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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004
Commission File Number 1-8250 WELLS-GARDNER ELECTRONICS CORPORATION (Exact name of registrant as specified in its charter)
 ILLINOIS
    
    36-1944630(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)
 9500 West 55thStreet, Suite A
McCook, Illinois 60525-3605
(Address of principal executive offices) Registrants telephone number, including area code: 708/290-2100 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $1.00 par value
    
    American Stock ExchangeTitle of each class
    
    Name of each exchange on which registered
 Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant 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 þ NO o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Act). 
YES o NO þ The aggregate market value of the registrants voting stock held by non-affiliates of the
registrant (assuming for the purposes hereof, that directors, executive officers and 10% or
greater stockholders of the registrant are affiliates of the registrant), based upon the
closing sale price of the registrants Common Stock on February 28, 2005 was approximately
$43,653,000. The number of shares of the registrants Common Stock outstanding as of March 18, 2005, was
approximately 8,239,116.




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DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrants Annual Report to Shareholders for the year ended December 31, 2004
are incorporated into Part II of this Report on Form 10-K and filed as Exhibit 13 hereto.
Portions of the Registrants definitive Proxy Statement relating to the Registrants 2005
Annual Meeting of Stockholders to be filed hereafter are incorporated into Part III of this
Report on Form 10-K. As used in this Annual Report on Form 10-K, the terms we, us, our and the Company mean
Wells-Gardner Electronics Corporation, an Illinois corporation, and its subsidiaries, unless
the context indicates a different meaning, and the term common stock means our common stock,
$1.00 par value per share.




TABLE OF CONTENTS  PART IItem 1. BUSINESSItem 2. PROPERTIESItem 3. LEGAL PROCEEDINGSItem 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIItem 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDERS MATTERSItem 6. SELECTED FINANCIAL DATAItem 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREItem 9A. CONTROLS AND PROCEDURESItem 9B. OTHER INFORMATIONPART IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTItem 11. EXECUTIVE COMPENSATIONItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSItem 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVItem 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESSIGNATURESAudited Financial StatementsFirst, Second, Third and Fourth Amendment to Employment AgreementAnnual Report to ShareholdersConsent of Blackman Kallick Bartelstein LLPConsent of KPMG LLPConsent of HorwathCertification Pursuant to Section 302Certification Pursuant to Section 906    Table of Contents  
 PART I 
 Item 1. BUSINESS OVERVIEW
 PRODUCTS
The Companys primary business is the distribution, design, manufacture, assembly, service and
marketing of electronic components which consist of video color monitors and liquid crystal
displays (LCDs), gaming supplies and components and the bonding of touch sensors to video
monitors. These video products, gaming parts and services accounted for 100 percent of revenue
in 2004, 2003 and 2002. The Company offers a full line of video monitors, with cathode ray tube (CRT) sizes ranging
from 13 to 39 with horizontal scan frequencies from 15kHz to 80kHz and LCD sizes ranging from
6.4 to 32. In addition to providing standardized products, the Company also customizes
electrical and mechanical applications to meet specific customer requirements and optically
bonds touch screen sensors to video displays to allow interaction with a computer program by
touching a video screen. The Company sells into the following markets: Market
    
    2004
    
    2003
    
    2002Gaming
    
    72%
    
    75%
    
    69%Amusement
    
    24%
    
    22%
    
    29%Other
    
    4%
    
    3%
    
    2%Totals
    
    100%
    
    100%
    
    100%
 The Company has a non-exclusive license covering the technical and electrical design of color
display and video monitor chassis under certain patents owned by RCA Corporation. Fees under
these licenses, which expire June 30, 2005, are based on the number of units shipped and
amounted to less than 1% of total 2004, 2003 and 2002 revenues, respectively. It has been the
practice of the Company to renew such licenses on substantially the same terms. However,
failure of the Company to obtain renewal of any of these licenses could have an adverse effect
on the Companys business and results of operations. Management has no reason to believe that
these licenses will not be renewed as they have been in the past. MANUFACTURING AND ASSEMBLY
The Companys production activities consist primarily of circuit designs, assembling finished
units (and to a limited extent subassemblies), aligning, testing and optically bonding touch
sensors in both its McCook, Illinois plant and in WEAs plant in Malaysia. The Company
manufactures a limited range of electronic components Page 2




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and therefore relies on outside sources for the majority of the other required components. A
limited number of sources are available for such electronic components and the other raw
materials. One source supplies the Company with almost all of the chassis subassemblies for its
two-dimensional color displays. Chassis subassemblies are contracted offshore, based on custom
designs developed by the Company. As the Company believes is characteristic of other
manufacturers in its industry, it has been confronted with long lead times and cost pressures.
Due to some of these extended lead times, the Company carries additional inventory of certain
critical supply components. MARKETING AND SALES
The Company sells products throughout the world. A portion of the Companys products is sold
through James Industries, Inc. under a Sales Representation Agreement. James Industries, Inc.
is headquartered in Inverness, Illinois and uses the services of regional sub-representative
agents and firms. The Company maintains its own internal sales staff primarily for sales of
products not covered under the Sales Representation Agreement, repair and service of its
products and to support its external sales representative organization. The Companys business is generally not seasonal, although the Company does close its McCook
production facility for two weeks in July and one week in December. The Company has no unique or unusual practices or policies relating to working capital items
and believes this is consistent with other comparable companies in its served markets. The
Company currently believes that its future financial requirements during the foreseeable future
can be met with funds generated from operating activities and from its credit facility. The
Companys current credit facility expires June 30, 2006. The Companys largest customer, Aristocrat, accounted for 28%, 21% and 24% of total revenues in
2004, 2003 and 2002, respectively and 24%, 23% and 39% of total accounts receivable in 2004,
2003 and 2002, respectively. The Company does not formally track backlog, but historically the Company has open orders,
which represent two to three months sales. It is the Companys experience that well over 90
percent of its open orders result in revenue recognition and management is not presently aware
of any information indicating that this historical pattern will not be repeated. No material portion of the Companys business is subject to re-negotiation of profits or
termination of contracts or subcontracts at the election of any governmental entity. The Companys market for its products and services is highly competitive with low barriers to
entry. During 2004, the Company spent approximately $1,051,000 for product engineering, research and
development costs, compared to $1,007,000 in 2003 and $1,067,000 in 2002. Compliance with federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise relating to the
protection of the environment, has had no material effect upon the capital expenditures,
earnings and competitive position of the Company. At December 31, 2004, the Company employed a total of approximately 104 employees at all its
locations. The Company believes its relationship with its employees is satisfactory. Certain
employees at the Companys McCook, Illinois facility are covered under a collective bargaining
agreement. The Companys export sales accounted for total revenues of 42%, 38% and 42% in 2004, 2003 and
2002, respectively, with the majority of these sales being shipped to Australia, Canada and, in
2004, Spain. RISK FACTORS RELATED TO OUR BUSINESS AND INDUSTRYTechnology changes as required by our customers could limit and impair our ability to produce
products.
We are currently predominantly dependent on CRT based technology. As we continue to
participate in developing solutions for future technological applications for our customers
such as LCDs, plasma and organic Page 3




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light emitting diode (OLED), the need for us to be able to provide a value-added component to
the technology remains a critical issue. Technology changes may also initially negatively affect margins.
The Company expects that the margins on the initial LCD contracts will be low due to start up
and learning curve issues. The Company expects this to have an effect on earnings in the first
and second quarters of 2005. The loss or interruption of supply from our key suppliers could limit our ability to
manufacture our products.
We purchase certain materials and components for our products from various suppliers, some of
which are located outside of the U.S. With respect to chassis subassemblies, we are currently
obtaining all our supply from one source. Any loss or interruption of supply from our key
suppliers may require us to find new suppliers. The number of suppliers for certain electronic
components and raw materials is limited. We could experience production or development delays
while we seek new suppliers and could have difficulty finding new suppliers, which would
substantially impair our operating results and business. The loss of our significant customer Aristocrat would reduce our revenues and our
profitability.
Our largest customer, Aristocrat Leisure Limited, with whom we have an exclusive supply
agreement through April 2006, accounted for 28%, 21% and 24% of total revenues in 2004, 2003
and 2002, respectively, and 24%, 23% and 39% of total accounts receivable in 2004, 2003 and
2002, respectively. A loss of this contract or customer would significantly reduce our
revenues and profitability. Our growth could be impaired if we are not able to continue to develop and maintain the success
of WEA.
WEA, the Malaysian joint venture we established in January 2000 with Eastern Asia Technology
Limited of Singapore, is an important part of our plan for growth. We expect to continue to
produce a significant amount of our manufacturing requirements at WEA. Our growth will depend,
in large part, on the success of WEA. If we are unable to continue to successfully execute
this strategy, we may not be able to grow as expected. Intense competition in our industry could impair our ability to grow and achieve profitability.
We may not be able to compete effectively with current or future competitors. The market for
our products and services is rapidly evolving and intensely competitive and there are low
barriers to entry to our business. We expect this competition to further intensify in the
future. Some of our competitors are large companies with greater financial, marketing and
product development resources. In addition, new competitors may enter our key markets. This
may place us at a disadvantage in responding to our competitors pricing strategies,
technological advances and other initiatives. The gaming business is heavily regulated and we depend on our ability to obtain/maintain
regulatory approvals.
The manufacture and distribution of parts for gaming machines are subject to extensive federal,
state, local and foreign regulations and taxes, and the governments of the various gaming
jurisdictions amend these regulations from time to time. Virtually all of these jurisdictions
require licenses, permits, documentation of qualification, including evidence of financial
stability, and other forms of approval for manufacturers and distributors of gaming machines
and for their key personnel. The revocation or denial of a license in a particular jurisdiction
could adversely affect our ability to obtain or maintain licenses in other jurisdictions. The loss of our bank line would severely limit our ability to fund operations.
Our current bank line expires June 30, 2006 and requires the Company to maintain certain
financial covenants. The Company fully intends to maintain compliance with the covenants under
its bank line and expects it will be able to do so. If unsuccessful, the Company would be
severely limited in its ability to fund operations. The market price for our shares is susceptible to significant changes in market price.
Historically, the volume of trading of our shares has been small. As a result, larger than
average buy or sell orders on a given day, or news about us or the gaming industry, has had and
may in the future have a significant impact on the trading price for our shares. Page 4




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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Because we want to provide you with more meaningful and useful information, this Annual Report
includes forward-looking statements that reflect our current expectations and projections about
our future results, performance, prospects and opportunities. You can find many of these
statements by looking for words such as may, will, expect, anticipate, believe,
intend, estimate and similar expressions. These forward-looking statements are based on
information currently available to us and are subject to a number of risks, uncertainties and
other factors that could cause our actual results, performance, prospects or opportunities in
2005 and beyond to differ materially from those expressed in, or implied by, these
forward-looking statements. These risks, uncertainties and other factors include but are not
limited to the factors described under the heading Risk Factors above. We caution you not to
place undue reliance on any forward-looking statements. Except as otherwise required by federal
securities laws, we undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, changed circumstances or any
other reason after the date of this Annual Report. 
 Item 2. PROPERTIES th
 
 Item 3. LEGAL PROCEEDINGS  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  
 PART II 
 Item 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDERS MATTERS  (b) Not applicable (c) Not applicable 
 Item 6. SELECTED FINANCIAL DATA  
 Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Page 5




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   
    Consolidated Balance Sheets as of December 31, 2004 and 2003
    Consolidated Statements of Operations for years ended December 31, 2004, 2003 and 2002
    Consolidated Statements of Shareholders Equity for years ended December 31, 2004, 2003
and 2002
    Consolidated Statements of Cash Flows for years ended December 31, 2004, 2003 and 2002
    Notes to the Consolidated Financial Statements
    Independent Auditors Reports Quarterly financial data for the four quarters ended December 31, 2004 and 2003 are set forth
in Exhibit 13 hereto in Note 13 of Notes to the Consolidated Financial Statements as part of
the Companys Annual Report to Shareholders for the year ended December 31, 2004, which
information is hereby incorporated herein by reference. 
 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  
 Item 9A. CONTROLS AND PROCEDURES  
 Item 9B. OTHER INFORMATION  
 PART III 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS
 EXECUTIVE OFFICERS OF THE REGISTRANT Year First ElectedName
    
    Office
    
    Age
    
    As Executive OfficerAnthony Spier
    
    Chairman of the Board, President
& Chief Executive Officer
    
    
    61
    
    
    
    1994
 Mr. Spier has served as an executive officer of the Company for at least the past five years. The Company maintains a Code of Business Conduct & Ethics governing the behavior of the
Companys employees, including its Executive and Corporate Officers, which is available for
review on the Companys website (www.wellsgardner.com) under its Investor Relations Corporate
Governance section. 
 Item 11. EXECUTIVE COMPENSATION  Page 6




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Directors on Compensation and Certain Transactions with Management in the Companys
definitive proxy statement related to its 2005 Annual Meeting. 
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS  
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES  
 PART IV 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   
    Consolidated Balance Sheets as of December 31, 2004 and 2003
    Consolidated Statements of Operations for years ended December 31, 2004, 2003 and 2002
    Consolidated Statements of Shareholders Equity for years ended December 31, 2004,
2003 and 2002
    Consolidated Statements of Cash Flows for years ended December 31, 2004, 2003 and 2002
    Notes to the Consolidated Financial Statements
    Independent Auditors Reports (2) A financial statement schedule regarding valuation and qualifying accounts and reserves is
set forth following the signature page of this Report. (3) and (c) The following exhibits are incorporated by reference or filed herewith:  3.1
    Articles of Incorporation of the Company, as amended, filed as Exhibit 3.1 of the
Companys Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference.  3.2
    By-Laws of the Company, as amended, filed as Exhibit 3.3 of the Companys Form 10-Q dated
April 28, 2003 and incorporated herein by reference.  4.1
    Form of Warrant filed as Exhibit 4.1 to the Companys Form 8-K dated September 23, 2004
and incorporated herein by reference.  4.2
    Form of Warrant filed as Exhibit 4.2 to the Companys Form 8-K dated September 23, 2004
and incorporated herein by reference.  10.1
    Employment Agreement dated February 29, 1996 between the Company and Anthony Spier, as
amended, filed as Exhibit 10.1 of the Companys Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference.  10.2
    Wells-Gardner Electronics Corporation Employee 401K Plan dated January 1, 1990, as
amended, filed as Exhibit 10.10 of the Companys Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference. Page 7




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10.3
    Wells-Gardner Electronics Corporation 1996 Nonemployee Director Plan filed as Annex A to
the Companys Proxy Statement for the Annual Meeting of Shareholders to be held on April
23, 1996 and incorporated herein by reference.  10.4
    Wells-Gardner Electronics Corporation Amended and Restated Incentive Stock Plan, as
amended and filed as Exhibit 4.1 of the Companys Form S-8, dated August 21, 1998 and
incorporated herein by reference.  10.5
    Amended and Restated Sales Representative Agreement dated December 9, 1998, filed as
Exhibit 10.1 of the Companys Form 10-Q dated November 10, 1999 and incorporated herein by
reference.  10.6
    Acquisition of Certain Assets of American Gaming and Electronics dated January 12, 2000,
filed as Exhibits 2.1, 2.2 and 2.3 on Form 8-K, dated January 27, 2000 and incorporated
herein by reference.  10.7
    Executive Stock Award Plan, filed as Exhibits 4.1 and 4.2 of the Companys Form S-8,
dated May 12, 2000 and incorporated by reference.  10.8
    Credit Agreement dated June 30, 2003, between LaSalle Bank National Association and the
Company, as amended and filed as Exhibit 10.1 to the Companys Form 10-Q dated August 11,
2003 and incorporated herein by reference.  10.9
    License Agreement dated July 1, 2000, between the Company and RCA Corporation, as
amended, filed as Exhibit 10.10 of the Companys Annual Report on Form 10-K for the year
ended December 31, 2000 and incorporated herein by reference.  10.10
    Agreement dated November 21, 2003, between the Company and Local 1031, I.B.E.W., AFL-CIO
filed as Exhibit 10.12 of the Companys Form 10-K for the year ended December 31, 2003 and
incorporated herein by reference.  10.11
    Securities Purchase Agreement dated as of September 20, 2004 by and among the Company
and the purchasers identified on the signature page thereto filed as Exhibit 10.1 to the
Companys Form 8-K dated September 23, 2004 and incorporated herein by reference.  10.12
    Securities Purchase Agreement dated as of September 20, 2004 by and among the Company
and the purchasers identified on the signature page thereto filed as Exhibit 10.2 to the
Companys Form 8-K dated September 23, 2004 and incorporated herein by reference.  10.13
    Second Amendment to the Credit Agreement dated January 17, 2005 filed as Exhibit 10.1 to
the Companys Current Report on Form 8K dated January 17, 2005 and incorporated herein by
reference.  10.14
    Audited financial statements of the Companys joint venture, Wells-Eastern Asia Displays
(m) Sdn. Bhd. for the year ended December 31, 2004.  10.15
    First, Second, Third and Fourth Amendment to the Employment Agreement between the
Company and Anthony Spier.  13.0
    Companys Annual Report to Shareholders for the year ended December 31, 2004.23.0
    Consent of independent registered public accounting firm Blackman Kallick Bartelstein LLP23.1
    Consent of independent registered public accounting firm KPMG LLP23.2
    Consent of independent registered public accounting firm Horwath31.1
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    Statement Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Page 8




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. WELLS-GARDNER ELECTRONICS CORPORATION By: /s/ ANTHONY SPIER

Anthony Spier
    
    Chairman of the Board, President
& Chief Executive Officer
(Principal Accounting Officer)
    
    March 28, 2005
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the
dates indicated. /s/ ANTHONY SPIER

Anthony Spier
    
    Chairman of the Board,
President
& Chief Executive Officer
    
    March 28, 2005/s/MERLE H. BANTA

Merle H. Banta
    
    Director
    
    March 28, 2005/s/ MARSHALL L. BURMAN

Marshall L. Burman
    
    Director
    
    March 28, 2005/s/ FRANK R. MARTIN

Frank R. Martin
    
    Director
    
    March 28, 2005
 Page 9




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FINANCIAL SCHEDULE Schedules not included with this additional financial data have been omitted because they are
not applicable or the required information is shown in the financial statements or notes
thereto. SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS (in $000s) ALLOWANCE FOR DOUBTFUL ACCOUNTS: Year Ended December 31,2004
    
    
    2003
    
    
    2002Beginning balance
    
    $
    146
    
    
    $
    147
    
    
    $
    130Additions charged to expense
    
    $
    14
    
    
    $
    31
    
    
    $
    123Deductions
    
    $
    (60
    )
    
    $
    (32
    )
    
    $
    (106
    )Balance at end of year
    
    $
    100
    
    
    $
    146
    
    
    $
    147INVENTORY OBSOLESCENCE RESERVE:Beginning balance
    
    $
    193
    
    
    $
    385
    
    
    $
    396Additions charged to expense
    
    $
    494
    
    
    $
    334
    
    
    $
    268Deductions
    
    $
    (307
    )
    
    $
    (526
    )
    
    $
    (279
    )Balance at end of year
    
    $
    380
    
    
    $
    193
    
    
    $
    385DEFERRED TAX ASSET VALUATION ALLOWANCE:Beginning balance
    
    $
    2,974
    
    
    $
    2,660
    
    
    $
    2,887
    (1)Additions charged (credited) to expense
    
    $
    (296
    )
    
    $
    314
    
    
    $
    (227
    )Balance at end of year
    
    $
    2,678
    
    
    $
    2,974
    
    
    $
    2,660
 (1) Reflects reduction to beginning balance of $364,000 due to overstatement of net operating loss
carryforward in prior years. As the Company had fully reserved all operating loss carryforwards,
the valuation allowance correspondingly was reduced. There was no change in either net earnings
(loss) or net worth. Page 10