448		-		-		448
Maintenance and Service		651		3		-		654
	$	5,209	$	493	$	-	$	5,702
Timing of revenue recognition:
Goods transferred at point in time	$	749	$	-	$	-	$	749
Goods and services transferred over time		4,460		493		-		4,953
	$	5,209	$	493	$	-	$	5,702

Revenue for the three months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	7,545	$	12	$	-	$	7,557
Europe		2,853		432		118		3,403
Asia		687		182		-		869
Other		371		-		-		371
	$	11,456	$	626	$	118	$	12,200
Products:
Audio-Visual Systems	$	8,718	$	360	$	-	$	9,078
Domes		1,842		266		118		2,226
Show Content		382		-		-		382
Maintenance and Service		514		-		-		514
	$	11,456	$	626	$	118	$	12,200
Timing of revenue recognition:
Goods transferred at point in time	$	472	$	-	$	-	$	472
Goods and services transferred over time		10,984		626		118		11,728
	$	11,456	$	626	$	118	$	12,200

Revenue for the nine months ended September 27, 2019
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	10,118	$	819	$	125	$	11,062
Europe		3,912		1,242		-		5,154
Asia		2,307		156		-		2,463
Other		2,194		-		-		2,194
	$	18,531	$	2,217	$	125	$	20,873
Products:
Audio-Visual Systems	$	11,978	$	804	$	-	$	12,782
Domes		3,056		1,337		125		4,518
Show Content		1,576		73		-		1,649
Maintenance and Service		1,921		3		-		1,924
	$	18,531	$	2,217	$	125	$	20,873
Timing of revenue recognition:
Goods transferred at point in time	$	2,078	$	73	$	-	$	2,151
Goods and services transferred over time		16,453		2,144		125		18,722
	$	18,531	$	2,217	$	125	$	20,873

Revenue for the nine months ended September 28, 2018
Product Application	Planetarium Theaters		Other Visitor Attractions		Architectural Treatments		Total
Primary Geographic Area:
North America	$	16,449	$	485	$	629	$	17,563
Europe		4,284		844		118		5,246
Asia		3,366		1,775		-		5,141
Other		703		-		-		703
	$	24,802	$	3,104	$	747	$	28,653
Products:
Audio-Visual Systems	$	16,713	$	772	$	-	$	17,485
Domes		4,725		2,332		747		7,804
Show Content		1,552		-		-		1,552
Maintenance and Service		1,812		-		-		1,812
	$	24,802	$	3,104	$	747	$	28,653
Timing of revenue recognition:
Goods transferred at point in time	$	2,031	$	-	$	-	$	2,031
Goods and services transferred over time		22,771		3,104		747		26,622
	$	24,802	$	3,104	$	747	$	28,653

Contract Balances

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers as of September 27, 2019 and December 31, 2018:

	September 27,    2019	December 31, 2018
Receivables reported as accounts receivable, net	$ 3,319	$ 3,250
Contract revenue in excess of billings	3,563	3,484
Billings in excess of contract revenue	4,198	5,959

Significant changes in the contract assets and the contract liabilities balances during the period are as follows:

	Contract Assets	Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period		$ (4,286)
Increases due to amounts billed to customers, excluding amounts recognized as revenue during the period		$ 2,525
Transferred to receivables from contract assets recognized at the beginning of the period	$ (2,679)
Increases as a result of revenue recognized, excluding amounts transferred to receivables during the period	$ 2,758

Contract assets arise when revenue recognized on a contract exceeds the cumulative progress billings. Contracts generally provide for an enforceable right to payment for performance completed to date but do not necessarily have a present right to consideration payment for performance completed until the event that triggers the progress billing. The contract assets are transferred to the receivables when the rights to payment occur and amounts are billed. Contract liabilities arise when progress billings on a contract exceed the revenue recognized. Contract liabilities are relieved as the performance obligation is completed and revenue is recognized. Progress billings vary among contracts and can be triggered by chronological milestones, performance events or other various measurements of performance.

Backlog of Remaining Customer Performance Obligations

The following table includes estimated revenue expected to be recognized and recorded as sales in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

	Remainder of 2019	2020	2021	2022	2023
Sales	$ 5,785	$ 8,453	$ 1,711	$ 945	$ 381

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Text Block [Abstract]
Sales	$ 5,702	$ 12,200	$ 20,873	$ 28,653
Cost of sales	(4,053)	(7,528)	(13,631)	(18,224)
Gross profit	1,649	4,672	7,242	10,429
Operating expenses:
Selling, general and administrative	(1,615)	(1,640)	(5,632)	(5,125)
Research and development	(723)	(628)	(2,459)	(2,148)
Pension	(57)	(55)	(170)	(163)
Total operating expenses	(2,395)	(2,323)	(8,261)	(7,436)
Operating income (loss)	(746)	2,349	(1,019)	2,993
Other expense, net	(56)	(68)	(204)	(243)
Income (loss) before income tax provision	(802)	2,281	(1,223)	2,750
Income tax provision	0	(30)	(19)	(61)
Net income (loss)	$ (802)	$ 2,251	$ (1,242)	$ 2,689
Net income (loss) per common share -basic	$ (0.07)	$ 0.20	$ (0.11)	$ 0.24
Net income (loss) per common share - diluted	$ (0.07)	$ 0.19	$ (0.11)	$ 0.22
Weighted average common shares outstanding - basic	11,483	11,353	11,457	11,353
Weighted average common shares outstanding - diluted	11,483	12,012	11,457	12,002

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3. Operating Lease (Tables)

9 Months Ended

Sep. 27, 2019

Notes to Financial Statements

Components of lease expense

Balance sheet information related to Previous Facility Lease and New Facility Lease are as follows:

	September 27,		December 31,
	2019		2018
Operating lease right-of-use asset	$	2,592	$	187
Operating lease liability, current portion		300		188
Operating lease liability, net of current portion		2,268		-

Schedule of lease expense

The components of lease expense are as follows:

	September 27,		September 28,
	2019		2018
Amortization of right-of-use asset recorded as rent expense	$	329	$	405
Interest on lease liability included in other expense		49		26
Total lease cost	$	378	$	431

Schedule of Future Minimum Payments for Operating Leases

Maturities of the lease liability are as follows:

Future Minimum Lease Payments
2019	$	106
2020		431
2021		444
2022		457
2023		471
2024		485
Thereafter		666
Total future minimum lease payments		3,060
Less: amount representing interest		(492)
Present value of future payments		2,568
Current portion		300
Long-term portion	$	2,268

Other information related to the lease

For the nine months ended:

	September 27,		September 28,
	2019		2018
Operating cashflows
Cash paid related to operating lease obligation	$	354	$	424
Remaining lease term (in years)
Operating lease		6.6		0.6

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6. Employee Retirement Benefit Plans

9 Months Ended

Sep. 27, 2019

Disclosure Text Block [Abstract]

6. Employee Retirement Benefit Plans

6.       EMPLOYEE RETIREMENT BENEFIT PLANS

Pension and Retirement Obligations

In 2015, the Company terminated a defined pension plan and settled the resulting liabilities in exchange for a fixed obligation secured by the Company’s assets (the “Pension Settlement Obligation”). The remaining payments due under the Pension Settlement Obligation consist of eight installments of $750 to the Pension Benefit Guaranty Corporation due annually on October 31. The Pension Settlement Obligation is recorded net of imputed interest expense at 7%, as a liability on the balance sheet.

The Company’s only remaining pension obligation is the Supplemental Executive Retirement Plan (“SERP”).

Employer Contributions

The Company is not currently required to fund the SERP. All benefit payments are made by the Company directly to those who receive benefits from the SERP. As such, these payments are treated as both contributions and benefits paid for reporting purposes. The Company expects to contribute and pay SERP benefits of approximately $668 in the next 12 months.

Components of Net Periodic Benefit Expense

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the nine months ended:	2019		2018
Interest cost	$	110	$	103
Amortization of actuarial loss		60		60
Net periodic benefit expense	$	170	$	163

	Supplemental Executive
	Retirement Plan
	September 27,		September 28,
For the three months ended:	2019		2018
Interest cost	$	37	$	35
Amortization of actuarial loss		20		20
Net periodic benefit expense	$	57	$	55

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5. Stock Option Plan: Schedule of Stock Option Plan Activity (Details) shares in Thousands	9 Months Ended
	Sep. 27, 2019 $ / shares shares
Text Block [Abstract]
Outstanding at beginning of the period | shares	1,597
Outstanding at beginning of year, weighted average exercise price | $ / shares	$ 0.65
Granted | shares	165
Granted, weighted average exercise price | $ / shares	$ 0.80
Exercised | shares	(130)
Exercised, weighted average exercise price | $ / shares	$ 0.17
Forfeited or expired | shares	(40)
Forfeited or expired, weighted average exercise price | $ / shares	$ 0.66
Outstanding at beginning of the period | shares	1,592
Outstanding at beginning of the period, weighted average exercise price | $ / shares	$ 0.71
Exercisable as of end of the period | shares	1,523
Exercisable as of end of the period, weighted average exercise price | $ / shares	$ 0.61

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3. Operating Lease: Other information related to lease (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018
Operating cashflows
Cash paid related to operating lease obligation	$ 354	$ 424
Remaining lease term (in years) Operating lease	6 years 7 months 6 days	7 months 6 days

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3. Operating Lease (Details) - USD ($) $ in Thousands	1 Months Ended	4 Months Ended	5 Months Ended	9 Months Ended
	Apr. 15, 2019	Apr. 30, 2019	Sep. 27, 2019	Sep. 27, 2019	Sep. 28, 2018	May 02, 2019	Dec. 31, 2018
Notes to Financial Statements
Lease expiration date				Oct. 31, 2019
Lease Term	7 years
Renewal lease term	5 years
Monthly base rent	$ 35
Escalation percent	3.00%
Estimated borrowing rate			5.25%	5.25%	7.50%
Rent expense		$ 183	$ 195		$ 431
Operating lease liability			2,568	$ 2,568		$ 2,698
ROU asset			2,592	2,592		$ 2,742	$ 187
Indirect cost			$ 44	$ 44

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2. Revenue: Schedule of geographical revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Application total
Product Application	$ 5,702	$ 12,200	$ 20,873	$ 28,653
Transferred at Point in Time
Product Application	749	472	2,151	2,031
Transferred over Time
Product Application	4,953	11,728	18,722	26,622
Audio-Visual Systems
Product Application	2,878	9,078	12,782	17,485
Domes
Product Application	1,722	2,226	4,518	7,804
Show Content
Product Application	448	382	1,649	1,552
Maintenance and Service
Product Application	654	514	1,924	1,812
Planetarium Theaters | Application total
Product Application	5,209	11,456	18,531	24,802
Planetarium Theaters | Transferred at Point in Time
Product Application	749	472	2,078	2,031
Planetarium Theaters | Transferred over Time
Product Application	4,460	10,984	16,453	22,771
Planetarium Theaters | Audio-Visual Systems
Product Application	2,854	8,718	11,978	16,713
Planetarium Theaters | Domes
Product Application	1,256	1,842	3,056	4,725
Planetarium Theaters | Show Content
Product Application	448	382	1,576	1,552
Planetarium Theaters | Maintenance and Service
Product Application	651	514	1,921	1,812
Other Visitor Attractions | Application total
Product Application	493	626	2,217	3,104
Other Visitor Attractions | Transferred at Point in Time
Product Application	0	0	73	0
Other Visitor Attractions | Transferred over Time
Product Application	493	626	2,144	3,104
Other Visitor Attractions | Audio-Visual Systems
Product Application	24	360	804	772
Other Visitor Attractions | Domes
Product Application	466	266	1,337	2,332
Other Visitor Attractions | Show Content
Product Application	0	0	73	0
Other Visitor Attractions | Maintenance and Service
Product Application	3	0	3	0
Architectural Treatments | Application total
Product Application	0	118	125	747
Architectural Treatments | Transferred at Point in Time
Product Application	0	0	0	0
Architectural Treatments | Transferred over Time
Product Application	0	118	125	747
Architectural Treatments | Audio-Visual Systems
Product Application	0	0	0	0
Architectural Treatments | Domes
Product Application	0	118	125	747
Architectural Treatments | Show Content
Product Application	0	0	0	0
Architectural Treatments | Maintenance and Service
Product Application	0	0	0	0
North America
Product Application	2,880	7,557	11,062	17,563
North America | Planetarium Theaters
Product Application	2,529	7,545	10,118	16,449
North America | Other Visitor Attractions
Product Application	351	12	819	485
North America | Architectural Treatments
Product Application	0	0	125	629
Europe
Product Application	771	3,403	5,154	5,246
Europe | Planetarium Theaters
Product Application	747	2,853	3,912	4,284
Europe | Other Visitor Attractions
Product Application	24	432	1,242	844
Europe | Architectural Treatments
Product Application	0	118	0	118
Asia
Product Application	1,213	869	2,463	5,141
Asia | Planetarium Theaters
Product Application	1,095	687	2,307	3,366
Asia | Other Visitor Attractions
Product Application	118	182	156	1,775
Asia | Architectural Treatments
Product Application	0	0	0	0
Other
Product Application	838	371	2,194	703
Other | Planetarium Theaters
Product Application	838	371	2,194	703
Other | Other Visitor Attractions
Product Application	0	0	0	0
Other | Architectural Treatments
Product Application	$ 0	$ 0	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018
Cash flows from operating activities:
Net income (loss)	$ (1,242)	$ 2,689
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	198	200
Bad debt expense	457	0
Provision for excess and obsolete inventory	0	219
Noncash lease expense	337	396
Other	30	136
Changes in operating assets (increases in parenthesis) and liabilities (decreases in parenthesis):
Accounts receivable	(484)	(2,450)
Lease receivable	195	184
Inventories	457	315
Operating lease right-of-use asset	(44)	0
Contract revenue in excess of billings	(79)	(558)
Prepaid expenses and other assets	434	(116)
Accounts payable	(478)	418
Accrued liabilities	369	648
Accrued pension and retirement liabilities	(124)	(179)
Billings in excess of contract revenue	(1,761)	850
Operating lease liability	(318)	(393)
Net cash provided by (used in) operating activities	(2,053)	2,359
Cash flows from investing activities:
Purchases of property and equipment	(100)	(80)
Proceeds from sale of property and equipment	0	28
Net cash used in investing activities	(100)	(52)
Cash flows from financing activities:
Proceeds for shares issued on exercise of options	21	0
Principal payments on long-term debt	(177)	(167)
Net cash used in financing activities	(156)	(167)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(2,309)	2,140
Cash, cash equivalents, and restricted cash as of beginning of the period	8,585	5,588
Cash, cash equivalents, and restricted cash as of end of the period	6,276	7,728
Supplemental disclosures of non-cash investing and financing activities
New operating lease	2,698	0
Supplemental disclosures of cash flow information
Cash paid during the period for: Interest	65	74
Cash paid during the period for: Income taxes	$ 46	$ 103

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 6,024	$ 8,365
Restricted cash	252	220
Accounts receivable, net	3,319	3,250
Current portion of lease receivable	274	262
Contract revenue in excess of billings	3,563	3,484
Inventories, net	2,615	3,072
Prepaid expenses and deposits	461	655
Total current assets	16,508	19,308
Long-term lease receivable, net of current portion	367	574
Operating lease right-of-use asset	2,592	187
Property and equipment, net	4,297	4,395
Goodwill	635	635
Other assets	2,009	2,249
Total assets	26,408	27,348
Current liabilities:
Accounts payable	1,049	1,527
Accrued liabilities	1,428	1,059
Billings in excess of contract revenue	4,198	5,959
Current portion of operating lease liability	300	188
Current portion of retirement obligations	668	621
Current portion of pension settlement obligation	438	438
Current portion of long-term debt	247	237
Total current liabilities	8,328	10,029
Operating lease liability, net of current portion	2,268	0
Retirement obligations, net of current portion	3,430	3,601
Pension settlement obligation, net of current portion	4,042	4,042
Long-term debt, net of current portion	1,116	1,303
Total liabilities	19,184	18,975
Stockholders' equity:
Preferred stock, no par value: 10,000,000 shares authorized; no shares outstanding	0	0
Common stock, $0.20 par value: 30,000,000 shares authorized; 11,746,866 shares issued	2,349	2,323
Additional paid-in-capital	54,034	53,967
Common stock in treasury, at cost, 264,350 shares	(3,532)	(3,532)
Accumulated deficit	(43,651)	(42,409)
Accumulated other comprehensive loss	(1,976)	(1,976)
Total stockholders' equity	7,224	8,373
Total liabilities and stockholders' equity	$ 26,408	$ 27,348

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3. Operating Lease: Components of lease expense (Details) - USD ($) $ in Thousands	Sep. 27, 2019	May 02, 2019	Dec. 31, 2018
Notes to Financial Statements
Operating lease right-of-use asset	$ 2,592	$ 2,742	$ 187
Operating lease liability, current portion	300		188
Operating lease liability, net of current portion	$ 2,268		$ 0

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2. Revenue: Schedule of contract balances (Details) - USD ($) $ in Thousands	Sep. 27, 2019	Dec. 31, 2018
Text Block [Abstract]
Accounts receivable, net	$ 3,319	$ 3,250
Contract revenue in excess of billings	3,563	3,484
Other Liabilities, Current	$ 4,198	$ 5,959

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4. Changes in Accounting Principal (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 28, 2018	Dec. 31, 2018	Sep. 27, 2019	Jan. 02, 2018
Notes to Financial Statements
Stockholders' equity		$ 8,373	$ 7,224	$ 808
Increase rent expense	$ 330
Increase stockholders' equity		$ 369

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1. General

9 Months Ended

Sep. 27, 2019

Disclosure Text Block [Abstract]

1. General

1.       GENERAL

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”). This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018.

The accompanying unaudited condensed consolidated balance sheets, statements of operations, 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 nine months ended September 27, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019. The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). In accordance with Topic 606, the Company recognizes revenue at a point of time or over the time of performance depending on the nature of the obligation.

Stock-Based Compensation

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

Net Income (Loss) Per Common Share

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.

Inventories, net

Inventories consisted of the following:

	September 27,		December 31,
	2019		2018
Raw materials	$	5,387	$	5,979
Work in process		115		116
Finished goods		459		323
Reserve for obsolete inventory		(3,346)		(3,346)
Inventories, net	$	2,615	$	3,072

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) ("Topic 842"). Topic 842 changes the accounting for leases. In particular, lessees will recognize lease assets and lease liabilities for operating leases. Effective January 1, 2019, the Company implemented Topic 842 as described in Note 3.

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Sep. 27, 2019	Dec. 31, 2018
Text Block [Abstract]
Preferred Stock, No Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.20	$ 0.20
Common Stock, Shares Authorized	30,000,000	30,000,000
Common Stock, Shares, Issued	11,746,866	11,746,866
Treasury Stock, Shares	264,350	264,350

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5. Stock Option Plan (Tables)

9 Months Ended

Sep. 27, 2019

Table Text Block Supplement [Abstract]

Schedule of Stock Option Plan Activity

A summary of activity in the stock option plan for the nine months ended September 27, 2019 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding as of beginning of the period	1,597	$	0.65
Granted	165		0.80
Exercised	(130)		0.17
Forfeited or expired	(40)		0.66
Outstanding as of end of the period	1,592		0.71
Exercisable as of end of the period	1,523	$	0.61

Schedule of Stock Options Valuation Assumptions

The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2019, were based on estimates as of the date of grant as follows:

Risk-free interest rate	2.64 %
Dividend yield	0.00 %
Volatility	81.15 %
Expected life	3.5 years

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1. General (Policies)

9 Months Ended

Sep. 27, 2019

Policy Text Block [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” or “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”). This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018.

The accompanying unaudited condensed consolidated balance sheets, statements of operations, 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 nine months ended September 27, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019. The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the thirteenth week in the quarter.

Revenue Recognition

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). In accordance with Topic 606, the Company recognizes revenue at a point of time or over the time of performance depending on the nature of the obligation.

Stock-Based Compensation

Stock-Based Compensation

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

Net Income Per Common Share

Net Income (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.

Inventories, net

Inventories, net

Inventories consisted of the following:

	September 27,		December 31,
	2019		2018
Raw materials	$	5,387	$	5,979
Work in process		115		116
Finished goods		459		323
Reserve for obsolete inventory		(3,346)		(3,346)
Inventories, net	$	2,615	$	3,072

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) ("Topic 842"). Topic 842 changes the accounting for leases. In particular, lessees will recognize lease assets and lease liabilities for operating leases. Effective January 1, 2019, the Company implemented Topic 842 as described in Note 3.

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5. Stock Option Plan (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018
Options exercisable, weighted average remaining contractual term	5 years 2 months 12 days
Options outstanding, weighted average remaining contractual term	6 years
Options outstanding, Aggregate Intrinsic Value	$ 234
Options, Exercisable, Aggregate Intrinsic Value	69
Total unrecognized share-based compensation cost	$ 76
Total unrecognized share-based compensation, compensation cost not yet recognized, weighted-average period	2 years
Allocated Share-based Compensation Expense	$ 72	$ 112
Stock Option Plan
Number of Shares Authorized	876,581

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6. Employee Retirement Benefit Plans: Schedule of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2019	Sep. 28, 2018	Sep. 27, 2019	Sep. 28, 2018
Text Block [Abstract]
Interest cost	$ 37	$ 35	$ 110	$ 103
Amortization of actuarial loss	20	20	60	60
Net periodic benefit cost	$ 57	$ 55	$ 170	$ 163