WELLS-GARDNER ELECTRONICS CORPORATION
                           1997 ANNUAL REPORT


Corporate Profile


Founded in 1925, Wells-Gardner Electronics Corporation is an ISO 9001 
certified video products corporation which designs, manufactures and 
assembles color video monitors for the coin-operated video games, 
lottery and gaming machines, leisure and fitness, service, automotive 
and display markets.


     Table of Contents

     Selected Financial Data & Common Share Market             
     Price....................................                 1
     President's Report.......................                 2
     Management's Discussion & Analysis.......                 4
     Financial Information....................                 6
     Notes to Financial Statements............                 9
     Independent Auditors'Report..............                 15
<PAGE>
<TABLE>
Selected Financial Data
Years ended December 31, (In thousands except per-share data)

                                         1997       1996       1995       1994       1993
<S>                                    <C>        <C>        <C>        <C>        <C>
Earnings Data:
Net sales                              $42,989    $36,668    $28,301    $33,435    $36,011
Earnings (loss) from operations
 excluding special charges, sale of 
 fixed assets & accounting change      $ 1,124    $   563    $  (375)   $  (407)   $(2,046)
Special charges                            ---        ---    $  (886)   $(1,201)       ---
Gain on sale of fixed assets               ---        ---    $   358        ---        ---
Cumulative effect of change in 
 accounting principle                      ---        ---        ---        ---    $   102
Net earnings (loss)                    $   775    $   403    $(1,059)   $(1,735)   $(1,779)

Basic Per-Share Data:                  
Earnings (loss) from continuing
 operations                            $  0.19    $  0.10    $( 0.26)   $( 0.45)   $( 0.49)
Cumulative effect of change in 
accounting principle                       ---        ---        ---        ---    $  0.03
Net earnings (loss)                    $  0.19    $  0.10    $( 0.26)   $( 0.45)   $( 0.46)

Dilutive Per-Share Data:
Earnings (loss) from continuing      
 operations                            $  0.18    $  0.10    $( 0.26)   $( 0.45)   $( 0.49)
Cumulative effect of change in
 accounting principle                      ---        ---        ---        ---    $  0.03
Net earnings (loss)                    $  0.18    $  0.10    $( 0.26)   $( 0.45)   $( 0.46)

Balance Sheet Data:
Inventory                              $ 9,257    $ 7,344    $ 8,930    $ 5,831    $ 6,989
Working capital                        $10,915    $ 9,017    $10,213    $ 7,561    $ 9,510
Total assets                           $17,520    $14,125    $16,570    $15,619    $16,085
Debt                                   $ 1,800    $ 1,300    $ 3,125    $ 1,925    $ 1,200
Shareholders' equity                   $11,385    $10,095    $ 9,633    $10,367    $12,108
</TABLE>


Common Share Market Price


The company's common shares are traded on the American Stock Exchange 
under the symbol WGA. On December 31, 1997, there were approximately 750
holders of record of the common shares. No dividends were paid in 1997 
or 1996. High and low sales prices for the last two years were:

<TABLE>
                           1997 Prices      1996 Prices

Quarter ended:             High     Low     High    Low
<S>                        <C>     <C>     <C>     <C>
March 31,                  $4.50   $3.38   $4.25   $2.50
June 30,                   $4.38   $3.38   $4.88   $3.88
September 30,              $6.88   $4.00   $4.63   $3.13
December 31,               $7.19   $5.00   $4.50   $3.25
</TABLE>
<PAGE>
PRESIDENT'S REPORT

TO OUR SHAREHOLDERS, CUSTOMERS, SUPPLIERS AND EMPLOYEES:

We are pleased to report to you that Wells-Gardner reported a profit for
the second consecutive  year, a feat  not accomplished since  1988.   In
addition, the Company reported  a profit for 7  of the last 8  quarters,
demonstrating a consistent earnings performance.  There continued to  be
many positive accomplishments such  as improvements in productivity  and
quality and the release of a dozen new and exciting products,  including
a new non-monitor product.

Strategic Planning For The Future
Your management and Board of Directors have spent considerable effort in
identifying the long term prospects for the Company. New and significant 
goals  have been established  and we are proceeding to implement actions 
which  will allow us to continue  the  current trend of increasing sales 
volume and profits.

     * Key to this strategy is a commitment to be the ``best-in-class''
       quality supplier in our served markets.   The Company obtained a
       further 3 years certification  through the year 2000  of the ISO
       9001 accreditation.  As  has been previously mentioned,  we were
       the first open-frame monitor manufacturer to obtain this quality
       certification and it has been a  valuable marketing advantage in
       selling to several highly prestigious accounts.   During 1997 we
       employed a very experienced Director of  Quality, who is working
       with our consultants to lead the  effort with increased training
       of our production and  engineering personnel and the  linking of
       quality and  price with  our key  electronics vendors.   We  are
       extremely pleased with the results thus far.

     * Even though our  plans provide  for significant  internal growth
       within our existing businesses,  we recognize the need  to enter
       other  growth  markets,  probably  through  the  acquisition  of
       another Company.   Our  goal  is to  reach  one hundred  million
       dollars in sales by December 31, 2000!  The  motto which we have
       adopted is ``100 by 2000.''

Wells-Gardner Released 12 New Products In 1997
In 1995, the Company embarked upon a strategic program of releasing  new
products at the  rate of approximately  one per month.   In  the last  3
years, Wells-Gardner has brought a total  of 32 new products to  market,
of which  12 were  released in  1997.   The  Company has  implemented  a
strategic initiative to use offshore engineering groups as a significant
resource in research and development.  Management's policy is to develop
new products  from marketing  specification to  release to  the  market,
including comprehensive beta-site and design verification testing within
12 months, which has been reduced from 36 months in 1994.

The new products included the release of the new WG2 line of high  value
monitors  manufactured  offshore,  the  new  generation  of  large  size
standard resolution and medium resolution  monitors, the new high  value
VGA monitors, the 33'' VGA product and the new Presentation Monitor.

Approximately 94 percent of 1997 revenues  were derived from the 32  new
products released since January 1995.
<PAGE>
Operations Improve Again in 1997
Net earnings almost doubled to 19 cents per share from 10 cents in 1996.
This represents the fourth  consecutive year of improved  profitability.
Also 1997 sales were $43.0 million up 17% from 1966 and up 52% over  the
1995 sales level with  the growth being derived  from almost all  market
segments. In  addition,  we  have  set  the  stage  for  further  margin
improvements through our release of new products during the year.

Our balance sheet remains strong.  The current ratio improved 3:52 to  1
with inventory  turns declining  slightly to  3.93  from 4.28  in  1996.
Although receivable days outstanding increased to 52 days, we still out-
performed industry averages.  Your shareholder equity improved to $2.70.

Letter Of Intent To Acquire Data Ray Corporation
On February 18, 1998 Wells-Gardner announced that it had signed a letter
of intent to acquire 100 percent of Data Ray Corporation of Westminster,
Colorado for cash. Data Ray Corporation is the number 1 manufacturer  of
medical monitors in the Unites States with estimated sales of about  $25
million. Wells-Gardner's annual sales for a  full year will increase  by
58 percent to about $68 million. We anticipate closing this  transaction
by the end of April, 1998.

This is a key step to implement our strategy of ``100  by 2000." We also
anticipate making  further acquisitions  in the  medical market  in  the
future.

On a personal note, I would like to note the retirement of Allan Gardner
in August 1997 from your Board  of Directors.  All  of us will miss  his
special and unique contribution to the Company that bears his name.

We thank all  of you  for your  continued support  as we  embark on  our
course to meet our strategic goals for the year 2000 and beyond.


Anthony Spier
Chairman of the Board, President
and Chief Executive Officer

March 13, 1998
<PAGE>

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & 
RESULTS OF OPERATIONS

Results of Operations
The following table sets forth the  percentage of net sales  represented
by each line item presented in the Company's Statements of Operations as
of December 31.
<TABLE>
                                             Percent of Net Sales

                                     1997           1996           1995
<S>                                 <C>            <C>            <C>
Net Sales......................     100.0%         100.0%         100.0%

Cost of Sales..................      84.2%          84.4%          86.3%

Gross Profit...................      15.8%          15.6%          13.7%

Engineering, Selling & 
 Administrative................      13.2%          14.1%          15.1%

Operating Income (Loss)........       2.6%           1.5%          (1.4%)

Other Expense (net)............        .8%            .4%            .5%

Gain on Sale of Fixed Assets...       ---            ---           (1.3%)

Special Charge.................       ---            ---            3.1%

Net Earnings (Loss)............       1.8%           1.1%          (3.7%)
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales increased 17.2% to $42,989,000 in 1997 compared to $36,668,000
in 1996.  The 1997 increase was attributed to sales growth primarily  in
the gaming  and service  segments and  the release  of 12  new  products
during the year.

Gross profit  for 1997  was $6,801,000  or 15.8%  of sales  compared  to
$5,721,000 or 15.8%  of sales in  1996.  Gross  margin improved for  the
fourth consecutive year as the Company  introduced the WG2 line of  high
value monitors manufactured in Asia and the release of new products.

Engineering, selling and administrative expenses decreased .9% of  sales
to $5,677,000 in 1997 compared to $5,158,000 in 1996.  The 1997  results
include an increase in the Company's provision for doubtful accounts  by
$154,000 to fully reserve for a  customer in financial difficulties  and
additional sales commissions paid  on the increased  sales volume.   The
percentage decrease is  reflective of the  Company's continued focus  on
increasing net sales without adding proportionate overhead expenses.

Operating income for 1997 was $1,124,000  compared to $563,000 in  1996,
an increase of 99.6%.  Other expense (net) increased to $339,000 in 1997
compared to  $160,000 in  1996.   The  Company  recorded an  income  tax
provision of $10,000 in 1997, but  did not record an income tax  expense
for 1996 due  to the  Company's utilization  of its  net operating  loss
carryforward.  As of December 31, 1997, the Company has available a  net
operating loss carryforward of approximately $2.44 million.
<PAGE>
As of  December 15,  1997, the  Company adopted  Statement of  Financial
Accounting Standards  (SFAS)    No.  128,  ``Earnings  Per  Share''  and
restated previously reported earnings per share as required.   Statement
No. 128 simplifies the standards for  computing earnings per share.   It
replaces  the  presentation  of  primary  earnings  per  share  with   a
presentation of  basic  earnings  per share.    It  also  requires  dual
presentation of basic and diluted earnings per share on the face of  the
income statement  and requires  a reconciliation  of the  numerator  and
denominator of the basic earnings per share computation to the numerator
and denominator of the  diluted earnings per  share computation.   Also,
during 1997,  the  Company  adopted Statement  of  Financial  Accounting
Standards (SFAS)  No. 130, ``Comprehensive Income.''  Statement No. 130
establishes standards  for the  reporting and  display of  comprehensive
income and its components (revenues, expenses, gains and losses).   This
Statement requires that  all items that  are required  to be  recognized
under accounting  standards as  components  of comprehensive  income  be
reported in  a  financial statement  that  is displayed  with  the  same
prominence as other financial statements.  These new accounting standard
only affects  financial  statement  presentation and  will  not  have  a
material impact on the Company.

Net income  for 1997  was  $775,000 compared  to  $403,000 in  1996,  an
increase of 92.3%.  For 1997, basic earnings per share were 19 cents and
diluted earnings per share  were 18 cents,  whereas 1996 reported  basic
and diluted earnings per share of 10 cents.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 29.6% to $36,668,000 in 1996 compared to $28,310,000
in 1995. The  1996 increase was  attributed to additional  sales to  the
amusement, display, INTRANET, leisure/fitness and service segments.

Gross profit  for 1996  was $5,721,000  or 15.6%  of sales  compared  to
$3,890,000 or 13.7% of sales in 1995. The increase in gross profit  from
1996 to 1995  was attributed  to increased  sales volume,  manufacturing
efficiencies and the Company's ongoing focus on cost reductions.

Engineering, selling and administrative expenses decreased 1.0% of sales
to $5,158,000 in 1996 compared to $4,265,000 in 1995.  The 1996  results
include an  increase  in new  product  development as  the  Company  has
released 32 new  products since  1995 and  additional sales  commissions
paid on  the  increased  sales  volume.    The  percentage  decrease  is
reflective of the Company's effort of increasing sales while maintaining
and controlling its costs.

Operating income for 1996 was $563,000 compared to an operating loss  of
($375,000) in 1995.  Other expense (net) was consistent as $160,000  was
incurred in 1996 compared to $156,000 in 1995.  During 1995, the Company
realized a gain of $358,000 on the sale of excess warehouse space.  Also
during 1995,  the Company  incurred a  charge of  $886,000 to  settle  a
warranty issue with  a major  customer.   The Company  has retained  the
customer, which remains  a significant contributor  to operations.   The
Company did not record an income tax expense in 1996 or 1995 due to  the
Company's utilization of its net operating loss carryforward.

Net income for 1996 was $403,000 compared to a net loss of  ($1,059,000)
in 1995.  As stated, the Company adopted FAS 128 which establishes basic
and diluted  earnings  per share  presentation.   For  1996,  basic  and
diluted earnings  per  share  were 10  cents  per  share,  whereas  1995
reported basic and diluted loss per share of (26) cents.
<PAGE>
Liquidity & Capital Resources
The Company's  financial  condition  and  liquidity  are  strong.    The
Company's 1997 current ratio remains strong at 3.52 compared to 4.30  in
1996.  Accounts receivable increased to  $5,232,000 in 1997 compared  to
$3,896,000 in 1996.  Days outstanding  were 52 days in 1997 compared  to
44 in 1996; both which  are far below the  industry average of 75  days.
Inventory has increased to $9,257,000 in 1997 compared to $7,344,000  in
1996.  The increase can be attributed to higher finished goods inventory
as the Company  began shipments of  its new WG2  product and higher  raw
materials as  the  Company made  a  special accommodation  for  a  large
customer.  Inventory turns were 3.93  in 1997 compared to 4.28 in  1996;
both exceed the  industry average of  3.40.   Capital expenditures  were
$296,000 in 1997 consistent with $296,000 in 1996.

Accounts payable  has  increased  to  $3,453,000  in  1997  compared  to
$1,763,000 in  1996.   This increase  is  attributed to  funding  higher
inventory at year-end.  Long-term  note payable increased to  $1,800,000
in 1997 compared to $1,300,000 in 1996.  This increase in borrowing  was
primarily for funding working capital and  higher sales growth.   During
1997, the Company extended its  long-term borrowing agreement until  the
year 2000.  Debt  to equity remains low  as it was 15.8%  at the end  of
1997 compared to 12.9% at year-end 1996. Shareholders' equity  increased
to $11,385,000 in  1997 from  $10,095,000 in  1996, and  the book  value
improved to $2.70 per share in 1997 compared to $2.48 per share in 1996.

Overall, the Company believes that its future financial requirements can
be met  with funds  generated from  operating  activities and  from  its
credit facility.

Inflation
Management believes that the effect of inflation on past operations  has
not been  significant and  anticipates that  inflation will  not have  a
significant impact on future operations.

Year 2000
Management believes that  the effect of  the year 2000  will not have  a
significant impact on future operations and is in the process of testing
and correcting  its systems  as well  as  contacting key  suppliers  and
customers as to the impact it may have on their operations.
<PAGE>
<TABLE>
Balance Sheets

                        ASSETS

                                                         December 31,
                                                     1997            1996
<S>                                               <C>             <C>
Current Assets:
  Cash & cash equivalents                         $   149,787     $    57,481
  Accounts receivable, net of allowances 
  of $264,300 in 1997, & $106,933 in 1996           5,231,835       3,895,805
  Note receivable (Note 2)                            374,507             ---
  Inventory (Note 3)                                9,256,552       7,343,843
  Prepaid expenses & other current assets             237,455         449,595
             Total current assets                 $15,250,136     $11,746,724

Property, Plant & Equipment (at cost):
  Land                                                206,144         206,144
  Land improvements                                    71,243          71,243
  Buildings & improvements                          3,521,753       3,458,860
  Machinery & equipment                             6,049,931       5,925,802
   Total property, plant & equipment                9,849,071       9,662,049
  Less accumulated depreciation                    (7,578,823)     (7,284,170)
         Property, plant & equipment, net         $ 2,270,248     $ 2,377,879
             Total assets                         $17,520,384     $14,124,603


                        LIABILITIES AND SHAREHOLDERS' EQUITY

                                                         December 31,
                                                     1997            1996
Current Liabilities:
  Accounts payable                                $ 3,453,251     $ 1,762,736
  Income taxes payable                                 10,000             ---
  Accrued expenses (Note 8)                           872,211         967,281
             Total current liabilities            $ 4,335,462     $ 2,730,017

Long-Term Liabilities:
  Note payable (note 9)                             1,800,000       1,300,000
             Total Liabilities                    $ 6,135,462     $ 4,030,017

Shareholders' Equity:
  Common shares, $1 par value; 25,000,000
   shares authorized; 4,215,083 shares issued 
   & outstanding at December 31, 1997
   4,068,426 shares issued & outstanding at 
   December 31, 1996                                4,215,083       4,068,426
   Capital in excess of par value                   1,424,496       1,158,308
   Retained earnings                                5,933,193       5,157,953
   Unearned compensation                             (187,850)       (290,101)
             Total shareholders' equity           $11,384,922     $10,094,586
             Total liabilities & shareholders'
             equity                               $17,520,384     $14,124,603

See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
                                     
                                            Year Ended December 31,
                                        1997         1996          1995
<S>                                <C>           <C>           <C>
Net sales                          $42,988,526   $36,667,774   $28,300,514
Cost & expenses:
  Cost of sales                     36,187,438    30,946,600    24,410,896
  Engineering, selling &
   administrative                    5,677,183     5,157,948     4,264,893
  Other expense (net) (Note 7)         338,665       160,124       155,806
  Gain on sale of fixed assets             ---           ---      (357,774)
  Special charge (Note 10)                 ---           ---       886,000
  Earnings (loss) before      
   income taxes                        785,240       403,102    (1,059,307)
  Income tax                            10,000           ---           ---
  Net earnings (loss)              $   775,240   $   403,102   $(1,059,307)
  
  Basic net earnings (loss)     
   per share                             $0.19         $0.10        $(0.26)

  Diluted net earnings (loss)
   per share                             $0.18         $0.10        $(0.26)

  Basic average common shares      
   outstanding                       4,128,524     4,061,860     4,015,717

  Diluted average common shares   
   outstanding                       4,316,368     4,153,762     4,015,717
</TABLE>
<TABLE>
Statements of Shareholders' Equity

                                              Capital in                                       Total
                               Common         excess of       Retained       Unearned       shareholders'
                               shares         par value       earnings      compensation       equity
<S>                         <C>             <C>             <C>             <C>             <C>
December 31, 1994           $ 3,957,736     $   959,545     $ 5,814,158     $  (364,500)    $10,366,939

Net loss                            ---             ---      (1,059,307)            ---      (1,059,307)
Stock options exercised         116,210         243,154             ---             ---         359,364
Stock repurchased & retired     (21,270)       (105,807)            ---             ---        (127,077)
Amortization of unearned
 compensation                       ---             ---             ---          93,500          93,500
December 31, 1995           $ 4,052,676     $ 1,096,892     $ 4,754,851     $  (271,000)    $ 9,633,419

Net earnings                        ---             ---         403,102             ---         403,102
Issuance of stock awards         12,000          54,854             ---         (57,304)          9,550
Stock options exercised           3,750           6,562             ---             ---          10,312
Amortization of unearned                   
 compensation                       ---             ---             ---          38,203          38,203
December 31, 1996           $ 4,068,426     $ 1,158,308     $ 5,157,953     $  (290,101)    $10,094,586

Net earnings                        ---             ---         775,240             ---         775,240
Issuance of stock awards         30,400          86,750             ---        (115,050)          2,100
Stock options exercised         116,257         179,438             ---             ---         295,695
Amortization of unearned                  
 compensation                       ---             ---             ---         217,301         217,301
December 31, 1997           $ 4,215,083     $ 1,424,496     $ 5,933,193     $  (187,850)    $11,384,922
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Statements of Cash Flows

                                                           Year Ended December 31,
                                                     1997           1996           1995
<S>                                              <C>            <C>            <C>
Cash flows from operating activities:
 Net earnings (loss)                             $   775,240    $   403,102    $ (1,059,307)
 Adjustments to reconcile net earnings
  (loss) to net cash provided by (used in)
  operating activities:
   Depreciation                                      403,989        463,859         489,432
   Net gain on the sale of fixed assets                  ---            ---        (357,774)
   Amortization of unearned compensation             217,301         38,203          93,500
 Changes in current assets & liabilities:
 Income tax receivable                                   ---         62,182         266,245
 Accounts receivable                              (1,336,030)      (355,459)      2,564,977
 Note receivable                                    (374,508)           ---             ---
 Inventory                                        (1,912,709)     1,586,096      (3,098,442)
 Prepaid expenses & other current assets             212,141        (74,748)         85,322
 Accounts payable                                  1,690,515     (1,314,041)      1,154,153
 Income taxes payable                                 10,000            ---             ---
 Accrued expenses                                    (95,071)       232,847        (765,309)
Net cash provided by (used in) operating
 activities                                      $  (409,132)   $ 1,042,041    $   (627,203)

Cash provided by (used in) investing 
 activities:
 Additions to property, plant & equipment, net      (296,357)      (296,052)       (346,467)
 Proceeds from the disposition of fixed assets           ---            ---         600,637
Net cash provided by (used in) investing
 activities                                      $  (296,357)   $  (296,052)   $    254,170                                
 
Cash provided by (used in) financing 
 activities:
 Borrowings (repayments) from note payable           500,000     (1,825,000)      1,200,000
 Proceeds from stock options exercised               297,795         19,862         359,364
 Stock repurchased & retired                             ---            ---        (127,077)
Net cash provided by (used in) financing            
 activities                                         $797,795    $(1,805,138)   $  1,432,287

Net increase (decrease) in cash & cash                
 equivalents                                          92,306     (1,059,149)      1,059,254
Cash & cash equivalents at beginning of year          57,481      1,116,630          57,376
Cash & cash equivalents at end of year           $   149,787    $    57,481    $  1,116,630


Supplemental cash flows disclosure:
 Income taxes paid                                       ---            ---             ---
 Interest paid                                   $   222,375    $   241,844    $    164,566

See accompanying notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements - December 31, 1997, 1996 & 1995

(1)  Summary of Significant Accounting Policies
Cash & Cash Equivalents
  For purposes  of  reporting  cash flows,  cash  and  cash  equivalents
include cash  on hand,  commercial paper,  certificates of  deposit  and
money market funds, which have an  original maturity of three months  or
less.

Inventory
  Inventory is stated at the lower of cost, determined by the  first-in,
first-out (FIFO) method, or market.

Property, Plant & Equipment
  Property, plant and  equipment are stated  at cost.   Depreciation  is
calculated on the straight-line method  over the estimated useful  lives
of the assets.  The approximate range of useful lives is as follows:

  Buildings....15 - 31 1/2 years   Machinery & Equipment...5 - 15 years

Revenue Recognition
  Revenue from sales of products which are recorded at time of shipment.

Earnings Per Share
  In  December,  1997,  the  Company  adopted  Statement  of   Financial
Accounting Standards  No. 128,  "Earnings Per  Share".     The  standard
establishes new methods for computing and presenting earnings per  share
("EPS") and replaces  the presentation of primary  and fully-diluted EPS
with basic and  diluted EPS.   For presentation purposes,  basic EPS  is
based on  the  weighted average  number  of shares  outstanding  whereas
diluted EPS includes  the dilutive  effect of  unexercised common  stock
equivalents.  Net loss per share is based on the weighted average number
of shares outstanding  and does not  include the  effect of  unexercised
stock options.  All  prior years reported within  this report have  been
restated to conform with this standard.

Financial Instruments
  The fair  value  of  the  Company's  financial  instruments  does  not
materially vary from the carrying value of such instruments.

Reclassifications
  Where appropriate, certain items relating to the prior years have been
reclassified to conform to the current year's presentation.

Research & Development
  Research and development costs for the years ended December 31,  1997,
1996 and 1995 were approximately $1,786,000, $1,701,000, and  1,506,000,
respectively,  which  were  4.2%,  4.6%   and  5.3%  of  annual   sales,
respectively.

Use of Estimates
  Management  of  the  Company  has  made  a  number  of  estimates  and
assumptions relating to the reporting of assets and liabilities and  the
disclosure  of  contingent  assets  and  liabilities  to  prepare  these
financial statements in  conformity with  generally accepted  accounting
principles.  Actual results could differ from those estimates.
<PAGE>
Long-Lived Assets
  Long-Lived assets  to be  held and  used are  reviewed for  impairment
whenever events or changes in  circumstances indicate that the  carrying
amounts should be evaluated.   Impairment is  measured by comparing  the
carrying value to the estimated undiscounted future cash flows  expected
to result from  the use of  the assets and  their eventual  disposition.
The Company has determined that as of December 31, 1997, there has  been
no impairment in the carrying values of long-lived assets.

(2)  Nature of Business and Related Parties
  Wells-Gardner Electronics Corporation is  an ISO 9001 certified  video
products corporation  which designs,  manufactures and  assembles  color
video monitors for  the coin-operated  video games,  lottery and  gaming
machines, leisure and fitness, service, automotive and display  markets.
The Company's largest customer accounted for total revenues of 34%,  18%
and 15%  in 1997,  1996  and 1995,  respectively.   Sales  to  customers
outside the United States were 21.8%, 24.4%, and 20.1% of total revenues
in 1997, 1996 and 1995, respectively.

  Monitor and data  display sales during  the period 1997  to 1995  were
made through a sales representative  firm, James Industries Inc.,  whose
Chairman  and  principal   shareholder  is   a  substantial   beneficial
shareholder and director of the Company.
  Commissions earned  by  James  Industries Inc.  for  the  years  ended
December  31,  1997,  1996  and  1995  were  approximately   $1,541,000,
$1,225,000 and  $868,000,  respectively.    Commissions  owed  to  James
Industries  Inc.  as  of   December  31,  1997,   1996  and  1995   were
approximately $246,000,  $169,000  and  $103,000  respectively.    Total
commissions as a percentage  of sales for the  years ended December  31,
1997, 1996 and 1995 were 3.6%, 3.3% and 3.1%, respectively.
  Sales to James Industries Inc. for the years ended December 31,  1997,
1996 and  1995  were  approximately  $406,000,  $543,000  and  $425,000,
respectively.
  Outstanding accounts  receivable due  from  James Industries  Inc.  at
December 31, 1997,  1996 and 1995  were approximately $100,000,  $40,000
and $33,000, respectively.
  During  1997,  the  Company  entered  into  an  agreement  with  James
Industries whereby  it  agreed  to sell  certain  specific  products  on
extended terms in exchange for a promissory note.  Shipments under  this
agreement began in September, 1997 and should be fully completed in  the
first quarter of 1998.   The note  carries interest at  a rate of  prime
plus 200  basis points  and is  personally  guaranteed by  Jim  Roberts,
Chairman and John Blouin,  President of James  Industries.  At  December
31, 1997 the balance on the note was approximately $375,000.

(3)  Inventory
Inventory consisted of the following components:
<TABLE>
                                 December 31,
                              1997           1996
    <S>                   <C>            <C>
    Raw materials         $  6,253,877   $  4,670,279
    Work in progress      $    451,080   $    597,574
    Finished goods        $  2,551,595   $  2,075,990
        Total             $  9,256,552   $  7,343,843
</TABLE>
<PAGE>
(4)  Income Taxes
The effective income tax rates for 1997, 1996 and 1995 differed from the 
expected Federal income tax rate (34%) for the following reasons:
<TABLE>
                                          1997         1996           1995
   <S>                                <C>           <C>           <C>
   Computed expected tax (benefit)    $  281,000    $  137,000    $ (360,000)
   State income taxes (benefit)       
    net of Federal tax effect         $   40,000    $   20,000    $ ( 52,000)
   Other, net                         $   12,000    $    8,000    $    6,000
   Limitations on and utilization     
    of tax benefits                   $ (323,000)   $ (165,000)   $  406,000
                                      $   10,000           ---           ---
</TABLE>

Deferred income taxes reflect the impact of temporary differences 
between the amounts of assets and liabilities for financial reporting 
purposes and such amounts as measured by income tax regulations.  
Temporary differences which gave rise to deferred tax assets and 
liabilities at December 31, 1997 and 1996 consisted of:

<TABLE>
                                                   1997           1996
    <S>                                       <C>            <C>
    Deferred tax assets:           
      Allowance for doubtful accounts         $   102,000    $    41,000
      Warranty reserve                             44,000         37,000
      Inventory reserve                           110,000        169,000
      Separation charge                               ---         39,000
      Deferred compensation                        55,000            ---
      Contributions carryovers                        ---         14,000
      Net operating loss carryforwards            940,000      1,293,000
      Alternative minimum tax credit 
       carryforwards                               60,000         50,000
      General business credit carryforwards       129,000        129,000
      Other                                         6,000          8,000
        Total gross deferred tax assets       $ 1,446,000    $ 1,780,000
        Less valuation allowance               (1,300,000)    (1,623,000)
        Net deferred tax assets               $   146,000    $   157,000
    Deferred tax liabilities:
      Property, plant & equipment,
       principally depreciation                   146,000        157,000
    Net deferred taxes                                ---            ---
</TABLE>

  A valuation allowance is provided when it is more likely than not that
some portion or  all of the  deferred tax assets  will not be  realized.
The net change in  the valuation allowance for  the year ended  December
31, 1997 was a decrease of $323,000 primarily due to the utilization  of
net operating loss carryforwards.  At December 31, 1997, the Company has
net operating  loss carryforwards  for Federal  income tax  purposes  of
approximately $2,436,000 which  are available to  offset future  Federal
taxable income, if any, through 2010.  The Company also has  alternative
minimum tax  credit carryforwards  of  approximately $60,000  which  are
available to reduce future Federal regular income taxes, if any, over an
indefinite period.  In addition, the Company has general business credit
carryforwards of approximately  $129,000 which are  available to  reduce
future Federal regular  income taxes, if  any.   These general  business
credits are scheduled to expire during 2004 through 2007.
<PAGE>
(5)  Stock Plans
  The Company  maintains a  Non-qualified Option  and Stock  Award  Plan
under which officers and  key employees may acquire  up to a maximum  of
1,400,000 common  shares and  a Nonemployee  Director Stock  Plan  under
which directors may acquire up to 250,000 common shares.  Options may be
granted thru December  31, 2004 at  an option price  not less than  fair
market value on the date of  grant and are exercisable not earlier  than
six months nor later  than ten years  from the date  of grant.   Options
vest over two  and three  year periods.   As  of December  31, 1997,  49
persons were eligible to  participate in the plans  and 43 persons  held
outstanding options.  Such  options expire on  dates ranging from  April
24, 2000 to May 1, 2007.

  The Company applies APB Opinion No. 25 and related Interpretations  in
accounting for its plans.   Accordingly, no  compensation cost has  been
recognized for its fixed stock option plans.  Had compensation cost  for
the Company's stock  option plans been  determined consistent with  FASB
Statement  of  Financial Accounting  Standards No. 123 ("FAS 123"),  the
Company's net earnings available to common shareholders and net earnings
per common  share would  have  been reduced  to  the pro  forma  amounts
indicated below: 
<TABLE>
                                                   1997          1996
<S>                                             <C>           <C>
Net earnings available to common shareholders
    Basic and Diluted as reported               $  775,240    $  403,102
    Pro forma                                   $  732,494    $  342,375
    Net earnings per common and common
     equivalent share
       Basic as reported                        $     0.19    $     0.10
       Diluted as reported                      $     0.18    $     0.10
       Pro forma - Basic                        $     0.18    $     0.08
       Pro forma - Diluted                      $     0.17    $     0.08
</TABLE>       

  Under the stock option plans, the exercise price of each option equals
the market price of the Company's stock on the date of grant.  For
purposes of calculating the compensation cost consistent with FAS 123,
the fair value of each grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1997 and 1996, respectively:
expected volatility of 20 percent; risk free interest rates ranging from
5.4 percent to 7.8 percent; and expected lives of 5 years.  Additional
information on shares subject to options is as follows:
<PAGE>
<TABLE>
                                    1997                      1996                       1995
                                   Weighted                  Weighted                   Weighted
                                   Average                   Average                    Average     
                        1997       Exercise      1996        Exercise       1995        Exercise
                       Options     Price        Options      Price         Options      Price
<S>                 <C>          <C>          <C>          <C>          <C>           <C>
Outstanding at         523,215   $    3.35       277,411   $    3.38       196,321    $    4.13
 beginning of year
Granted                285,789   $    3.73       263,054   $    3.30       221,300    $    2.75
Forfeited               (8,000)  $    3.50       (13,500)  $    3.13       (24,000)   $    5.10
Exercised             (137,230)  $    3.02        (3,750)  $    2.75      (116,210)   $    3.09
Outstanding at         663,774   $    3.56       523,215   $    3.35       277,411    $    3.38
 end of year


Weighted average fair value      
 of options granted              $    1.22                 $    1.04                  $    1.88


Options exercisable                                                          
 at year end           286,405                   215,900                    99,561

</TABLE>

<TABLE>
  The following table summarizes information about stock options 
  outstanding at December 31, 1997:

                                                    
                                                         
                                   Weighted Average                           Options
   Range of         Outstanding        Remaining       Weighted Average     Exercisable
Exercise Prices     at 12/31/97    Contractual Life     Exercise Price      at 12/31/97
<C>                <C>             <C>                 <C>                 <C>
    $ 3.00                4,900           2                 $ 3.00                4,900
    $ 2.88               15,536           3                 $ 2.88               15,536
    $ 5.38               54,250           4                 $ 5.38               54,250
$ 3.50 - $ 3.75          17,500           6                 $ 3.64               17,500
    $ 2.75               89,620           7                 $ 2.75               41,870
$ 3.13 - $ 4.25         210,554           8                 $ 3.34               91,527
$ 3.63 - $ 3.75         271,414           9                 $ 3.73               60,822
                        663,774           8                 $ 3.56              286,405
</TABLE>


 (6)  Earnings Per Share
  In accordance with Statement of Financial Accounting Standards No. 128
"Earnings Per Share", the following table presents  a reconciliation  of
the numerators and denominators of basic and diluted earnings per common
share for the years ended December 31, 1997, 1996 and 1995:
<PAGE>
<TABLE>
                                                       December 31,
                                            1997          1996           1995
<S>                                      <C>           <C>            <C>
Basic earnings per common share
 Net income                              $   775,240   $   403,102    $(1,059,307)

 Weighted average common shares       
  outstanding                              4,128,524     4,061,860      4,015,717

 Per share amount                              $0.19         $0.10         $(0.26)
                            
Diluted earnings per common share
 Net income                              $   775,240   $   403,102    $(1,059,307)

 Weighted average common shares     
  outstanding                              4,128,524     4,061,860      4,015,717
 Add: Effect of dilutive stock options       187,844        91,902            --- 
 Adjusted weighted average common   
  shares outstanding                       4,316,368     4,153,762      4,015,717

 Per share amount                              $0.18         $0.10         $(0.26)
</TABLE>

  As of December 31, 1997, 1996 and 1995 respectively, 58,000, 99,554
and 0 options would have had an anti-dilutive effect on diluted earnings
per share and therefore, were not included in the above calculations.

(7)  Other Expense (net)
Other expense (net) consisted of the following components:
<TABLE>        
                                   December 31,
                              1997         1996           1995
    <S>                    <C>          <C>            <C>
    Other expense, net     $  373,394   $  286,443     $  196,991
    Other income, net      $  (34,729)  $ (126,319)    $  (41,185)
      Other expense (net)  $  338,665   $  160,124     $  155,806
</TABLE>

(8)  Accrued Expenses
Accrued expenses consisted of the following components:
<TABLE>
                                             December 31,
                                          1997          1996
    <S>                                <C>           <C>
    Payroll and additional salary      $  316,954    $  254,619
    Taxes other than on income         $  110,521    $  125,989
    Sales commissions                  $  246,109    $  168,726
    Insurance                          $   35,812    $  172,350
    Warranty                           $  113,616    $   97,101
    Other accrued expenses             $   49,199    $  148,496
            Total                      $  872,211    $  967,281
</TABLE>
<PAGE>

(9)  Note Payable
  The note payable consisted  of a revolving line  of credit balance  of
$1,800,000 and $1,300,000 at December  31, 1997 and 1996,  respectively,
bearing interest  at prime  (8.50% at  December 31,  1997 and  8.25%  at
December 31,  1996). During  1997, the  Company extended  its  long-term
banking agreement with Harris Trust and Savings Bank for its  $7,000,000
revolving line of credit. This agreement runs through December 31, 1999.
At December 31, 1997 the Company had an unused balance of  approximately
$4,253,300 on its line of credit. During 1997, the average rate for  the
borrowings was  8.46%.   The  long-term  note is  uncollateralized  with
certain covenant restrictions. The Company had an outstanding letter  of
credit balance of  approximately $947,000  and $50,400  at December  31,
1997 and 1996 respectively.

(10)  Special Charge
  During 1995, the Company incurred a one time charge of $886,000, or 22
cents per share.   This charge related to  a warranty issue on  monitors
shipped to a major customer from 1991 to 1993.  This charge covered  all
contingent liabilities which expired December 31, 1995.

(11)  Lease Commitments
  The Company  leases  certain  data processing  equipment  under  lease
agreements expiring through the year 2001.  The following is a  schedule
of future minimum lease payments required  under operating leases as  of
December 31, 1997:       
<TABLE>
        Year
       ending
     December 31,       Amount
     <C>             <C>
       1998          $ 27,962
       1999            23,644
       2000            20,100
       2001            20,100
       2002                 0
     Thereafter           ---
                     $ 91,806
</TABLE>

  Rent expense related to  operating leases were approximately  $38,000,
$6,000 and $13,000 during  the years ended December  31, 1997, 1996  and
1995, respectively.
<PAGE>
<TABLE>
(12)  Unaudited Quarterly Financial Data
Selected quarterly data for 1997 and 1996 are as follows:
(In thousands except per-share data)

                                                                1997
                                            First        Second       Third         Fourth
<S>                                      <C>          <C>          <C>           <C>
Net sales                                $  10,105    $  12,016    $  10,554     $  10,314
Net earnings                             $     109    $     448    $     188     $      30
Basic net earnings per share             $    0.03    $    0.11    $    0.04     $    0.01
Diluted net earnings per share           $    0.03    $    0.10    $    0.04     $    0.01
         
                                                                1996
                                            First        Second       Third         Fourth
<S>                                      <C>          <C>          <C>           <C>
Net sales                                $  10,429    $   9,158    $   7,950     $   9,131
Net earnings (loss)                      $     265    $     151    $     164     $    (177)
Basic net earnings (loss) per share      $    0.07    $    0.03    $    0.04     $   (0.04)
Diluted net earnings (loss) per share    $    0.07    $    0.03    $    0.04     $   (0.04)
</TABLE>



INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Wells-Gardner Electronics Corporation:

  We have  audited  the  accompanying balance  sheets  of  Wells-Gardner
Electronics Corporation as of December 31, 1997 and 1996 and the related
statements of operations, shareholders' equity  and cash flows for  each
of the years in  the three-year period ended  December 31, 1997.   These
financial statements are the responsibility of the Company's management.
Our  responsibility  is  to  express  an  opinion  on  these   financial
statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that  we plan and perform the  audit
to obtain reasonable  assurance about whether  the financial  statements
are free of material  misstatement.  An audit  includes examining, on  a
test basis,  evidence  supporting the  amounts  and disclosures  in  the
financial statements.  An audit  also includes assessing the  accounting
principles used and significant estimates made by management, as well as
evaluating the  overall financial  statement presentation.   We  believe
that our audits provide a reasonable basis for our opinion.

  In our opinion,  the financial  statements referred  to above  present
fairly, in  all  material respects,  the  financial position  of  Wells-
Gardner Electronics Corporation at December 31,  1997 and 1996, and  the
results of its operations and  its cash flows for  each of the years  in
the three-year  period  ended  December 31,  1997,  in  conformity  with
generally accepted accounting principles.

Chicago, Illinois
January 30, 1998
<PAGE>
ALLAN GARDNER RETIRED FROM THE BOARD OF DIRECTORS IN 1997

Allan Gardner,  76,  retired  from Wells-Gardner's  Board  of  Directors
during August of 1997.   Allan first started  with the Company 51  years
ago and before retiring  from active employment in  1988, had served  25
years as the Vice President of sales.

His first position was in the stock room during 1947, and he moved  into
television and  high fidelity  console sales  in 1949.   His  career  at
Wells-Gardner was indivisible from the sales effort.  The year 1977  was
the low point  of Wells-Gardner's  corporate performance.   Clearly  the
offshore manufacturers were invading our country's consumer  electronics
industries.  Allan spearheaded a sales-purchase agreement, which is  now
expired, with the General Corporation (later Fujitsu).  The results  led
the Company  into the  design, assembly,  and  sale of  monitors,  which
remain today our mainstream product.

Allan still  views all  employees at  Wells-Gardner to  be part  of  the
overall sales effort.   In agreement  with his  founding father,  George
Gardner, he always  regarded the quality  of Wells-Gardner personnel  as
responsible for the success of the corporation.

We all wish Allan warmest regards and best wishes for the future.

DIRECTORS                              OFFICERS
Anthony Spier                          Anthony Spier
Chairman of the Board, President       Chairman of the Board,
& Chief Executive Officer of           President & Chief Executive 
Wells-Gardner Electronics              Officer

John R. Blouin                         Eugene C. Ahner
President of                           Director of Human Resources
James Industries, Inc.
                                       Kathleen E. Hoppe
H. Wayne Harris                        Director of Management
President of                           Information Systems
Wayne Harris Company
                                       Mark E. Komorowski
Ira J. Kaufman                         Vice President & General
Senior Managing Director of            Manager of Business Services
Mesirow Financial, Inc.
                                       Larry S. Mahl
Frank R. Martin                        Director of Materials
Senior Partner of
Righeimer, Martin & Cinquino, PC       John S. Pircon
                                       Vice President of
James J. Roberts, Jr.                  Marketing & Engineering
Chairman & Chief Executive Officer
of James Industries, Inc.              Eric A. Slagh
                                       Director of Quality
Randall S. Wells
Executive Vice President               George B. Toma  CPA, CMA
& General Manager of                   Vice President of Finance,
Wells-Gardner Electronics              Chief Financial Officer
                                       & Treasurer

Ernest R. Wish                         Randall S. Wells
Chairman of                            Executive Vice President
WRM, Inc.                              & General Manager
<PAGE>

CORPORATE OFFICES                            TRANSFER AGENT
Wells-Gardner Electronics Corporation        Harris Trust & Savings Bank
2701 North Kildare Avenue                    311 West Monroe Street
Chicago, Illinois  60639                     Chicago, Illinois  60690
Telephone: 773/252-8220                      Telephone: 312/461-6848

ANNUAL MEETING                               INDEPENDENT AUDITORS
The annual meeting of shareholders           KPMG Peat Marwick LLP
will take place on April 28, 1998 at         Chicago, Illinois
2:00 p.m. at the above address.              

FORM 10-K                                    GENERAL COUNSEL
A copy of the Company's annual report        Katten  Muchin  & Zavis
on Form 10-K, without exhibits, as           Chicago, Illinois
filed with the Securities and Exchange 
Commission is available without charge 
upon written request to Mr. George
B. Toma at the above address.