Utah
|
87-0278175
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification No.)
|
770 Komas Drive, Salt Lake City, Utah
|
84108
|
(Address of principal executive offices)
|
(Zip Code)
|
Name
|
Age
|
Position
|
|
Jonathan A. Shaw
|
60
|
Chief Executive Officer and Director
|
|
Paul L. Dailey
|
60
|
Chief Financial Officer and Corporate Secretary
|
|
Kirk D. Johnson
|
55
|
Chief Operating Officer and President
|
2016
|
2015
|
|||||||||||||||
High | Low |
High
|
Low
|
|||||||||||||
First Quarter
|
$ | 1.06 | $ | 0.75 | $ | 0.55 | $ | 0.30 | ||||||||
Second Quarter
|
1.15 | 0.70 | 0.95 | 0.42 | ||||||||||||
Third Quarter
|
1.35 | 0.51 | 1.14 | 0.49 | ||||||||||||
Fourth
|
1.48
|
0.90
|
1.21
|
0.72
|
2016
|
2015
|
|||||||
Sales
|
$ | 32,944 | $ | 35,298 |
2016
|
2015
|
|||||||
Gross profit
|
$ | 12,073 | $ | 12,342 | ||||
Gross profit percentage
|
37% | 35% |
2016
|
2015
|
|||||||
Selling, general and administrative
|
$ | 7,115 | $ | 6,633 | ||||
Research and development
|
2,344 | 2,262 | ||||||
Pension | 262 | 522 | ||||||
Pension settlement
|
- | 3,620 | ||||||
Total operating expenses
|
$ | 9,721 | $ | 13,037 |
2016
|
2015
|
|||||||
Interest expense
|
$ | (510) | $ | (429) | ||||
Other expense, net
|
(6) | (163) |
2016
|
2015
|
|||||||
Income tax benefit (provision)
|
$ | (93) | $ | 12 |
2016
|
2015
|
|||||||
Decrease (increase) to minimum pension liability
|
$ | 258 | $ | (555) | ||||
Pension settlement
|
- | 31,776 | ||||||
Other comprehensive income
|
$ | 258 | $ | 31,221 | ||||
Net cash and cash equivalents provided by (used in):
|
2016
|
2015
|
||||||
Operating activities
|
$ | 3,747 | $ | (2,943) | ||||
Investing activities
|
(174) | (173) | ||||||
Financing activities
|
(484) | (188) | ||||||
Increase (decrease) in cash and cash equivalents
|
$ | 3,089 | $ | (3,304) |
·
|
Our belief that our range of products and services at various price and performance levels, our research and development investments and capabilities, and our ability to design and manufacture products will enable us to compete effectively.
|
·
|
Our belief that our facilities and operations are within standards fully acceptable to the Environmental Protection Agency and that all facilities and procedures are operated in accordance with environmental rules and regulations, and international, federal, state and local laws.
|
·
|
Our belief that our existing sources of liquidity, including marketable securities, will provide sufficient liquidity to meet our obligations through 2017 and beyond.
|
·
|
Our belief that our ability to include the wide range of complementary products offered by E&S and Spitz in the systems we sell, along with access to the legacy customer base of E&S and Spitz, provides a unique competitive advantage.
|
·
|
Our expectations for variable future sales and gross profits from our current product line at annual levels sufficient to cover or exceed operating expenses.
|
|
Our belief that an improved financial position as a result of relief from the burden of the Pension Plan may present opportunities for better results through the availability of credit and stronger qualification for customer projects.
|
·
|
Our belief that
any potential shortfalls in our forecasted revenues would be within a range whereby we could reduce variable costs in order to meet our 2017 obligations.
|
·
|
Our belief that the business has the potential for long-term profitability without the burden of the Pension Plan.
|
·
|
Our belief that capital expenditures during 2017 will be similar to the capital expenditures incurred during 2016.
|
·
|
Our belief that the effects of inflation will not be material for 2017.
|
·
|
Our belief that approximately 75% of our backlog will be converted to sales in 2017.
|
·
|
Our belief that our 2016 orders will continue at a level sufficient to recognize sales in 2017 comparable to 2016.
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
6,823
|
$
|
3,734
|
||||
Restricted cash
|
603
|
601
|
||||||
Accounts receivable, net
|
3,271
|
4,825
|
||||||
Current portion of lease receivable
|
252
|
-
|
||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
3,038
|
2,695
|
||||||
Inventories, net
|
3,751
|
4,072
|
||||||
Prepaid expenses and deposits
|
902
|
1,038
|
||||||
Total current assets
|
18,640
|
16,965
|
||||||
Long-term lease receivable, net of current portion
|
1,083
|
-
|
||||||
Property and equipment, net
|
4,638
|
4,735
|
||||||
Goodwill
|
635
|
635
|
||||||
Intangible assets, net
|
-
|
27
|
||||||
Other assets
|
1,222
|
1,082
|
||||||
Total assets
|
$
|
26,218
|
$
|
23,444
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
1,158
|
$
|
1,062
|
||||
Accrued liabilities
|
1,400
|
1,031
|
||||||
Billings in excess of costs and estimated earnings on uncompleted contracts
|
6,500
|
3,995
|
||||||
Customer deposits
|
2,238
|
3,232
|
||||||
Current portion of retirement obligations
|
507
|
480
|
||||||
Current portion of pension settlement obligation
|
382
|
356
|
||||||
Current portion of long-term debt
|
211
|
199
|
||||||
Total current liabilities
|
12,396
|
10,355
|
||||||
Pension and retirement obligations, net of current portion
|
4,344
|
4,839
|
||||||
Pension settlement obligation, net of current portion
|
4,886
|
5,268
|
||||||
Long-term debt, net of current portion
|
1,764
|
1,975
|
||||||
Deferred rent obligation
|
1,231
|
1,653
|
||||||
Total liabilities
|
24,621
|
24,090
|
||||||
Commitments and contingencies (Notes 5, 6, 7 and 9)
|
||||||||
Stockholders' equity (deficit):
|
||||||||
Preferred stock, no par value: 10,000,000 shares authorized; no shares outstanding
|
-
|
-
|
||||||
Common stock, $0.20 par value: 30,000,000 shares authorized; 11,616,866 and 11,441,666 shares issued, respectively
|
2,323
|
2,288
|
||||||
Additional paid-in-capital
|
53,641
|
53,434
|
||||||
Common stock in treasury, at cost, 264,350 shares
|
(3,532
|
)
|
(3,532
|
)
|
||||
Accumulated deficit
|
(48,689
|
)
|
(50,432
|
)
|
||||
Accumulated other comprehensive loss
|
(2,146
|
)
|
(2,404
|
)
|
||||
Total stockholders' equity (deficit)
|
1,597
|
(646
|
)
|
|||||
Total liabilities and stockholders' equity (deficit)
|
$
|
26,218
|
$
|
23,444
|
||||
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Sales
|
$
|
32,944
|
$
|
35,298
|
||||
Cost of sales
|
(20,871
|
)
|
(22,956
|
)
|
||||
Gross profit
|
12,073
|
12,342
|
||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
(7,115
|
)
|
(6,633
|
)
|
||||
Research and development
|
(2,344
|
)
|
(2,262
|
)
|
||||
Pension
|
(262
|
)
|
(522
|
)
|
||||
Pension settlement
|
-
|
(3,620
|
)
|
|||||
Total operating expenses
|
(9,721
|
)
|
(13,037
|
)
|
||||
Operating income (loss)
|
2,352
|
(695
|
)
|
|||||
Interest expense
|
(510
|
)
|
(429
|
)
|
||||
Other expense, net
|
(6
|
)
|
(163
|
)
|
||||
Income (loss) before income tax benefit (provision)
|
1,836
|
(1,287
|
)
|
|||||
Income tax benefit (provision)
|
(93
|
)
|
12
|
|||||
Net income (loss)
|
$
|
1,743
|
$
|
(1,275
|
)
|
|||
Net income (loss) per common share – basic
|
$
|
0.16
|
$
|
(0.11
|
)
|
|||
Net income (loss) per common share – diluted
|
$
|
0.15
|
$
|
(0.11
|
)
|
|||
Weighted average common shares outstanding – basic
|
11,214
|
11,150
|
||||||
Weighted average common shares outstanding – diluted
|
11,836
|
11,150
|
||||||
Comprehensive income, net of tax:
|
||||||||
Net income (loss)
|
$
|
1,743
|
$
|
(1,275
|
)
|
|||
Pension settlement
|
-
|
31,776
|
||||||
Decrease (increase) in minimum pension liability
|
258
|
(555
|
)
|
|||||
Other comprehensive income
|
258
|
31,221
|
||||||
Total comprehensive income
|
$
|
2,001
|
$
|
29,946
|
||||
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Common Stock
|
Paid-in
|
Treasury
|
Accumulated
|
Comprehensive
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stock
|
Deficit
|
Loss
|
Total
|
||||||||||||||||||||||
Balance, December 31, 2014
|
11,442
|
$
|
2,288
|
$
|
54,500
|
$
|
(4,709
|
)
|
$
|
(49,157
|
)
|
$
|
(33,625
|
)
|
$
|
(30,703
|
)
|
|||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(1,275
|
)
|
-
|
(1,275
|
)
|
|||||||||||||||||||
Issuance of 88,117 shares from treasury for pension settlement
|
-
|
-
|
(1,107
|
)
|
1,177
|
-
|
-
|
70
|
||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
31,221
|
31,221
|
|||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
41
|
-
|
-
|
-
|
41
|
|||||||||||||||||||||
Balance, December 31, 2015
|
11,442
|
$
|
2,288
|
$
|
53,434
|
$
|
(3,532
|
)
|
$
|
(50,432
|
)
|
$
|
(2,404
|
)
|
$
|
(646
|
)
|
|||||||||||
Net income
|
-
|
-
|
-
|
-
|
1,743
|
-
|
1,743
|
|||||||||||||||||||||
Issuance of shares on exercise of options
|
175
|
35
|
36
|
-
|
-
|
-
|
71
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
258
|
258
|
|||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
171
|
-
|
-
|
-
|
171
|
|||||||||||||||||||||
Balance, December 31, 2016
|
11,617
|
$
|
2,323
|
$
|
53,641
|
$
|
(3,532
|
)
|
$
|
(48,689
|
)
|
$
|
(2,146
|
)
|
$
|
1,597
|
||||||||||||
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
1,743
|
$
|
(1,275
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
294
|
291
|
||||||
Amortization of deferred pension costs
|
258
|
106
|
||||||
Pension settlement charge
|
-
|
3,620
|
||||||
Provision for excess and obsolete inventory
|
344
|
155
|
||||||
Other
|
196
|
166
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Decrease (increase) in restricted cash
|
(2
|
)
|
110
|
|||||
Decrease (increase) in accounts receivable
|
1,533
|
(373
|
)
|
|||||
Increase in lease receivable
|
(1,335
|
)
|
-
|
|||||
Increase in inventories
|
(23
|
)
|
(64
|
)
|
||||
Decrease (increase) in costs and estimated earnings in excess of billings on uncompleted contracts, net
|
2,162
|
(2,177
|
)
|
|||||
Increase in prepaid expenses and other assets
|
(4
|
)
|
(367
|
)
|
||||
Increase in accounts payable
|
96
|
352
|
||||||
Increase (decrease) in accrued liabilities
|
369
|
(111
|
)
|
|||||
Decrease in accrued pension and retirement liabilities
|
(468
|
)
|
(84
|
)
|
||||
Decrease in pension settlement obligation
|
-
|
(2,019
|
)
|
|||||
Decrease in customer deposits
|
(994
|
)
|
(849
|
)
|
||||
Decrease in deferred rent obligation
|
(422
|
)
|
(424
|
)
|
||||
Net cash provided by (used in) operating activities
|
3,747
|
(2,943
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(174
|
)
|
(182
|
)
|
||||
Proceeds from sale of property and equipment
|
-
|
9
|
||||||
Net cash used in investing activities
|
(174
|
)
|
(173
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from shares issued on exercise of options
|
71
|
-
|
||||||
Principal payments on long-term debt
|
(199
|
)
|
(188
|
)
|
||||
Principal payments on pension settlement obligation
|
(356
|
)
|
-
|
|||||
Net cash used in financing activities
|
(484
|
)
|
(188
|
)
|
||||
Net increase (decrease) in cash and cash equivalents
|
3,089
|
(3,304
|
)
|
|||||
Cash and cash equivalents as of beginning of the year
|
3,734
|
7,038
|
||||||
Cash and cash equivalents as of end of the year
|
$
|
6,823
|
$
|
3,734
|
||||
Supplemental disclosures of non-cash investing and financing activities
|
||||||||
Settlement of pension liability
|
$
|
-
|
$
|
35,870
|
||||
Increase in minimum pension and retirement obligations
|
-
|
661
|
||||||
Supplemental disclosures of cash flow information
|
||||||||
Cash paid during the year for:
|
||||||||
Interest
|
$
|
516
|
$
|
364
|
||||
Income taxes
|
11
|
12
|
2016
|
2015
|
|||||||
Beginning balance
|
$
|
286
|
$
|
217
|
||||
Write-off of accounts receivable
|
(47
|
)
|
(64
|
)
|
||||
Increase in estimated losses on accounts receivable
|
20
|
133
|
||||||
Ending balance
|
$
|
259
|
$
|
286
|
2016
|
2015
|
|||||||
Raw materials
|
$
|
5,427
|
$
|
5,958
|
||||
Work in process
|
1,120
|
1,265
|
||||||
Finished goods
|
326
|
220
|
||||||
Reserve for obsolete inventory
|
(3,122
|
)
|
(3,371
|
)
|
||||
Inventories, net
|
$
|
3,751
|
$
|
4,072
|
||||
Estimated
|
||||||||||||
Useful Lives
|
2016
|
2015
|
||||||||||
Land
|
n/a
|
$
|
2,250
|
$
|
2,250
|
|||||||
Buildings and improvements
|
5 - 40 years
|
3,065
|
3,028
|
|||||||||
Manufacturing machinery and equipment
|
3 - 8 years
|
5,434
|
5,301
|
|||||||||
Office furniture and equipment
|
3 - 8 years
|
779
|
779
|
|||||||||
Total
|
11,528
|
11,358
|
||||||||||
Less accumulated depreciation and amortization
|
(6,890
|
)
|
(6,623
|
)
|
||||||||
Net property and equipment
|
$
|
4,638
|
$
|
4,735
|
2016
|
2015
|
|||||||
Beginning balance
|
$
|
127
|
$
|
125
|
||||
Additions to warranty reserve
|
227
|
149
|
||||||
Warranty costs
|
(231
|
)
|
(147
|
)
|
||||
Ending balance
|
$
|
123
|
$
|
127
|
2016
|
2015
|
|||||||
Percentage of completion
|
$
|
18,248
|
$
|
19,827
|
||||
Completed contract
|
12,845
|
13,653
|
||||||
Other
|
1,851
|
1,818
|
||||||
Total sales
|
$
|
32,944
|
$
|
35,298
|
2016
|
2015
|
|||||||
Numerator
|
||||||||
Net Income (loss)
|
$
|
1,743
|
$
|
(1,275
|
)
|
|||
Denominator
|
||||||||
Weighted-average number of common shares outstanding - basic
|
11,214
|
11,150
|
||||||
Incremental shares assumed for stock options
|
622
|
-
|
||||||
Weighted-average number of common shares outstanding - dilutive
|
11,836
|
11,150
|
||||||
Basic net income (loss) per common share
|
$
|
0.16
|
$
|
(0.11
|
)
|
|||
Diluted net income (loss) per common share
|
$
|
0.15
|
$
|
(0.11
|
)
|
|||
2016
|
2015
|
|||||||
Total accumulated costs and estimated earnings on uncompleted contracts
|
$
|
31,634
|
$
|
33,445
|
||||
Less total billings on uncompleted contracts
|
(35,096
|
)
|
(34,745
|
)
|
||||
Ending balance
|
$
|
(3,462
|
)
|
$
|
(1,300
|
)
|
2016
|
2015
|
|||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
$
|
3,038
|
$
|
2,695
|
||||
Billings in excess of costs and estimated earnings on uncompleted contracts
|
(6,500
|
)
|
(3,995
|
)
|
||||
Ending balance
|
$
|
(3,462
|
)
|
$
|
(1,300
|
)
|
2016
|
||||
Lease receivable
|
$
|
252
|
||
Lease receivable long term
|
1,083
|
|||
Total
|
$
|
1,335
|
Years Ending
|
Rent
|
Gain on
|
Deferred
|
Net Rent
|
||||||||||||
December 31,
|
Expense
|
Building
|
Rent Credit
|
Expense
|
||||||||||||
2017
|
$
|
549
|
$
|
(124
|
)
|
$
|
(305
|
)
|
$
|
120
|
||||||
2018
|
565
|
(124
|
)
|
(305
|
)
|
136
|
||||||||||
2019
|
475
|
(108
|
)
|
(265
|
)
|
102
|
||||||||||
Total
|
$
|
1,589
|
$
|
(356
|
)
|
$
|
(875
|
)
|
$
|
358
|
||||||
Unfunded Pension Plan Liability
|
$
|
35,870
|
||
Market value of common shares issued from treasury
|
(70
|
)
|
||
Pension Settlement Obligation
|
(7,644
|
)
|
||
Total consideration to PBGC
|
(7,714
|
)
|
||
Total gain from settlement of Pension Plan Liabilities
|
$
|
28,156
|
||
Gain recorded as:
|
||||
Charge to statement of operations
|
$
|
(3,620
|
)
|
|
Other comprehensive Income
|
31,776
|
|||
Contribution to total comprehensive income
|
$
|
28,156
|
2016
|
2015
|
|||||||
Current portion of pension settlement obligation
|
$
|
382
|
$
|
356
|
||||
Pension settlement obligation, net of current portion
|
4,886
|
5,268
|
||||||
Total Pension Settlement Obligation
|
$
|
5,268
|
$
|
5,624
|
Pension Plan
|
SERP
|
|||||||||||||||
Changes in plan assets
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Fair value of plan assets - beginning of year
|
$
|
-
|
$
|
29,721
|
$
|
-
|
$
|
-
|
||||||||
Actual return on plan assets
|
-
|
1,547
|
-
|
-
|
||||||||||||
Contributions
|
-
|
-
|
475
|
497
|
||||||||||||
Benefits paid
|
-
|
(339
|
)
|
(475
|
)
|
(497
|
)
|
|||||||||
Transfer out upon termination
|
-
|
(30,929
|
)
|
-
|
-
|
|||||||||||
Fair value of plan assets - end of year
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Pension Plan
|
SERP
|
|||||||||||||||
Changes in benefit obligation
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Projected benefit obligation - beginning of year
|
$
|
-
|
$
|
64,831
|
$
|
5,320
|
$
|
4,871
|
||||||||
Interest cost
|
-
|
617
|
190
|
177
|
||||||||||||
Actuarial loss (gain)
|
-
|
1,690
|
(184
|
)
|
769
|
|||||||||||
Benefits paid
|
-
|
(339
|
)
|
(475
|
)
|
(497
|
)
|
|||||||||
Transfer of benefit obligation upon termination
|
-
|
(66,799
|
)
|
-
|
-
|
|||||||||||
Projected benefit obligation - end of year
|
$
|
-
|
$
|
-
|
$
|
4,851
|
$
|
5,320
|
Pension Plan
|
SERP
|
|||||||||||||||
Net amount recognized
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Unfunded status
|
$
|
-
|
$
|
-
|
$
|
(4,851
|
)
|
$
|
(5,320
|
)
|
||||||
Unrecognized net actuarial loss
|
-
|
-
|
2,146
|
2,415
|
||||||||||||
Unrecognized prior service cost
|
-
|
-
|
-
|
(11
|
)
|
|||||||||||
Net amount recognized
|
$
|
-
|
$
|
-
|
$
|
(2,705
|
)
|
$
|
(2,916
|
)
|
Pension Plan
|
SERP
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Accrued liability
|
$
|
-
|
$
|
-
|
$
|
(4,851
|
)
|
$
|
(5,320
|
)
|
||||||
Accumulated other comprehensive loss
|
-
|
-
|
2,146
|
2,404
|
||||||||||||
Net amount recognized
|
$
|
-
|
$
|
-
|
$
|
(2,705
|
)
|
$
|
(2,916
|
)
|
Pension Plan
|
SERP
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Interest cost
|
$
|
-
|
$
|
617
|
$
|
190
|
$
|
177
|
||||||||
Expected return on assets
|
-
|
(585
|
)
|
-
|
-
|
|||||||||||
Amortization of actuarial loss
|
-
|
195
|
82
|
68
|
||||||||||||
Amortization of prior year service cost
|
-
|
-
|
(10
|
)
|
(49
|
)
|
||||||||||
Net periodic benefit expense
|
-
|
227
|
262
|
196
|
||||||||||||
Insurance premium due PBGC
|
99
|
-
|
-
|
|||||||||||||
$
|
-
|
$
|
326
|
$
|
262
|
$
|
196
|
Years Ending December 31,
|
SERP
|
|||
2017
|
$
|
507
|
||
2018
|
510
|
|||
2019
|
423
|
|||
2020
|
417
|
|||
2021
|
411
|
|||
2022-2026
|
1,937
|
2016
|
2015
|
|||||||
First mortgage note payable due in monthly installments of $23 (interest at 5.75%) through January 1, 2024; payment and rate subject to adjustment every 3 years, next adjustment January 14, 2019
|
$
|
1,611
|
$
|
1,789
|
||||
Second mortgage note payable due in monthly installments of $4 (interest at 5.75%) through October 1, 2028; payment and rate subject to adjustment every 5 years, next adjustment October 1, 2018
|
364
|
385
|
||||||
Total debt
|
1,975
|
2,174
|
||||||
Current portion of long-term debt
|
(211
|
)
|
(199
|
)
|
||||
Long-term debt, net of current portion
|
$
|
1,764
|
$
|
1,975
|
Years Ending December 31,
|
||||
2017
|
$
|
211
|
||
2018
|
224
|
|||
2019
|
237
|
|||
2020
|
251
|
|||
2021
|
267
|
|||
Thereafter
|
785
|
|||
Total debt
|
$
|
1,975
|
2016
|
2015
|
|||||||
Income tax provision (benefit) at U.S. federal statutory rate
|
$
|
624
|
$
|
(440
|
)
|
|||
State tax provision (benefit), net of federal income tax
|
48
|
14
|
||||||
Change in valuation allowance attributable to operations
|
(936
|
)
|
(4,146
|
)
|
||||
Change in effective tax rate
|
-
|
4,064
|
||||||
Pension settlement
|
(213
|
)
|
466
|
|||||
Adjustments to federal tax carryforwards / deductions
|
548
|
-
|
||||||
Other, net
|
22
|
30
|
||||||
Income tax provision (benefit)
|
$
|
93
|
$
|
(12
|
)
|
2016
|
2015
|
|||||||
Property and equipment, principally due to differences in depreciation
|
$
|
(643
|
)
|
$
|
(722
|
)
|
||
Inventory reserves and other inventory-related temporary basis differences
|
614
|
696
|
||||||
Warranty, vacation, deferred rent and other liabilities
|
687
|
883
|
||||||
Retirement liabilities
|
1,032
|
1,088
|
||||||
Net operating loss carryforwards
|
62,484
|
62,194
|
||||||
Credit carryforwards
|
36
|
817
|
||||||
Other
|
1,037
|
1,227
|
||||||
Total deferred income tax
|
65,247
|
66,183
|
||||||
Less valuation allowance
|
(65,247
|
)
|
(66,183
|
)
|
||||
Net deferred income tax
|
$
|
-
|
$
|
-
|
2016
|
2015
|
|||||||
United States
|
$
|
1,836
|
$
|
(1,296
|
)
|
|||
International
|
-
|
-
|
||||||
Total
|
$
|
1,836
|
$
|
(1,296
|
)
|
2016
|
2015
|
|||||||
Current
|
||||||||
U.S. federal
|
$
|
10
|
$
|
-
|
||||
State
|
83
|
(12
|
)
|
|||||
Total current expense (benefit)
|
$
|
93
|
$
|
(12
|
)
|
|||
Deferred
|
||||||||
U.S. federal
|
$
|
937
|
$
|
4,068
|
||||
State
|
(1
|
)
|
78
|
|||||
Total
|
936
|
4,146
|
||||||
Valuation allowance increase
|
(936
|
)
|
(4,146
|
)
|
||||
Total deferred expense (benefit)
|
-
|
-
|
||||||
Total income tax expense (benefit)
|
$
|
93
|
$
|
(12
|
)
|
2016
|
2015
|
|||||||||||||||
Weighted-
|
Weighted-
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Number
|
Exercise
|
Number
|
Exercise
|
|||||||||||||
of Shares
|
Price
|
of Shares
|
Price
|
|||||||||||||
Outstanding as of beginning of the year
|
1,470
|
$
|
1.53
|
1,333
|
$
|
2.08
|
||||||||||
Granted
|
512
|
0.90
|
221
|
0.39
|
||||||||||||
Exercised
|
(175
|
)
|
0.40
|
-
|
-
|
|||||||||||
Forfeited or expired
|
(182
|
)
|
6.59
|
(84
|
)
|
7.23
|
||||||||||
Outstanding as of end of the year
|
1,625
|
0.88
|
1,470
|
1.53
|
||||||||||||
Exercisable as of end of the year
|
1,056
|
0.95
|
1,065
|
2.01
|
||||||||||||
2016
|
2015
|
|||||||
Expected life (in years)
|
3.5
|
3.5
|
||||||
Risk free interest rate
|
1.04
|
%
|
0.91
|
%
|
||||
Expected volatility
|
229
|
%
|
340
|
%
|
||||
Dividend yield
|
-
|
-
|
2016
|
2015
|
|||||||
United States
|
$
|
24,994
|
$
|
16,809
|
||||
International
|
7,950
|
18,489
|
||||||
Total sales
|
$
|
32,944
|
$
|
35,298
|
||||
Number of securities
|
||||||||||||
Number of securities
|
remaining available for
|
|||||||||||
to be issued upon
|
Weighted average
|
future issuance
|
||||||||||
exercise of
|
exercise price of
|
under equity compensation
|
||||||||||
outstanding options,
|
outstanding options,
|
plans (excluding securities
|
||||||||||
warrants and rights
|
warrants and rights
|
reflected in column (a))
|
||||||||||
(a)
|
(b)
|
(c)
|
||||||||||
|
||||||||||||
Equity compensation plans approved by security holders
|
1,624,500
|
$
|
0.88
|
973,981
|
||||||||
|
||||||||||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||||||
Total
|
1,624,500
|
$
|
0.88
|
973,981
|
(a)
|
List of documents filed as part of this report
|
·
|
Consolidated Balance Sheets as of December 31, 2016 and 2015
|
·
|
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016 and 2015
|
·
|
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2016 and 2015
|
·
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015
|
·
|
Notes to Consolidated Financial Statements
|
3.
|
Exhibits
|
3.1.1 |
Articles of Incorporation, as amended, filed as Exhibit 3.1 to Evans & Sutherland Computer Corporation's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 25, 1987, and incorporated herein by reference.
|
3.1.2 |
Amendments to Articles of Incorporation filed as Exhibit 3.1.1 to Evans & Sutherland Computer Corporation's Annual Report on Form 10-K, SEC File No. 000-08771, for the fiscal year ended December 30, 1988, and incorporated herein by reference.
|
3.1.3 |
Certificate of Designation, Preferences and Other Rights of the Class B-1 Preferred Stock of Evans & Sutherland Computer Corporation, filed as Exhibit 3.1 to Evans & Sutherland Computer Corporation's Form 10-Q, SEC File No. 000-08771, for the quarter ended September 25, 1998, and incorporated herein by reference.
|
3.2.1 |
Amended and Restated Bylaws of Evans & Sutherland Computer Corporation, filed as Exhibit 3.2 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
|
3.2.2 |
Amendment No. 1 to the Amended and Restated Bylaws of Evans & Sutherland Computer Corporation, filed as Exhibit 3.3 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
|
3.2.3 |
Amendment No. 2 to the Amended and Restated Bylaws of Evans & Sutherland Computer Corporation, filed as Exhibit 3.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on November 31, 2015, and incorporated herein by reference.
|
10.1 |
Evans & Sutherland Computer Corporation 2004 Stock Incentive Plan, filed as Annex A to Evans & Sutherland's Form 14A, SEC File No. 001-14667, filed on April 19, 2004 and incorporated herein by reference.
|
10.2 |
Amended and Restated Evans & Sutherland Computer Corporation's Supplemental Executive Retirement Plan (SERP), dated May 16, 2002, filed as Exhibit 10.38 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
|
10.3 |
Evans & Sutherland Computer Corporation 2014 Stock Incentive Plan, filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on May 16, 2014, and incorporated herein by reference.
|
10.4 |
Form of Incentive Stock Option Award Agreement under the Evans & Sutherland Computer Corporation 2014 Stock Incentive Plan, filed as Exhibit 10.2 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on May 16, 2014, and incorporated herein by reference.
|
10.5 |
Form of Non-Qualified Stock Option Award Agreement under the Evans & Sutherland Computer Corporation 2014 Stock Incentive Plan, filed as Exhibit 10.3 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on May 16, 2014, and incorporated herein by reference.
|
10.6 |
Form of Indemnification Agreement, filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on September 2, 2016, and incorporated herein by reference.
|
10.7 |
Separation and Release Agreement between Evans & Sutherland Computer Corporation and David H. Bateman, dated September 2, 2016, filed as Exhibit 10.2 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on September 2, 2016, and incorporated herein by reference.
|
10.7 |
Employment Agreement by and between Evans & Sutherland Computer Corporation and Jonathan Shaw, dated September 2, 2016, filed as Exhibit 10.3 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on September 2, 2016, and incorporated herein by reference.
|
10.8 |
Employment Agreement by and between Evans & Sutherland Computer Corporation and Kirk Johnson, dated September 2, 2016, filed as Exhibit 10.4 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on September 2, 2016, and incorporated herein by reference.
|
10.9 |
Employment Agreement, by and between Evans & Sutherland Computer Corporation and Paul Dailey, dated December 15, 2016, filed herein.
|
10.10 |
First Amendment to Employment Agreement, by and between Evans & Sutherland Computer Corporation and Jonathan Shaw, dated January 9, 2017 filed herein.
|
10.11 |
First Amendment to Employment Agreement, by and between Evans & Sutherland Computer Corporation and Kirk Johnson, dated January 9, 2017, filed herein.
|
10.12 |
Guaranty, dated April 28, 2006, by Evans and Sutherland Computer Corporation, filed as Exhibit 10.7 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.
|
10.13 |
Pledge Agreement, dated April 28, 2006, by and between Evans & Sutherland Computer Corporation, Spitz, Inc. and First Keystone Bank, filed as Exhibit 10.8 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.
|
10.14 |
Security Agreement, dated April 28, 2006, by and between Spitz, Inc. and First Keystone Bank, filed as Exhibit 10.9 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.
|
10.15 |
Open-end Mortgage and Security Agreement, dated April 28, 2006, by and between Spitz, Inc. and First Keystone Bank, filed as Exhibit 10.10 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.
|
10.16 |
Mortgage Note dated January 14, 2004, of Transnational Industries, Inc. and Spitz, Inc. to First Keystone Bank filed as Exhibit 10.25 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.
|
10.17 |
Open-End Mortgage and Security Agreement dated January 14, 2004, between Spitz, Inc. and First Keystone Bank filed as Exhibit 10.26 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.
|
10.18 |
Loan Agreement dated as January 14, 2004, between First Keystone Bank, Transnational Industries, Inc. and Spitz, Inc filed as Exhibit 10.27 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.
|
10.19 |
First Modification Agreement to Mortgage Loan Agreements, dated March 30 2007, by and between Evans & Sutherland Computer Corporation, Spitz, Inc. and First Keystone Bank, filed as Exhibit 10.28 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.
|
10.20 |
Guaranty, dated March 30, 2007 by Evans and Sutherland Computer Corporation, filed as Exhibit 10.30 to Evans & Sutherland Computer Corporation's Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.
|
10.21 |
First Amendment to Sublease Agreement dated November 4, 2014, by and between Evans & Sutherland Computer Corporation and Wasatch Research Park I, LLC, filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended September 26, 2014 and incorporated herein by reference.
|
10.22 |
Line of Credit Agreement between Spitz, Inc. and Bryn Mawr Trust Company dated March 15, 2012 filed as Exhibit 10.2 to Evans & Sutherland Computer Corporation's Form 10-Q for the quarter ended September 26, 2014 and incorporated herein by reference.
|
10.23 |
Settlement Agreement, dated April 21, 2015, between Pension Benefit Guaranty Corporation, Evans & Sutherland Computer Corporation and Spitz, Inc., filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on April 24, 2015, and incorporated herein by reference.
|
10.24 |
Agreement for Appointment of Trustee and Termination of Plan, dated April 21, 2015, between Pension Benefit Guaranty Corporation and Evans & Sutherland Computer Corporation, filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on April 24, 2015, and incorporated herein by reference.
|
10.25 |
Security Agreement, dated April 21, 2015, between Pension Benefit Guaranty Corporation, Evans & Sutherland Computer Corporation and Spitz, Inc., filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on April 24, 2015, and incorporated herein by reference.
|
10.26 |
Open-End Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated April 21, 2015, executed by Spitz, Inc. in favor of Pension Benefit Guaranty Corporation, filed as Exhibit 10.1 to Evans & Sutherland Computer Corporation's Form 8-K filed with the Commission on April 24, 2015, and incorporated herein by reference.
|
21.1 |
Subsidiaries of Registrant, filed herein.
|
23.1
|
Consent of Independent Registered Public Accounting Firm, filed herein.
|
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 herein.
|
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 herein.
|
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 herein.
|
Signature
|
Title
|
Date
|
/s/
JONATHAN SHAW
|
Chief Executive Officer
and Director (Principal Executive Officer) |
March 10, 2017
|
Jonathan Shaw
|
||
/s/
Paul L. Dailey
|
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
|
March 10, 2017
|
Paul L. Dailey
|
||
/s/
L. Tim Pierce
|
Director
|
March 10, 2017
|
L. Tim Pierce
|
||
/s/
William Schneider, Jr.
|
Director
|
March 10, 2017
|
William Schneider, Jr.
|
||
/s/
James P. McCarthy
|
Director
|
March 10, 2017
|
James P. McCarthy
|
||
/s/
E. Michael Campbell
|
Director
|
March 10, 2017
|
E. Michael Campbell
|
||
/s/
William E. Stringham
|
Director
|
March 10, 2017
|
William E. Stringham
|
1.
|
Position and Duties
.
|
(a)
|
You will be employed by the Company as its Executive Vice President and Chief Financial Officer. In such position, you will have the duties and authority consistent with the duties and authority of a chief financial officer of a public company in the information technology industry of a size comparable to E&S. The Company's Chief Executive Officer ("
CEO
"), in his sole discretion, may alter, modify, or change your duties, offices, positions, responsibilities and obligations set forth in this Agreement at any time, consistent with the status of a senior executive of the Company. You accept employment with the Company on the terms and conditions set forth in this Agreement, and you agree to devote your full business time, judgment, energy and skills exclusively to the advancement of the business interests of the Company and its affiliates and to discharge your duties and responsibilities for them. You shall report directly to the CEO. Your principal place of employment will be in Chadds Ford, Pennsylvania, except for required travel on Company business, including travel to the Company's headquarters in Salt Lake City, Utah, as necessary and appropriate. You will use best efforts to travel to the Company's headquarters in Salt Lake City, Utah, not less frequently that you have historically.
|
(b)
|
You will agree to serve, without additional compensation, if elected or appointed thereto, in one or more executive offices of the Company or any affiliate of the Company, or as a member of the board of directors of any affiliate of the Company;
provided, however
, that you are indemnified for serving in any and all such capacities on a basis no less favorable that is currently provided in the Company's bylaws, or otherwise.
|
2.
|
Term of Employment
. You will be employed by the Company commencing on December 15, 2016, until December 31, 2019, after which your employment term will automatically renew for additional terms of one (1) year each;
provided
that either you or the Company may give written notice of non-renewal, which notice period shall be a minimum of three (3) months before the end of the then-current term, and
further provided,
that either you or the Company may terminate your employment at any time, with or without cause, subject to the provisions of
Sections 4, 5
and
6
below.
|
3.
|
Compensation
. You will be compensated for your services to the Company as follows:
|
(a)
|
Base Salary
: Commencing on the Effective Date, your annual base salary ("
Base Salary
") shall be Two Hundred Eighty Thousand dollars ($280,000) payable bi-weekly in accordance with the Company's normal payroll practices. Base Salary shall be subject to periodic review and adjustment during the Term of this Agreement, but in no event shall Base Salary be reduced below Two Hundred Eighty Thousand dollars ($280,000).
|
(b)
|
Award of Options
: As of the Effective Date, you will be granted incentive stock options to purchase up to Sixty Thousand (60,000) in shares of the Company's common stock. Pursuant to the Company's 2014 Equity Incentive Plan (the "
Equity Plan
"), the options granted pursuant to this paragraph shall vest on each of the following dates: 20% on January 1, 2017; 20% on January 1, 2018; 20% on January 1, 2019; 20% on January 1, 2020; and 20% on January 1, 2021, all as more fully described in the Option Award Agreement dated as of the Effective Date between you and the Company. The above notwithstanding, in the event of a Change in Control all unvested equity grants, including options granted above, shall become immediately vested. The Option Award Agreement shall reflect the full vesting of options upon Change in Control.
|
(c)
|
Incentive Bonus
: As determined annually by the Compensation Committee, you will be eligible to receive an annual bonus under the E&S Management Incentive Plan (the "
MIP
"). Your bonus under the MIP will be based upon the Company's and your achievement of various financial goals established and approved annually by the Board of Directors (the "
Board
") or the Compensation Committee of the Board. Nothing in this Agreement shall guaranty that you will receive an annual bonus or that any bonus awarded will be for a particular amount. Any bonus for a fiscal year will be paid within 90 days after the close of that fiscal year. The Company reserves the right to amend, change, or cancel the MIP at its sole discretion.
|
(d)
|
Benefits
: You will have the right, on the same basis as other similarly-situated employees of the Company, to participate in and to receive benefits under any applicable benefit plans, as well as under the Company's business expense reimbursement and other policies. Your participation will be subject to the terms of the applicable plan documents and generally applicable Company policies, as the same may be in effect from time to time, and any other restrictions or limitations imposed by law, including without limitation, applicable tax rules. You will accrue paid vacation in accordance with the Company's vacation policy. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
|
(e)
|
Withholding
: All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.
|
4.
|
Voluntary Termination
. In the event that you voluntarily resign from your employment with the Company without Good Reason (as defined in
Section 5
) you will be entitled to no compensation or benefits from the Company other than those earned under
Section 3(a)
and
(e)
through the date of your termination. You agree that if you voluntarily terminate your employment with the Company without Good Reason, you will provide the Company with 60 days' written notice of your resignation. The Company may, in its sole discretion, elect to waive all or any part of such notice period and accept your resignation at an earlier date.
|
5.
|
Resignation for Good Reason
. During your employment with the Company, you may terminate your employment for Good Reason within thirty (30) days of the event constituting Good Reason by delivering to the Company a notice specifying that you are terminating your employment for Good Reason, setting forth in reasonable detail the facts and circumstances you claim give you Good Reason, and giving the Company thirty (30) days to cure the circumstances you claim give you Good Reason. If you deliver such a notice and the Company fails to cure the circumstances you claim give you Good Reason within thirty (30) days resulting in a Separation (as defined in
Section 6(c)
) then the Company shall pay you the same severance pay and benefits you would have received if your employment had been terminated without cause pursuant
Section 6(b)
of this Agreement,
provided however
, that you must sign a general release of known and unknown claims in the form attached hereto as
Exhibit A
in order to receive such severance. For purposes of this Agreement, "
Good Reason
" shall mean any of the following events if effected by the Company without your consent: (i) a material diminution of your duties, responsibilities, or authority; (ii) a material reduction of your Base Salary; (iii) a requirement that you report to a corporate officer or employee instead of reporting directly to the CEO; (iv) a material change in the geographic location where you work; (v) the Company's failure to secure the written assumption of its material obligations under this Agreement from any successor to the Company; or (vi) a material breach of this Agreement by the Company which is not remedied within fifteen (15) business days following written notice from you.
|
6.
|
Other Termination
. Your employment may be terminated by the Company under the circumstances set forth below.
|
(a)
|
Termination for Cause
: If your employment is terminated by the Company for cause as defined below, you shall be entitled to no compensation or benefits from the Company other than those earned under
Section 3(a)
and
(e)
through the date of your termination for cause.
|
(b)
|
Termination Without Cause, Death or Disability
: If a Separation occurs because your employment is terminated by the Company without cause or as a result of your death or Disability (as defined below), and if you sign a general release of known and unknown claims in form attached hereto as
Exhibit A
, you will receive severance payments equal to one hundred thirty-five percent (135%) of your Base Salary at the time of such termination; less applicable withholding, payable over a period of twelve (12) months after the date of the Separation. Severance payments will be made periodically in accordance with the Company's normal payroll schedule. You, your personal representative or guardian, as applicable, must execute and return the form of release attached hereto as
Exhibit A
to receive severance payments. The severance payments will commence on the date in which the release becomes irrevocable in accordance with its terms or applicable law. During the twelve-month severance period, the Company will also pay the premiums to continue your group health insurance coverage under COBRA if you are eligible for COBRA and have elected continuation coverage under the applicable rules. However, the Company's COBRA obligations shall immediately cease to the extent you become eligible for benefits from a subsequent employer.
|
(c)
|
Termination following Change of Control
. If a Change of Control (as defined in the Equity Plan) occurs and within twelve (12) months following such Change of Control, your employment with the Company or its successor is terminated: (i) by the Company or its successor without cause; (ii) as a result of your death or Disability; or (iii) following your resignation for Good Reason, you shall be entitled to all separation payment and benefit set forth in
Section 6(b)
;
provided however
, that the severance payments shall be made in a single lump sum upon execution and non-revocation of the form of release attached hereto as
Exhibit A
.
|
(d)
|
Definition of Separation
. For purposes of this Agreement, "
Separation
" means a "separation from service," as defined in the regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the "
Code
"). For purposes of this Agreement, "
Disability
" means (i) your inability, by reason of physical or mental illness or other cause, to perform your duties hereunder on a full‑time basis for a period of ninety (90) days in any one year period, or (ii) in the discretion of the CEO, as such term is defined in any disability insurance policy in effect at the Company during the time in question.
|
(e)
|
Commencement of Payments
. For purposes of Section 409A of the Code, each salary continuation payment under
Section 5
or
6(b)
above is hereby designated as a separate payment. If the Company determines that you are a "specified employee" under Section 409A(a)(2)(B)(i) of the Code at the time of your Separation, then (i) the salary continuation payments under
Section 5
or
6(b)
above, to the extent that they are subject to Section 409A of the Code, will commence during the seventh month after your Separation and (ii) the installments that otherwise would have been paid during the first six months after your Separation will be paid in a lump sum when the salary continuation payments commence.
|
7.
|
Termination Obligations
.
|
(a)
|
Return of Property
. You agree that all property (including, without limitation, all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to you by the Company or any affiliate or created or prepared by you in the course of your employment belongs to the Company and shall be promptly returned to the Company upon termination of your employment.
|
(b)
|
Resignation and Cooperation
. Following any termination of employment, you shall cooperate with the Company in the winding up of pending work on behalf of the Company or any affiliate and the orderly transfer of work to other employees. You shall also cooperate with the Company and any affiliate in the defense of any action brought by any third party against the Company that relates to your employment by the Company. The Company shall reimburse you for your time and reasonable expenses incurred in connection with such cooperation.
|
8.
|
Confidential Information
.
|
(a)
|
You acknowledge that because of your position with the Company, you will have access to Confidential Information (as defined below) of the Company and its affiliates. Accordingly, you hereby agree that, during your employment and at all times thereafter, you will hold the Confidential Information of the Company and its affiliates in strict confidence and will neither use (for yourself or any third party) the information nor furnish, make available or disclose it to anyone, except to the extent necessary to carry out your responsibilities as an employee of the Company or as specifically authorized in writing by the CEO. As used in this Agreement, "
Confidential Information
" means any information relating to the business or affairs of the Company and its affiliates, including, but not limited to information relating to financial statements, operations manuals, systems manuals, customer identities, customer profiles, customer preferences, partner or investor identities, employees, suppliers, advertising programs, target markets, servicing methods, equipment, programs, strategies and information, market analyses, profit margins, past, current or future marketing strategies, or any other proprietary information used by the Company or its affiliates;
provided, however,
that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no act or omission by you. You acknowledge that the Confidential Information is vital, sensitive, confidential and proprietary to the Company and that you are under a contractual and common law duty to not disclose the Confidential Information to any third party at any time. You acknowledge and agree that your non-disclosure obligation applies to all Confidential Information of the Company, no matter when you obtained knowledge of or access to such Confidential Information. You further acknowledge that the Company would not employ you or provide you with access to its Confidential Information, but for your promises and covenants contained in this
Section 8
and elsewhere in this Agreement. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency,
provided
that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. You shall promptly provide written notice of any such order to the CEO.
|
(b)
|
Notice of Immunity under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016
. Notwithstanding any other provision of this Agreement:
|
(i)
|
You will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that: (A) is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.
|
(ii)
|
If you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the Company's trade secrets to your attorney and use the trade secret information in the court proceeding if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.
|
9.
|
Ownership of Information and Property
. You agree that all information and property of the Company or its affiliates that comes into your control or possession due to your relationship with the Company or any of its affiliates, including without limitation any Confidential Information, are and shall remain the property of the Company or an Affiliate, as applicable, and, at the Company's request, you shall promptly return all such information and property to the Company and provide to Company a written certificate confirming that all such information and property have been returned to the Company.
|
10.
|
Non-Competition and Non-Solicitation Covenants
.
|
(a)
|
Prohibited Activities
. During the Term of your employment and for twelve (12) months thereafter (the "
Restricted Period
"), in addition to your other obligations hereunder, you shall not, in any manner, directly or indirectly, (i) engage or invest in, (ii) own, manage, operate, finance, control, (iii) participate in the ownership, management, operation, financing, or control of, or (iv) be employed by, work for or with, or in any way assist any business or any person or entity that engages in the Restricted Business (as defined below) in the Restricted Territory (as defined below). For purposes of this Agreement, (x) "
Restricted Business
" means the business and operations that are the same or similar to those engaged in by the Company or its affiliates during your employment with the Company, or in which any of the Company or its affiliates has material plans to engage of which you are aware during the period of your employment with the Company, which business and operations include the business of advanced computer graphics technology for digital planetariums and full dome digital cinemas worldwide, full-dome education including projection systems, software, curriculum, lighting and audio and dome screens, and other architectural domes, spheres, and freeform structures; and (y) "
Restricted Territory
" means the geographic area where the Company and its affiliates conduct business. For purposes of this paragraph, "
Company
" shall mean E&S and its affiliates. For avoidance of doubt, a Restricted Business may take the form of a sole proprietorship, corporation, partnership, limited liability company, governmental or private entity or any other entity of whatever kind (including without limitation, a private equity fund) that engages in a Restricted Business.
|
(b)
|
Communication of Contents of Covenants
. During the Restricted Period, you will communicate the contents of this Agreement to any person or entity that you intend to be retained or employed by, associated with, or represent and which you know is engaged in the Restricted Business or in a business that competes with the Company in the Restricted Business.
|
(c)
|
Non-Solicitation of Customers
. You understand and acknowledge that because of your experience with and relationship to the Company, you will have access to and learn about much or all of the Company's customer information. "
Customer Information
" includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to sales and services. You understand and acknowledge that loss of these customer relationships or goodwill will cause significant and irreparable harm to the Company. You agree and covenant that during the Restricted Period, you will not directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company's current, former or prospective customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
|
(d)
|
Tolling of Covenants
. If it is judicially determined that you have violated any of your obligations under this Agreement, then the Restricted Period will automatically be extended by a period of time equal in length to the period during which such violation or violations occurred.
|
(e)
|
Non-disparagement
. You and the Company both agree and covenant that neither will at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the other or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers and other associated third parties. This section does not, in any way, restrict or impede you from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency,
provided
that such compliance does not exceed that required by the law, regulation or order.
|
(f)
|
Acknowledgments
. You understand that the nature of your position gives you access to and knowledge of Confidential Information and places you in a position of trust and confidence with the Company. You further understand and acknowledge that the Company's ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by you is likely to result in unfair or unlawful competitive activity. You acknowledges that your obligations under this
Section
10
(including the geographic boundaries, scope of prohibited activities and the time duration of the provisions) are reasonable in the context of the nature of the Restricted Business and the competitive injuries likely to be sustained by the Company if you were to violate such obligations, and are no broader than are necessary to protect the legitimate business interests of the Company. You further acknowledge that the Company would not have employed you in the absence of this
Section
10
and your other covenants and representations and warranties made herein, which you acknowledge constitutes good, valuable and sufficient consideration.
|
11.
|
Severability
. If any provision of this Agreement is deemed invalid, illegal or unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected.
|
12.
|
Assignment
. In view of the personal nature of the services to be performed under this Agreement by you, you cannot assign or transfer any of your obligations under this Agreement.
|
13.
|
Entire Agreement
. This Agreement and the agreements referred to above constitute the entire agreement between you and the Company regarding the terms and conditions of your employment, and they supersede all prior negotiations, representations or agreements between you and the Company regarding your employment, whether written or oral.
|
14.
|
Modification
. This Agreement may only be modified or amended by a supplemental written agreement signed by you and an authorized representative of the Company.
|
15.
|
Governing Law
. This Agreement, and all matters relating hereto, including any matter or dispute arising out of the Agreement, shall be interpreted, governed, and enforced according to the laws of the State of Utah, without regard to conflict of laws principals.
|
16.
|
Remedies and Jurisdiction
.
|
17.
|
Attorneys' Fees
. In any arbitration, court action or other adjudicative proceeding arising out of or relating to this Agreement or Employee's employment with the Company, each party shall pay its own attorneys', accountants', and experts' fees and costs of such proceeding(s).
|
18.
|
Section Headings
. The section headings of this Agreement are inserted only for convenience and in no way define, limit, or describe the scope or intent of this Agreement nor affect its terms and provisions.
|
19.
|
Construction
. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and no provision of this Agreement shall be construed against either party as the drafter thereof.
|
20.
|
Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.
|
21.
|
EMPLOYEE ACKNOWLEDGEMENT
. YOU HAVE HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT AND HAVE OBTAINED AND CONSIDERED THE ADVICE OF SUCH LEGAL COUNSEL TO THE EXTENT YOU DEEMS NECESSARY OR APPROPRIATE. YOU HAVE READ AND UNDERSTANDS THE AGREEMENT, ARE FULLY AWARE OF ITS LEGAL EFFECT, AND HAVE ENTERED INTO IT FREELY BASED ON YOUR OWN JUDGMENT AND NOT BASED ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.
|
1.
|
I have reviewed this annual report on Form 10-K 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.
|
1.
|
I have reviewed this annual report on Form 10-K 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.
|