10-Q

S

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, 2022

Or

☐ 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 ☐

1

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 1, 2022 was 3,403,021.

2

ELECTRO-SENSORS, INC.

Form 10-Q

For the Periods Ended June 30, 2022

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION	4
Item 1. Financial Statements (unaudited):	4
Condensed Balance Sheets – As of June 30, 2022 and December 31, 2021	4
Condensed Statements of Comprehensive Income (Loss) – For the Three and Six Months ended June 30, 2022 and June 30, 2021	5
Condensed Statements of Changes in Stockholders' Equity – For the Three and Six Months ended June 30, 2022 and June 30, 2021	6
Condensed Statements of Cash Flows – For the Six Months ended June 30, 2022 and June 30, 2021	7
Notes to Condensed Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22
PART II – OTHER INFORMATION	23
Item 1. Legal Proceedings	23
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	23
Item 4. Mine Safety Disclosures	23
Item 5. Other Information	23
Item 6. Exhibits	23
SIGNATURES	24

3

ELECTRO-SENSORS, INC.

(in thousands except share and per share amounts) 

	June 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	6,429	$	6,713
Investments		3,052		3,056
Trade receivables, less allowance for doubtful accounts of $11		1,323		1,005
Inventories		1,720		1,663
Other current assets		171		188
Income tax receivable		81		3
Total current assets		12,776		12,628
Deferred income tax asset, net		226		208
Intangible assets, net		13		38
Property and equipment, net		981		1,017
Total assets	$	13,996	$	13,891
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of financing lease	$	6	$	6
Accounts payable		319		349
Accrued expenses		769		342
Total current liabilities		1,094		697
Long-term liabilities
Financing lease, net of current maturities		3		6
Total long-term liabilities		3		6
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		2,043		2,041
Retained earnings		10,515		10,808
Accumulated other comprehensive gain (unrealized gain on available-for-sale securities, net of income tax)		2		0
Total stockholders’ equity		12,899		13,188
Total liabilities and stockholders’ equity	$	13,996	$	13,891

See accompanying notes to unaudited condensed financial statements

4

ELECTRO-SENSORS, INC.

(in thousands except share and per share amounts)  

(unaudited)  

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	2,564		$	2,462		$	4,699		$	4,363
Cost of goods sold		1,156			1,086			2,125			1,997
Gross profit		1,408			1,376			2,574			2,366
Operating expenses
Selling and marketing		427			364			873			712
General and administrative		1,125			458			1,628			901
Research and development		221			283			452			486
Total operating expenses		1,773			1,105			2,953			2,099
Operating income (loss)		(365	)		271			(379	)		267
Non-operating income
Interest income		7			0			8			2
Total non-operating income, net		7			0			8			2
Income (loss) before income tax expense (benefit)		(358	)		271			(371	)		269
Income tax expense (benefit)		(74	)		57			(78	)		57
Net income (loss)	$	(284	)	$	214		$	(293	)	$	212
Other comprehensive gain (loss)
Change in unrealized value of available-for-sale securities, net of income tax	$	2		$	(1	)	$	2		$	(1	)
Other comprehensive gain (loss)		2			(1	)		2			(1	)
Net comprehensive income (loss)	$	(282	)	$	213		$	(291	)	$	211
Net income (loss) per share data:
Basic
Net income (loss) per share	$	(0.08	)	$	0.06		$	(0.09	)	$	0.06
Weighted average shares		3,395,521			3,395,521			3,395,521			3,395,521
Diluted
Net income (loss) per share	$	(0.08	)	$	0.06		$	(0.09	)	$	0.06
Weighted average shares		3,395,521			3,413,444			3,395,521			3,433,609

See accompanying notes to unaudited condensed financial statements

5

ELECTRO-SENSORS, INC.

(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
March 31, 2022	3,395,521	$	339	$	2,042	$	10,799		$	0		$	13,180
Other comprehensive gain										2			2
Stock-based compensation expense					1								1
Net loss							(284	)					(284	)
Balance June 30, 2022 (unaudited)	3,395,521	$	339	$	2,043	$	10,515		$	2		$	12,899
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

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
December 31, 2021	3,395,521	$	339	$	2,041	$	10,808		$	0		$	13,188
Other comprehensive gain										2			2
Stock-based compensation expense					2								2
Net loss							(293	)					(293	)
Balance June 30, 2022 (unaudited)	3,395,521	$	339	$	2,043	$	10,515		$	2		$	12,899
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

See accompanying notes to unaudited condensed financial statements

6

ELECTRO-SENSORS, INC.

(in thousands)

(unaudited) 

	Six Months Ended June 30,
	2022			2021
Cash flows from (used in) operating activities
Net income (loss)	$	(293	)	$	212
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:
Depreciation and amortization		78			181
Deferred income taxes		(18	)		(28	)
Stock-based compensation expense		2			3
Interest accrued on treasury bills		(2	)		(2	)
Change in:
Trade receivables		(318	)		(455	)
Inventories		(57	)		47
Other current assets		17			(6	)
Accounts payable		(30	)		137
Accrued expenses		427			293
Income tax receivable/payable		(78	)		84
Net cash from (used in) operating activities		(272	)		466
Cash flows used in investing activities
Purchases of treasury bills		(4,992	)		(8,999	)
Proceeds from the maturity of treasury bills		5,000			9,000
Purchase of property and equipment		(17	)		(14	)
Net cash used in investing activities		(9	)		(13	)
Cash flows used in financing activities
Payments on financing lease		(3	)		(3	)
Net cash used in financing activities		(3	)		(3	)
Net increase (decrease) in cash and cash equivalents		(284	)		450
Cash and cash equivalents, beginning		6,713			1,090
Cash and cash equivalents, ending	$	6,429		$	1,540
Supplemental cash flow information
Cash paid for income taxes	$	17		$	1

See accompanying notes to unaudited condensed financial statements

7

ELECTRO-SENSORS, INC.

FOR THE PERIOD ENDED JUNE 30, 2022

(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, 2021, 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, 2022 and for the three and six-month periods ended June 30, 2022 and 2021, 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 ultimate goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff, manufacturers’ representatives, 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.

Information regarding our recently announced merger agreement is presented in Note 5. 

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. We also determine the transaction price for each performance obligation at contract inception. Our 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 that have multiple performance obligations, we allocate the transaction price to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the observable stand-alone prices charged to customers. We recognize product revenue at the point in time when control of the product is transferred to the customer, which typically occurs when we ship the products. We recognize service revenue at the point in time when we have provided the service.  

8

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

(in thousands except share and per share amounts)

(unaudited)

Fair Value Measurements 

The carrying value of trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2022 and December 31, 2021, due to the short maturity nature of these instruments.

Intangibles

The intangible asset is a technology license.  The Company amortizes the cost of the intangible asset on a straight-line method over the estimated useful life.  During the first six months of 2021, the Company had amortization expense related to the HazardPRO technology, which was fully amortized in the 2021 third quarter.  

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. 

As of June 30, 2022, there was approximately $1 of unrecognized compensation expense related to unvested stock options. The Company expects to recognize this expense over the next three months.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 economic lives of long-lived assets, realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, stock compensation expense, and the potential estimated impact on operations resulting from the COVID-19 pandemic as it relates to potential disruptions to our supply chain and customer demand. It is at least reasonably possible that these estimates may change in the near term.  

9

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

(in thousands except share and per share amounts)

(unaudited)

Net Income (Loss) per Common Share

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

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, 2022 and 2021, 332,500 and 314,577, respectively, weighted average common shares for underlying stock options have been excluded from the calculation. For the six-month periods ended June 30, 2022 and 2021, 332,500 and 294,412 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.   

New Accounting Standard Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018 the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies codification and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in February 2020 the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), both of which delay the effective date of ASU 2016-13 by three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. In accordance with ASU 2019-10 and ASU 2020-02, ASU 2016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2023 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-13 on our financial statements.

10

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

(in thousands except share and per share amounts)

(unaudited)

Note 2. Investments

The Company has investments in commercial paper, Treasury Bills, and common equity securities of two private U.S. companies. The commercial paper investment is in U.S. debt with ratings of A-1+, P-1, and F1+. The Treasury Bills have remaining terms ranging from one month to four months at June 30, 2022.  

The Company classifies its investments in commercial paper and Treasury Bills as available-for-sale, accounted for at fair value with unrealized gains and losses recognized in accumulated other comprehensive gain on the balance sheet.

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, 2022
Commercial Paper	$	1,141	$	0	$	0	$	1,141
Treasury Bills		7,983		6		0		7,989
Equity Securities		54		2		0		56
		9,178		8		0		9,186
Less Cash Equivalents		6,130		4		0		6,134
Total Investments, June 30, 2022	$	3,048	$	4	$	0	$	3,052
December 31, 2021
Commercial Paper	$	1,520	$	0	$	0	$	1,520
Treasury Bills		8,000		0		0		8,000
Equity Securities		54		2		0		56
		9,574		2		0		9,576
Less Cash Equivalents		6,520		0		0		6,520
Total Investments, December 31, 2021	$	3,054	$	2	$	0	$	3,056

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ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

(in thousands except share and per share amounts)

(unaudited)

Note 3. Fair Value Measurements

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

June 30, 2022

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,141	$	1,141	$	1,141	$	0	$	0
Treasury bills		4,993		4,993		4,993		0		0
Treasury bills - maturity date greater than three months		2,996		2,996		2,996		0		0
Equity Securities		56		56		0		0		56

December 31, 2021

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,520	$	1,520	$	1,520	$	0	$	0
Treasury bills		5,000		5,000		5,000		0		0
Treasury Bills - maturity date greater than three months		3,000		3,000		3,000		0		0
Equity Securities		56		56		0		0		56

The fair value of the commercial paper and treasury bills is based on quoted market prices in an active market.  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.  

The changes in level 3 assets measured at fair value on a recurring basis are as follows:  

	Six Months Ended June 30,
	2022		2021
Beginning Balance	$	56	$	42
Change in Fair Value		0		0
Ending Balance	$	56	$	42

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ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

(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,  2022			December 31,  2021
Raw Materials	$	1,158		$	1,129
Work In Process		285			257
Finished Goods		287			287
Reserve for Obsolescence		(10	)		(10	)
Total Inventories, net	$	1,720		$	1,663

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ELECTRO-SENSORS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022
(in thousands except share and per share amounts)
(unaudited)

Note 5. Merger Agreement with Mobile X Global, Inc. 

On June 10, 2022, Electro-Sensors, Inc. (“ELSE” or “Electro-Sensors”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mobile X Newco, Inc., a Delaware corporation, a wholly owned subsidiary of ELSE (the “Merger Sub”), and Mobile X Global, Inc., a Delaware corporation (“Mobile X”) (together with ELSE and Merger Sub the “Parties”).  Mobile X Global, Inc. is a new entrant in the global mobile industry founded by its CEO Peter Adderton.  Mobile X plans to launch a new mobile wireless brand called Mobile X in the United States in 2022, enabled by a network agreement with a major carrier.

The Merger is structured as a statutory reverse triangular merger under Delaware and Minnesota law, under which Merger Sub will be merged with and into Mobile X Global, Inc., with Mobile X Global, Inc. surviving the Merger and becoming a wholly owned subsidiary of ELSE. In connection with the Merger, ELSE will reincorporate in Delaware, be re-named Mobile X Global, Inc., and operate both the new MobileX wireless business and the existing Electro-Sensors business. The Merger Agreement also provides that Electro-Sensors, Inc. will effect a four-for-one reverse stock split shortly before completion of the Merger, unless the Parties agree on a different reverse split ratio.

In connection with the execution of the Merger Agreement, a third-party institutional investor has entered into a commitment letter with Mobile X Global, Inc. to provide equity financing in the form of convertible preferred stock of up to $20.0 million upon closing of the Merger. The commitment is subject to diligence and definitive agreements satisfactory to the third-party institutional investor, including an agreement for a $50.0 million equity line of credit to be provided by the investor. The equity line of credit would provide significant additional liquidity, at the option of Mobile X. The commitment letter terminates on October 31, 2022.

It is anticipated that, immediately after the Merger, former Mobile X stockholders will own approximately 76% of the combined company, legacy ELSE shareholders will own approximately 11% of the combined company, and that the third-party institutional investor noted above (or an alternative investor agreed to by the Parties to the Merger Agreement) and certain other investors will own approximately 13% of the combined company, all based on current ownership of ELSE and Mobile X, and assuming the closing of $20.0 million of equity financing on the terms contained in the commitment letter from the third-party institutional investor noted above.

ELSE expects the approximately 325,000 of currently outstanding options to acquire ELSE shares to be exercised in connection with the Merger prior to the record date of the cash dividend discussed below. Assuming this exercise, and based on the relative valuations agreed to by Mobile X and ELSE, and after giving effect to the reverse stock split at a ratio of four-for-one, the legacy ELSE shareholders would own approximately 932,005 shares, the Mobile X stockholders would own approximately 6,668,294 shares, the third-party institutional investor noted above (or an alternative investor agreed to by the Parties to the Merger Agreement) would own approximately 1,066,860 shares (on an as-converted to common basis) assuming the closing of $20.0 million of equity financing on the terms in the commitment letter, and approximately 75,851 shares would be held by others.

In addition to their continuing interest in the combined company, legacy Electro-Sensors shareholders as of a record date to be determined before the closing of the Merger would  receive special cash dividends expected to be approximately $18.0 million in the aggregate, with the amount of the dividends possibly adjusted based on the amount of ELSE transaction expenses and its working capital balance at the closing of the Merger, and further adjusted for indebtedness, if any, and transaction bonuses, if any, approved by the ELSE board of directors. Aggregate cash dividends of $18.0 million would be approximately $4.83 per share based on the current, pre-reverse split, fully diluted shares of Electro-Sensors.  

14

ELECTRO-SENSORS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022
(in thousands except share and per share amounts)
(unaudited)

Closing of the Merger is subject to specified conditions, including, among other matters: (i) the approval by Mobile X stockholders and ELSE shareholders of the Merger; (ii) a registration statement becoming effective under the Securities Act of 1933, as amended, related to the shares being issued to the Mobile X stockholders in the Merger and the clearance of the proxy statement related to the approval by the ELSE shareholders of the Merger; (iii) receipt of $20.0 million in third party equity financing; (iv) listing of the combined company's common stock on Nasdaq; and (v) the filing of an amendment to ELSE 's Articles of Incorporation to increase the number of shares of common stock authorized for issuance to a number at least large enough to consummate the Merger, allowing the issuance of shares to former Mobile X stockholders and any third-party investors, after giving effect to the reverse stock split described above.

In connection with the execution of the Merger Agreement, Electro-Sensors' directors, officers, and certain major shareholders, who collectively own a majority of Electro-Sensors' outstanding shares, have entered into agreements with Mobile X to vote their shares in favor of the Merger at a special meeting of shareholders to be held before the closing of the Merger on a date to be announced. In addition, directors, officers and certain major stockholders of Mobile X, who collectively own a majority of Mobile X's outstanding shares, have entered into similar voting agreements. No written consents have been granted nor have any votes been cast. The Voting Agreements may be terminated in connection with a termination of the Merger Agreement. Closing will follow the special meeting of shareholders of Electro-Sensors, consent of stockholders of Mobile X Global, and satisfaction of other customary and specified closing conditions, including the U.S. Securities and Exchange Commission ("SEC") having declared effective a registration statement, and The Nasdaq Stock Market having approved the listing of the common stock of the combined company.

A full description of the terms of the Merger Agreement will be provided in a combined Form S-4 Registration Statement/Proxy Statement for the shareholders of ELSE (the “Merger Proxy Statement”) to be filed with the SEC.  ELSE urges investors, shareholders, and other interested persons to read, when available, the preliminary proxy statement as well as other documents filed with the SEC because these documents will contain important information about ELSE, Mobile X, and the proposed transaction.  The definitive Merger Proxy Statement will be mailed to ELSE shareholders as of a record date to be established for voting on the proposed transaction.  Shareholders will also be able to obtain a copy of the definitive Merger Proxy Statement (when available), without charge, by directing a request to: Electro-Sensors, Inc., 6111 Blue Circle Drive, Minnetonka MN 55343.  The preliminary and definitive proxy statement, once available, can also be obtained, without charge, at the SEC’s website (www.sec.gov).

The Company expects the Merger to close in the second half of 2022.

Note 6. Subsequent Events

On July 15, 2022, three Company directors exercised their stock options. Each director had options to purchase 2,500 shares at an exercise price of $4.15.  The total amount received by the Company for the exercise of the options was $31. 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements include, but are not limited to, statements about the success of our marketing efforts; our efforts to accelerate future growth or income; our business development activities; our efforts to maintain or reduce production costs; our ability to continue to obtain components and other raw materials for our products at reasonable prices as well as our ability to pass along any increased costs to our customers; our cash requirements; and the sufficiency of our cash flows.  Based on rapidly changing dynamics in global supply chains of materials and components, we may experience both price increases and difficulty in sourcing materials and components.  In addition, we may experience changes in transportation and freight availability that may make it difficult to have materials and components shipped to us or our products shipped to customers in a timely manner. Any statement that is not based solely upon historical facts, including our strategies for the future and the outcome of events that have not yet occurred, is a forward-looking statement.

This Form 10-Q also includes certain forward-looking statements concerning Electro-Sensors, Mobile X Global and the proposed transactions within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding future financial performance, future growth, and the development of future products and services; the benefits of the proposed transactions, including anticipated growth and synergies; the combined company’s plans, objectives and expectations and intentions; the expected timing of the proposed transactions; and future acquisitions. These statements are based on current expectations or beliefs and are subject to uncertainty and changes in circumstances. There can be no guarantee that the proposed transactions described in this Form 10-Q will be completed, or that they will be completed as currently proposed, or at any particular time. Actual results may vary materially from those expressed or implied by the statements here due to changes in economic, business, competitive or regulatory factors, and other risks and uncertainties affecting the operation of Electro-Sensors as well as the business of Mobile X Global. Many of these risks, uncertainties and contingencies related to Electro-Sensors are presented in Electro- Sensors’ Annual Report on Form 10-K and, from time to time, in Electro-Sensors’ other filings with the SEC. These and other risks related to the business of Mobile X Global will be presented in the proxy statement/prospectus/consent solicitation statement to be filed with the SEC.

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The information here should be read considering these risks and the following considerations: the ability of the merger parties to obtain definitive investment documents and close on the equity investments necessary to complete the Merger; the ability of MobileX to successfully launch its business, attract subscribers, and achieve the levels of customer service, revenues and costs that it currently expects; the ability of the combined company to successfully maintain a Nasdaq Capital Market listing; the ability of the combined company to successfully access the capital markets to finance expansion and acquisitions; the ability of the combined company to identify and acquire appropriate acquisition targets and successfully integrate these companies into its operations; the ability of the combined company to achieve synergies between its legacy sensor business and its new MobileX business; the conditions to the  closing of the Merger may not be satisfied or an event, change or other circumstance could occur that could give rise to the termination of the Merger Agreement; the Merger may involve unexpected costs, liabilities or delays, resulting in the Merger not being consummated within the expected time period; risks that the announced merger may disrupt current  Electro-Sensors plans and operations or that the business or stock price of Electro-Sensors may suffer as a result of uncertainty surrounding the Merger; the outcome of any legal proceedings related to the Merger; and Electro-Sensors or Mobile X Global may be adversely affected by other economic, business, or competitive factors.  Additional information regarding the merger is available in Note 5 to the financial statements.

All forward-looking statements in this document are based on information available to us as of the date of this Form 10-Q, and we assume no obligation to update any of these forward-looking statements, other than as required by law. Our actual results could differ materially from those projected or indicated in these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause future results to differ materially from our recent results or those projected in the forward-looking statements, including the accuracy of management’s assumptions with respect to industry trends, fluctuations in industry conditions, the accuracy of management’s assumptions regarding expenses and our cash needs and those listed under the heading “Forward-Looking Statements” under “Item 1—Business,” in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as any effect the COVID-19 pandemic may have on the efficiency of our business operations, our customer base and the domestic or worldwide economy. 

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make decisions based upon estimates, assumptions, and factors it considers relevant to the circumstances. These decisions include the selection of applicable accounting principles and the use of judgment in their application and affect reported amounts and disclosures. Changes in economic conditions or other business circumstances may affect the outcomes of management’s estimates and assumptions. An in-depth description of our accounting estimates can be found in the interim financial statements included in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 

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SELECTED FINANCIAL INFORMATION

The following table contains selected financial information, for the periods indicated, from our Condensed Statements of Comprehensive Loss expressed as a percentage of net sales. 

	Three Months Ended June 30				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	45.1		44.1		45.2		45.8
Gross profit	54.9		55.9		54.8		54.2
Operating expenses
Selling and marketing	16.7		14.8		18.5		16.3
General and administrative	43.9		18.6		34.6		20.7
Research and development	8.6		11.5		9.6		11.1
Total operating expenses	69.2		44.9		62.7		48.1
Operating loss	(14.3	)	11.0		(7.9	)	6.1
Non-operating income
Interest income	0.3		0.0		0.2		0.0
Total non-operating income, net	0.3		0.0		0.2		0.0
Loss before income tax benefit	(14.0	)	11.0		(7.7	)	6.1
Income tax benefit	(2.9	)	2.3		(1.7	)	1.3
Net loss	(11.1)	%	8.7	%	(6.0)	%	4.8	%

The following paragraphs discuss the Company’s performance for the three and six months ended June 30, 2022 and 2021.

RESULTS OF OPERATIONS (in thousands) 

Net Sales

Net sales for the three-month period ended June 30, 2022 were $2,564, an increase of $102, or 4.1%, from $2,462 during the comparable period in 2021. Net sales for the six months ended June 30, 2022 were $4,699, an increase of $336, or 7.7%, from $4,363 during the comparable period in 2021. The increased sales were driven by broad-based strength in agricultural applications, including commodity refining and biofuels.

Gross Profit

Gross profit for the second quarter of 2022 increased $32 to $1,408, or 2.3%, over the same period in 2021. Gross profit for the six months ended June 30, 2022 increased $208 to $2,574, or 8.8%, over the same period in 2021. Gross margin decreased in the second quarter of 2022 to 54.9% from 55.9% during the same period in 2021. Gross margin for the six months ended June 30, 2022 increased to 54.8% from 54.2% over the same period in 2021. The decrease in gross margin for the second quarter was due to a increase in raw material costs.  The increase in gross margin for the six months ended June 30, 2022  was primarily due to improved factory utilization, partially offset by increases in raw material costs.

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Operating Expenses

Total operating expenses increased $668, or 60.5% to $1,773 for the second quarter of 2022 compared to the same period in 2021, and increased as a percentage of net sales to 69.2% from 44.9%. Total operating expenses increased $854, or 40.7%, for the six months ended June 30, 2022 compared to the same period in 2021, and increased as a percentage of net sales to 62.7% from 48.1%. The increase in operating expenses was primarily due to increases in legal and professional fees directly related to the pending merger with Mobile X as discussed in Note 5 to the financial statements.  

● Selling and marketing expenses in the second quarter of 2022 increased $63 to $427, or 17.3%, from the same period in 2021 and increased as a percentage of net sales to 16.7% from 14.8%. Selling and marketing expenses in the six months ended June 30, 2022 increased $161 to $873, or 22.6%, from the same period in 2021 and increased as a percentage of net sales to 18.5% from 16.3%. The increase for both periods was primarily due to additional sales headcount, and increased travel and tradeshow related expenses.  The increase in tradeshow expenses in 2022 occurred because a majority of tradeshows in 2021 were held during the third quarter.  

● General and administrative expenses increased $667 to $1,125, or 145.6%, in the second quarter of 2022 compared to the same period in 2021 and increased as a percentage of net sales to 43.9% from 18.6%. General and administrative expenses increased $727 to $1,628, or 80.7%, for the six months ended June 30, 2022 compared to the same period in 2021 and increased as a percentage of net sales to 34.6% from 20.7%. The increase for both periods was primarily due to increased legal and other professional fees related to the June 10, 2022 execution of the Merger Agreement and pending related filings, partially offset by a decrease in amortization expense related to the HazardPRO technology, which was fully amortized in the third quarter of 2021.

● Research and development expenses decreased $62 to $221, or 21.9%, in the second quarter of 2022 from the same period in 2021 and decreased as a percentage of net sales to 8.6% from 11.5%. Research and development expenses decreased $34 to $452, or 7.0%, in the six months ended June 30, 2022 from the same period in 2021 and decreased as a percentage of net sales to 9.6% from 11.1%. The decrease for both periods was due to lower third party engineering costs related to product development and enhancements.  

Non-Operating Income

Net non-operating income increased by $6, or 300.0%, for the six months ended June 30, 2022 compared to the same period in 2021. 

Income (Loss) Before Income Tax Expense (Benefit)

Loss before income tax benefit was $358 for the second quarter of 2022, representing a decrease of $629 compared to an income before income tax expense of $271 for the same period in 2021. Loss before income tax benefit was $371 for the six months ended of June 30, 2022, representing a decrease of $640 compared to an income before income tax expense of $269 for the same period in 2021. The decrease for both periods was primarily the result of higher legal and other professional fees related to the pending merger.

Income Tax Expense (Benefit)

Income tax benefit was $74, or (2.9)% of net sales in the second quarter of 2022 compared to an income tax expense of $57, or 2.3% of net sales in the second quarter of 2021. The income tax benefit was $78, or (1.7)% of net sales, in the six months ended June 30, 2022 compared to an income tax expense of $57, or 1.3% of net sales, for the six months ended June 30, 2021. The decrease in both periods is due to loss before income tax benefit in 2022 compared to a net income before income tax in 2021.

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LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $6,429 at June 30, 2022 and $6,713 at December 31, 2021. The decrease was primarily the result of an increase in cash used in operating activities discussed below.  

Cash used in operating activities was $272 for the six months ended June 30, 2022 as compared to cash generated from operating activities of $466 for the six months ended June 30, 2021. The $738 increase in cash used in operations was due primarily to an increase in the net loss.  The 2022 net loss compared to the 2021 net income was primarily due to the increase in legal and professional fees related to the merger expenses. 

Cash used in investing activities was $9 for the six months ended June 30, 2022 compared to $13 for the six months ended June 30, 2021. The decrease in cash used in investing activities was due to a decrease in Treasury Bill maturities classified as investments during 2022.  

Cash used in financing activities in the six months ended June 30, 2022 and 2021 was $3 for both periods. 

Subject to the following sections, entitled "COVID-19 Pandemic Discussion" and "Supply Chain Dynamics," the Company believe its ongoing cash requirements will be primarily for capital expenditures, research and development, working capital, and corporate and business development initiatives and that cash on hand and any cash generated from operations will be sufficient to meet these cash requirements through at least the next 12 months.

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COVID-19 Pandemic Discussion

While many regions of the United States have reduced the various restrictions implemented beginning in 2020, many of our customers and potential customers continue to operate under modified and changing restrictions based on the number of local or regional COVID-19 cases.  The uncertainty surrounding the ongoing fluctuations in regional case counts creates uncertainty in our business and may negatively affect our 2022 financial results.

Supply Chain Dynamics

We traditionally have had one or more robust sources for production components and materials.  However, we are increasingly experiencing significant disruptions in our supply chain, resulting in difficulty sourcing some parts. Additionally, we are experiencing price increases for many of the components used in our products. In certain situations, we are modifying product designs to accommodate new components that are more readily available.  There is no guarantee that we will continue to be successful in updating these designs and sourcing alternative components, and we could experience significant delays or run out of certain components and materials. We are also seeing delays in shipping and transportation services, which may adversely affect our ability to make timely deliveries to our customers. Furthermore, the labor market for qualified employees able to fill our production positions is challenging and may result in delays in filling open positions.  While we continue to closely manage each of these activities, our actions may not be successful and may result in a negative effect on our sales and profit margins.

Future Corporate and Business Development Activities

We continue to seek growth opportunities, both internally through our existing portfolio of products, technologies, and markets, as well as externally through technology partnerships or related-product or business acquisitions.  In addition, we continued to explore other strategic investments that we believed presented good opportunities for the Company and its shareholders. We substantially increased these business development activities in the second half of 2021 and first half of 2022.  On June 10, 2022, we announced that we had entered into the Merger Agreement with Mobile X Global, Inc.

Off-balance Sheet Arrangements

As of June 30, 2022, the Company had no off-balance sheet arrangements or transactions.

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Not Applicable.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer has concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), were effective as of June 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the second quarter of 2022 that were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

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Exhibit	Description
3.1	Restated Articles of Incorporation, as amended
3.2	Bylaws, as amended June 10, 2022
31.1	Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from Electro-Sensors, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language), (i) Condensed Balance Sheets as of June 30, 2022 and December 31, 2021, (ii) Condensed Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and June 30, 2021 (iii) Condensed Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2022 and June 30, 2021, (iv) Condensed Statements of Cash Flows for the six months ended June 30, 2022 and June 30, 2021, and (v) Notes to Financial Statements.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Electro-Sensors, Inc.
August 2, 2022	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

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EX-3.1

Exhibit 3.1

RESTATED ARTICLES OF INCORPORATION
OF
ELECTRO-SENSORS, INC.

AS OF JUNE 30, 2022

ARTICLE 1
NAME

1.1The name of the corporation shall be Electro-Sensors, Inc.

ARTICLE 2
REGISTERED OFFICE

2.1 The location and post office address of the registered office of the corporation shall be 6111 Blue Circle Drive Minnetonka, Minnesota 55343-9108

ARTICLE 3

PURPOSE

3.1 The corporation shall have general business purpose.

ARTICLE 4

CAPITAL STOCK

4.1 Authorized Capital Stock – The authorized capital stock of this corporation shall be Ten Million (10,000,000) shares of common stock with a par value of ten cents ($.10) per share. All shares are to be held, sold, and paid for at such times and in such manner as the Board of Directors may from time to time determine, in accordance with Statutes of Minnesota.

4.2 Voting Rights – Each holder of record of the common stock of the corporation shall be entitled to one (1) vote for each share of common stock held by him at each meeting of the shareholders in respect to any matter on which the shareholders have a right to vote. The right to vote shall be subject to the provisions of the by-laws of the corporation in effect from time to time with respect to closing the transfer books and fixing a record date for the determination of shareholders entitled to vote. Cumulative voting for directors is not permitted.

4.3 Pre-emptive Rights – The shareholders of the corporation shall not have the pre-emptive right of subscription to any shares of common stock of the corporation to be issued or sold, or hereafter authorized, or any obligations or securities exchangeable for or convertible into stock of the corporation of any class, including capital stock of the corporation which has not yet been authorized.

1

4.4 Stock Rights and Options – The Board of Directors shall have the power to create and issue rights, warrants, or options entitling the holders thereof to purchase from the corporation any shares of its capital stock of any class or series, upon such terms and conditions and at such times and prices as the Board of Directors may provide, which terms and conditions shall be incorporated in an instrument or instruments evidencing such rights.

4.5 Dividends – The holders of the common stock shall be entitled to receive, when and as authorized by the Board of Directors, dividends, payable either in cash, in property, or in shares of the capital stock of the corporation. The Board of Directors may authorize dividends only if the corporation will be able to pay its debts in the ordinary course of business after paying the dividends.

4.6 Other Distributions – The Board of Directors may authorize, and the holders of the common stock may receive, distributions other than dividends only if the corporation will be able to pay its debts in the ordinary course of business after making the distribution.

4.7 Board of Directors’ Powers – The common stock may be issued as and when the Board of Directors shall determine, and, under and pursuant to the laws of the State of Minnesota, the Board of Directors shall have the power to fix or alter, from time to time, in respect to shares then unissued, any or all of the following: dividend rate; redemption price; the liquidation price; the conversion rights and the sinking or purchase fund rights of shares of any class, or of any series of any class, or the number of shares constituting any series of any class. The Board of Directors shall have the power to issue convertible securities of any class or series.

ARTICLE 5

BOARD OF DIRECTORS

5.1 The Board of Directors is expressly authorized to make and alter by-laws of this corporation subject to the power of the shareholders to change or repeal such by-laws; provided, the Board of Directors shall not adopt, amend or repeal any by-laws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the board, or fixing the number of directors or their classifications or terms of office.

5.2 Any action required or permitted to be taken at a duly called Board of Directors meeting may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the Board, except that on an action which requires shareholder approval the written action must be signed by all the directors.

2

ARTICLE 6

VOLUNTARY TRANSFER OF CORPORATE ASSETS

6.1 The holders of a majority of all the shares entitled to vote at any duly constituted meeting of the shareholders shall have the power to authorize the Board of Directors to sell, lease, exchange or otherwise dispose of all or substantially all of the property and assets of this corporation, including its goodwill, upon such terms and conditions and for such consideration as the Board of Directors deems advisable, and to adopt or reject an agreement of consolidation or merger, provided, however, that notice of such proposal shall have been mailed to each shareholder entitled to vote at such meeting at least ten (10) days prior to such meeting, or the written consent of such shareholder is given to such action as provided by statute.

ARTICLE 7

AMENDMENT OF ARTICLES

7.1 The holders of a majority of all the shares entitled to vote at any duly constituted meeting of the shareholders shall have the power to amend, alter or repeal the Restated Articles of Incorporation to the extent and the manner prescribed by the laws of the State of Minnesota.

ARTICLE 8

8.1 No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) under section 302A.559 or 80A.23 of Minnesota Statutes; (iv) for any transaction from which the director derived any improper personal benefit; or (v) for any act or omission occurring prior to the date when this provision becomes effective.

8.2 The provisions of this Article 8 shall not be deemed to limit or preclude indemnification of a director by the corporation for any liability of a director which has not been eliminated by the provisions of this Article 8.

8.3 If Minnesota Statutes hereafter are amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Minnesota Statutes, as so amended.

ARTICLE 9

INAPPLICABILITY OF MINNESOTA CONTROL SHARE ACQUISITION STATUTE

9.1 Section 302A.671 of the Minnesota Statutes Annotated (entitled “Control Share Acquisitions”) shall not apply to this corporation.

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EX-3.2

Exhibit 3.2

Amended Bylaws
of
Electro-Sensors, Inc.
(as of june 10, 2022)

ARTICLE 1

Offices and Corporate Seal

1.1 Offices. The principal office of the corporation will be located at 6111 Blue Circle Drive, Minnetonka, Minnesota, and the corporation may have offices at such other places within or without the State of Minnesota as the Board of Directors may from time to time determine or the business of the corporation requires.

1.2 Seal. The corporation will have such corporate seal or no corporate seal as the Board of Directors may from time to time determine.

ARTICLE 2

Meetings of Shareholders

2.1 Annual Meeting. The annual meeting of the shareholders of the corporation entitled to vote will be held at the principal office of the corporation or at such other place, within or without the State of Minnesota, as is designated by the Board of Directors, or by written consent of all the shareholders entitled to vote thereat, at such time on such day of each year as determined by the Board of Directors or by the President. At the annual meeting, the shareholders, voting as provided in the Articles of Incorporation, will elect directors and transact such other business as properly comes before the meeting.

2.2 Special Meetings. Special meetings of the shareholders entitled to vote may be called by the Secretary at any time upon request of the Chairman of the Board, the President or the Board of Directors (acting upon majority vote), or upon request by shareholders holding 10% or more of the voting power of the shareholders.

2.3 Remote or Virtual Shareholder Meetings.The Board of Directors may determine that shareholders not physically present in person or by proxy at a regular or special shareholder meeting called pursuant to Section 2.1 or 2.2 of these Bylaws may, by means of remote communication, participate in a regular or special shareholder meeting held at a designated place. The Board of Directors also may determine that any regular or special meeting of the shareholders will not be held at a physical place, but instead solely by means of remote communication, so long as the corporation implements reasonable measures to provide that each shareholder participating by remote communication has a reasonable opportunity to participate in the meeting in accordance with the provisions of Section 302A.436, subdivision 5, of the Minnesota Business Corporation Act (the “MBCA”) as amended from time to time, or any successor statute.Participation by remote communication constitutes presence at the meeting.

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2.4 Notice of Meetings.

(a)Written Notice of Meetings.Subject to Section 2.4(b), the Company must mail to each shareholder entitled to vote, at the address on the books of the corporation, a notice setting out the place, date and hour of the regular meeting or any special meeting, which notice must be mailed at least 10 but not more than 60 days prior to the date of the meeting.Notice of any special meeting must state the purpose or purposes of the proposed meeting, and the business transacted at all special meetings will be confined to purposes stated in the notice.Attendance at a meeting by any shareholder, without objection at the beginning of the meeting by the shareholder as to the transaction of business because the meeting is not lawfully convened or that the item may not lawfully be considered, will constitute the shareholder’s waiver of notice of the meeting.

(b)Electronic Notice.Notwithstanding the written notice requirement in Subsection 2.4(a) above, notice of any regular or special meeting may be given to a shareholder by means of electronic communication if the requirements of MBCA Section 302A.436, subdivision 5, as amended from time to time, are met. Notice to a shareholder is also effectively given if the notice is given to the shareholder in a manner permitted by the rules and regulations under the Securities Exchange Act of 1934, as amended, so long as the corporation has first received any written or implied consent required by those rules and regulations.

2.5 Quorum and Adjourned Meetings. The holders of a majority of all shares outstanding and entitled to vote, represented either in person or by proxy, will constitute a quorum for the transaction of business at any annual or special meeting of the shareholders. In case a quorum is not present at the annual meeting, those present will have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite number of voting shares are represented. At such adjourned meetings at which the required amount of voting shares are represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.6 Voting. At each meeting of the shareholders, every shareholder having the right to vote will be entitled to vote in person or by proxy duly appointed by an instrument in writing subscribed by such shareholder. Each shareholder will have one vote for each share having voting power standing in his name on the books of the corporation except as may be otherwise required to provide for cumulative voting (if not denied by the Articles). Upon the demand of any shareholder, the vote for directors or the vote upon any question before the meeting will be by ballot. All elections will be had and all questions decided by a majority vote of the number of shares entitled to vote and represented at any meeting at which there is a quorum except in such cases as otherwise be required by statute, the Articles of Incorporation or these Bylaws. Except as may otherwise be required to conform to cumulative voting procedures, directors will be elected by a plurality of the votes cast by holders of shares entitled to vote thereon. 

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2.7 Closing of Books. The Board of Directors may fix a time, not exceeding 60 days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed, The Board of Directors may close the books of the corporation against transfer of shares during the whole or any part of such period. In the absence of action by the Board, only shareholders of record 20 days prior to a meeting may vote at such meeting.

2.8 Order of Business. The suggested order of business at the annual meeting and, to the extent appropriate, at all other meetings of the shareholders, will, unless modified by the presiding chairman, be:

(a)Call of roll

(b)Proof of due notice of meeting or waiver of notice

(c)Determination of existence of quorum

(d)Reading and disposal of any unapproved minutes

(e)Annual report of officers and committees

(f)Election of directors

(g)Unfinished business

(h)New business

(i)Adjournment

ARTICLE 3

Directors

3.1 General Powers. The property, affairs and business of the corporation will be managed by the Board of Directors.

3.2 Number, Term and Qualifications. The Board of Directors will consist of one or more members. At each annual meeting, the shareholders will determine the number of directors; provided, that between annual meetings the authorized number of directors may be increased or decreased by the shareholders or increased by the Board of Directors. Each director will serve for an indefinite term that expires at the next annual meeting of shareholders, and until the director’s successor is elected and qualified, or until the director’s earlier death, resignation, disqualification or removal as provided by statute.

3.3 Vacancies. Vacancies in the Board of Directors may be filled by the remaining members of the Board, though less than a quorum; provided that newly created directorships resulting from an increase in the authorized number of directors may be filled by two-thirds (2/3) of the directors serving at the time of such increase. Persons so elected will serve as directors until their successors are elected by the shareholders, who may make such election at their next annual meeting or at any special meeting duly called for that purpose.

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3.4 Quorum. A majority of the entire Board of Directors will constitute a quorum for the transaction of business; provided, however, that if any vacancies exist by reason of death, resignation or otherwise, a majority of the remaining directors will constitute a quorum for the purpose of filling of such vacancies.

3.5 First Meeting. As soon as practicable after each annual election of directors, the Board of Directors will meet for the purpose of organization, electing or appointing officers of the corporation, and transaction of other business, at the place where the shareholders' meeting is held or at the place where regular meetings of the Board of Directors are held. No notice of such meeting need be given. Such first meeting may be held at any other time and place specified in a notice given as hereinafter provided for special meetings or in a waiver of notice signed by all the directors.

3.6 Regular Meetings. Regular meetings of the Board of Directors may be held from time to time at such time and place as may from time to time be fixed by resolution adopted by a majority of the entire Board of Directors. No notice need be given of any regular meeting.

3.7 Special Meetings. Special meetings of the Board of Directors may be held at such time and place as may be designated in the notice or the waiver of notice of the meeting. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or by any two directors. Unless notice is waived by all directors, notice of such special meeting (including a statement of the purposes thereof) must be given to each director at least 24 hours in advance of the meeting if oral or two days in advance of the meeting if by mail, telegraph or other written communication; provided, however, that meetings may be held without waiver of notice from or giving notice to any director serving in the armed forces of the United States or outside the continental limits of the United States. A director, by attendance at any directors' meeting without objection in writing, will be deemed to have waived notice of that meeting.

3.8 Compensation. Directors and members of any committee of the Board contemplated by these Bylaws or otherwise provided for by resolution of the Board of Directors, will receive only such compensation therefor as may be determined from time to time by resolution of the Board of Directors. Nothing herein contained may be construed to preclude any director from serving the corporation in any other capacity and receiving proper compensation therefor, unless prohibited by the rules of any national securities exchange or other market on which the corporation’s securities are listed.

3.9 Indemnification. The corporation shall indemnify such persons, for such expenses and liabilities, in such manner, under such circumstances, and to such extent, as permitted by Minnesota Statutes, Section 302A.521, as now enacted or hereafter amended.

3.10 Executive Committee. The Board of Directors may, by unanimous affirmative action of the entire Board, designate two or more of its number to constitute an Executive Committee, which, to the extent determined by unanimous affirmative action of the entire Board, will have and exercise the authority of the Board in the management of the business of the corporation. Any such Executive Committee may act only in the interval between meetings of the Board and will be subject at all times to the control and direction of the Board.

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3.11 Order of Business. The suggested order of business at any meeting of the Board of Directors will, to the extent appropriate and unless modified by the presiding chairman, be:

(a)Roll call

(b)Proof of due notice of meeting or waiver of notice, or unanimous presence and declaration by President

(c)Determination of existence of quorum

(d)Reading and disposal of any unapproved minutes

(e)Reports of officers and committees

(f)Election of officers

(g)Unfinished business

(h)New business

(i)Adjournment

3.12 Exclusive Forum for Internal Corporate Claims. The sole and exclusive forum for (i) any claim that is based upon a violation of a duty under the laws of the State of Minnesota by a current or former director, officer or shareholder in such capacity; (ii) any derivative action or proceeding brought on behalf of the corporation; or (iii) any action asserting a claim arising under any provision of the Minnesota Business Corporation Act or the corporation’s articles or bylaws will be the federal courts (where jurisdiction exists) and state courts located in Hennepin County, Minnesota.Any person or entity purchasing or otherwise acquiring an interest in shares of capital stock of the corporation is deemed to have notice of and consented to the provisions of this bylaw.

ARTICLE 4

Officers

4.1 Number and Designation. The Board of Directors will elect a President, Chief Executive Officer, Chief Financial Officer, and Secretary, and may elect or appoint a Chairman of the Board and such other officers and agents as it may from time to time determine. Any two or more of these offices may be held by one person.

4.2 Election, Term of Office and Qualifications. At each annual meeting of the Board of Directors, the Board will elect the officers provided for in Section 4.1 and these officers will hold office until the next annual meeting of the Board or until their successors are elected or appointed and qualify; provided, however, that any officer may be removed with or without cause by the affirmative vote of a majority of the entire Board of Directors (without prejudice, however, to any contract rights of such officer).

4.3 Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chairman, President or Secretary. The resignation will take effect at the time specified in the notice and, unless otherwise specified therein, acceptance of the resignation will not be necessary to make it effective.

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4.4 Vacancies in Offices. If there be a vacancy in any office of the corporation, by reason of death, resignation, removal or otherwise, the vacancy may be filled for the unexpired term by the Board of Directors at any regular or special meeting. 

4.5 Chairman of the Board. The Board of Directors may, in its discretion, elect one of its number as Chairman of the Board.The Chairman will exercise general supervision and direction over the more significant matters of policy affecting the affairs of the corporation, including particularly its financial and fiscal affairs. The Chairman or his designee will preside at all meetings of the shareholders and of the Board. The Chairman of the Board may call a meeting of the Board whenever the Chairman deems it advisable.

4.6 President. The President will have general active management of the business of the corporation.In the absence of the Chairman of the Board, the President will preside at all meetings of the shareholders and Board of Directors. The President will be the chief executive officer of the corporation and will see that all orders and resolutions are carried into effect. The President will perform all duties usually incident to the office of President and such other duties as may from time to time be assigned by the Board.

4.7 Vice President. Each Vice President will have such powers and will perform such duties as may be specified in these Bylaws, prescribed by the Board of Directors, or prescribed by the President.

4.8 Secretary. The Secretary will be secretary of and will attend all meetings of the shareholders and Board of Directors, will act as clerk thereof and will record all the proceedings of such meetings in the minute book of the corporation. The Secretary will give proper notice of meetings of shareholders and directors and may, with the Chairman of the Board, President or any authorized officer, sign all certificates representing shares of the corporation and will perform the duties usually incident to this office and such other duties as may be prescribed by the Board of Directors from time to time.

4.9 Other Officers. The Board of Directors may appoint one or more Assistant Secretaries and such other officers, agents and employees as the Board may deem advisable. Each officer, agent or employee so appointed will hold office at the pleasure of the Board and perform such duties as may be assigned by the Board, Chairman of the Board or President.

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ARTICLE 5

Shares and Their Transfer

5.1 Certificates of Stock. The shares of the corporation may be either certificated or uncertificated shares as determined by resolution of the Board of Directors.In the absence of such resolution, shares will be certificated.If shares are uncertificated, the Secretary will mail to each holder of uncertificated shares the information set forth at the end of this section to be contained on certificates.Every owner of certificated shares of stock of the corporation will be entitled to a certificate, to be in such form as the Board of Directors may prescribe, certifying the number of shares of stock of the corporation owned. The certificates for the stock will be numbered (separately for each class) in the order issued and signed in the name of the corporation by the proper officer of the corporation thereunto authorized by the Board of Directors.Signatures of the officers upon a certificate may be facsimiles.Certificates on which a facsimile signature of a former officer appears may be issued with the same effect as if the former officer were such officer on the date of issue.Certificates will contain the name of the corporation, state that the corporation is incorporated under the laws of the State of Minnesota, state the name of the holder and number, class and series, if any, that the certificate represents.Certificates must in addition, note conspicuously on their face or back any transfer restrictions to which they are subject.

5.2 Stock Record. As used in these Bylaws, the term "shareholder" means the person, firm or corporation in whose name outstanding shares of capital stock of the corporation are currently registered on the stock record books of the corporation. A record will be kept of the name of the person, firm or corporation owning the stock represented by such certificates respectively, the respective dates thereof and, in the case of cancellation, the respective dates of cancellation. Every certificate surrendered to the corporation for exchange or transfer must be cancelled and no new certificate or certificates may be issued in exchange for any existing certificate until such existing certificate has been so cancelled (except as provided for in Section 5.4 of this Article 5).

5.3 Transfer of Shares. Transfer of shares on the books of the corporation may be authorized only by the shareholder named in the certificate (or his legal representative or duly authorized attorney-in-fact) and upon surrender for cancellation of the certificate or certificates for such shares. The shareholder in whose name shares of stock stand on the books of the corporation will be deemed the owner thereof for all purposes as regards the corporation; provided, that when any transfer of shares are made as collateral security and not absolutely, such fact, if known to the Secretary of the corporation or to the transfer agent, will be so expressed in the entry of transfer.

7

5.4 Lost Certificates. Any shareholder claiming a certificate of stock to be lost or destroyed must make an affidavit or affirmation of that fact in such form as the Board of Directors may require, and must, if the directors so require, give the corporation a bond of indemnity in form and with one or more sureties satisfactory to the Board of at least double the value, as determined by the Board, of the stock represented by such certificate to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been destroyed or lost.

5.5 Inspection of Books by Shareholders. Shareholders will be permitted to inspect the books of the corporation in accordance with the MBCA.

ARTICLE 6

Dividends, Surplus, Reserves

6.1 Dividends. Subject to the provisions of the Articles of Incorporation and of these Bylaws, the Board of Directors may declare dividends from the net earnings or net assets of the corporation available for dividends whenever and in such amounts as, in its opinion, the condition of the affairs of the corporation renders it advisable.

6.2 Use of Surplus; Reserves. Subject to the provisions of the Articles of Incorporation and of these Bylaws, the Board of Directors in its discretion may use and apply any of the net earnings or net assets of the corporation available for such purpose to purchase or acquire any of the shares of the capital stock of the corporation in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences ofindebtedness, or from time to time may set aside from its net assets or net earnings such sums as it, in its absolute discretion, may think proper as a reserve fund to meet contingencies, for the purpose of maintaining or increasing the property or business of the corporation, or for any other purpose it may think conducive to the best interests of the corporation.

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ARTICLE 7

Fiscal Year and Audit

7.1 Fiscal Year. The fiscal year of the corporation will be established by the Board of Directors. 

7.2 Audit of Books and Accounts. The books and accounts of the corporation must by audited at least once in each fiscal year or at such times as may be ordered by the Board of Directors.

ARTICLE 8

Waiver of Notice and Unanimous Consent

8.1 Requirement of Waiver in Writing. Whenever any notice whatever is required to be given by these Bylaws, the Articles of Incorporation or any of the laws of the State of Minnesota, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before, at or after the time stated therein, will be deemed equivalent to the actual required notice.

8.2 Authorization Without Meeting. Any action of the shareholders, the Board of Directors, or any lawfully constituted Executive Committee of the corporation which may be taken at a meeting thereof, may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to notice of a meeting for such purpose, by all of the directors or by all of the members of such Executive Committee, as the case may be.

ARTICLE 9

Amendments

9.1 Amendments. These Bylaws may be altered, amended, added to or repealed by the affirmative vote of 51% of the members of the Board of Directors at any regular meeting of the Board or at any special meeting of the Board called for that purpose, subject to the power of the shareholders to change or repeal such Bylaws and subject to any other limitations on such authority of the Board provided by the MBCA. 

9

EX-31.1

 EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY-ACT OF 2002

I, David L. Klenk, certify that: 

1. I have reviewed this report on Form 10-Q of Electro-Sensors Inc.;

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. I am 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 my supervision, to ensure that material information relating to the registrant is made known to me 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 my 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 my 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. I have disclosed, based on my 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.

August 2, 2022	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer

1

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Electro-Sensors, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, David L. Klenk, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  

August 2, 2022	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer

1

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Aug. 01, 2022
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Filer Category	Non-accelerated Filer
Entity Registrant Name	ELECTRO SENSORS INC
Entity Central Index Key	0000351789
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Common Stock, Shares Outstanding		3,403,021
Trading Symbol	ELSE
Entity Emerging Growth Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-09587
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-0943459
Entity Address, Address Line One	6111 Blue Circle Drive
Entity Address, City or Town	Minnetonka
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55343-9108
City Area Code	952
Local Phone Number	930-0100
Title of 12(b) Security	Common stock
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Entity Shell Company	false

XML

Condensed Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 6,429	$ 6,713
Investments	3,052	3,056
Trade receivables, less allowance for doubtful accounts of $11	1,323	1,005
Inventories	1,720	1,663
Other current assets	171	188
Income tax receivable	81	3
Total current assets	12,776	12,628
Deferred income tax asset, net	226	208
Intangible assets, net	13	38
Property and equipment, net	981	1,017
Total assets	13,996	13,891
Current liabilities
Current maturities of financing lease	6	6
Accounts payable	319	349
Accrued expenses	769	342
Total current liabilities	1,094	697
Long-term liabilities
Financing lease, net of current maturities	3	6
Total long-term liabilities	3	6
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	2,043	2,041
Retained earnings	10,515	10,808
Accumulated other comprehensive gain (unrealized gain on available-for-sale securities, net of income tax)	2	0
Total stockholders' equity	12,899	13,188
Total liabilities and stockholders' equity	$ 13,996	$ 13,891

XML

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Balance Sheets [Abstract]
Trade receivables, allowance for doubtful accounts	$ 11	$ 11
Common stock, par value	$ 0.1	$ 0.1
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,395,521	3,395,521
Common stock, shares outstanding	3,395,521	3,395,521

XML

Condensed Statements Of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statements of Comprehensive Income (Loss) [Abstract]
Net sales	$ 2,564	$ 2,462	$ 4,699	$ 4,363
Cost of goods sold	1,156	1,086	2,125	1,997
Gross profit	1,408	1,376	2,574	2,366
Operating expenses
Selling and marketing	427	364	873	712
General and administrative	1,125	458	1,628	901
Research and development	221	283	452	486
Total operating expenses	1,773	1,105	2,953	2,099
Operating income (loss)	(365)	271	(379)	267
Non-operating income
Interest income	7	0	8	2
Total non-operating income, net	7	0	8	2
Income (loss) before income tax expense (benefit)	(358)	271	(371)	269
Income tax expense (benefit)	(74)	57	(78)	57
Net income (loss)	(284)	214	(293)	212
Other comprehensive gain (loss)
Change in unrealized value of available-for-sale securities, net of income tax	2	(1)	2	(1)
Other comprehensive gain (loss)	2	(1)	2	(1)
Net comprehensive income (loss)	$ (282)	$ 213	$ (291)	$ 211
Basic
Net income (loss) per share	$ (0.08)	$ 0.06	$ (0.09)	$ 0.06
Weighted average shares	3,395,521	3,395,521	3,395,521	3,395,521
Diluted
Net income (loss) per share	$ (0.08)	$ 0.06	$ (0.09)	$ 0.06
Weighted average shares	3,395,521	3,413,444	3,395,521	3,433,609

XML

Condensed Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock Issued [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Beginning Balance at Dec. 31, 2020	$ 12,774	$ 339	$ 2,036	$ 10,398	$ 1
Beginning Balance, Shares at Dec. 31, 2020		3,395,521
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive gain (loss)	(1)				(1)
Stock-based compensation expense	3		3
Net income (loss)	212			212
Ending Balance at Jun. 30, 2021	12,988	$ 339	2,039	10,610	0
Ending Balance, Shares at Jun. 30, 2021		3,395,521
Beginning Balance at Mar. 31, 2021	12,773	$ 339	2,037	10,396	1
Beginning Balance, Shares at Mar. 31, 2021		3,395,521
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive gain (loss)	(1)				(1)
Stock-based compensation expense	2		2
Net income (loss)	214			214
Ending Balance at Jun. 30, 2021	12,988	$ 339	2,039	10,610	0
Ending Balance, Shares at Jun. 30, 2021		3,395,521
Beginning Balance at Dec. 31, 2021	13,188	$ 339	2,041	10,808	0
Beginning Balance, Shares at Dec. 31, 2021		3,395,521
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive gain (loss)	2				2
Stock-based compensation expense	2		2
Net income (loss)	(293)			(293)
Ending Balance at Jun. 30, 2022	12,899	$ 339	2,043	10,515	2
Ending Balance, Shares at Jun. 30, 2022		3,395,521
Beginning Balance at Mar. 31, 2022	13,180	$ 339	2,042	10,799	0
Beginning Balance, Shares at Mar. 31, 2022		3,395,521
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive gain (loss)	2				2
Stock-based compensation expense	1		1
Net income (loss)	(284)			(284)
Ending Balance at Jun. 30, 2022	$ 12,899	$ 339	$ 2,043	$ 10,515	$ 2
Ending Balance, Shares at Jun. 30, 2022		3,395,521

XML

Condensed Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from (used in) operating activities
Net income (loss)	$ (293)	$ 212
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:
Depreciation and amortization	78	181
Deferred income taxes	(18)	(28)
Stock-based compensation expense	2	3
Interest accrued on treasury bills	(2)	(2)
Change in:
Trade receivables	(318)	(455)
Inventories	(57)	47
Other current assets	17	(6)
Accounts payable	(30)	137
Accrued expenses	427	293
Income tax receivable/payable	(78)	84
Net cash from (used in) operating activities	(272)	466
Cash flows used in investing activities
Purchases of treasury bills	(4,992)	(8,999)
Proceeds from the maturity of treasury bills	5,000	9,000
Purchase of property and equipment	(17)	(14)
Net cash used in investing activities	(9)	(13)
Cash flows used in financing activities
Payments on financing lease	(3)	(3)
Net cash used in financing activities	(3)	(3)
Net increase (decrease) in cash and cash equivalents	(284)	450
Cash and cash equivalents, beginning	6,713	1,090
Cash and cash equivalents, ending	6,429	1,540
Supplemental cash flow information
Cash paid for income taxes	$ 17	$ 1

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2022

Basis of Presentation [Abstract]

Basis of Presentation

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, 2021, 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, 2022 and for the three and six-month periods ended June 30, 2022 and 2021, 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 ultimate goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff, manufacturers’ representatives, 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.

Information regarding our recently announced merger agreement is presented in Note 5. 

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. We also determine the transaction price for each performance obligation at contract inception. Our 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 that have multiple performance obligations, we allocate the transaction price to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the observable stand-alone prices charged to customers. We recognize product revenue at the point in time when control of the product is transferred to the customer, which typically occurs when we ship the products. We recognize service revenue at the point in time when we have provided the service.  

Fair Value Measurements 

The carrying value of trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2022 and December 31, 2021, due to the short maturity nature of these instruments.

Intangibles

The intangible asset is a technology license.  The Company amortizes the cost of the intangible asset on a straight-line method over the estimated useful life.  During the first six months of 2021, the Company had amortization expense related to the HazardPRO technology, which was fully amortized in the 2021 third quarter.  

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. 

As of June 30, 2022, there was approximately $1 of unrecognized compensation expense related to unvested stock options. The Company expects to recognize this expense over the next three months.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 economic lives of long-lived assets, realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, stock compensation expense, and the potential estimated impact on operations resulting from the COVID-19 pandemic as it relates to potential disruptions to our supply chain and customer demand. It is at least reasonably possible that these estimates may change in the near term.  

Net Income (Loss) per Common Share

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

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, 2022 and 2021, 332,500 and 314,577, respectively, weighted average common shares for underlying stock options have been excluded from the calculation. For the six-month periods ended June 30, 2022 and 2021, 332,500 and 294,412 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.   

New Accounting Standard Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018 the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies codification and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in February 2020 the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), both of which delay the effective date of ASU 2016-13 by three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. In accordance with ASU 2019-10 and ASU 2020-02, ASU 2016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2023 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-13 on our financial statements.

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Investments

6 Months Ended

Jun. 30, 2022

Investments [Abstract]

Investments

Note 2. Investments

The Company has investments in commercial paper, Treasury Bills, and common equity securities of two private U.S. companies. The commercial paper investment is in U.S. debt with ratings of A-1+, P-1, and F1+. The Treasury Bills have remaining terms ranging from one month to four months at June 30, 2022.  

The Company classifies its investments in commercial paper and Treasury Bills as available-for-sale, accounted for at fair value with unrealized gains and losses recognized in accumulated other comprehensive gain on the balance sheet.

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, 2022
Commercial Paper	$	1,141	$	0	$	0	$	1,141
Treasury Bills		7,983		6		0		7,989
Equity Securities		54		2		0		56
		9,178		8		0		9,186
Less Cash Equivalents		6,130		4		0		6,134
Total Investments, June 30, 2022	$	3,048	$	4	$	0	$	3,052
December 31, 2021
Commercial Paper	$	1,520	$	0	$	0	$	1,520
Treasury Bills		8,000		0		0		8,000
Equity Securities		54		2		0		56
		9,574		2		0		9,576
Less Cash Equivalents		6,520		0		0		6,520
Total Investments, December 31, 2021	$	3,054	$	2	$	0	$	3,056

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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 3. Fair Value Measurements

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

June 30, 2022

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,141	$	1,141	$	1,141	$	0	$	0
Treasury bills		4,993		4,993		4,993		0		0
Treasury bills - maturity date greater than three months		2,996		2,996		2,996		0		0
Equity Securities		56		56		0		0		56

December 31, 2021

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,520	$	1,520	$	1,520	$	0	$	0
Treasury bills		5,000		5,000		5,000		0		0
Treasury Bills - maturity date greater than three months		3,000		3,000		3,000		0		0
Equity Securities		56		56		0		0		56

The fair value of the commercial paper and treasury bills is based on quoted market prices in an active market.  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.  

The changes in level 3 assets measured at fair value on a recurring basis are as follows:  

	Six Months Ended June 30,
	2022		2021
Beginning Balance	$	56	$	42
Change in Fair Value		0		0
Ending Balance	$	56	$	42

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Inventories

6 Months Ended

Jun. 30, 2022

Inventories [Abstract]

Inventories

Note 4. Inventories

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

	June 30,  2022			December 31,  2021
Raw Materials	$	1,158		$	1,129
Work In Process		285			257
Finished Goods		287			287
Reserve for Obsolescence		(10	)		(10	)
Total Inventories, net	$	1,720		$	1,663

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Merger Agreement with Mobile X Global, Inc.

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Merger Agreement with Mobile X Global, Inc.

Note 5. Merger Agreement with Mobile X Global, Inc. 

On June 10, 2022, Electro-Sensors, Inc. (“ELSE” or “Electro-Sensors”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mobile X Newco, Inc., a Delaware corporation, a wholly owned subsidiary of ELSE (the “Merger Sub”), and Mobile X Global, Inc., a Delaware corporation (“Mobile X”) (together with ELSE and Merger Sub the “Parties”).  Mobile X Global, Inc. is a new entrant in the global mobile industry founded by its CEO Peter Adderton.  Mobile X plans to launch a new mobile wireless brand called Mobile X in the United States in 2022, enabled by a network agreement with a major carrier.

The Merger is structured as a statutory reverse triangular merger under Delaware and Minnesota law, under which Merger Sub will be merged with and into Mobile X Global, Inc., with Mobile X Global, Inc. surviving the Merger and becoming a wholly owned subsidiary of ELSE. In connection with the Merger, ELSE will reincorporate in Delaware, be re-named Mobile X Global, Inc., and operate both the new MobileX wireless business and the existing Electro-Sensors business. The Merger Agreement also provides that Electro-Sensors, Inc. will effect a four-for-one reverse stock split shortly before completion of the Merger, unless the Parties agree on a different reverse split ratio.

In connection with the execution of the Merger Agreement, a third-party institutional investor has entered into a commitment letter with Mobile X Global, Inc. to provide equity financing in the form of convertible preferred stock of up to $20.0 million upon closing of the Merger. The commitment is subject to diligence and definitive agreements satisfactory to the third-party institutional investor, including an agreement for a $50.0 million equity line of credit to be provided by the investor. The equity line of credit would provide significant additional liquidity, at the option of Mobile X. The commitment letter terminates on October 31, 2022.

It is anticipated that, immediately after the Merger, former Mobile X stockholders will own approximately 76% of the combined company, legacy ELSE shareholders will own approximately 11% of the combined company, and that the third-party institutional investor noted above (or an alternative investor agreed to by the Parties to the Merger Agreement) and certain other investors will own approximately 13% of the combined company, all based on current ownership of ELSE and Mobile X, and assuming the closing of $20.0 million of equity financing on the terms contained in the commitment letter from the third-party institutional investor noted above.

ELSE expects the approximately 325,000 of currently outstanding options to acquire ELSE shares to be exercised in connection with the Merger prior to the record date of the cash dividend discussed below. Assuming this exercise, and based on the relative valuations agreed to by Mobile X and ELSE, and after giving effect to the reverse stock split at a ratio of four-for-one, the legacy ELSE shareholders would own approximately 932,005 shares, the Mobile X stockholders would own approximately 6,668,294 shares, the third-party institutional investor noted above (or an alternative investor agreed to by the Parties to the Merger Agreement) would own approximately 1,066,860 shares (on an as-converted to common basis) assuming the closing of $20.0 million of equity financing on the terms in the commitment letter, and approximately 75,851 shares would be held by others.

In addition to their continuing interest in the combined company, legacy Electro-Sensors shareholders as of a record date to be determined before the closing of the Merger would  receive special cash dividends expected to be approximately $18.0 million in the aggregate, with the amount of the dividends possibly adjusted based on the amount of ELSE transaction expenses and its working capital balance at the closing of the Merger, and further adjusted for indebtedness, if any, and transaction bonuses, if any, approved by the ELSE board of directors. Aggregate cash dividends of $18.0 million would be approximately $4.83 per share based on the current, pre-reverse split, fully diluted shares of Electro-Sensors.  

Closing of the Merger is subject to specified conditions, including, among other matters: (i) the approval by Mobile X stockholders and ELSE shareholders of the Merger; (ii) a registration statement becoming effective under the Securities Act of 1933, as amended, related to the shares being issued to the Mobile X stockholders in the Merger and the clearance of the proxy statement related to the approval by the ELSE shareholders of the Merger; (iii) receipt of $20.0 million in third party equity financing; (iv) listing of the combined company's common stock on Nasdaq; and (v) the filing of an amendment to ELSE 's Articles of Incorporation to increase the number of shares of common stock authorized for issuance to a number at least large enough to consummate the Merger, allowing the issuance of shares to former Mobile X stockholders and any third-party investors, after giving effect to the reverse stock split described above.

In connection with the execution of the Merger Agreement, Electro-Sensors' directors, officers, and certain major shareholders, who collectively own a majority of Electro-Sensors' outstanding shares, have entered into agreements with Mobile X to vote their shares in favor of the Merger at a special meeting of shareholders to be held before the closing of the Merger on a date to be announced. In addition, directors, officers and certain major stockholders of Mobile X, who collectively own a majority of Mobile X's outstanding shares, have entered into similar voting agreements. No written consents have been granted nor have any votes been cast. The Voting Agreements may be terminated in connection with a termination of the Merger Agreement. Closing will follow the special meeting of shareholders of Electro-Sensors, consent of stockholders of Mobile X Global, and satisfaction of other customary and specified closing conditions, including the U.S. Securities and Exchange Commission ("SEC") having declared effective a registration statement, and The Nasdaq Stock Market having approved the listing of the common stock of the combined company.

A full description of the terms of the Merger Agreement will be provided in a combined Form S-4 Registration Statement/Proxy Statement for the shareholders of ELSE (the “Merger Proxy Statement”) to be filed with the SEC.  ELSE urges investors, shareholders, and other interested persons to read, when available, the preliminary proxy statement as well as other documents filed with the SEC because these documents will contain important information about ELSE, Mobile X, and the proposed transaction.  The definitive Merger Proxy Statement will be mailed to ELSE shareholders as of a record date to be established for voting on the proposed transaction.  Shareholders will also be able to obtain a copy of the definitive Merger Proxy Statement (when available), without charge, by directing a request to: Electro-Sensors, Inc., 6111 Blue Circle Drive, Minnetonka MN 55343.  The preliminary and definitive proxy statement, once available, can also be obtained, without charge, at the SEC’s website (www.sec.gov).

The Company expects the Merger to close in the second half of 2022.

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Subsequent Events

6 Months Ended

Jun. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

Note 6. Subsequent Events

On July 15, 2022, three Company directors exercised their stock options. Each director had options to purchase 2,500 shares at an exercise price of $4.15.  The total amount received by the Company for the exercise of the options was $31. 

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Basis of Presentation (Policy)

6 Months Ended

Jun. 30, 2022

Basis of Presentation [Abstract]

Nature of Business

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 ultimate goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff, manufacturers’ representatives, 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.

Information regarding our recently announced merger agreement is presented in Note 5. 

Revenue Recognition

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. We also determine the transaction price for each performance obligation at contract inception. Our 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 that have multiple performance obligations, we allocate the transaction price to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the observable stand-alone prices charged to customers. We recognize product revenue at the point in time when control of the product is transferred to the customer, which typically occurs when we ship the products. We recognize service revenue at the point in time when we have provided the service.  

Fair Value Measurements

Fair Value Measurements 

The carrying value of trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2022 and December 31, 2021, due to the short maturity nature of these instruments.

Intangibles

Intangibles

The intangible asset is a technology license.  The Company amortizes the cost of the intangible asset on a straight-line method over the estimated useful life.  During the first six months of 2021, the Company had amortization expense related to the HazardPRO technology, which was fully amortized in the 2021 third quarter.  

Stock-Based Compensation

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. 

As of June 30, 2022, there was approximately $1 of unrecognized compensation expense related to unvested stock options. The Company expects to recognize this expense over the next three months.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 economic lives of long-lived assets, realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, stock compensation expense, and the potential estimated impact on operations resulting from the COVID-19 pandemic as it relates to potential disruptions to our supply chain and customer demand. It is at least reasonably possible that these estimates may change in the near term.  

Net Loss per Common Share

Net Income (Loss) per Common Share

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

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, 2022 and 2021, 332,500 and 314,577, respectively, weighted average common shares for underlying stock options have been excluded from the calculation. For the six-month periods ended June 30, 2022 and 2021, 332,500 and 294,412 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.   

New Accounting Standard Not Yet Adopted

New Accounting Standard Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018 the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies codification and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in February 2020 the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), both of which delay the effective date of ASU 2016-13 by three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. In accordance with ASU 2019-10 and ASU 2020-02, ASU 2016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2023 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-13 on our financial statements.

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Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments [Abstract]

Cost And Estimated Fair Value Of Investments

	Cost		Gross unrealized gain		Gross unrealized loss		Fair value
June 30, 2022
Commercial Paper	$	1,141	$	0	$	0	$	1,141
Treasury Bills		7,983		6		0		7,989
Equity Securities		54		2		0		56
		9,178		8		0		9,186
Less Cash Equivalents		6,130		4		0		6,134
Total Investments, June 30, 2022	$	3,048	$	4	$	0	$	3,052
December 31, 2021
Commercial Paper	$	1,520	$	0	$	0	$	1,520
Treasury Bills		8,000		0		0		8,000
Equity Securities		54		2		0		56
		9,574		2		0		9,576
Less Cash Equivalents		6,520		0		0		6,520
Total Investments, December 31, 2021	$	3,054	$	2	$	0	$	3,056

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Measurements [Abstract]

Schedule of fair value measurement on a recurring basis

June 30, 2022

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,141	$	1,141	$	1,141	$	0	$	0
Treasury bills		4,993		4,993		4,993		0		0
Treasury bills - maturity date greater than three months		2,996		2,996		2,996		0		0
Equity Securities		56		56		0		0		56

December 31, 2021

	Carrying amount				Fair Value Measurement Using
	in balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Commercial paper	$	1,520	$	1,520	$	1,520	$	0	$	0
Treasury bills		5,000		5,000		5,000		0		0
Treasury Bills - maturity date greater than three months		3,000		3,000		3,000		0		0
Equity Securities		56		56		0		0		56

Summary of change in level 3 assets at fair value on a recurring basis

	Six Months Ended June 30,
	2022		2021
Beginning Balance	$	56	$	42
Change in Fair Value		0		0
Ending Balance	$	56	$	42

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Inventories (Tables)

6 Months Ended

Jun. 30, 2022

Inventories [Abstract]

Schedule of Inventories used in the determination of cost of goods sold

	June 30,  2022			December 31,  2021
Raw Materials	$	1,158		$	1,129
Work In Process		285			257
Finished Goods		287			287
Reserve for Obsolescence		(10	)		(10	)
Total Inventories, net	$	1,720		$	1,663

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Basis of Presentation (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Basis of Presentation [Abstract]
Unrecognized compensation expense related to unvested stock options	$ 1		$ 1
Number of years to recognize remaining expense			3 months
Options excluded from the computations of diluted weighted-average shares outstanding	332,500	314,577	332,500	294,412

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Investments (Narrative) (Details)	6 Months Ended
	Jun. 30, 2022 Number
Marketable Securities [Line Items]
Number of private companies which entity has investments in common equity securities	2
Minimum [Member]
Marketable Securities [Line Items]
Treasury Bills, term	1 month
Maximum [Member]
Marketable Securities [Line Items]
Treasury Bills, term	4 months

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Investments (Cost And Estimated Fair Value Of Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Investments
Cost	$ 3,048	$ 3,054
Gross unrealized gain	4	2
Gross unrealized loss	0	0
Fair value, investments	3,052	3,056
Cash equivalents, Carrying amount	6,429	6,713
Commercial Paper [Member]
Investments
Cost	1,141	1,520
Gross unrealized gain	0	0
Gross unrealized loss	0	0
Fair value, investments	1,141	1,520
Treasury Bills [Member]
Investments
Cost	7,983	8,000
Gross unrealized gain	6	0
Gross unrealized loss	0	0
Fair value, investments	7,989	8,000
Equity Securities [Member]
Investments
Cost	54	54
Gross unrealized gain	2	2
Gross unrealized loss	0	0
Fair value, investments	56	56
Debt and Equity Securities [Member]
Investments
Cost	9,178	9,574
Gross unrealized gain	8	2
Gross unrealized loss	0	0
Fair value, investments	9,186	9,576
Less Cash Equivalents [Member]
Investments
Gross unrealized gain	4	0
Gross unrealized loss	0	0
Cash equivalents, Carrying amount	6,130	6,520
Cash equivalents, Fair value	$ 6,134	$ 6,520

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Fair Value Measurements (Fair Value Measurements On A Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Carrying amount	$ 6,429	$ 6,713
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Carrying amount	1,141	1,520
Cash equivalents, Fair Value	1,141	1,520
Commercial Paper [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	1,141	1,520
Commercial Paper [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	0	0
Commercial Paper [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	0	0
Treasury Bills [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Carrying amount	4,993	5,000
Cash equivalents, Fair Value	4,993	5,000
Treasury bills, Carrying amount	2,996	3,000
Treasury bills, Fair Value	2,996	3,000
Treasury Bills [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	4,993	5,000
Treasury bills, Fair Value	2,996	3,000
Treasury Bills [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	0	0
Treasury bills, Fair Value	0	0
Treasury Bills [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Fair Value	0	0
Treasury bills, Fair Value	0	0
Limited Marketable Company [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities, Carrying amount	56	56
Equity Securities, Fair Value	56	56
Limited Marketable Company [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities, Fair Value	0	0
Limited Marketable Company [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities, Fair Value	0	0
Limited Marketable Company [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity Securities, Fair Value	$ 56	$ 56

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Fair Value Measurements (Fair Value Assets Measured on Recurring Basis Unobservable Inputs Reconciliation) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Assets measured at fair value on a recurring basis
Beginning Balance	$ 56	$ 42
Change in Fair Value	0	0
Ending Balance	$ 56	$ 42

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventories [Abstract]
Raw Materials	$ 1,158	$ 1,129
Work In Process	285	257
Finished Goods	287	287
Reserve for Obsolescence	(10)	(10)
Total Inventories	$ 1,720	$ 1,663

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Merger Agreement with Mobile X Global, Inc. (Details) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Third-party institutional investor [Member]
Merger Agreement with Mobile X Global, Inc.
Number of shares held by shareholder after reverse stock split	1,066,860
Third-party institutional investor and certain other investors [Member]
Merger Agreement with Mobile X Global, Inc.
Percentage of stockholding by stockholders after the Merger	13.00%
Other Investors [Member]
Merger Agreement with Mobile X Global, Inc.
Number of shares held by shareholder after reverse stock split	75,851
Electro-Sensors, Inc. [Member]
Merger Agreement with Mobile X Global, Inc.
Reverse stock split	four-for-onefour-for-one
Percentage of stockholding by stockholders after the Merger	11.00%
Number of share options outstanding	325,000
Number of shares held by shareholder after reverse stock split	932,005
Aggregate cash dividends before the closing of the Merger | $	$ 18.0
Cash dividends per share before reverse stock split | $ / shares	$ 4.83
Electro-Sensors, Inc. [Member] | Third-party institutional investor [Member]
Merger Agreement with Mobile X Global, Inc.
Equity financing | $	$ 20.0
Mobile X Global, Inc. Combined Company [Member] | Third-party institutional investor [Member]
Merger Agreement with Mobile X Global, Inc.
Equity line of credit | $	$ 50.0
Mobile X Global, Inc. Original Company [Member]
Merger Agreement with Mobile X Global, Inc.
Percentage of stockholding by stockholders after the Merger	76.00%
Number of shares held by shareholder after reverse stock split	6,668,294

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Subsequent Events (Details) - Subsequent event [Member] - Director [Member] $ / shares in Units, $ in Thousands	Jul. 15, 2022 USD ($) $ / shares shares
Subsequent Event [Line Items]
Number of directors has exercised stock options	3
Stock options exercised | shares	2,500
Stock options exercised, exercise price | $ / shares	$ 4.15
Total amount of options exercised | $	$ 31