**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

| For                the Quarter Ended: | September                30, 2007 |
|---------------------------------------|-----------------------------------|

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

**WINLAND      ELECTRONICS, INC.**

| 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 þ |
|------------------------------------------|------------------------------------|---------------------------------------------|

----

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                                          |
| EXHIBIT                INDEX                        |

*Page          2          of 23*

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Table          of Contents

**PART      I – FINANCIAL INFORMATION**

**ITEM      1.                      FINANCIAL STATEMENTS**

| **WINLAND                  ELECTRONICS, INC.**            |   |
|------------------------------------------------------------------------------------------------------------------|--------|
| **CONDENSED                  BALANCE SHEETS**             |   |
| (In                  Thousands of Dollars)                |   |
|                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| **ASSETS**                                                                                                       |   | **September                  30, 2007** |   |   | December                  31, 2006    |   |
|                                                                                                             |   | **(Unaudited)**    |   |   |   |   |   |   |   |
| Current                  Assets                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|  Cash                                                                                                       |   |   |   |   | **$** | **107** |   |   |   |   |   | $ | 51 |   |
|  Accounts                  receivable, net                                                                  |   |   |   |   | ** ** | **4,663** |   |   |   |   |   |   | 5,165 |   |
|  Refundable                  Income taxes                                                                   |   |   |   |   | ** ** | **441** |   |   |   |   |   |   | 237 |   |
|  Inventories                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Raw                  materials                                                                             |   | ** ** | **3,630** |   |   |   |   |   |   |   | 4,881 |   |   |   |   |   |
|  Work                  in process                                                                           |   | ** ** | **293** |   |   |   |   |   |   |   | 327 |   |   |   |   |   |
|  Finished                  goods                                                                            |   | ** ** | **1,038** |   |   |   |   |   |   |   | 1,976 |   |   |   |   |   |
|  Allowance                  for obsolete inventory                                                          |   | ** ** | **(551** | **)** |   |   |   |   |   |   | (190 | ) |   |   |   |   |
|  Total                  inventories                                                                         |   |   |   |   |   | ** ** | **4,410** |   |   |   |   |   |   |   | 6,994 |   |
|  Prepaid                  expenses                                                                          |   |   |   |   |   | ** ** | **393** |   |   |   |   |   |   |   | 360 |   |
|  Deferred                  income taxes                                                                     |   |   |   |   |   | ** ** | **296** |   |   |   |   |   |   |   | 278 |   |
| ** Total                  current assets**                                                                  |   |   |   |   |   | ** ** | **10,310** |   |   |   |   |   |   |   | 13,085 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Other                  Assets                                                                              |   |   |   |   |   | ** ** | **3** |   |   |   |   |   |   |   | 3 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Property                  and Equipment, at cost:                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Land                  and land improvements                                                                |   | ** ** | **383** |   |   |   |   |   |   |   | 383 |   |   |   |   |   |
|  Building                                                                                                   |   | ** ** | **3,052** |   |   |   |   |   |   |   | 3,048 |   |   |   |   |   |
|  Machinery                  and equipment                                                                   |   | ** ** | **7,037** |   |   |   |   |   |   |   | 6,863 |   |   |   |   |   |
|  Data                  processing equipment                                                                 |   | ** ** | **1,258** |   |   |   |   |   |   |   | 1,003 |   |   |   |   |   |
|  Office                  furniture and equipment                                                            |   | ** ** | **483** |   |   |   |   |   |   |   | 457 |   |   |   |   |   |
| ** Total                  property and equipment**                                                          |   |   |   |   |   | ** ** | **12,213** |   |   |   |   |   |   |   | 11,754 |   |
|  Less                  accumulated depreciation                                                             |   |   |   |   |   | ** ** | **(6,632** | **)** |   |   |   |   |   |   | (5,975 | ) |
| ** Net                  property and equipment**                                                            |   |   |   |   |   | ** ** | **5,581** |   |   |   |   |   |   |   | 5,779 |   |
| ** Total                  assets**                                                                          |   |   |   |   |   | **$** | **15,894** |   |   |   |   |   |   | $ | 18,867 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  Notes to Condensed Financial Statements                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |

*Page            3            of 23*

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Table            of Contents

| **WINLAND                  ELECTRONICS, INC.**              |   |
|-----------------------------------------------------------------------|--------|
| **CONDENSED                  BALANCE SHEETS**               |   |
| (In                  Thousands of Dollars)                       |   |
|                                                                  |   |   |   |   |   |   |
| ** LIABILITIES                  AND STOCKHOLDERS' EQUITY**       |   | **September                  30, 2007** |   |   | December                  31, 2006 |   |
|                                                                  |   | **(Unaudited)** |   |   |   |   |
|  Current                  Liabilities                            |   |   |   |   |   |   |
|  Revolving                  line of credit agreement             |   | **$** | **-** |   |   | $ | 1,924 |   |
|  Current                  maturities of long-term debt           |   | ** ** | **558** |   |   |   | 627 |   |
|  Accounts                  payable                               |   | ** ** | **2,224** |   |   |   | 2,830 |   |
|  Accrued                  expenses:                              |   |   |   |   |   |   |   |   |
|  Compensation                                                    |   | ** ** | **490** |   |   |   | 673 |   |
|  Allowance                  for rework and warranty costs        |   | ** ** | **164** |   |   |   | 126 |   |
|  Other                                                           |   | ** ** | **155** |   |   |   | 197 |   |
| ** Total                  current liabilities**                  |   | ** ** | **3,591** |   |   |   | 6,377 |   |
|                                                                  |   |   |   |   |   |   |   |   |
|  Long                  Term Liabilities                          |   |   |   |   |   |   |   |   |
|  Long-term                  debt, less current maturities        |   | ** ** | **1,535** |   |   |   | 1,706 |   |
|  Other                  long term tax liabilities                |   | ** ** | **48** |   |   |   | - |   |
|  Deferred                  income taxes                          |   | ** ** | **255** |   |   |   | 255 |   |
|  Deferred                  revenue                               |   | ** ** | **140** |   |   |   | 146 |   |
| ** Total                  long-term liabilities**                |   | ** ** | **1,978** |   |   |   | 2,107 |   |
|                                                                  |   |   |   |   |   |   |   |   |
|  Stockholders'                  Equity                           |   |   |   |   |   |   |   |   |
|  Common                  stock                                   |   | ** ** | **36** |   |   |   | 36 |   |
|  Additional                  paid-in capital                     |   | ** ** | **4,640** |   |   |   | 4,429 |   |
|  Retained                  earnings                              |   | ** ** | **5,649** |   |   |   | 5,918 |   |
| ** Total                  stockholders' equity**                 |   | ** ** | **10,325** |   |   |   | 10,383 |   |
| ** Total                  liabilities and stockholders' equity** |   | **$** | **15,894** |   |   | $ | 18,867 |   |
|                                                                  |   |   |   |   |   |   |   |   |
|  See                  Notes to Condensed Financial Statements    |   |   |   |   |   |   |   |   |

*Page            4            of 23*

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| **WINLAND                  ELECTRONICS, INC.**               |   |
|-----------------------------------------------------------------------------|--------|
| **CONDENSED                  STATEMENTS OF INCOME**          |   |
| (In                  Thousands, Except Per Share Amounts)    |   |
| (Unaudited)                                                  |   |
|                                                                        |   |   |   |   |   |   |
|                                                                        |   | For                  the Three Months Ended September 30, |   |
|                                                                        |   | **2007** |   |   | 2006 |   |
|                                                                        |   |   |   |   |   |   |
| Net                  sales                                                  |   | **$** | **9,855** |   |   | $ | 9,803 |   |
| Cost                  of sales                                              |   | ** ** | **8,010** |   |   |   | 8,040 |   |
| **Gross                  profit**                                           |   | ** ** | **1,845** |   |   |   | 1,763 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Operating                  expenses:                                        |   |   |   |   |   |   |   |   |
| General                  and administrative                                 |   | ** ** | **549** |   |   |   | 592 |   |
| Sales                  and marketing                                        |   | ** ** | **388** |   |   |   | 393 |   |
| Research                  and development                                   |   | ** ** | **305** |   |   |   | 143 |   |
|                                                                        |   | ** ** | **1,242** |   |   |   | 1,128 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| **Operating                  income**                                       |   | ** ** | **603** |   |   |   | 635 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Other                  income (expenses):                                   |   |   |   |   |   |   |   |   |
| Interest                  expense                                           |   | ** ** | **(53** | **)** |   |   | (50 | ) |
| Other                  income, net                                          |   | ** ** | **25** |   |   |   | 2 |   |
|                                                                        |   | ** ** | **(28** | **)** |   |   | (48 | ) |
|                                                                        |   |   |   |   |   |   |   |   |
| **Income                  before income taxes**                             |   | ** ** | **575** |   |   |   | 587 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Income                  tax expense                                         |   | ** ** | **(88** | **)** |   |   | (202 | ) |
| **Net                  income**                                             |   | **$** | **487** |   |   | $ | 385 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Earnings                  per common share:                                 |   |   |   |   |   |   |   |   |
| Basic                                                                       |   | **$** | **0.13** |   |   | $ | 0.11 |   |
| Diluted                                                                     |   | **$** | **0.13** |   |   | $ | 0.11 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Weighted-average                  number of common shares outstanding:      |   |   |   |   |   |
| Basic                                                                       |   | ** ** | **3,622,811** |   |   |   | 3,578,415 |   |
| Diluted                                                                     |   | ** ** | **3,642,825** |   |   |   | 3,645,336 |   |
|                                                                        |   |   |   |   |   |   |   |   |
|  See                  Notes to Condensed Financial Statements          |   |   |   |   |   |   |   |   |

*Page            5            of 23*

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| **WINLAND                  ELECTRONICS, INC.**               |   |
|-----------------------------------------------------------------------------|--------|
| **CONDENSED                  STATEMENTS OF INCOME**          |   |
| (In                  Thousands, Except Per Share Amounts)    |   |
| (Unaudited)                                                  |   |
|                                                                        |   |   |   |   |   |   |
|                                                                        |   | For                  the Nine Months Ended September 30, |   |
|                                                                        |   | **2007** |   |   | 2006 |   |
|                                                                        |   |   |   |   |   |   |
| Net                  sales                                                  |   | **$** | **27,254** |   |   | $ | 28,724 |   |
| Cost                  of sales                                              |   | ** ** | **23,326** |   |   |   | 23,700 |   |
| **Gross                  profit**                                           |   | ** ** | **3,928** |   |   |   | 5,024 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Operating                  expenses:                                        |   |   |   |   |   |   |   |   |
| General                  and administrative                                 |   | ** ** | **1,924** |   |   |   | 1,803 |   |
| Sales                  and marketing                                        |   | ** ** | **1,237** |   |   |   | 1,197 |   |
| Research                  and development                                   |   | ** ** | **1,198** |   |   |   | 410 |   |
|                                                                        |   | ** ** | **4,359** |   |   |   | 3,410 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| **Operating                  income (loss)**                                |   | ** ** | **(431** | **)** |   |   | 1,614 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Other                  income (expenses):                                   |   |   |   |   |   |   |   |   |
| Interest                  expense                                           |   | ** ** | **(226** | **)** |   |   | (109 | ) |
| Other                  income, net                                          |   | ** ** | **40** |   |   |   | 8 |   |
|                                                                        |   | ** ** | **(186** | **)** |   |   | (101 | ) |
|                                                                        |   |   |   |   |   |   |   |   |
| **Income                  (loss) before income taxes**                      |   | ** ** | **(617** | **)** |   |   | 1,513 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Income                  tax benefit (expense)                               |   | ** ** | **347** |   |   |   | (526 | ) |
| **Net                  income (loss)**                                      |   | **$** | **(270** | **)** |   | $ | 987 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Earnings                  (loss) per common share:                          |   |   |   |   |   |   |   |   |
| Basic                                                                       |   | **$** | **(0.07** | **)** |   | $ | 0.28 |   |
| Diluted                                                                     |   | **$** | **(0.07** | **)** |   | $ | 0.27 |   |
|                                                                        |   |   |   |   |   |   |   |   |
| Weighted-average                  number of common shares outstanding:      |   |   |   |   |   |
| Basic                                                                       |   | ** ** | **3,608,086** |   |   |   | 3,558,793 |   |
| Diluted                                                                     |   | ** ** | **3,608,086** |   |   |   | 3,655,078 |   |
|                                                                        |   |   |   |   |   |   |   |   |
|  See                  Notes to Condensed Financial Statements          |   |   |   |   |   |   |   |   |

*Page            6            of 23*

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| **WINLAND                  ELECTRONICS, INC.**                  |   |
|--------------------------------------------------------------------------------|--------|
| **CONDENSED                  STATEMENTS OF CASH FLOWS**         |   |
| (In                  Thousands of Dollars)                      |   |
| (Unaudited)                                                     |   |
|                                                                           |   | For                  the Nine Months Ended September 30, |   |
|                                                                           |   | **2007** |   |   | 2006 |   |
| Cash                  Flows From Operating Activities                          |   |   |   |   |   |   |
|  Net                  income (loss)                                       |   | **$** | **(270** | **)** |   | $ | 987 |   |
|  Adjustments                  to reconcile net income (loss) to net cash  |   |   |   |   |   |   |   |   |
|  provided                  by (used in) operating activities:             |   |   |   |   |   |   |   |   |
|  Non-cash                  stock based compensation                       |   | ** ** | **148** |   |   |   | 108 |   |
|  Depreciation                  and amortization                           |   | ** ** | **662** |   |   |   | 566 |   |
|  Loss                  on disposal of equipment                           |   | ** ** | **-** |   |   |   | 6 |   |
|  Investor                  relations expense, non-cash warrant expense    |   | ** ** | **-** |   |   |   | 3 |   |
|  Consulting                  expense, non-cash warrant expense            |   | ** ** | **22** |   |   |   | 8 |   |
|  Deferred                  tax assets                                     |   | ** ** | **(18** | **)** |   |   | (23 | ) |
|  Changes                  in assets and liabilities:                      |   |   |   |   |   |   |   |   |
|  Accounts                  receivable                                     |   | ** ** | **502** |   |   |   | (1,205 | ) |
|  Refundable                  income taxes                                 |   | ** ** | **(204** | **)** |   |   | (6 | ) |
|  Inventories                                                              |   | ** ** | **2,584** |   |   |   | (3,675 | ) |
|  Prepaid                  expenses                                        |   | ** ** | **(33** | **)** |   |   | (73 | ) |
|  Accounts                  payable                                        |   | ** ** | **(606** | **)** |   |   | 1,536 |   |
|  Accrued                  expenses and deferred revenue                   |   | ** ** | **(145** | **)** |   |   | 293 |   |
| ** Net                  cash provided by (used in) operating activities** |   | ** ** | **2,642** |   |   |   | (1,475 | ) |
|                                                                           |   |   |   |   |   |   |   |   |
|  Cash                  Flows From Investing Activities                    |   |   |   |   |   |   |   |   |
|  Purchases                  of property and equipment                     |   | ** ** | **(220** | **)** |   |   | (535 | ) |
|  Proceeds                  from sale of property and equipment            |   | ** ** | **4** |   |   |   | - |   |
| ** Net                  cash used in investing activities**               |   | ** ** | **(216** | **)** |   |   | (535 | ) |
|                                                                           |   |   |   |   |   |   |   |   |
|  Cash                  flows From Financing Activities                    |   |   |   |   |   |   |   |   |
|  Net                  borrowings (payments) on revolving line of credit   |   | ** ** | **(1,924** | **)** |   |   | 1,526 |   |
|  Payments                  on long-term borrowings, including capital     |   |   |   |   |   |   |   |   |
|  lease                  obligations                                       |   | ** ** | **(486** | **)** |   |   | (419 | ) |
|  Proceeds                  from issuance of common stock                  |   | ** ** | **40** |   |   |   | 38 |   |
| ** Net                  cash provided by (used in) financing activities** |   | ** ** | **(2,370** | **)** |   |   | 1,145 |   |
|                                                                           |   |   |   |   |   |   |   |   |
| ** Net                  increase (decrease) in cash**                     |   | ** ** | **56** |   |   |   | (865 | ) |
|                                                                           |   |   |   |   |   |   |   |   |
|  Cash                                                                     |   |   |   |   |   |   |   |   |
|  Beginning                                                                |   | ** ** | **51** |   |   |   | 865 |   |
|  Ending                                                                   |   | **$** | **107** |   |   | $ | - |   |
|                                                                           |   |   |   |   |   |   |   |   |
|  Supplemental                  Disclosures of Cash Flow Information       |   |   |   |   |   |   |   |   |
|  Cash                  payments for:                                      |   |   |   |   |   |   |   |   |
|  Interest                                                                 |   | **$** | **234** |   |   | $ | 123 |   |
|  Income                  taxes                                            |   | ** ** | **-** |   |   |   | 555 |   |
|                                                                           |   |   |   |   |   |   |   |   |
|  Acquisition                  of property under capital leases            |   | **$** | **252** |   |   | $ | 957 |   |
|                                                                           |   |   |   |   |   |   |   |   |
|  See                  Notes to Condensed Financial Statements             |   |   |   |   |   |   |   |   |

*Page            7            of 23*

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**Note        1. Basis of Presentation**

**Note        2. Earnings per Common Share**

**Note        3. Financing Arrangement**

*Page          8          of 23*

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**Note      4. Major Customers and Enterprisewide Disclosures**

**Major      Customers: **

|                                                                                                                                                         |   | For                    the Three Months Ended September 30, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| Sales                    percentage:                                                                                                                         |   | 2007                                                        |   |   | 2006 |   |
|    Customer                    A                                                                                                              |   |                                                        | 25     | % |   |   | 23 | % |
|    Customer                    B                                                                                                              |   |                                                        | 18     | % |   |   | 37 | % |
|    Customer                    C                                                                                                              |   |                                                        | 17     | % |   |   | 11 | % |
|    Customer                    D                                                                                                              |   |                                                        | 10     | % |   |   | 3 | % |
|                                                                                                                                                         |   |                                                        |   |   |   |   |   |   |
|                                                                                                                                                         |   | For                    the Nine Months Ended September 30,  |   |
| Sales                    percentage:                                                                                                                         |   | 2007                                                        |   |   | 2006 |   |
|    Customer                    A                                                                                                              |   |                                                        | 21     | % |   |   | 20 | % |
|    Customer                    B                                                                                                              |   |                                                        | 20     | % |   |   | 41 | % |
|    Customer                    C                                                                                                              |   |                                                        | 17     | % |   |   | 8 | % |
|    Customer                    D                                                                                                              |   |                                                        | 10     | % |   |   | 2 | % |
|                                                                                                                                                         |   |                                                        |   |   |   |   |   |   |
| The                    Company had net receivables from the above customers at September                    30, 2007                    and 2006 as follows: |   |
|                                                                                                                                                         |   |                                                        |   |   |   |   |   |   |
| Accounts                    receivable percentage:                                                                                                           |   | 2007                                                        |   |   | 2006 |   |
|    Customer                    A                                                                                                              |   |                                                        | 32     | % |   |   | 14 | % |
|    Customer                    B                                                                                                              |   |                                                        | 11     | % |   |   | 25 | % |
|    Customer                    C                                                                                                              |   |                                                        | 17     | % |   |   | 21 | % |
|    Customer                    D                                                                                                              |   |                                                        | 14     | % |   |   | 7 | % |

**Enterprisewide        Disclosures: **

|                                                                     |   | For                  the Three Months Ended September 30, |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------------|------------|
|                                                                     |   | 2007                                                      |       |   | 2006 |   |
| Proprietary                  microprocessors and mechanically controlled |   |                                                      |       |   |   |   |
| sensors                  and alarms                                      |   | $                                                         | 741,000    |   |   | $ | 859,000 |   |
| Electronic                  controls and assemblies for OEM customers    |   |                                                      | 8,150,000  |   |   |   | 8,679,000 |   |
| Raw                  material and sub-assemblies for OEM customers       |   |                                                      | 849,000    |   |   |   | 217,000 |   |
| Engineering                  Design Services                             |   |                                                      | 86,000     |   |   |   | 27,000 |   |
| Freight                  Out                                             |   |                                                      | 29,000     |   |   |   | 21,000 |   |
|                                                                     |   | $                                                         | 9,855,000  |   |   | $ | 9,803,000 |   |
|                                                                     |   |                                                      |       |   |   |   |   |   |
|                                                                     |   |                                                      |       |   |   |   |   |   |
|                                                                     |   | For                  the Nine Months Ended September 30,  |       |
|                                                                     |   | 2007                                                      |       |   | 2006 |   |
| Proprietary                  microprocessors and mechanically controlled |   |                                                      |       |   |   |   |   |   |
| sensors                  and alarms                                      |   | $                                                         | 2,247,000  |   |   | $ | 2,477,000 |   |
| Electronic                  controls and assemblies for OEM customers    |   |                                                      | 22,696,000 |   |   |   | 25,676,000 |   |
| Raw                  material and sub-assemblies for OEM customers       |   |                                                      | 1,846,000  |   |   |   | 330,000 |   |
| Engineering                  Design Services                             |   |                                                      | 396,000    |   |   |   | 180,000 |   |
| Freight                  Out                                             |   |                                                      | 69,000     |   |   |   | 61,000 |   |
|                                                                     |   | $                                                         | 27,254,000 |   |   | $ | 28,724,000 |   |

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**Note      5. Allowance for Doubtful Accounts**

**Note      6. Allowance for Obsolete Inventory**

**Note      7. Allowance for Rework and Warranty Costs**

|                                                           |   | For                the Three Months Ended September 30, |     |
|----------------------------------------------------------------|--------|---------------------------------------------------------|----------|
|                                                           |   | 2007                                                    |     |   | 2006 |   |
| Balance,                Beginning                              |   | $                                                       | 240,000  |   |   | $ | 496,000 |   |
| Accruals                for products sold                      |   |                                                    | 67,000   |   |   |   | 20,000 |   |
| Expensing                of specific warranty items            |   |                                                    | (98,000  | ) |   |   | - |   |
| Charges                in accruals for pre-existing warranties |   |                                                    | (45,000  | ) |   |   | (214,000 | ) |
| Balance,                Ending                                 |   | $                                                       | 164,000  |   |   | $ | 302,000 |   |
|                                                           |   |                                                    |     |   |   |   |   |   |
|                                                           |   |                                                    |     |   |   |   |   |   |
|                                                           |   | For                the Nine Months Ended September 30,  |     |
|                                                           |   | 2007                                                    |     |   | 2006 |   |
| Balance,                Beginning                              |   | $                                                       | 126,000  |   |   | $ | 117,000 |   |
| Accruals                for products sold                      |   |                                                    | 657,000  |   |   |   | 477,000 |   |
| Expensing                of specific warranty items            |   |                                                    | (554,000 | ) |   |   | - |   |
| Charges                in accruals for pre-existing warranties |   |                                                    | (65,000  | ) |   |   | (292,000 | ) |
| Balance,                Ending                                 |   | $                                                       | 164,000  |   |   | $ | 302,000 |   |

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**Note      8. Warrants and Stock-Based Compensation Plans**

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**Note        8. Warrants and Stock-Based Compensation Plans (Continued)**

|                                       |   | For                    the Nine Months Ended September 30, |   |
|--------------------------------------------|--------|------------------------------------------------------------|--------|
|                                       |   | 2007                                                       |   |   | 2006 |   |
| Expected                    life, in years |   |                                                       | 5.09   |   |   |   | 5.90 |   |
| Expected                    volatility     |   |                                                       | 69.53  | % |   |   | 81.74 | % |
| Risk-free                    interest rate |   |                                                       | 4.63   | % |   |   | 4.74 | % |
| Dividend                    yield          |   |                                                       | 0.00   | % |   |   | 0.00 | % |

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**Note        8. Warrants and Stock-Based Compensation Plans (Continued)**

|                                                         |   |                         |    |   |                              |   |   | Weighted-Average                    |   |
|--------------------------------------------------------------|--------|------------------------------|---------|--------|-----------------------------------|--------|--------|-------------------------------------|--------|
|                                                         |   |                         |    |   |                              |   |   | Remaining                           |   |
|                                                         |   | Number                    of |    |   | Weighted-Average                  |   |   | Contractual                    Life |   |
|                                                         |   | Shares                       |    |   | Exercise                    Price |   |   | (Years)                             |   |
| Outstanding                    options at January 1, 2007    |   |                         | 286,040 |   |                              | $      | 2.95   |                                |   |   |   |
| Granted                                                      |   |                         | 93,000  |   |                              |   | 3.27   |                                |   |   |   |
| Exercised                                                    |   |                         | (38,840 | )      |                              |   | 1.29   |                                |   |   |   |
| Forfeited                                                    |   |                         | (28,100 | )      |                              |   | 2.97   |                                |   |   |   |
| Outstanding                    options at September 30, 2007 |   |                         | 312,100 |   |                              | $      | 3.25   |                                |   |   | 5.0 |   |
|                                                         |   |                         |    |   |                              |   |   |                                |   |   |   |   |
| Exercisable                    at September 30, 2007         |   |                         | 154,140 |   |                              | $      | 3.25   |                                |   |   | 4.3 |   |

|                                        |                            |   | Options                    Outstanding |   |    |                                                                   |   |   | Options                    Exercisable             |   |
|---------------------------------------------|---------------------------------|--------|----------------------------------------|--------|---------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------|--------|
| Range                    of Exercise Prices |                            |   | Number                    of Shares    |   |    | Weighted-Average                    Remaining Contractual Life (Years) |   |   | Weighted-Average                    Exercise Price |   |   | Number                    of Shares |   |   | Weighted-Average                    Exercise Price |   |
| $                                           | 0.90                    - $1.34 |   |                                   |   | 8,800   |                                                                   |   |   | 1.2                                                |   |   |   | 1.27 |   |   |   | 6,600 |   |   |   | 1.27 |   |
| $                                           | 2.24                    - $2.69 |   |                                   |   | 32,800  |                                                                   |   |   | 2.6                                                |   |   |   | 2.40 |   |   |   | 18,840 |   |   |   | 2.46 |   |
| $                                           | 2.70                    - $3.14 |   |                                   |   | 63,500  |                                                                   |   |   | 1.6                                                |   |   |   | 2.90 |   |   |   | 54,300 |   |   |   | 2.89 |   |
| $                                           | 3.15                    - $3.58 |   |                                   |   | 139,000 |                                                                   |   |   | 6.9                                                |   |   |   | 3.35 |   |   |   | 25,600 |   |   |   | 3.28 |   |
| $                                           | 3.58                    - $4.03 |   |                                   |   | 24,000  |                                                                   |   |   | 4.9                                                |   |   |   | 3.62 |   |   |   | 4,800 |   |   |   | 3.62 |   |
| $                                           | 4.04                    - $4.48 |   |                                   |   | 44,000  |                                                                   |   |   | 6.7                                                |   |   |   | 4.26 |   |   |   | 44,000 |   |   |   | 4.26 |   |
|                                        |                            |   |                                   |   | 312,100 |                                                                   |   |   | 5.0                                                |   |   | $ | 3.25 |   |   |   | 154,140 |   |   | $ | 3.25 |   |

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**Note        9.                      Income        Taxes**

**Note      10. Emerging Accounting Standards**

*Page          14 of 23*

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**ITEM      2:                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND      RESULTS      OF OPERATIONS**

**Overview**

**Executive        Summary**

***Net        sales***

***Gross        profit***

***Total        operating expenses***

***Net        income***

**RESULTS        OF OPERATIONS**

**  Net sales for the three months ended September 30, 2007        were $9,855,000, up $52,000 or 0.5% compared to the same period in        2006.**

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**Net        sales for the nine months ended September 30, 2007 were $27,254,000, down        $1,463,000 or 5.1% compared to the first nine months of 2006.  Net        sales of electronic controls and final assemblies for OEM customers were        $22,696,000, down $2,980,000 or 11.6% compared to 2006.**

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**Gross profit was $1,845,000 for the three        months ended September 30, 2007, an increase of $82,000 or 4.7% compared        to the        same period a year ago.**

**Gross        profit was $3,928,000 for the nine months ended September 30, 2007, a decrease        of $1,097,000 or 21.8%, compared to the nine months ended September 30,        2006.**

***Total        operating expenses***

*Page            17 of 23*

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**LIQUIDITY        AND CAPITAL RESOURCES**

|                                                 |   | 2007   |    |   | 2008   |   |    | 2009   |   |   | 2010    |   |   | 2011                  and thereafter |    |   | Total  |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------------------------------------|---------|--------|--------|--------|
| Term                  Loans (including interest)     |   | $      | 133,000 |   |   | $      | 353,000 |   |   | $      | 189,000 |   |   | $                                    | 136,000 |   |   | $      | 516,000 |   |   | $ | 1,327,000 |   |
| Capital                  Leases (including interest) |   |   | 76,000  |   |   |   | 293,000 |   |   |   | 293,000 |   |   |                                 | 293,000 |   |   |   | 234,000 |   |   |   | 1,189,000 |   |
| Total                                                |   | $      | 209,000 |   |   | $      | 646,000 |   |   | $      | 482,000 |   |   | $                                    | 429,000 |   |   | $      | 750,000 |   |   | $ | 2,516,000 |   |
|                                                 |   |   |    |   |   |   |    |   |   |   |    |   |   |                                 |    |   |   |   |   |   |   |   |   |   |

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**FORWARD-LOOKING      STATEMENTS**

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**ITEM      3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT      MARKET      RISK**

**ITEM      4.                      CONTROLS AND PROCEDURES**

**Evaluation      of Disclosure Controls Procedures.**

**Changes      in Internal Control.**

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**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**

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**SIGNATURES**

|                                        | **Winland              Electronics, Inc.** |                                                                   |
|---------------------------------------------|--------------------------------------------|------------------------------------------------------------------------|
|                                        |                                       |                                                                   |   |
| Date:                 October 31, 2007 | By:                                        | /s/ Lorin              E. Krueger                                 |   |
|                                        |                                       | Lorin              E. Krueger, President & Chief Executive Officer |   |
|                                        |                                       | (Principal              Executive Officer)                             |   |
|                                        |                                       |                                                                   |   |

|   |   |                                                                              |
|--------|--------|-----------------------------------------------------------------------------------|
|   |   |                                                                              |   |
|   | By:    | /s/               Glenn A. Kermes                                            |   |
|   |   | Glenn              A. Kermes, Chief Financial Officer                             |   |
|   |   | (Principal              Financial Officer and Principal Accounting Officer)  |   |
|   |   |                                                                              |   |

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**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C.  20549**

**EXHIBIT      INDEX TO FORM 10-Q**

| For                the fiscal quarter ended September 30, 2007 | Commission                File No. 0-15637 |
|----------------------------------------------------------------|--------------------------------------------|

**WINLAND      ELECTRONICS, INC.**

**__________________________**

| Exhibit                No. | Description                                                                                                                                                                                                                                                  |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                         |
|  10.1            |  Separation              agreement between the Company and Lorin E. Krueger dated October 29,              2007              (Incorporated by reference to Exhibit 10.1 to Current Report on Form              8-K              dated October 30, 2007) |
| 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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