Electro-Sensors(ELSE) - 2023 Q1 - Quarterly Report

Financial Performance - Net sales for Q1 2023 were $2,045, a decrease of $90 or 4.2% from $2,135 in Q1 2022, attributed to reduced domestic sales of wired and wireless sensor products [54]. - Gross profit for Q1 2023 was $1,022, a decrease of $144 or 12.3% year-over-year, with gross margin declining to 50.0% from 54.6% due to increased material costs [55]. - Total operating expenses for Q1 2023 were $1,160, a decrease of $20 or 1.7% from Q1 2022, but increased as a percentage of net sales to 56.7% from 55.3% [57]. - Non-operating income increased by $92 or 9,200.0% in Q1 2023, primarily due to higher interest income from Treasury Bills [57]. - Cash used in operating activities was $148 for Q1 2023, compared to $106 in Q1 2022, reflecting an increase in net loss attributed to decreased gross profit [62]. Cash and Investments - Cash and cash equivalents decreased to $5,540 as of March 31, 2023, from $7,646 at December 31, 2022, mainly due to increased Treasury Bill investments [61]. - The company anticipates ongoing cash requirements for capital expenditures, R&D, and working capital will be met through existing cash and operations for at least the next 12 months [64]. Research and Development - Research and development expenses increased by $37 or 16.0% in Q1 2023, rising to 13.1% of net sales from 10.8% in Q1 2022, driven by higher third-party engineering costs [60]. Strategic Initiatives - The company is exploring growth opportunities through technology partnerships and potential acquisitions following the termination of a merger agreement with Mobile X [66]. Supply Chain Challenges - Supply chain disruptions are impacting the sourcing of components and material costs, leading to potential delays and increased costs that may affect sales and profit margins [65].