<SEC-DOCUMENT>0001104659-01-502232.txt : 20011009
<SEC-HEADER>0001104659-01-502232.hdr.sgml : 20011009
ACCESSION NUMBER:		0001104659-01-502232
CONFORMED SUBMISSION TYPE:	10QSB/A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:		20010928

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ELECTRO SENSORS INC
		CENTRAL INDEX KEY:			0000351789
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823]
		IRS NUMBER:				410943459
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-09587
		FILM NUMBER:		1747976

	BUSINESS ADDRESS:	
		STREET 1:		6111 BLUE CIRCLE DR
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343-9108
		BUSINESS PHONE:		9529300100

	MAIL ADDRESS:	
		STREET 1:		6111 BLUE CIRCLE DR
		CITY:			MINNETONKA
		STATE:			MN
		ZIP:			55343
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB/A
<SEQUENCE>1
<FILENAME>j1749_10qsba.htm
<DESCRIPTION>10QSB/A
<TEXT>
<html>

<head>
<title>Prepared by MerrillDirect</title>

</head>

<body>

<div>

<div align=right><b><font size=2>

<hr size=2 width="100%" noshade color=black align=right>

</font></b></div>


<div align=right><b><font size=2>

<hr size=1 width="100%" noshade color=black align=right>

</font></b></div>


<p align=center><b><font size=5>UNITED STATES<br>
SECURITES AND EXCHANGE COMMISSION</font></b><b><font size=2><br>
Washington, DC 20549</font></b></p>

<p align=center><b><font size=5>FORM 10-QSB/A</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="5%" valign=top><b><font size=3 face=Wingdings>&#253;</font></b></td>
  <td width="94%" valign=top><b><font size=3>QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</font></b></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="94%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="100%" colspan=2 valign=top><b><font size=2>For
  the quarterly period ended June 30, 2001</font></b></td>
 </tr>
 <tr>
  <td  align=center width="100%" colspan=2 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="5%" valign=top><b><font size=3 face=Wingdings>o</font></b></td>
  <td width="94%" valign=top><b><font size=3>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OR 1934</font></b></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="94%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="100%" colspan=2 valign=top><b><font size=2>For
  the transition period from _____to _____</font></b></td>
 </tr>
</table>

<p><b><font size=2>&nbsp;</font></b></p>

<p align=center><b><font size=2>Commission file number 0-9587</font></b></p>

<p align=center><b><font size=2>&nbsp;</font></b></p>

<p align=center><b><font size=5>ELECTRO-SENSORS, INC.<br>
</font></b><font size=2>(Exact name of small business issuer as
specified in its charter)</font></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="50%" valign=top><b><font size=2>Minnesota</font></b></td>
  <td  align=center width="50%" valign=top><b><font size=2>41-0943459</font></b></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font size=2>(State or other
  jurisdiction of incorporation or organization)</font></td>
  <td  align=center width="50%" valign=top><font size=2>(IRS Employer
  Identification Number)</font></td>
 </tr>
</table>

</div>

<p><font size=2>&nbsp;</font></p>

<p align=center><b><font size=2>6111
Blue Circle Drive<br>
Minnetonka, Minnesota 55343-9108<br>
</font></b><font size=2>(Address of principal executive offices)</font></p>

<p align=center><font size=2>&nbsp;</font></p>

<p align=center><b><font size=2>(952)930-0100</font></b><font size=2><br>
(Issuer's telephone number)</font></p>

<p align=center><font size=2>&nbsp;</font></p>

<p align=center><font size=2>(Former name, former address and former fiscal
year, if changed since last report)</font></p>

<p align=center><font size=2>&nbsp;</font></p>

<p><font size=2>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.&nbsp; Yes </font><font size=2 face=Wingdings>&#253;</font><font size=2>&nbsp;&nbsp;&nbsp; No </font><font size=2 face=Wingdings>o</font><font size=2><br><br></font></p>

<p><font size=2>Shares of $0.10 par value common stock outstanding at August 10, 2001:
3,118,948<br><br></font></p>

<p><font size=2>Transitional Small Business Disclosure Format (Check one):&nbsp; Yes </font><font size=2 face=Wingdings>o</font><font size=2>&nbsp;&nbsp;&nbsp; No </font><font size=2 face=Wingdings>&#253;</font><font size=2><br><br></font></p>





<hr size=1 width="100%" noshade color=black align=right>






<hr size=2 width="100%" noshade color=black align=right>


<page>


<p><b><font size=2>Part
I &#150; Financial Information</font></b></p>

<p><b><font size=2>Item
1</font></b></p>

<p><a name=FinancialStatements><b><font size=2>Financial Statements</font></b></a></p>

<p align=center><b><font size=2>Electro-Sensors, Inc.<br>
Balance Sheets<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width=732>
 <tr>
  <td width="64%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="0%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="15%" valign=bottom><b><font   size=2>June 30, 2001</font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=center width="15%" valign=bottom><b><font   size=2>December 31, 2000</font></b></td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="15%" valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="15%" valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="0%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><b><font size=2>Assets</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><b><font size=2>Current Assets</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Cash</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>7,393,255 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>3,191,176 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Investments</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>1,500,000 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>3,266,753 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Trade Receivables, less
  allowance for doubtful<br>
  accounts of $37,140 and $26,500, respectively</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>643,535 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>730,577 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Inventories</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>842,998 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>922,610 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Other current assets</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>213,696 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>127,177 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Prepaid Income taxes</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>-</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>74,606 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="60%" valign=bottom bgcolor="#cceeff"><b><font size=2>Total Current Assets</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>10,593,484 </font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>8,312,899 </font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><font size=2>Property &amp; Equipment, net</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>1,570,626 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>1,615,994 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Investments</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>15,433,042 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>17,202,689 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><b><font size=2>Total Assets</font></b></td>
  <td  align=right width="15%" valign=bottom><b><font   size=2>27,597,152 </font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom><b><font   size=2>27,131,582 </font></b></td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><b><font size=2>Liabilities &amp; Shareholders'
  Equity</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom>&nbsp;</td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom bgcolor="#cceeff"><b><font size=2>Current Liabilities</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Accounts Payable</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>90,460 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>108,482 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Customer Deposits</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>8,098 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>6,493 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Accrued Expenses</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>254,825 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>234,212 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Deferred Taxes</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>637,000 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>1,047,900 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Accrued Income Taxes</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>1,411,447 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>-</font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="60%" valign=bottom bgcolor="#cceeff"><b><font size=2>Total Current Liabilities</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>2,401,830 </font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>1,397,087 </font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><font size=2>Deferred Income Taxes</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>6,553,906 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>5,879,400 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom bgcolor="#cceeff"><b><font size=2>Shareholders' Equity</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Common Stock par value $.10 per share; authorized <br>
  10,000,000 shares; issued 3,118,948 and 2,077,112 shares, </font><font   size=2>respectively.</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>311,895</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>207,711 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Additional Paid-In Capital</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>988,378 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>985,410 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Retained Earnings</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>8,830,019 </font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><font   size=2>6,391,246 </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="62%" colspan=2 valign=bottom><font size=2>Accumulated other
  Comprehensive Income</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>8,511,124 </font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" valign=bottom><font   size=2>12,270,728 </font></td>
  <td width="0%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom bgcolor="#cceeff"><b><font size=2>Total Shareholders' Equity</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>18,641,416 </font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom bgcolor="#cceeff"><b><font   size=2>19,855,095 </font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="64%" colspan=3 valign=bottom><b><font size=2>Total Liabilities and
  Shareholders' Equity</font></b></td>
  <td  align=right width="15%" valign=bottom><b><font   size=2>27,597,152 </font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" valign=bottom><b><font   size=2>27,131,582</font></b></td>
  <td width="0%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>

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<page>


<p>&nbsp;</p>

<p align=center><b><font size=2>Electro-Sensors, Inc.<br>
Income Statements<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="27%" colspan=5 valign=bottom><b><font   size=2>Three Months Ended</font></b></td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="26%" colspan=5 valign=bottom><b><font   size=2>Six Months Ended</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="27%" colspan=5 valign=bottom><b><font   size=2>June 30,</font></b></td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="26%" colspan=5 valign=bottom><b><font   size=2>June 30,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font   size=2>2001</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom><b><font   size=2>2000</font></b></td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom><b><font   size=2>2001</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=2 valign=bottom><b><font   size=2>2000</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Sales</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,183,979</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,295,193</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,485,348</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>3,004,778</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Cost of Sales</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>440,472</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>497,205</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>915,168</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>1,113,485</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Gross Margin</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>743,507</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>797,988</font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>1,570,180</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>1,891,293</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Operating Expenses</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Selling</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>317,609</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>342,597</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>611,914</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>704,410</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Administrative</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>247,785</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>207,162</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>510,485</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>491,459</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Research &amp; Development</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>187,657</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>213,831</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>375,685</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>436,368</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Total Operating Expenses</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom><b><font   size=2>753,051</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>763,590</font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>1,498,084</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>1,632,237</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Income from Operations</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>(9,544</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>)</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>34,398</font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>72,096</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>259,056</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Other Income/(Expense)</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Interest Income</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>65,006</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>29,542</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>98,504</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>58,236</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Sale of Investments</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>2,737,663</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>4,164,230</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Total Other Income</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>2,802,669</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>29,542</font></b></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>4,262,734</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font   size=2>58,236</font></b></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Income/(Loss) before
  Discontinued Operations<br>&nbsp;&nbsp;&nbsp; and Income Taxes</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom><b><font   size=2>2,793,125</font></b></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>63,940</font></b></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>4,334,830</font></b></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>317,292</font></b></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Provision for Income Taxes</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>980,434</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>21,800</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,535,459</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>113,150</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Income/(Loss) from Continuing
  Operations</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom><b><font   size=2>1,812,691</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>42,140</font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>2,799,371</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="12%" colspan=2 valign=bottom><b><font   size=2>204,142</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Discontinued Operations:</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Income/(Loss) from
  Discontinued Operations</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>(2,524</font></td>
  <td width="2%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>7,193</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>(3,510</font></td>
  <td width="2%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>9,167</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Loss on Disposal of Segment</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(69,229</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(69,229</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Net Income</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,740,938</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>49,333</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,726,632</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>213,309</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Net Income/(Loss) Per Share
  Data:</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom><b><font size=2>Basic:</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Income/(loss) from continuing
  operations</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>0.58</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom bgcolor="#cceeff"><font   size=2>0.01</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom bgcolor="#cceeff"><font   size=2>0.90</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom bgcolor="#cceeff"><font   size=2>0.07</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Net income/(loss) per share</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>0.56</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>0.02</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>0.87</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>0.07</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Shares used in per share
  calculations</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>3,118,948</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,988,945</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>3,118,948</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,985,384</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="40%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Diluted:</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Income/(loss) from continuing
  operations</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>0.56</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom><font   size=2>0.01</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom><font   size=2>0.86</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom><font   size=2>0.07</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="38%" valign=bottom bgcolor="#cceeff"><font size=2>Net income/(loss) per share</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>0.54</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>0.02</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>0.85</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>0.07</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="38%" valign=bottom><font size=2>Shares used in per share
  calculations</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>3,240,749</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>3,088,412</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>3,225,828</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom><font   size=2>3,061,424</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
</table>

<page>


<p>&nbsp;</p>

<p align=center><b><font size=2>Electro-Sensors, Inc</font></b><font size=2><br>
</font><b><font size=2>Statements of Cash Flows<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom>&nbsp;</td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom><b><font   size=2>Six Months Ended</font></b></td>
  <td  align=center width="3%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom><b><font   size=2>Six Months Ended</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom><b><font   size=2>June 30, 2001</font></b></td>
  <td width="3%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=center width="17%" valign=bottom><b><font   size=2>June 30, 2000</font></b></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom><div align=right><b><font   size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><b><font size=2>Reconciliation of Net Income to
  Net Cash</font></b></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><b><font size=2>Provided by Operating Activites:</font></b></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net Income</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>2,726,632</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>213,309</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Adjustments to reconcile net income to net cash provided<br>
  by/(used in) operating activites:</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Provision for losses on trade
  receivables</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(10,640</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Loss on Disposal of Segment</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>71,753</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Depreciation</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>60,919</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>69,696</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Deferred Taxes</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>219,533</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>6,367</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Realized gain on sale of
  investments</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(4,164,230</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Change in Assets and Liabilities:</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Trade receivables</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(61,682</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(4,157</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Inventory</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(79,612</font></td>
  <td width="3%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(91,890</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Prepaid Expenses</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>86,519</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>48,120</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Prepaid Income Taxes</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(74,606</font></td>
  <td width="3%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>125,609</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Accounts Payable</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(18,022</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>3,698</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Customer Deposits</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>1,605</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(353,645</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Accrued Expenses</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>20,613</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>131,127</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Accrued income taxes</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>1,411,447</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>94,150</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Deferred Income taxes</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Net cash provided by operating activities</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>190,229</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>242,384</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Cash flows from investing activities:</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Proceeeds from sale of
  investments</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>4,205,032</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Purchase of property and
  equipment</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(18,475</font></td>
  <td width="3%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(30,598</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Proceeds from disposed segment</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>5,000</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Net cash provided by/(used in) investing activities</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>4,191,557</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(30,598</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Cash flows from financing activities:</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Proceeds from issuance of
  stock</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>6,538</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>38,008</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom><font size=2>Prinicipal payments received
  on note receivable</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>1,000</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="58%" valign=bottom bgcolor="#cceeff"><font size=2>Dividends Paid</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(187,245</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>(119,431</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="58%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Net cash used in financing activities</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(179,707</font></td>
  <td width="3%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>(81,423</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Net increase in cash and cash equivalents</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>4,202,079</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>130,363</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Cash and cash equivalents, beginning</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>3,191,176</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>2,507,689</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom><font size=2>Cash and cash equivalents, ending</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>7,393,255</font></td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>2,638,052</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Supplemental Schedule of
  Non-Cash Investing and<br></font></b><font size=2>&nbsp;</font><b><font   size=2>Financing Activities</font></b></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net change in unrealized gain/(loss) on marketable securities.</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>3,495,598</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>25,393,187</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="3%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Issuance of Note Receivable related to sale of segment.</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>36,000</font></td>
  <td width="3%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="60%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p align=center><b><font size=2>&nbsp;</font></b></p>

<page>


<p align=center><b><font size=2>Electro-Sensors, Inc. and Subsidiaries<br>
Notes to Consolidated Financial Statements<br>
June 30, 2001<br>
(Unaudited)</font></b></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>Note A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Nature of
Business</font></p>

<p><font size=2>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 monitoring
and motor control systems for industrial machinery. The Controls Division
utilizes leading-edge technology to continuously improve its products and make
them easier to use. The Controls Division&#146;s goal is to manufacture the
industry-preferred product for every market served. These products are sold
through an internal sales staff and distributors to a wide variety of
manufacturers, OEMS and processors to monitor the efficiency of process
machinery. The Company markets its products to a number of different industries
located throughout the United States and abroad. The Company owns marketable
securities, which have experienced significant appreciation in value since the
related company&#146;s IPO in 2000. During late 2000 and the first six months of
2001, the Company has recognized income from the sale of a portion of its
holdings.</font></p>

<p><font size=2>The second business is AutoData Systems (ADS), a division of
Electro-Sensors, Inc. ADS designs and markets a desktop software based system
that reads handprinted characters, checkmarks and bar code information from
scanned or faxed forms. ADS products are designed to provide capabilities to
automate data collection through telemarketing to end users, resellers and
developers in the United States, Canada, Europe and Asia.</font></p>

<p><font size=2>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 gas
torches used primarily by hobbyists, electronic kit assemblers and creators of
jewelry. MFI products were sold through distributors to retailers of hardware,
hobby craft and electronic products.</font></p>

<p><font size=2>Note B:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basis of
Presentation</font></p>

<p><font size=2>The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.</font></p>

<p><font size=2>Intercompany accounts, transactions and earnings are eliminated through
consolidation.</font></p>

<p><font size=2>The Balance Sheet at December 31, 2000 has been derived from the
Company&#146;s audited financial statements for the year ended December 31, 2000,
but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.</font></p>

<p><font size=2>For further information, refer to the financial statements and footnotes
thereto included in the Company&#146;s annual report on Form 10-K for the year ended
December 31, 2000.</font></p>

<page>


<p>&nbsp;</p>

<p><font size=2>Note C:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive
Income</font></p>

<p><font size=2>&nbsp;</font></p>


<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="34%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="31%" colspan=5 valign=bottom><font   size=2>Three Months
  Ended <br>
  June 30,</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="31%" colspan=5 valign=bottom><font   size=2>Six Months
  Ended <br>
  June 30,</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=13 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="34%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="15%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="15%" colspan=2 valign=bottom><font   size=2>2000</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="15%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><font   size=2>2000</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=13 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net Income</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>1,740,938</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>49,333</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><b><font size=2>2,726,632</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>213,309</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Other comprehensive gain:</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>Change in unrealized value</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom><font   size=2>&nbsp;</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom><font   size=2>&nbsp;</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom><font   size=2>&nbsp;</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>&nbsp;</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="32%" valign=bottom bgcolor="#cceeff"><font size=2>investments, net.</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>3,080,700</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>16,016,048</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>1,476,200</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>17,087,753</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Less:&nbsp;
  Reclassification adjustment</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>For gains included in net income</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom><b><font size=2>(3,412,608</font></b></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="15%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="15%" colspan=2 valign=bottom><b><font size=2>(5,236,804</font></b></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=13 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total comprehensive income</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>1,409,030</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>16,065,981</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><b><font size=2>(1,033,972</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>17,301,602</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=13 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
</table>


<p><font size=2>Note D:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investments</font></p>

<p><font size=2>The Company has a portfolio of investments. Management determines the
appropriate classification of securities at the date individual investments are
acquired, and evaluates the appropriateness of such classification at each
balance sheet date.</font></p>

<p><font size=2>The Company&#146;s investments consist of marketable equity securities,
primarily common stocks, government debt securities, money market funds and
unregistered equity securities. The estimated fair value of marketable equity
securities is based on quoted market prices and, therefore, is subject to the
inherent risk of market fluctuations.</font></p>

<p><font size=2>Since the Company does not buy investments in anticipation of short-term
fluctuations in market prices, the investments in marketable equity securities
have been classified as available-for-sale. Available-for-sale securities are
stated at fair value, and unrealized holding gains and losses, net of the
related deferred tax effect, are reported as a separate component of stockholders&#146;
equity. Dividends on marketable equity securities are recognized in income when
declared. Investments in unregistered securities are reported at original cost.</font></p>

<p><font size=2>Realized gains and losses, including losses from declines in value of
specific securities determined by management to be other-than-temporary, are
included in income. Realized gains and losses are determined on the basis of
the specific securities sold.</font></p>

<p><font size=2>Note E:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Accounting
Pronouncements</font></p>

<p><font size=2>In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No.101 (SAB 101), &#147;Revenue Recognition in Financial
Statements.&#148; SAB 101 summarizes certain of the SEC&#146;s views in applying
generally accepted accounting principles to revenue recognition in financial
statements. In October 2000, the SEC issued additional written guidance to
further supplement SAB 101. The Company adopted SAB 101 upon its issuance by
the SEC. The adoption did not have any material effect on the Company&#146;s
revenues or revenue recognition policy.</font></p>

<p><font size=2>Effective July 1, 2000, the Company adopted Financial Accounting
Standards No. 133, &quot;Accounting for Derivative Instruments and Hedging
Activities,&quot; amended by Standard No. 137 which provides guidance on
accounting for derivatives and hedge transactions.</font></p>

<page>


<p><font size=2>The Company&#146;s revenue recognition policy and procedures for &#147;Accounting
for Derivative Instruments and Hedging Activities&#148; are as follows:</font></p>

<p><font size=2>Revenue recognition of production monitoring equipment and gas torches:</font></p>

<p><font size=2>All production monitoring equipment and gas torches are shipped without
an evaluation or acceptance period. Revenues from the sale of these products
and any related warranty costs are recognized at the time of shipment.&nbsp; The company&#146;s distributors are not granted
any price protection.&nbsp; Sales to all
customers including distributors are final and no right of return after
shipment exists.</font></p>

<p><font size=2>Software revenue recognition:</font></p>

<p><font size=2>The Company recognizes revenue upon shipment of its character
recognition software.&nbsp; The product is
sold to the end user and risk of loss is transferred, and the Company has no
continuing obligations, once its products are delivered to the shipper.&nbsp; The Company recognizes revenue upon
shipment, net of return reserves based on historical experience.&nbsp; To recognize revenue, it must be probable
that the Company will collect the accounts receivable from its customers.&nbsp; In some situations, the Company receives
advance payments from its customers.&nbsp;
Revenue associated with these advance payments is deferred until the
product is shipped.&nbsp; Warranty reserves
are provided at the time revenue is recognized for the estimated cost of
replacing defective product.</font></p>

<p><font size=2>SFAS No. 133; Accounting for Derivative Instruments and Hedging
Activities (as amended by SFAS No. 137 with respect to the effective date) will
be effective for the Company in January 2001.&nbsp;
SFAS No. 133 requires all derivatives to be recognized as assets or
liabilities on the balance sheet and measured at fair value on a mark-to-market
basis.&nbsp; This applies whether the
derivatives are stand-alone instruments, such as forwarded currency exchange
contracts and interest rate swaps or collars, or embedded investments.&nbsp; Along with the derivatives, the underlying
hedged items are also to be marked to market on an ongoing basis.&nbsp; These market value adjustments are to be
included in net income (loss) in the statement of operations or in other
comprehensive income (and accumulated in shareholders&#146; equity), depending on
the nature of the transaction.</font></p>

<page>


<p><font size=2>Note F:&nbsp; Segment Information:</font></p>

<p><font size=2>The following is financial information relating to the operating
segments:</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="36%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="30%" colspan=5 valign=bottom><font   size=2>Quarter
  Ended</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="30%" colspan=5 valign=bottom><font   size=2>Six Months
  Ended</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="34%" colspan=2 valign=bottom><font size=2>June 30,</font></td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><font   size=2>2000</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><font   size=2>2000</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=14 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>External Sales</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>Production Monitoring</font></td>
  <td width="0%" valign=bottom><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom><b><font size=2>1,033,090</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>1,129,003</font></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom><b><font size=2>2,154,008</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom><font   size=2>2,579,506</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="32%" valign=bottom bgcolor="#cceeff"><font size=2>Character Recognition</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>150,889</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>166,191</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>331,340</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>425,272</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>Investments</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><b><font size=2>0</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>0</font></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom><b><font size=2>0</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>0</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=14 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><b><font size=2>1,183,979</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>1,295,194</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><b><font size=2>2,485,348</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>3,004,778</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=14 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="36%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net income (loss) before taxes and <br>
  discontinued&nbsp; operations</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>Production Monitoring</font></td>
  <td width="0%" valign=bottom><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom><b><font size=2>10,971</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>147,569</font></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom><b><font size=2>108,625</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom><font   size=2>456,313</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="32%" valign=bottom bgcolor="#cceeff"><font size=2>Character Recognition</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>15,464</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(72,250</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>)</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>40,419</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(118,955</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="32%" valign=bottom><font size=2>Investments</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><b><font size=2>2,766,689</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(8,979</font></td>
  <td width="1%" valign=bottom><b><font size=2>)</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom><b><font size=2>4,185,786</font></b></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(20,066</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=14 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="34%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><b><font size=2>2,793,124</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>63,340</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><b><font size=2>$</font></b></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><b><font size=2>4,334,830</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="14%" valign=bottom bgcolor="#cceeff"><font   size=2>317,292</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=14 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>

<!-- DO NOT remove the following table row. It is needed for  .               the proper rendering of tables containing misaligned cells.-->
 <tr height=0>
  <td width=11></td>
  <td width=7></td>
  <td width=236></td>
  <td width=12></td>
  <td width=96></td>
  <td width=8></td>
  <td width=12></td>
  <td width=96></td>
  <td width=9></td>
  <td width=12></td>
  <td width=94></td>
  <td width=8></td>
  <td width=12></td>
  <td width=99></td>
  <td width=9></td>
 </tr>
</table>

<p><font size=2>The Company&#146;s subsidiary Microflame, Inc. was sold in May 2001.&nbsp; See Note G below.&nbsp; Segment information related to Microflame, Inc. previously has
been included as the brazing torch operations segment.</font></p>

<p><font size=2>The Company has no inter-segment sales.</font></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>Note G:&nbsp; Disposal of Microflame,
Inc.</font></p>

<p><font size=2>On May 14, 2001, the Company disposed of its brazing torches segment
through a sale of all of its shares of stock in Microflame, Inc. to an
unrelated party.&nbsp; The Company has
restated its prior financial statements to present the operating results of the
brazing torch operations as discontinued.&nbsp;
Summary of the operating information for this segment is as follows:</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="63%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><font   size=2>Revenue</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><font   size=2>Taxes</font></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=7 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="61%" valign=bottom bgcolor="#cceeff"><font size=2>Three months ended June 30, 2001</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom bgcolor="#cceeff"><font   size=2>20,468</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom bgcolor="#cceeff"><font   size=2>(1,268</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="61%" valign=bottom><font size=2>Three months ended June 30, 2000</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom><font   size=2>78,605</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom><font   size=2>4,075</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="61%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="61%" valign=bottom><font size=2>Six months ended June 30, 2001</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom><font   size=2>61,443</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom><font   size=2>(1,839</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="61%" valign=bottom bgcolor="#cceeff"><font size=2>Six months ended June 30, 2000</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom bgcolor="#cceeff"><font   size=2>149,421</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="16%" valign=bottom bgcolor="#cceeff"><font   size=2>5,275</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td  align=center width="98%" colspan=7 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p><font size=2>Proceeds on the sale of the operations include a $5,000 cash payment and
a note receivable for $36,000.&nbsp; The note
is payable in 36-monthly payments of $1,000 plus interest at 9.5%.&nbsp; The note is secured by the stock of
Microflame, Inc.&nbsp; The tax benefit
resulting from the loss on the disposal of its investment is $30,000.<b><page></b></font></p>

<p><a name=Signatures><b><font size=2>Signatures</font></b></a></p>

<p><font size=2>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 the
undersigned, thereto duly authorized.</font></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>Electro-Sensors, Inc.</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width=33 valign=top><b><font size=2>By:</font></b></td>
  <td width=200 valign=top><font size=2>/s/ Bradley D. Slye</font></td>
  <td width=489 valign=top><font size=2>September 28, 2001</font></td>
 </tr>
 <tr>
  <td width=33 valign=top>&nbsp;</td>
  <td width=200 valign=top>
<hr size=1 width="65%" noshade color=black align=left></td>
  <td width=489 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width=721 colspan=3 valign=top><font size=2>Bradley D. Slye,
  President</font></td>
 </tr>
 <tr>
  <td width=721 colspan=3 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width=721 colspan=3 valign=top><font size=2>(Principal
  Financial Officer)</font></td>
 </tr>
</table>

<pre><font size=2>&nbsp;</font></pre><pre><font size=2>&nbsp;</font></pre></div>

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