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   September 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          55343-9108
(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   November 4,
1997:   1,958,362

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)


<TABLE>
<CAPTION>


                                            Three Months ended            Nine Months Ended
                                               September 30,                September 30,
                                             1997        1996              1997        1996

<S>                                    <C>          <C>              <C>          <C>    
SALES                                  $1,596,353   $1,508,733       $4,835,188   $4,554,085
-----

COST OF SALES                             658,531      642,490        1,997,834    1,949,854
-------------                           ---------    ---------        ---------    ---------

GROSS MARGIN                              937,822      866,243        2,837,354    2,604,231
------------                            ---------    ---------        ---------    ---------

OPERATING EXPENSES:
  Selling expense                         419,215      328,431        1,135,538    1,031,639
  Administrative expense                  172,419      192,574          579,037      603,010
  Research and development                161,282      168,601          495,314      531,277
                                        ---------    ---------        ---------    ---------

TOTAL OPERATING EXPENSES                  752,916      689,606        2,209,889    2,165,926
------------------------                ---------    ---------        ---------    ---------

INCOME FROM OPERATIONS                    184,906      176,637          627,465      438,305
----------------------                  ---------    ---------        ---------    ---------

OTHER INCOME (EXPENSE):
  Gain (loss) on sale of
   investment securities                    4,397       71,457            9,929      203,113
  Interest income                          29,224       28,444           88,529       82,402
  Other                                   (28,272)     (36,210)        (110,680)    (110,999)
                                        ---------    ---------        ---------    ---------

TOTAL OTHER INCOME                          5,349       63,691          (12,222)     174,516
------------------                      ---------    ---------        ---------    ---------

INCOME BEFORE INCOME TAXES                190,255      240,328          615,243      612,821
--------------------------

PROVISION FOR INCOME TAXES                 69,600       77,000          225,200      222,500
--------------------------              ---------    ---------        ---------    ---------

NET INCOME                             $  120,655   $  163,328       $  390,043   $  390,321
----------                              =========    =========        =========    =========


</TABLE>


<PAGE>



(Continued)

<TABLE>
<CAPTION>


                                            Three Months ended            Nine Months Ended
                                               September 30,                September 30,
                                             1997        1996              1997        1996



<S>                                     <C>         <C>              <C>          <C>    
WEIGHTED AVERAGE NUMBER
 OF COMMON AND COMMON
  EQUIVALENT SHARES:

  PRIMARY                               1,981,768    1,964,465        1,973,628    1,969,370
  -------                               =========    =========        =========    =========

  ASSUMED FULLY DILUTED                 2,005,474    1,964,465        2,005,474    1,969,370
  ---------------------                 =========    =========        =========    =========

EARNINGS PER COMMON
 AND COMMON EQUIVALENT
  SHARES:

  PRIMARY                                    $.06         $.09             $.20         $.20
  -------                                     ===          ===              ===          ===

  ASSUMED FULLY DILUTED                      $.05         $.09             $.19         $.20
  ---------------------                       ===          ===              ===          ===





</TABLE>







<PAGE>



                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

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

<S>                                                           <C>            <C>    
CURRENT ASSETS
  Cash                                                        $ 2,687,026    $ 2,581,588
  Investment in available-for-sale securities                   5,803,896      5,356,210
  Trade receivables, less allowance
    for doubtful accounts of $40,000
    and $18,000, respectively                                     696,349        726,628
  Inventories                                                     952,758        829,428
  Prepaid expenses                                                 86,918         76,018
  Prepaid income tax                                                  621            -0-
  Deferred taxes                                                   77,200         77,200
                                                               ----------     ----------

TOTAL CURRENT ASSETS                                           10,304,768      9,647,072
--------------------

PROPERTY AND EQUIPMENT, NET                                     1,812,771      1,838,270
---------------------------                                    ----------     ----------

TOTAL ASSETS                                                  $12,117,539    $11,485,342
------------                                                   ==========     ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable                                                $   329,593     $  421,383
  Accounts payable                                                178,628        115,666
  Accrued expenses                                                274,140        387,594
  Accrued income taxes                                                -0-         14,748
                                                               ----------     ----------

TOTAL CURRENT LIABILITIES                                         782,361        939,391
-------------------------                                      ----------     ----------

DEFERRED INCOME TAXES                                           1,593,800      1,398,900
---------------------                                          ----------     ----------

SHAREHOLDERS' EQUITY:
  Common stock - par value $.10 per share;
    Authorized 10,000,000 shares; issued
    1,958,362 and 1,942,282
    shares, respectively                                          195,836        194,228
  Additional paid-in capital                                      666,704        618,135
  Retained earnings                                             6,204,669      5,988,629
  Unrealized holding gain on investment
    securities, net                                             2,676,471       2,408,385
  Notes receivable                                                 (2,302)        (62,326)
                                                               ----------      ----------

    Total shareholders' equity                                  9,741,378       9,147,051
                                                               ----------      ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $12,117,539     $11,485,342
------------------------------------------                     ==========      ==========

</TABLE>



<PAGE>


                 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES

                        CONSOLIDATED CASH FLOW STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                       Nine Months Ended
                                                          September 30,
                                                      1997            1996
                                                     ------          ------
<S>                                              <C>              <C>   
CASH FLOW FROM OPERATING ACTIVITIES
  Cash received from customers                   $4,791,217       $4,564,514
  Cash paid to suppliers and employees           (4,330,940)      (4,173,172)
  Interest received                                  88,529           82,402
  Income taxes paid                                (240,569)        (328,733)
                                                 ----------       ----------
    Net cash provided by operating activities       308,237          145,011
                                                 ----------       ----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Investment in available-for-sale activities:
    Sales                                            25,229          216,168
    Purchases                                           -0-          (31,250)
  Purchase of property and equipment                (72,436)         (45,574)
  Notes receivable                                   60,024            1,622
  Net advances to Employee Stock
   Ownership Trust                                      -0-           41,951
                                                 ----------       ----------
    Net cash (used in) investing activities          12,817          182,917
                                                 ----------       ----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends paid                                   (175,163)      (1,144,820)
  Payments on short-term borrowings                 (91,790)        (105,474)
  Proceeds from issuance of stock                    51,337           34,101
                                                 ----------       ----------
    Net cash (used in) financing activities        (215,616)      (1,216,193)
                                                 ----------       ----------
      Increase (decrease) in cash                   105,438         (888,265)
CASH AND CASH EQUIVALENTS
  Beginning                                       2,581,588        3,273,873
                                                 ----------       ----------
  End                                           $ 2,687,026      $ 2,385,608
                                                 ==========       ==========

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income                                      $   390,043      $   390,321
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization                    97,935           94,897
    Provision for losses on trade receivables        74,250           15,750
    Realized (gain) loss on sale of marketable
      securities                                     (9,929)        (203,113)
      (Increase) decrease in:
      Trade receivables                             (43,971)          10,429
      Inventory                                    (123,330)        (101,208)
      Prepaid expenses                              (10,900)         (20,072)
      Prepaid income taxes                             (621)         (17,302)
    Increase (decrease) in:
      Accounts payable                               62,962           64,532
      Accrued expenses                             (113,454)            (292)
      Accrued income taxes payable                  (14,748)         (88,931)
                                                  ---------        ---------
Net cash provided by operating activities        $  308,237       $  145,011
                                                  =========        =========

NONCASH INVESTING AND FINANCING ACTIVITIES
  Tax benefit of stock options exercised         $    1,160       $      -0-
  Unrealized gain(loss) on marketable securities    462,986         (351,719)
                                                  ---------        ---------
    Total noncash investing and financing        $  464,146       $ (351,719)
                                                  =========        =========
</TABLE>


<PAGE>



Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

RESULTS OF OPERATION

The Company's  sales increased by 5.8% and 6.2%,  respectively  during the third
quarter and first nine months of 1997 when compared to the same periods of 1996.
Increased  third  quarter  sales  were  provided  primarily  by both  the  Speed
Monitoring  Systems and AutoData  Systems  divisions.  The Drive Control Systems
division continues to experience declining sales to its OEM customers during the
third  quarter of 1997.  Meanwhile,  third  quarter  sales  remained  relatively
unchanged for 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  to 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 3.4%
decrease  in sales  during the first nine  months of 1997.  The decline in sales
reflects a decrease  in single gas torch 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


<PAGE>



concentrated in the product  promotion of its automated survey software packages
into the general and healthcare markets.

The Company's  operating  income increased 43.2% during the first nine months of
1997 resulting  principally 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. This resulted
in net income  remaining  relatively  unchanged  during the first nine months of
1997 as compared to the same periods of 1996.


LIQUIDITY AND CAPITAL RESOURCES

During the first nine months ended September 30, 1997, working capital increased
$814,726 to a total of  $9,522,407.  The  increase  in the fair market  value of
marketable securities resulted from the increased quoted market price of certain
securities.  This increase in market value accounted for $462,986 of this change
in working  capital.  Accounts  receivable  and  inventory  increased due to the
higher  volume of sales during the first nine months of 1997.  Accounts  payable
decreased due to timing differences.  In addition, proceeds from the exercise of
stock  options  and the  employee  stock  purchase  plan  generated  $33,160 and
$18,177,  respectively,  during  the first nine  months.  The  Company  received
$25,229 from the sale of marketable securities.  The Company also received notes
receivable  payments of $60,024.  The Company made dividend payments of $58,347,
$58,348  and  $58,468  during the first nine months of 1997.  In  addition,  the
Company  invested  both  an  additional  $72,436  in  office  and  manufacturing
equipment and $91,790 into the repayment of short-term  borrowings.  The Company
believes it can pay projected  capital and operating  expenses out of income and
current reserves.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

            Not Applicable.


                                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




<PAGE>




          There were no 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
               September 30, 1997.

                                   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  November 4, 1997       By   /s/ Bradley D. Slye
                                  Bradley D. Slye, President


Date  November 4, 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 September 30, 1997

Exhibit No.                                    Description
    27                                   Financial Data Schedule