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"Company,"  "E&S,” “we,” “us”" "we," "us" and “our”"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”"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”"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’sCompany'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

We continue to expect variable but reasonably consistent future sales and gross profits from our current product line at annual levels sufficient to cover or exceed operating expenses.expenses and meet our obligations including the Pension Settlement Obligation. The net income for the first three months of 2016 brings us closer to the elimination of our stockholders' deficit and our goal of building shareholder value. With the settlement of the Pension Plan liabilities, we expect anour improved financial position that mayto present opportunities for better results through the availability of credit and stronger qualification for customer projects.

Critical Accounting Policies

Certain accounting policies are considered by management to be critical to an understanding of our condensed consolidated financial statements.  Their application requires significant management judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain.  A summary of critical accounting policies can be found in our Form 10-K for the year ended December 31, 2014.2015.  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:

Sales for the first three monthsquarter of 20152016 were 20% higherslightly lower than the same period in 2014.2015. The higher 2015lower 2016 sales were attributable to progresstiming of deliveries and deliverieswork completed on larger customer contracts as compared to the same period of 2014.contracts.

Revenue backlog continueddeclined to improve totaling $34,324$22,293 as of April 3, 2015,1, 2016, compared to $28,173$26,298 as of December 31, 2014.  We expect sales2015.  The decline in the revenue backlog is attributed to a low volume of new orders booked in the first three months of 2016. Sales prospects support the outlook for a higher volume of new orders through the remainder of 2015 to result in total annual sales in excess of 2014 based on delivery schedules from the improved revenue backlog and strong sales prospects.2016.

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

Operating Expenses

The following table summarizes our operating expenses:

Line of Credit

The Company is a party to a line of creditline-of-credit agreement with a commercial bank which until October 3, 2014, permittedpermits borrowings of up to $1,100 to fund Spitzthe working capital requirements.requirements of Spitz. Under the line of credit agreement, interest is charged on amounts borrowed at the Wall Street Journal Prime Rate.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 creditline-of-credit agreement and mortgage notes (with the same commercial bank) contain cross default provisions whereby thea default ofon either agreement will result in the default of both agreements. On October 3, 2014, the commercial bank notified the Company that it is no longer obligated to make advances under the line of credit agreement and elected to suspend future advances because of events ofa default on loan covenants resulting from the liens placed on the Company’s assets by the Pension Plan. The Company believes that with the settlement of the pension liabilities, it will be able to comply with covenants as required by the commercial bank and that, later in 2015, the bank will permit new borrowings for potential working capital requirements.both agreements. There were no borrowings outstanding under the line of creditline-of-credit agreement during 2015 and 2014 and, as of April 3, 2015, there was no amount outstanding under the line of credit agreement.1, 2016.

Letters of Credit