FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

For Quarter Ended:  March 31, 1999
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 May  1,  1999,  the
Registrant had 2,891,786 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                                                March 31,        December 31,
                                                         1999              1998
                                                    ------------       ------------
<S>                                                 <C>                <C>
CURRENT ASSETS:
Cash                                                $    172,032       $     20,656
Accounts Receivable, Net                               3,156,510          2,482,507
Other Receivables                                              0             47,454
Inventories                                            3,726,685          3,763,939
Prepaid Expenses                                          46,339             62,882
Deferred Taxes                                           145,400            124,000
                                                    ------------       ------------
              Total Current Assets                     7,246,966          6,501,438
                                                    ------------       ------------

OTHER ASSETS:
Patent and Trademarks, net of amortization                 5,137              5,505
                                                    ------------       ------------

Property and Equipment, at cost:
Land and Land Improvements                               270,009            270,009
Building                                               2,663,587          2,497,067
Machinery and Equipment                                3,035,651          3,001,256
Data Processing Equipment                                972,264            842,352
Office Furniture and Equipment                           266,810            267,472
                                                    ------------       ------------
    Total                                              7,208,321          6,878,156
    Less Accumulated Depreciation                     (1,926,003)        (1,754,500)
                                                    ------------       ------------
   Property and Equipment, Net of Depreciation         5,282,318          5,123,656
                                                    ------------       ------------
              TOTAL ASSETS                          $ 12,534,421       $ 11,630,599
                                                    ------------       ------------


</TABLE>

<PAGE>

                            WINLAND ELECTRONICS, INC.
                                  BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>


LIABILITIES AND SHAREHOLDERS' EQUITY                   March 31,        December 31,
                                                         1999               1998
                                                    ------------       ------------
<S>                                                  <C>                <C>
CURRENT LIABILITIES:                            
Notes Payable                                        $ 1,857,227        $ 1,629,227
Current Maturities of Long Term Debt                     569,827            573,183
Accounts Payable                                       1,524,368          1,263,326
Accrued Expenses:                               
   Compensation                                          358,696            310,136
   Other                                                  91,359             47,757
Income Taxes Payable                                     245,307            228,843
                                                    ------------       ------------
              Total Current Liabilities                4,646,784          4,052,472
                                                    ------------       ------------
                                                
LONG TERM LIABILITIES:                          
Deferred Revenue                                         207,353            209,084
Long Term Debt, Less Current Maturities                3,288,931          3,429,975
Deferred Taxes                                           111,000            111,000
                                                    ------------       ------------
              TOTAL LONG TERM LIABILITIES              3,607,284          3,750,059
                                                    ------------       ------------
                                                
SHAREHOLDERS' EQUITY:                           
Common Stock                                              28,918             28,867
Additional Paid-In Capital                             2,151,019          2,142,008
Retained Earnings                                      2,100,416          1,657,193
                                                    ------------       ------------
              Total Shareholders' Equity               4,280,353          3,828,068
                                                    ------------       ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY             $12,534,421        $11,630,599
                                                    ------------       ------------
                                                
</TABLE>
                                                
                                                
                                                
                                          

<PAGE>


                            WINLAND ELECTRONICS, INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                 March 31,

                                                         1999              1998
                                                     -----------        -----------
<S>                                                  <C>                <C>        
NET SALES:                                           $ 6,615,048        $ 4,402,960
        Cost of Goods Sold                             5,092,939          3,509,481
                                                     -----------        -----------
        Gross Profit                                   1,522,109            893,479
                                                     
OPERATING EXPENSES:                                  
        General and Administrative                       470,111            302,958
        Marketing                                         90,106             66,731
        Research and Development                         171,441            166,031
                                                     -----------        -----------
                    Total Operating Expenses             731,658            535,720
                                                     
                                                     
OPERATING INCOME                                         790,451            357,759
                                                     -----------        -----------
OTHER INCOME AND (EXPENSE)                                29,159             39,763
INTEREST EXPENSE                                        (116,082)          (127,881)
                                                     -----------        -----------
                                                         (86,923)           (88,118)
                                                     -----------        -----------
                                                     
NET INCOME BEFORE INCOME TAXES                           703,528            269,641
                                                     -----------        -----------
                                                     
PROVISION FOR INCOME TAXES                               260,305             94,365
                                                     -----------        -----------
NET INCOME                                           $   443,223        $   175,276
                                                     
BASIC EARNINGS PER SHARE                             $     0.153        $     0.062
WEIGHTED AVERAGE NUMBER OF SHARES                    
        OUTSTANDING                                    2,888,453          2,833,039
                                                     
DILUTED EARNINGS PER SHARE                           $     0.150        $     0.061
WEIGHTED AVERAGE NUMBER OF SHARES                    
OUTSTANDING, INCLUDING DILUTIVE SHARES                 2,952,561          2,867,882
                                                  
</TABLE>


<PAGE>


                            WINLAND ELECTRONICS, INC.
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED   THREE MONTHS ENDED
                                                                            MARCH 31, 1999       MARCH 31, 1998
                                                                            --------------       --------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S>                                                                            <C>                 <C>
     Net Income                                                                $ 443,223           $ 175,276
     Adjustments to reconcile net income to net cash provided by                                  
     (used in) operating activeties:                                                              
         Depreciation and Amortization                                           177,089             146,956
         Loss on Disposal of Equipment                                              --                   460
         Deferred Taxes                                                          (21,400)               --
         Changes in Assets and Liabilities                                                        
           (Increase) Decrease in:                                                                
               Accounts Receivable                                              (674,003)           (379,750)
               Other Receivables                                                  47,454                --
               Inventories                                                        37,254            (712,983)
               Prepaid Expenses                                                   16,543              18,572
           Increase in:                                                                           
               Accounts Payable                                                  261,042             205,688
               Accrued Expenses and Other                                         90,431              18,602
               Income Taxes Payable                                               16,464              89,451
                                                                               ---------           ---------
                   Net Cash Provided By (Used In) in Operating Activities        394,097            (437,728)
                                                                               ---------           ---------
                                                                                                  
CASH FLOW FROM INVESTING ACTIVITIES:                                                              
     Purchases of Property and Equipment                                        (335,382)           (148,558)
     Proceeds from sale of Equipment                                                --                   200
                                                                               ---------           ---------
                   Net Cash Used in Investing Activities                        (335,382)           (148,358)
                                                                               ---------           ---------
                                                                                                  
CASH FLOW FROM FINANCING ACTIVITIES:                                                              
     Net Borrowings on Revolving Credit Agreement                                228,000             824,000
     Principal Payments on Long-term Borrowings, Including                                        
     Capital Lease Obligations                                                  (144,401)           (128,511)
     Proceeds From Issuance of Common Stock                                        9,062               1,500
                                                                               ---------           ---------
                   Net Provided by Financing Activities                           92,661             696,989
                                                                               ---------           ---------
                                                                                                  
                   Net Increase in Cash                                          151,376             110,903
                                                                                                  
CASH                                                                                              
     Beginning                                                                    20,656              23,542
                                                                               ---------           ---------
     End                                                                       $ 172,032           $ 134,445
                                                                               ---------           ---------
                                                                                                  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                 
     Cash Payments For:                                                                           
         Interest                                                              $ 116,082           $ 128,143
         Income Taxes                                                            265,241               4,914
                                                                               ---------           ---------
                                                                                                  
Supplemental Schedule of Noncash Investing and Financing Activities                               
         Capital Lease Obligations Incurred for the Purchase of Equipment      $    --             $ 129,048
                                                                               ---------           ---------
                                                                                              
</TABLE>

<PAGE>
                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                 March 31, 1999
                                   (UNAUDITED)

NOTE 1 - 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 2
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 2 - 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
$154,784 at March 31, 1999 and at December 31, 1998

NOTE 3 - INVENTORY
Major  components  of  inventory  at March 31, 1999 and December 31, 1998 are as
follows:

                                                   March 31,       December 31,
                                                      1999            1998
                                                   ----------      ----------
Raw Materials                                      $2,380,911      $2,676,738
Work In Process                                       856,038         565,229
Finished Goods                                        489,736         521,972
                                                   ----------      ----------
                           Total                   $3,726,685      $3,763,939
                                                   ----------      ----------

NOTE 4 - FINANCING ARRANGEMENTS AND LONG -TERM DEBT
Financing  Arrangement:  The Company has a $3,500,000  revolving line-of -credit
agreement through June 1999 Interest on advances is at the bank's reference rate
(7.75  percent  at March 31,  1999),  and is due  monthly.  Advances  are due on
demand, are secured by substantially all assets of the Company,  and are subject
to a defined borrowing base equal to 80 percent of qualified accounts receivable
and 60 percent of  inventories.  In addition,  the  agreement  contains  certain
reporting  and  operating  covenants.  Advances  outstanding  on  the  revolving
line-of-credit  agreement  at  March  31,  1999  and  December  31,  1998,  were
$1,857,227 and $1,629,227, respectively.

<TABLE>
<CAPTION>
Long-term Debt:  The following is a summary of long-term debt:         March 31,        December 31,
                                                                         1999               1998
                                                                         ----               ----
<S>                                                                <C>                    <C>
6.941% note payable due in monthly installments of $13,117,  
    including interest, to January 1, 2000, when the remaining
    balance is payable, secured by property and equipment.         $     1,509,720         1,522,723
4% note payable due in monthly installments of $3,030,
    including interest, to January 1, 2000, when the remaining
    balance is payable, secured by property and equipment.                 425,963           430,761
Note payable in monthly installments of $8,334, plus interest at
    prime plus 0.75%, to October 2001, secured by accounts
    receivable.                                                            258,314           283,316
8.75% note payable due in monthly installments of $1,400,
    including interest, to July 2003, secured by equipment.                167,124           167,660
Capitalized lease obligations, due in various monthly
    installments, with interest ranging from 8.95% to 9.5%, to
    October 2000, secured by equipment.                                    104,384           130,584
</TABLE>

                                        6
<PAGE>

                            WINLAND ELECTRONICS, INC.
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                 March 31, 1999
                                   (UNAUDITED)

NOTE 4 - FINANCING ARRANGEMENTS AND LONG -TERM DEBT(Continued)

<TABLE>
<CAPTION>
                                                                          March 31,           December 31,
                                                                            1999                   1998
                                                                        ----------              ---------
<S>                                                                <C>                    <C>
Capitalized lease obligations, due in various monthly
    installments, with interest ranging from 8.5% to 9.96%, to
    August 2001, secured by equipment.                                     313,652                342,219
Capitalized lease obligations, due in various monthly
    installments, with interest ranging from 8.88% to 10.04%, to
    October 2002, secured by equipment.                                    322,386                342,389
Capitalized lease obligations, due in various monthly
    installments, with interest ranging from 8.5% to 9.3%, to April
    2003, secured by equipment.                                            225,544                235,804
Capitalized lease obligations, due in monthly installments of
    $9,399, with interest at 8.97%, to November 2004, secured by
    equipment.                                                             531,671                547,702
                                                                        ----------              ---------
                                                                         3,858,758              4,003,158

Less current maturities                                                    566,828                573,183
                                                                        ----------              ---------
Total Long-term Debt                                                $    3,291,930         $    3,429,975
                                                                        ----------              ---------
</TABLE>


NOTE 5 - STOCK OPTIONS AND WARRANTS
As of March 31, 1999,  options to purchase an aggregate of 209,000 shares of the
Company's  common stock were granted and  outstanding  under the Company's  1989
Stock Option  Plan(the "1989 Plan").  As of March 31, 1999,  options to purchase
142,400 shares granted under the 1989 Plan were exercisable. The exercise prices
of all  outstanding  options  under the 1989 Plan  range from $1.75 to $2.69 per
share. Options to purchase 172,000 shares were granted and outstanding under the
1997 Stock Option Plan (the "1997 Plan") as of March 31, 1999,  of which 128,000
shares were  exercisable.  The  exercise  prices of options  under the 1997 Plan
range from $1.75 to $2.819 per share.

As of March 31, 1999,  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 months ended March 31, 1999 v.
Three months ended March 31, 1998

Net Sales:
The Company  recorded net sales of  $6,615,048  for the three months ended March
31, 1999, an increase of 50.2% from  $4,402,960 for the same period in 1998. The
increase in sales for the first  quarter of 1999  compared to 1998 is  primarily
attributed  to  increases  in sales to  several  OEM  customers,  with  sales to
Peoplenet  Communications,  Inc. representing the largest increase for the first
three months of 1999 over 1998  revenues.  In addition,  sales of the  Company's
security/industrial  products also  increased for the first three months of 1999
over the same period in 1998.

The Company has in place several firm purchase commitments for delivery ii 1999,
the largest are as  follows,  Select  Comfort  Corporation  $6 million  dollars,
PeopleNet  Communications,  Inc.  $2  million  dollars  and  CIC  Systems,  Inc.
$300,000. In addition to the above mentioned agreements, the Company has several
smaller agreements with various OEM customers to be fulfilled in 1999.

The Company has  continued  to position  itself as a full  service  designer and
manufacturer  of custom  controls and assemblies for OEM customers.  The loss of
Select  Comfort  Corporation,  PeopleNet  Communications,   inc.  or  other  OEM
customers could have an adverse effect on the Company's  short-term results. The
Company's  marketing  research  indicates that there is a large potential market
for electronic design and manufacturing services and that this market is growing
rapidly.

Gross Profits:
Gross  profit was  $1,552,109  or 23.0% of net sales for the three  months ended
March 31,  1999,  compared to $893,479 or 20.3% of net sales for the same period
in 1998. Improved gross profits as a percentage of net sales for the first three
months of 1999 compared to 1998 were the result of a combination of product sale
price  increases,  product sales mix, and  production  efficiencies  experienced
during the period.

Operating Expenses:
General and  administrative  expense  was  $470,111 or 7.1% of net sales for the
three months ended March 31, 1999, compared to $302,958 or 6.9% of net sales for
the same period in 1998.  As a percentage  of sales  general and  administrative
expense  increased  for the  first  quarter  of 1999.  The  actual  general  and
administrative  expenses  increased  $167,153 for both the first three months of
1999,  compared to 1998. The increase in general and  administrative  expense is
primarily due to increases in accrued  performance  bonus  expense.  Performance
bonuses  are tied  directly  to the  Companies  profits  for the  period,  which
increased in excess of 150 percent for 1999 compared to 1998.

Marketing  and customer  relations  expense was $90,106 or 1.4% of net sales for
the three months ended March 31, 1999,  compared to $66,731or  1.5% of net sales
for the same period in 1998.  Although marketing and customer relations' expense
declined  slightly as a percentage of sales,  the actual  marketing and customer
relations'  expense  increased $23,375 during the first quarter of 1999 compared
to the same period of 1998.  The  increases are due to the addition of marketing
and customer  relation's  personnel  necessary to provide  appropriate levels of
service  to  OEM   customers   and  assist  in  securing   new,   long-term  OEM
relationships.

Research and development expense was $171,441 or 2.6% of net sales for the first
quarter of 1999,  compared  to $166,031 or 3.8% of net sales for the same period
in 1998.  Research and development expense declined as a percentage of sales for
the first three months of 1999,  compared to 1998. The actual expense  increased
$5,410 for the period.  Research and  development  staff continue to concentrate
efforts on design and support services for the Company's OEM customers,  as well
as researching possible new proprietary product designs.



<PAGE>



Interest Expense:
Interest  expense,  including  interest on the revolving  line of credit,  other
long-term borrowing,  and interest on capital leases was $116,082 or 1.8% of net
sales for the three months ended March 31, 1999, compared to $127,881 or 2.9% of
net sales for the same period in 1998.  The decline in interest  expense both in
actual  dollars  and as a  percentage  of sales  is  primarily  attributed  to a
reduction of the interest rate and lower  outstanding  balances on the revolving
line of credit.  The interest rate on the revolving credit agreement was reduced
from 1/2 of a percent  over the prime rate for the first  quarter of 1998 to the
prime rate for the first quarter of 1999.

Net Earnings:
The Company  reported net income of $443,223 or $0.150 per diluted share for the
three months ended March 31, 1999,  compared to net income of $175,276 or $0.061
per diluted  share for the same  period in 1998.  Net income rose 152.9% for the
first quarter of 1999 compared to the same period in 1998. The dramatic increase
in net income is  attributed  to the increase in sales  combined  with  improved
gross  profit  margins,  maintaining  control  over  operating  expenses  and  a
reduction of interest costs during the period.

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

Liquidity and Capital Resources

The  current  ratio on March 31,  1999 was 1.56 to 1,  compared  to 1.60 to 1 on
December 31, 1998. Working capital on March 31, 1999 was $2,600,182  compared to
$2,448,966  on December 31, 1998.  The increase in working  capital is primarily
attributed  to  increases  in  accounts  receivable  and cash that are offset by
additional short-term borrowing needed to support the increased sales levels for
the first three months of 1999.

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 per
annum on the revolving credit agreement is equal to the reference rate. At March
31, 1999,  advances  outstanding on the revolving line of credit was $1,857,227.
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.

In late 1998, the Company made a decision to expand its facility by 5,000 square
feet and begun  construction  of the  additional  space in February of 1999. The
expansion,  including  additional  equipment  and furniture is estimated to cost
between  $600,000  and $700,000 to  complete.  The Company  plans to finance the
expansion primarily through a mortgage loan from Norwest Bank, with a portion of
the  financing to come from the Minnesota  Investments  Fund through a loan with
the City of Mankato.  The equipment and  additional  furniture  will be financed
through capital equipment  leases.  The expansion is scheduled to be complete in
late May 1999.

Year 2000:

Year 2000 Background

The Company's  overall goal is to be Year 2000  compliant.  To  accomplish  this
goal, the Company is addressing  the issue with respect to both its  information
technology (IT) and non-IT systems,  as well as its business  relationships with
key third  parties.  To be ready,  the Company  needs to evaluate  the Year 2000
issues and fix any problems it can so that all of its systems and  relationships
will be suitable for continued use into and beyond the Year 2000.

The  Company  began  addressing  the Year 2000 issue in 1996 using a  multi-step
approach,  including  inventory and  assessment,  remediation  and testing,  and
contingency  planning.  The Company  began by assessing  its  internal  computer
systems,  including  their  components and machinery,  that were  susceptible to
system  failure or  processing  errors as a result of the Year 2000 issue.  This
phase is substantially complete.


<PAGE>

The  Company's  Year 2000 efforts have also  included  assessment  of "embedded"
systems (such as automated systems and telephone systems).  In 1998, the Company
hired an outside  consultant to assist in the assessment and remediation  phases
of handling the Year 2000 issue.

As part of the assessment  phase,  the Company has  substantially  completed the
initial  communications  with certain key third  parties,  including  suppliers,
distributors,  and  customers  in order to  determine  the  extent  to which the
Company is vulnerable  to those third  parties'  failure to remediate  their own
Year 2000 issues.  The Company  believes this part of the assessment  phase will
continue  throughout  1999 and cannot  predict the  outcome of other  companies'
remediation efforts.

Year 2000 Costs

The  Company  plans to  continue  to work on its Year  2000  compliance  efforts
throughout 1999. To date, the Company has spent only a minimal amount during the
assessment  phase.  Because the Company is still conducting the assessment phase
of its Year 2000 analysis, it cannot yet predict the total remaining cost of its
assessment,  remediation  and  testing  phases.  As the  Company  continues  its
analysis,  it will monitor such costs.  The cost will depend on the availability
of certain resources, third parties' Year 2000 readiness and other unpredictable
factors.

Risk Assessment

At this time, the Company  believes that its most  reasonably  likely worst case
scenario is that the Company  and/or its key customers  could  experience  minor
disruptions.  In the event that such  disruptions do occur, the Company does not
expect that they would have a material adverse effect on the Company's financial
condition and results of operations.  Due to the complex issues surrounding Year
2000 and other significant business issues,  however, it is difficult to predict
outcomes and resulting consequences that could have a material adverse impact on
the company's results of operations, financial condition and cash flows.

Contingency Plans

During 1999,  the Company  plans to prepare  contingency  plans if it determines
that certain Year 2000 issues  cannot be resolved by December  1999.  Such plans
will be  designed  so that the  Company's  critical  business  processes  can be
expected to continue  to function on January 1, 2000 and beyond.  The  Company's
contingency  plans will be structured to address both remediation of systems and
their components and overall business  operating risks. These plans are intended
to mitigate both internal  risks as well as potential  risks in the supply chain
of the Company's suppliers and customers.

Cautionary Statements:

As provided for under the Private Securities  Litigation Reform Act of 1995, the
Company wishes to caution investors that the following important factors,  among
others, in some cases have affected and in the future could affect the Company's
actual  results of operations and cause such results to differ  materially  from
those  anticipated  in  forward-looking  statements  made in this  document  and
elsewhere by or on behalf of the Company.

The Company derives a significant  portion of its revenues from a limited number
of major OEM customers which are not subject to any long-term contracts with the
Company.  If any major  customer  should for any reason stop doing business with
the Company,  the Company's business would be significantly  adversely affected.
Some of the Company's key  customers are not large  well-established  companies,
and the  business of each  customer  is subject to various  risks such as market
acceptance of new products and  continuing  availability  of  financing.  To the
extent that the Company's  customers encounter  difficulties,  or the Company is
unable to meet the demands of its OEM customers,  the Company could be adversely
affected.


<PAGE>

The Company's ability to sustain continued  increases in revenues and profits is
dependent  upon  its  ability  to  retain  existing  customers  and  obtain  new
customers.

The Company competes for new customers with numerous independent contract design
and  manufacturing  firms in the  United  States and  abroad,  many of whom have
greater  financial  resources and a more established  reputation.  The Company's
ability to compete  successfully  in this industry  depends,  in part,  upon the
price at which the Company is willing to manufacture a proposed  product and the
quality  of  the  Company's  design  and  manufacturing  services.  There  is no
assurance  that the  Company  will be able to  continue  to win  contracts  from
existing and new customers on financially advantageous terms, and the failure to
do so could prevent the Company from achieving the growth it anticipates.

The operations and success of the Company depend, in part, upon the experience
and knowledge of W. Kirk Hankins, the Company's Chief Executive Officer and
Chief Financial Officer, and Lorin E. Krueger, the Company's President and Chief
Operating Officer. The loss of either Mr. Hankins or Mr. Krueger would have a
material adverse effect on the Company.

The  impact  of Year  2000  issues  on the  Company's  business  depends  on the
accuracy,  reliability and effectiveness of the Company's and its suppliers' and
customers'  assessment  and  remediation  of Year 2000  issues.  There can be no
assurance that the Company's efforts will result in complete  resolution of Year
2000  issues in order to  prevent a  material  effect on its  critical  business
systems.








<PAGE>



                            PART II-OTHER INFORMATION



ITEM 1: LEGAL PROCEEDINGS

The Company is one of five defendants in a products liability case venued in the
Colorado State District Court for the County of Boulder. The case was commenced
by two product consumers, Lee Turner and Elizabeth Turner, in February of 1999.
The Turners allege that the basement of their home was flooded by a
malfunctioning water system and have sued a variety of manufacturers, designers
and installers claiming that the water damage resulted from some alleged but
unspecified failures in the water system design, construction, alarm system or
component parts. The plaintiffs contend that flooding occurred in the lower
level of their home while they were absent, thereby allegedly damaging floors,
carpeting, walls and personal property. The amount of monetary damages sought
has not been identified by the plaintiffs at this time.



ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      The exhibit to this report is:

                  27.1     Financial Data Schedule (included in electronic
                           version only)

         (b)      No reports on Form 8-K were filed during the quarter ended
                  March 31, 1999




<PAGE>



                                   SIGNATURES



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


                                              WINLAND ELECTRONICS, INC.


Dated: May 7, 1999                           By:   /s/ W. K. Hankins
                                                   William K. Hankins,
                                                   Chief Executive Officer and
                                                   Chief Financial Officer
                                                   (Principal Executive Officer
                                                   and Principal Financial and
                                                   Accounting Officer)