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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, 2005
Commission File Number 1-8250
 WELLS-GARDNER ELECTRONICS CORPORATION
 (Exact name of registrant as specified in its charter)
 ILLINOIS
(State or other jurisdiction of incorporation or organization)
    
    36-1944630
(IRS Employer Identification Number)
 9500 West 55th Street, Suite A
McCook, Illinois 60525-3605
 708/290-2100
  Common Stock, $1.00 par value
    
    American Stock ExchangeTitle of each class
    
    Name of each exchange on which registered
  þ o
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DOCUMENTS INCORPORATED BY REFERENCE
   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 StatementsThird Amendment to the Credit AgreementSixth Amendment to the Credit AgreementAnnual Report to ShareholdersConsent of Blackman Kallick Bartelstein LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Statement of CEO and CFO Pursuant to Section 906    Table of Contents  
 PART I
 
 Item 1. BUSINESS
 OVERVIEW
  PRODUCTS
    Market
    
    
    
    
    
    2005
    
    2004
    
    2003Gaming
    
    
    
    
    
    
    76
    %
    
    
    72
    %
    
    
    75
    %Amusement
    
    
    22
    %
    
    
    24
    %
    
    
    22
    %Other
    
    
    
    
    
    
    2
    %
    
    
    4
    %
    
    
    3
    %Totals
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 MANUFACTURING AND ASSEMBLY
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MARKETING AND SALES
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RISK FACTORS RELATED TO OUR BUSINESS AND INDUSTRY
 Technology changes as required by our customers could limit and impair our ability to produce
products.
  Technology changes may also initially negatively affect margins.
  The loss or interruption of supply from our key suppliers could limit our ability to
manufacture our products.
  The loss of our significant customer Aristocrat would reduce our revenues and our
profitability.
  Our growth could be impaired if we are not able to continue to develop and maintain the success
of WEA.
  Intense competition in our industry could impair our ability to grow and achieve profitability.
  The gaming business is heavily regulated and we depend on our ability to obtain/maintain
regulatory approvals.
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The loss of our bank line would severely limit our ability to fund operations.
  The market price for our shares is susceptible to significant changes in market price.
  Available Information
 http://www,sec,gov
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
 Item 2. PROPERTIES
 th
 
 Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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PART II
 
 Item 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDERS MATTERS
    
 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
  
 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  -
    
    Consolidated Balance Sheets as of December 31, 2005 and 2004-
    
    Consolidated Statements of Operations for years ended December 31, 2005, 2004 and 2003-
    
    Consolidated Statements of Shareholders Equity for years ended December 31, 2005, 2004
and 2003-
    
    Consolidated Statements of Cash Flows for years ended December 31, 2005, 2004 and 2003-
    
    Notes to the Consolidated Financial Statements-
    
    Independent Auditors Reports
  
 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A. CONTROLS AND PROCEDURES
  
 Item 9B. OTHER INFORMATION
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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
    
    62
    
    1994James F. Brace
    
    Vice President, Secretary, Treasurer& Chief Financial Officer
    
    60
    
    2005
   
 Item 11. EXECUTIVE COMPENSATION
  
 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
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PART IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  -
    
    Consolidated Balance Sheets as of December 31, 2005 and 2004-
    
    Consolidated Statements of Operations for years ended December 31, 2005, 2004 and 2003-
    
    Consolidated Statements of Shareholders Equity for years ended December 31, 2005,
2004 and 2003-
    
    Consolidated Statements of Cash Flows for years ended December 31, 2005, 2004 and 2003-
    
    Notes to the Consolidated Financial Statements-
    
    Independent Auditors Reports
   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.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.
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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.10.10
    
    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 10.1 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, 2005.10.15
    
    First, Second and Third Amendment to the Employment Agreement between the Company and
Anthony Spier filed as Exhibit 10.15 of the Companys Form 10-K for the year ended
December 31, 2004 and incorporated herein by reference.10.16
    
    Employment Agreement dated February 16, 2000 between the Company and George B. Toma
filed as Exhibit 10.16 of the Companys Form 10-K for the year ended December 31, 2004 and
incorporated herein by reference.10.17
    
    Third Amendment to the Credit Agreement dated April 25, 200510.18
    
    Fourth Amendment to the Credit Agreement dated August 10, 2005 filed as Exhibit 10.1 to
the Companys Form 10Q dated August 12, 2005 and incorporated herein by reference.10.19
    
    Waiver and Fifth Amendment to the Credit Agreement dated November 10, 2005 filed as
Exhibit 10.1 to the Companys Form 10Q dated November 14, 2005 and incorporated herein by
reference.10.20
    
    Sixth Amendment to the Credit Agreement dated March 15, 200613.0
    
    Companys Annual Report to Shareholders for the year ended December 31, 2005.23.0
    
    Consent of Blackman Kallick Bartelstein LLP31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
  WELLS-GARDNER ELECTRONICS CORPORATION
 By:
    
    /s/ ANTHONY SPIER
    
    
    
    Chairman of the Board, PresidentAnthony Spier
    
    
    
    & Chief Executive Officer
    
    
    
    March 15, 2006/s/ JAMES F. BRACE
    
    
    
    Vice President, Secretary, TreasurerJames F. Brace
    
    
    
    & Chief Financial Officer(Principal Accounting Officer)
    
    
    
    March 15, 2006
  /s/ ANTHONY SPIER
    
    
    
    Chairman of the Board, PresidentAnthony Spier
    
    
    
    & Chief Executive Officer
    
    
    
    March 15, 2006/s/ MERLE BANTAMerle Banta
    
    
    
    Director
    
    
    
    March 15, 2006/s/ MARSHALL L. BURMANMarshall L. Burman
    
    
    
    Director
    
    
    
    March 15, 2006/s/ FRANK R. MARTINFrank R. Martin
    
    
    
    Director
    
    
    
    March 15, 2006
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FINANCIAL SCHEDULE
  SCHEDULE II
 VALUATION AND QUALIFYING ACCOUNTS (in $000s)
 ALLOWANCE FOR DOUBTFUL ACCOUNTS:
 Year Ended December 31,2005
    
    2004
    
    2003Beginning balance
    
    $
    100
    
    
    $
    146
    
    
    $
    147Additions charged to expense
    
    $
    38
    
    
    $
    14
    
    
    $
    31Deductions
    
    $
    (4
    )
    
    $
    (60
    )
    
    $
    (32
    )Balance at end of year
    
    $
    134
    
    
    $
    100
    
    
    $
    146INVENTORY OBSOLESCENCE RESERVE:Beginning balance
    
    $
    380
    
    
    $
    193
    
    
    $
    385Additions charged to expense
    
    $
    697
    
    
    $
    494
    
    
    $
    334Deductions
    
    $
    (84
    )
    
    $
    (307
    )
    
    $
    (526
    )Balance at end of year
    
    $
    993
    
    
    $
    380
    
    
    $
    193DEFERRED TAX ASSET VALUATION ALLOWANCE:Beginning balance
    
    $
    2,678
    
    
    $
    2,974
    
    
    $
    2,660Additions charged (credited to) to expense
    
    $
    1,208
    
    
    $
    (296
    )
    
    $
    314Balance at end of year
    
    $
    3,886
    
    
    $
    2,678
    
    
    $
    2,974
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