else-20210930.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, 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 November 4, 2021 was 3,395,521.

ELECTRO-SENSORS, INC.

Form 10-Q

For the Periods Ended September 30, 2021

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION	4

Item 1. Financial Statements (unaudited):	4

Condensed Balance Sheets – As of September 30, 2021 and December 31, 2020	4
Condensed Statements of Comprehensive Income (Loss) – For the Three and Nine Months ended September 30, 2021 and September 30, 2020	5
Condensed Statements of Changes in Stockholders' Equity – For the Three and Nine Months ended September 30, 2021 and September 30, 2020	6
Condensed Statements of Cash Flows – For the Nine Months ended September 30, 2021 and September 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)

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

Current assets

Cash and cash equivalents	$	4,620	$	1,090
Investments		5,041		8,041
Trade receivables, less allowance for doubtful accounts of $11		1,325		957
Inventories		1,477		1,572
Other current assets		207		170
Income tax receivable		0		26

Total current assets		12,670		11,856

Deferred income tax asset, net		270		246

Intangible assets, net		50		228

Property and equipment, net		919		989

Total assets	$	13,909	$	13,319

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of financing lease	$	6	$	6
Accounts payable		175		197
Accrued expenses		629		330
Accrued income tax		85		0

Total current liabilities		895		533

Long-term liabilities
Financing lease, net of current maturities		8		12

Total long-term liabilities		8		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		2,040		2,036
Retained earnings		10,627		10,398
Accumulated other comprehensive gain (unrealized gain on available-for-sale securities, net of income tax)		0		1

Total stockholders’ equity		13,006		12,774

Total liabilities and stockholders’ equity	$	13,909	$	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 September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Net sales	$	2,154		$	1,899		$	6,517		$	5,914
Cost of goods sold		950			907			2,947			2,825

Gross profit		1,204			992			3,570			3,089

Operating expenses
Selling and marketing		375			417			1,087			1,318
General and administrative		620			420			1,521			1,325
Research and development		189			209			675			622

Total operating expenses		1,184			1,046			3,283			3,265

Operating income (loss)		20			(54	)		287			(176	)

Non-operating income
Loss on investment		0			0			0			(3	)
Interest expense		(1	)		(2	)		(1	)		(3	)
Interest income		2			2			4			35
Other income		0			0			0			2

Total non-operating income, net		1			0			3			31

Income (loss) before income tax expense (benefit)		21			(54	)		290			(145	)

Provision for (benefit of) income tax		4			(8	)		61			(26	)

Net income (loss)	$	17		$	(46	)	$	229		$	(119	)

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

Net comprehensive income (loss)	$	17		$	(46	)	$	228		$	(119	)

Net income (loss) per share data:

Basic
Net income (loss) per share	$	0.01		$	(0.01	)	$	0.07		$	(0.04	)
Weighted average shares		3,395,521			3,395,521			3,395,521			3,395,521

Diluted
Net income (loss) per share	$	0.00		$	(0.01	)	$	0.07		$	(0.04	)
Weighted average shares		3,439,377			3,395,521			3,435,595			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 September 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

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

Stock-based compensation expense					1							1
Net income							17					17

Balance September 30, 2021 (unaudited)	3,395,521	$	339	$	2,040	$	10,627		$	0	$	13,006

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

Stock-based compensation expense					1							1
Net loss							(46	)				(46	)

Balance September 30, 2020 (unaudited)	3,395,521	$	339	$	2,035	$	10,403		$	0	$	12,777


For the nine months ended September 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					4								4
Net income							229						229

Balance September 30, 2021 (unaudited)	3,395,521	$	339	$	2,040	$	10,627		$	0		$	13,006

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

Stock-based compensation expense					5								5
Net loss							(119	)					(119	)

Balance September 30, 2020 (unaudited)	3,395,521	$	339	$	2,035	$	10,403		$	0		$	12,777

See accompanying notes to unaudited condensed financial statements

ELECTRO-SENSORS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities

Net income (loss)	$	229		$	(119	)

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

Depreciation and amortization		254			272
Deferred income taxes		(24	)		(24	)
Stock-based compensation expense		4			5
Interest accrued on treasury bills		(2	)		(2	)
Loss on investments		0			3
Loss on disposal of fixed assets		8			0
Change in:
Trade receivables		(368	)		(3	)
Inventories		95			36
Other current assets		(37	)		(37	)
Accounts payable		(22	)		52
Accrued expenses		299			142
Income tax receivable/payable		111			(23	)

Net cash from operating activities		547			302

Cash flows from (used in) investing activities

Purchases of treasury bills		(10,999	)		(7,747	)
Proceeds from the maturity of treasury bills		14,000			5,750
Purchase of property and equipment		(14	)		(24	)

Net cash from (used in) investing activities		2,987			(2,021	)

Cash flows used in financing activities

TABLE OF CONTENTS

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