else-20250630.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, 2025

☐ 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, $0.10 par value	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, 2025 was 3,449,021.

ELECTRO-SENSORS, INC.

Form 10-Q

For the Period Ended June 30, 2025

PART I. FINANCIAL INFORMATION	4

Item 1. Financial Statements (unaudited):	4

Condensed Balance Sheets – As of June 30, 2025 and December 31, 2024	4
Condensed Statements of Operations – For the Three and Six Months Ended June 30, 2025 and June 30, 2024	5
Condensed Statements of Changes in Stockholders' Equity – For the Three and Six Months Ended June 30, 2025 and June 30, 2024	6
Condensed Statements of Cash Flows – For the Six Months Ended June 30, 2025 and June 30, 2024	7
Notes to Condensed Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	20

PART II – OTHER INFORMATION	21

Item 1. Legal Proceedings	21
Item 1A. Risk Factors	21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3. Defaults Upon Senior Securities	21
Item 4. Mine Safety Disclosures	21
Item 5. Other Information	21
Item 6. Exhibits	21

SIGNATURES	22

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ELECTRO-SENSORS, INC.

CONDENSED BALANCE SHEETS

(in thousands except share and per share amounts)

	June 30, 2025		December 31, 2024
	(unaudited)
ASSETS

Current assets

Cash and cash equivalents	$	10,182	$	9,948
Investments		56		56
Trade receivables, less allowance for credit losses of $28 and $11, respectively		1,282		1,309
Inventories, net		2,010		1,964
Other current assets		180		197
Income tax receivable		72		0

Total current assets		13,782		13,474

Deferred income tax asset, net		501		501

Property and equipment, net		877		910

Total assets	$	15,160	$	14,885

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable	$	287	$	146
Accrued expenses		482		365
Accrued income taxes		0		41

Total current liabilities		769		552

Commitments and contingencies

Stockholders’ equity

Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,449,021 shares issued and outstanding		344		344
Additional paid-in capital		2,423		2,360
Retained earnings		11,624		11,629
Total stockholders’ equity		14,391		14,333

Total liabilities and stockholders’ equity	$	15,160	$	14,885

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands except share and per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024

Net sales	$	2,400		$	2,217		$	4,639		$	4,461
Cost of goods sold		1,172			1,170			2,327			2,334

Gross profit		1,228			1,047			2,312			2,127

Operating expenses
Selling and marketing		441			353			861			704
General and administrative		575			537			1,162			1,104
Research and development		214			264			460			526

Total operating expenses		1,230			1,154			2,483			2,334

Operating loss		(2	)		(107	)		(171	)		(207	)

Non-operating income
Interest expense		(6	)		0			(6	)		0
Interest income		88			109			176			225

Total non-operating income, net		82			109			170			225

Income (loss) before income tax expense		80			2			(1	)		18

Income tax expense		21			6			4			11

Net income (loss)	$	59		$	(4	)	$	(5	)	$	7

Net income per share data:

Basic
Net income per share	$	0.02		$	0.00		$	0.00		$	0.00
Weighted average shares		3,449,021			3,428,021			3,449,021			3,428,021

Diluted
Net income per share	$	0.02		$	0.00		$	0.00		$	0.00
Weighted average shares		3,550,957			3,428,021			3,449,021			3,428,021

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands except share amounts)

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

March 31, 2025 (unaudited)	3,449,021	$	344	$	2,391	$	11,565		$	14,300

Stock-based compensation expense					32					32
Net income							59			59

Balance June 30, 2025 (unaudited)	3,449,021	$	344	$	2,423	$	11,624		$	14,391

March 31, 2024 (unaudited)	3,428,021	$	342	$	2,259	$	11,194		$	13,795

Stock-based compensation expense					38					38
Net loss							(4	)		(4	)

Balance June 30, 2024 (unaudited)	3,428,021	$	342	$	2,297	$	11,190		$	13,829

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

December 31, 2024	3,449,021	$	344	$	2,360	$	11,629		$	14,333

Stock-based compensation expense					63					63
Net loss							(5	)		(5	)

Balance June 30, 2025 (unaudited)	3,449,021	$	344	$	2,423	$	11,624		$	14,391

December 31, 2023	3,428,021	$	342	$	2,230	$	11,183		$	13,755

Stock-based compensation expense					67					67
Net income							7			7

Balance June 30, 2024 (unaudited)	3,428,021	$	342	$	2,297	$	11,190		$	13,829

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2025			2024
Cash flows from operating activities

Net income (loss)	$	(5	)	$	7

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

Depreciation		45			47
Deferred income taxes		0			25
Stock-based compensation expense		63			67
Change in allowance for credit losses		17			0
Loss on disposal of fixed assets		1			0
Change in:
Trade receivables		10			103
Inventories		(46	)		(114	)
Other current assets		17			2
Accounts payable		141			(92	)
Accrued expenses		117			116
Income tax payable/receivable		(113	)		(117	)

Net cash from operating activities		247			44

Cash flows used in investing activities

Purchase of property and equipment		(13	)		(26	)

Net cash used in investing activities		(13	)		(26	)

Net increase in cash and cash equivalents		234			18

Cash and cash equivalents, beginning		9,948			9,870
Cash and cash equivalents, ending	$	10,182		$	9,888

Supplemental cash flow information
Cash paid for income taxes	$	117		$	101
Cash paid for interest		6			0

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2025

(in thousands except share and per share amounts)

(unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed 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, 2024, 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 Company's financial position as of June 30, 2025 and results of operations for the three and six-month periods ended June 30, 2025 and 2024, 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. (the "Company") manufactures and markets a complete line of monitoring and control systems for a wide range of industrial machine applications. The Company uses leading-edge technology to continuously improve its products, with the goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff and distributors to a wide range of industries that use the products in a variety of applications to monitor process machinery operations. The Company markets its products to customers located throughout the United States, Canada, Latin America, Europe, and Asia.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are invested in commercial paper, money market accounts, and may also be invested in Treasury Bills with an original maturity of three months or less. Cash equivalents are carried at fair value. Cash equivalents were $7,973 and $7,980 as of June 30, 2025 and December 31, 2024, respectively.

The Company maintains its cash and cash equivalents primarily in two bank deposit accounts, which, at times, may have a balance that exceeds federally insured limits. The Company has not experienced any losses on these accounts. The Company believes it is not exposed to significant credit risk on cash.

Trade receivables and credit policies

Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices over 90 days are considered delinquent. The Company does not accrue interest on delinquent trade receivables.

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2025

(in thousands except share and per share amounts)

(unaudited)

Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The Company maintains an allowance for credit losses on trade receivables, which is recorded as an offset to trade receivables. Changes in the allowance for credit losses are included as a component of operating expenses in the Statements of Operations. The Company assesses credit losses on a collective basis where similar risk characteristics exist. Receivables that do not share risk characteristics with other receivables, or where known collectability issues exist, are evaluated on an individual basis.

The allowance is based on the credit losses expected to arise over the life of the receivable (contractual term). The Company considers historical loss rates and current economic conditions when determining the expected credit losses. Receivables deemed uncollectible are written off against the allowance for credit losses. The allowance for credit losses was $28 and $11 at June 30, 2025 and December 31, 2024, respectively.

Revenue Recognition

At contract inception, the Company assesses the goods and services to be provided to a customer and identifies a performance obligation for each distinct good or service. The transaction price for each performance obligation is determined at contract inception. Contracts, generally in the form of a purchase order, specify the product or service that is to be provided to the customer. The typical contract life is less than one month and contains a single performance obligation, to provide conforming goods or services to the customer. Certain contracts have a second performance obligation, which typically is the initialization of the HazardPRO^TM product. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. Stand-alone selling prices are based on observable stand-alone prices charged to customers. Product revenue is recognized at the point in time when control is transferred to the customer, which typically occurs upon shipment. Service revenue is recognized when provided to the customer and typically takes less than a week to provide.

Fair Value Measurements

The carrying value of cash equivalents, trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2025 and December 31, 2024, due to the short maturity nature of these instruments.

Stock-Based Compensation

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model. The Company uses historical data, among other factors, to estimate the expected price volatility, the expected option life, and the expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2025

(in thousands except share and per share amounts)

(unaudited)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Current significant estimates, including the underlying assumptions, consist of realizability of trade receivables, and valuation of deferred tax assets/liabilities, inventory, investments, and stock compensation expense. It is at least reasonably possible that these estimates may change in the near term.

Net Income per Common Share

Basic income per share excludes dilution and is determined by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities such as options or restricted stock units were exercised or converted into common stock.

Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential shares would have an anti-dilutive effect. Diluted EPS also excludes the impact of common shares issuable upon the exercise of outstanding stock options in periods in which the option exercise price is greater than the average market price of our common stock during the period.

For the three-month periods ended June 30, 2025, and 2024, 83,064 and 175,000, respectively, weighted-average common shares for underlying stock options have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. For the six-month periods ended June 30, 2025 and 2024, 185,000 and 175,000 respectively, weighted average common shares for underlying stock options have been excluded from the calculation of diluted EPS for the same reason.

In addition, for each of the three and six-month periods ended June 30, 2025, and 2024, 84,000 and 105,000, respectively, restricted stock units have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive.

New Accounting Pronouncement Adopted

In December 2023, the FASB issued ASU No. 223-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The updates in this ASU are effective for annual periods beginning after December 15, 2024. The adoption will result in disclosure changes only.

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2025

(in thousands except share and per share amounts)

(unaudited)

Note 2. Investments

The Company has investments in common equity securities of two private U.S. companies that have an undeterminable market.

Equity securities are stated at estimated fair value and realized and unrealized gains and losses, if any, are reported in our Statements of Operations in non-operating income.

The cost and estimated fair value of the Company’s investments are as follows:

	Cost		Gross unrealized gain		Gross unrealized loss		Fair value
June 30, 2025
Equity Securities	$	54	$	2	$	0	$	56
Total Investments, June 30, 2025	$	54	$	2	$	0	$	56

December 31, 2024
Equity Securities	$	54	$	2	$	0	$	56
Total Investments, December 31, 2024	$	54	$	2	$	0	$	56

Note 3. Fair Value Measurements

The following table provides information on those assets measured at fair value on a recurring basis.

June 30, 2025

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Equity Securities	$	56	$	56	$	0	$	0	$	56

December 31, 2024

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Equity Securities	$	56	$	56	$	0	$	0	$	56

The equity securities owned by the Company are investments in two non-publicly traded companies. There is an undeterminable market for each of these two companies and the Company has determined the fair value based on financial and other factors that are considered Level 3 inputs in the fair value hierarchy.

There was no change in Level 3 assets measured at fair value on a recurring basis during the three and six-month periods ended June 30, 2025 and 2024.

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2025

(in thousands except share and per share amounts)

(unaudited)

Note 4. Inventories

Inventories used in the determination of cost of goods sold are as follows:

	June 30, 2025		December 31, 2024
	June 30, 2025		December 31, 2024
Raw Materials	$	1,300	$	1,334
Work In Process		365

TABLE OF CONTENTS

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