Financial Performance - Net sales for Q1 2024 were $2,244, an increase of $199, or 9.7%, from $2,045 in Q1 2023, driven by larger orders for facility upgrades and increased sales of wired and wireless systems [61]. - Gross profit for Q1 2024 was $1,080, an increase of $58, or 5.7%, with a gross margin decrease to 48.1% from 50.0% in Q1 2023 due to rising material and labor costs [62]. - Total operating expenses for Q1 2024 were $1,180, an increase of $20, or 1.7%, but decreased as a percentage of net sales to 52.6% from 56.7% in Q1 2023 [63]. - Net non-operating income increased by $23, or 24.7%, in Q1 2024 compared to Q1 2023, attributed to higher interest income from Treasury Bills [64]. - Income before income tax expense was $16 in Q1 2024, an increase of $61 compared to a loss of $45 in Q1 2023, driven by higher revenues and increased interest income [65]. Cash Flow - Cash and cash equivalents were $10,072 at March 31, 2024, up from $9,870 at December 31, 2023, primarily due to increased cash from operating activities [68]. - Cash from operating activities was $202 for Q1 2024, compared to cash used of $112 in Q1 2023, reflecting increased net income and decreased trade receivables [69]. Taxation - The effective tax rate for Q1 2024 was 31%, compared to 2.2% in Q1 2023, due to changes in deferred taxes [66]. Operational Challenges - The company is facing supply chain disruptions and price increases for components, which may affect gross margins and timely deliveries [72]. Strategic Growth - The company continues to seek growth opportunities through internal product development and external acquisitions, with a special committee exploring strategic alternatives [73].

MINNETONKA, Minn., March 21, 2024 /PRNewswire/ -- Electro-Sensors, Inc. (NASDAQ: ELSE), a leading global provider of machine monitoring sensors and hazard monitoring systems, today announced financial results for the year ended December 31, 2023. Annual revenue of $8.6 million, down 5.2% over prior year Gross Margin of 49.6% Cash and investments of $9.9 million Table in thousands, except per share data FY22 FY21 Change Net Sales $8,555 $9,029 (5.2) % Gross Margin 49.6 % 53.6 %(400) bps Operating Income (Los ...

Financial Performance - Net sales for 2023 were $8,555, a decrease of $474, or 5.2%, from $9,029 in 2022[75]. - Gross profit for 2023 decreased $596, or 12.3%, to $4,245 from $4,841 in 2022, with a gross margin of 49.6% compared to 53.6% in 2022[76]. - Total operating expenses decreased $605, or 12.4%, to $4,273 in 2023 from $4,878 in 2022, representing 50.0% of net sales[77]. - Operating loss was $28 in 2023 compared to $37 in 2022, a decrease of $9, or 24.3%[78]. - Non-operating income increased $297 to $406 in 2023 from $109 in 2022, primarily due to higher interest income[79]. - Net income for 2023 was $275 compared to $100 in 2022, an increase of $175, or 175.0%[83]. - Cash generated from operating activities was $130 in 2023 compared to cash used in operating activities of $147 in 2022, an increase of $277[92]. - Total stockholders' equity increased to $13,755,000 in 2023 from $13,414,000 in 2022, reflecting a 2.5% growth[126]. - The total federal and state income taxes for 2023 amounted to $103, compared to a tax provision of $(28) in 2022[211]. Research and Development - The company aims to continue investing in research and development to create new products and enhance existing ones, which is crucial for future sales growth[44]. - Research and development expenses increased $137, or 16.4%, to $973 in 2023 compared to $836 in 2022[81]. - Research and development expenses rose to $973,000 in 2023, up from $836,000 in 2022, indicating a 16.4% increase[158]. Supply Chain and Operations - The company experienced supply chain disruptions in 2023, leading to increased costs for parts and materials, and has been modifying product designs to accommodate more readily available components[34]. - The company is facing supply chain disruptions and price increases for components, which may affect profit margins and operational efficiency[97]. Employee Relations - The company had 35 full-time employees as of December 31, 2023, and emphasizes the importance of employee relations and retention for maintaining competitive advantage[47]. - The Company has an employee stock ownership plan (ESOP) covering substantially all employees, with 94,434 shares held by participants as of December 31, 2023[206]. Mergers and Acquisitions - The company announced a terminated merger agreement with Mobile X Global, Inc. on January 30, 2023, and is exploring other business development opportunities[41]. - The merger agreement with Mobile X was terminated due to unavailability of necessary PIPE investment financing amid challenging financial market conditions[189]. Investments and Cash Flow - Cash and cash equivalents were $9,870 and $7,646 at December 31, 2023 and 2022, respectively, reflecting an increase in available funds[91]. - Cash generated from investing activities increased to $2,100 in 2023 from $964 in 2022, primarily due to increased maturities of Treasury Bills[93]. - Cash used in financing activities was $6 in 2023, a significant decrease from cash generated of $116 in 2022[94]. - The company purchased Treasury Bills totaling $13,830,000 in 2023, compared to $6,971,000 in 2022, marking a 98.5% increase[128]. Intellectual Property - The company holds six patents related to its production monitoring systems and actively seeks to protect its intellectual property[38]. - The company has established the HazardPRO trademark and intends to register it, reflecting its commitment to brand recognition and market presence[37]. Market Presence - In 2023, international sales represented approximately 10% of total revenues, with sales occurring in countries such as Canada, Mexico, and the United Kingdom[29]. - The company sells a range of products from simple sensors to complex integrated monitoring systems, targeting industries such as manufacturing and power generation[29]. - The company continues to explore new industries and applications to expand sales and may consider acquiring compatible businesses as part of its growth strategy[30]. Stock and Compensation - The Company had issued 25,000 shares and had 175,000 options outstanding under the 2013 Equity Incentive Plan, with 95,000 options exercisable[192]. - The Company granted 105,000 restricted stock units in 2023, with a weighted-average grant-date fair value of $4.11[202]. - The unrecognized compensation expense related to outstanding stock options is $111, expected to be recognized over four years[198]. - The Company recognized compensation expense of approximately $38 for stock options and $29 for restricted stock units during the year ended December 31, 2023[198][203]. - The company incurred stock-based compensation expenses of $67,000 in 2023, significantly higher than $3,000 in 2022[128]. Financial Position - Total current assets rose to $13,139 in 2023, compared to $12,813 in 2022, with cash and cash equivalents increasing to $9,870 from $7,646[122]. - The company reported total inventories of $1,751,000 as of December 31, 2023, slightly up from $1,745,000 in 2022, showing a marginal increase[180]. - The total property and equipment net value decreased to $951,000 in 2023 from $975,000 in 2022, representing a decline of approximately 2.46%[183]. - Accrued expenses decreased to $323,000 in 2023 from $350,000 in 2022, reflecting a reduction of about 7.71%[185]. - The company reported an allowance for credit losses of $11 against trade receivables of $1,283 in 2023, reflecting a cautious approach to credit risk[122]. - The allowance for credit losses on trade receivables remained stable at $11,000 for both 2023 and 2022[140]. - The company had no customers exceeding 10% of accounts receivable as of December 31, 2023, compared to one customer at 12% in 2022[141]. Accounting and Compliance - The company adopted a new accounting standard on January 1, 2023, which had no significant impact on the financial statements[166]. - The lease expense for the year ended December 31, 2023, was $1, a decrease from the previous year[187].

Financial Performance - Net sales for Q3 2023 were $2,057, a decrease of $159, or 7.2%, from $2,216 in Q3 2022; for the nine months ended September 30, 2023, net sales were $6,239, a decrease of $676, or 9.8%, from $6,915 in the same period in 2022[69]. - Gross profit for Q3 2023 was $993, a decrease of $170, or 14.6%, compared to Q3 2022; gross profit for the nine months ended September 30, 2023, was $3,083, a decrease of $654, or 17.5%, from the same period in 2022[70]. - Income before income tax expense for Q3 2023 was $83, a decrease of $71 compared to $154 in Q3 2022; for the nine months ended September 30, 2023, it was $176, an increase of $393 compared to a loss of $217 in the same period in 2022[74]. - For the three months ended September 30, 2023, the Company reported a Net Income (Loss) of $8 million, compared to a Net Income of $122 million for the same period in 2022[91]. - Adjusted Net Income for the three months ended September 30, 2023, was $8 million, while it was $184 million for the same period in 2022, reflecting a decrease of approximately 95.65%[91]. - For the nine months ended September 30, 2023, the Company reported a Net Income (Loss) of $80 million, compared to a Net Loss of $171 million for the same period in 2022[91]. - Adjusted Net Income for the nine months ended September 30, 2023, was $80 million, down from $505 million for the same period in 2022, indicating a decrease of approximately 84.24%[91]. Operating Expenses - Total operating expenses for Q3 2023 decreased by $25, or 2.4%, to $1,019, while as a percentage of net sales, it increased to 49.5% from 47.1%; for the nine months ended September 30, 2023, total operating expenses decreased by $794, or 19.9%, to $3,203[72]. Cash Flow - Cash and cash equivalents were $3,902 at September 30, 2023, down from $7,646 at December 31, 2022; total cash, cash equivalents, and investments were $9,928 at September 30, 2023, compared to $9,682 at December 31, 2022[77]. - Cash from operating activities was $92 for the nine months ended September 30, 2023, compared to cash used in operating activities of $213 for the same period in 2022, reflecting a $305 increase due to higher net income and decreased trade receivables[78]. - Cash used in investing activities was $3,831 for the nine months ended September 30, 2023, compared to cash from investing activities of $2,991 for the same period in 2022, primarily due to increased purchases of Treasury Bills[79]. Non-Operating Income - Net non-operating income increased by $74, or 211.4%, for Q3 2023 compared to Q3 2022; for the nine months ended September 30, 2023, it increased by $253, or 588.4%[73]. Merger and Acquisition Activities - The company continues to seek growth opportunities through internal product development and external acquisitions, following the termination of a merger agreement with Mobile X[83]. - The Company and Mobile X jointly agreed to terminate the merger agreement on January 30, 2023, with no further non-GAAP information presented[89]. - The Company incurred approximately $79 million in legal and other professional fees related to the Mobile X merger opportunity for the three months ended September 30, 2022[90]. - Total merger-related expenses for the nine months ended September 30, 2022, amounted to approximately $856 million[90]. - The Company believes that adding back merger-related costs provides a more accurate portrayal of underlying business results and trends[88]. - The income tax benefit of merger-related expenses for the three months ended September 30, 2022, was $(17) million, and for the nine months ended September 30, 2022, it was $(180) million[91]. - The Company is using "Adjusted Net Income" as a non-GAAP financial measure to facilitate comparisons and analysis of its operating performance[87]. Supply Chain Issues - The company is experiencing supply chain disruptions and price increases for components, which may affect sales and profit margins[82].

Financial Performance - Net sales for Q2 2023 were $2,137, a decrease of $427, or 16.7%, from $2,564 in Q2 2022[55] - Gross profit for Q2 2023 was $1,068, a decrease of $340, or 24.1%, compared to Q2 2022, with a gross margin of 50.0% down from 54.9%[56] - Total operating expenses decreased by $749, or 42.2%, to $1,024 in Q2 2023, representing 47.9% of net sales, down from 69.2% in Q2 2022[57] - Income before income tax expense was $138 for Q2 2023, an increase of $496 compared to a loss of $358 in Q2 2022[59] - For the three months ended June 30, 2023, the Company reported a GAAP Net Income of $116 million, compared to a loss of $284 million in the same period of 2022[76] - Adjusted Net Income for the three months ended June 30, 2023, was $135 million, down from $255 million in the same period of 2022[76] - For the six months ended June 30, 2023, the GAAP Net Income was $72 million, compared to a loss of $293 million in the same period of 2022[76] - Adjusted Net Income for the six months ended June 30, 2023, was $105 million, down from $321 million in the same period of 2022[76] Cash Flow and Expenses - Cash and cash equivalents were $5,600 at June 30, 2023, down from $7,646 at December 31, 2022[62] - Cash used in operating activities was $136 for the six months ended June 30, 2023, compared to $272 for the same period in 2022[63] - Cash used in investing activities increased to $1,907 for the six months ended June 30, 2023, compared to $9 in the same period in 2022[64] - The Company incurred merger-related expenses of approximately $24 million for the three months ended June 30, 2023, significantly lower than $682 million in the same period of 2022[76] - The Company incurred approximately $42 million in merger-related expenses for the six months ended June 30, 2023, compared to $777 million in the same period of 2022[76] - The income tax benefit of merger-related expenses for the three months ended June 30, 2023, was $(5) million, compared to $(143) million in the same period of 2022[76] - The income tax benefit of merger-related expenses for the six months ended June 30, 2023, was $(9) million, compared to $(163) million in the same period of 2022[76] Strategic Initiatives - The company is exploring growth opportunities through technology partnerships and potential acquisitions following the termination of the merger agreement with Mobile X[68] Operational Challenges - Supply chain disruptions and increased component costs are impacting production efficiency and profit margins[67] Non-Operating Income - Net non-operating income increased by $87, or 1,242.9%, for Q2 2023 compared to Q2 2022, driven by higher interest income[58]

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 March 31, 2023 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 jurisdi ...

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company manufactures and sells industrial monitoring and control systems, serving various industries while exploring strategic alternatives - ESI manufactures and sells industrial production monitoring and process control systems, including speed, temperature, position, and vibration monitors[14](index=14&type=chunk)[16](index=16&type=chunk) - The company markets its wireless hazard technology monitoring system under the **HazardPRO** brand, which provides an integrated solution for monitoring safety and facility runtime[27](index=27&type=chunk) - Sales are conducted through an internal team and a network of national and international distributors, with international sales accounting for approximately **10% of total sales in 2022**[31](index=31&type=chunk) - Key competitors include 4B Components Ltd, Maxi-Tronic, Inc, Siemens Corporation, and Ag Growth International Inc (AGI), with competitive advantages cited as **superior product design and quality**[35](index=35&type=chunk) - The company experienced **supply chain disruptions** in 2022, leading to difficulties in sourcing parts and price increases for components, and is modifying product designs to adapt[37](index=37&type=chunk) - Following the termination of a merger agreement with Mobile X Global, Inc in January 2023, the Board of Directors is **exploring strategic alternatives**[44](index=44&type=chunk) [Item 1A. Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, this section is not required - As a smaller reporting company, Electro-Sensors, Inc is **not required** to provide a separate Risk Factors section[64](index=64&type=chunk) [Item 2. Properties](index=11&type=section&id=Item%202.%20Properties) The company owns and operates a 25,400 square foot facility in Minnetonka, Minnesota, which is adequate for its current needs - The company owns a **25,400 square foot facility** in Minnetonka, Minnesota, which houses all of its operations[65](index=65&type=chunk) [Item 3. Legal Proceedings](index=11&type=section&id=Item%203.%20Legal%20Proceedings) The company is not subject to any material legal proceedings - The company reports **no material legal proceedings** or threatened litigation[66](index=66&type=chunk) [Item 4. Mine Safety Disclosures](index=11&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - No mine safety disclosures are applicable to the company[67](index=67&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=11&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq under "ELSE", and no shares were repurchased in 2022 or 2021 - The company's common stock is traded on the Nasdaq Capital Market under the ticker symbol **"ELSE"**[69](index=69&type=chunk) - As of February 28, 2023, there were **64 shareholders of record** and approximately 1,250 shareholders holding shares in street name[69](index=69&type=chunk) - **No common stock was repurchased** during the years ended December 31, 2022 and 2021[70](index=70&type=chunk) [Item 6. Selected Financial Data](index=11&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, this section is not required - As a smaller reporting company, Electro-Sensors, Inc is **not required** to provide selected financial data[71](index=71&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=12&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales grew 4.9% in 2022, but higher operating expenses from a terminated merger led to a significant drop in net income [Results of Operations](index=12&type=section&id=Results%20of%20Operations) Sales grew 4.9% in 2022, but higher merger-related costs drove a 75.6% decline in net income to $100 thousand Financial Performance Comparison (2022 vs 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $9,029 | $8,607 | 4.9% | | Gross Profit | $4,841 | $4,677 | 3.5% | | Gross Margin | 53.6% | 54.3% | (0.7 pts) | | Operating Income (Loss) | ($37) | $441 | (108.4%) | | Net Income | $100 | $410 | (75.6%) | | Basic EPS | $0.03 | $0.12 | (75.0%) | - The increase in operating expenses was primarily due to **legal and other professional fees** associated with the announced merger with Mobile X Global, Inc that was terminated in January 2023[77](index=77&type=chunk) Non-GAAP Adjusted Net Income Reconciliation | Description | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net Income - GAAP | $100 | $410 | | Plus merger related expenses | $875 | $304 | | Less income taxes on merger expenses | ($184) | ($64) | | **Adjusted Net Income** | **$791** | **$650** | [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong with $7.6 million in cash, despite a decrease in cash from operations Key Liquidity Metrics (as of Dec 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $7,646 | $6,713 | | Working capital | $12,183 | $11,931 | Cash Flow Summary | Activity | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash from (used in) operating activities | ($147) | $769 | | Net cash from investing activities | $964 | $4,860 | | Net cash from (used in) financing activities | $116 | ($6) | - Management believes that cash on hand and cash provided by operations will be **sufficient to meet cash requirements** for at least the next 12 months[95](index=95&type=chunk) [Critical Accounting Estimates](index=16&type=section&id=Critical%20Accounting%20Estimates) Key estimates involve asset lives, receivables, deferred taxes, inventory, investments, and stock-based compensation - Significant accounting estimates include: economic lives of long-lived assets, realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory valuation, investment valuation, and stock compensation expense[99](index=99&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable to the company - No quantitative and qualitative disclosures about market risk are applicable to the company[108](index=108&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=18&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited financial statements for 2022 and 2021, with an unqualified opinion from the auditor [Financial Statements](index=20&type=section&id=Financial%20Statements) Total assets grew slightly to $14.0 million in 2022, while net income decreased to $100 thousand from $410 thousand in 2021 Balance Sheet Summary (as of Dec 31, in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $12,813 | $12,628 | | **Total Assets** | **$14,044** | **$13,891** | | Total Current Liabilities | $630 | $697 | | **Total Liabilities** | **$630** | **$703** | | **Total Stockholders' Equity** | **$13,414** | **$13,188** | Statement of Comprehensive Income Summary (Year Ended Dec 31, in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Net Sales | $9,029 | $8,607 | | Gross Profit | $4,841 | $4,677 | | Operating Income (Loss) | ($37) | $441 | | **Net Income** | **$100** | **$410** | [Notes to Financial Statements](index=24&type=section&id=Notes%20to%20Financial%20Statements) Notes detail the terminated merger, investment holdings, employee benefit plans, and income tax components - The company's investments consist primarily of commercial paper and Treasury Bills, classified as available-for-sale, with a total fair value of **$9.4 million** at year-end 2022[171](index=171&type=chunk)[172](index=172&type=chunk) - On January 30, 2023, the company and Mobile X Global, Inc **mutually terminated their merger agreement** from June 10, 2022, because the required equity financing was not available[194](index=194&type=chunk)[214](index=214&type=chunk) - The company sponsors an Employee Stock Ownership Plan (ESOP) which held **94,434 shares** of company stock as of December 31, 2022[204](index=204&type=chunk) - The company has **R&D tax credits of $313 thousand** available to be carried forward[212](index=212&type=chunk) [Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=41&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants - There were **no disagreements** with accountants on accounting and financial disclosure[215](index=215&type=chunk) [Item 9A. Controls and Procedures](index=41&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2022 - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were **effective** as of December 31, 2022[216](index=216&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and concluded that it was **effective** as of December 31, 2022[220](index=220&type=chunk) [Item 9B. Other Information](index=42&type=section&id=Item%209B.%20Other%20Information) No other information was reported in this section - No information was reported under this item[224](index=224&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=43&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information is incorporated by reference from the 2023 Proxy Statement, and the company has a Code of Ethics - Required information is **incorporated by reference** from the 2023 Proxy Statement[227](index=227&type=chunk)[229](index=229&type=chunk) - The company has adopted the Electro-Sensors **Code of Ethics and Business Conduct**[228](index=228&type=chunk) [Item 11. Executive Compensation](index=43&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Required information is **incorporated by reference** from the 2023 Proxy Statement under the caption "Executive Compensation"[230](index=230&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=43&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference, with details provided on equity compensation plans - Security ownership information is **incorporated by reference** from the 2023 Proxy Statement[231](index=231&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise of outstanding options (a) | Weighted-average exercise price of outstanding options (b) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Approved by security holders | 300,000 | $4.36 | 275,000 | | Not approved by security holders | — | — | — | | **Total** | **300,000** | **$4.36** | **275,000** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=44&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the 2023 Proxy Statement - Required information is **incorporated by reference** from the 2023 Proxy Statement[236](index=236&type=chunk) [Item 14. Principal Accountant Fees and Services](index=44&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Required information is **incorporated by reference** from the 2023 Proxy Statement under the caption "Ratification of Independent Registered Public Accounting Firm"[237](index=237&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=45&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits included in the report, with schedules omitted as permitted - An index to the Financial Statements is provided on page 18 of the report[240](index=240&type=chunk) - Financial Statement Schedules were **omitted** because they were not required or the information was included in the financial statements or notes[241](index=241&type=chunk) [Item 16. Form 10-K Summary](index=45&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - No Form 10-K summary was provided[242](index=242&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 1 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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 j ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q2 2022 financial statements report total assets of $14.0 million, a net loss of $284 thousand, and a pending merger with Mobile X Global, Inc [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Total assets slightly increased to $14.0 million by June 30, 2022, while current liabilities significantly rose to $1.1 million Condensed Balance Sheet Data (in thousands) | Account | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $6,429 | $6,713 | | Total current assets | $12,776 | $12,628 | | Total assets | $13,996 | $13,891 | | **Liabilities & Equity** | | | | Total current liabilities | $1,094 | $697 | | Total liabilities | $1,097 | $703 | | Total stockholders' equity | $12,899 | $13,188 | [Condensed Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q2 2022 saw a net loss of $284 thousand, a reversal from prior year's income, despite a 4.1% sales increase, due to surging operating expenses Financial Performance Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,564 | $2,462 | $4,699 | $4,363 | | Gross Profit | $1,408 | $1,376 | $2,574 | $2,366 | | Operating Income (Loss) | $(365) | $271 | $(379) | $267 | | Net Income (Loss) | $(284) | $214 | $(293) | $212 | | Diluted EPS | $(0.08) | $0.06 | $(0.09) | $0.06 | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Operating activities used $272 thousand in cash for the first six months of 2022, a significant shift from prior year's generation, ending with $6.4 million cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash from (used in) operating activities | $(272) | $466 | | Net cash used in investing activities | $(9) | $(13) | | Net cash used in financing activities | $(3) | $(3) | | **Net (decrease) in cash** | **$(284)** | **$450** | [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail accounting policies and significant disclosures, primarily outlining the pending reverse triangular merger with Mobile X Global, Inc., expected to close in H2 2022 - On June 10, 2022, the company entered a reverse triangular merger agreement with Mobile X Global, Inc., where Mobile X will become a wholly-owned subsidiary of Electro-Sensors (ELSE)[50](index=50&type=chunk)[51](index=51&type=chunk) - Post-merger, former Mobile X stockholders will own approximately **76%** of the combined company, legacy ELSE shareholders about **11%**, and new investors about **13%**[53](index=53&type=chunk) - Legacy Electro-Sensors shareholders are expected to receive special cash dividends totaling approximately **$18.0 million**, or about **$4.83 per share** (pre-reverse split)[55](index=55&type=chunk) - The merger's closing, anticipated in H2 2022, is contingent on shareholder approval, securing **$20.0 million** in equity financing, and Nasdaq listing approval[57](index=57&type=chunk)[60](index=60&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 7.7% sales growth driven by agricultural applications, offset by a 40.7% surge in operating expenses due to merger costs, leading to a net loss and negative operating cash flow [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Net sales grew 4.1% in Q2 and 7.7% for six months, driven by agricultural applications, but a 145.6% surge in G&A expenses led to a Q2 operating loss of $365 thousand Net Sales Growth | Period | Net Sales 2022 (in thousands) | Net Sales 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Q2 | $2,564 | $2,462 | +4.1% | | Six Months | $4,699 | $4,363 | +7.7% | - The sales increase was driven by broad-based strength in agricultural applications, including commodity refining and biofuels[74](index=74&type=chunk) - Total operating expenses for Q2 2022 increased by **60.5%** year-over-year, primarily due to a **145.6%** increase in General and Administrative expenses from merger-related legal and professional fees[77](index=77&type=chunk) - Research and development expenses decreased by **21.9%** in Q2 2022 due to lower third-party engineering costs[77](index=77&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents were $6.4 million, with operating cash flow shifting to a $272 thousand use due to merger expenses, while supply chain disruptions pose ongoing risks - Cash used in operating activities was **$272 thousand** for the first six months of 2022, a shift from **$466 thousand** generated in 2021, primarily due to the net loss from merger expenses[81](index=81&type=chunk) - The company faces significant supply chain disruptions, including difficulty sourcing parts, component price increases, and shipping delays[87](index=87&type=chunk) - The company's primary business development activity culminated in the June 10, 2022 announcement of the Merger Agreement with Mobile X Global, Inc[88](index=88&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable for the current reporting period - Not Applicable[91](index=91&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls during Q2 - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2022[92](index=92&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during Q2 2022[93](index=93&type=chunk) [PART II – OTHER INFORMATION](index=23&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Other Information Summary](index=23&type=section&id=Other%20Information%20Summary) This section confirms no legal proceedings, unregistered equity sales, or senior security defaults, and lists filed exhibits including amended bylaws and SOX certifications - The company reports no legal proceedings, unregistered sales of equity securities, or defaults upon senior securities[95](index=95&type=chunk) - Filed exhibits include amended bylaws and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[95](index=95&type=chunk)[96](index=96&type=chunk) [Signatures](index=24&type=section&id=SIGNATURES) [Signatures](index=24&type=section&id=Signatures) The report was signed on August 2, 2022, by David L. Klenk, in his capacity as Chief Executive Officer and Chief Financial Officer - The Form 10-Q was signed on August 2, 2022, by David L. Klenk, the company's CEO and CFO[101](index=101&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 1 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 juris ...