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:  September 30, 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 October 31, 1997,  the
Registrant had 2,803,881 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)
<TABLE>
<CAPTION>
ASSETS                                                 September 30,  December 31,
                                                            1997         1996
                                                        ----------   ----------
CURRENT ASSETS:
<S>                                                     <C>          <C>       
Cash                                                    $  167,906   $   19,499
Accounts Receivable, Net                                 1,240,680    1,327,386
Inventories                                              3,320,231    2,969,677
Prepaid Items                                              135,867       63,633
                                                        ----------   ----------
             Total Current Assets                        4,864,684    4,380,195

Property and Equipment, Net                              3,165,875    3,128,588
Property Under Capital Lease, Net                        1,053,326      721,066
OTHER ASSETS:
             Intangibles                                     7,417        8,564
             Deferred Income Taxes                          52,535       52,535
                                                        ----------   ----------
                          TOTAL ASSETS                  $9,143,837   $8,290,948

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
             Notes Payable                              $1,822,227   $1,580,227
             Accounts Payable                              677,345      683,406
             Payroll Taxes Payable                          27,437       34,891
             Wages and Commissions Payable                  66,463       41,815
             Other Accruals                                133,912      120,382
             Obligations Under Capital Lease               229,019      163,636
             Deferred Revenue                               27,001       27,001
             Income Taxes Payable                           22,416          336
             Current Maturities                            169,530      161,267
                                                        ----------   ----------
                          Total Current Liabilities      3,175,350    2,812,961

LONG TERM LIABILITIES:
             Long Term Maturities                        2,332,376    2,459,644
             Obligations Under Capital Lease
             Less: Current Portion                         725,547      492,120
                                                        ----------   ----------
                          TOTAL LONG TERM LIABILITIES    3,057,923    2,951,764

OTHER LIABILITIES:
             Deferred Revenue
             Less: Current Portion                         195,756      216,007
                                                        ----------   ----------
                          TOTAL LIABILITIES              6,429,029    5,980,732

SHAREHOLDERS' EQUITY:
             Common Stock                                   28,039       27,511
             Additional Paid-In Capital                  2,068,920    2,047,794
             Retained Earnings                             617,849      234,911
                                                        ----------   ----------
                          Total Shareholders' Equity     2,714,808    2,310,216

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                $9,143,837   $8,290,948
</TABLE>


<PAGE>
                            WINLAND ELECTRONICS, INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                        QUARTER ENDED
                                                        SEPTEMBER 30,

                                                    1997           1996
                                               -----------    -----------
<S>                                            <C>            <C>
NET SALES:                                     $ 2,854,539    $ 2,183,619
       Less, Cost of Goods Sold                  2,242,295      1,787,402
                                               -----------    -----------
       Gross Profit on Sales                       612,244        396,217

OPERATING EXPENSES:
       General and Administrative                  207,481        188,970
       Marketing                                    59,798         48,407
       Research and Development                    113,852         88,073
                                               -----------    -----------
                    Total Operating Expenses       381,131        325,450

INCOME BEFORE OTHER INCOME
       AND EXPENSE                                 231,113         70,767
                                               -----------    -----------
MISCELLANEOUS INCOME                                19,675         14,336
MISCELLANEOUS EXPENSE, PROVISION
       FOR BAD DEBT                                (19,400)          --
INTEREST EXPENSE                                   (55,438)       (43,390)
                                               -----------    -----------
       TOTAL OTHER INCOME & EXPENSE                (55,163)       (29,054)
                                               -----------    -----------

NET INCOME BEFORE TAXES                            175,950         41,713
                                               -----------    -----------

PROVISION FOR INCOME TAXES                             584            500
                                               -----------    -----------

NET INCOME                                     $   175,366    $    41,213

NET INCOME PER COMMON SHARE                    $     0.063    $     0.016

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING AS OF SEPTEMBER 30, 1997 & 1996      2,803,881      2,599,911
</TABLE>



<PAGE>
                            WINLAND ELECTRONICS, INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                    NINE MONTHS ENDED
                                                      SEPTEMBER 30,

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

<S>                                            <C>            <C>
NET SALES:                                     $ 8,660,164    $ 5,499,326
       Less, Cost of Goods Sold                  6,806,799      4,400,044
                                               -----------    -----------
       Gross Profit on Sales                     1,853,365      1,099,282

OPERATING EXPENSES:
       General and Administrative                  759,630        579,699
       Marketing                                   184,720        143,132
       Research and Development                    322,067        222,665
                                               -----------    -----------
                    Total Operating Expenses     1,266,417        945,496

INCOME BEFORE OTHER INCOME
       AND EXPENSE                                 586,948        153,786
                                               -----------    -----------
MISCELLANEOUS INCOME                                44,513         63,147
MISCELLANEOUS EXPENSE, PROVISION
       FOR BAD DEBT                                (62,400)          --
INTEREST EXPENSE                                  (161,957)      (113,348)
                                               -----------    -----------
       TOTAL OTHER INCOME & EXPENSE               (179,844)       (50,201)
                                               -----------    -----------

NET INCOME BEFORE TAXES                            407,104        103,585
                                               -----------    -----------

PROVISION FOR INCOME TAXES                          24,168          1,500
                                               -----------    -----------

NET INCOME                                     $   382,936    $   102,085

NET INCOME PER COMMON SHARE                    $     0.137    $     0.039

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING AS OF SEPTEMBER 30, 1997 & 1996      2,793,522      2,590,689
</TABLE>

                                                   

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

                                                                         NINE MONTHS ENDED            NINE MONTHS ENDED
                                                                         SEPTEMBER 30, 1997           SEPTEMBER 30, 1997
                                                                            -----------                   -----------
CASH FLOW FROM OPERATING ACTIVITIES:
<S>                                                                         <C>                           <C>
       Cash Received from Customers                                         $ 8,684,470                   $ 5,062,708
       Interest Received                                                         22,411                        27,622
       Other Miscellaneous Operating Receipts                                     1,400                        15,428
       Cash Paid to Suppliers and Employees                                  (7,991,729)                   (5,370,986)
       Interest Paid                                                           (326,595)                     (239,292)
       Income Taxes Paid                                                         (1,752)                       (1,500)
                                                                            -----------                   -----------
           Net Cash Provided (Used) by Operating Activities                     388,205                      (506,020)
                                                                            -----------                   -----------
CASH FLOW FROM INVESTING ACTIVITIES:
       Purchases of Property and Equipment                                     (215,473)                     (243,791)
       Cash Proceeds From Sales of Equipment                                      3,165                          --   
                                                                            -----------                   -----------
           Net Cash Provided  (Used) by Investing Activities                   (212,308)                     (243,791)
                                                                            -----------                   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Net Advances on Credit Line                                              242,000                       919,775
       Proceeds from Debt                                                          --                          57,725
       Payments on Debt                                                        (119,005)                      (46,094)
       Payments on Capital Lease Obligations                                   (172,139)                      (95,299)
       Sale of Common Stock                                                      21,654                         1,376
                                                                            -----------                   -----------
           Net Cash Provided by Financing Activities                            (27,490)                      837,483
                                                                            -----------                   -----------
NET INCREASE IN CASH                                                            148,407                        87,672
CASH - BEGINNING OF YEAR                                                         19,499                         2,839
                                                                            -----------                   -----------
CASH - END OF PERIOD                                                        $   167,906                   $    90,511
                                                                            -----------                   -----------

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


Net Income (Loss)                                                           $   382,936                  $   102,085
Adjustments:
Disposition of Assets                                                              (407)                         155
Depreciation & Amortization                                                     315,266                      193,271
(Increase) Decrease in Accounts Receivable                                       86,706                     (436,617)
(Increase) Decrease in Inventory                                               (350,554)                    (343,818)
(Increase) Decrease in Prepaid Items                                            (72,234)                     (11,422)
(Decrease) Increase in Accounts Payable                                          (6,061)                     (35,192)
(Decrease) Increase in Wages Payable                                             24,648                       43,371
(Decrease) Increase in Accrued Payroll Taxes                                     (7,454)                       7,301
(Decrease) Increase in Other Accruals                                            13,530                       (4,903)
(Decrease) Increase in Deferred Revenue                                         (20,251)                     (20,251)
(Decrease) Increase in Income Taxes Payable                                      22,080                         --   
                                                                            -----------                   -----------
Net Cash Provided (Used) by Operating Activities                            $   388,205                   $ (506,020)
                                                                            -----------                   -----------
</TABLE>


<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 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  other  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
$66,330 at September 30, 1997 and $4,455 at December 31, 1996. The allowance for
doubtful  accounts  was  increased  by  $62,400  in  1997 to  reflect  increased
uncertainty regarding a customer that had filed for chapter eleven bankruptcy.

NOTE C - INVENTORY

Major Components of inventory at September 30, 1997 and December 31, 1996 are as
follows:

                                             September 30,   December 31,
                                                  1997           1996
                                              -----------    -----------
Raw Materials                                  $2,219,624    $1,695,764
Work In Process                                   461,699       554,090
Finished Goods                                    630,705       709,860
Manufacturing, Shipping, and Office Supplies        8,203         9,963
                                              -----------    -----------
                        Total                  $3,320,231    $2,969,677
                                              -----------    -----------

NOTE D - PROPERTY AND EQUIPMENT

Property and  Equipment not under  capital  leases  consists of the following at
September 30, 1997 and December 31, 1996:

                                             September 30,   December 31,
                                                  1997           1996
                                              -----------    -----------
Building                                      $ 2,376,511    $ 2,343,275
Land                                              192,640        192,640
Office Equipment                                  166,429        341,658
Computer & Telephone Equipment                    390,729           --
Research & Development                            109,369        143,941
Marketing and Display Equipment                    18,152         31,413
Factory Equipment                                 547,845        549,567
Land Improvements                                  77,369         77,369
Accumulated Deprecation                          (713,169)      (551,275)
                                              -----------    -----------
                        Net Book Value        $ 3,165,875    $ 3,128,588
                                              -----------    -----------

<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)

NOTE D - CONTINUED

Property  and  Equipment  under  capital  leases  consists of the  following  at
September 30, 1997 and at December 31, 1996:

<TABLE>
<CAPTION>

                                                                              September 30,   December 31,
                                                                                   1997           1996
                                                                               -----------    -----------
<S>                                                                            <C>            <C>        
Factory Equipment                                                              $ 1,247,109    $   863,472
Office Equipment                                                                    41,623         95,754
Computer & Telephone Equipment                                                     110,640           --
Research & Development                                                                --            4,401
Accumulated Amortization                                                          (346,046)      (242,561)
                                                                               -----------    -----------
            Total Leased Property and Equipment, Net of
                        Accumulated Amortization                               $ 1,053,326    $   721,066
                                                                               -----------    -----------
Capital Leases are summarized as follows:
Lease on factory equipment with lease period expiring
May of 2002, at an interest rate of 10.04%                                     $    60,989    $      --
Lease on factory equipment with lease period expiring
June of 2002, at an interest rate of 10.04%                                         76,053           --
Lease on factory equipment with lease period expiring
March of 2002, at an interest rate of 9.94%                                         58,493           --
Lease on factory equipment with lease period expiring
March of 2002, at an interest rate of 8.88%                                        196,474           --
Lease on computer and telephone equipment with lease
period expiring February of 2000, at an interest rate of 9.01%                      34,038           --
Lease on factory equipment with lease period expiring
August of 2001, at an interest rate of 9.49%                                       211,691        242,293
Lease on factory equipment with lease period expiring
July of 2001, at an interest rate of 9.96%                                         100,140        113,809
Lease on factory, office, and R&D equipment with lease
period expiring July of 1997, at an interest rate of 8.0%                             --            6,195
Lease on factory and office equipment with lease period
expiring January of 2000, at interest  of 1% over prime                            186,332        248,826
Lease on factory equipment with lease period expiring
October of 1998 at an interest rate of 9.23%                                        15,155         25,641
Lease on office equipment with lease period expiring
March of 2000 at an interest rate of 9%                                             15,201         18,992
                                                                               -----------    -----------
Total                                                                          $   954,566    $   655,756
Less Current Portion                                                              (229,019)      (163,636)
                                                                               -----------    -----------
Long Term Obligation Under Capital Leases                                      $   725,547    $   492,120
                                                                               -----------    -----------
</TABLE>

NOTE E - SHORT TERM BORROWING

Short term  borrowing  consists  of the  following  at  September  30,  1997 and
December 31, 1996 balance sheet:
<TABLE>
<CAPTION>

                                                                             September 30,    December 31,
Norwest Bank - Revolving Credit Line                                              1997           1996
                                                                               -----------    -----------
<S>                                                                            <C>            <C>       
Balance                                                                        $1,822,227     $1,580,227
Stated Interest Rate per Annum                                                        9.0%*          9.0%*
Maximum Amount Outstanding During the Quarter                                  $1,897,227     $1,995,227
Average Amount Outstanding During the Quarter                                  $1,872,227     $1,626,398
Unused Credit Available                                                        $  755,003     $1,204,081
</TABLE>

<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)

* The stated  interest  rate per annum was equal to 3/4 of a percent  over prime
rate for the majority of the third  quarter.  Effective  September 18, 1997, the
stated  interest  rate per annum was reduced to 1/2 of a percent  over the prime
rate.  The interest on the revolving loan was $55,438 for the three months ended
September  30, 1997 and $161,957  for the first nine months of 1997.  Additional
interest expense was reported related to the leased capital  equipment and other
term borrowing. The interest expense on leased equipment was $23,952 and $71,772
for the three and nine months  ended  September  30, 1997.  Interest  expense on
other long term  borrowing was $33,507 and $90,322 for the three and nine months
ended September 30, 1997.

NOTE F - STOCK OPTIONS AND WARRANTS

As of September 30, 1997,  options to purchase an aggregate of 305,000 shares of
the Company's common stock were granted and outstanding under the Company's 1989
Stock  Option  Plan(the  "1989  Plan").  As of September  30,  1997,  options to
purchase  154,900  shares  granted  under the 1989 Plan  were  exercisable.  The
exercise prices of all outstanding  options under the 1989 Plan range from $0.06
to  $3.64  per  share.  Options  to  purchase  6,000  shares  were  granted  and
outstanding  under the 1997 Stock Option Plan, all of which were  exercisable at
September 30, 1997. The exercise price of such options was $3.125.

As of September 30, 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.




<PAGE>

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results of Operations
Three and nine months ended September 30 1997 v.
Three and nine months ended September 30 1996

Net Sales:
The  Company  recorded  net  sales of  $2,854,539  for the  three  months  ended
September 30, 1997,  an increase of 30.7% from net sales of  $2,183,619  for the
same period in 1996.  Net sales of  $8,660,164  were recorded for the first nine
months of 1997,  compared to  $5,499,326  for the same  period in 1996,  a 57.5%
increase.  The increase in sales for the third  quarter and first nine months of
1997  compared to the same period in 1996 was  primarily  attributed to sales to
Select Comfort  Corporation  pursuant to a $9.7 million dollar  purchase  order,
which was  increased  from $6.9 million  dollars in October of 1997.  The Select
Comfort  Corporation  purchase  order for $9.7  million  was  approximately  59%
complete at September 30, 1997. In addition to the Select Comfort purchase order
the Company also has in place a $5.5 million dollar manufacturing agreement with
PeopleNet  Communications  Corporation of Chaska, MN. The Company plans to begin
production  in relation to this  agreement in late 1997. In late October of 1997
the Company  announced  that it had been awarded a $250,000  purchase order from
Keyless Door Lock Company,  for the  manufacture of a residential key less entry
system,  to be fulfilled in late 1997 and early 1998. In addition,  sales of the
Company's  security/industrial  products  were up  slightly  for both the  third
quarter and first nine months of 1997, compared to 1996.

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 the  greatest
potential for growth and is actively promoting this portion of the business.

Gross Profits:
Gross  profit  was  $612,244  or 21.4% of net sales for the three  months  ended
September  30,  1997,  compared  to  $396,217 or 18.1% of net sales for the same
period in 1996.  For the first nine months of 1997,  gross profit was $1,853,365
or 21.4% of net sales, compared to $1,099,282 or 20.0% of net sales for the same
period in 1996.  As a percentage  of net sales,  gross  profits  increased  only
slightly for the three and nine months ended September 30, 1997, compared to the
same periods in 1996.  The higher gross profits are primarily  attributed to the
sales mix during the quarter and first nine months of 1997 compared to 1996.

Operating Expenses:
General and  administrative  expense  was  $207,481 or 7.3% of net sales for the
three months ended September 30 1997,  compared to $188,970 or 8.7% of net sales
for the same period in 1996. General and administrative  expense was $759,630 or
8.8% for the first nine  months of 1997,  compared  to  $579,699 or 10.5% of net
sales for the same period in 1996.  As a  percentage  of net sales,  general and
administrative  expenses  declined  for the three  months and nine months  ended
September 30, 1997, compared to the same periods in 1996. The decline in general
and administrative  expense is primarily attributed to the costs associated with
supporting a growing  sales base  increasing at a slower rate than the sales for
the periods ended September 30, 1997.

Marketing  and customer  relations  expense was $59,798 or 2.1% of net sales for
the quarter ended  September 30, 1997,  compared to $48,407 or 2.2% for the same
period in 1996. The marketing and customer  relations expense for the first nine
months of 1997 was  $184,720 or 2.1% of net sales,  compared to $143,132 or 2.6%
of net sales for the same  period in 1996.  As a  percentage  of net sales,  the
marketing  and customer  relations  expense  declined for the third  quarter and
first nine  months of 1997,  compared  to the same  periods  in 1996.  While the
Company continues to actively market its security/industrial products, there has
been a shift to emphasize the Company's design and manufacturing capabilities of
custom  controls and  assemblies.  These custom controls and assemblies are sold
primarily for the Company's contract manufacture customers.

<PAGE>

Research and development expense was $113,852 or 4.0% of net sales for the three
months ended  September  30, 1997,  compared to $88,073 or 4.0% of net sales for
the same  period  in 1996.  For the  first  nine  months  of 1997  research  and
development expenses were $322,067 or 3.7% of net sales, compared to $222,665 or
4.0% of net sales for the same period in 1996.  While  research and  development
expenses,  as a percentage  of net sales,  declined or remained the same for the
three and nine months ended September 30, 1997, the actual expenses increased to
support the Company's emphasis on the expansion of its engineering capabilities.
The increases are  primarily  attributed to the addition of technical  staff and
equipment.

Interest  Expense:
Interest  expense on the  revolving  line of credit  was  $55,438 or 1.9% of net
sales for the three months ended September 30, 1997, compared to $43,390 or 2.0%
of net sales for the same  period in 1996.  Interest  expense for the first nine
months of 1997 on the revolving line of credit was $161,957 or 1.9% of net sales
compared  to  $113,348  or 2.1% of net  sales for the same  period in 1996.  The
increase in interest expense reflected additional short-term borrowing needed to
support  increased  sales,  as well as increases in interest  rates  compared to
1996.

Net Earnings:
The  Company  reported  net income of $175,366 or $0.063 per share for the three
months ended September 30, 1997, compared to net income of $41,213 or $0.016 per
share for the same period in 1996. For the nine months ended September 30, 1997,
the Company reported net income of $382,936 or $0.137 per share, compared to net
income of $102,085 or $0.039 per share for the same period in 1996.

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

Liquidity and Capital Resources

The current  ratio on September 30, 1997 was 1.53 to 1, compared to 1.56 to 1 on
December 31, 1996. Working capital on September 30, 1997 was $1,689,334 compared
to $1,567,234 on December 31, 1996. The increase in working capital is primarily
attributed  to  increases  in  inventory,  and prepaid  items that are offset by
additional short term borrowing needed to support the increased sales during the
first nine months of 1997. The Company has pending lease  agreements for capital
equipment  expenditures in excess of $700,000, for which delivery is expected in
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 1/2% over the prime interest rate. On September 18, 1997, pursuant
to the "Third  Amendment" to the revolving credit  agreement,  the interest rate
was reduced from 3/4 % over prime to 1/2 % over prime.  At  September  30, 1997,
there was an  outstanding  balance of $1,822,227  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.

<PAGE>


                            PART II-OTHER INFORMATION



ITEM 1: LEGAL PROCEEDINGS


The Company is one of 18 different  companies  who are  defendants in a products
liability  case. The  plaintiffs  are Debmar,  Inc. and St. Paul Fire and Marine
Insurance  Company.  It is  venued in the  Superior  Court of  Maricopa  County,
Phoenix,  Arizona. The case was filed in May of 1997, although it was not served
on the Company until a few months later.  The plaintiff Debmar is a company that
provides vaccines to various medical  entities,  and St. Paul Fire and Marine is
Debmar's  insurance carrier.  Debmar claims that a refrigeration  system that it
purchased  to  store  certain  vaccines  was  defective,  causing  a drop in the
refrigeration  system's  temperatures  in May of 1995 and an alleged  subsequent
substantial loss of vaccines.  Debmar's  insurance carrier paid for the economic
loss and is now seeking  indemnification  for the payment from  virtually all of
the companies that had any relationship in manufacturing component parts for the
refrigeration system,  distributing or maintaining the refrigeration system. The
amount of the claimed  loss is in excess of $1.1  million.  It appears  that the
Company is a party in this case  because it  produced a small  component  of the
larger refrigeration system.



ITEM 5: OTHER INFORMATION

Effective  September  8, 1997,  Steven N.  Bronson  resigned  as a member of the
Company's  Board of  Directors.  The  Company  does not plan to be  replace  Mr.
Bronson at this time.

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 September 30, 1997.


<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: Nov. 10, 1997               By: /s/ W. K. Hankins
                                   William K. Hankins, President,
                                   Chief Executive Officer and
                                   Chief Financial Officer
                                   (Principal Executive Officer
                                   and Principal Financial and
                                   Accounting Officer)

<PAGE>







                           WINLAND ELECTRONICS, INC.
                          EXHIBIT INDEX TO FORM 10-QSB
                              FOR THE QUARTER ENDED
                                SEPTEMBER 30,1997



Exhibit
Number            Item

11                Statement Re: Computation of per share earnings.

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