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**UNITED STATESSECURITES AND EXCHANGE COMMISSION****Washington, DC 20549**

**FORM 10-QSB/A**
| **ý**                                        | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------|-----------------------------------------------------------------------------------------|
|                                              |                                                                                    |
| **For  the quarterly period ended June 30, 2001** |
|                                              |
| **o**                                             | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OR 1934** |
|                                              |                                                                                    |
| **For  the transition period from _____to _____** |

** **

**Commission file number 0-9587**

** **

**ELECTRO-SENSORS, INC.**(Exact name of small business issuer asspecified in its charter)

| **Minnesota**                                                   | **41-0943459**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) | (IRS Employer  Identification Number) |

 

**6111Blue Circle DriveMinnetonka, Minnesota 55343-9108**(Address of principal executive offices)

 

**(952)930-0100**(Issuer's telephone number)

 

(Former name, former address and former fiscalyear, if changed since last report)

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter 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 ý    No o

Shares of $0.10 par value common stock outstanding at August 10, 2001:3,118,948

Transitional Small Business Disclosure Format (Check one):  Yes o    No ý

----

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**PartI – Financial Information**

**Item1**

**Financial Statements**

**Electro-Sensors, Inc.Balance Sheets(Unaudited)**

|                                            |                                                                                                                        |           |                  |          |
|-------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|----------------|-----------------------|---------------|
|                                            | **June 30, 2001**                                                                                                           | ** **     | **December 31, 2000** | ** **    |
|                                            | ****                                                                                                                        |           | ****                  |          |
| **Assets**                                      |                                                                                                                        | ** **     |                  | ** **    |
| **Current Assets**                              |                                                                                                                        | ** **     |                  | ** **    |
|                                            | Cash                                                                                                                        | 7,393,255      |                  | 3,191,176     |   |
|                                            | Investments                                                                                                                 | 1,500,000      |                  | 3,266,753     |   |
|                                            | Trade Receivables, less  allowance for doubtful  accounts of $37,140 and $26,500, respectively                              | 643,535        |                  | 730,577       |   |
|                                            | Inventories                                                                                                                 | 842,998        |                  | 922,610       |   |
|                                            | Other current assets                                                                                                        | 213,696        |                  | 127,177       |   |
|                                            | Prepaid Income taxes                                                                                                        | -              |                  | 74,606        |   |
|                                            | **Total Current Assets**                                                                                                    | **10,593,484** | ** **            | **8,312,899** | ** ** |
| Property & Equipment, net                   | 1,570,626                                                                                                                   |           | 1,615,994             |          |
| Investments                                     | 15,433,042                                                                                                                  |           | 17,202,689            |          |
| **Total Assets**                                | **27,597,152**                                                                                                              | ** **     | **27,131,582**        | ** **    |
|                                            |                                                                                                                        |           |                  |          |
| **Liabilities & Shareholders'  Equity**     |                                                                                                                        | ** **     |                  | ** **    |
| **Current Liabilities**                         |                                                                                                                        | ** **     |                  | ** **    |
|                                            | Accounts Payable                                                                                                            | 90,460         |                  | 108,482       |   |
|                                            | Customer Deposits                                                                                                           | 8,098          |                  | 6,493         |   |
|                                            | Accrued Expenses                                                                                                            | 254,825        |                  | 234,212       |   |
|                                            | Deferred Taxes                                                                                                              | 637,000        |                  | 1,047,900     |   |
|                                            | Accrued Income Taxes                                                                                                        | 1,411,447      |                  | -             |   |
|                                            | **Total Current Liabilities**                                                                                               | **2,401,830**  | ** **            | **1,397,087** | ** ** |
| Deferred Income Taxes                           | 6,553,906                                                                                                                   |           | 5,879,400             |          |
| **Shareholders' Equity**                        |                                                                                                                        | ** **     |                  | ** **    |
|                                            | Common Stock par value $.10 per share; authorized   10,000,000 shares; issued 3,118,948 and 2,077,112 shares, respectively. | 311,895        |                  | 207,711       |   |
|                                            | Additional Paid-In Capital                                                                                                  | 988,378        |                  | 985,410       |   |
|                                            | Retained Earnings                                                                                                           | 8,830,019      |                  | 6,391,246     |   |
|                                            | Accumulated other  Comprehensive Income                                                                                     | 8,511,124      |                  | 12,270,728    |   |
| **Total Shareholders' Equity**                  | **18,641,416**                                                                                                              | ** **     | **19,855,095**        | ** **    |
| **Total Liabilities and  Shareholders' Equity** | **27,597,152**                                                                                                              | ** **     | **27,131,582**        | ** **    |
|                                                 |                                                                                                                             |                |                       |               |  |  |

 

**Electro-Sensors, Inc.Income Statements(Unaudited)**

|                                                                                 |                                        |       |                 |       |          |       |          |       |
|--------------------------------------------------------------------------------------|---------------------------------------------|------------|----------------------|------------|---------------|------------|---------------|------------|
|                                                                                 | **Three Months Ended**                      |       | **Six Months Ended** |       |
|                                                                                 | **June 30,**                                |       | **June 30,**         |       |
|                                                                                 | **2001**                                    |       | **2000**             |       | **2001**      |       | **2000**      | ** ** |
|                                                                                 | ****                                        |       | ****                 |       | ****          |       | ****          |       |
|                                                                                 |                                        | ** ** |                 | ** ** |          | ** ** |          | ** ** |
| **Sales**                                                                            | 1,183,979                                   |       | 1,295,193            |       | 2,485,348     |       | 3,004,778     |       |
| **Cost of Sales**                                                                    | 440,472                                     |       | 497,205              |       | 915,168       |       | 1,113,485     |       |
| **Gross Margin**                                                                     | **743,507**                                 | ** ** | **797,988**          | ** ** | **1,570,180** | ** ** | **1,891,293** | ** ** |
| **Operating Expenses**                                                               |                                        |       |                 |       |          |       |          |       |
|                                                                                 | Selling                                     | 317,609    |                 | 342,597    |          | 611,914    |          | 704,410    |   |
|                                                                                 | Administrative                              | 247,785    |                 | 207,162    |          | 510,485    |          | 491,459    |   |
|                                                                                 | Research & Development                  | 187,657    |                 | 213,831    |          | 375,685    |          | 436,368    |   |
| **Total Operating Expenses**                                                         | **753,051**                                 | ** ** | **763,590**          | ** ** | **1,498,084** | ** ** | **1,632,237** | ** ** |
| **Income from Operations**                                                           | **(9,544**                                  | **)**      | **34,398**           | ** ** | **72,096**    | ** ** | **259,056**   | ** ** |
| **Other Income/(Expense)**                                                           |                                        |       |                 |       |          |       |          |       |
|                                                                                 | Interest Income                             | 65,006     |                 | 29,542     |          | 98,504     |          | 58,236     |   |
|                                                                                 | Sale of Investments                         | 2,737,663  |                 | -          |          | 4,164,230  |          | -          |   |
| **Total Other Income**                                                               | **2,802,669**                               | ** ** | **29,542**           | ** ** | **4,262,734** | ** ** | **58,236**    | ** ** |
| **Income/(Loss) before  Discontinued Operations    and Income Taxes** | **2,793,125**                               |       | **63,940**           |       | **4,334,830** |       | **317,292**   |       |
| Provision for Income Taxes                                                           | 980,434                                     |       | 21,800               |       | 1,535,459     |       | 113,150       |       |
| **Income/(Loss) from Continuing  Operations**                                        | **1,812,691**                               | ** ** | **42,140**           | ** ** | **2,799,371** | ** ** | **204,142**   | ** ** |
| **Discontinued Operations:**                                                         |                                        |       |                 |       |          |       |          |       |
|                                                                                 | Income/(Loss) from  Discontinued Operations | (2,524     | )                    | 7,193      |          | (3,510     | )             | 9,167      |   |
|                                                                                 | Loss on Disposal of Segment                 | (69,229    | )                    |       |          | (69,229    | )             | -          |   |
|                                                                                 |                                             |       |                      |       |               |       |               |       |
|                                                                                 |                                        |       |                 |       |          |       |          |       |
| **Net Income**                                                                       | 1,740,938                                   |       | 49,333               |       | 2,726,632     |       | 213,309       |       |
|                                                                                 |                                             |       |                      |       |               |       |               |       |
|                                                                                 |                                        |       |                 |       |          |       |          |       |
|                                                                                 |                                        |       |                 |       |          |       |          |       |
|                                                                                 |                                        |       |                 |       |          |       |          |       |
| **Net Income/(Loss) Per Share  Data:**                                               |                                        |       |                 |       |          |       |          |       |
| **Basic:**                                                                           |                                        |       |                 |       |          |       |          |       |
|                                                                                 | Income/(loss) from continuing  operations   | $          | 0.58                 |       | $             | 0.01       |          | $          | 0.90 |   | $ | 0.07 |   |
|                                                                                 | Net income/(loss) per share                 | 0.56       |                 | 0.02       |          | 0.87       |          | 0.07       |   |
|                                                                                 | Shares used in per share  calculations      | 3,118,948  |                 | 2,988,945  |          | 3,118,948  |          | 2,985,384  |   |
|                                                                                 |                                        |       |                 |       |          |       |          |       |
| **Diluted:**                                                                         |                                        |       |                 |       |          |       |          |       |
|                                                                                 | Income/(loss) from continuing  operations   | $          | 0.56                 |       | $             | 0.01       |          | $          | 0.86 |   | $ | 0.07 |   |
|                                                                                 | Net income/(loss) per share                 | 0.54       |                 | 0.02       |          | 0.85       |          | 0.07       |   |
|                                                                                 | Shares used in per share  calculations      | 3,240,749  |                 | 3,088,412  |          | 3,225,828  |          | 3,061,424  |   |

 

**Electro-Sensors, Inc****Statements of Cash Flows(Unaudited)**

|                                                                                        |                                             |       |                 |       |
|---------------------------------------------------------------------------------------------|--------------------------------------------------|------------|----------------------|------------|
|                                                                                        | **Six Months Ended**                             |       | **Six Months Ended** |       |
|                                                                                        | **June 30, 2001**                                | ** ** | **June 30, 2000**    | ** ** |
|                                                                                        | ****                                             |       | ****                 |       |
| **Reconciliation of Net Income to  Net Cash**                                               |                                             |       |                 |       |
| **Provided by Operating Activites:**                                                        |                                             |       |                 |       |
|                                                                                        |                                             |       |                 |       |
| Net Income                                                                                  | 2,726,632                                        |       | 213,309              |       |
|                                                                                        |                                             |       |                 |       |
| Adjustments to reconcile net income to net cash provided  by/(used in) operating activites: |                                             |       |                 |       |
|                                                                                        |                                             |       |                 |       |
|                                                                                        | Provision for losses on trade  receivables       | (10,640    | )                    |       |   |
|                                                                                        | Loss on Disposal of Segment                      | 71,753     |                 |       |   |
|                                                                                        | Depreciation                                     | 60,919     |                 | 69,696     |   |
|                                                                                        | Deferred Taxes                                   | 219,533    |                 | 6,367      |   |
|                                                                                        | Realized gain on sale of  investments            | (4,164,230 | )                    |       |   |
|                                                                                        |                                             |       |                 |       |
|                                                                                        |                                             |       |                 |       |
| Change in Assets and Liabilities:                                                           |                                             |       |                 |       |
|                                                                                        | Trade receivables                                | (61,682    | )                    | (4,157     | ) |
|                                                                                        | Inventory                                        | (79,612    | )                    | (91,890    | ) |
|                                                                                        | Prepaid Expenses                                 | 86,519     |                 | 48,120     |   |
|                                                                                        | Prepaid Income Taxes                             | (74,606    | )                    | 125,609    |   |
|                                                                                        | Accounts Payable                                 | (18,022    | )                    | 3,698      |   |
|                                                                                        | Customer Deposits                                | 1,605      |                 | (353,645   | ) |
|                                                                                        | Accrued Expenses                                 | 20,613     |                 | 131,127    |   |
|                                                                                        | Accrued income taxes                             | 1,411,447  |                 | 94,150     |   |
|                                                                                        | Deferred Income taxes                            | -          |                 |       |   |
|                                                                                        |                                                  |       |                      |       |
| Net cash provided by operating activities                                                   | 190,229                                          |       | 242,384              |       |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
| Cash flows from investing activities:                                                       |                                             |       |                 |       |
|                                                                                        | Proceeeds from sale of  investments              | 4,205,032  |                 |       |   |
|                                                                                        | Purchase of property and  equipment              | (18,475    | )                    | (30,598    | ) |
|                                                                                        | Proceeds from disposed segment                   | 5,000      |                 |       |   |
|                                                                                        |                                                  |       |                      |       |
| Net cash provided by/(used in) investing activities                                         | 4,191,557                                        |       | (30,598              | )          |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
| Cash flows from financing activities:                                                       |                                             |       |                 |       |
|                                                                                        | Proceeds from issuance of  stock                 | 6,538      |                 | 38,008     |   |
|                                                                                        | Prinicipal payments received  on note receivable | 1,000      |                 |       |   |
|                                                                                        | Dividends Paid                                   | (187,245   | )                    | (119,431   | ) |
|                                                                                        |                                             |            |                 |            |   |
| Net cash used in financing activities                                                       | (179,707                                         | )          | (81,423              | )          |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
| Net increase in cash and cash equivalents                                                   | 4,202,079                                        |       | 130,363              |       |
|                                                                                        |                                             |       |                 |       |
| Cash and cash equivalents, beginning                                                        | 3,191,176                                        |       | 2,507,689            |       |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
| Cash and cash equivalents, ending                                                           | 7,393,255                                        |       | 2,638,052            |       |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
|                                                                                        |                                             |       |                 |       |
| **Supplemental Schedule of  Non-Cash Investing and** **Financing Activities**          |                                             |       |                 |       |
|                                                                                        |                                             |       |                 |       |
| Net change in unrealized gain/(loss) on marketable securities.                              | 3,495,598                                        |       | 25,393,187           |       |
|                                                                                        |                                                  |       |                      |       |
|                                                                                        |                                             |       |                 |       |
| Issuance of Note Receivable related to sale of segment.                                     | 36,000                                           |       | -                    |       |
|                                                                                        |                                                  |       |                 |       |

** **

**Electro-Sensors, Inc. and SubsidiariesNotes to Consolidated Financial StatementsJune 30, 2001(Unaudited)**

 

Note A:             Nature ofBusiness

Electro-Sensors, Inc. (the Company), operates two distinct businesses.The first is the Controls Division, which carries the name of Electro-Sensors,Inc. This division manufactures and markets a complete line of speed monitoringand motor control systems for industrial machinery. The Controls Divisionutilizes leading-edge technology to continuously improve its products and makethem easier to use. The Controls Division’s goal is to manufacture theindustry-preferred product for every market served. These products are soldthrough an internal sales staff and distributors to a wide variety ofmanufacturers, OEMS and processors to monitor the efficiency of processmachinery. The Company markets its products to a number of different industrieslocated throughout the United States and abroad. The Company owns marketablesecurities, which have experienced significant appreciation in value since therelated company’s IPO in 2000. During late 2000 and the first six months of2001, the Company has recognized income from the sale of a portion of itsholdings.

The second business is AutoData Systems (ADS), a division ofElectro-Sensors, Inc. ADS designs and markets a desktop software based systemthat reads handprinted characters, checkmarks and bar code information fromscanned or faxed forms. ADS products are designed to provide capabilities toautomate data collection through telemarketing to end users, resellers anddevelopers in the United States, Canada, Europe and Asia.

The Company had previously operated a third business, Microflame, Inc.(MFI), a wholly owned subsidiary, which was sold in May 2001 (see Item 2:Results of Operations for further discussion). MFI produced small hand held gastorches used primarily by hobbyists, electronic kit assemblers and creators ofjewelry. MFI products were sold through distributors to retailers of hardware,hobby craft and electronic products.

Note B:             Basis ofPresentation

The accompanying unaudited consolidated financial statements have beenprepared in accordance with generally accepted accounting principles forinterim financial information and with the instructions to Form 10-Q and Rule10-01 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principles forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included.

Intercompany accounts, transactions and earnings are eliminated throughconsolidation.

The Balance Sheet at December 31, 2000 has been derived from theCompany’s audited financial statements for the year ended December 31, 2000,but does not include all of the information and footnotes required by generallyaccepted accounting principles for complete financial statements.

For further information, refer to the financial statements and footnotesthereto included in the Company’s annual report on Form 10-K for the year endedDecember 31, 2000.

 

Note C:             ComprehensiveIncome

 

|                                     | Three Months  Ended   June 30,   |           | Six Months  Ended   June 30, |       |
|------------------------------------------|----------------------------------|----------------|------------------------------|------------|
|                                          |                             |
|                                     | **2001**                         |           | 2000                         |       | **2001** |   | 2000 |   |
|                                          |                             |
| Net Income                               | **$**                            | 1,740,938      |                         | $          | 49,333 | ** ** | **$** | **2,726,632** |   | $ | 213,309 |   |
|                                     |                             |           |                         |       |   |   |   |   |
| Other comprehensive gain:                |                             |           |                         |       |   |   |   |   |
|                                     | Change in unrealized value       |           |                         |       |   |   |   |   |   |
|                                     | investments, net.                | **3,080,700**  |                         | 16,016,048 | ** ** | **1,476,200** |   | 17,087,753 |   |
|                                     |                             |           |                         |       |   |   |   |   |
| Less:   Reclassification adjustment |                             |           |                         |       |   |   |   |   |
|                                     | For gains included in net income | **(3,412,608** | )                            | -          | ** ** | **(5,236,804** | ) | - |   |
|                                          |                             |
| Total comprehensive income               | **$**                            | 1,409,030      |                         | $          | 16,065,981 | ** ** | **$** | **(1,033,972** | ) | $ | 17,301,602 |   |
|                                          |                             |

Note D:             Investments

The Company has a portfolio of investments. Management determines theappropriate classification of securities at the date individual investments areacquired, and evaluates the appropriateness of such classification at eachbalance sheet date.

The Company’s investments consist of marketable equity securities,primarily common stocks, government debt securities, money market funds andunregistered equity securities. The estimated fair value of marketable equitysecurities is based on quoted market prices and, therefore, is subject to theinherent risk of market fluctuations.

Since the Company does not buy investments in anticipation of short-termfluctuations in market prices, the investments in marketable equity securitieshave been classified as available-for-sale. Available-for-sale securities arestated at fair value, and unrealized holding gains and losses, net of therelated deferred tax effect, are reported as a separate component of stockholders’equity. Dividends on marketable equity securities are recognized in income whendeclared. Investments in unregistered securities are reported at original cost.

Realized gains and losses, including losses from declines in value ofspecific securities determined by management to be other-than-temporary, areincluded in income. Realized gains and losses are determined on the basis ofthe specific securities sold.

Note E:              New AccountingPronouncements

In December 1999, the Securities and Exchange Commission (SEC) issuedStaff Accounting Bulletin No.101 (SAB 101), “Revenue Recognition in FinancialStatements.” SAB 101 summarizes certain of the SEC’s views in applyinggenerally accepted accounting principles to revenue recognition in financialstatements. In October 2000, the SEC issued additional written guidance tofurther supplement SAB 101. The Company adopted SAB 101 upon its issuance bythe SEC. The adoption did not have any material effect on the Company’srevenues or revenue recognition policy.

Effective July 1, 2000, the Company adopted Financial AccountingStandards No. 133, "Accounting for Derivative Instruments and HedgingActivities," amended by Standard No. 137 which provides guidance onaccounting for derivatives and hedge transactions.

The Company’s revenue recognition policy and procedures for “Accountingfor Derivative Instruments and Hedging Activities” are as follows:

Revenue recognition of production monitoring equipment and gas torches:

All production monitoring equipment and gas torches are shipped withoutan evaluation or acceptance period. Revenues from the sale of these productsand any related warranty costs are recognized at the time of shipment.  The company’s distributors are not grantedany price protection.  Sales to allcustomers including distributors are final and no right of return aftershipment exists.

Software revenue recognition:

The Company recognizes revenue upon shipment of its characterrecognition software.  The product issold to the end user and risk of loss is transferred, and the Company has nocontinuing obligations, once its products are delivered to the shipper.  The Company recognizes revenue uponshipment, net of return reserves based on historical experience.  To recognize revenue, it must be probablethat the Company will collect the accounts receivable from its customers.  In some situations, the Company receivesadvance payments from its customers. Revenue associated with these advance payments is deferred until theproduct is shipped.  Warranty reservesare provided at the time revenue is recognized for the estimated cost ofreplacing defective product.

SFAS No. 133; Accounting for Derivative Instruments and HedgingActivities (as amended by SFAS No. 137 with respect to the effective date) willbe effective for the Company in January 2001. SFAS No. 133 requires all derivatives to be recognized as assets orliabilities on the balance sheet and measured at fair value on a mark-to-marketbasis.  This applies whether thederivatives are stand-alone instruments, such as forwarded currency exchangecontracts and interest rate swaps or collars, or embedded investments.  Along with the derivatives, the underlyinghedged items are also to be marked to market on an ongoing basis.  These market value adjustments are to beincluded in net income (loss) in the statement of operations or in othercomprehensive income (and accumulated in shareholders’ equity), depending onthe nature of the transaction.

Note F:  Segment Information:

The following is financial information relating to the operatingsegments:

 

|   | Quarter  Ended                                                     |          | Six Months  Ended |    |
|--------|--------------------------------------------------------------------|---------------|-------------------|---------|
|   | June 30,                                                           | **2001**      |              | 2000    |   | **2001** |   | 2000 |   |
|        |                                                               |
|   | External Sales                                                     |          |              |    |   |   |   |   |   |
|   | Production Monitoring                                              | **$**         | **1,033,090**     |    | $ | 1,129,003 | ** ** | **$** | **2,154,008** |   | $ | 2,579,506 |   |
|   | Character Recognition                                              | **150,889**   |              | 166,191 | ** ** | **331,340** |   | 425,272 |   |
|   | Investments                                                        | **0**         |              | 0       | ** ** | **0** |   | 0 |   |
|        |                                                               |
|   | Total                                                              | **$**         | **1,183,979**     |    | $ | 1,295,194 | ** ** | **$** | **2,485,348** |   | $ | 3,004,778 |   |
|        |                                                               |
|   |                                                               |          |              |    |   |   |   |   |
|   | Net income (loss) before taxes and   discontinued  operations |          |              |    |   |   |   |   |   |
|   | Production Monitoring                                              | **$**         | **10,971**        |    | $ | 147,569 | ** ** | **$** | **108,625** |   | $ | 456,313 |   |
|   | Character Recognition                                              | **15,464**    |              | (72,250 | **)** | **40,419** |   | (118,955 | ) |
|   | Investments                                                        | **2,766,689** |              | (8,979  | **)** | **4,185,786** |   | (20,066 | ) |
|        |                                                               |
|   | Total                                                              | **$**         | **2,793,124**     |    | $ | 63,340 | ** ** | **$** | **4,334,830** |   | $ | 317,292 |   |
|        |                                                               |
|        |                                                                    |               |                   |         |  |  |  |  |  |  |  |  |  |  |

The Company’s subsidiary Microflame, Inc. was sold in May 2001.  See Note G below.  Segment information related to Microflame, Inc. previously hasbeen included as the brazing torch operations segment.

The Company has no inter-segment sales.

 

Note G:  Disposal of Microflame,Inc.

On May 14, 2001, the Company disposed of its brazing torches segmentthrough a sale of all of its shares of stock in Microflame, Inc. to anunrelated party.  The Company hasrestated its prior financial statements to present the operating results of thebrazing torch operations as discontinued. Summary of the operating information for this segment is as follows:

 

|   | Revenue                          |   | Taxes   |   |
|--------|----------------------------------|--------|---------|--------|
|        |                             |
|   | Three months ended June 30, 2001 | $      | 20,468  |   | $ | (1,268 | ) |
|   | Three months ended June 30, 2000 | $      | 78,605  |   | $ | 4,075 |   |
|   |                             |   |    |   |   |
|   | Six months ended June 30, 2001   | $      | 61,443  |   | $ | (1,839 | ) |
|   | Six months ended June 30, 2000   | $      | 149,421 |   | $ | 5,275 |   |
|        |                             |

Proceeds on the sale of the operations include a $5,000 cash payment anda note receivable for $36,000.  The noteis payable in 36-monthly payments of $1,000 plus interest at 9.5%.  The note is secured by the stock ofMicroflame, Inc.  The tax benefitresulting from the loss on the disposal of its investment is $30,000.****Signatures**

Pursuant to the requirements of the Securities and Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned, thereto duly authorized.

 

Electro-Sensors, Inc.

 
**By:**/s/ Bradley D. SlyeSeptember 28, 2001  Bradley D. Slye,  President (Principal  Financial Officer)  **