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, 1996
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 November 4, 1996,  the
Registrant had 2,659,911 shares of Common Stock, $.01 par value, outstanding.

         Transitional Small Business Disclosure Format (check one):

         Yes                        No   x










                                        1

<PAGE>




                          PART I-FINANCIAL INFORMATION

ITEM 1: Financial Statements
<TABLE>
<CAPTION>

                            WINLAND ELECTRONICS, INC.
                                  BALANCE SHEET
                                   (Unaudited)

ASSETS                                               SEPTEMBER 30   DECEMBER 31
                                                          1996          1995
                                                      ------------  -----------

<S>                                                   <C>           <C>
CURRENT ASSETS:

Cash                                                  $    90,511   $     2,839
Accounts Receivable, Net                                1,431,848       995,231
Inventories                                             2,538,860     2,195,042
Prepaid Items                                              52,346        40,924
                                                      -----------   -----------
         Total Current Assets                           4,113,565     3,234,036

Property and Equipment, Net                             2,991,954     2,884,759
Property Under Capital Lease, Net                         757,786       426,857
OTHER  ASSETS:
         Intangibles                                        8,947        10,093
                                                      -----------   -----------
                  TOTAL ASSETS                        $ 7,872,252   $ 6,555,745

LIABILITIES AND SHAREHOLDERS'  EQUITY

CURRENT LIABILITIES:
         Notes Payable                                  1,995,227     1,075,452
         Accounts Payable                                 595,268       630,460
         Payroll Taxes Payable                             19,071        11,770
         Wages and Commission Payable                      68,993        25,622
         Other Accruals                                    68,223        73,126
         Obligations Under Capital Lease                  171,246       108,081
         Deferred Revenue                                  27,001        27,001
         Current Maturities                                65,468        60,662
                                                      -----------   -----------
                  Total Current Liabilities             3,010,497     2,012,174

LONG TERM LIABILITIES:
         Long Term Maturities                           2,093,323     2,086,499
         Obligations Under Capital Lease
         Less: Current Portion                            528,521       300,373
                                                      -----------   -----------
                  TOTAL LONG TERM LIABILITIES           2,621,844     2,386,872

OTHER LIABILITIES:
         Deferred Revenue
         Less:Current Portion                             222,757       243,008
                                                      -----------   -----------
                  TOTAL LIABILITIES                     5,855,098     4,642,054

SHAREHOLDERS' EQUITY:
         Common Stock                                      25,999        25,833
         Additional Paid-In Capital                     1,918,304     1,917,094
         Retained Earnings                                 72,851       (29,236)
                                                      -----------   -----------
                  Total Shareholders' Equity            2,017,154     1,913,691

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 7,872,252   $ 6,555,745
                                                      ===========   ===========

</TABLE>

<PAGE>


                            WINLAND ELECTRONICS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED
                                                      SEPTEMBER 30

                                                   1996            1995
                                                -----------    -----------

<S>                                             <C>           <C>
NET SALES:                                      $ 2,183,619    $ 1,284,021
         Less, Cost of Goods Sold                (1,787,402)    (1,131,253)
                                                -----------    -----------
         Gross Profit on Sales                      396,217        152,768

OPERATING EXPENSES:
         General and Administrative                 188,970        159,122
         Marketing                                   48,407         46,822
         Research and Development                    88,073         49,594
                                                -----------    -----------
              Total Operating Expenses              325,450        255,538

INCOME BEFORE OTHER INCOME
         AND EXPENSE                                 70,767       (102,770)
                                                -----------    -----------

MISCELLANEOUS INCOME                                 14,336          7,714
INTEREST EXPENSE                                    (43,390)       (15,334)
                                                -----------    -----------
         TOTAL OTHER INCOME AND EXPENSE             (29,054)        (7,620)
                                                -----------    -----------

NET INCOME BEFORE TAXES                              41,713       (110,390)
                                                -----------    -----------

PROVISION FOR INCOME TAXES                             (500)          (733)
                                                -----------    -----------

NET INCOME                                      $    41,213    $  (111,123)
                                                ===========    ===========
NET INCOME PER COMMON SHARE                     $     0.016    $    (0.043)
                                                ===========    ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AS OF SEPTEMBER 30, 1996 AND 1995                 2,599,991      2,583,311

</TABLE>
<PAGE>



                            WINLAND ELECTRONICS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>



                                                     NINE MONTHS ENDED
                                                         SEPTEMBER 30

                                                   1996           1995
                                                -----------    -----------

<S>                                             <C>            <C>
NET SALES:                                      $ 5,499,326    $ 4,317,637
         Less, Cost of Goods Sold                (4,400,044)    (3,559,375)
                                                -----------    -----------
         Gross Profit on Sales                    1,099,282        758,262

OPERATING EXPENSES:
         General and Administrative                 579,699        537,154
         Marketing                                  143,132        154,541
         Research and Development                   222,665        143,855
                                                -----------    -----------
              Total Operating Expenses              945,496        835,550

INCOME BEFORE OTHER INCOME
         AND EXPENSE                                153,786        (77,288)
                                                -----------    -----------

MISCELLANEOUS INCOME                                 63,147          7,450
INTEREST EXPENSE                                   (113,348)       (61,222)
                                                -----------    -----------
         TOTAL OTHER INCOME AND EXPENSE             (50,201)       (53,772)
                                                               -----------

NET INCOME BEFORE TAXES                             103,585       (131,060)
                                                -----------    -----------

PROVISION FOR INCOME TAXES                           (1,500)        (2,199)
                                                -----------    -----------

NET INCOME                                      $   102,085    $  (133,259)
                                                ===========    ===========
NET INCOME PER COMMON SHARE                     $     0.039    $    (0.054)
                                                ===========    ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AS OF SEPTEMBER 30, 1996 AND 1995                 2,590,689      2,454,644


</TABLE>

<PAGE>


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

                                                              NINE MONTHS ENDED   NINE MONTHS ENDED
                                                              SEPTEMBER 30, 1996  SEPTEMBER 30, 1995

<S>                                                                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Cash Received from Customers                                     $ 5,062,708    $ 4,204,437
  Interest Received                                                     27,622            -0-
  Other miscellaneous operating receipts                                15,428          9,083
  Cash Paid to Suppliers and Employees                              (5,370,986)    (4,210,406)
  Interest Paid                                                       (239,292)      (177,173)
  Income Tax Paid                                                       (1,500)        (5,661)
                                                                   -----------    -----------
    Net Cash (Used) by Operating Activities                           (506,020)      (179,720)
                                                                   -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of Property and Equipment                                 (243,791)    (2,488,445)
                                                                   -----------    -----------
  Cash Proceeds From Sales of Equipment                                    -0-            250
   Net Cash (Used) by Investing Activities                            (243,791)    (2,488,195)
                                                                   -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net Advances on Credit Line                                          919,775       (273,000)
  Proceeds from Debt                                                    57,725      2,199,620
  Payments on Debt                                                     (46,094)       (37,862)
  Payments on Capital Lease Obligations                                (95,299)       (61,397)
  Sale of Common Stock                                                   1,376        887,253
                                                                   -----------    -----------
    Net Cash Provided by Financing Activities                          837,483      2,714,614
                                                                   -----------    -----------
NET INCREASE IN CASH                                                    87,672         46,699
CASH - BEGINNING OF YEAR                                                 2,839         17,797
CASH - END OF THE FIRST NINE MONTHS OF 1996                        $    90,511    $    64,496
                                                                   -----------    -----------



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


Net Income (Loss)                                                  $   102,085    $  (133,259)
Adjustments:
Disposition of Assets                                                      155          1,633
Depreciation & Amortization                                            193,271        138,045
(Increase) in Accounts Receivable                                     (436,617       (113,200)
(Increase) in Inventory                                               (343,818)        43,919
(Increase) in Prepaid items                                            (11,422)       (13,841)
(Decrease) in Accounts Payable                                         (35,192)       (58,429)
Increase in Wages Payable                                               43,371         29,306
Increase in Accrued Payroll Taxes                                        7,301          8,221
(Decrease) in Other Accruals                                            (4,903)       (78,653)
(Decrease) in Deferred Revenue                                         (20,251)           -0-
(Decrease) in Income Taxes Payable                                         -0-         (3,462)
                                                                   -----------    -----------
Net Cash (Used) by Operating Activities                            $  (506,020)   $  (179,720)
                                                                   -----------    -----------

</TABLE>
<PAGE>



                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
                                    UNAUDITED

NOTE A - BASIS OF PRESENTATION

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

NOTE B - ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company  maintains an allowance for doubtful  accounts based on the aging of
accounts  receivable.  The balance of the  allowance  for  doubtful  accounts is
$4,770 at September 30, 1996 and $5,000 at December 31, 1995.

NOTE C - INVENTORY

Major components of inventory at September 30, 1996 and December 31, 1995 are as
follows:

                                                   September 30  December 31,
                                                       1996         1995
Raw Material                                        $1,420,111   $1,458,611
Work in Process                                        606,210      405,102
Finished Goods                                         503,880      322,231
Manufacturing, Shipping, and Office Supplies             8,659        9,098
                                                    ----------   ----------
         Total                                      $2,538,860   $2,195,042
                                                    ==========   ==========

NOTE D - PROPERTY AND EQUIPMENT

Property and  Equipment not under  capital  leases  consists of the following at
September 30, 1996 and December 31, 1995:

                                         September 30,   December 31,
                                             1996           1995
Building..............................  $ 2,324,514    $ 2,268,510
Land..................................      192,640        192,640
Office Equipment......................      296,458        241,431
Research & Development Equipment......      131,860         64,829
Marketing and Display Equipment.......       23,394         14,999
Factory Equipment.....................      448,236        410,570
Land Improvements.....................       77,369         77,369
Accumulated Depreciation..............     (502,517)      (385,589)
                                           ---------      ---------
Net Book Value........................  $ 2,991,954    $ 2,884,759
                                           =========      =========

<PAGE>

                                                              
                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                SEPTEMBER 30,1996
                                    UNAUDITED

NOTE D - CONTINUED

Property  and  Equipment  under  capital  leases  consists of the  following  at
September 30, 1996 and at December 31, 1995:

                                           September 30,   December 31,
                                                1996            1995
Factory Equipment.....................      $  860,682     $  447,311
Office Equipment......................          95,754         95,754
Research and Development Equipment....           4,401          4,401
Accumulated Amortization..............        (203,051)      (120,604)
                                             ----------     ----------
Total Leased Property and Equipment,
  Net of Accumulated Amortization.....      $  757,786        426,857

Capital Leases are summarized as follows:
Lease on factory equipment with lease
period expiring August, 2001, at interest
of 9.9%................................     $  252,020      $    -0-
Lease on factory equipment with lease
period expiring May, 2001, at interest
of 9.96%...............................     $  118,145      $    -0-
Lease on factory, office, and R&D equipment
with lease period expiring July, 1997, at
interest of 8%.........................         11,797         21,185
Lease on factory and office equipment with
lease period expiring January, 2000, at
interest of 1% over prime..............        268,618        325,050
Lease on factory equipment with lease
period expiring October, 1998 at interest
of 9.23%...............................         28,979         38,544
Lease on office equipment with lease
period expiring March, 2000 at interest
of 9%..................................         20,207         23,675
Total..................................     $  699,766     $  408,454
Less Current Portion...................       (171,245)      (108,081)
                                             ---------      ---------
Long term Obligation under Capital Leases   $  528,521     $  300,373
                                             =========      =========

NOTE E - SHORT TERM BORROWING

Short Term  Borrowing  consists  of the  following  at  September  30,  1996 and
December 31, 1995 balance sheet:

                                          September 30,    December 31,
Norwest Bank-Revolving Credit Line             1996            1995
                                             --------       -------
September 30, 1996 Balance............     $ 1,995,227      $1,075,452
Stated Interest Rate Per Annum........          9.0% *         9.25%
Maximum Amount Outstanding During the
         Quarter.........................  $ 1,995,227      $1,373,452
Average Amount Outstanding During the
         Quarter.........................  $ 1,928,561      $  853,529
Unused Credit Available at September
      30, 1996........................     $     4,773      $  126,548
Weighted Average Interest Rate........         9.0%           9.6%

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


<PAGE>

                           WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                               September 30, 1996
                                   UNAUDITED


NOTE E - CONTINUED

The  interest  expense on the  revolving  loan was $43,390 and  $113,348 for the
three and nine months ended September 30, 1996, respectively.  Addition interest
expense was reported related to the leased capital equipment and other long term
borrowing.  The interest expense on the leased capital equipment was $12,461 and
$31,100 for the three and nine months ended  September  30, 1996,  respectively.
The interest  expense on other long term  borrowing was $34,482 and $102,203 for
the three and nine months ended September 30, 1996, respectively.

NOTE F - STOCK OPTIONS AND WARRANTS

As of September 30, 1996,  options to purchase an aggregate of 374,100 shares of
the Company's Common Stock were granted and outstanding under the Company's 1989
Stock Option Plan, and options to purchase 65,000 shares of the Company's Common
Stock granted  outside of any plan were  outstanding.  As of September 30, 1996,
options to purchase 248,100 shares granted under the 1989 Stock Option Plan were
exercisable,  and options to purchase  65,000 shares granted outside of any plan
were  exercisable.  The exercise  prices of all  outstanding  options range from
$0.06 to $3.64 per share.

As of September 30, 1996,  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 1996 v.
Three and nine months ended September 30 1995

Net Sales:
Net sales  increased  70.1%  from  $1,284,021  for the third  quarter of 1995 to
$2,183,619  for the third  quarter of 1996.  The Company  recorded  net sales of
$5,499,326 for the first nine months of 1996, a 11.6%  increase over  $4,317,637
in net  sales  for the same  period in 1995.  The  increased  sales for both the
quarter and the first nine months of 1996  compared  to 1995 are  attributed  to
increases in contract  design and  manufacturing  sales, as well as increases in
sales  of  the  Company's  security/industrial  products.  Contract  design  and
manufacturing  sales increased at a faster rate, as a percentage of total sales,
than the  security/industrial  product sales did for the quarter and nine months
ended September 30, 1996.

The Company's  management  believes that, for the foreseeable  future, net sales
from  contract  design and  manufacturing  services  will  continue to grow at a
faster rate than security/industrial products. In July 1996 the Company obtained
a $5.6  million  purchase  order from Select  Comfort  Corporation.  The Company
expects  to begin  shipping  product  with  respect  to such order in the fourth
quarter of 1996. The Company continues to direct  considerable  attention toward
expanding customer relationships and securing new, long-term contract design and
manufacturing customer relationships.

Gross Profits:
Gross  profit  was  $396,217  or 18.1% of net sales for the three  months  ended
September  30,  1996,  compared  to  $152,768 or 11.9% of net sales for the same
period in 1995.  Gross profit was $1,099,282 or 20.0% of net sales for the first
nine  months of 1996,  compared  to  $758,262 or 17.6% of net sales for the same
period in 1995.  The increased  gross profit for both the quarter and first nine
months of 1996 is primarily  attributed to net sales increasing at a faster rate
than associated  fixed costs. To a lesser degree,  the sales mix for the periods
also had a favorable effect on the gross profits.

Operating Expenses:
General and  administrative  expense  was  $188,970 or 8.7% of net sales for the
three months  ended  September  30,  1996,  compared to $159,122 or 12.4% of net
sales for the period in 1995. General and  administrative  expense for the first
nine months of 1996 was $579,699 or 10.5% of net sales,  compared to $537,154 or
12.4%  for the same  period  in 1995.  The  actual  general  and  administrative
expenses increased only marginally, while declining as a percentage of net sales
for both the  third  quarter  and first  nine  months  of 1996.  The  additional
expenses were necessary to support an increased level of sales.


<PAGE>

Marketing  expense  was  $48,407  or 2.2% of net  sales  for the  quarter  ended
September  30,  1996,  compared  to $46,822 or 3.6% for the same period in 1995.
Marketing expense was $143,132 or 2.6% of net sales for the first nine months of
1996,  compared  to  $154,541  or 3.6% of net sales for the same period in 1995.
Marketing  expense as a  percentage  of sales  declined  for both the first nine
months and the third quarter of 1996 compared to 1995.  The nominal  decrease in
marketing  expenditures for the first half of 1996 reflects a temporary shift in
efforts due to the increased  demands of new contract  design and  manufacturing
customer relationships.

Research and development  expense was $88,073 or 4.0% of net sales for the third
quarter of 1996, compared to $49,594 or 3.9% of net sales for the same period in
1995.  Research  and  development  expense for the first nine months of 1996 was
$222,665 or 4.0% of net sales, compared to $143,855 or 3.3% of net sales for the
same  period  in  1995.  The  increased  research  and  development  expense  is
attributed to increased  technical staffing and the purchases of additional test
and  development  equipment.  Both the addition of staff and the  acquisition of
research  and   development   equipment  are  intended  to  further  assist  the
development  of new  products,  the  enhancement  of  existing  products  and to
continue to provide full  technical  and  development  services to the Company's
customers.

Interest Expense:
Interest  expense  was $43,390 or 2.0% of net sales for the three  months  ended
September 30, 1996, compared to $15,334 or 1.2% of net sales for the same period
in 1995.  Interest  expense was $113,348 or 2.1% of net sales for the first nine
months ended  September  30, 1996,  compared to $61,222 or 1.4% of net sales for
the same period in 1995. The increase in interest expense  reflected  additional
borrowing needed to support increased sales and inventories.

Net Earnings:
The  Company  recorded  net  income of $41,213 or $0.016 per share for the third
quarter of 1996,  compared to a net loss of $111,123 or $0.043 per share for the
same period in 1995.  For the nine months ended  September 30, 1996, the Company
reported  net income of $102,085 or $0.039 per share,  compared to a net loss of
$133,259 or $0.054 per share for the same period in 1995.  The Company  recorded
increased  sales and  increased  net income  for the first  nine  months of 1996
compared to 1995. The Company also reported increased interest income and rental
income during the first nine months of 1996 compared to the same period in 1995.

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

Liquidity and Capital Resources

The current  ratio on September 30, 1996 was 1.37 to 1, compared to 1.61 to 1 on
December 31, 1995. Working capital on September 30, 1996 was $1,103,068 compared
to  $1,221,862  on December  31, 1995.  The decrease is primarily  the result of
increased short term borrowing and increased accounts  receivable offset in part
by increased inventories.

The Company has entered into a new revolving  credit  agreement with the Norwest
Bank Minnesota  South  N.A.("Norwest"),  first amendment dated October 21, 1996,
with a maximum loan limit of $3,500,000,  subject to additional  limitations set
forth in the credit agreement.  The interest rate is calculated at 3/4% over the
prime  interest  rate,  which is  unchanged  from  the  previous  agreement.  At
September 30, 1996, there was $1,995,227 outstanding under the line of credit.

In addition to the  $1,500,000  increase on the  revolving  line of credit,  the
Company  also  entered  into a five year term loan  agreement  with  Norwest for
$500,000.  Management  believes  that with the total  increase of  $2,000,000 in
credit  available,  which doubles the previous credit  available,  together with
cash flows from  operations  that this will be sufficient to meets the Company's
capital needs in the foreseeable future.



<PAGE>



                            PART II-OTHER INFORMATION




ITEM 6: Exhibits and Reports on Form 8-K

         (a) See Exhibit Index following the signature page.

         (b) There are no reports on Form 8-K for the quarter
             ended September 30, 1996.










<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:   November 13, 1996                  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, 1996



Exhibit
Number            Item

10.1     First  Amendment dated October 21, 1996 between the Company and Norwest
         Bank Minnesota South, National Association.


10.2     Revolving  Note  dated  October  21,  1996 in the  principal  amount of
         $3,500,000  in  favor  of  Norwest  Bank  Minnesota   South,   National
         Association.


10.3     Term Note dated  October 21, 1996 in the amount of $500,000 in favor of
         Norwest Bank Minnesota South, National Association.


11       Statement Re: Computation of per share earnings.


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