----

----

| For      the Quarter Ended: | September      30, 2008 |
|-----------------------------|-------------------------|

| For      the transition period from _____________________ to      ____________________._________________ |
|----------------------------------------------------------------------------------------------------------|

| Minnesota                                                           | 41-0992135                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (IRS      Employer Identification Number) |

| Title of Each Class                  | Name of Exchange             |
|--------------------------------------|------------------------------|
| Common      Stock, $.01 par value    | American      Stock Exchange |
| Preferred      Stock Purchase Rights | American      Stock Exchange |

| Large      accelerated filer o | Accelerated      filer o | Non-accelerated      filer o | Smaller      Reporting Company þ |
|--------------------------------|--------------------------|------------------------------|---------------------------------------|

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TABLE OF CONTENTS

| PART I – FINANCIAL INFORMATION |
|--------------------------------------|
|                                 | ITEM 1. FINANCIAL STATEMENTS |
|                                 | ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL      CONDITION AND RESULTS OF OPERATIONS |
|                                 | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT      MARKET RISK |
|                                 | ITEM 4. CONTROLS AND PROCEDURES |
| PART II – OTHER INFORMATION    |
|                                 | ITEM 1. LEGAL PROCEEDINGS |
|                                 | ITEM 1A. RISK FACTORS |
|                                 | ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE      OF PROCEEDS |
|                                 | ITEM 3. DEFAULTS UPON SENIOR    SECURITIES |
|                                 | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS |
|                                 | ITEM 5. OTHER INFORMATION |
|                                 | ITEM      6. EXHIBITS |
| SIGNATURES                           |
| EXHIBITINDEX                         |

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Table of Contents

PART I – FINANCIAL INFORMATION

| WINLAND      ELECTRONICS, INC.                                                                                                        |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED      BALANCE SHEETS                                                                                                         |   |
| (In      Thousands of Dollars, Except Share Data)                                                                                     |   |
|                                                                                                                                  |   |   |   |   |   |   |
| ASSETS                                                                                                                                |   | September      30, 2008 |   |   | December      31, 2007 |   |
|                                                                                                                                  |   | (Unaudited) |   |   |   |   |
| Current Assets                                                                                                                        |   |   |   |   |   |   |
|  Cash                                                                                                                            |   | $ | 537 |   |   | $ | 1,152 |   |
|  Accounts      receivable, less allowance for doubtful accounts of $25                                                           |   |   | 3,837 |   |   |   | 3,436 |   |
|  Refundable      income taxes                                                                                                    |   |   | 651 |   |   |   | 389 |   |
|  Inventories                                                                                                                     |   |   | 4,715 |   |   |   | 4,708 |   |
|  Prepaid      expenses and other assets                                                                                          |   |   | 333 |   |   |   | 253 |   |
|  Deferred      income taxes                                                                                                      |   |   | - |   |   |   | 400 |   |
|  Total      current assets                                                                                                       |   |   | 10,073 |   |   |   | 10,338 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  Property      and equipment at cost                                                                                             |   |   | 11,931 |   |   |   | 11,827 |   |
|  Less      accumulated depreciation                                                                                              |   |   | (6,996 | ) |   |   | (6,410 | ) |
|  Net      property and equipment                                                                                                 |   |   | 4,935 |   |   |   | 5,417 |   |
|  Total      assets                                                                                                               |   | $ | 15,008 |   |   | $ | 15,755 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                                       |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  Current      Liabilities                                                                                                        |   |   |   |   |   |   |   |   |
|  Revolving      line of credit                                                                                                   |   | $ | 55 |   |   | $ | - |   |
|  Current      maturities of long-term debt                                                                                       |   |   | 417 |   |   |   | 512 |   |
|  Accounts      payable                                                                                                           |   |   | 2,633 |   |   |   | 1,729 |   |
|  Accrued      expenses:                                                                                                          |   |   |   |   |   |   |   |   |
|  Compensation                                                                                                                    |   |   | 537 |   |   |   | 733 |   |
|  Allowance      for rework and warranty costs                                                                                    |   |   | 150 |   |   |   | 160 |   |
|  Other                                                                                                                           |   |   | 192 |   |   |   | 219 |   |
|  Total      current liabilities                                                                                                  |   |   | 3,984 |   |   |   | 3,353 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  Long      Term Liabilities                                                                                                      |   |   |   |   |   |   |   |   |
|  Long-term      debt, less current maturities                                                                                    |   |   | 1,169 |   |   |   | 1,471 |   |
|  Deferred      income taxes                                                                                                      |   |   | - |   |   |   | 282 |   |
|  Deferred      revenue                                                                                                           |   |   | 132 |   |   |   | 138 |   |
|  Other      long term tax liabilities                                                                                            |   |   | 146 |   |   |   | 129 |   |
|  Total      long-term liabilities                                                                                                |   |   | 1,447 |   |   |   | 2,020 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  Stockholders'      Equity                                                                                                       |   |   |   |   |   |   |   |   |
| Common      stock, par value $0.01 per share; authorized 20,000,000                                                                   |   |   |   |   |   |   |   |   |
| shares;      issued and outstanding 3,656,668 and 3,640,741 shares as of September 30,      2008 and December 31, 2007, respectively. |   |   | 37 |   |   |   | 36 |   |
|  Additional      paid-in capital                                                                                                 |   |   | 4,912 |   |   |   | 4,691 |   |
|  Retained      earnings                                                                                                          |   |   | 4,628 |   |   |   | 5,655 |   |
|  Total      stockholders' equity                                                                                                 |   |   | 9,577 |   |   |   | 10,382 |   |
|  Total      liabilities and stockholders' equity                                                                                 |   | $ | 15,008 |   |   | $ | 15,755 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |
|  See      Notes to Condensed Financial Statements                                                                                |   |   |   |   |   |   |   |   |

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| WINLAND      ELECTRONICS, INC.                             |   |
|------------------------------------------------------------|--------|
| CONDENSED      STATEMENTS OF OPERATIONS                    |   |
| (In      Thousands, Except Per Share Amounts)              |   |
| (Unaudited)                                                |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   | For      the Three Months Ended September 30, |   |   | For      the Nine Months Ended September 30, |   |
|                                                       |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
| Net      sales                                             |   | $ | 7,003 |   |   | $ | 9,855 |   |   | $ | 20,901 |   |   | $ | 27,254 |   |
| Cost      of sales                                         |   |   | 5,883 |   |   |   | 8,222 |   |   |   | 18,487 |   |   |   | 24,141 |   |
| Gross      profit                                          |   |   | 1,120 |   |   |   | 1,633 |   |   |   | 2,414 |   |   |   | 3,113 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General      and administrative                            |   |   | 576 |   |   |   | 549 |   |   |   | 1,769 |   |   |   | 1,896 |   |
| Sales      and marketing                                   |   |   | 300 |   |   |   | 260 |   |   |   | 993 |   |   |   | 791 |   |
| Research      and development                              |   |   | 137 |   |   |   | 221 |   |   |   | 731 |   |   |   | 857 |   |
| Total      operating expenses                              |   |   | 1,013 |   |   |   | 1,030 |   |   |   | 3,493 |   |   |   | 3,544 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)                               |   |   | 107 |   |   |   | 603 |   |   |   | (1,079 | ) |   |   | (431 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expense)                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                      |   |   | (34 | ) |   |   | (53 | ) |   |   | (98 | ) |   |   | (226 | ) |
| Other      income, net                                     |   |   | 12 |   |   |   | 25 |   |   |   | 22 |   |   |   | 40 |   |
| Total      other income (expense)                          |   |   | (22 | ) |   |   | (28 | ) |   |   | (76 | ) |   |   | (186 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before income taxes                     |   |   | 85 |   |   |   | 575 |   |   |   | (1,155 | ) |   |   | (617 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit (expense)                          |   |   | 33 |   |   |   | (88 | ) |   |   | 128 |   |   |   | 347 |   |
| Net      income (loss)                                     |   | $ | 118 |   |   | $ | 487 |   |   | $ | (1,027 | ) |   | $ | (270 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per common share:                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                      |   | $ | 0.03 |   |   | $ | 0.13 |   |   | $ | (0.28 | ) |   | $ | (0.07 | ) |
| Diluted                                                    |   | $ | 0.03 |   |   | $ | 0.13 |   |   | $ | (0.28 | ) |   | $ | (0.07 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average      number of common shares outstanding: |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                      |   |   | 3,656,668 |   |   |   | 3,622,811 |   |   |   | 3,647,309 |   |   |   | 3,608,086 |   |
| Diluted                                                    |   |   | 3,656,668 |   |   |   | 3,642,825 |   |   |   | 3,647,309 |   |   |   | 3,608,086 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See      Notes to Condensed Financial Statements           |   |   |   |   |   |   |   |   |   |   |   |   |   |

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| WINLAND      ELECTRONICS, INC.                                       |   |
|----------------------------------------------------------------------|--------|
| CONDENSED      STATEMENTS OF CASH FLOWS                              |   |
| (In      Thousands of Dollars)                                       |   |
| (Unaudited)                                                          |   |
|                                                                 |   | For      the Nine Months Ended September 30, |   |
|                                                                 |   | 2008 |   |   | 2007 |   |
| Cash      Flows From Operating Activities                            |   |   |   |   |   |   |
|  Net      loss                                                  |   | $ | (1,027 | ) |   | $ | (270 | ) |
|  Adjustments      to reconcile net loss to net cash provided by |   |   |   |   |   |   |   |   |
|  (used      in) operating activities:                           |   |   |   |   |   |   |   |   |
|  Non-cash      stock based compensation                         |   |   | 202 |   |   |   | 148 |   |
|  Depreciation      and amortization                             |   |   | 611 |   |   |   | 662 |   |
|  Consulting      expense, non-cash warrant expense              |   |   | - |   |   |   | 22 |   |
|  Deferred      tax assets                                       |   |   | 118 |   |   |   | (18 | ) |
|  Changes      in assets and liabilities:                        |   |   |   |   |   |   |   |   |
|  Accounts      receivable                                       |   |   | (401 | ) |   |   | 502 |   |
|  Refundable      income taxes                                   |   |   | (262 | ) |   |   | (204 | ) |
|  Inventories                                                    |   |   | (7 | ) |   |   | 2,584 |   |
|  Prepaid      expenses                                          |   |   | (80 | ) |   |   | (33 | ) |
|  Accounts      payable                                          |   |   | 904 |   |   |   | (606 | ) |
|  Accrued      expenses, including deferred revenue and          |   |   |   |   |   |   |   |   |
|  other      long term tax liabilities                           |   |   | (224 | ) |   |   | (145 | ) |
|  Net      cash provided by (used in) operating activities       |   |   | (166 | ) |   |   | 2,642 |   |
|                                                                 |   |   |   |   |   |   |   |   |
|  Cash      Flows From Investing Activities                      |   |   |   |   |   |   |   |   |
|  Purchases      of property and equipment                       |   |   | (130 | ) |   |   | (220 | ) |
|  Proceeds      from sale of property and equipment              |   |   | - |   |   |   | 4 |   |
|  Net      cash used in investing activities                     |   |   | (130 | ) |   |   | (216 | ) |
|                                                                 |   |   |   |   |   |   |   |   |
|  Cash      flows From Financing Activities                      |   |   |   |   |   |   |   |   |
|  Net      borrowings (payments) on revolving line of credit     |   |   | 55 |   |   |   | (1,924 | ) |
|  Payments      on long-term borrowings, including capital       |   |   |   |   |   |   |   |   |
|  lease      obligations                                         |   |   | (397 | ) |   |   | (486 | ) |
|  Proceeds      from issuance of common stock                    |   |   | 20 |   |   |   | 40 |   |
|  Net      cash used in financing activities                     |   |   | (322 | ) |   |   | (2,370 | ) |
|                                                                 |   |   |   |   |   |   |   |   |
|  Net      increase (decrease) in cash                           |   |   | (618 | ) |   |   | 56 |   |
|                                                                 |   |   |   |   |   |   |   |   |
|  Cash                                                           |   |   |   |   |   |   |   |   |
|  Beginning      of period                                       |   |   | 1,152 |   |   |   | 51 |   |
|  Ending      of period                                          |   | $ | 534 |   |   | $ | 107 |   |
|                                                                 |   |   |   |   |   |   |   |   |
|  Supplemental      information                                  |   |   |   |   |   |   |   |   |
|  Cash      payments for:                                        |   |   |   |   |   |   |   |   |
|  Interest                                                       |   | $ | 98 |   |   | $ | 234 |   |
|  Acquisition      of property under capital leases              |   | $ | - |   |   | $ | 252 |   |
|                                                                 |   |   |   |   |   |   |   |   |
|  See      Notes to Condensed Financial Statements               |   |   |   |   |   |   |   |   |

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| WINLAND      ELECTRONICS, INC.             |   |
|--------------------------------------------|--------|
| SEGMENT      REPORTING                     |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| ($      in thousands)                      |   | EMS |   |   | Proprietary |   |   | Other |   |   | Total |   |
| Three      months ended September 30, 2008 |   |   |   |   |   |   |   |   |   |   |
| Net      sales                             |   | $ | 6,051 |   |   | $ | 952 |   |   | $ | - |   |   | $ | 7,003 |   |
| Operating      income (loss)               |   |   | 553 |   |   |   | 130 |   |   |   | (576 | ) |   |   | 107 |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Three      months ended September 30, 2007 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                             |   | $ | 9,084 |   |   | $ | 771 |   |   | $ | - |   |   | $ | 9,855 |   |
| Operating      income (loss)               |   |   | 1,045 |   |   |   | 107 |   |   |   | (549 | ) |   |   | 603 |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nine      months ended September 30, 2008  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                             |   | $ | 18,191 |   |   | $ | 2,710 |   |   | $ | - |   |   | $ | 20,901 |   |
| Operating      income (loss)               |   |   | 630 |   |   |   | 60 |   |   |   | (1,769 | ) |   |   | (1,079 | ) |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nine      months ended September 30, 2007  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                             |   | $ | 24,941 |   |   | $ | 2,313 |   |   | $ | - |   |   | $ | 27,254 |   |
| Operating      income (loss)               |   |   | 1,326 |   |   |   | 138 |   |   |   | (1,895 | ) |   |   | (431 | ) |

|                                                                                                                                                    |   | For      the Three Months Ended September 30, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
| Sales      percentage:                                                                                                                                  |   | 2008                                          |   |   | 2007 |   |
|    Customer      A                                                                                                                       |   |                                          | 34     | % |   |   | 25 | % |
|    Customer      B                                                                                                                       |   |                                          | 17     | % |   |   | 18 | % |
|    Customer      C                                                                                                                       |   |                                          | 8      | % |   |   | 17 | % |
|    Customer      D                                                                                                                       |   |                                          | 0      | % |   |   | 10 | % |
|                                                                                                                                                    |   |                                          |   |   |   |   |   |   |
|                                                                                                                                                    |   | For      the Nine Months Ended September 30,  |   |
| Sales      percentage:                                                                                                                                  |   | 2008                                          |   |   | 2007 |   |
|    Customer      A                                                                                                                       |   |                                          | 33     | % |   |   | 21 | % |
|    Customer      B                                                                                                                       |   |                                          | 17     | % |   |   | 20 | % |
|    Customer      C                                                                                                                       |   |                                          | 11     | % |   |   | 17 | % |
|    Customer      D                                                                                                                       |   |                                          | 1      | % |   |   | 10 | % |
|                                                                                                                                                    |   |                                          |   |   |   |   |   |   |
| The      Company had net receivables (as a percentage of total receivables) from      the above customers at September 30, 2008 and 2007 as    follows: |   |
|                                                                                                                                                    |   |                                          |   |   |   |   |   |   |
| Accounts      receivable percentage:                                                                                                                    |   | 2008                                          |   |   | 2007 |   |
|    Customer      A                                                                                                                       |   |                                          | 34     | % |   |   | 32 | % |
|    Customer      B                                                                                                                       |   |                                          | 16     | % |   |   | 11 | % |
|    Customer      C                                                                                                                       |   |                                          | 10     | % |   |   | 17 | % |
|    Customer      D                                                                                                                       |   |                                          | 0      | % |   |   | 14 | % |

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| ($      in thousands) |   | September      30, 2008 |   |   | December      31, 2007 |   |
|-----------------------|--------|-------------------------|--------|--------|------------------------|--------|
| Raw      materials    |   | $                       | 3,419  |   |                   | $      | 3,467 |   |
| Work      in progress |   |                    | 470    |   |                   |   | 293 |   |
| Finished      goods   |   |                    | 826    |   |                   |   | 948 |   |
| Total                 |   | $                       | 4,715  |   |                   | $      | 4,708 |   |

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|                                      |   | For      the Three Months Ended September 30, |   |
|-------------------------------------------|--------|-----------------------------------------------|--------|
| ($      in thousands)                     |   | 2008                                          |   |   | 2007 |   |
| Balance,      Beginning                   |   | $                                             | 175    |   |   | $ | 191 |   |
| Accruals      for products sold           |   |                                          | 23     |   |   |   | 160 |   |
| Expensing      of specific warranty items |   |                                          | (48    | ) |   |   | (111 | ) |
| Balance,      Ending                      |   | $                                             | 150    |   |   | $ | 240 |   |
|                                      |   |                                          |   |   |   |   |   |   |
|                                      |   |                                          |   |   |   |   |   |   |
|                                      |   | For      the Nine Months Ended September 30,  |   |
|                                      |   | 2008                                          |   |   | 2007 |   |
| Balance,      Beginning                   |   | $                                             | 160    |   |   | $ | 126 |   |
| Accruals      for products sold           |   |                                          | 263    |   |   |   | 570 |   |
| Expensing      of specific warranty items |   |                                          | (273   | ) |   |   | (456 | ) |
| Balance,      Ending                      |   | $                                             | 150    |   |   | $ | 240 |   |

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ITEM2:                      MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

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ITEM3.                      QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM4.                      CONTROLSAND PROCEDURES

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PART II – OTHER INFORMATION

ITEM1.                      LEGALPROCEEDINGS

ITEM1A.                      RISKFACTORS

ITEM2.                      UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM3.                      DEFAULTSUPON SENIOR SECURITIES

ITEM4.                      SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM5.                      OTHERINFORMATION

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SIGNATURES

|                               | Company Name |                                       |
|------------------------------------|--------------|--------------------------------------------|
|                               |         |                                       |   |
| Date:       November 12, 2008 | By:          | /s/       Thomas J. de Petra          |   |
|                               |         | Thomas      J. de Petra                    |   |
|                               |         | President      and Chief Executive Officer |   |
|                               |         |                                       |   |

|   |   |                                 |
|--------|--------|--------------------------------------|
|   |   |                                 |   |
|   |   | /s/       Glenn A. Kermes  |   |
|   |   | Glenn      A. Kermes                 |   |
|   |   | Chief      Financial Officer         |   |
|   |   |                                 |   |

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| For      the fiscal quarter ended September 30, 2008 | Commission      File No. 0-15637 |
|------------------------------------------------------|----------------------------------|

| Exhibit No. | Description                                                                                                                            |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                   |
| 10.1   | Amendment No.12 to Credit Agreement      between the Company and M&I Marshall & Ilsley Bank dated October      27, 2008.  |
| 31.1   | Certification of Chief Executive Officer      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                           |
| 31.2   | Certification of Chief Financial Officer      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                           |
| 32.1   | Certification of Chief Executive Officer      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                           |
| 32.2   | Certification of Chief Financial Officer      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                           |

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