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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, 2024

 

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, $0.10 par value ELSE Nasdaq Capital Market


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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 8, 2024 was 3,428,021.

 

 

 

2

 

ELECTRO-SENSORS, INC.

Form 10-Q

For the Period Ended June 30, 2024

 

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION 4
    
Item 1. Financial Statements (unaudited): 4
      
Condensed Balance Sheets – As of June 30, 2024 and December 31, 2023 4
Condensed Statements of Comprehensive Income (Loss) – For the Three and Six Months ended June 30, 2024 and June 30, 2023 5
Condensed Statements of Changes in Stockholders' Equity – For the Three and Six Months ended June 30, 2024 and June 30, 2023 6
Condensed Statements of Cash Flows – For the Six Months ended June 30, 2024 and June 30, 2023 7
Notes to Condensed Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
      
PART II – OTHER INFORMATION 20
        
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Mine Safety Disclosures 20
Item 5. Other Information 20
Item 6. Exhibits 20
   
SIGNATURES 21
   

  

3

ELECTRO-SENSORS, INC.

(in thousands except share and per share amounts) 

 

 

June 30,
2024

 

 

December 31,
2023

 

 

 

(unaudited)

 

 

 

 

ASSETS  

 

 

 

 

 

 

Current assets 

 

 

 

 

 

 

 

 

Cash and cash equivalents 

 

$

9,888

 

 

$

9,870

 

Investments

 

 

56

 

 

 

56

 

Trade receivables, less allowance for credit losses of $11 and $11, respectively

1,180

 

 

 

1,283

 

Inventories

 

 

1,865

 

 

 

1,751

 

Other current assets 

 

 

177

 

 

 

179

 

Income tax receivable

41


0

Total current assets

 

 

13,207

 

 

 

13,139

 

Deferred income tax asset, net

 

 

330

 

 

 

355

 

Property and equipment, net

 

 

930

 

 

 

951

 

Total assets

 

$

14,467

 

 

$

14,445

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

199

 

 

$ 

291

 

Accrued expenses

 

 

439

 

 

 

323

 

Accrued income taxes

0


76

Total current liabilities

 

 

638

 

 

 

690

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,428,021 shares issued and outstanding

 

 

342

 

 

 

342

 

Additional paid-in capital

 

 

2,297

 

 

 

2,230

 

Retained earnings

 

 

11,190

 

 

 

11,183

 

Total stockholders’ equity

 

 

13,829

 

 

 

13,755

 

Total liabilities and stockholders’ equity 

 

$

14,467

 

 

$

14,445

 

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,


     2024     2023  

2024


2023
                  







Net sales   $ 2,217     $ 2,137


4,461


4,182
Cost of goods sold      1,170    
1,069  

2,334


2,092
                  





Gross profit  
1,047    
1,068  

2,127


2,090
                  





Operating expenses                





Selling and marketing     353       344  

704


714
General and administrative     537       442  

1,104


964
Research and development  
264    
238  

526


506
                  





Total operating expenses   
1,154    
1,024  

2,334


2,184
                  





Operating income (loss)     (107 )     44

(207 )

(94 )
                  





Non-operating income                





Interest expense

0


(1 )

0


(1 )
Interest income      109       95  

225


188
                  





Total non-operating income, net  
109    
94  

225


187
                  





Income before income tax expense     2     138

18


93
                  





Income tax expense     6  
22

11


21
                  





Net income (loss)   $ (4 )   $
 116

7


72
                  





Other comprehensive income (loss)                





Change in unrealized value of available-for-sale securities, net of income tax $ 0 $ 2

0


(2 )
Other comprehensive income (loss)     0     2

0


(2 )
                  





Net comprehensive income (loss)   $
 (4 )   $ 118

7


70
                  





Net income (loss) per share data:













                  





Basic                





Net income (loss) per share   $ 0.00   $ 0.03

0.00


0.02
Weighted average shares     3,428,021       3,428,021  

3,428,021


3,428,021
                  





Diluted                





Net income (loss) per share   $
 0.00   $
 0.03

0.00


0.02
Weighted average shares     3,428,021       3,443,394  

3,428,021


3,443,930

See accompanying notes to unaudited condensed financial statements


5


ELECTRO-SENSORS, INC.

(in thousands except share amounts)

 

For the three months ended June 30













    

Common Stock Issued

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Stockholders’

Equity

 

   

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024
3,428,021

$ 342

$ 2,259

$ 11,194

$ 0

$ 13,795

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense 







38










38
Net loss











(4 )





(4 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2024 (unaudited)  3,428,021

$ 342

$ 2,297

$ 11,190

$ 0
$ 13,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2023 3,428,021

$ 342

$ 2,163

$ 10,864

$ (3 )
$ 13,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income














2

2
Net income











116





116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2023 (unaudited) 3,428,021

$ 342

$ 2,163

$ 10,980

$ (1 )
$ 13,484


For the six months ended June 30













    

Common Stock Issued

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Stockholders’

Equity

 

   

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023
3,428,021

$ 342

$ 2,230

$ 11,183

$ 0

$ 13,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense







67










67
Net income











7





7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2024 (unaudited)  3,428,021 $ 342 $ 2,297 $ 11,190 $ 0
$ 13,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022 3,428,021

$ 342

$ 2,163

$ 10,908

$ 1

$ 13,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss














(2 )

(2 )
Net income











72





72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2023 (unaudited) 3,428,021

$ 342

$ 2,163

$ 10,980

$ (1 )
$ 13,484


See accompanying notes to unaudited condensed financial statements 


6


ELECTRO-SENSORS, INC.

(in thousands)

(unaudited) 

 

 

Six Months Ended
June 30,

 

 

 

2024

 

2023

 

Cash flows from (used in) operating activities

 

 

 

 

 

 

 

 

Net income

 

$

7

 

$

72

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

 

 

 

 

 

 

 

 

Depreciation

 

 

47

 

 

 

47

 

Deferred income taxes

 

 

25

 

 

(88

 )

Stock-based compensation expense 

 

 

67

 

 

 

0

 

Change in:

 

 



 

 

 

 

Trade receivables

 

 

103

 

 

(41

 )

Inventories

 

 

(114

 )

 

 

(170

 )

Other current assets

 

 

2

 

 

(10

 )

Accounts payable

 

 

(92

 )

 

 

82

Accrued expenses 

 

 

116

  

 

 

81

Income tax payable/receivable

 

 

(117

 )

 

 

(20

 )

Net cash from (used in) operating activities

 

 

44

 

 

(47

 )

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

(26 )

(1 )

Net cash used in investing activities

 

 

(26

 )

 

 

(1

 )

 

 

 

 

 

 

 

 

 

Cash flows used in financing activities

 

 

 

 

 

 

 

 

Payments on financing lease

0

(3 )

Net cash used in financing activities

 

 

0

 

 

(3

 )

Net increase (decrease) in cash and cash equivalents

 

 

18

 

 

(51

 )

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning

 

 

9,870

 

 

 

9,626

 

Cash and cash equivalents, ending

 

$

9,888

 

 

$

9,575

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

101

 

 

$

129

 

Cash paid for interest

0


1

 

See accompanying notes to unaudited condensed financial statements


7

ELECTRO-SENSORS, INC.

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

Note 1. Basis of Presentation 

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions and regulations of the Securities and Exchange Commission to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

This report should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2024 and for the three and six-month periods ended June 30, 2024 and 2023, in accordance with accounting principles generally accepted in the United States of America. The results of interim periods may not be indicative of results to be expected for the year.

 

Nature of Business

 

Electro-Sensors, Inc. (the "Company") manufactures and markets a complete line of monitoring and control systems for a wide range of industrial machine applications. The Company uses leading-edge technology to continuously improve its products, with the goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff and distributors to a wide range of industries that use the products in a variety of applications to monitor process machinery operations. The Company markets its products to customers located throughout the United States, Canada, Latin America, Europe, and Asia. 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are invested in commercial paper, money market accounts and may, also, be invested in Treasury Bills with an original maturity of three months or less. Cash equivalents are carried at fair value.

 

The Company maintains its cash and cash equivalents primarily in two bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses on these accounts. The Company believes it is not exposed to significant credit risk on cash.

 

Trade receivables and credit policies

 

Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices over 90 days are considered delinquent. The Company does not accrue interest on delinquent trade receivables.

 

Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

 

8

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

The Company maintains an allowance for credit losses on trade receivables, which is recorded as an offset to trade receivables. Changes in the allowance for credit losses are included as a component of operating expenses in the Statements of Comprehensive Income (Loss). The Company assesses credit losses on its entire balance of trade receivables. 

 

The allowance is based on the credit losses expected to arise over the life of the receivable (contractual term). The Company considers historical loss rates and current economic conditions when determining the expected credit losses. Receivables are written off against the allowance for credit losses.  The allowance for credit losses was $11 at June 30, 2024 and December 31, 2023.


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, which is to provide conforming goods or services to the customer. Certain contracts have a second performance obligation, which typically is the initialization of the HazardPROTM product. For contracts 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, which typically takes less than a week to provide.


Fair Value Measurements 

 

The carrying value of cash equivalents, trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2024 and December 31, 2023, due to the short maturity nature of these instruments.


Stock-Based Compensation

 

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model. The Company uses historical data, among other factors, to estimate the expected price volatility, the expected option life, and the expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.   


9

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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, and valuation of deferred tax assets/liabilities, inventory, investments, and stock compensation expense. 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 or restricted stock units were exercised or converted into common stock.


Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential shares would have an anti-dilutive effect. Diluted EPS also excludes the impact of common shares issuable upon the exercise of outstanding stock options in periods in which the option exercise price is greater than the average market price of our common stock during the period.

 

For the three-month periods ended June 30, 2024, and 2023, 175,000 and 284,627 respectively, weighted-average common shares for underlying stock options have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. For the six-month periods ended June 30, 2024 and 2023, 175,000 and 284,091 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.


In addition, for each of the three and six-month periods ended June 30, 2024, 105,000 restricted stock units have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. 


Reclassification of Prior Year Presentation


All Treasury Bills have been reclassified to cash equivalents for consistency with the current year presentation. The reclassification had no effect on the reported results of operations. The Balance Sheet and Statement of Cash Flows have been adjusted to reflect this reclassification.


10

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

Note 2. Investments

 

The Company has investments in common equity securities of two private U.S. companies.  


Equity securities are stated at estimated fair value and realized and unrealized gains and losses, if any, are reported in our Statements of Comprehensive Income (Loss) in non-operating income.

 

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, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

54

 

 

$

2

 

 

$  

0

 

$  

56

 

Total Investments, June 30, 2024

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$  

54

 

 

$  

2

 

 

$  

0

 

$  

56

 

Total Investments, December 31, 2023

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

 

11

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(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, 2024

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 

 

 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

$

56

$

56

 

 

$

0

 

 

$

0

 

 

$

56

 

 

December 31, 2023

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 


 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities


$

56

 

 

$

56

 

 

$

0

 

 

$

0

 

 

$

56

 

 

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,


2024

2023
 




     
Beginning Balance  
$ 56

$ 56  

Change in Fair Value

0
  0
Ending Balance
$ 56

$ 56  

 

Note 4. Inventories


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

June 30, 

2024

December 31, 

2023




Raw Materials $ 1,192

$ 1,172
Work In Process
336


301

Finished Goods
347


288
Reserve for Obsolescence 
(10 )

(10 )
Total Inventories, net $ 1,865

$ 1,751

 

12

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

Note 5. Stock-Based Compensation

Stock options
The 2013 Equity Incentive Plan (the “2013 Plan”) authorizes the issuance of nonqualified stock options. Payment for the shares may be made in cash, shares of the Company’s common stock or a combination thereof. Under the terms of the 2013 Plan, non-qualified stock options are granted at a minimum of 100% of fair market value on the date of grant and may be exercised at various times depending upon the terms of the option. All existing options expire 10 years from the date of grant, subject to early termination 12 months after termination of employment or service due to death, disability, or termination other than for cause. The grants include a provision providing for acceleration of vesting upon a change of control in the Company.

As of June 30, 2024, the total unrecognized compensation expense related to outstanding stock options was $124, which the Company expects to recognize through April 2028. The Company recognized compensation expense in connection with the vesting of stock options of approximately $16 and $24 for the three and six months ended June 30, 2024, respectively. There was no stock compensation expense related to stock option grants recognized in the six months ended June 30, 2023.


During the second quarter of 2024, the Company granted 25,000 non-qualified stock options to one of its non-employee board members. The options vest 20% on the grant date, with an additional 20% vesting annually thereafter.  There were no stock options exercised in the six months ended June 30, 2024. There were no stock options granted or exercised in the six months ended June 30, 2023.  


The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model during the three-month period ended June 30, 2024 are as follows:
                
Dividend Yield 0.00%
Expected Volatility 25.07%
Risk Free Interest Rate 4.65%
Expected Life 6 Years

The Company calculates expected volatility for stock options and other awards using historical volatility as the Company believes the expected volatility will approximate historical volatility.

 

13

ELECTRO-SENSORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2024

(in thousands except share and per share amounts)

(unaudited)

 

The following table summarizes the activity for all stock options outstanding for the six months ended June 30:

 

 

2024

 

2023

 

 

 

Shares

 

 

Weighted Average Exercise Price

 

Shares

 

 

 

Weighted Average Exercise Price

 

Options outstanding at beginning of year

 

175,000

 

 

$

4.06

 

 

300,000

 

 

$

4.35

 

Granted

 

25,000

 

 

 

4.13

 

 

0

 

 

 

 

 

Exercised

 

0

 

 

 

 

 

 

0


 

 


 

Expired

 

(25,000

)

 

 

4.39

 

 

0

 

 

 

 

 

Options outstanding at June 30

 

175,000

 

 

$

4.04

 

 

300,000

 

 

$

4.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at June 30

 

75,000

 

 

$

3.68

 

 

300,000

 

 

$

4.35

 

 

Restricted stock units

The 2013 Plan authorizes the issuance of restricted stock units. Stock-based compensation expense is determined on the grant date based on the closing market value of the Company's common stock. The amount of expense is calculated based on an estimate of the number of awards expected to vest at the end of each vesting period and is expensed evenly over the vesting period. In connection with the time of vesting and issuance of shares, an eligible recipient of common stock may elect to have some shares withheld by the Company to satisfy any requirement for withholding taxes. The grants include a provision providing for acceleration of vesting upon a change of control in the Company.

As of June 30, 2024, the total unrecognized compensation expenses related to outstanding restricted stock units is $360, which the Company expects to recognize through August 2028. The Company recognized compensation expense in connection with the vesting of restricted stock units of approximately $22 and $43 for the three and six months ended June 30, 2024, respectively. There was no stock compensation expense related to restricted stock unit grants recognized in the six months ended June 30, 2023.

 

There were no restricted stock units granted or exercised in the six months ended June 30, 2024 and 2023. 

 

Note 6. Contingencies

 

The Company at times becomes subject to claims against it in the ordinary course of business. There are currently no pending or threatened claims against the Company that it believes will have a material adverse effect on its results of operations or liquidity.

 

14

 

FORWARD-LOOKING STATEMENTS

 

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. We have made, and may continue to make, forward-looking statements with respect to our business and financial matters, including statements contained in this document, other filings with the Securities and Exchange Commission, and reports to shareholders. Forward-looking statements generally include discussion of current expectations or forecasts of future events and can be identified by the use of terminology such as “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” and similar words or expressions. Any statement that does not relate solely to historical fact should be considered forward-looking.

Our forward-looking statements generally relate to our growth strategy, future financial results, product development, and sales efforts. We make forward-looking statements throughout this Form 10-Q, but primarily in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section. These include statements relating to our beliefs and expectations and intentions with respect to (i) our growth and profitability, (ii) our marketing and product development, (iii) our ability to continue to obtain parts and materials for our products from various manufacturers and distributors in a timely manner and at reasonable prices, (iv) the value of our intellectual property, (v) our competitive position in the marketplace, (vi) the effect of governmental regulations on our business, (vii) our employee relations, (viii) the adequacy of our facilities, (ix) our intention to develop new products, (x) the possibility of us acquiring compatible businesses or product lines as part of our growth strategy, and (xi) our future cash requirements and use of cash.

Forward-looking statements cannot be guaranteed and our actual results may vary materially due to the uncertainties and risks, known and unknown, associated with these statements, including our ability to successfully develop new products and manage our cash requirements. We undertake no obligation to update any forward-looking statements. We cannot foresee or identify all factors that could cause actual results to differ from expected or historical results. As such, investors should not consider any list of these factors to be an exhaustive statement of all risks, uncertainties, or potentially inaccurate assumptions.  These forward-looking statements are subject to certain risks and uncertainties that could cause future results to differ materially from our recent results 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, 2023.

 

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, 2023.  There have been no changes to our critical accounting estimates during the three and six-month periods ended June 30, 2024.

 

15

 

SELECTED FINANCIAL INFORMATION

 

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

 

 

Three Months Ended June 30
Six Months Ended June 30

 

2024

2023


2024 2023

Net sales

100.0 %
100.0 %
100.0 %
100.0 %

Cost of goods sold

52.8

50.0

52.3

50.0

Gross profit

47.2

50.0

47.7

50.0
  










Operating expenses












     Selling and marketing

15.9

16.1

15.8

17.0

     General and administrative

24.2

20.7

24.7

23.1

     Research and development

11.9

11.1

11.8

12.1

Total operating expenses

52.0

47.9

52.3

52.2
  










Operating income (loss)

 (4.8 )
2.1
(4.6 )
(2.2 )
  










Non-operating income












     Interest income

4.9

4.4

5.0

4.5

Total non-operating income, net

4.9

4.4

5.0

4.5
  










Income before income tax expense

 0.1
6.5
0.5

2.3
  










Income tax expense

 0.3
1.0
0.2

0.5
  










Net income (loss)

(0.2 )%
5.5 %
0.3 %
1.8 %


The following paragraphs discuss the Company’s performance for the three and six months ended June 30, 2024 and 2023.

 

RESULTS OF OPERATIONS (in thousands) 

 

Net Sales

 

Net sales for the second quarter of 2024 were $2,217, an increase of $80, or 3.7%, from $2,137 during the comparable period in 2023. Net sales for the six months ended June 30, 2024 were $4,461, an increase of $279, or 6.7%, from $4,182 during the comparable period in 2023. The increase during the three-month period was due to higher sales of HazardPRO wireless hazard monitoring systems for agricultural applications. 

 

Gross Profit

 

Gross profit for the second quarter of 2024 was $1,047, a decrease of $21, or 2.0%, over the same period in 2023. Gross profit for the six months ended June 30, 2024 was $2,127, an increase of $37, or 1.8%, over the same period in 2023. Gross margin decreased in the second quarter of 2024 to 47.2% from 50.0% during the same period in 2023. Gross margin for the six months ended June 30, 2024 decreased to 47.7% from 50.0% over the same period in 2023. The decrease in gross margin was primarily due to an increase in material and labor costs across all product lines.  

 

16

Operating Expenses

 

Total operating expenses increased $130, or 12.7%, to $1,154 for the second quarter of 2024 compared to the same period in 2023 and increased as a percentage of net sales to 52.0% from 47.9%. Total operating expenses increased $150, or 6.9%, to $2,334 for the six months ended June 30, 2024 compared to the same period in 2023 and increased as a percentage of net sales to 52.3% from 52.2%. The increase in operating expenses for both periods was primarily due to additional headcount and stock-based compensation related to the granting of stock options and restricted stock units in the current quarter and third quarter of 2023.

 

 

●

Selling and marketing expenses in the second quarter of 2024 increased $9 to $353, or 2.6%, from the same period in 2023 and decreased as a percentage of net sales to 15.9% from 16.1%. Selling and marketing expenses in the six months ended June 30, 2024 decreased $10 to $704, or 1.4%, from the same period in 2023 and decreased as a percentage of net sales to 15.8% from 17.0%. The increase for the three-month period was primarily due to increased employee benefits expenses and higher trade show expenses.  The decrease for the six-month period was primarily due to decreased customer focused marketing expenses and change in sales staff.

 

 

●

General and administrative expenses increased $95 to $537, or 21.5%, in the second quarter of 2024 compared to the same period in 2023 and increased as a percentage of net sales to 24.2% from 20.7%. General and administrative expenses increased $140 to $1,104, or 14.5%, in the six months ended June 30, 2024 compared to the same period in 2023 and increased as a percentage of net sales to 24.7% from 23.1%. The increase in the second quarter was primarily due to an increase in stock-based compensation and contract labor costs. The increase in the six-month period was primarily due to an increase in stock-based compensation and contract labor costs, partially offset by a decrease in legal and professional fees.

 

 

●

Research and development expenses increased $26 to $264, or 10.9%, in the second quarter of 2024 compared to the same period in 2023 and increased as a percentage of net sales to 11.9% from 11.1%. Research and development expenses increased $20 to $526, or 4.0%, in the six months ended June 30, 2024 compared to the same period in 2023 but decreased as a percentage of net sales to 11.8% from 12.1%. The increase for the three-month period was due to additional headcount. The increase for the six-month period was due to additional headcount, partially offset by lower contract engineering costs related to product development and enhancements.

 

Non-Operating Income

 

Net non-operating income increased by $15, or 16.0%, for the three-month period ended June 30, 2024 compared to the same period in 2023. Net non-operating income increased by $38, or 20.3%, for the six months ended June 30, 2024 compared to the same period in 2023. The increase for both periods is the result of additional interest income earned as a result of higher interest rates on Treasury Bills.

 

Income Before Income Tax Expense

 

Income before income tax expense was $2 for the three-month period ended June 30, 2024, representing a decrease of $136 compared to $138 for the same period in 2023. Income before income tax expense was $18 for the six months ended June 30, 2024, representing a decrease of $75 compared to $93 for the same period in 2023. The decrease in both periods was primarily due to lower gross margins and higher operating expenses, partially offset by an increase in interest income, as discussed above.

 

17


Income Tax Expense

 

Income tax expense was $6, or 0.3%, of net sales in the second quarter of 2024 compared to $22, or 1.0%, of net sales in the second quarter of 2023. Income tax expense was $11, or 0.2% of net sales for the six months ended June 30, 2024 compared to $21, or 0.5% of net sales for the six months ended June 30, 2023. The effective tax rate for the six-month period ended June 30, 2024 was 61.1% compared to 22.6% in the same period of 2023. The change in the effective tax rate is due to non-deductible stock-based compensation expense.


LIQUIDITY AND CAPITAL RESOURCES

 

Cash and cash equivalents were $9,888 at June 30, 2024 and $9,870 at December 31, 2023. The increase was primarily the result of an increase in cash from operating activities.

 

Cash from operating activities was $44 for the six months ended June 30, 2024 as compared to cash used in operating activities of $47 for the six months ended June 30, 2023. The $91 increase in cash from operating activities was due primarily to a change in deferred taxes, an increase in stock-based compensation expense, and a decrease in trade receivables, partially offset by a decrease in accounts payable. The decrease in trade receivables is due to the timing of sales and collections. The decrease in accounts payable is due to the timing of inventory receipts and payment of invoices.

 

Cash used in investing activities was $26 and $1 for the six months ended June 30, 2024 and 2023, respectively. The cash used was for the purchase of office equipment.

 

Cash used in financing activities in the six months ended June 30, 2023 was $3. There was no cash flow from financing activities in the six months ended June 30, 2024.

 

Subject to the following section, entitled "Supply Chain and Labor Dynamics," the Company believes its ongoing cash requirements will be primarily for capital expenditures, research, and development, working capital, corporate and business development, and other strategic alternatives and that existing cash, cash equivalents, and investments and any cash generated from operations will be sufficient to meet these cash requirements through at least the next 12 months.

 

Supply Chain and Labor Dynamics

 

We strive to have multiple sources of production components and materials. However, we continue to experience disruptions in our supply chain, resulting in difficulty sourcing certain components. We are also experiencing price increases for many of the components used in our products. To meet these challenges, we are seeking additional sources for components and modifying product designs to accommodate new components that are more readily available at competitive prices. There is no guarantee that we will continue to be successful in modifying these designs and sourcing alternative components. As a result, we could experience significant delays in receiving certain components needed to make timely customer deliveries, as well as increased costs that erode gross margins. Supply chain dynamics may have an effect on the efficiency of our business operations, our customer base, and the domestic or worldwide economy.  Furthermore, the labor market for qualified employees able to fill our various open positions is challenging and may result in delays in filling these positions and increased labor costs. 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 and cost-effective manner. 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.

 

18

 

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 continue to explore other strategic alternatives that we believe present good opportunities for the Company and its shareholders. The Company's Board of Directors has a special committee to explore and pursue business development and other strategic alternatives.

 

Off-balance Sheet Arrangements

 

As of June 30, 2024, the Company had no off-balance sheet arrangements or transactions.


 

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, 2024.

 

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 2024 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. 

 

19

 

 


Exhibit

 

Description



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, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language), (i) Condensed Balance Sheets as of June 30, 2024 and December 31, 2023, (ii) Condensed Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and June 30, 2023, (iii) Condensed Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2024 and June 30, 2023, (iv) Condensed Statements of Cash Flows for the six months ended June 30, 2024 and June 30, 2023, and (v) Notes to Financial Statements. 

  

20

 

 

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 9, 2024

/s/ David L. Klenk

 

David L. Klenk

 

Chief Executive Officer and Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

 

21

 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 9, 2024 /s/ David L. Klenk
  David L. Klenk
  Chief Executive Officer and Chief Financial Officer

 

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, 2024 as filed with the Securities and Exchange Commission on the date hereof (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 to my knowledge:

 

(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 9, 2024 /s/ David L. Klenk
  David L. Klenk
  Chief Executive Officer and Chief Financial Officer

  

1


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Document And Entity Information - shares
 6 Months Ended
Jun. 30, 2024
Aug. 08, 2024
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Document Type 10-Q  
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Document Period End Date Jun. 30, 2024  
Document Fiscal Year Focus 2024  
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   3,428,021
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, $0.10 par value  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
Entity Shell Company false  
v3.24.2.u1
CONDENSED BALANCE SHEETS (unaudited) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 9,888 $ 9,870
Investments 56 56
Trade receivables, less allowance for credit losses of $11 and $11, respectively 1,180 1,283
Inventories 1,865 1,751
Other current assets 177 179
Income tax receivable 41 0
Total current assets 13,207 13,139
Deferred income tax asset, net 330 355
Property and equipment, net 930 951
Total assets 14,467 14,445
Current liabilities    
Accounts payable 199 291
Accrued expenses 439 323
Accrued income taxes 0 76
Total current liabilities 638 690
Commitments and contingencies
Stockholders' equity    
Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,428,021 shares issued and outstanding 342 342
Additional paid-in capital 2,297 2,230
Retained earnings 11,190 11,183
Total stockholders' equity 13,829 13,755
Total liabilities and stockholders' equity $ 14,467 $ 14,445
v3.24.2.u1
CONDENSED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Balance Sheets [Abstract]    
Trade receivables, allowance for credit losses $ 11 $ 11
Common stock, par value $ 0.1 $ 0.1
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 3,428,021 3,428,021
Common stock, shares outstanding 3,428,021 3,428,021
v3.24.2.u1
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Statements of Comprehensive Income (Loss) [Abstract]        
Net sales $ 2,217 $ 2,137 $ 4,461 $ 4,182
Cost of goods sold 1,170 1,069 2,334 2,092
Gross profit 1,047 1,068 2,127 2,090
Operating expenses        
Selling and marketing 353 344 704 714
General and administrative 537 442 1,104 964
Research and development 264 238 526 506
Total operating expenses 1,154 1,024 2,334 2,184
Operating income (loss) (107) 44 (207) (94)
Non-operating income        
Interest expense 0 (1) 0 (1)
Interest income 109 95 225 188
Total non-operating income, net 109 94 225 187
Income before income tax expense 2 138 18 93
Income tax expense 6 22 11 21
Net income (loss) (4) 116 7 72
Other comprehensive income (loss)        
Change in unrealized value of available-for-sale securities, net of income tax 0 2 0 (2)
Other comprehensive income (loss) 0 2 0 (2)
Net comprehensive income (loss) $ (4) $ 118 $ 7 $ 70
Basic        
Net income (loss) per share $ 0 $ 0.03 $ 0 $ 0.02
Weighted average shares 3,428,021 3,428,021 3,428,021 3,428,021
Diluted        
Net income (loss) per share $ 0 $ 0.03 $ 0 $ 0.02
Weighted average shares 3,428,021 3,443,394 3,428,021 3,443,930
v3.24.2.u1
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) - USD ($)
$ in Thousands
Total
Common Stock Issued [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Dec. 31, 2022 $ 13,414 $ 342 $ 2,163 $ 10,908 $ 1
Beginning Balance, Shares at Dec. 31, 2022   3,428,021      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Other comprehensive income (loss) (2)       (2)
Net income (loss) 72     72  
Ending Balance at Jun. 30, 2023 13,484 $ 342 2,163 10,980 (1)
Ending Balance, Shares at Jun. 30, 2023   3,428,021      
Beginning Balance at Mar. 31, 2023 13,366 $ 342 2,163 10,864 (3)
Beginning Balance, Shares at Mar. 31, 2023   3,428,021      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Other comprehensive income (loss) 2       2
Net income (loss) 116     116  
Ending Balance at Jun. 30, 2023 13,484 $ 342 2,163 10,980 (1)
Ending Balance, Shares at Jun. 30, 2023   3,428,021      
Beginning Balance at Dec. 31, 2023 13,755 $ 342 2,230 11,183 0
Beginning Balance, Shares at Dec. 31, 2023   3,428,021      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Other comprehensive income (loss) 0        
Stock-based compensation expense 67   67    
Net income (loss) 7     7  
Ending Balance at Jun. 30, 2024 13,829 $ 342 2,297 11,190 0
Ending Balance, Shares at Jun. 30, 2024   3,428,021      
Beginning Balance at Mar. 31, 2024 13,795 $ 342 2,259 11,194 0
Beginning Balance, Shares at Mar. 31, 2024   3,428,021      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Other comprehensive income (loss) 0        
Stock-based compensation expense 38   38    
Net income (loss) (4)     (4)  
Ending Balance at Jun. 30, 2024 $ 13,829 $ 342 $ 2,297 $ 11,190 $ 0
Ending Balance, Shares at Jun. 30, 2024   3,428,021      
v3.24.2.u1
CONDENSED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Cash flows from (used in) operating activities    
Net income $ 7 $ 72
Adjustments to reconcile net income to net cash from (used in) operating activities:    
Depreciation 47 47
Deferred income taxes 25 (88)
Stock-based compensation expense 67 0
Change in:    
Trade receivables 103 (41)
Inventories (114) (170)
Other current assets 2 (10)
Accounts payable (92) 82
Accrued expenses 116 81
Income tax payable/receivable (117) (20)
Net cash from (used in) operating activities 44 (47)
Cash flows used in investing activities    
Purchase of property and equipment (26) (1)
Net cash used in investing activities (26) (1)
Cash flows used in financing activities    
Payments on financing lease 0 (3)
Net cash used in financing activities 0 (3)
Net increase (decrease) in cash and cash equivalents 18 (51)
Cash and cash equivalents, beginning 9,870 9,626
Cash and cash equivalents, ending 9,888 9,575
Supplemental cash flow information    
Cash paid for income taxes 101 129
Cash paid for interest $ 0 $ 1
v3.24.2.u1
Basis of Presentation
 6 Months Ended
Jun. 30, 2024
Basis of Presentation [Abstract]  
Basis of Presentation

Note 1. Basis of Presentation 

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions and regulations of the Securities and Exchange Commission to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

This report should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2024 and for the three and six-month periods ended June 30, 2024 and 2023, in accordance with accounting principles generally accepted in the United States of America. The results of interim periods may not be indicative of results to be expected for the year.

 

Nature of Business

 

Electro-Sensors, Inc. (the "Company") manufactures and markets a complete line of monitoring and control systems for a wide range of industrial machine applications. The Company uses leading-edge technology to continuously improve its products, with the goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff and distributors to a wide range of industries that use the products in a variety of applications to monitor process machinery operations. The Company markets its products to customers located throughout the United States, Canada, Latin America, Europe, and Asia. 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are invested in commercial paper, money market accounts and may, also, be invested in Treasury Bills with an original maturity of three months or less. Cash equivalents are carried at fair value.

 

The Company maintains its cash and cash equivalents primarily in two bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses on these accounts. The Company believes it is not exposed to significant credit risk on cash.

 

Trade receivables and credit policies

 

Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices over 90 days are considered delinquent. The Company does not accrue interest on delinquent trade receivables.

 

Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

 

The Company maintains an allowance for credit losses on trade receivables, which is recorded as an offset to trade receivables. Changes in the allowance for credit losses are included as a component of operating expenses in the Statements of Comprehensive Income (Loss). The Company assesses credit losses on its entire balance of trade receivables. 

 

The allowance is based on the credit losses expected to arise over the life of the receivable (contractual term). The Company considers historical loss rates and current economic conditions when determining the expected credit losses. Receivables are written off against the allowance for credit losses.  The allowance for credit losses was $11 at June 30, 2024 and December 31, 2023.


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, which is to provide conforming goods or services to the customer. Certain contracts have a second performance obligation, which typically is the initialization of the HazardPROTM product. For contracts 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, which typically takes less than a week to provide.


Fair Value Measurements 

 

The carrying value of cash equivalents, trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2024 and December 31, 2023, due to the short maturity nature of these instruments.


Stock-Based Compensation

 

The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model. The Company uses historical data, among other factors, to estimate the expected price volatility, the expected option life, and the expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.   

 

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, and valuation of deferred tax assets/liabilities, inventory, investments, and stock compensation expense. 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 or restricted stock units were exercised or converted into common stock.


Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential shares would have an anti-dilutive effect. Diluted EPS also excludes the impact of common shares issuable upon the exercise of outstanding stock options in periods in which the option exercise price is greater than the average market price of our common stock during the period.

 

For the three-month periods ended June 30, 2024, and 2023, 175,000 and 284,627 respectively, weighted-average common shares for underlying stock options have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. For the six-month periods ended June 30, 2024 and 2023, 175,000 and 284,091 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.


In addition, for each of the three and six-month periods ended June 30, 2024, 105,000 restricted stock units have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. 


Reclassification of Prior Year Presentation


All Treasury Bills have been reclassified to cash equivalents for consistency with the current year presentation. The reclassification had no effect on the reported results of operations. The Balance Sheet and Statement of Cash Flows have been adjusted to reflect this reclassification.
v3.24.2.u1
Investments
 6 Months Ended
Jun. 30, 2024
Investments [Abstract]  
Investments

Note 2. Investments

 

The Company has investments in common equity securities of two private U.S. companies.  


Equity securities are stated at estimated fair value and realized and unrealized gains and losses, if any, are reported in our Statements of Comprehensive Income (Loss) in non-operating income.

 

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, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

54

 

 

$

2

 

 

$  

0

 

$  

56

 

Total Investments, June 30, 2024

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$  

54

 

 

$  

2

 

 

$  

0

 

$  

56

 

Total Investments, December 31, 2023

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

v3.24.2.u1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
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, 2024

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 

 

 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

$

56

$

56

 

 

$

0

 

 

$

0

 

 

$

56

 

 

December 31, 2023

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 


 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities


$

56

 

 

$

56

 

 

$

0

 

 

$

0

 

 

$

56

 

 

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,


2024

2023
 




     
Beginning Balance  
$ 56

$ 56  

Change in Fair Value

0
  0
Ending Balance
$ 56

$ 56  
v3.24.2.u1
Inventories
 6 Months Ended
Jun. 30, 2024
Inventories [Abstract]  
Inventories

Note 4. Inventories


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

June 30, 

2024

December 31, 

2023




Raw Materials $ 1,192

$ 1,172
Work In Process
336


301

Finished Goods
347


288
Reserve for Obsolescence 
(10 )

(10 )
Total Inventories, net $ 1,865

$ 1,751
v3.24.2.u1
Stock-Based Compensation
 6 Months Ended
Jun. 30, 2024
Stock-Based Compensation  
Stock-Based Compensation

Note 5. Stock-Based Compensation

Stock options
The 2013 Equity Incentive Plan (the “2013 Plan”) authorizes the issuance of nonqualified stock options. Payment for the shares may be made in cash, shares of the Company’s common stock or a combination thereof. Under the terms of the 2013 Plan, non-qualified stock options are granted at a minimum of 100% of fair market value on the date of grant and may be exercised at various times depending upon the terms of the option. All existing options expire 10 years from the date of grant, subject to early termination 12 months after termination of employment or service due to death, disability, or termination other than for cause. The grants include a provision providing for acceleration of vesting upon a change of control in the Company.

As of June 30, 2024, the total unrecognized compensation expense related to outstanding stock options was $124, which the Company expects to recognize through April 2028. The Company recognized compensation expense in connection with the vesting of stock options of approximately $16 and $24 for the three and six months ended June 30, 2024, respectively. There was no stock compensation expense related to stock option grants recognized in the six months ended June 30, 2023.


During the second quarter of 2024, the Company granted 25,000 non-qualified stock options to one of its non-employee board members. The options vest 20% on the grant date, with an additional 20% vesting annually thereafter.  There were no stock options exercised in the six months ended June 30, 2024. There were no stock options granted or exercised in the six months ended June 30, 2023.  


The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model during the three-month period ended June 30, 2024 are as follows:
                
Dividend Yield 0.00%
Expected Volatility 25.07%
Risk Free Interest Rate 4.65%
Expected Life 6 Years

The Company calculates expected volatility for stock options and other awards using historical volatility as the Company believes the expected volatility will approximate historical volatility.

 

The following table summarizes the activity for all stock options outstanding for the six months ended June 30:

 

 

2024

 

2023

 

 

 

Shares

 

 

Weighted Average Exercise Price

 

Shares

 

 

 

Weighted Average Exercise Price

 

Options outstanding at beginning of year

 

175,000

 

 

$

4.06

 

 

300,000

 

 

$

4.35

 

Granted

 

25,000

 

 

 

4.13

 

 

0

 

 

 

 

 

Exercised

 

0

 

 

 

 

 

 

0


 

 


 

Expired

 

(25,000

)

 

 

4.39

 

 

0

 

 

 

 

 

Options outstanding at June 30

 

175,000

 

 

$

4.04

 

 

300,000

 

 

$

4.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at June 30

 

75,000

 

 

$

3.68

 

 

300,000

 

 

$

4.35

 

 

Restricted stock units

The 2013 Plan authorizes the issuance of restricted stock units. Stock-based compensation expense is determined on the grant date based on the closing market value of the Company's common stock. The amount of expense is calculated based on an estimate of the number of awards expected to vest at the end of each vesting period and is expensed evenly over the vesting period. In connection with the time of vesting and issuance of shares, an eligible recipient of common stock may elect to have some shares withheld by the Company to satisfy any requirement for withholding taxes. The grants include a provision providing for acceleration of vesting upon a change of control in the Company.

As of June 30, 2024, the total unrecognized compensation expenses related to outstanding restricted stock units is $360, which the Company expects to recognize through August 2028. The Company recognized compensation expense in connection with the vesting of restricted stock units of approximately $22 and $43 for the three and six months ended June 30, 2024, respectively. There was no stock compensation expense related to restricted stock unit grants recognized in the six months ended June 30, 2023.

 

There were no restricted stock units granted or exercised in the six months ended June 30, 2024 and 2023. 
v3.24.2.u1
Contingencies
 6 Months Ended
Jun. 30, 2024
Contingencies [Abstract]  
Contingencies

Note 6. Contingencies

 

The Company at times becomes subject to claims against it in the ordinary course of business. There are currently no pending or threatened claims against the Company that it believes will have a material adverse effect on its results of operations or liquidity.
v3.24.2.u1
Insider Trading Arrangements
 6 Months Ended
Jun. 30, 2024
Trading Arrangements, by Individual [Table]  
Rule 10b5-1 Arrangement Adopted [Flag] false
Non-Rule 10b5-1 Arrangement Adopted [Flag] false
Rule 10b5-1 Arrangement Terminated [Flag] false
Non-Rule 10b5-1 Arrangement Terminated [Flag] false
v3.24.2.u1
Basis of Presentation (Policy)
 6 Months Ended
Jun. 30, 2024
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 goal of manufacturing the industry-preferred product for each of our served markets. The Company sells these products through an internal sales staff and distributors to a wide range of industries that use the products in a variety of applications to monitor process machinery operations. The Company markets its products to customers located throughout the United States, Canada, Latin America, Europe, and Asia. 
Cash and cash equivalents

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are invested in commercial paper, money market accounts and may, also, be invested in Treasury Bills with an original maturity of three months or less. Cash equivalents are carried at fair value.

 

The Company maintains its cash and cash equivalents primarily in two bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses on these accounts. The Company believes it is not exposed to significant credit risk on cash.
Trade receivables and credit policies

Trade receivables and credit policies

 

Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices over 90 days are considered delinquent. The Company does not accrue interest on delinquent trade receivables.

 

Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

 

The Company maintains an allowance for credit losses on trade receivables, which is recorded as an offset to trade receivables. Changes in the allowance for credit losses are included as a component of operating expenses in the Statements of Comprehensive Income (Loss). The Company assesses credit losses on its entire balance of trade receivables. 

 

The allowance is based on the credit losses expected to arise over the life of the receivable (contractual term). The Company considers historical loss rates and current economic conditions when determining the expected credit losses. Receivables are written off against the allowance for credit losses.  The allowance for credit losses was $11 at June 30, 2024 and December 31, 2023.
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, which is to provide conforming goods or services to the customer. Certain contracts have a second performance obligation, which typically is the initialization of the HazardPROTM product. For contracts 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, which typically takes less than a week to provide.
Fair Value Measurements

Fair Value Measurements 

 

The carrying value of cash equivalents, trade receivables, accounts payable, and other financial working capital items approximates fair value at June 30, 2024 and December 31, 2023, due to the short maturity nature of these instruments.
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.   
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, and valuation of deferred tax assets/liabilities, inventory, investments, and stock compensation expense. It is at least reasonably possible that these estimates may change in the near term. 
Net Income (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 or restricted stock units were exercised or converted into common stock.


Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential shares would have an anti-dilutive effect. Diluted EPS also excludes the impact of common shares issuable upon the exercise of outstanding stock options in periods in which the option exercise price is greater than the average market price of our common stock during the period.

 

For the three-month periods ended June 30, 2024, and 2023, 175,000 and 284,627 respectively, weighted-average common shares for underlying stock options have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. For the six-month periods ended June 30, 2024 and 2023, 175,000 and 284,091 respectively, weighted average common shares for underlying stock options have been excluded from the calculation.


In addition, for each of the three and six-month periods ended June 30, 2024, 105,000 restricted stock units have been excluded from the calculation of diluted EPS because their effect would be anti-dilutive. 
Reclassification of Prior Year Presentation

Reclassification of Prior Year Presentation


All Treasury Bills have been reclassified to cash equivalents for consistency with the current year presentation. The reclassification had no effect on the reported results of operations. The Balance Sheet and Statement of Cash Flows have been adjusted to reflect this reclassification.
v3.24.2.u1
Investments (Tables)
 6 Months Ended
Jun. 30, 2024
Investments [Abstract]  
Cost And Estimated Fair Value Of Investments

 

 

Cost

 

 

Gross
unrealized
gain

 

 

Gross
unrealized
loss

 

 

Fair
value

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

54

 

 

$

2

 

 

$  

0

 

$  

56

 

Total Investments, June 30, 2024

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$  

54

 

 

$  

2

 

 

$  

0

 

$  

56

 

Total Investments, December 31, 2023

 

$

54

 

 

$

2

 

 

$

0

 

$

56

 

v3.24.2.u1
Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2024
Fair Value Measurements [Abstract]  
Schedule of fair value measurement on a recurring basis

June 30, 2024

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 

 

 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

$

56

$

56

 

 

$

0

 

 

$

0

 

 

$

56

 

 

December 31, 2023

 

Carrying amount

 

 

 

 

 

 Fair Value Measurement Using 

 


 

in balance sheet

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,


2024

2023
 




     
Beginning Balance  
$ 56

$ 56  

Change in Fair Value

0
  0
Ending Balance
$ 56

$ 56  
v3.24.2.u1
Inventories (Tables)
 6 Months Ended
Jun. 30, 2024
Inventories [Abstract]  
Schedule of Inventories used in the determination of cost of goods sold

June 30, 

2024

December 31, 

2023




Raw Materials $ 1,192

$ 1,172
Work In Process
336


301

Finished Goods
347


288
Reserve for Obsolescence 
(10 )

(10 )
Total Inventories, net $ 1,865

$ 1,751
v3.24.2.u1
Stock-Based Compensation (Tables)
 6 Months Ended
Jun. 30, 2024
Stock-Based Compensation  
Schedule of assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model
Dividend Yield 0.00%
Expected Volatility 25.07%
Risk Free Interest Rate 4.65%
Expected Life 6 Years
Summary of stock options activity

 

 

2024

 

2023

 

 

 

Shares

 

 

Weighted Average Exercise Price

 

Shares

 

 

 

Weighted Average Exercise Price

 

Options outstanding at beginning of year

 

175,000

 

 

$

4.06

 

 

300,000

 

 

$

4.35

 

Granted

 

25,000

 

 

 

4.13

 

 

0

 

 

 

 

 

Exercised

 

0

 

 

 

 

 

 

0


 

 


 

Expired

 

(25,000

)

 

 

4.39

 

 

0

 

 

 

 

 

Options outstanding at June 30

 

175,000

 

 

$

4.04

 

 

300,000

 

 

$

4.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at June 30

 

75,000

 

 

$

3.68

 

 

300,000

 

 

$

4.35

 

v3.24.2.u1
Basis of Presentation (Narrative) (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Basis of Presentation          
Trade receivables, allowance for credit losses $ 11   $ 11   $ 11
Stock Options [Member]          
Basis of Presentation          
Securities excluded from the computations of diluted weighted-average shares outstanding 175,000 284,627 175,000 284,091  
Unvested Restricted Stock Units [Member]          
Basis of Presentation          
Securities excluded from the computations of diluted weighted-average shares outstanding 105,000   105,000    
v3.24.2.u1
Investments (Narrative) (Details)
 6 Months Ended
Jun. 30, 2024
Number
Marketable Securities [Line Items]  
Number of private companies which entity has investments in common equity securities 2
v3.24.2.u1
Investments (Cost And Estimated Fair Value Of Investments) (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Investments    
Cost $ 54 $ 54
Gross unrealized gain 2 2
Gross unrealized loss 0 0
Fair value, investments 56 56
Equity Securities [Member]    
Investments    
Cost 54 54
Gross unrealized gain 2 2
Gross unrealized loss 0 0
Fair value, investments $ 56 $ 56
v3.24.2.u1
Fair Value Measurements (Fair Value Measurements On A Recurring Basis) (Details) - Equity Securities [Member] - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
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
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
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
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
v3.24.2.u1
Fair Value Measurements (Fair Value Assets Measured on Recurring Basis Unobservable Inputs Reconciliation) (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Assets measured at fair value on a recurring basis    
Beginning Balance $ 56 $ 56
Change in Fair Value 0 0
Ending Balance $ 56 $ 56
v3.24.2.u1
Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Inventories [Abstract]    
Raw Materials $ 1,192 $ 1,172
Work In Process 336 301
Finished Goods 347 288
Reserve for Obsolescence (10) (10)
Total Inventories, net $ 1,865 $ 1,751
v3.24.2.u1
Stock-Based Compensation - Schedule of Valuation Assumptions (Details)
 6 Months Ended
Jun. 30, 2024
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions and Methodology [Abstract]  
Dividend Yield 0.00%
Expected Volatility 25.07%
Risk Free Interest Rate 4.65%
Expected Life 6 years
v3.24.2.u1
Stock-Based Compensation - Summary of Stock Options Activity (Details 1) - $ / shares
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Share-based Compensation Arrangement by Share-based Payment Award, Stock Options Activity    
Beginning balance, Number of Shares 175,000 300,000
Granted, Number of Shares 25,000 0
Exercised, Number of Shares 0 0
Expired, Number of Shares (25,000) 0
Ending balance, Number of Shares 175,000 300,000
Ending balance, Options Exercisable, Number of Shares 75,000 300,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]    
Beginning balance, Weighted-Average Exercise Price $ 4.06 $ 4.35
Granted, Weighted-Average Exercise Price 4.13  
Expired, Weighted-Average Exercise Price 4.39  
Ending balance, Weighted-Average Exercise Price 4.04 4.35
Ending balance, Options Exercisable, Weighted-Average Exercise Price $ 3.68 $ 4.35
v3.24.2.u1
Stock-Based Compensation (Narrative) (Details 2) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2024
Jun. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of shares granted during the period (in shares)   25,000 0
Number of shares expired during the period (in shares)   25,000 0
Number of shares exercised during the period (in shares)   0 0
2013 Equity Incentive Plan [Member] | Stock Options [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Options expiration from date of grant   10 years  
Options expiration from termination of employment or service due to death, disability, or termination other than for cause   12 months  
Number of shares granted during the period (in shares)     0
Number of shares exercised during the period (in shares)   0 0
Unrecognized compensation expense related to outstanding stock options $ 124 $ 124  
Recognized compensation expense 16 $ 24 $ 0
2013 Equity Incentive Plan [Member] | Stock Options [Member] | Minimum [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Stock options fair market value (as a percent)   100.00%  
2013 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Non-Employee Board of Director, One [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of shares granted during the period (in shares)   25,000  
2013 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Non-Employee Board of Director, One [Member] | Vested on grant date      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Vesting Percentage   20.00%  
2013 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Non-Employee Board of Director, One [Member] | Vesting on the first four anniversaries of the grant date      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Vesting Percentage   20.00%  
2013 Equity Incentive Plan [Member] | Unvested Restricted Stock Units [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of shares granted during the period (in shares)   0 0
Number of shares exercised during the period (in shares)   0 0
Recognized compensation expense 22 $ 43 $ 0
Unrecognized compensation expense related to outstanding restricted stock units $ 360 $ 360  
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