U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB



                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

             For the quarterly period ended  March 31, 1997

                       Commission File Number 0-9587


                         ELECTRO-SENSORS, INC.
  (Exact Name of Small Business Issuer as Specified in Its Charter)

          MINNESOTA                                 41-0943459
(State or Other Jurisdiction of                  (I.R.S. Employer
 Incorporation or Organization)                 Identification No.)


6111 Blue Circle Drive, Minnetonka, Minnesota             55343-9108
(Address of Principal Executive Offices)                  (Zip Code)


                            (612)930-0100
        (Issuer's telephone number, Including Area Code)



     (Former Name, Former Address and Former Fiscal Year, if Changed
                     Since Last Report)


Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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   X     No


Shares of $.10 par value common stock outstanding at       May 2,
1997:   1,944,911

Transitional Small Business Disclosure Format (check one):
Yes         No   X







<PAGE>




Part I. Financial Information

The interim financial  statements included in this form 10-QSB are unaudited and
reflect in the opinion of management all adjustments  (which include only normal
recurring  adjustments)  necessary  for a fair  presentation  of the  results of
operations for these periods.

                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)

                                                   Three Months Ended
                                                        March 31,
                                                    1997        1996

SALES                                           $1,668,709    $1,575,421

COST OF SALES                                      704,425       680,499
                                                 ---------     ---------
GROSS MARGIN                                       964,284       894,922
                                                 ---------     ---------
OPERATING EXPENSES:
  Selling                                          340,133       324,940
  Administrative                                   204,988       219,620
  Research and development                         171,092       178,882
                                                 ---------     ---------
TOTAL OPERATING EXPENSES                           716,213       723,442
                                                 ---------     ---------
INCOME FROM OPERATIONS                             248,071       171,480
                                                 ---------     ---------
OTHER INCOME (EXPENSE):
  Gain on sale of
   investment securities                             5,532        35,852
  Interest income                                   29,581        27,477
  Other                                            (44,341)      (37,461)
                                                 ---------     ---------
TOTAL OTHER INCOME                                  (9,228)       25,868
                                                 ---------     ---------
INCOME BEFORE INCOME TAXES                         238,843       197,348

PROVISION FOR INCOME TAXES                          87,500        81,400
                                                 ---------     ---------
NET INCOME                                      $  151,343    $  115,948
                                                 =========     =========








                                        2

<PAGE>



(Continued)

                                                    Three Months Ended
                                                        March 31,
                                                     1997       1996

WEIGHTED AVERAGE NUMBER
 OF COMMON AND COMMON
  EQUIVALENT SHARES:

  PRIMARY                                        1,954,387     1,966,582
                                                 =========     =========
  ASSUMED FULLY DILUTED                          1,954,387     1,966,582
                                                 =========     =========
EARNINGS PER COMMON
 AND COMMON EQUIVALENT
  SHARES:

  PRIMARY                                             $.08          $.06
                                                       ===           ===
  ASSUMED FULLY DILUTED                               $.08          $.06
                                                       ===           ===






























                                        3

<PAGE>




                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                March 31,     December 31,
                                                                  1997            1996
      ASSETS
<S>                                                            <C>             <C>    
CURRENT ASSETS
  Cash                                                         $2,727,971      $2,581,588
  Investment in available-for-sale securities                   4,179,695       5,356,210
  Trade receivables, less allowance
    for doubtful accounts of $45,150
    and $18,000, respectively                                     750,752         726,628
  Inventories                                                     802,383         829,428
  Prepaid expenses                                                 82,997          76,018
  Deferred taxes                                                   77,200          77,200
                                                                ---------       ---------
TOTAL CURRENT ASSETS                                            8,620,998       9,647,072

PROPERTY AND EQUIPMENT, NET                                     1,850,047       1,838,270
                                                                ---------       ---------
TOTAL ASSETS                                                  $10,471,045     $11,485,342
                                                               ==========      ==========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable                                                $   378,203     $   421,383
  Accounts payable                                                161,101         115,666
  Accrued expenses                                                303,847         387,594
  Accrued income taxes                                            101,166          14,748
                                                                ---------       ---------
TOTAL CURRENT LIABILITIES                                         944,317         939,391
                                                                ---------       ---------
DEFERRED INCOME TAXES                                             953,400       1,398,900
                                                                ---------       ---------
SHAREHOLDERS' EQUITY:
  Common stock - par value $.10 per share; 
  Authorized 10,000,000 shares; issued
    1,944,911 and 1,942,282
    shares, respectively                                          194,491         194,228
  Additional paid-in capital                                      625,135         618,135
  Retained earnings                                             6,081,622       5,988,629
  Unrealized holding gain on investment
    securities, net                                             1,678,421       2,408,385
  Notes receivable                                                 (6,341)        (62,326)
                                                                ---------       ---------
    Total shareholders' equity                                  8,573,328       9,147,051
                                                                ---------       ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $10,471,045     $11,485,342
                                                               ==========      ==========

</TABLE>

                                                                  4

<PAGE>

                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                        CONSOLIDATED CASH FLOW STATEMENTS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                           Three Months Ended
                                                                               March 31,
                                                                       1997                 1996
<S>                                                                  <C>                  <C>   
CASH FLOW FROM OPERATING ACTIVITIES
  Cash received from customers                                       $1,616,335           $1,494,416
  Cash paid to suppliers and employees                               (1,423,190)          (1,351,957)
  Interest received                                                      29,581               27,477
  Income taxes paid                                                      (1,082)            (101,333)
                                                                      ---------            ---------
    Net cash provided by operating activities                           221,644               68,603
CASH FLOWS FROM INVESTING ACTIVITIES                                  ---------            ---------
  Investments in available-for-sale securities:
    Sales                                                                 6,583               41,107
    Purchases                                                               -0-              (31,250)
  Purchase of equipment                                                 (43,562)              (8,644)
  Repayments of notes receivable                                         55,985                  707
  Net repayment from Employee Stock
    Ownership Trust                                                         -0-               41,951
                                                                      ---------            ---------
      Net cash (used in) investing activities                            19,006               43,871
CASH FLOWS FROM FINANCING ACTIVITIES                                  ---------            ---------
  Dividends paid                                                        (58,350)          (1,028,343)
  Payments on short-term borrowings                                     (43,180)             (39,964)
  Proceeds from Employee Stock Purchase Plan                              7,263                  -0-
                                                                      ---------            ---------
    Net cash (used in) financing activities                             (94,267)          (1,068,307)
                                                                      ---------            ---------
      Increase (decrease) in cash                                       146,383             (955,833)
CASH AND CASH EQUIVALENTS
  Beginning                                                           2,581,588            3,273,873
                                                                      ---------            ---------
  End                                                                $2,727,971           $2,318,040
                                                                      =========            =========

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

<S>                                                                   <C>                 <C>   
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income                                                            $ 151,343            $ 115,948
Adjustments to reconcile net income to net
      cash provided by operating activities:
    Depreciation and amortization                                        31,785               30,236
    Provision for losses on trade receivables                            28,250                5,250
    Employee Stock Ownership Plan shares
      released by plan                                                      -0-               25,549
    Realized (gain) loss on sale of
      investment securities, net                                         (5,532)             (35,852)
    Deferred taxes                                                          -0-                  -0-
    (Increase) decrease in:
      Trade receivables                                                 (52,374)             (81,005)
      Inventory                                                          27,045                9,827
      Prepaid expenses                                                   (6,979)              (6,587)
    Increase (decrease) in:
      Accounts payable                                                   45,435               71,537
      Accrued expenses                                                  (83,747)             (46,367)
      Accrued income taxes payable                                       86,418              (19,933)
                                                                      ---------            ---------
Net cash provided by operating activities                             $ 221,644            $  68,603
                                                                      =========            =========
NONCASH INVESTING AND FINANCING ACTIVITIES
  Employee Stock Ownership Plan shares
    released by plan                                                        -0-               25,549
  Unrealized gain(loss) on marketable securities                     $1,175,464            $ 247,102
                                                                      ---------            ---------
    Total noncash investing and financing                            $1,175,464            $ 272,651
                                                                      =========            =========

</TABLE>

                                                                5

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

RESULTS OF OPERATION

Net income  increased  30.5%  during the first  quarter of 1997.  The  increased
earnings are attributed to the increase in sales activity experienced during the
period.

Sales for the first quarter of 1997  increased 5.9% to $1,668,709 as compared to
$1,575,421  for the first  quarter of 1996.  The  increase in sales was provided
primarily  by  the  AutoData  Systems  segment.  In  addition,  both  the  Speed
Monitoring Systems and Drive Control Systems segments experienced moderate sales
increases while Microflame  experienced a sales decrease during the period.  The
increase in AutoData  Systems sales resulted from its  development of a vertical
market  survey  package  utilizing  check  mark  recognition  technology  in the
processing of participant  responses for the Healthcare  industry.  The AutoData
Systems survey package was released late during the first quarter 1996.

The Company's cost of sales increased when compared to a year ago, but decreased
as a percentage  of sales.  The  increased  cost during the  comparable  periods
resulted from both increased sales volume and a slight increase in material cost
of semiconductor  components which are utilized by the electronic  manufacturing
segments of our business.

Selling and  administrative  expenses remained  relatively  unchanged during the
first  quarter  of 1997 as  compared  to the  same  period  of  1996.  Decreased
personnel  costs  offset  increased   marketing  expenses  associated  with  the
promotion of the  AutoData  Survey  package.  Other  selling and  administrative
expenses remained relatively unchanged.

Research and development  expense  decreased during the first quarter of 1997 as
compared to 1996.  The decreased  expense  resulted  primarily from decreases in
both  personnel cost and  development  expenses  during the comparable  periods.
However,   the  Company  still  continues  its  commitment  toward  new  product
development as the key for future sales growth.


LIQUIDITY AND CAPITAL RESOURCES

During the first three months ended March 31, 1997,  working  capital  decreased
$1,031,000  to a total of  $7,676,681.  The decrease in the fair market value of
marketable  securities resulted from the declined quoted market price of certain
securities.  This  decline  in  market  value is the  principal  reason  for the
reduction  in working  capital.  Accounts  receivable  increased  and  inventory
decreased  due to the higher  volume of sales during the first  quarter of 1997.
Accounts payable increased as a result of additional raw material purchases late
during the first  quarter.  In addition,  proceeds  from the sales of marketable
securities and the employee  stock  purchase plan  generated  $6,583 and $7,263,
respectively,  during  the  first  three  months.  The  Company  received  notes
receivable  payments of $55,985.  The Company made a dividend payment of $58,350
during  the  first  quarter  of 1997.  In  addition,  the  Company  invested  an
additional  $43,562 in office and manufacturing  equipment and repaid $43,180 of
short-term  borrowings.  The Company  believes it can pay projected  capital and
operating expenses out of income and current reserves.

                                        6
<PAGE>

                                OTHER INFORMATION

PART II

Item 1.   Legal Proceedings

          There were no  material  developments  in  previously  reported  legal
          proceedings.

Item 2.   Changes in Securities

          No changes have been made in any registered securities.

Item 3.   Defaults Upon Senior Securities

          No event  constituting  a default has occurred  respecting  any senior
          security of the Registrant.

Item 4.   Submission of Matters to a Vote of Security Holders

          There were no matters  submitted to a vote of shareholders  during the
          period covered by this Form 10-QSB.

Item 5.   Other Information

          As provided for under the Private Securities  Litigation Reform Act of
          1995,  the  Company  wishes to caution  investors  that the  following
          important  factors,  among others,  in some cases have affected and in
          the future could affect the Company's actual results of operations and
          cause such  results to differ  materially  from those  anticipated  in
          forward-looking  statements  made in this document and elsewhere by or
          on behalf of the Company:  the  uncertainty of market  acceptance of
          products of the Company's  AutoData  Systems  division  which is in an
          early stage of  development;  fluctuations  and  declines in operating
          results of the Company's Drive Control  Systems,  Speed Monitoring and
          Microflame  division;  fluctuations  in the  value  of  the  Company's
          investments,  particularly PPT Vision,  and sales of such investments;
          competition,  particularly with regard to the pricing of products; the
          Company's   ability  to  develop  new  products;   and  dependence  on
          suppliers. For additional information, please see the Company's Annual
          Report on Form 10-KSB.

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits.

               27.  Financial Data Schedule

          (b)  Reports on Form 8-K.

               No reports on Form 8-K were filed during the quarter  ended March
               31, 1997.



                                        7

<PAGE>





                                   SIGNATURES

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



                                 ELECTRO-SENSORS, INC.



Date  MAY 7, 1997                By /s/ Bradley D. Slye
                                    Bradley D. Slye, President



                                 By /s/  Mark D. Laumann
                                   Mark D. Laumann, Treasurer
                                  (principal financial officer)






                                        8

<PAGE>


                                  EXHIBIT INDEX
                              ELECTRO-SENSORS, INC.
                                   FORM 10-QSB
                     For Fiscal Quarter Ended March 31, 1997

Exhibit No.                 Description
    27               Financial Data Schedule (filed in electronic format only)