else-20250930.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 September 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 November 12, 2025 was 3,480,521.

ELECTRO-SENSORS, INC.

Form 10-Q

For the Period Ended September 30, 2025

PART I. FINANCIAL INFORMATION	4

Item 1. Financial Statements (unaudited):	4

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19

PART II – OTHER INFORMATION	20

Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults Upon Senior Securities	20
Item 4. Mine Safety Disclosures	20
Item 5. Other Information	20
Item 6. Exhibits	20

SIGNATURES	21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ELECTRO-SENSORS, INC.

CONDENSED BALANCE SHEETS

(in thousands except share and per share amounts)

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

Current assets

Cash and cash equivalents	$	10,571	$	9,948
Investments		56		56
Trade receivables, less allowance for credit losses of $36 and $11, respectively		1,425		1,309
Inventories, net		2,070		1,964
Other current assets		246		197
Income tax receivable		72		0

Total current assets		14,440		13,474

Deferred income tax asset, net		437		501

Property and equipment, net of accumulated depreciation of $1,708 and $1,664, respectively		860		910

Total assets	$	15,737	$	14,885

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities

Accounts payable	$	381	$	146
Accrued expenses		668		365
Accrued income tax		0		41

Total current liabilities		1,049		552

Commitments and contingencies

Stockholders’ equity
Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,480,521 and 3,449,021 shares issued and outstanding, respectively		348		344
Additional paid-in capital		2,508		2,360
Retained earnings		11,832		11,629
Total stockholders’ equity		14,688		14,333

Total liabilities and stockholders’ equity	$	15,737	$	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				Nine Months Ended
	September 30				September 30
	2025		2024		2025		2024

Net sales	$	2,748	$	2,512	$	7,387	$	6,973
Cost of goods sold		1,290		1,247		3,617		3,581

Gross profit		1,458		1,265		3,770		3,392

Operating expenses
Selling and marketing		434		340		1,295		1,044
General and administrative		606		517		1,768		1,621
Research and development		237		235		697		761

Total operating expenses		1,277		1,092		3,760		3,426

Operating income (loss)		181		173		10		(34)

Non-operating income
Interest expense		0		0		(6)		0
Interest income		91		117		267		342

Total non-operating income, net		91		117		261		342

Income before income tax expense		272		290		271		308

Income tax expense		64		52		68		63

Net income	$	208	$	238	$	203	$	245

Net income per share data:

Basic
Net income per share	$	0.06	$	0.07	$	0.06	$	0.07
Weighted average shares		3,462,564		3,428,021		3,453,585		3,428,021
Diluted
Net income per share	$	0.06	$	0.07	$	0.06	$	0.07
Weighted average shares		3,473,921		3,434,417		3,453,585		3,440,382

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 September 30
	Common Stock Issued				Additional Paid-in Capital				Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity

June 30, 2025	3,449,021	$	344	$	2,423	$	11,624	$	14,391

Restricted stock units vested	31,500		4		(4)				0
Stock-based compensation expense					89				89
Net income							208		208

Balance September 30, 2025 (unaudited)	3,480,521	$	348	$	2,508	$	11,832	$	14,688

June 30, 2024	3,428,021	$	342	$	2,297	$	11,190	$	13,829

Stock-based compensation expense					31				31
Net income							238		238

Balance September 30, 2024 (unaudited)	3,428,021	$	342	$	2,328	$	11,428	$	14,098

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

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

Restricted stock units vested	31,500		4		(4)				0
Stock-based compensation expense					152				152
Net income							203		203

Balance, September 30, 2025	3,480,521	$	348	$	2,508	$	11,832	$	14,688

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

Stock-based compensation expense					98				98
Net income							245		245

Balance, September 30, 2024	3,428,021	$	342	$	2,328	$	11,428	$	14,098

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	September 30
	2025		2024
Cash flows from operating activities

Net income	$	203	$	245

Adjustments to reconcile net income to net cash from operating activities:

Depreciation		68		70
Deferred income taxes		64		68
Stock-based compensation expense		152		98
Change in allowance for credit losses		25		0
Loss on disposal of fixed assets		1		0
Change in:
Trade receivables		(141)		101
Inventories		(106)		(252)
Other current assets		(49)		(61)
Accounts payable		235		(71)
Accrued expenses		303		316
Income tax payable/receivable		(113)		(108)

Net cash from operating activities		642		406

Cash flows used in investing activities

Purchase of property and equipment		(19)		(30)

Net cash used in investing activities		(19)		(30)

Net increase in cash and cash equivalents		623		376

Cash and cash equivalents, beginning		9,948		9,870
Cash and cash equivalents, ending	$	10,571	$	10,246

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 SEPTEMBER 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 condensed financial statements include all adjustments, consisting of normal recurring accruals, necessary to fairly state the Company's financial position as of September 30, 2025 and results of operations for the three and nine-month periods ended September 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 $7,977 and $7,980 as of September 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 SEPTEMBER 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 $36 and $11 at September 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 HazardPROTM 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 September 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 SEPTEMBER 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. 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. Actual results could differ from those estimates.

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 period ended September 30, 2025, and 2024, 173,643 and 168,604, 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 nine months ended September 30, 2025 and 2024, 185,000 and 162,639, 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 nine-month periods ended September 30, 2025, and 2024, 52,500 and 105,000 restricted stock units, respectively, 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. 2023-09 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 SEPTEMBER 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:

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

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

TABLE OF CONTENTS

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