10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

☐ 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 000-9587

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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 

The number of shares outstanding of the registrant’s common stock, $0.10 par value, on November 9, 2016 was 3,395,521.

ELECTRO-SENSORS, INC.

Form 10-Q

For the Periods Ended September 30, 2016

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets – As of September 30, 2016 and December 31, 2015	3
Consolidated Statements of Comprehensive Income – For the Three and Nine Months ended September 30, 2016 and September 30, 2015	4
Consolidated Statements of Cash Flows – For the Nine Months ended September 30, 2016 and September 30, 2015	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	13
Item 4. Controls and Procedures	14
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	14
Item 1A. Risk Factors	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Defaults Upon Senior Securities	14
Item 4. Mine Safety Disclosures	14
Item 5. Other Information	14
Item 6. Exhibits	14
SIGNATURES	15
EXHIBITS	16

2 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ELECTRO-SENSORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share amounts)

	September 30,			December 31,
	2016			2015
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	792		$	569
Treasury bills		7,432			7,872
Trade receivables, less allowance for doubtful accounts of $8		838			689
Inventories		1,517			1,564
Other current assets		187			170
Income tax receivable		17			0
Deferred income tax asset		0			14
Total current assets		10,783			10,878
Deferred income tax asset		215			170
Intangible assets, net		1,094			1,270
Property and equipment, net		1,046			1,103
Total assets	$	13,138		$	13,421
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of note payable	$	0		$	390
Accounts payable		157			136
Accrued expenses		407			396
Accrued income tax		0			4
Deferred income tax liability		5			0
Total current liabilities		569			926
Long-term liabilities
Contingent earn-out		383			455
Total long-term liabilities		383			455
Commitments and contingencies
Stockholders’ equity
Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,395,521 shares issued and outstanding		339			339
Additional paid-in capital		1,945			1,879
Retained earnings		9,929			9,855
Accumulated other comprehensive loss (unrealized loss on available-for-sale securities, net of income tax benefit)		(27	)		(33	)
Total stockholders’ equity		12,186			12,040
Total liabilities and stockholders’ equity	$	13,138		$	13,421

See accompanying notes to unaudited consolidated financial statements

3 

ELECTRO-SENSORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands except share and per share amounts)

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net sales	$	1,837	$	2,132		$	5,562		$	6,065
Cost of goods sold		835		920			2,452			2,665
Gross profit		1,002		1,212			3,110			3,400
Operating expenses
Selling and marketing		387		368			1,262			1,186
General and administrative		386		389			1,199			1,194
Research and development		200		161			561			566
Total operating expenses		973		918			3,022			2,946
Operating income		29		294			88			454
Non-operating income (expense)
Interest expense		0		(3	)		(1	)		(9	)
Gain on sale of available-for-sale securities		0		0			0			1,449
Interest income		3		4			18			6
Other income		3		4			12			11
Total non-operating income, net		6		5			29			1,457
Income before income taxes		35		299			117			1,911
Income taxes		12		104			43			667
Net income	$	23	$	195		$	74		$	1,244
Other comprehensive income (loss)
Change in unrealized value of available-for-sale securities, net of income tax		2		0			6			132
Reclassification of gains included in net income, net of income tax		0		0			0			(899	)
Other comprehensive income (loss)		2		0			6			(767	)
Net comprehensive income	$	25	$	195		$	80		$	477
Net income per share data:
Basic
Net income per share	$	0.01	$	0.06		$	0.02		$	0.37
Weighted average shares		3,395,521		3,395,521			3,395,521			3,395,521
Diluted
Net income per share	$	0.01	$	0.05		$	0.02		$	0.34
Weighted average shares		3,703,021		3,653,021			3,695,722			3,653,021

See accompanying notes to unaudited consolidated financial statements

4 

ELECTRO-SENSORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2016			2015
Cash flows from (used in) operating activities
Net income	$	74		$	1,244
Adjustments to reconcile net income to net cash from (used in) operating activities:
Depreciation and amortization		235			264
Realized gain on sale of available-for-sale securities		0			(1,449	)
Deferred income taxes		(26	)		(34	)
Stock-based compensation expense		66			47
Change in contingent earn-out fair value		(72	)		(17	)
Other		(18	)		(7	)
Change in:
Trade receivables		(149	)		(176	)
Inventories		47			(334	)
Other current assets		(17	)		(12	)
Accounts payable		21			50
Accrued expenses		11			85
Accrued income taxes/income tax receivable		(21	)		110
Net cash from (used in) operating activities		151			(229	)
Cash flows from (used in) investing activities
Proceeds from sale of available-for-sale securities		0			1,467
Purchases of treasury bills		(7,425	)		(8,636	)
Proceeds from the maturity of treasury bills		7,889			9,043
Purchase of property and equipment		(2	)		(19	)
Net cash from investing activities		462			1,855
Cash flows used in financing activities
Payments on long-term debt		(390	)		(381	)
Net cash used in financing activities		(390	)		(381	)
Net increase in cash and cash equivalents		223			1,245
Cash and cash equivalents, beginning		569			1,190
Cash and cash equivalents, ending	$	792		$	2,435
Supplemental cash flow information
Cash paid for income taxes	$	90		$	592
Cash paid for interest	$	10		$	19

See accompanying notes to unaudited consolidated financial statements

5 

 ELECTRO-SENSORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED SEPTEMBER 30, 2016 

(in thousands except share and per share amounts) 

(unaudited)

Note 1.   Basis of Presentation

The accompanying unaudited consolidated 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, 2015, including the audited consolidated 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 September 30, 2016 and for the three and nine-month periods then ended 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. manufactures and markets a complete line of monitoring and control systems for a variety of industrial machinery. The Company uses leading-edge technology to continuously improve its products and make them easier to use, with the ultimate goal of manufacturing the industry-preferred product for every market served. The Company sells these products through an internal sales staff, manufacturers’ representatives, and distributors to a wide variety 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.

Fair Value Measurements

The carrying value of cash equivalents, treasury bills, trade receivables, accounts payable, and other financial working capital items approximates fair value at September 30, 2016 and December 31, 2015, 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 consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates, including the underlying assumptions, consist of economic lives of long-lived assets, realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, contingent earn-out, and stock compensation expense. It is at least reasonably possible that these estimates may change in the near term.

6 

ELECTRO-SENSORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED SEPTEMBER 30, 2016 

(in thousands except share and per share amounts) 

(unaudited)

Note 2.   Investments

The cost and estimated fair value of the Company’s investments are as follows: 

	Cost		Gross unrealized gain		Gross unrealized loss			Fair value
September 30, 2016
Money Market	$	240	$	0	$	0		$	240
Commercial Paper		263		0		0			263
Treasury Bills		7,426		6		0			7,432
Equity Securities		54		0		(54	)		0
		7,983		6		(54	)		7,935
Less Cash Equivalents		503		0		0			503
Total Investments, September 30, 2016	$	7,480	$	6	$	(54	)	$	7,432
December 31, 2015
Money Market	$	246	$	0	$	0		$	246
Commercial Paper		247		0		0			247
Treasury Bills		7,876		0		(4	)		7,872
Equity Securities		54		0		(54	)		0
		8,423		0		(58	)		8,365
Less Cash Equivalents		493		0		0			493
Total Investments, December 31, 2015	$	7,930	$	0	$	(58	)	$	7,872

During the nine-month period ended September 30, 2015, the Company sold 122,649 shares of Rudolph Technologies, Inc. (ticker symbol RTEC) stock and reported gains of $1,447 in non-operating income. As of September 30, 2016, the Company held no shares of RTEC stock.

7 

ELECTRO-SENSORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED SEPTEMBER 30, 2016 

(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.

September 30, 2016
	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money market funds	$	240	$	240	$	240	$	0	$	0
Commercial paper		263		263		263		0		0
Treasury bills		7,432		7,432		7,432		0		0
Equity securities		0		0		0		0		0
Liabilities:
Contingent earn-out		383		383		0		0		383

December 31, 2015

	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money market funds	$	246	$	246	$	246	$	0	$	0
Commercial paper		247		247		247		0		0
Treasury bills		7,872		7,872		7,872		0		0
Equity securities		0		0		0		0		0
Liabilities:
Contingent earn-out		455		455		0		0		455

The fair value of the money market funds, commercial paper and treasury bills is based on quoted market prices in an active market. The available-for-sale equity security is a limited-marketable company. There is an insignificant market for the limited-marketable company and the Company has determined its value based on financial and other factors, which are considered level 3 inputs in the fair value hierarchy. Management estimated the probability of meeting the revenue targets over the measurement period to determine the fair value of the contingent earn-out, which is considered a level 3 input in the fair value hierarchy.

The change in level 3 liabilities at fair value on a recurring basis is summarized as follows:

	Period Ended September 30,
	2016			2015
Beginning Balance	$	455		$	472
Credit to earnings		(72	)		(17	)
Ending Balance	$	383		$	455

The decrease in the contingent liability reflects the Company’s expectation of moderately lower future contingent payments throughout the four year earn-out period.

8 

ELECTRO-SENSORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED SEPTEMBER 30, 2016 

(in thousands except share and per share amounts) 

(unaudited)

Note 4.   Note Payable

The note payable consists of the following:

	December 31, 2015
Note payable to seller	$	400
Payable in annual installments of principal of $400. The note was paid off in February 2016. This note was non-interest bearing and unsecured.
Less: Discount of note payable listed above		(10	)
Net note payable		390
Less: Current maturities		390
Note Payable – Long Term	$	0

Note 5.   Stock-Based Compensation

During the first quarter of 2016, the Company granted its Chief Executive Officer options to purchase 50,000 shares of common stock. The options were priced at fair market value and vested 20% on the grant date, with an additional 20% vesting on the first four anniversaries of the grant date. The options expire ten years from the date of grant.

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model for the nine months ended September 30, 2016 are as follows:

Dividend yield	0.00%
Expected volatility	36.17%
Risk free interest rate	1.31%
Expected life	6 years

As of September 30, 2016, there was approximately $105 of unrecognized compensation expense. The Company expects to recognize this expense over the next four years.

9 

ELECTRO-SENSORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED SEPTEMBER 30, 2016 

(in thousands except share and per share amounts) 

(unaudited)

Note 6. Segment Information

As of January 1, 2016, the Company has one reportable operating segment: Production Monitoring. During 2015, the Company had two reportable operating segments: Production Monitoring and Investments. The Production Monitoring Division manufactures and markets a complete line of production monitoring equipment. ESI Investment Company held investments in marketable and non-marketable securities.

The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. In evaluating segment performance, management focuses on sales and income before income taxes. The Company had no inter-segment sales.

The following is financial information relating to the continuing operating segments: 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
External sales
Production monitoring	$	1,837	$	2,132	$	5,562	$	6,065
Total	$	1,837	$	2,132	$	5,562	$	6,065
Net income before income taxes
Production monitoring	$	35	$	295	$	117	$	456
Investments		N/A		4		N/A		1,455
Total	$	35	$	299	$	117	$	1,911

N/A Not applicable

10 

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

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements include, but are not limited to, statements relating to our marketing efforts or our efforts to accelerate growth; our business development activities; our efforts to maintain or reduce production costs; management’s intention that we not become an investment company; our expected use of cash on hand; our cash requirements; and the sufficiency of our cash flows. Any statement that is not based solely upon historical facts, including strategies for the future and the outcome of events that have not yet occurred, is considered a forward-looking statement.

All forward-looking statements in this document are based on information available to us as of the date of this Form 10Q, and we assume no obligation to update any of these forward-looking statements, other than as required by law. Our actual results could differ materially from those in projected or indicated in these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause future results to differ materially from our recent results or those projected in the forward-looking statements, including the accuracy of management’s assumptions with respect to industry trends, fluctuations in industry conditions, the accuracy of management’s assumptions regarding expenses and our cash needs and those listed under the heading “Cautionary Statements” under “Item 1—Business,” in our Annual Report on Form 10-K for the year ended December 31, 2015.

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 year ended December 31, 2015. We have not developed new estimates subsequent to those discussed in our Annual Report.

The following table contains selected financial information, for the periods indicated, from our consolidated statements of comprehensive income expressed as a percentage of net sales.

	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		45.5			43.2			44.1			43.9
Gross profit		54.5			56.8			55.9			56.1
Operating expenses
Selling and marketing		21.1			17.3			22.7			19.6
General and administrative		21.0			18.2			21.5			19.7
Research and development		10.9			7.6			10.1			9.3
Total operating expenses		53.0			43.1			54.3			48.6
Operating income		1.5			13.7			1.6			7.5
Non-operating income (expense)
Interest expense		0.0			(0.1	)		0.0			(0.1	)
Gain on sale of available-for-sale securities		0.0			0.0			0.0			23.9
Interest income		0.2			0.2			0.3			0.1
Other income		0.2			0.2			0.2			0.1
Total non-operating income, net		0.4			0.3			0.5			24.0
Income before income taxes		1.9			14.0			2.1			31.5
Income taxes		0.7			4.9			0.8			11.0
Net income		1.2	%		9.1	%		1.3	%		20.5	%

 11

The following discusses the Company’s performance for the three and nine months ended September 30, 2016 and 2015.

RESULTS OF OPERATIONS (in thousands)

Net Sales

Net sales for the three-month period ended ending September 30, 2016 were $1,837, a decrease of $295 or 13.8% over the same period in 2015. Net sales for the 2016 nine-month period were $5,562, a decrease of $503 or 8.3% over the same period in 2015. The 2016 three-month decrease was primarily due to weaker performance in the east and southeastern regions of the U.S. Additionally, the strength of the U.S. dollar continued to negatively affect many of our international markets. Sales to Canada were particularly affected and were down 27% compared to the same three-month period in 2015.

Furthermore, during the quarter the Company experienced a lower average value per order, resulting in a decline in overall large order performance. We believe this was caused by a trend in our general manufacturing customers shifting their production from a build-to-stock to build-to-order strategy.

Gross Profit

Gross profit for the 2016 three-month period decreased $210, or 17.3%, from $1,212 to $1,002, over the same period in 2015. Gross profit for the 2016 nine-month period decreased $290 or 8.5%, from $3,400 to $3,110, over the 2015 period. Gross margin, as a percentage of net sales, decreased to 54.5% in the 2016 three-month period from 56.8% in the prior year, and decreased to 55.9% in the 2016 nine-month period compared to 56.1% in the prior year. The decrease in the gross margin was primarily due to product mix and under-utilization of capacity in production due to lower sales.

Operating Expenses

Total operating expenses increased $55, or 6.0%, for the 2016 three-month period compared to the same period in 2015 and increased as a percentage of sales to 53.0% from 43.1%. Total operating expenses increased $76, or 2.6%, for the 2016 nine-month period compared to the same period in 2015 and increased as a percentage of sales to 54.3% from 48.6%. The increase in operating expenses as a percentage of sales was due primarily to the fact that 2016 third quarter sales decreased 13.8% from 2015 sales and the 2016 nine-month sales decreased 8.3% from 2015 sales.

● Selling and marketing expenses increased $19, or 5.2%, in the 2016 three-month period over the prior year, and increased as a percentage of net sales to 21.1% from 17.3%. Selling and marketing expenses increased $76, or 6.4%, in the 2016 nine-month period over the prior year period, and increased as a percentage of net sales to 22.7% from 19.6%. The 2016 three-month period increase resulted from an increase in wages and benefits due to additional marketing personnel. The nine-month period increase resulted from higher wages and benefits due to hiring additional personnel, the cost of providing system demonstrations to potential customers, cost associated with attending a higher number of tradeshows, and increased travel.

● General and administrative expenses decreased $3, or 0.8%, for the 2016 three-month period compared to the same period in 2015, but increased as a percentage of net sales to 21.0% from 18.2%. For the 2016 nine-month period, general and administrative expenses increased $5, or 0.4%, compared to the 2015 period and increased as a percentage of net sales to 21.5% from 19.7%. The decrease for the 2016 three-month period was primarily due to a decrease in amortization of our enterprise software and related hardware, which was fully amortized in 2015, partially offset by an increase in stock compensation expense for an option granted to the Chief Executive Officer in February 2016. The increase for the nine-month period resulted from an increase in wages and benefits, legal and professional fees, and director fees. This increase was partially offset by decreases in contract personnel, due to the 2015 expensing of post-closing deliverables related to the HazardPRO acquisition, and amortization of our enterprise software and related hardware, which was fully amortized in 2015.

● Research and development expenses increased $39, or 24.2%, in the 2016 three–month period from the same period in 2015 and increased as a percentage of net sales to 10.9% from 7.6%. For the 2016 nine–month period, research and development expenses decreased $5, or 0.9%, over the 2015 period, but increased as a percentage of net sales to 10.1% from 9.3%. The increase for the 2016 three-month period resulted from lab testing costs for additional certifications for the HazardPRO product line and contract engineering fees related to HazardPRO software modifications and upgrades. The decrease for nine-month period is due to a decrease in lab testing and certifications on our HazardPRO product line and salaries due to reduced staffing, which was partially offset by an increase in third quarter costs in contract engineering related to HazardPRO software modifications and upgrades.

 12

Operating Income

Three-month operating income decreased 90.1% to $29 from $294 and nine-month operating income decreased 80.6% to $88 from $454, due primarily to lower 2016 revenue.

Non-Operating Income

Non-operating income increased by $1, or 20.0%, for the 2016 three-month period compared to the same 2015 period. Non-operating income decreased $1,428, or 98.0%, in the nine months ended September 30, 2016, when compared to the same period in 2015. This decrease was due to the liquidation of 122,649 shares of Rudolph Technologies, Inc. stock during the first half of 2015, which resulted in a recognized gain of $1,447.

Income Before Income Taxes

Income before income taxes was $35 for the three months ended September 30, 2016, representing a decrease of $264, or 88.3%, when compared to the same period in 2015. Income before income taxes was $117 for the nine months ended September 30, 2016, representing a decrease of $1,794, or 93.9%, when compared to the same period in 2015.

The decrease for both 2016 periods was the result of a decrease in revenue. In addition, the decrease for 2016 nine-month period was also the result of a decrease in the sale of available-for-sale securities recognized in 2016. During the 2015 nine-month period, we recognized $1,449 of gain on sale of available-for-sale securities (see “Non-Operating Income (Expense)”).

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $792 at September 30, 2016, and $569 at December 31, 2015. The increase was mainly from investing activities.

Cash used in operations was favorably affected by a decrease in inventories, and an increase in accounts payable and accrued expenses. For the 2016 nine-month period we used $380 less cash in operations than in the 2015 nine-month period. In the 2016 period, the Company had a decrease in inventories due to delaying purchases as a result of lower revenues.

Cash generated from investing activities was $462 and $1,855 for the nine months ended September 30, 2016 and 2015, respectively. During the 2016 and 2015 nine-month periods, the Company had net proceeds of Treasury Bills with a maturity date of more than three months of $464 and $407, respectively. In addition, the Company generated $1,467 in proceeds on the sale of available-for-sale securities during 2015 from the sale of Rudolph stock.

Cash used in financing activities was $390 and $381 for respective 2016 and 2015 nine-month periods. During the nine months ended September 30, 2016 and 2015, we paid $390 and $381, respectively, on the long-term debt owed to Harvest Engineering, Inc. (“Harvest”) for the technology purchased in February 2014. As of September 30, 2016, the note payable to Harvest has been paid in full.

Our ongoing cash requirements will be primarily for capital expenditures, research and development, and working capital. Management believes that cash on hand and any cash provided by operations will be sufficient to meet our cash requirements through at least the next 12 months.

Off-balance Sheet Arrangements

As of September 30, 2016, the Company had no off-balance sheet arrangements or transactions.

Future Business Development Activities

The Company continues to seek growth opportunities, both internally through the Company’s existing portfolio of products, technologies and markets, as well as externally through technology partnerships or related-product acquisitions. Although the Company is continuing to explore these external opportunities, it currently has no agreements or understandings with any third parties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

 13

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have 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 September 30, 2016 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the third quarter of 2016, which 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. 

PART II – OTHER INFORMATION

Item 1. Legal Proceedings - None.

Item 1A. Risk Factors - Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - None.

Item 3. Defaults Upon Senior Securities - None.

Item 4. Mine Safety Disclosures – Not Applicable.

Item 5. Other Information - None.

Item 6. Exhibits 

(a)Exhibits - See Exhibit Index following signature page.

 14

SIGNATURES

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.
November 10, 2016	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer
November 10, 2016	/s/ Gloria M. Grundhoefer
	Gloria M. Grundhoefer
	Controller

 15

EXHIBIT INDEX

ELECTRO-SENSORS, INC.

FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2016

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 September 30, 2016, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and September 30, 2015, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and September 30, 2015, and (iv) Notes to Consolidated Financial Statements.

 16

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY-ACT OF 2002

I, David L. Klenk, certify that:

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

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, 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.

November 10, 2016	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer

17

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Electro-Sensors, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission (the “Report”), I, David L. Klenk, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

November 10, 2016	/s/ David L. Klenk
	David L. Klenk
	Chief Executive Officer and Chief Financial Officer

18

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 09, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Entity Registrant Name	ELECTRO SENSORS INC
Entity Central Index Key	0000351789
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Common Stock, Shares Outstanding		3,395,521
Trading Symbol	ELSE

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 792	$ 569
Treasury bills	7,432	7,872
Trade receivables, less allowance for doubtful accounts of $8	838	689
Inventories	1,517	1,564
Other current assets	187	170
Income tax receivable	17	0
Deferred income tax asset	0	14
Total current assets	10,783	10,878
Deferred income tax asset, current	215	170
Intangible assets, net	1,094	1,270
Property and equipment, net	1,046	1,103
Total assets	13,138	13,421
Current liabilities
Current maturities of note payable	0	390
Accounts payable current	157	136
Accrued expenses current	407	396
Accrued income tax	0	4
Deferred income tax liability	5	0
Total current liabilities	569	926
Long-term liabilities
Contingent earn-out	383	455
Total long-term liabilities	383	455
Commitments and contingencies
Stockholders' equity
Common stock par value $0.10 per share; authorized 10,000,000 shares; 3,395,521 shares issued and outstanding	339	339
Additional paid-in capital	1,945	1,879
Retained earnings	9,929	9,855
Accumulated other comprehensive loss (unrealized loss on available-for-sale securities, net of income tax benefit)	(27)	(33)
Total stockholders' equity	12,186	12,040
Total liabilities and stockholders' equity	$ 13,138	$ 13,421

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Condensed Consolidated Balance Sheets [Abstract]
Trade receivables, allowance for doubtful accounts	$ 8	$ 8
Common stock, par value	$ 0.10	$ 0.10
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,395,521	3,395,521
Common stock, shares outstanding	3,395,521	3,395,521

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Consolidated Statements Of Comprehensive Income [Abstract]
Net Sales	$ 1,837	$ 2,132	$ 5,562	$ 6,065
Cost of Goods Sold	835	920	2,452	2,665
Gross Profit	1,002	1,212	3,110	3,400
Operating Expenses
Selling and marketing	387	368	1,262	1,186
General and administrative	386	389	1,199	1,194
Research and development	200	161	561	566
Total Operating Expenses	973	918	3,022	2,946
Operating Income	29	294	88	454
Non-operating Income (Expense)
Interest expense	0	(3)	(1)	(9)
Gain on sale of available-for-sale securities	0	0	0	1,449
Interest income	3	4	18	6
Other income	3	4	12	11
Total Non-operating Income, Net	6	5	29	1,457
Income before Income Taxes	35	299	117	1,911
Income taxes	12	104	43	667
Net Income	23	195	74	1,244
Other Comprehensive Income (Loss)
Change in unrealized value of available-for-sale securities, net of income tax	2	0	6	132
Reclassification of gains included in net income, net of income tax	0	0	0	(899)
Other Comprehensive Income (Loss)	2	0	6	(767)
Net Comprehensive Income	$ 25	$ 195	$ 80	$ 477
Basic
Net income per share	$ 0.01	$ 0.06	$ 0.02	$ 0.37
Weighted average shares	3,395,521	3,395,521	3,395,521	3,395,521
Diluted
Net income per share	$ 0.01	$ 0.05	$ 0.02	$ 0.34
Weighted average shares	3,703,021	3,653,021	3,695,722	3,653,021

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from (used in) operating activities
Net income	$ 74	$ 1,244
Adjustments to reconcile net income to net cash from (used in) operating activities:
Depreciation and amortization	235	264
Realized gain on sale of available-for-sale securities	0	(1,449)
Deferred income taxes	(26)	(34)
Stock-based compensation expense	66	47
Change in contingent earn-out fair value	(72)	(17)
Other	(18)	(7)
Change in:
Trade receivables	(149)	(176)
Inventories	47	(334)
Current assets, other	(17)	(12)
Accounts payable	21	50
Accrued expenses	11	85
Accrued income taxes/income tax receivable	(21)	110
Net cash from (used in) operating activities	151	(229)
Cash flows from (used in) investing activities
Proceeds from sale of available-for-sale securities	0	1,467
Purchases of treasury bills	(7,425)	(8,636)
Proceeds from the maturity of treasury bills	7,889	9,043
Purchase of property and equipment	(2)	(19)
Net cash from investing activities	462	1,855
Cash flows used in financing activities
Payments on long-term debt	(390)	(381)
Net cash used in financing activities	(390)	(381)
Net increase in cash and cash equivalents	223	1,245
Cash and cash equivalents, beginning	569	1,190
Cash and cash equivalents, ending	792	2,435
Supplemental cash flow information
Cash paid for income taxes	90	592
Cash paid for interest	$ 10	$ 19

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2016

Nature Of Business And Significant Accounting Policies [Abstract]

Basis Of Presentation

Note 1.  Basis of Presentation

The accompanying unaudited consolidated 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, 2015, including the audited consolidated 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 September 30, 2016 and for the three and nine-month periods then ended 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. manufactures and markets a complete line of monitoring and control systems for a variety of industrial machinery. The Company uses leading-edge technology to continuously improve its products and make them easier to use, with the ultimate goal of manufacturing the industry-preferred product for every market served. The Company sells these productsthrough an internal sales staff, manufacturers’ representatives, and distributors to a wide variety 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. 

Fair Value Measurements 

The carrying value of cash equivalents, treasury bills, trade receivables, accounts payable, and other financial working capital items approximates fair value at September  30, 2016 and December 31, 2015, 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 consolidated financial statements and accompanying notes.  Actual results could differ from those estimates.  Significant estimates, including the underlying assumptions, consist of economic lives of long-lived assets,realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, contingent earn-out, and stock compensation expense.  It is at least reasonably possible that these estimates may change in the near term.

XML

Investments

9 Months Ended

Sep. 30, 2016

Investments [Abstract]

Investments

Note 2.   Investments 

The cost and estimated fair value of the Company’s investments are as follows:  

			Gross		Gross
			unrealized		unrealized		Fair
	Cost		gain		loss		value
September 30, 2016
Money Market	$	240	$	0	$	0	$	240
Commercial Paper		263		0		0		263
Treasury Bills		7,426		6		0		7,432
Equity Securities		54		0		(54)		0
		7,983		6		(54)		7,935
Less Cash Equivalents		503		0		0		503
Total Investments, September 30, 2016	$	7,480	$	6	$	(54)	$	7,432
December 31, 2015
Money Market	$	246	$	0	$	0	$	246
Commercial Paper		247		0		0		247
Treasury Bills		7,876		0		(4)		7,872
Equity Securities		54		0		(54)		0
		8,423		0		(58)		8,365
Less Cash Equivalents		493		0		0		493
Total Investments, December 31, 2015	$	7,930	$	0	$	(58)	$	7,872

During the nine-month period ended September 30, 2015, the Company sold 122,649 shares of Rudolph Technologies, Inc. (ticker symbol RTEC) stock and reported gains of $1,447 in non-operating income.  As of September 30, 2016, the Company held no shares of RTEC stock.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2016

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. 

September 30, 2016
	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money Market Funds	$	240	$	240	$	240	$	0	$	0
Commercial Paper		263		263		263		0		0
Treasury Bills		7,432		7,432		7,432		0		0
Equity Securities		0		0		0		0		0
Liabilities:
Contingent Earn-out		383		383		0		0		383
December 31, 2015
	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money Market Funds	$	246	$	246	$	246	$	0	$	0
Commercial Paper		247		247		247		0		0
Treasury Bills		7,872		7,872		7,872		0		0
Equity Securities		0		0		0		0		0
Liabilities:
Contingent Earn-out		455		455		0		0		455

The fair value of the money market funds, commercial paper and treasury bills is based on quoted market prices in an active market. The available-for-sale equity security is a limited-marketable company.  There is an insignificant market for the limited-marketable company and the Company has determined its value based on financial and other factors, which are considered level 3 inputs in the fair value hierarchy.  Management estimated the probability of meeting the revenue targets over the measurement period to determine the fair value of the contingent earn-out, which is considered a level 3 input in the fair value hierarchy.

The change in level 3 liabilities at fair value on a recurring basis is summarized as follows:

	Period Ended September 30,
	2016			2015
Beginning Balance	$	455		$	472
Credit to earnings	(72		)	(17		)
Ending Balance	$	383		$	455

The decrease in the contingent liability reflects the Company’s expectation of moderately lower future contingent payments throughout the four year earn-out period.

XML

Note Payable

9 Months Ended

Sep. 30, 2016

Note Payable [Abstract]

Notes Payable

Note 4.  Note Payable

The note payable consists of the following:

	December 31, 2015
Note payable to seller	$	400
Payable in annual installments of principal of $400. The note was paid off in February 2016.  This note was non-interest bearing and unsecured.
Less: Discount of note payable listed above		(10)
Net note payable		390
Less: Current maturities		390
Note Payable – Long Term	$	0

XML

Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 5.  Stock-Based Compensation 

During the first quarter of 2016, the Company granted its Chief Executive Officer options to purchase 50,000 shares of common stock.  The options were priced at fair market value and vested 20% on the grant date, with an additional 20% vesting on the first four anniversaries of the grant date.  The options expire ten years from the date of grant. 

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model for the nine months ended September 30, 2016 are as follows:

Dividend yield	0.00%
Expected volatility	36.17%
Risk free interest rate	1.31%
Expected life	6 years

As of September 30, 2016, there was approximately $105 of unrecognized compensation expense.  The Company expects to recognize this expense over the next four years. 

XML

Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information [Abstract]

Segment Information

Note 6.  Segment Information 

As of January 1, 2016, the Company has one reportable operating segment: Production Monitoring.  During 2015, the Company had two reportable operating segments: Production Monitoring and Investments.  The Production Monitoring Division manufactures and markets a complete line of production monitoring equipment.  ESI Investment Company held investments in marketable and non-marketable securities. 

The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.  In evaluating segment performance, management focuses on sales and income before income taxes.  The Company had no inter-segment sales. 

The following is financial information relating to the continuing operating segments:  

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
External sales
Production monitoring	$	1,837	$	2,132	$	5,562	$	6,065
Total	$	1,837	$	2,132	$	5,562	$	6,065
Income before income taxes
Production monitoring	$	35	$	295	$	117	$	456
Investments		N/A		4		N/A		1,455
Total	$	35	$	299	$	117	$	1,911

N/A Not applicable

XML

Basis Of Presentation (Policy)

9 Months Ended

Sep. 30, 2016

Nature Of Business And Significant Accounting Policies [Abstract]

Nature Of Business

Nature of Business

Electro-Sensors, Inc. manufactures and markets a complete line of monitoring and control systems for a variety of industrial machinery. The Company uses leading-edge technology to continuously improve its products and make them easier to use, with the ultimate goal of manufacturing the industry-preferred product for every market served. The Company sells these productsthrough an internal sales staff, manufacturers’ representatives, and distributors to a wide variety 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. 

Fair Value Measurements

Fair Value Measurements 

The carrying value of cash equivalents, treasury bills, trade receivables, accounts payable, and other financial working capital items approximates fair value at September  30, 2016 and December 31, 2015, 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 consolidated financial statements and accompanying notes.  Actual results could differ from those estimates.  Significant estimates, including the underlying assumptions, consist of economic lives of long-lived assets,realizability of trade receivables, valuation of deferred tax assets/liabilities, inventory, investments, contingent earn-out, and stock compensation expense.  It is at least reasonably possible that these estimates may change in the near term.

XML

Investments (Tables)

9 Months Ended

Sep. 30, 2016

Investments [Abstract]

Cost And Estimated Fair Value Of Investments

			Gross		Gross
			unrealized		unrealized		Fair
	Cost		gain		loss		value
September 30, 2016
Money Market	$	240	$	0	$	0	$	240
Commercial Paper		263		0		0		263
Treasury Bills		7,426		6		0		7,432
Equity Securities		54		0		(54)		0
		7,983		6		(54)		7,935
Less Cash Equivalents		503		0		0		503
Total Investments, September 30, 2016	$	7,480	$	6	$	(54)	$	7,432
December 31, 2015
Money Market	$	246	$	0	$	0	$	246
Commercial Paper		247		0		0		247
Treasury Bills		7,876		0		(4)		7,872
Equity Securities		54		0		(54)		0
		8,423		0		(58)		8,365
Less Cash Equivalents		493		0		0		493
Total Investments, December 31, 2015	$	7,930	$	0	$	(58)	$	7,872

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Measurements [Abstract]

Fair Value Measurements on a Recurring Basis

September 30, 2016
	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money Market Funds	$	240	$	240	$	240	$	0	$	0
Commercial Paper		263		263		263		0		0
Treasury Bills		7,432		7,432		7,432		0		0
Equity Securities		0		0		0		0		0
Liabilities:
Contingent Earn-out		383		383		0		0		383
December 31, 2015
	Carrying amount in consolidated				Fair Value Measurement Using
	balance sheet		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents
Money Market Funds	$	246	$	246	$	246	$	0	$	0
Commercial Paper		247		247		247		0		0
Treasury Bills		7,872		7,872		7,872		0		0
Equity Securities		0		0		0		0		0
Liabilities:
Contingent Earn-out		455		455		0		0		455

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Period Ended September 30,
	2016			2015
Beginning Balance	$	455		$	472
Credit to earnings	(72		)	(17		)
Ending Balance	$	383		$	455

XML

Note Payable (Tables)

9 Months Ended

Sep. 30, 2016

Note Payable [Abstract]

Schedule Of Note Payable

	December 31, 2015
Note payable to seller	$	400
Payable in annual installments of principal of $400. The note was paid off in February 2016.  This note was non-interest bearing and unsecured.
Less: Discount of note payable listed above		(10)
Net note payable		390
Less: Current maturities		390
Note Payable – Long Term	$	0

XML

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2016

Stock-Based Compensation (Valuation Assumption) [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Dividend yield	0.00%
Expected volatility	36.17%
Risk free interest rate	1.31%
Expected life	6 years

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2016

Segment Information [Abstract]

Financial Information Relating To Continuing Operating Segments

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
External sales
Production monitoring	$	1,837	$	2,132	$	5,562	$	6,065
Total	$	1,837	$	2,132	$	5,562	$	6,065
Income before income taxes
Production monitoring	$	35	$	295	$	117	$	456
Investments		N/A		4		N/A		1,455
Total	$	35	$	299	$	117	$	1,911

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Nature Of Business And Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Nature Of Business And Significant Accounting Policies [Abstract]
Research and development expense	$ 200	$ 161	$ 561	$ 566

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Investments (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Investment In Organization [Line Items]
Gain on sale of available-for-sale securities	$ 0	$ 0	$ 0	$ 1,449
Rudolph Technologies, Inc [Member]
Investment In Organization [Line Items]
Investments owned, shares	0		0
Available-for-sale shares sold				122,649
Gain on sale of available-for-sale securities				$ 1,447

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Investments (Cost And Estimated Fair Value Of Investments) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 7,480	$ 7,930
Gross unrealized gain	6	0
Gross unrealized loss	(54)	(58)
Fair value, investments	7,432	7,872
Less cash equivalents, Carrying amount	792	569	$ 2,435	$ 1,190
Money Market [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	240	246
Gross unrealized gain	0	0
Gross unrealized loss	0	0
Fair value, investments	240	246
Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	263	247
Gross unrealized gain	0	0
Gross unrealized loss	0	0
Fair value, investments	263	247
Treasury Bills [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	7,426	7,876
Gross unrealized gain	6	0
Gross unrealized loss	0	(4)
Fair value, investments	7,432	7,872
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	54	54
Gross unrealized gain	0	0
Gross unrealized loss	(54)	(54)
Fair value, investments	0	0
Debt and Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	7,983	8,423
Gross unrealized gain	6	0
Gross unrealized loss	(54)	(58)
Fair value, investments	7,935	8,365
Less Cash and Cash Equivalents [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross unrealized gain	0	0
Gross unrealized loss	0	0
Less cash equivalents, Carrying amount	503	493
Less cash equivalents, Fair value	$ 503	$ 493

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Fair Value Measurements (Fair Value Measurements On A Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Carrying amount	$ 792	$ 569	$ 2,435	$ 1,190
Treasury Bills, fair value	7,432	7,872
Available-for-sale Securities, Fair Value	7,432	7,872
Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Earn-out, Fair Value	383	455
Contingent Earn-out, Carrying Value	383	455
Fair Value, Inputs, Level 1 [Member] | Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Earn-out, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member] | Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Earn-out, Fair Value	0	0
Fair Value, Inputs, Level 3 [Member] | Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Earn-out, Fair Value	383	455
Limited Marketable Company [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Carrying amount	0	0
Available-for-sale Securities, Fair Value	0	0
Limited Marketable Company [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value	0	0
Limited Marketable Company [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value	0	0
Limited Marketable Company [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value	0	0
Money Market [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Carrying amount	240	246
Cash and cash equivalents, Fair Value	240	246
Money Market [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	240	246
Money Market [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	0	0
Money Market [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	0	0
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Carrying amount	263	247
Cash and cash equivalents, Fair Value	263	247
Commercial Paper [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	263	247
Commercial Paper [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	0	0
Commercial Paper [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	0	0
Treasury Bills [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Treasury Bills, carrying value	7,432	7,872
Treasury Bills, fair value	7,432	7,872
Treasury Bills [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Treasury Bills, fair value	7,432	7,872
Treasury Bills [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Treasury Bills, fair value	0	0
Treasury Bills [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Treasury Bills, fair value	$ 0	$ 0

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Fair Value Liabilities Measured on Recurring Basis Unobservable Inputs Reconciliation (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Fair Value Measurements [Abstract]
Beginning Balance	$ 455	$ 472
Credit to earnings	(72)	(17)
Ending Balance	$ 383	$ 455

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Note Payable (Schedule of Notes Payable) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2016
Note Payable Long Term [Abstract]
Note Payable to seller	$ 400
Less: Discount of note payable listed above	10
Net Note Payable	390
Current maturities of note payable	390	$ 0
Note Payable - Long Term	0
Note Payable, Annual Installment	$ 400
Note Payable, annual installment frequency	annual

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Stock-Based Compensation (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2016 USD ($) shares
Unrecognized Share Based Compensation | $	$ 105
Number of Years To Recognize Remaining Expense	4 years
Chief Executive Officer [Member]
Options expiration from date of grant	10 years
Granted, Number of Shares | shares	50,000
Stock Option Vesting Period	4 years
Vesting Percentage	20%

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Stock Based Compensation (Valuation Assumptions) (Details)	9 Months Ended
	Sep. 30, 2016
Stock-Based Compensation (Valuation Assumption) [Abstract]
Dividend Yield	0.00%
Expected Volatility	36.17%
Risk Free Interest Rate	1.31%
Expected Life	6 years

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Segment Information (Continuing Operating Segments) (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) segment	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) segment
Net revenues	$ 1,837	$ 2,132	$ 5,562	$ 6,065
Interest income	3	4	18	6
Depreciation and amortization			235	264
Interest expense	0	3	1	9
Purchase of property and equipment			2	19
Total assets	13,138		13,138		$ 13,421
Income before income taxes	35	299	$ 117	1,911
Number of reportable segments | segment			1		2
Production Monitoring [Member]
Net revenues	1,837	2,132	$ 5,562	6,065
Income before income taxes	$ 35	295	$ 117	456
Segment Investments [Member]
Income before income taxes		$ 4		$ 1,455