|                                  | Years Ended December 31, |
|---------------------------------------|--------------------------|
|                                  | 2010                     | 2009 | 2008 | 2007 | 2006 |
| Net Sales                             | $45,704                  | $52,526 | $53,839 | $59,308 | $64,748 |
| Gross Margin                          | $8,396                   | $9,148 | $8,356 | $9,866 | $10,349 |
| Operating Earnings                    | $363                     | $1,377 | $582 | $546 | $1,095 |
| Net earnings                          | $190                     | $1,097 | $204 | $195 | $343 |
| Basic net earnings per common share   | $0.02                    | $0.10 | $0.02 | $0.02 | $0.03 |
| Diluted net earnings per common share | $0.02                    | $0.10 | $0.02 | $0.02 | $0.03 |
| Total Assets                          | $18,949                  | $24,305 | $25,848 | $26,601 | $30,187 |
| Long-term liabilities                 | $565                     | $2,178 | $5,185 | $6,709 | $9,234 |
| Working capital                       | $14,087                  | $15,569 | $17,301 | $18,376 | $18,863 |

|                     | 2010 Prices | 2009 Prices |
|--------------------------|-------------|-------------|
|                     | High        | Low         | High | Low |
| Quarter ended:           |        |        |   |   |
|   March 31     | $2.62       | $2.08       | $0.68 | $0.33 |
|   June 30      | $2.50       | $1.45       | $1.22 | $0.40 |
|   September 30 | $2.89       | $1.55       | $2.19 | $0.76 |
|   December 31  | $2.27       | $1.81       | $2.97 | $1.71 |

----

| ·   | The Company was profitable for the fifth consecutive year with net earnings of $190,000 or $0.02 per share compared to $1.1 million or $0.10 per share in 2009. The 2010 results included unusual charges of $572,000, which were made up of $122,000 of reorganization charges and $450,000 of operating expenses related to the Illinois Video Lottery business, which is not expected to generate revenue until the fourth quarter 2011.  The 2009 earnings included non recurring tax charges of $168,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales for fiscal 2010 were $45.7 million, a decrease of 13% or $6.8 million compared to the sales of $52.5 million in the prior year. This sales decline was due to the decline in LCD prices of around 6%, which resulted in a sales decline of over $3 million as well as a decline in LCD unit sales of 3% and the loss of a large parts contract. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Margins improved in 2010 to 18.4% compared to 17.4% in the prior year. The margin improvement was driven by improved design and purchasing cost control. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company’s Balance Sheet strengthened considerably with the generation of an additional $1.6 million of free cash flow. Bank debt declined to $565,000 from $2.2 million at year end 2009 and is the lowest debt level at a yearend in the last 20 years. This resulted in interest expense reduction of 14%. The Company’s debt/equity ratio was reduced to 4% from 14% at yearend 2009 and 70% at year end 2006 when the debt level was $9.9 million. This means that the Company has generated over $9.3 million of free cash flow from operations over the past 4 years. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | LCD sales continue to dominate our business and the Company sold over 101,000 LCDs in 2010 a decline of 3 percent compared to almost 104,000 sold in 2009. The Company sold its 450,000th LCD in December 2010. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company was granted two LCD patents. One of these patents has royalty income potential. We have another 5 LCD patents filed. This is a continuation of our push to broaden the scope of our Intellectual Property (IP). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company has embarked on two new directions, namely entering the new Illinois Video Lottery Terminal market and developing new products using new technologies including digital signage, 3D, flexible CDs and OLED products among others. The two opportunities that have significant potential for Wells Gardner for the next several years. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | LCD manufacturing in Mainland China and the US, primarily for the gaming industry. |
|--------------------|------------------------------------------------------------------------------------|

| ·   | Preparing to distribute products to the Illinois Video Lottery Terminal market |
|--------------------|--------------------------------------------------------------------------------|

| ·   | Distributing Wells-Gardner’s and other manufacturers’ parts to casinos throughout North America and Central America, South America, Europe, South East Asia including Macau,  Middle East and Africa.. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Servicing video displays and other game parts for casinos in North America |
|--------------------|----------------------------------------------------------------------------|

----

----

----

----

----

| Payments Due In year Ending December 31, |                         |
|------------------------------------------|------------------------------|
|                                     |                         |   |   |   |   |   |   |
| (in $000’s)                        | Total                        | 2011 | 2012 | 2013 | 2014 | 2015 | 2016+ |
| Note Payable (Note 4)                    | $    565 | $ --- | $ --- | $ 565 | $  --- | $ --- | $ --- |
| Operating Leases (Note 11)               | $ 1,599                      | $ 725 | $ 659 | $ 201 | $   11 | $   3 | $ --- |
|                                     | $ 2,164                      | $ 725 | $ 659 | $ 766 | $   11 | $   3 | $ --- |

----

|                                                                      |   | 2010   |   |   | 2009   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| ASSETS                                                                    |   |   |   |   |   |   |
| Current Assets:                                                           |   |   |   |   |   |   |
| Cash                                                                      |   | $      | 29     |   |   | $      | 131 |   |
| Accounts receivable, net of allowances of $256 in 2010 & $248 in 2009 |   |   | 4,761  |   |   |   | 7,148 |   |
| Accounts receivable, subcontractor                                        |   |   | 2,956  |   |   |   | 6,167 |   |
| Inventory                                                                 |   |   | 8,600  |   |   |   | 8,008 |   |
| Prepaid expenses & other assets                                       |   |   | 676    |   |   |   | 1,080 |   |
| Total current assets                                                      |   | $      | 17,022 |   |   | $      | 22,534 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| Property, Plant & Equipment (at cost):                                |   |   |   |   |   |   |   |   |
| Leasehold improvements                                                    |   |   | 533    |   |   |   | 389 |   |
| Machinery, equipment & software                                       |   |   | 8,759  |   |   |   | 8,665 |   |
| less: Accumulated depreciation & amortization                         |   |   | (8,871 | )      |   |   | (8,789 | ) |
| Property, plant & equipment, net                                      |   | $      | 421    |   |   |   | 265 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| Other Assets:                                                             |   |   |   |   |   |   |   |   |
| Deferred tax asset, net                                                   |   |   | 177    |   |   |   | 177 |   |
| Goodwill                                                                  |   |   | 1,329  |   |   |   | 1,329 |   |
| Total other assets                                                        |   | $      | 1,506  |   |   | $      | 1,506 |   |
| Total Assets                                                              |   | $      | 18,949 |   |   | $      | 24,305 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| LIABILITIES & SHAREHOLDERS' EQUITY                                    |   |   |   |   |   |   |   |   |
| Current Liabilities:                                                      |   |   |   |   |   |   |   |   |
| Accounts payable                                                          |   |   | 878    |   |   |   | 1,345 |   |
| Accounts payable, subcontractor                                           |   |   | 1,165  |   |   |   | 4,327 |   |
| Accrued expenses                                                          |   |   | 892    |   |   |   | 1,293 |   |
| Total current liabilities                                                 |   | $      | 2,935  |   |   | $      | 6,965 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| Long-Term Liabilities:                                                    |   |   |   |   |   |   |   |   |
| Note payable                                                              |   |   | 565    |   |   |   | 2,178 |   |
| Total long-term liabilities                                               |   | $      | 565    |   |   | $      | 2,178 |   |
| Total Liabilities                                                         |   | $      | 3,500  |   |   | $      | 9,143 |   |
|                                                                      |   |   |   |   |   |   |   |   |
| Shareholders' Equity:                                                     |   |   |   |   |   |   |   |   |
| Common shares:                                                            |   |   |   |   |   |   |   |   |
| $1 par value; 25,000,000 shares authorized;                               |   |   |   |   |   |   |   |   |
| 10,988,219 shares issued and outstanding at December 31, 2010             |   |   |   |   |   |   |   |   |
| 10,942,013 shares issued and outstanding at December 31, 2009             |   |   | 10,988 |   |   |   | 10,421 |   |
| Capital in excess of par value                                            |   |   | 5,515  |   |   |   | 5,968 |   |
| Accumulated deficit                                                       |   |   | (916   | )      |   |   | (1,107 | ) |
| Unearned compensation                                                     |   |   | (138   | )      |   |   | (120 | ) |
| Total Shareholders' Equity                                                |   | $      | 15,449 |   |   | $      | 15,162 |   |
| Total Liabilities & Shareholders’ Equity                        |   | $      | 18,949 |   |   | $      | 24,305 |   |

----

|                                       |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|--------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Net sales                                  |   | $      | 45,704     |   |   | $      | 52,526     |   |   | $ | 53,839 |   |
| Cost of sales                              |   |   | 37,308     |   |   |   | 43,378     |   |   |   | 45,483 |   |
| Gross margin                               |   |   | 8,396      |   |   |   | 9,148      |   |   |   | 8,356 |   |
| Engineering, selling & administrative  |   |   | 8,033      |   |   |   | 7,771      |   |   |   | 7,774 |   |
| Operating earnings                         |   |   | 363        |   |   |   | 1,377      |   |   |   | 582 |   |
| Other expense (income):                    |   |   |       |   |   |   |       |   |   |   |   |   |
| Interest                                   |   |   | 184        |   |   |   | 213        |   |   |   | 356 |   |
| Joint Venture income                       |   |   | 0          |   |   |   | (1         | )      |   |   | (3 | ) |
| Other (income) expense                     |   |   | (5         | )      |   |   | 170        |   |   |   | 0 |   |
| Earnings before income tax                 |   |   | 184        |   |   |   | 995        |   |   |   | 229 |   |
| Income tax (benefit) expense               |   |   | (6         | )      |   |   | (102       | )      |   |   | 25 |   |
| Net earnings                               |   | $      | 190        |   |   | $      | 1,097      |   |   | $ | 204 |   |
|                                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic net earnings per common share        |   | $      | 0.02       |   |   | $      | 0.10       |   |   | $ | .02 |   |
|                                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Diluted net earnings per common share      |   | $      | 0.02       |   |   | $      | 0.10       |   |   | $ | .02 |   |
|                                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic common weighted shares outstanding   |   |   | 10,982,985 |   |   |   | 10,937,883 |   |   |   | 10,867,267 |   |
| Diluted common weighted shares outstanding |   |   | 10,989,450 |   |   |   | 10,937,883 |   |   |   | 10,867,267 |   |

----

|                                        |   |   |   |   | Capital In |   |   |        |   |   |         |   |   | Total         |   |
|---------------------------------------------|--------|--------|--------|--------|------------|--------|--------|-------------|--------|--------|--------------|--------|--------|---------------|--------|
|                                        |   | Common |   |   | Excess Of  |   |   | Accumulated |   |   | Unearned     |   |   | Shareholders' |   |
|                                        |   | Shares |   |   | Par Value  |   |   | Deficit     |   |   | Compensation |   |   | Equity        |   |
| December 31, 2007                           |   | $      | 9,835  |   |       | $      | 6,503  |        |   | $      | (2,408       | )      |   | $             | (227   | ) |   | $ | 13,704 |   |
|                                        |   |   |   |   |       |   |   |        |   |   |         |   |   |          |   |   |   |   |   |   |
| Net earnings                                |   |   |   |   |       |   |   |        |   |   | 204          |   |   |          |   |   |   |   | 204 |   |
| Stock dividend issued                       |   |   | 493    |   |       |   | (493   | )           |   |   |         |   |   |          |   |   |   |   | 0 |   |
| Issuance / forfeiture of stock awards (net) |   |   | 20     |   |       |   | (3     | )           |   |   |         |   |   |          | (17    | ) |   |   | 0 |   |
| Amortization of unearned compensation       |   |   |   |   |       |   |   |        |   |   |         |   |   |          | 74     |   |   |   | 74 |   |
| December 31, 2008                           |   | $      | 10,349 |   |       | $      | 6,007  |        |   | $      | (2,204       | )      |   | $             | (171   | ) |   | $ | 13,981 |   |
|                                        |   |   |   |   |       |   |   |        |   |   |         |   |   |          |   |   |   |   |   |   |
| Net earnings                                |   |   |   |   |       |   |   |        |   |   | 1,097        |   |   |          |   |   |   |   | 1,097 |   |
| Issuance / forfeiture of stock awards (net) |   |   | 72     |   |       |   | (39    | )           |   |   |         |   |   |          | (33    | ) |   |   | 0 |   |
| Amortization of unearned compensation       |   |   |   |   |       |   |   |        |   |   |         |   |   |          | 84     |   |   |   | 84 |   |
| December 31, 2009                           |   | $      | 10,421 |   |       | $      | 5,968  |        |   | $      | (1,107       | )      |   | $             | (120   | ) |   | $ | 15,162 |   |
|                                        |   |   |   |   |       |   |   |        |   |   |         |   |   |          |   |   |   |   |   |   |
| Net earnings                                |   |   |   |   |       |   |   |        |   |   | 190          |   |   |          |   |   |   |   | 190 |   |
| Stock dividend issued                       |   |   | 523    |   |       |   | (523   | )           |   |   |         |   |   |          |   |   |   |   | 0 |   |
| Issuance / forfeiture of stock awards (net) |   |   | 32     |   |       |   | 57     |        |   |   |         |   |   |          | (89    | ) |   |   | 0 |   |
| Stock options exercised                     |   |   | 12     |   |       |   | 12     |        |   |   |         |   |   |          |   |   |   |   | 24 |   |
| Amortization of unearned compensation       |   |   |   |   |       |   |   |        |   |   |         |   |   |          | 72     |   |   |   | 72 |   |
| December 31, 2010                           |   | $      | 10,988 |   |       | $      | 5,515  |        |   | $      | (916         | )      |   | $             | (138   | ) |   | $ | 15,449 |   |

----

|                                                   |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cash flows from operating activities:                  |   |   |   |   |   |   |   |   |   |
| Net earnings                                           |   | $      | 190    |   |   | $      | 1,097  |   |   | $ | 204 |   |
| Adjustments to reconcile net earnings to net           |   |   |   |   |   |   |   |   |   |   |   |   |
| cash provided by operating activities:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                          |   |   | 134    |   |   |   | 268    |   |   |   | 171 |   |
| Bad debt expense                                       |   |   | 26     |   |   |   | 101    |   |   |   | 31 |   |
| Amortization of unearned compensation                  |   |   | 72     |   |   |   | 84     |   |   |   | 74 |   |
| Share of earnings of joint venture                     |   |   | 0      |   |   |   | (1     | )      |   |   | (2 | ) |
| Deferred income tax                                    |   |   | 0      |   |   |   | (122   | )      |   |   | 0 |   |
| Changes in current assets & liabilities:           |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable, net                               |   |   | 2,361  |   |   |   | (960   | )      |   |   | (299 | ) |
| Inventory                                              |   |   | (591   | )      |   |   | 3,778  |   |   |   | 1,127 |   |
| Prepaid expenses & other                           |   |   | 403    |   |   |   | (167   | )      |   |   | 393 |   |
| Accounts payable, net                                  |   |   | (467   | )      |   |   | (449   | )      |   |   | 166 |   |
| Due to/from subcontractor                              |   |   | 49     |   |   |   | (851   | )      |   |   | (389 | ) |
| Accrued expenses                                       |   |   | (401   | )      |   |   | 227    |   |   |   | (69 | ) |
| Net cash provided by operating activities              |   | $      | 1,776  |   |   | $      | 3,005  |   |   | $ | 1,407 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows (used in) provided by investing activities: |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital dividend from Joint Venture                    |   |   | 0      |   |   |   | 9      |   |   |   | 123 |   |
| Additions to property, plant & equipment, net      |   |   | (290   | )      |   |   | (60    | )      |   |   | (121 | ) |
| Net cash (used in) provided by investing activities    |   | $      | (290   | )      |   | $      | (51    | )      |   | $ | 2 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                  |   |   |   |   |   |   |   |   |   |   |   |   |
| (Repayments) from note payable                         |   |   | (1,613 | )      |   |   | (3,007 | )      |   |   | (1,524 | ) |
| Proceeds from stock issued, options exercised          |   |   |   |   |   |   |   |   |   |   |   |   |
| & employee stock purchase plan                     |   |   | 25     |   |   |   | 0      |   |   |   | 0 |   |
| Net cash (used in) financing activities                |   | $      | (1,588 | )      |   | $      | (3,007 | )      |   | $ | (1,524 | ) |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (decrease) in cash                                 |   |   | (102   | )      |   |   | (53    | )      |   |   | (115 | ) |
| Cash at beginning of year                              |   |   | 131    |   |   |   | 184    |   |   |   | 299 |   |
| Cash at end of year                                    |   | $      | 29     |   |   | $      | 131    |   |   | $ | 184 |   |
|                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental cash flows disclosure:                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes paid                                      |   | $      | 0      |   |   | $      | 0      |   |   | $ | 33 |   |
| Interest paid                                          |   | $      | 184    |   |   | $      | 213    |   |   | $ | 356 |   |

----

----

----

|                     |   | December 31, |
|--------------------------|--------|--------------|
| (in $000's)              |   | 2010         |   | 2009 |   | 2008 |
| Raw materials            | $      | 3,097        | $ | 3,112 | $ | 3,706 |
| Work in progress         | $      | 0            | $ | 0 | $ | 52 |
| Intransit finished goods | $      | 948          | $ | 1,116 | $ | 1,593 |
| Finished goods           | $      | 4,555        | $ | 3,780 | $ | 6,435 |
| Total                    | $      | 8,600        | $ | 8,008 | $ | 11,786 |

----

|                             |   |    |    |   |             |   |   | Weighted average |   |   | Aggregate |   |
|----------------------------------|--------|---------|---------|--------|------------------|--------|--------|------------------|--------|--------|-----------|--------|
|                             |   |    |    |   | Weighted average |   |   | Remaining        |   |   | Intrinsic |   |
|                             |   | Options |    |   | exercise price   |   |   | Contractual Life |   |   | Value     |   |
| Outstanding at beginning of year |   |    | 50,878  |   |             | $      | 1.92   |             |   |   |      |   |   |   |
| Granted                          |   |    | 0       |   |             | $      | -      |             |   |   |      |   |   |   |
| Forfeited                        |   |    | (5,495  | )      |             | $      | 2.07   |             |   |   |      |   |   |   |
| Exercised                        |   |    | (12,656 | )      |             | $      | 1.93   |             |   |   |      |   |   |   |
| Outstanding, December 31, 2010   |   |    | 32,727  |   |             | $      | 1.88   |             |   |   | 2.0       |   |   |   | 11,127 |   |
|                             |   |    |    |   |             |   |   |             |   |   |      |   |   |   |   |   |
| Exercisable, December 31, 2010   |   |    | 32,727  |   |             | $      | 1.88   |             |   |   | 2.0       |   |   |   | 11,127 |   |

|                          |   |   |    |   | Weighted average |   |
|-------------------------------|--------|--------|---------|--------|------------------|--------|
|                          |   |   |    |   | Grant Date       |   |
|                          |   | Shares |    |   | Fair Value       |   |
| Unvested at December 31, 2009 |   |   | 174,232 |   |             | $      | 1.62 |   |
| Granted                       |   |   | 47,800  |   |             | $      | 2.20 |   |
| Vested                        |   |   | (63,105 | )      |             | $      | 2.06 |   |
| Forfeited                     |   |   | (13,727 | )      |             | $      | 1.63 |   |
| Unvested, December 31, 2010   |   |   | 145,200 |   |             | $      | 1.62 |   |

|                        |   | December 31, |   |
|-----------------------------|--------|--------------|--------|
| (in $000's)                 |   | 2010         |   |   | 2009 |   |
| Payroll & related costs |   | $            | 218    |   |   | $ | 497 |   |
| Sales commissions           |   | $            | 61     |   |   | $ | 71 |   |
| Warranty                    |   | $            | 75     |   |   | $ | 90 |   |
| Other accrued expenses      |   | $            | 538    |   |   | $ | 635 |   |
| Total                       |   | $            | 892    |   |   | $ | 1,293 |   |

----

|                   |   | Year Ended December 31, |   |
|------------------------|--------|-------------------------|--------|
| Warranty Reserve:      |   | 2010                    |   |   | 2009 |   |
| Beginning Balance      |   | $                       | 90     |   |   | $ | 183 |   |
| Additions              |   | $                       | 114    |   |   | $ | 160 |   |
| Payments               |   | $                       | (129   | ) |   | $ | (253 | ) |
| Balance at end of year |   | $                       | 75     |   |   | $ | 90 |   |

| (in $000's)                                                  |   | 2010 |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------|--------|------|--------|--------|--------|--------|--------|--------|--------|
| Computed expected tax expense                                |   | $    | 62     |   |   | $      | 338    |   |   | $ | 70 |   |
| State income tax expense, net of Federal tax effect          |   | $    | 9      |   |   | $      | 48     |   |   | $ | 10 |   |
| Distribution from Joint Venture                              |   | $    | 0      |   |   | $      | 4      |   |   | $ | 48 |   |
| Reduction of valuation allowance                             |   | $    | 0      |   |   | $      | (122   | )      |   | $ | 0 |   |
| Expiration of general business credit carry-forward          |   | $    | 129    |   |   | $      | 0      |   |   | $ | 0 |   |
| Other, net  (primarily permanent differences)      |   | $    | (37    | )      |   | $      | 64     |   |   | $ | 92 |   |
| Change in valuation allowance (regarding utilization of NOL) |   | $    | (169   | )      |   | $      | (434   | )      |   | $ | (195 | ) |
| Income Tax Expense (Benefit)                                 |   | $    | (6     | )      |   | $      | (102   | )      |   | $ | 25 |   |

|                                                              |   | December 31: |   |
|-------------------------------------------------------------------|--------|--------------|--------|
| (in $000's)                                                       |   | 2010         |   |   | 2009 |   |   | 2008 |   |
| Deferred tax assets:                                              |   |         |   |   |   |   |   |   |   |
| Allowance for doubtful accounts                                   |   | $            | 99     |   |   | $ | 96 |   |   | $ | 62 |   |
| Warranty reserve                                                  |   | $            | 29     |   |   | $ | 35 |   |   | $ | 71 |   |
| Inventory reserve                                                 |   | $            | 694    |   |   | $ | 990 |   |   | $ | 1,061 |   |
| Property, plant, equipment and software, principally depreciation |   | $            | 94     |   |   | $ | 87 |   |   | $ | 15 |   |
| Net operating loss carry forwards *                               |   | $            | 2,322  |   |   | $ | 2,118 |   |   | $ | 2,498 |   |
| Alternative minimum tax credit carry forwards                     |   | $            | 136    |   |   | $ | 74 |   |   | $ | 74 |   |
| General business credit carry forwards                            |   | $            | 0      |   |   | $ | 129 |   |   | $ | 129 |   |
| Other                                                             |   | $            | 60     |   |   | $ | 52 |   |   | $ | 75 |   |
| Total gross deferred tax assets                                   |   | $            | 3,434  |   |   | $ | 3,581 |   |   | $ | 3,985 |   |
| Less valuation allowance                                          |   | $            | (2,844 | ) |   | $ | (3,013 | ) |   | $ | (3,569 | ) |
| Total deferred tax assets                                         |   | $            | 590    |   |   | $ | 568 |   |   | $ | 416 |   |
| Deferred tax liabilities:                                         |   |         |   |   |   |   |   |   |   |   |   |   |
| Property, plant, equipment and software, principally depreciation |   | $            | 0      |   |   | $ | 0 |   |   | $ | 0 |   |
| Goodwill                                                          |   | $            | 413    |   |   | $ | 391 |   |   | $ | 361 |   |
| Total deferred tax liabilities                                    |   | $            | 413    |   |   | $ | 391 |   |   | $ | 361 |   |
| Net deferred taxes                                                |   | $            | 177    |   |   | $ | 177 |   |   | $ | 55 |   |

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| (in $000's except for per share data)               |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Basic earnings  per common share:         |   |   |   |   |   |   |   |   |   |
| Net earnings                                        |   | $      | 190    |   |   | $      | 1,097  |   |   | $ | 204 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding          |   |   | 10,983 |   |   |   | 10,938 |   |   |   | 10,867 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net earnings per common share                 |   | $      | 0.02   |   |   | $      | 0.10   |   |   | $ | 0.02 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per common share:                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                                        |   | $      | 190    |   |   | $      | 1,097  |   |   | $ | 204 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average common shares outstanding          |   |   | 10,983 |   |   |   | 10,938 |   |   |   | 10,867 |   |
| Add:  Effect of dilutive stock options    |   |   | 6      |   |   |   | 0      |   |   |   | 0 |   |
| Adjusted weighted-average common shares outstanding |   |   | 10,989 |   |   |   | 10,938 |   |   |   | 10,867 |   |
|                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net earnings per common share               |   | $      | 0.02   |   |   | $      | 0.10   |   |   | $ | 0.02 |   |

----

| Years ending December 31 |   | (in $000's) |   |
|--------------------------|--------|-------------|--------|
| 2011                     |   | $           | 725    |   |
| 2012                     |   | $           | 659    |   |
| 2013                     |   | $           | 201    |   |
| 2014                     |   | $           | 11     |   |
| 2015                     |   | $           | 3      |   |
| Thereafter               |   | $           | 3      |   |
|                     |   | $           | 1,602  |   |

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|                                  |   | 2010   |
|---------------------------------------|--------|--------|
| (in $000's except per share data)     |   | First  |   | Second |   | Third |   | Fourth |
| Net sales                             | $      | 11,576 | $ | 15,388 | $ | 11,031 | $ | 7,709 |
| Gross margin                          | $      | 2,142  | $ | 2,820 | $ | 1,961 | $ | 1,473 |
| Net earnings (loss)                   | $      | 105    | $ | 441 | $ | (176) | $ | (180) |
| Basic net earnings (loss) per share   | $      | 0.01   | $ | 0.04 | $ | (0.02) | $ | (0.02) |
| Diluted net earnings (loss) per share | $      | 0.01   | $ | 0.04 | $ | (0.02) | $ | (0.02) |
|                                  |   |   |   |   |   |   |   |   |
|                                  |   | 2009   |
| (in $000's except per share data)     |   | First  |   | Second |   | Third |   | Fourth |
| Net sales                             | $      | 11,604 | $ | 14,376 | $ | 13,446 | $ | 13,100 |
| Gross margin                          | $      | 2,083  | $ | 2,601 | $ | 2,391 | $ | 2,072 |
| Net earnings                          | $      | 103    | $ | 484 | $ | 266 | $ | 244 |
| Basic net earnings per share          | $      | 0.01   | $ | 0.04 | $ | 0.03 | $ | 0.02 |
| Diluted net earnings per share        | $      | 0.01   | $ | 0.04 | $ | 0.03 | $ | 0.02 |

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| BOARD OF DIRECTORS                       |   | EXECUTIVE OFFICERS                      |
|------------------------------------------|--------|-----------------------------------------|
|                                     |   |                                    |
| Anthony Spier                            |   | Anthony Spier                           |
| Chairman, President                      |   | Chairman, President                     |
| & Chief Executive Officer            |   | & Chief Executive Officer           |
|                                     |   |                                    |
| Marshall L. Burman                       |   | James F. Brace                          |
| Counsel to                               |   | Executive Vice President, Secretary,    |
| Wildman, Harrold, Allen & Dixon, LLP |   | Treasurer & Chief Financial Officer |
|                                     |   |                                    |
| Merle H. Banta                           |   |                                    |
| Chairman & Chief Executive Officer   |   |                                    |
| BHH Management, Inc.                     |   |                                    |
|                                     |   |                                    |
| Frank R. Martin                          |   |                                    |
| Attorney                                 |   |                                    |
| Righeimer, Martin & Cinquino, P.C.   |   |                                    |

| CORPORATE INFORMATION                                                                                                                                                                                                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                        |   |   |
| ANNUAL MEETING                                                                                                                                                                                                              |   | BANKER |
| The Annual Meeting of Shareholders will take place at 10:00 a.m. on Tuesday, May 10, 2011 at the corporate offices of the Company.                                                                                          |   | Wells Fargo Bank N.A.Milwaukee, Wisconsin |
|                                                                                                                                                                                                                        |   |   |
| FORM 10-K                                                                                                                                                                                                                   |   | AUDITOR |
| A copy of the Company’s annual report on Form 10-K, as filed with the Securities and Exchange Commission, is available without charge upon written request to James F. Brace at the corporate offices of the Company. |   | Blackman Kallick, LLPChicago, Illinois |
|                                                                                                                                                                                                                        |   |   |
| TRANSFER AGENT                                                                                                                                                                                                              |   | COUNSEL |
| StockTrans | a Broadridge Company44 W. Lancaster AvenueArdmore, PA 19003Telephone: 1-800-733-1121Direct: 1-610-649-7300Fax: 1-610-649-7302www.stocktrans.com                                                                |   | Gould & Ratner, LLPChicago, Illinois |

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