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 June 30, 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
(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    July 31,
1997:   1,953,362



<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      Six Months Ended
                                       June 30,               June 30,
                                    1997       1996        1997       1996

SALES                           $1,570,126  $1,469,931   $3,238,835  $3,045,352

COST OF SALES                      634,878     626,865    1,339,303   1,307,364
                                 ---------   ---------    ---------   ---------

GROSS MARGIN                       935,248     843,066    1,899,532   1,737,988
                                 ---------   ---------    ---------   ---------

OPERATING EXPENSES:
  Selling expense                  376,190     378,268      716,323     703,208
  Administrative expense           201,630     190,816      406,618     410,436
  Research and development         162,940     183,794      334,032     362,676
                                 ---------   ---------    ---------   ---------

TOTAL OPERATING EXPENSES           740,760     752,878    1,456,973   1,476,320
                                 ---------   ---------    ---------   ---------

INCOME FROM OPERATIONS             194,488      90,188      442,559     261,668
                                 ---------   ---------    ---------   ---------

OTHER INCOME (EXPENSE):
  Gain (loss) on sale of
   investment securities               -0-      95,804        5,532     131,656
  Interest income                   29,724      26,481       59,305      53,958
  Dividend income                      -0-         -0-          -0-         -0-
  Other                            (38,067)    (37,328)     (82,408)    (74,789)
                                 ---------   ---------    ---------   ---------

TOTAL OTHER INCOME                  (8,343)     84,957      (17,571)    110,825
                                 ---------   ---------    ---------   ---------

INCOME BEFORE INCOME TAXES         186,145     175,145      424,988     372,493
     
PROVISION FOR INCOME TAXES          68,100      64,100      155,600     145,500
                                 ---------   ---------    ---------   ---------

NET INCOME                      $  118,045  $  111,045   $  269,388  $  226,993
                                 =========   =========    =========   =========


<PAGE>


(Continued)




                                  Three Months Ended      Six Months Ended
                                       June 30,               June 30,
                                    1997       1996        1997       1996


WEIGHTED AVERAGE NUMBER
 OF COMMON AND COMMON
  EQUIVALENT SHARES:

   PRIMARY                       1,962,838   1,971,631    1,962,838   1,971,078
                                 =========   =========    =========   =========

  ASSUMED FULLY DILUTED          1,962,838   1,975,298    1,962,838   1,975,298
                                 =========   =========    =========   =========

EARNINGS PER COMMON
 AND COMMON EQUIVALENT
  SHARES:

  PRIMARY                             $.06        $.05         $.14        $.11
                                       ===         ===          ===         ===

  ASSUMED FULLY DILUTED               $.06        $.05         $.14        $.11
                                       ===         ===          ===         ===



<PAGE>















                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                    June 30,     December 31,
                                                      1997            1996    
                                                   ----------     ----------- 
      ASSETS

CURRENT ASSETS
  Cash                                            $ 2,653,037     $ 2,581,588
  Investment in available-for-sale securities       4,242,067       5,356,210
  Trade receivables, less allowance
    for doubtful accounts of $25,300
    and $18,000, respectively                         673,408         726,628
  Inventories                                         906,432         829,428
  Prepaid expenses                                     74,941          76,018
  Deferred taxes                                       77,200          77,200
                                                   ----------       ----------

TOTAL CURRENT ASSETS                                8,627,085        9,647,072

PROPERTY AND EQUIPMENT, NET                         1,817,773        1,838,270
                                                   ----------       ----------

TOTAL ASSETS                                      $10,444,858      $11,485,342
                                                   ==========       ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable                                    $   333,981       $  421,383
  Accounts payable                                    157,316          115,666
  Accrued expenses                                    281,003          387,594
  Accrued income taxes                                  5,580           14,748
                                                   ----------       ----------
TOTAL CURRENT LIABILITIES                             777,880          939,391
                                                   ----------       ----------

DEFERRED INCOME TAXES                               1,010,500        1,398,900
                                                   ----------       ----------

SHAREHOLDERS' EQUITY:
  Common  stock - par value $.10 per share;
    Authorized  10,000,000  shares;
    issued 1,949,411 and 1,942,282
    shares, respectively                              194,941          194,228
  Additional paid-in capital                          640,435          618,135
  Retained earnings                                 6,141,320        5,988,629
  Unrealized holding gain on investment
    securities, net                                 1,683,693        2,408,385
  Notes receivable                                     (3,911)         (62,326)
                                                   ----------       ----------

    Total shareholders' equity                      8,656,478        9,147,051
                                                   ----------       ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $10,444,858      $11,485,342
                                                   ==========       ==========


<PAGE>

                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES


                        CONSOLIDATED CASH FLOW STATEMENTS
                                   (Unaudited)
                                                      Six Months Ended
                                                          June 30,
                                                     1997              1996
                                                  ---------          --------
CASH FLOW FROM OPERATING ACTIVITIES
  Cash received from customers                   $3,186,235        $3,026,443
  Cash paid to suppliers and employees           (2,849,480)       (2,732,813)
  Interest received                                  59,305            53,958
  Income taxes paid                                (164,768)         (251,233)
                                                  ---------         ---------
    Net cash provided by operating activities       231,292            96,355
                                                  ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Investments in available-for-sale securities:
    Sales                                             6,583           139,910
    Purchases                                           -0-           (31,250)
  Purchase of equipment                             (43,755)          (27,655)
  Repayments of notes receivable                     58,415             1,414
  Net advances to Employee Stock
    Ownership Trust                                     -0-            41,951
                                                  ---------         ---------
      Net cash (used in) investing activities        21,243           124,370
                                                  ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends paid                                   (116,695)       (1,086,551)
  Payments on short-term borrowings                 (87,402)          (80,900)
  Proceeds from exercise of stock options            15,750               -0-
  Proceeds from Employee Stock Purchase Plan          7,261               -0-
                                                  ---------         ---------
    Net cash (used in) financing activities        (181,086)       (1,167,451)
                                                  ---------         ---------
      Increase (decrease) in cash                    71,449          (946,726)
CASH AND CASH EQUIVALENTS
  Beginning                                       2,581,588         3,273,873
                                                  ---------         ---------
  End                                            $2,653,037        $2,327,147
                                                  =========         =========

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income                                       $  269,388        $  226,993
Adjustments to reconcile net income to net
      cash provided by operating activities:
    Depreciation and amortization                    64,252            62,040
    Provision for losses on trade receivables        60,000            10,500
    Employee stock ownership plan shares                -0-            25,549
    Realized (gain) loss on sale of marketable
      securities                                     (5,532)         (131,656)
    (Increase) decrease in:
      Trade receivables                              (6,780)          (18,909)
      Inventory                                     (77,004)          (65,116)
      Prepaid expenses                                1,077            16,212
      Prepaid income taxes                              -0-           (16,802)
    Increase (decrease) in:
      Accounts payable                               41,650            95,937
      Accrued expenses                             (106,591)          (19,462)
      Accrued income taxes payable                   (9,168)          (88,931)
                                                   --------           -------
Net cash provided by operating activities         $ 231,292          $ 96,355
                                                   ========           =======
NONCASH INVESTING AND FINANCING ACTIVITIES
  Employee stock ownership plan shares
    released by plan                              $     -0-          $ 25,549
  Unrealized gain(loss) on marketable securities   (724,692)          763,138
                                                   --------           -------
    Total noncash investing and financing         $(724,692)         $788,687
                                                   ========           =======


<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATION

RESULTS OF OPERATION

The Company's sales increased by 6.8% and 6.4%,  respectively  during the second
quarter and first six months of 1997 when  compared to the same periods of 1996.
Increased  second  quarter  sales  for both the  Speed  Monitoring  Systems  and
AutoData  Systems  divisions  offset  decreased  sales in both the Drive Control
Systems division and the Company's wholly-owned subsidiary, Microflame, Inc.

The Company's Speed Monitoring and Drive Control Systems  divisions  experienced
increased and decreased  sales growth,  respectively  during 1997. The increased
Speed Monitoring sales have been provided by strong economic growth. Many of our
customers  have been  required to maintain or slightly  improve  their  existing
manufacturing  equipment  to meet  increasing  production  capacities.  This has
provided  an  increased  demand  for  our  Speed  Monitoring  products  as  both
replacement  and minor  improvements.  However,  the same  increased  production
demands have prevented plants from performing major plant expansion and retrofit
projects.  This has caused slowed Drive Control  Systems sales during the second
quarter as a result of our customers being unable to temporarily stop production
to install enhancement devices capable of improving overall plant performance.

AutoData Systems sales have improved  significantly in 1997. Increasing customer
acceptance of the AutoData survey software and increased scanner sales have been
attributed  with the rising  AutoData sales levels  throughout  1997. The survey
software package  utilizes our optical mark  recognition  technology to automate
the data entry  processing of responding  participant  questionnaires.  AutoData
Systems has  experienced  positive  customer  response  since the release of its
automated survey software in 1996 and continues to concentrate marketing efforts
in this area.

The Company's wholly-owned subsidiary,  Microflame, Inc., has experienced a 6.1%
decrease  in sales  during  the first six months of 1997.  The  decline in sales
reflects a decrease in sales to its largest customer (Radio Shack).

Cost of sales  decreased as a percentage of sales but increased when compared to
a year ago. The improved margin resulted from a change in product mix due to the
increased AutoData sales which contain a higher margin.

Operating  expenses  decreased  slightly  during 1997 when  compared to the same
periods of 1996.  Increased  marketing expense in the AutoData operating segment
was offset by decreased  personnel and  engineering  costs during the year. The
increased  marketing  expenses were concentrated in the product promotion of its
automated survey software packages into the general and healthcare markets.

Net income increased 6.3% and 18.7%,  respectively during the second quarter and
first six months of 1997 as compared to the same periods of 1996.  The Company's
operating  income  increased  69.1%  during  the  first  six  months of 1997 and
resulted directly from the increased sales.  However,  the increase in operating
income  was  partially  offset  by lower  income  from  the  sale of  investment
securities experienced during 1997 as compared to 1996.

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

During  the first six months  ended June 30,  1997,  working  capital  decreased
$858,476 to a total of  $7,849,205.  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,  inventory  and  accounts
payable  increased due to the higher volume of sales during the first six months
of 1997.  In  addition,  proceeds  from the  exercise  of stock  options and the
employee stock purchase plan generated $15,750 and $7,261, respectively,  during
the first six months.  The Company  received  $5,532 from the sale of marketable
securities.  The Company also received notes receivable payments of $58,415. The
Company  made  dividend  payments of $58,347  and  $58,348  during the first six
months of 1997. In addition,  the Company invested both an additional $43,755 in
office and manufacturing  equipment and $87,402 into the repayment of short-term
borrowings.  The Company  believes it can pay  projected  capital and  operating
expenses out of income and current reserves.

                                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

          The following matters were voted on by shareholders  during the period
          covered by this Form 10-QSB:

            a) The Annual Meeting of Shareholders was held April 29, 1997.

            b) Election of Directors as Follows:

                Peter R. Peterson  1,802,665 For   7,550 Withheld Authority
                James P. Slattery  1,802,665 For   7,550 Withheld Authority
                Mark D. Laumann    1,802,665 For   7,550 Withheld Authority
                John S. Strom      1,802,665 For   7,550 Withheld Authority
                Joseph A. Marino   1,802,665 For   7,550 Withheld Authority

<PAGE>

            c) Approval of the Electro-Sensors, Inc. 1997 Stock Option Plan.

                 1,181,542 For   37,608 Against   10,250 Abstain
                 ---------       ------           ------

            d) Approval of Schweitzer Rubin Karon & Bremer as independent
               Auditors.

                 1,805,615 For    3,900 Against      700 Abstain
                 ---------        -----           ------

               There were no other  matters  submitted  to 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 June
                 30, 1997.


<PAGE>



                                   SIGNATURES


  Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  the
  registrant  has  duly  caused  this  report  to be  signed  on  behalf  of the
  undersigned thereunto duly authorized.


                                   ELECTRO-SENSORS, INC.



  Date   August 11, 1997        By  /s/ Bradley D. Slye
                                    Bradley D. Slye, President


  Date   August 11, 1997        By  /s/ Mark D. Laumann
                                    Mark D. Laumann, Treasurer
                                    (principal financial officer)







<PAGE>


                                  EXHIBIT INDEX
                              ELECTRO-SENSORS, INC.
                                   FORM 10-QSB
                     For Fiscal Quarter Ended June 30, 1997

Exhibit No.                                    Description
    27                                   Financial Data Schedule