else-20210630.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ 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 000-09587

ELECTRO-SENSORS, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-0943459
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6111 Blue Circle Drive
Minnetonka, Minnesota 55343-9108

(Address of principal executive offices)

(952) 930-0100

(Registrant’s telephone number, including area code)

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	ELSE	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 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 ☒ 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 ☒ 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 the 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	☒	Smaller reporting company ☒
		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 ☒

The number of shares outstanding of the registrant’s common stock, $0.10 par value, on August 11, 2021 was 3,395,521.

ELECTRO-SENSORS, INC.

Form 10-Q

For the Periods Ended June 30, 2021

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION	4

Item 1. Financial Statements (unaudited):	4

Condensed Balance Sheets – As of June 30, 2021 and December 31, 2020	4
Condensed Statements of Comprehensive Income (Loss) – For the Three and Six Months ended June 30, 2021 and June 30, 2020	5
Condensed Statements of Changes in Stockholders' Equity – For the Three and Six Months ended June 30, 2021 and June 30, 2020	6
Condensed Statements of Cash Flows – For the Six Months ended June 30, 2021 and June 30, 2020	7
Notes to Condensed Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
Item 4. Controls and Procedures	18

PART II – OTHER INFORMATION	19

Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3. Defaults Upon Senior Securities	19
Item 4. Mine Safety Disclosures	19
Item 5. Other Information	19
Item 6. Exhibits	19

SIGNATURES	20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ELECTRO-SENSORS, INC.

CONDENSED BALANCE SHEETS

(in thousands except share and per share amounts)

	June 30, 2021		December 31, 2020
	(unaudited)
ASSETS

Current assets

Cash and cash equivalents	$	1,540	$	1,090
Investments		8,041		8,041
Trade receivables, less allowance for doubtful accounts of $11		1,412		957
Inventories		1,525		1,572
Other current assets		176		170
Income tax receivable		0		26

Total current assets		12,694		11,856

Deferred income tax asset, net		274		246

Intangible assets, net		98		228

Property and equipment, net		952		989

Total assets	$	14,018	$	13,319

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of financing lease	$	6	$	6
Accounts payable		334		197
Accrued expenses		623		330
Accrued income tax		58		0

Total current liabilities		1,021		533

Long-term liabilities
Financing lease, net of current maturities		9		12

Total long-term liabilities		9		12

Commitments and contingencies

Stockholders’ equity

Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,395,521 shares issued and outstanding		339		339
Additional paid-in capital		2,039		2,036
Retained earnings		10,610		10,398
Accumulated other comprehensive gain (unrealized gain on available-for-sale securities, net of income tax)		0		1

Total stockholders’ equity		12,988		12,774

Total liabilities and stockholders’ equity	$	14,018	$	13,319

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands except share and per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Net sales	$	2,462		$	2,092		$	4,363		$	4,015
Cost of goods sold		1,086			994			1,997			1,918

Gross profit		1,376			1,098			2,366			2,097

Operating expenses
Selling and marketing		364			443			712			901
General and administrative		458			440			901			905
Research and development		283			196			486			413

Total operating expenses		1,105			1,079			2,099			2,219

Operating income (loss)		271			19			267			(122	)

Non-operating income
Loss on investment		0			0			0			(3	)
Interest expense		0			(1	)		0			(1	)
Interest income		0			1			2			33
Other income		0			0			0			2

Total non-operating income, net		0			0			2			31

Income (loss) before income tax expense (benefit)		271			19			269			(91	)

Provision for (benefit of) income tax		57			1			57			(18	)

Net income (loss)	$	214		$	18		$	212		$	(73	)

Other comprehensive loss
Change in unrealized value of available-for-sale securities, net of income tax	$	(1	)	$	0		$	(1	)	$	0
Other comprehensive loss		(1	)		0			(1	)		0

Net comprehensive income (loss)	$	213		$	18		$	211		$	(73	)

Net income (loss) per share data:

Basic
Net income (loss) per share	$	0.06		$	0.01		$	0.06		$	(0.02	)
Weighted average shares		3,395,521			3,395,521			3,395,521			3,395,521

Diluted
Net income (loss) per share	$	0.06		$	0.01		$	0.06		$	(0.02	)
Weighted average shares		3,413,444			3,395,521			3,433,609			3,395,521

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands except share and per share amounts)

For the three months ended June 30
	Common Stock Issued			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total Stockholders’ Equity

March 31, 2021	3,395,521	$	339	$	2,037	$	10,396	$	1		$	12,773

Other comprehensive loss									(1	)		(1	)
Stock-based compensation expense					2							2
Net income							214					214

Balance June 30, 2021 (unaudited)	3,395,521	$	339	$	2,039	$	10,610	$	0		$	12,988

March 31, 2020	3,395,521	$	339	$	2,033	$	10,431	$	0		$	12,803

Stock-based compensation expense					1							1
Net income							18					18

Balance June 30, 2020 (unaudited)	3,395,521	$	339	$	2,034	$	10,449	$	0		$	12,822


For the six months ended June 30
	Common Stock Issued			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity

December 31, 2020	3,395,521	$	339	$	2,036	$	10,398		$	1		$	12,774

Other comprehensive loss										(1	)		(1	)
Stock-based compensation expense					3								3
Net income							212						212

Balance June 30, 2021 (unaudited)	3,395,521	$	339	$	2,039	$	10,610		$	0		$	12,988

December 31, 2019	3,395,521	$	339	$	2,030	$	10,522		$	0		$	12,891

Stock-based compensation expense					4								4
Net loss							(73	)					(73	)

Balance June 30, 2020 (unaudited)	3,395,521	$	339	$	2,034	$	10,449		$	0		$	12,822

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities

Net income (loss)	$	212		$	(73	)

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation and amortization		181			181
Deferred income taxes		(28	)		(18	)
Stock-based compensation expense		3			4
Interest accrued on treasury bills		(2	)		0
Loss on investments		0			3
Change in:
Trade receivables		(455	)		(18	)
Inventories		47			(40	)
Other current assets		(6	)		(4	)
Accounts payable		137			15
Accrued expenses		293			201
Income tax receivable/payable		84			(11	)

Net cash from operating activities		466			240

Cash flows used in investing activities

Purchases of treasury bills		(8,999	)		(6,748	)
Proceeds from the maturity of treasury bills		9,000			0
Purchase of property and equipment		(14	)		(12	)

Net cash used in investing activities		(13	)		(6,760	)

Cash flows used in financing activities

Payments on financing lease		(3	)		(3	)
Proceeds from Paycheck Protection Program		0			645
Repayment of Paycheck Protection Program loan		0			(645	)

Net cash used in financing activities		(3	)		(3	)

Net increase (decrease) in cash and cash equivalents		450			(6,523	)

Cash and cash equivalents, beginning		1,090			8,785
Cash and cash equivalents, ending	$	1,540		$	2,262

Supplemental cash flow information
Cash paid for income taxes	$	1		$	11
Cash paid for interest	$	1		$	1

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2021

(in thousands except share and per share amounts)

(unaudited)

Note 1. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions and regulations of the Securities and Exchange Commission to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

This report should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, including the audited financial statements and footnotes therein.

Management believes that the unaudited financial statements include all adjustments, consisting of normal recurring accruals, necessary to fairly state the financial position and results of operations as of June 30, 2021 and for the three and six-month periods ended June 30, 2021 and 2020, in accordance with accounting principles generally accepted in the United States of America. The results of interim periods may not be indicative of results to be expected for the year.

Nature of Business

Electro-Sensors, Inc. manufactures and markets a complete line of monitoring and control systems for a variety of industrial machinery. The Company uses leading-edge technology to continuously improve its products, with the ultimate goal of manufacturing the industry-preferred product for every market served. The Company sells these products through an internal sales staff, manufacturers’ representatives, and distributors to a wide variety of industries that use the products in a variety of applic

TABLE OF CONTENTS

SEC Form 10-Q filed by Electro-Sensors, Inc.