Winland Electronics, Inc. (NYSE Amex: WEX) today reported sales of Proprietary Environmental Monitoring products of $769,000 for the third quarter ended September 30, 2011, down $69,000, or 8.2 percent, from the $838,000 that the company reported in the same period in 2010. Net loss from the quarter totaled $300,000, or $0.08 per share versus a loss of $305,000, or $0.08 per share for the same period in 2010.

The company reported an operating loss of $296,000 for the three months ended September 30, 2011 compared to an operating loss of $198,000 for the comparable period in 2010. Gross margins decreased to 34.9 percent from 47.3 percent for the three months ended September 30, 2011 compared to the same period in 2010. Declines in gross margin for the three months ended September 30, 2011 were expected based on changing from a direct internal manufacturing operation to outsourcing the company’s manufacturing requirements upon the sale of its EMS business segment.

“Sales in the third quarter were down as a result of a decline in volume from our largest customer, a situation attributable to the customer’s current inventory positions and the timing of replacement orders,” said Brian Lawrence, Winland’s Chief Financial Officer and Senior Vice President. “On the positive side, however, the company realized increased sales to its other top ten customers, with sales up 10 percent quarter-over-quarter and 16 percent year-over-year.”

The company’s lower cost structure from its restructuring in late 2010 and early 2011 resulted in General and Administrative expenses of $191,000 for the second quarter, down $177,000 year-over-year. G&A expenses were down as a result of significant decreases in salaries of $78,000 and board of director fees totaling $28,000, decreased information technology fees of $24,000 and lower professional fees of $20,000.

Sales and marketing expenses were $270,000 for the three months ended September 30, 2011, an increase of $44,000 over the third quarter of 2010. The increase was due to increased advertising expenses of $20,000 and increased marketing and trade show expenses of $20,000 as the company incurred costs in advance of an expected release of its new EA800-ip product.

Nine-Month Results

Net sales for the nine months ended September 30, 2011 were $2.7 million, up $223,000 from the comparable period in 2010. The increase was related to increased sales of $123,000 to the company’s largest distributor and a large project sale of $79,000 to a new customer.

The company reported a net loss of $646,000, or $0.17 per basic and diluted share for the nine months ended September 30, 2011, versus a net loss of $1.7 million, or $0.45 per share for the same period in 2010.

For the nine months ended September 30, 2011, the company reported an operating loss of $707,000 compared to an operating loss of $1.0 million for the same period in 2010. Gross margins decreased to 32.6 percent from 43.1 percent for the nine months ended September 30, 2011 compared to the same period in 2010.

General and Administrative expenses were $693,000 in the first nine months of 2011, down from $1.3 million in the same period in 2010. The decline in expense was primarily related to decreased salaries expenses of $332,000, decreased professional fees of $80,000, decreased information technology fees of $77,000, decreased audit fees of $75,000 and decreased financial advisor fees of $67,000, partially offset by $44,000 of increased bank fees related to non-recurring financing fees.

For the nine months ended September 30, 2011, sales and marketing expenses were $736,000, up $44,000 compared to the same period in 2010. The increase was attributable to increased salary expenses of $22,000 and increased marketing and trade show expenses of $12,000, partially offset by decreased information technology fees of $27,000.

“We are disappointed in the softening in total sales, but recognize that this was primarily attributable to one customer,” Mr. Lawrence said. “Our sales momentum within our broader customer base continues to build, and we’re encouraged our new EnviroAlert EA800-ip will provide increased sales which will positively affect our results as we enter 2012.”

Going forward, press releases regarding the company’s financial results will be posted on the Company’s website and will be communicated when available.

About Winland Electronics

Winland Electronics, Inc. (www.winland.com), is an industry leader of critical condition monitoring devices. Products including EnviroAlert, WaterBug, TempAlert, Vehicle Alert and more are designed in-house to monitor critical conditions for industries including health/medical, grocery/food service, commercial/industrial, as well as agriculture and residential. Proudly made in the USA, Winland products are compatible with any hard wire or wireless alarm system and are available through distribution worldwide. Headquartered in Mankato, MN, Winland trades on the NYSE Amex Exchange under the symbol WEX.

Cautionary Statements

Certain statements contained in this press release and other written and oral statements made from time to time by the company do not relate strictly to historical or current facts. As such, they are considered forward-looking statements, which provide current expectations or forecasts of future events. The statements included in this release with respect to the following matters are forward looking statements; (i) that the company’s sales momentum within its broader customer base continues to build; and (ii) that the EnviroAlert EA800-ip will provide increased sales which will positively affect the company’s results as it enters 2012. These statements involves risks and uncertainties, known and unknown, including among other risks that (i) the company’s sales momentum within its broader customer base does continue to build; (ii) the company will recognize increased sales due to the EA800-ip, and (iii) the company’s results will be positively affected. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.

  WINLAND ELECTRONICS, INC. CONDENSED STATEMENTS OF OPERATIONS (In Thousands, Except Share and Per Share Data) (Unaudited)        

For the Three Months EndedSeptember 30,

For the Nine Months EndedSeptember 30,

    2011   2010 2011   2010 Net sales $ 769 $ 838 $ 2,673 $ 2,450 Cost of sales   501     442     1,801     1,395   Gross profit   268     396     872     1,055     Operating expenses: General and administrative 191 368 693 1,339 Sales and marketing 270 226 736 736 Research and development   103     -     150     -     564     594     1,579     2,075     Operating loss (296 ) (198 ) (707 ) (1,020 )   Other income (expenses): Interest expense (6 ) (19 ) (45 ) (31 ) Other, net   2     (9 )   17     (10 )   (4 )   (38 )   (28 )   (78 )   Loss from continuing operations before income taxes (300 ) (236 ) (735 ) (1,098 )   Income tax benefit (expense)   -     89     (9 )   87   Loss from continuing operations (300 ) (147 ) (744 ) (1,011 ) Gain (loss) from discontinued operations, net of tax   -     (158 )   98     (656 )   Net loss $ (300 ) $ (305 ) $ (646 ) $ (1,667 )   Loss per common share data: Basic and diluted $ (0.08 ) $ (0.08 ) $ (0.17 ) $ (0.45 ) Loss from continuing operations per common share data: Basic and diluted $ (0.08 ) $ (0.04 ) $ (0.20 ) $ (0.27 ) Gain (loss) from discontinued operations per common share data: Basic and diluted $ - $ (0.04 ) $ 0.03 $ (0.18 ) Weighted-average number of common shares outstanding: Basic and diluted 3,701,630 3,699,230 3,700,848 3,690,911       WINLAND ELECTRONICS, INC. CONDENSED BALANCE SHEETS (In Thousands, Except Share Data)   ASSETS

September 30,2011

December 31,2010

(Unaudited) Current Assets Cash and cash equivalents $ 1,598 $ 318

Accounts receivable, less allowance for doubtful accounts of $7 as of September 30, 2011 and $10 as of December 31, 2010

402 547 Receivable due from EMS asset sale 250 - Refundable income taxes - 277 Inventories 442 112 Prepaid expenses and other assets 71 87 Current assets of discontinued operations   157     4,649   Total current assets 2,920 5,990   Property and Equipment, at cost Property and equipment 313 3,750 Less accumulated depreciation and amortization   235     1,447   Net property and equipment 78 2,303 Assets held for sale, net 2,135 - Property and equipment of discontinued operations, net   -     1,151   Total assets $ 5,133   $ 9,444     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Revolving line-of-credit $ - $ 1,249 Current maturities of long-term debt 365 448 Accounts payable 473 381 Other short-term tax liabilities - 68 Accrued liabilities: Compensation 135 410 Other 23 35 Current liabilities of discontinued operations   60     2,084   Total current liabilities   1,056     4,675     Long-Term Liabilities Deferred revenue 108 114 Long-term liabilities of discontinued operations   -     29   Total long-term liabilities   108     143   Total liabilities   1,164     4,818     Stockholders’ Equity

Common stock, par value $0.01 per share; authorized 20,000,000 shares; issued and outstanding 3,701,630 as of September 30, 2011 and 3,699,230 shares as of December 31, 2010

37 37 Additional paid-in capital 5,014 5,025 Accumulated deficit earnings   (1,082 )   (436 ) Total stockholders’ equity   3,969     4,626   Total liabilities and stockholders’ equity $ 5,133   $ 9,444       WINLAND ELECTRONICS, INC. CONDENSED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)      

For the Nine Months EndedSeptember 30,

2011   2010 Cash Flows From Operating Activities Net loss $ (646 ) $ (1,667 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 100 589 Non-cash stock based compensation (13 ) 23 Decrease in allowance for doubtful accounts (3 ) (6 ) Decrease in allowance for obsolete inventory (20 ) - Loss on disposal of equipment - 56 Decrease in deferred tax valuation allowance - (86 )

Decrease in allowance for obsolete inventory held for discontinued operations

(112 ) - Loss on sale of EMS business unit 14 - Changes in assets and liabilities: Accounts receivables 8 297 Refundable income taxes 277 628 Inventories (310 ) (280 ) Prepaid expenses and other assets 16 6 Accounts payable 42 324

Accrued expenses, including deferred revenue and other short and long term tax liabilities

  (341 )   (39 ) Net cash used in operating activities   (988 )   (155 )   Cash Flows From Investing Activities Purchases of property and equipment (10 ) (31 ) Proceeds from sale of property and equipment - 7 Sale of inventory from discontinued operations 2,795 - Cash from sale of EMS business unit, net of transaction costs   813     -   Net cash provided by (used in) investing activities 3,598 (24 )   Cash flows From Financing Activities Net borrowings (payments) on revolving credit agreement (1,249 ) 581

Net principal payments on long-term borrowings, including capital lease obligations

(83 ) (282 ) Cash received from exercise of stock options   2     7   Net cash provided by (used in) financing activities   (1,330 )   306     Net increase in cash and cash equivalents 1,280 127   Cash and cash equivalents Beginning   318     55   Ending $ 1,598   $ 182     Supplemental Disclosures of Cash Flow Information Cash payments for interest $ 49   $ 81   Cash receipts for income taxes $ 209   $ 628   Non-cash reclassification of other tax liability from long-term to short-term $ -   $ 258   Non-cash investing activities

Receivable recorded for sale of EMS Business unit

$ 250   $ -   Accrued transaction costs for sale of EMS business unit $ 50   $ -