FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                   Quarterly Report under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For Quarter Ended:   March 31, 1997
Commission File Number:  0-18393

                            WINLAND ELECTRONICS, INC.
        (Exact name of small business issuer as specified in its charter)

          Minnesota                                          41-0992135
(state or other juris-                                   (I.R.S. Employer
diction of incorporation)                               Identification No.)

                   1950 Excel Drive, Mankato, Minnesota 56001
               (Address of principal executive offices)(zip code)

               Registrant's telephone number, including area code:
                                 (507) 625-7231

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

         Yes  [ x ]                    No  [   ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of the latest  practicable  date:  As of April 30, 1997,  the
Registrant had 2,795,011 shares of Common Stock, $.01 par value, outstanding.

         Transitional Small Business Disclosure Format (check one):

         Yes  [   ]                    No [ x ]










                                                  

<PAGE>


                          PART I-FINANCIAL INFORMATION

ITEM 1: Financial Statements

                            WINLAND ELECTRONICS, INC.
                                  BALANCE SHEET
                                   (Unaudited)

ASSETS                                                     MARCH 31  DECEMBER 31
                                                             1997        1996
CURRENT ASSETS:

Cash                                                     $  110,549   $   19,499
Accounts Receivable, Net                                  1,398,546    1,327,386
Inventories                                               3,280,815    2,969,677
Prepaid Items                                                92,153       63,633
                                                         ----------   ----------
         Total Current Assets                             4,882,063    4,380,195

Property and Equipment, Net                               3,123,060    3,128,588
Property Under Capital Lease, Net                         1,000,363      721,066
OTHER  ASSETS:
         Intangibles                                          8,182        8,564
         Deferred Income Taxes                               52,535       52,535
                                                         ----------   ----------
                  TOTAL ASSETS                           $9,066,203   $8,290,948

LIABILITIES AND SHAREHOLDERS'  EQUITY

CURRENT LIABILITIES:
         Notes Payable                                    1,935,227    1,580,227
         Accounts Payable                                   721,712      683,406
         Payroll Taxes Payable                               31,799       34,891
         Wages and Commission Payable                        64,252       41,815
         Other Accruals                                     125,085      120,382
         Obligations Under Capital Lease                    212,541      163,636
         Deferred Revenue                                    27,001       27,001
         Income Taxes Payable                                   -0-          336
         Current Maturities                                 162,194      161,267
                                                         ----------   ----------
                  Total Current Liabilities               3,279,811    2,812,961

LONG TERM LIABILITIES:
         Long Term Maturities                             2,417,607    2,459,644
         Obligations Under Capital Lease
         Less: Current Portion                              718,083      492,120
                                                         ----------   ----------
                  TOTAL LONG TERM LIABILITIES             3,135,690    2,951,764

OTHER LIABILITIES:
         Deferred Revenue
         Less:Current Portion                               209,257      216,007
                                                         ----------   ----------
                  TOTAL LIABILITIES                       6,624,758    5,980,732

SHAREHOLDERS' EQUITY:
         Common Stock                                        27,950       27,511
         Additional Paid-In Capital                       2,050,246    2,047,794
         Retained Earnings                                  363,249      234,911
                                                         ----------   ----------
                  Total Shareholders' Equity              2,441,445    2,310,216

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $9,066,203   $8,290,948
                                                         ==========   ==========

                                        2


<PAGE>



                            WINLAND ELECTRONICS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




                                                           QUARTER ENDED
                                                              MARCH 31

                                                        1997             1996
                                                     -----------    -----------

      NET SALES:                                     $ 2,822,095    $ 1,753,052
         Less, Cost of Goods Sold                     (2,156,152)    (1,360,631)
                                                     -----------    -----------
         Gross Profit on Sales                           665,943        392,421

OPERATING EXPENSES:
         General and Administrative                      264,005        204,153
         Marketing                                        66,806         52,461
         Research and Development                        100,173         60,330
                                                     -----------    -----------
              Total Operating Expenses                   430,984        316,944

INCOME BEFORE OTHER INCOME
         AND EXPENSE                                     234,959         75,477
                                                     -----------    -----------

MISCELLANEOUS INCOME                                       8,863         29,876
MISCELLANEOUS EXPENSE, PROVISION FOR BAD DEBT            (43,000)           -0-
INTEREST EXPENSE                                         (49,485)       (33,782)
                                                     -----------    -----------
         TOTAL OTHER INCOME AND EXPENSE                  (83,622)        (3,906)
                                                     -----------    -----------

NET INCOME BEFORE TAXES                                  151,337         71,571
                                                     -----------    -----------

PROVISION FOR INCOME TAXES                                23,000            -0-
                                                     -----------    -----------

NET INCOME                                           $   128,337    $    71,571
                                                     ===========    ===========
NET INCOME PER COMMON SHARE                          $     0.046    $     0.028
                                                     ===========    ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AS OF MARCH 31, 1997 AND 1996                          2,776,384      2,583,311



                                        3


<PAGE>


                            WINLAND ELECTRONICS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED THREE MONTHS ENDED
                                                         MARCH 31, 1997     MARCH 31, 1996
                                                           -----------       -----------

<S>                                                        <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Cash Received from Customers                             $ 2,707,935       $ 1,680,794
  Interest Received                                              2,128               -0-
  Other miscellaneous operating receipts                           -0-             6,891
  Cash Paid to Suppliers and Employees                      (2,724,098)       (2,270,371)
  Interest Paid                                               (109,094)          (28,760)
  Income Tax Paid                                                 (920)              -0-
                                                           -----------       -----------
    Net Cash (Used) by Operating Activities                   (124,049)         (611,446)
                                                           -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of Property and Equipment                          (48,944)          (77,153)
                                                           -----------       -----------
  Cash Proceeds From Sales of Equipment                            -0-               -0-
   Net Cash (Used) by Investing Activities                     (48,944)          (77,153)
                                                           -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net Advances on Credit Line                                  355,000           749,775
  Proceeds from Debt                                               -0-               -0-
  Payments on Debt                                             (41,110)          (14,821)
  Payments on Capital Lease Obligations                        (52,738)          (21,531)
  Sale of Common Stock                                           2,891               -0-
                                                           -----------       -----------
    Net Cash Provided by Financing Activities                  264,043           713,423
                                                           -----------       -----------
NET INCREASE IN CASH                                            91,050            24,824
CASH - BEGINNING OF YEAR                                        19,499             2,839
CASH - END OF THE FIRST NINE MONTHS OF 1996                $   110,549       $    27,663
                                                           -----------       -----------



                 RECONCILIATION OF NET INCOME TO NET CASH (USED)
                             BY OPERATING ACTIVITIES


Net Income (Loss)                                         $   128,337        $    71,571
Adjustments:
Disposition of Assets                                              15                155
Depreciation & Amortization                                   102,813             57,166
(Increase) in Accounts Receivable                             (71,160)           (79,918)
(Increase) in Inventory                                      (311,138)          (466,343)
(Increase) in Prepaid items                                   (28,520)           (12,490)
(Decrease) in Accounts Payable                                 38,306           (215,576)
Increase in Wages Payable                                      22,437             26,213
Increase in Accrued Payroll Taxes                              (3,092)            14,793
(Decrease) in Other Accruals                                  (17,377)              (267)
(Decrease) in Deferred Revenue                                 (6,750)            (6,750)
(Decrease) in Income Taxes Payable                             22,080                -0-
                                                          -----------        -----------
Net Cash (Used) by Operating Activities                   $  (124,049)       $  (611,446)
                                                          -----------        -----------
</TABLE>

                                        4


<PAGE>


                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                 MARCH 31, 1997
                                    UNAUDITED

NOTE A - BASIS OF PRESENTATION

The  accompanying  unaudited  financial  statements  have been  prepared  by the
Company in accordance with generally accepted accounting principles, pursuant to
the  rules  and  regulations  of the  Securities  and  Exchange  Commission.  In
management's  opinion all  adjustments  necessary to a fair  presentation of the
results for the  interim  period have been  reflected  in the interim  financial
statements. The results of operations for any interim period are not necessarily
indicative of the results for a full year.  Except for those described in Note B
below,  all  such  adjustments  are  of  a  normal  recurring  nature.   Certain
information and footnote  disclosures  normally included in financial statements
have  been  condensed  or  omitted.   Such  disclosures  are  those  that  would
substantially  duplicate  information  contained  in  the  most  recent  audited
financial  statements of the Company,  such as significant  accounting policies,
net operating loss carry-overs, lease and license commitments and stock options.
Management  presumes  that  users of the  interim  statements  have read or have
access to the audited financial statements included in the Company's most recent
annual report on Form 10-KSB.

NOTE B - ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company  maintains an allowance for doubtful  accounts based on the aging of
accounts  receivable.  The balance of the  allowance  for  doubtful  accounts is
$47,537 at March 31, 1997 and $4,455 at December 31,  1996.  The  allowance  for
doubtful  accounts was  increased by $43,000 in the first  quarter of 1997.  The
Company was informed  that a customer had filed for chapter  eleven  bankruptcy,
which required a significant increase the allowance.

NOTE C - INVENTORY

Major  components  of  inventory  at March 31, 1997 and December 31, 1996 are as
follows:

                                                March 31,     December 31,
                                                   1997          1996
                                                ---------      ---------
Raw Material................................. $ 1,753,846     $1,695,764
Work in Process...............................    728,556        554,090
Finished Goods................................    789,701        709,860
Manufacturing, Shipping, and Office Supplies..      8,712          9,963
                                                 --------        -------
         Total................................$ 3,280,815     $2,969,677
                                                =========      =========

NOTE D - PROPERTY AND EQUIPMENT

Property and  Equipment not under  capital  leases  consists of the following at
March 31, 1997 and December 31, 1996:

                                           March 30,    December 31,
                                             1997           1996
                                          ---------      ---------
Building..............................  $ 2,359,811    $ 2,343,275
Land..................................      192,640        192,640
Office Equipment......................      156,104        341,658
Computer & Telephone Equipment........      328,617          -0-
Research & Development Equipment......       95,223        143,941
Marketing and Display Equipment.......       18,152         31,413
Factory Equipment.....................      495,519        549,567
Land Improvements.....................       77,369         77,369
Accumulated Depreciation..............     (600,375)      (551,275)
                                           ---------      ---------
Net Book Value........................  $ 3,123,060    $ 3,128,588
                                           =========      =========

                                        5
<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                 MARCH 31, 1997
                                    UNAUDITED

NOTE D - CONTINUED

Property and Equipment  under capital leases  consists of the following at March
31, 1997 and at December 31, 1996:

                                             March 31,    December 31,
                                               1997            1996 
                                            ----------     ----------
Factory Equipment.....................      $1,117,546     $  863,473
Office Equipment......................          95,754         95,754
Computer and Telephone Equipment......         110,640           -0-
Research and Development Equipment....           4,401          4,401
Accumulated Amortization..............        (292,632)      (242,561)
                                             ----------     ----------
Total Leased Property and Equipment,
  Net of Accumulated Amortization.....      $1,000,363     $  721,066

Capital Leases are summarized as follows:

Lease on factory equipment with lease
period expiring March of 2002, at an
interest rate of 9.94%................      $   63,288     $      -0-
Lease on factory equipment with lease
period expiring March of 2002, at an
interest rate of 8.88%................         212,652            -0-
Lease on computer and telephone equipment
with lease period expiring February of
2000,  at an interest rate of 9.01%...          39,875            -0-
Lease on factory equipment with lease
period expiring August, 2001, at interest
of 9.49%...............................        232,332        242,293
Lease on factory equipment with lease
period expiring July, 2001, at interest
of 9.96%...............................        109,365        113,809
Lease on factory, office, and R&D equipment
with lease period expiring July, 1997, at
interest of 8%.........................          4,606          6,195
Lease on factory and office equipment with
lease period expiring January, 2000, at
interest of 1% over prime..............        228,520        248,826
Lease on factory equipment with lease
period expiring October, 1998 at interest
of 9.23%...............................         22,225         25,641
Lease on office equipment with lease
period expiring March, 2000 at interest
of 9%..................................         17,761         18,992
Total..................................     $  930,624     $  655,756
Less Current Portion...................       (212,541)      (163,636)
                                             ---------      ---------
Long term Obligation under Capital Leases   $  718,083     $  492,120
                                             =========      =========






                                        6
<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                 March 31, 1997
                                    UNAUDITED


NOTE E - SHORT TERM BORROWING

Short Term  Borrowing  consists of the  following at March 31, 1997 and December
31, 1996 balance sheet:

                                           March 31,     December 31,
Norwest Bank-Revolving Credit Line           1997            1996
                                           ----------     ---------
Balance..............                     $ 1,935,227    $1,580,227
Stated Interest Rate Per Annum........        9.0% *        9.0% *
Maximum Amount Outstanding During the
         Quarter......................    $ 1,935,227    $1,995,227
Average Amount Outstanding During the
         Quarter......................    $ 1,858,560    $1,626,398
Unused Credit Available...............    $  682,156     $1,204,081

* The stated interest rate per annum is equal to 3/4 of a percent over the prime
rate

The  interest  expense on the  revolving  loan was $49,485 for the three  months
ended March 31, 1997.  Additional  interest  expense was reported related to the
leased capital equipment and other long term borrowing.  The interest expense on
the leased capital  equipment was $23,157 and the interest expense on other long
term borrowing was $33,908 for the three months ended March 31, 1997.

NOTE F - STOCK OPTIONS AND WARRANTS

As of March 31, 1997,  options to purchase an aggregate of 309,000 shares of the
Company's  Common Stock were granted and  outstanding  under the Company's  1989
Stock Option  Plan.  As of March 31, 1997,  options to purchase  126,400  shares
granted under the 1989 Stock Option Plan were  exercisable.  The exercise prices
of all outstanding options range from $0.06 to $3.64 per share.

As of March 31, 1997,  warrants to purchase an aggregate of 37,000 shares of the
Company's Common Stock at $2.20 per share were granted and  outstanding,  all of
which warrants are exercisable.





                                        7



<PAGE>


ITEM 2:  Management's Discussion and Analysis or Plan of Operation

Results of Operations
Three months ended March 31 1997 v.
Three months ended March 31 1996

Net Sales:
The Company recorded net sales of $2,822,095 for the three months ended March 31
1997,  an  increase of 61% from net sales of  $1,753,052  for the same period in
1996.  The increase in sales for the first  quarter of 1997 compared to 1996 was
primarily  attributed to sales to Select Comfort Corporation  pursuant to a $5.6
million dollar purchase order which was approximately thirty percent complete at
March 31, 1997.

The  Company  has  continued  to  identify  and secure new  contract  design and
manufacturing  customers,  as well as to actively market its security/industrial
products.  The loss of any contract customer could have an adverse effect on the
Company's  short term results.  The management of the Company  believes that the
contract  design and  manufacturing  portion of its business has  potential  for
growth and is actively promoting this portion of the business.

Gross Profits:
Gross profit was $665,943 or 23.6% of net sales for the three months ended March
31,  1997,  compared  to  $392,421  or 22.4% of net sales for the same period in
1996.  The  increase in gross  profit  margins is due in part to the addition of
capital equipment.  This equipment has helped to streamline production processes
and improved monitoring and reporting methods. To a lesser degree, the sales mix
has also impacted the gross margins for the period.

Operating Expenses:
General and  administrative  expense  was  $264,005 or 9.4% of net sales for the
three months ended March 31 1997, compared to $204,153 or 11.6% of net sales for
the same period in 1996. The additional general and administrative expenses were
necessary  to support the  increased  level of sales  during the  quarter.  As a
percentage of sales, general and administrative  expenses declined for the first
quarter  of 1997,  compared  to the same  period  in 1996  because  general  and
administrative expenses increased at a slower rate than the increase in sales.

Marketing  expense was $66,806 or 2.4% of net sales for the quarter  ended March
31, 1997,  compared to $52,461 or 3.0% for the same period in 1996. The increase
in marketing expense is attributed in part to the addition of a customer service
representative needed to support the continued growth in the contract design and
manufacturing  activities.  The  Company  has  continued  its  emphasis  on  the
marketing of its security/industrial  products, in addition to actively pursuing
new contract design and manufacturing relationships.

Research and development expense was $100,173 or 3.5% of net sales for the first
three  months of 1997,  compared  to  $60,330  or 3.4% of net sales for the same
period in 1996.



                                        8
<PAGE>

The increased  research and development  expense is primarily  attributed to the
addition of technical staff and equipment  needed to better serve our customers'
growing requirements for design and support services.

Interest Expense:
Interest  expense  on the  revolving  line of  credit  was $1.7% of net sales or
$49,485 for the first quarter of 1997,  compared to 1.9% of net sales or $33,782
for the  same  period  in 1996.  The  increase  in  interest  expense  reflected
additional  short term borrowing  needed to support  increased  sales,  accounts
receivable and inventories.

Net Earnings:
The  Company  recorded  net income of $128,337 or $0.046 per share for the first
quarter of 1997, compared to a net income of $71,571 or $0.028 per share for the
same period in 1996.  The results of the first quarter of 1997 were  unfavorably
affected by a $43,000  increase in the  allowance  for  doubtful  accounts.  The
allowance was increased after the Company was notified that a customer had filed
for chapter eleven bankruptcy.  Furthermore,  the Company has set up a provision
for  income  taxes  in  anticipation  that any  remaining  loss  carry  forwards
available to the Company will be used up in the current fiscal year.

The Company  believes  inflation has not  significantly  affected its results of
operations.

Liquidity and Capital Resources

The  current  ratio on March 31,  1997 was 1.49 to 1,  compared  to 1.56 to 1 on
December 31, 1996. Working capital on March 31, 1997 was $1,602,252  compared to
$1,567,234  on December 31, 1996.  The  increase in working  capital  during the
first quarter reflects increases in inventory  ($311,138),  accounts  receivable
($71,160),  and prepaid items ($28,250) that are offset by additional short term
borrowing  ($355,000)  needed to support the  increased  sales  during the first
quarter of 1997.

The Company has a revolving  credit  agreement  with the Norwest Bank  Minnesota
South  N.A.("Norwest"),  with a maximum  loan  limit of  $3,500,000,  subject to
additional  limitations set forth in the credit agreement.  The interest rate is
calculated at 3/4% over the prime  interest  rate. At March 31, 1997,  there was
$1,935,227  outstanding  under  the line of  credit.  The  Company's  management
believes that capital available  through the current credit agreement,  together
with cash flows from operations will be sufficient to meet the Company's capital
needs in the near future.







                                        9
<PAGE>


                            PART II-OTHER INFORMATION




ITEM 6: Exhibits and Reports on Form 8-K

         (a) See Exhibit Index following the signature page.

         (b) There are no reports on Form 8-K for the quarter
             ended March 31, 1997.










                                       10


<PAGE>









                                   SIGNATURES



Pursuant  to the  requirement  of the  Securities  Exchange  Act  of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                           WINLAND ELECTRONICS, INC.


Dated:  May 5, 1997                        By: /s/ William K. Hankins
                                           William K. Hankins, President,
                                           Chief Executive Officer and
                                           Chief Financial Officer
                                           (Principal Executive Officer
                                           and Principal Financial and
                                           Accounting Officer)















                                       11


<PAGE>


                            WINLAND ELECTRONICS, INC.
                          EXHIBIT INDEX TO FORM 10-QSB



For The Quarter Ended
March 31, 1997



Exhibit
Number            Item


11                Statement Re: Computation of per share earnings.


27                Financial Data Schedule (filed only with electronic version).



















                                       12