Mail Stop 03-06
April 22, 2005
Via U.S. Mail and Facsimile (507-625-5135)
Jennifer A. Thompson
Chief Financial Officer
Winland Electronics, Inc.
1950 Excel Drive
Mankato, Minnesota 56001
Re: Winland Electronics, Inc.
Form 10-KSB for year ended December 31, 2004
Filed March 21, 2005
File No. 001-15637
Dear Ms. Thompson:
We have reviewed your filings and have the following
comments.
We have limited our review to matters related to the issues raised
in
our comments. Where indicated, we think you should revise your
future filings in response to these comments. If you disagree, we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comment or on any other
aspects
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the year ended December 31, 2004
Management`s Discussion and Analysis or Plan of Operation, page 7
1. We note throughout your MD&A in the results of operations you
identify significant changes that significantly impacted your
operating results but you do not quantify such changes or provide
an
adequate discussion or explanation for such changes. For example,
you indicate that gross profit increased in 2004 due to increases
in
temporary employee wages, component prep charges, equipment
repairs
and leases, small tooling, manufacturing supplies and freight,
which
were offset in part by a reduction in obsolescence and warranty
reserves. In future filings please provide an investor with an
extensive discussion of the items that significantly impacted your
results for the periods being compared along with the impact of
such
item.
2. In future filings revise this section to include a discussion
of
the material components of Cost of Sales and General and
Administrative expenses so the reader understands your income
statement presentation and how gross margin is computed. Also
include in your discussion the type of costs that you capitalize
in
inventories.
- -Critical Accounting Policies - page 9
3. In addition to identifying in MD&A all significant estimates,
in
future filings include a discussion of the methodology used by
management in determining these particular estimates and the
likelihood that materially different amounts would be reported
under
different conditions or using different methods. For example,
expand
your discussion in future filings and tell us supplementally in
regards to your inventory obsolescence reserve the methodology
that
is used by Management to determine such reserve and the
significant
assumptions made and estimates used. Refer to the guidance
provided
in FR-60 and FR-72.
Financial Statements
Note 1. Nature of Business and Significant Accounting Policies -
page 19
- -Revenue recognition - page 19
4. Please tell us supplementally and expand in greater detail in
future filings your revenue recognition policy, especially as it
relates to the different types of revenue you earn such as product
sales, consisting of electronic controls and assemblies, and
proprietary products consisting of sensors and alarms, out of
warranty repairs and engineering design services. Include in your
discussion the types of post shipment obligations or acceptance
provisions you may have and how you account for such obligations
when
they exist. Refer to the guidance provided in SAB 104.
Note 9. Major Customers, International Sales and Enterprise Wide
Disclosures - Page 29
5. We note from the business section of your Form 10-KSB that you
design and manufacture electronic controls and assemblies for OEM
customers and provide proprietary products consisting of sensors
and
alarms for the security/industrial markets. It appears that you
have
two products that are sold to different types of customers and
through different marketing channels. We further note that the
discussion of your results of operations is based on revenue
generated for each product. Tell us supplementally why you
believe
you operate in one operating segment and how you determined that
you
do not have more than one reportable segment that meets the
criteria
of paragraph 10 of SFAS 131. If you applied the aggregation
guidance
provided in paragraph 17 of SFAS 131 that fact should be disclosed
in
future filings along with why you believe the criteria for
aggregation outlined in paragraph 17 was met.
Item 8A. Controls and Procedures - Page 31
6. Tell us supplementally and disclose in greater detail in future
filings the nature of the material weaknesses identified in your
disclosure. In this regard, tell us supplementally and disclose
in
future filings the specific steps that you have taken to remediate
the material weaknesses and whether management believes that the
material weaknesses have been corrected.
* * * * * * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter with your response that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please file your cover letter on EDGAR. Please understand that we
may have additional comments after reviewing your amendment and
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* The company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* Staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Praveen Kartholy, Staff Accountant, at (202)
824-5465 or me at (202) 942-7903 if you have questions regarding
these comments.
Sincerely,
Michele Gohlke
Branch Chief
Ms. Jennifer A. Thompson
Winland Electronics, Inc.
April 22, 2005
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