Exhibit 13.0

Wells-Gardner Electronics Corporation  10-K Exhibit 13.0  2002 Annual Report

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CORPORATE PROFILE:

Founded in 1925, Wells-Gardner Electronics Corporation® is a global distributor and manufacturer of color video monitors and other related
distribution products for a variety of markets including, but not limited to, gaming machine manufacturers, casinos, coin-operated video game manufacturers and other display integrators.
The Company's primary business is the distribution, design, manufacture, assembly service and marketing of color video monitors, liquid crystal displays (LCD's), gaming supplies and other components.
The Company successfully formed a 50/50 joint venture named Wells-Eastern Asia Displays to manufacture video monitors in Malaysia. In addition, the Company owns American Gaming & Electronics, a
leading service center and parts distributor to the gaming markets. They have offices in Nevada, New Jersey, Florida and Illinois. Wells-Gardner is publicly traded on the American Stock Exchange under
the symbol WGA.

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SELECTED FINANCIAL DATA(in $000's except for per share data)

|                                                    |  | Years Ended December 31, |       
|--------------------------------------------------- |  | ------------------------ | ------
|
|Net sales                                           |  | $                        | 49,309
|Moving related costs                                |  |                          |      
|Operating earnings (loss)                           |  |                          | 1,097 
|Gain on sale of fixed assets                        |  |                          |      
|Earnings (loss) from continuing operations          |  |                          | 763   
|Loss on discontinued operations                     |  |                          |      
|Cumulative effect of change in accounting principle |  |                          | 52    
|                                                    |  |                          |       
|Net earnings (loss)                                 |  | $                        | 815   
|                                                    |  |                          |       
|Basic net earnings (loss) per common share          |  | $                        | 0.15  
|Diluted net earnings (loss) per common share        |  | $                        | 0.15  
|                                                    |  |                          |       
|Total assets                                        |  | $                        | 22,909
|Long-term liabilities                               |  | $                        | 8,352 
|Working capital                                     |  | $                        | 12,269

COMMON SHARE MARKET PRICE

The Company's common shares are traded on the American Stock Exchange under the symbol WGA. On December 31, 2002, there were approximately 642 holders of
record of the common shares. A five percent (5%) stock dividend was issued in 2002 and 2001.

High
and low prices for the last two years were:

|               |              | 2002 Prices |      | 2001 Prices
|-------------- | ------------ | ----------- | ---- | -----------
|
|Quarter ended: |              |             |      |            
|               | March 31     |             | 3.15 |            
|               | June 30      |             | 2.84 |            
|               | September 30 |             | 2.04 |            
|               | December 31  |             | 1.95 |            

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2002 President's Report

To Our Shareholders, Customers, Suppliers & Employees:

2002 has been a good year for our Company:



All
of the above results were a continuation of the implementation of the strategic plan announced in 2000.

Strategic Plan for the 21st Century

We announced in July 2000 our new strategy for the 21st Century. Wells-Gardner has now transitioned from a US based manufacturer and supplier
primarily serving the low growth amusement market to a global manufacturing, service and parts distribution Company for the fast growing gaming market. An integral aspect of this strategy is to grow
the more profitable parts and service business.

American Gaming & Electronics (AGE)

We acquired AGE in 2000 and established it as a wholly-owned subsidiary. We have sales operations in Las Vegas and Reno, Nevada, New Jersey, California, Florida
and Illinois. We are expanding into other gaming jurisdictions in North and South America. We have major distribution relationships with JCM, 3MTouch, Ithica, and others. We signed contracts to
install some manufacturers' new gaming devices in New Jersey and Connecticut. We also purchase, refurbish and market used gaming devices out of our New Jersey facility to both national and
international customers.

Wells Eastern Asia (WEA)

In 2000, we established WEA, our 50/50 joint venture in Malaysia with Eastech, a publicly traded company on the Singapore stock exchange. This production facility
is essential to our strategy of being a globally competitive manufacturer of video monitors. We manufacture our long run monitors at WEA, many of which are for the gaming market. As noted above we
doubled our production in 2002 after we had already doubled production in 2001.

Gaming Strategy

Wells-Gardner is continuing its strategy of using our strengths in one area of the gaming market to provide leverage and increase our market penetration in other
areas of the gaming market. The Company is participating in five areas of the gaming market:



The
strategy is proving successful as gaming revenue accounted for approximately 70% of the Company's total revenue in 2002, compared to 60% in 2001 and 52% in 2000.

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Parts and Service Strategy

A major and critical aspect of our strategy is to focus on the more profitable parts and service business. Parts and service revenue accounted for approximately
32% of the Company's 2002 total revenue, compared to 1.5% in 1994. This is an annual growth rate of approximately 47%.

2002 Sales Increased 16%

2002 sales were $49.3 million, an increase of 16% or $6.7 million from $42.6 million in 2001. The increase was due primarily to the Company's
further penetration of the gaming market, which increased from 60% of revenue in 2001 to 70% of revenue in 2002.

The International Sales Strategy Paid Dividends

The international sales strategy continued to pay dividends in 2002. The Company received a 3-year exclusive manufacturing contract in 2001 valued at
approximately $12 million per year to supply digital monitors to a major gaming manufacturer. This customer became our largest customer in 2002, accounting for approximately 24% of our revenue.
In addition, the Company is supplying other international customers and is expecting international sales of monitors to grow at a considerably faster rate than US sales. In fact international sales
accounted for 42% of the Company's revenues in 2002, up from 16% in 2001.

Digital Product Line

Wells-Gardner continued to market a full line of digital products for both the gaming and amusement markets. We are able to manufacture these products in both
Malaysia and the US, giving us a competitive advantage over most of our major competitors. As a result, we believe that we have become a market leader in supplying digital video monitors to the gaming
industry. We have already obtained business from several new customers based entirely on the combination of our digital capability and our Asian manufacturing cost advantage, and expect to see
continued growth in this area.

Flat Panel and LCD Sales

The Company is transitioning its product line to include the newer technology of LCDs and other flat panel products. We have already obtained a 3-year
excusive contract to supply a major gaming manufacturer with its entire flat panel requirements through December 2005.

Quality Continues To Be The Top Priority

Wells-Gardner remains committed to being the"best-in-class"quality supplier in all our
served markets. The Company became a"certified supplier"to one of our major gaming customers, which is an important third party endorsement of our
quality approach.

2003 Outlook

Wells-Gardner expects to continue to grow its revenue due to further penetration of the gaming market, particularly in the area of LCD and flat panel products, as
well as by growing the AGE business with aggressive experienced gaming management. The Company is also continuing to move a substantial amount of production to WEA in Malaysia, which is expected to
improve profitability and competitiveness. The major risk is the worldwide economy and uncertain international political climate.

I
thank all of you for your continued support as we complete the implementation of our strategic plan. I am confident that this will lead to increased profitability and improved
shareholder value.

Anthony
Spier
Chairman of the Board, President
& Chief Executive Officer
February 20, 2003

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

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Net sales from continuing operations increased 15.9% to $49.3 million in 2002 compared to $42.6 million in 2001, as gross margin for 2002 increased
to $9.4 million or 19.0% of sales compared to $7.4 million or 17.4% of sales in 2001. The increase was primarily caused by additional revenue and margin produced from production at the
Company's Malaysian joint venture. Engineering, selling and administrative expenses decreased to $8.3 million in 2002 compared to $8.4 million in 2001. The decrease is attributed to the
Company's ongoing cost reductions and management's focus on minimizing operating expenses. During the second quarter of 2001, the Company moved its Chicago based operations to McCook, Illinois which
resulted in a charge to operations of $1.3 million. Operating earnings from continuing operations for 2002 were $1.1 million compared to an operating loss from continuing operations of
$2.4 million in 2001. Other expense, net was $332,000 in 2002 compared to $522,000 in 2001 as the Company recorded lower interest expense on its reduced borrowings. The Company did not
recognize any material income tax expense for 2002 due to the utilization of its net operating loss carryforwards. The Company has available a net operating loss carryforward of approximately
$8.3 million at December 31, 2002. During the fourth quarter of 2001, the Company discontinued its coin door business and recorded a loss on discontinued operations of
$2.8 million, which included a loss on disposal of assets of $2.4 million. During the first quarter of 2002, the Company recorded a $52,000 benefit from the reversal of negative goodwill
relating to the Company's joint venture upon the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Net earnings for 2002 were $815,000
compared to a net loss of $5.7 million for 2001. For 2002, basic and diluted earnings per share were $0.15 compared to basic and diluted loss per share of $1.06 for 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net sales from continuing operations decreased 8.4% to $42.6 million in 2001 compared to $46.5 million in 2000, as gross margin for 2001 decreased
to $7.4 million or 17.4% of sales compared to $9.5 million or 20.5% of sales in 2000. The decline was primarily caused by a reduction of $4.7 million of sales to our largest
amusement customer of 2000, who exited our market during 2001. In addition, the general state of the economy and the impact of the September 11 events depressed sales in the gaming markets we
serve, particularly in the last four months. Engineering, selling and administrative expenses increased to $8.4 million in 2001 compared to $8.2 million in 2000.
The increase is attributed to the operating expenses incurred for American Gaming and Electronics and the Company's initiative to invest in international sales and new product development. During the
second quarter of 2001, the Company moved its Chicago based operations to McCook, Illinois which resulted in a charge to operations of $1.3 million. Operating loss from continuing operations
for 2001 was $2.4 million compared to operating earnings from continuing operations of $1.3 million in 2000. During the first quarter of 2000, the Company sold its headquarters and
recognized a gain on the sale of fixed assets of $329,000. Other expense, net was $522,000 in 2001 compared to $549,000 in 2000 as the Company incurred interest expense to fund the facility move and
fund operations. Additionally, during the fourth quarter of 2001, the Company discontinued its coin door business and recorded a loss on discontinued operations of $2.8 million, which included
a loss on disposal of assets of $2.4 million. The Company did not recognize any material income tax expense for 2000 due to the utilization of net operating loss carryforwards. Net loss for
2001 was $5.7 million compared to net earnings of $851,000 in 2000. For 2001, basic and diluted loss per share was $1.06, compared to basic and diluted earnings per share of $0.16 for 2000.

On
January 4, 2000, the Company announced that it entered into a 50/50 joint venture with Eastern Asia Technology Limited of Singapore to produce and manufacture a full line of
open frame video monitors in Malaysia. The joint venture is accounted for under the equity method. On January 12, 2000, the Company acquired certain assets of American Gaming and Electronics of
Nevada, New Jersey and Florida. American Gaming and Electronics is the largest independent distributor of gaming parts and services in North America and is operated as a wholly-owned subsidiary.

Market and Credit Risks

The Company is subject to certain market risks, mainly interest rates. During 2001, the Company entered into a two-year, $15.7 million, secured
credit facility with Bank One (formerly American National Bank), with respect to which Bank One committed on February 5, 2003 to extend the maturity until March 31, 2004. At
December 31,

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2002, the Company had total outstanding bank debt of $9.6 million, which consisted of $6.6 million on its revolving line of credit at an interest rate of 4.25% and $3.0 million
on its installment term note at an interest rate of 5.75%. The Company believes that its exposure to interest rate fluctuations will be limited due to the Company's current practice of maintaining a
minimal cash balance in an effort to effectively use any excess cash flows to reduce outstanding debt. All of the Company's debt is subject to variable interest rates. An adverse change in interest
rates during the time that this debt is outstanding would cause an increase in the amount of interest paid. The Company may pay down the loans at any time without penalty. However, a 100 basis point
increase in interest rates would result in an annual increase of approximately $96,000 in interest expense recognized in the consolidated financial statements.

Critical Accounting Policies

The preparation of the Company's consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
requires the Company's management to adopt accounting policies and to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported amounts of revenue and expenses. Management periodically evaluates its policies, estimates and assumptions related to, among others: revenue recognition, inventory
obsolescence and costing methods, provision for bad debts and contingencies. The Company's management bases its estimates on historical experience and expectations of the future. Actual reported and
future amounts could differ from those estimates under different conditions and assumptions.

Revenue Recognition

In general, the Company recognizes revenue when the following criteria are met: evidence of an arrangement between the Company and its customer exists, shipment
has occurred or services have been rendered, the sales price is fixed and determinable and collectibility is reasonably assured.

Inventory Obsolescence and Costing Methods

Inventory is stated at the lower of cost (first-in, first-out) or market. The Company provides an allowance for estimated obsolete or
excess inventory based on assumptions about future demands for its products.

Provision For Bad Debts

The Company is exposed to credit risk on certain assets, primarily accounts receivable. The Company provides credit to customers in the ordinary course of
business and performs ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are somewhat limited due to the large number of customers comprising the Company's
customer base. The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks.

Contingencies

When applicable, the Company assesses its exposures to loss contingencies including legal and other matters and provides for an exposure if it is judged to be
probable and estimable. If the actual loss from a contingency differs from management's estimates, operating results could be impacted.

Liquidity & Capital Resources

Accounts receivable increased to $7.8 million in 2002 compared to $5.9 million in 2001. This increase is attributed to higher sales in the fourth
quarter of 2002. Inventory decreased to $9.0 million in 2002 compared to $10.0 million in 2001. This decrease is attributed to the Company's ongoing effort to minimize its on hand
inventory. Current liabilities increased to $6.3 million in 2002 compared to $5.4 million in 2001. This increase is attributed to higher accounts payable outstanding at
year-end to support its increased sales in 2002. Long-term liabilities decreased to $8.4 million in 2002 compared to $8.9 million in 2001. This decrease is
attributed to lower borrowings on the Company's line of credit. Shareholders' equity increased to $8.2 million in 2002 from $7.2 million in 2001. The Company is dependent on its credit
facility to fund operations. Under its current credit facility, the Company is required to maintain certain financial covenants. While the Company currently expects to meet these financial covenants
during 2003, its liquidity could be adversely affected if it is unable to do so. The credit facility expires August 31, 2003, however the bank has committed to extending the maturity date of
the Company's obligations to March 31, 2004. The Company fully intends to extend this agreement or enter into a

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new banking agreement. If unsuccessful, the Company would be severely limited in its ability to fund operations. Overall, the Company currently believes that its future financial requirements can be
met with funds generated from operating activities and from its credit facility during the foreseeable future.

Contractual Obligations

The following table summarizes the Company's contractual commitments as of December 31, 2002. The commitments are discussed in the indicated notes to the
Company's consolidated financial statements:

|                           |  | Payments Due In Year Ending December 31,
|-------------------------- |  | ----------------------------------------
|
|Note Payable (Note 5)      |  | $                                       
|Operating Leases (Note 13) |  | $                                       
|                           |  |                                         
|                           |  | $                                       

Recently Issued Accounting Pronouncements

During 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143), which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and (or) normal use
of the asset. The Company is required and plans to adopt the provisions of SFAS 143 during the quarter ending March 31, 2003. To accomplish this, the Company must identify all
obligations for asset retirement obligations, if any, and determine the fair value of these obligations on the date of adoption. The Company does not believe the adoption of SFAS 143 will have
a significant impact on its consolidated financial statements.

During
2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" (SFAS 146), which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or
disposal plan. This standard will be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption of SFAS 146 will
have a significant impact on its consolidated financial statements.

Inflation

To date, inflation has not had a material effect on the Company's results of operations.

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CONSOLIDATED BALANCE SHEETSAs of December 31,
(in $000's except for share information)

|                                       |                                                                       | 2002                                                                                                                                  |                                          | 2001   |       
|-------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------ | ------
|ASSETS                                 |                                                                       |                                                                                                                                       |                                          |        |       
|Current Assets:                        |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Cash                                                                  |                                                                                                                                       | $                                        | 782    |       
|                                       | Accounts receivable, net of allowances of $147 in 2002 & $130 in 2001 |                                                                                                                                       |                                          | 7,835  |       
|                                       | Inventory                                                             |                                                                                                                                       |                                          | 8,995  |       
|                                       | Prepaid expenses & other assets                                       |                                                                                                                                       |                                          | 974    |       
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | Total current assets                                                                                                                  |                                          | $      | 18,586
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|Property, Plant & Equipment (at cost): |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Leasehold improvements                                                |                                                                                                                                       |                                          | 279    |       
|                                       | Machinery, equipment & software                                       |                                                                                                                                       |                                          | 8,384  |       
|                                       | less: Accumulated depreciation & amortization                         |                                                                                                                                       |                                          | (6,205 | )     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | Property, plant & equipment, net                                                                                                      |                                          | $      | 2,458 
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|Other Assets:                          |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Investment in joint venture                                           |                                                                                                                                       |                                          | 536    |       
|                                       | Goodwill                                                              |                                                                                                                                       |                                          | 1,329  |       
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | Total other assets                                                                                                                    |                                          | $      | 1,865 
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       |                                                                                                                                       | Total Assets                             |        | $     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|LIABILITIES & SHAREHOLDERS' EQUITY     |                                                                       |                                                                                                                                       |                                          |        |       
|Current Liabilities:                   |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Accounts payable                                                      |                                                                                                                                       |                                          | 4,384  |       
|                                       | Accrued expenses                                                      |                                                                                                                                       |                                          | 733    |       
|                                       | Installment note payable                                              |                                                                                                                                       |                                          | 1,200  |       
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | Total current liabilities                                                                                                             |                                          | $      | 6,317 
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|Long-Term Liabilities:                 |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Note payable                                                          |                                                                                                                                       |                                          | 6,539  |       
|                                       | Installment note payable                                              |                                                                                                                                       |                                          | 1,813  |       
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | Total long-term liabilities                                                                                                           |                                          | $      | 8,352 
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       |                                                                                                                                       | Total Liabilities                        |        | $     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|Shareholders' Equity:                  |                                                                       |                                                                                                                                       |                                          |        |       
|                                       | Common shares:                                                        |                                                                                                                                       |                                          |        |       
|                                       |                                                                       | $1 par value; 25,000,000 shares authorized;
5,583,446 shares issued at December 31, 2002
5,271,935 shares issued at December 31, 2001 |                                          |        | 5,583 
|                                       | Capital in excess of par value                                        |                                                                                                                                       |                                          | 3,827  |       
|                                       | Accumulated deficit                                                   |                                                                                                                                       |                                          | (1,032 | )     
|                                       | Unearned compensation                                                 |                                                                                                                                       |                                          | (138   | )     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       |                                                                                                                                       | Total Shareholders' Equity               |        | $     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       
|                                       |                                                                       |                                                                                                                                       | Total Liabilities & Shareholders' Equity |        | $     
|                                       |                                                                       |                                                                                                                                       |                                          |        |       

See
accompanying notes to the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONSYears ended December 31,
(in $000's except for share & per share data)

|                                                                               |                                                     | 2002 |           | 2001   |   | 2000      |       
|------------------------------------------------------------------------------ | --------------------------------------------------- | ---- | --------- | ------ | - | --------- | ------
|Net sales                                                                      |                                                     | $    | 49,309    |        | $ | 42,550    |       
|                                                                               | Cost & expenses:                                    |      |           |        |   |           |       
|                                                                               | Cost of sales                                       |      |           | 39,929 |   |           | 35,136
|                                                                               | Engineering, selling & administrative               |      |           | 8,283  |   |           | 8,352 
|                                                                               | Goodwill amortization                               |      |           |       |   |           | 100   
|                                                                               | Moving related costs                                |      |           |       |   |           | 1,334 
|                                                                               |                                                     |      |           |        |   |           |       
|Operating earnings (loss)                                                      |                                                     |      | 1,097     |        |   | (2,372    | )     
|                                                                               | Gain on sale of fixed assets                        |      |           |       |   |           |      
|                                                                               | Other expense, net                                  |      |           | (332   | ) |           | (522  
|                                                                               |                                                     |      |           |        |   |           |       
|Earnings (loss) from continuing operations before income tax                   |                                                     |      | 765       |        |   | (2,894    | )     
|                                                                               | Income tax                                          |      |           | 2      |   |           |      
|                                                                               |                                                     |      |           |        |   |           |       
|Earnings (loss) from continuing operations                                     |                                                     |      | 763       |        |   | (2,894    | )     
|Loss on discontinued operations (including loss on disposal of $2,394 in 2001) |                                                     |      |          |        |   | (2,813    | )     
|Cumulative effect of change in accounting principle                            |                                                     |      | 52        |        |   |          |       
|                                                                               |                                                     |      |           |        |   |           |       
|Net earnings (loss)                                                            |                                                     | $    | 815       |        | $ | (5,707    | )     
|                                                                               |                                                     |      |           |        |   |           |       
|Basic earnings (loss) per common share:                                        |                                                     |      |           |        |   |           |       
|                                                                               | Continuing operations                               |      | $         | 0.14   |   | $         | (0.54 
|                                                                               | Discontinued operations                             |      |           |       |   | $         | (0.52 
|                                                                               | Cumulative effect of change in accounting principle |      | $         | 0.01   |   |           |      
|                                                                               |                                                     |      |           |        |   |           |       
|Basic earnings (loss) per common share                                         |                                                     | $    | 0.15      |        | $ | (1.06     | )     
|                                                                               |                                                     |      |           |        |   |           |       
|Diluted earnings (loss) per common share:                                      |                                                     |      |           |        |   |           |       
|                                                                               | Continuing operations                               |      | $         | 0.14   |   | $         | (0.54 
|                                                                               | Discontinued operations                             |      |           |       |   | $         | (0.52 
|                                                                               | Cumulative effect of change in accounting principle |      | $         | 0.01   |   |           |      
|                                                                               |                                                     |      |           |        |   |           |       
|Diluted earnings (loss) per common share                                       |                                                     | $    | 0.15      |        | $ | (1.06     | )     
|                                                                               |                                                     |      |           |        |   |           |       
|Basic common shares outstanding                                                |                                                     |      | 5,468,718 |        |   | 5,375,375 |       
|Diluted common shares outstanding                                              |                                                     |      | 5,540,161 |        |   | 5,375,375 |       

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(in $000's)

|                                            |  | Common
Shares |       | Capital In Excess Of Par Value |   | Retained Earnings (Deficit) |   | Unearned Compensation |        | Total
Shareholders'
Equity |  
|------------------------------------------- |  | ------------- | ----- | ------------------------------ | - | --------------------------- | - | --------------------- | ------ | -------------------------- | -
|December 31, 1999                           |  | $             | 4,544 |                                | $ | 1,869                       |   | $                     | 5,248  |                            |  
|Net earnings                                |  |               |      |                                |   |                            |   |                       | 851    |                            |  
|Stock dividend issued                       |  |               | 229   |                                |   | 657                         |   |                       | (886   | )                          |  
|Issuance of stock awards                    |  |               | 86    |                                |   | 173                         |   |                       |       |                            |  
|Shares issued from stock purchase plan      |  |               | 12    |                                |   | 24                          |   |                       |       |                            |  
|Stock options exercised                     |  |               | 27    |                                |   | 40                          |   |                       |       |                            |  
|Amortization of unearned compensation       |  |               |      |                                |   |                            |   |                       |       |                            |  
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  
|December 31, 2000                           |  | $             | 4,898 |                                | $ | 2,763                       |   | $                     | 5,213  |                            | $
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  
|Net loss                                    |  |               |      |                                |   |                            |   |                       | (5,707 | )                          |  
|Stock dividend issued                       |  |               | 242   |                                |   | 399                         |   |                       | (641   | )                          |  
|Issuance/cancellation of stock awards (net) |  |               | 76    |                                |   | 103                         |   |                       |       |                            |  
|Shares issued from stock purchase plan      |  |               | 12    |                                |   | 22                          |   |                       |       |                            |  
|Stock options exercised                     |  |               | 44    |                                |   | 32                          |   |                       |       |                            |  
|Amortization of unearned compensation       |  |               |      |                                |   |                            |   |                       |       |                            |  
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  
|December 31, 2001                           |  | $             | 5,272 |                                | $ | 3,319                       |   | $                     | (1,135 | )                          | $
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  
|Net earnings                                |  |               |      |                                |   |                            |   |                       | 815    |                            |  
|Stock dividend issued                       |  |               | 260   |                                |   | 452                         |   |                       | (712   | )                          |  
|Issuance/cancellation of stock awards (net) |  |               | (13   | )                              |   | (24                         | ) |                       |       |                            |  
|Shares issued from stock purchase plan      |  |               | 9     |                                |   | 10                          |   |                       |       |                            |  
|Stock options exercised                     |  |               | 55    |                                |   | 70                          |   |                       |       |                            |  
|Amortization of unearned compensation       |  |               |      |                                |   |                            |   |                       |       |                            |  
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  
|December 31, 2002                           |  | $             | 5,583 |                                | $ | 3,827                       |   | $                     | (1,032 | )                          | $
|                                            |  |               |       |                                |   |                             |   |                       |        |                            |  

See
accompanying notes to the consolidated financial statements.

9

---

CONSOLIDATED STATEMENTS OF CASH FLOWSYears ended December 31,
(in $000's)

|                                                    |                                                                                                      | 2002                                                |       | 2001 |        | 2000   |       
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | ---- | ------ | ------ | ------
|Cash flows from operating activities:               |                                                                                                      |                                                     |       |      |        |        |       
|                                                    | Net earnings (loss)                                                                                  |                                                     | $     | 815  |        | $      | (5,707
|                                                    | Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |                                                     |       |      |        |        |       
|                                                    |                                                                                                      | Loss on sale of discontinued operations             |       |      |       |        |       
|                                                    |                                                                                                      | Depreciation & amortization                         |       |      | 555    |        |       
|                                                    |                                                                                                      | Amortization of unearned compensation               |       |      | 39     |        |       
|                                                    |                                                                                                      | Cumulative effect of change in accounting principle |       |      | (52    | )      |       
|                                                    |                                                                                                      | Gain on sale of fixed assets                        |       |      |       |        |       
|                                                    |                                                                                                      | Share of (gain) / loss in joint venture             |       |      | (188   | )      |       
|                                                    | Changes in current assets & liabilities (net of effects of acquisitions):                            |                                                     |       |      |        |        |       
|                                                    |                                                                                                      | Accounts receivable                                 |       |      | (1,911 | )      |       
|                                                    |                                                                                                      | Inventory                                           |       |      | 1,016  |        |       
|                                                    |                                                                                                      | Prepaid expenses & other                            |       |      | (16    | )      |       
|                                                    |                                                                                                      | Accounts payable                                    |       |      | 570    |        |       
|                                                    |                                                                                                      | Accrued expenses                                    |       |      | 302    |        |       
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Net cash provided by (used in) operating activities |                                                                                                      | $                                                   | 1,130 |      | $      | 548    |       
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Cash flows from investing activities:               |                                                                                                      |                                                     |       |      |        |        |       
|                                                    | Payments for acquisitions, net of cash acquired                                                      |                                                     |       |     |        |        | (700  
|                                                    | Proceeds from sale of fixed assets                                                                   |                                                     |       |     |        |        |      
|                                                    | Net proceeds from sale of discontinued operations                                                    |                                                     |       |     |        |        | 152   
|                                                    | Additions to property, plant & equipment, net                                                        |                                                     |       | (115 | )      |        | (1,692
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Net cash used in investing activities               |                                                                                                      | $                                                   | (115  | )    | $      | (2,240 | )     
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Cash flows from financing activities:               |                                                                                                      |                                                     |       |      |        |        |       
|                                                    | Net borrowings (repayments) from note payable                                                        |                                                     |       | (573 | )      |        | 1,603 
|                                                    | Proceeds from options exercised & purchase plan                                                      |                                                     |       | 181  |        |        | 163   
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Net cash provided by (used in) financing activities |                                                                                                      | $                                                   | (392  | )    | $      | 1,766  |       
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Net increase (decrease) in cash & cash equivalents  |                                                                                                      |                                                     | 623   |      |        | 74     |       
|Cash at beginning of year                           |                                                                                                      |                                                     | 159   |      |        | 85     |       
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Cash at end of year                                 |                                                                                                      | $                                                   | 782   |      | $      | 159    |       
|                                                    |                                                                                                      |                                                     |       |      |        |        |       
|Supplemental cash flows disclosure:                 |                                                                                                      |                                                     |       |      |        |        |       
|                                                    | Income taxes paid                                                                                    |                                                     | $     | 2    |        |        |      
|                                                    | Interest paid                                                                                        |                                                     | $     | 483  |        | $      | 625   
|Supplemental schedule of non-cash activities:       |                                                                                                      |                                                     |       |      |        |        |       
|                                                    | Investment in joint venture                                                                          |                                                     |       |     |        |        |      

See
accompanying notes to the consolidated financial statements.

10

---

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    DESCRIPTION OF THE BUSINESS

Wells-Gardner Electronics is a sales, service, distribution and manufacturing company that primarily services the gaming and amusement markets, with facilities in
the United States and a manufacturing joint venture in Malaysia.

Note 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Wells-Gardner Electronics Corporation and its wholly-owned subsidiary, American
Gaming and Electronics. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

In general, the Company recognizes revenue when the following criteria are met: evidence of an arrangement between the Company and its customer exists, shipment
has occurred or services have been rendered, the sales price is fixed and determinable and collectibility is reasonably assured.

Financial Instruments

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

Inventory Obsolescence and Costing Methods

Inventory is stated at the lower of cost (first-in, first-out) or market. The Company provides an allowance for estimated obsolete or
excess inventory based on assumptions about future demands for its products.

Property, Plant & Equipment

Property, plant and equipment are stated at cost and are depreciated and amortized for financial reporting purposes over the estimated useful lives on a
straight-line basis as follows: machinery & equipmentfive to fifteen years & leasehold improvementsshorter of lease term or estimated useful life.

Internal Use Software

The Company has adopted the provisions of Statement of Position 98-1, "Accounting for the Costs of Software Developed or Obtained for Internal Use."
Accordingly, certain costs incurred in the planning and development stage of internal use computer software projects are expensed, while costs incurred during the application development stage are
capitalized. Capitalized software costs are amortized over the expected economic life of the software. Total capitalized costs as of December 31, 2002 and 2001 were $1.6 million and are
included in property, plant & equipment on the face of the consolidated balance sheets. During the years ended December 31, 2002 and 2001, amortization expense related to the capitalized
software was $229,000 and $191,000, respectively.

Investments

The Company's joint venture is accounted for under the equity method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 18,
"The Equity Method of Accounting for Investments in Common Stock." Under this method, the investment is adjusted to recognize the Company's share of the income or losses in the joint venture. Write
downs are recognized when the Company believes that a permanent impairment in value has occurred.

Significant Customer

The Company's largest customer accounted for 24%, 4% and 0% of total revenues in 2002, 2001 and 2000, respectively and 39% and 6% of total accounts receivable as
of December 31, 2002 and 2001, respectively.

11

---

Engineering Research & Development

Engineering research and development costs for the years ended December 31, 2002, 2001 and 2000 were approximately $1,067,000, $1,260,000 and $1,344,000,
respectively, which were 2.2%, 3.0% and 2.9% of annual sales from continuing operations, respectively. These costs are recorded in engineering, selling & administrative expenses on the
consolidated statement of operations.

Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares outstanding whereas diluted earnings per share includes the dilutive
effect of unexercised common stock options. For all periods reported, earnings per share have been retroactively restated to reflect the stock dividends issued in 2002, 2001 and 2000.

Stock Based Compensation

At December 31, 2002, the Company has two stock-based compensation plans, which are described more fully in Note 6. The Company accounts for these
plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No stock-based compensation costs are
reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation:

(in $000's except per share data)

2002

2001

2000Net earnings (loss):As reported

$
815

$
(5,707
)
$
851Pro forma


794


(5,726
)

806Net earnings (loss) per common and common equivalent share:Basic as reported

$
0.15

$
(1.06
)
$
0.16Diluted as reported


0.15


(1.06
)

0.16Pro forma  Basic


0.15


(1.07
)

0.15Pro forma  Diluted


0.14


(1.07
)

0.15


Reclassifications

Certain amounts in previously issued financial statements have been reclassified to conform to the current year's presentation.

Adoption of Statement of Financial Accounting Standards No. 142

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). The new standard requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. The
standard also specifies criteria that intangible assets must meet to be recognized and reported apart from goodwill. As of the date of adoption of SFAS 142, the Company has discontinued
amortization of all existing goodwill. The SFAS 142 transitional and annual impairment evaluations did not indicate any goodwill impairment. In addition, the Company has not identified any
intangible assets,

12

---

which must be recognized apart from goodwill. Upon adoption of SFAS 142, the Company recorded a $52,000 cumulative effect of change in accounting principle benefit from the reversal of
negative goodwill associated with the Company's joint venture. The following table shows the impact on the Company's consolidated financial statements as if SFAS 142 was adopted as of
January 1, 2000:

(in $000's)

2002

2001

2000Net earnings (loss) as reported

$
815

$
(5,707
)
$
851Add back  goodwill amortization





232


225Adjusted net earnings (loss)

$
815

$
(5,475
)
$
1,076Basic & diluted net earnings (loss) per share:Net earnings (loss) per share as reported

$
0.15

$
(1.06
)
$
0.16Add back  goodwill amortization





0.04


0.04Adjusted net earnings (loss) per share

$
0.15

$
(1.02
)
$
0.20


Note 3.    RELATED-PARTY TRANSACTIONS

During the period 2000 to 2002, a portion of the Company's sales were made through a sales representative firm, James Industries Inc., whose Chairman and
principal shareholder is a substantial beneficial shareholder of the Company. Commissions earned by James Industries Inc. for the years ended December 31, 2002, 2001 and 2000 were
approximately $417,000, $587,000 and $965,000, respectively. Commissions owed to James Industries Inc. as of December 31, 2002, 2001 and 2000 were approximately $43,000, $61,000 and
$55,000 respectively. Total commissions as a percentage of sales from continuing operations for the years ended December 31, 2002, 2001 and 2000 were 0.8%, 1.4% and 2.1%, respectively. Sales of
products to James Industries Inc. for the years ended December 31, 2002, 2001 and 2000 were approximately $22,000, $16,000 and $108,000, respectively. Outstanding accounts receivable due
from James Industries Inc. at December 31, 2002 and 2001were approximately $1,000 and $2,000, respectively.

Note 4.    INVENTORY

Inventory consisted of the following components:

December 31,(in $000's)2002

2001Raw materials

$
5,438

$
5,405Work in progress


585


994Finished goods


2,972


3,612Total

$
8,995

$
10,011


Note 5.    DEBT

During 2001, the Company entered into a two-year, $15.7 million, secured credit facility with Bank One (formerly American National Bank), which
Bank One committed to extend in 2003. Substantially all assets of the Company are used as collateral for this credit facility. At December 31, 2002, the Company had total outstanding bank debt
of $9.6 million, which consisted of $6.6 million on a revolving line of credit at an interest rate of 4.25% and $3.0 million on a installment term note at an interest rate of
5.75%. The installment term note is being repaid with monthly principal payments of $100,000. All bank debt is due and payable on August 31, 2003 however, Bank One has committed to extend the
maturity date to March 31, 2004.

Note 6.    STOCK PLANS

The Company maintains an Incentive Stock Option and Stock Award Plan under which officers and key employees may acquire up to a maximum of 1,980,000 common shares
and a Nonemployee Director Stock Plan under which directors may acquire up to 300,000 common shares. Options may be granted through December 31, 2008 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

13

---

December 31, 2002, 39 persons held outstanding options and were eligible to participate in the plans. Such options expire on various dates through July 29, 2012.

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 2002, 2001 and 2000, respectively: expected volatility of 33%; risk free interest rates ranging from 7.85% to 4.53%; and expected lives of 5 years. Additional information on
shares subject to options is as follows:

2002

2001

2000Options

Weighted
average
exercise
price

Options

Weighted
average
exercise
price

Options

Weighted
average
exercise
priceOutstanding at beginning of year

1,300,666

$
3.11

1,337,470

$
3.32

1,162,778

$
3.48Granted

219,414


2.64

230,379


2.69

298,712


3.39Forfeited

(223,857
)

3.35

(223,130
)

3.17

(97,202
)

3.67Exercised

(55,494
)

2.20

(44,053
)

2.77

(26,818
)

2.65Outstanding at end of year

1,240,729

$
2.87

1,300,666

$
3.11

1,337,470

$
3.32Weighted average fair value of options granted



$
1.51



$
1.58



$
1.65Options exercisable at year end

1,040,454




995,935




928,738


The
following table summarizes information about stock options outstanding at December 31, 2002:

Range of exercise prices

Options outstanding

Weighted average remaining contractual life

Weighted average exercise price

Options exercisable$1.90$2.37

343,019

7.1

$
2.23

290,045$2.56$2.94

358,400

7.9


2.69

242,958$3.01$3.34

339,575

6.4


3.14

309,164$3.80$4.41

199,735

6.1


3.84

198,2871,240,729

7.0

$
2.87

1,040,454


In
November 2001, the Company granted 60,000 restricted shares of common stock to seven employees of the Company. The employees will earn the restricted shares in exchange for
services to be provided to the Company over a five year period. The Company recorded deferred compensation in the amount of $135,000, equal to the market value of the restricted shares on the date of
grant. In July 2000, the Company granted 60,000 restricted shares of common stock to seven employees of the Company. The employees will earn the restricted shares in exchange for services to be
provided to the Company over a five year period. The Company recorded deferred compensation in the amount of $180,000, equal to the market value of the restricted shares on the date of grant. During
2002, 28,800 shares of restricted stock were cancelled and 16,000 shares of restricted stock were earned. During 2001, 4,000 shares of restricted stock were cancelled. The Company recorded $38,600,
$40,000 and $15,000 in related net compensation expense for the years ended December 31, 2002, 2001 and 2000, respectively. As of December 31, 2002, 71,200 restricted shares are
outstanding.

Note 7.    ACCRUED EXPENSES

Accrued expenses consisted of the following components:

December 31,(in $000's)2002

2001Payroll & related costs

$
368

$
162Sales commissions


43


61Warranty


100


60Other accrued expenses


222


148Total

$
733

$
431


14

---

Note 8.    OTHER EXPENSE, NET

Other expense, net consisted of the following components:

(in $000's)

2002

2001

2000Interest expense

$
483

$
625

$
464Other expense


36


55


123Other income


(187
)

(158
)

(38
)Other expense, net

$
332

$
522

$
549


Note 9.    INCOME TAXES

The effective income tax rates differed from the expected Federal income tax rate (34%) for the following reasons:

(in $000's)

2002

2001

2000Computed expected tax expense (benefit)

$
278

$
(1,937
)
$
292State income tax expense (benefit), net of Federal tax effect


21


(205
)

49Other, net


(70
)

(19
)

1Change in valuation allowance


(227
)

2,161


(334
)$
2




$
8


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

December 31,(in $000's)2002

2001Deferred tax assets:Allowance for doubtful accounts

$
57

$
50Warranty reserve


39


23Inventory reserve


149


153Net operating loss carryforwards


3,149


3,379Alternative minimum tax credit carryforwards


73


73General business credit carryforwards


129


129Other


14


43Total gross deferred tax assets


3,610


3,850Less valuation allowance


(3,024
)

(3,251
)Total deferred tax assets

$
586

$
599Deferred tax liabilities:Deferred compensation


6


21Property, plant, equipment and software, principally depreciation


548


578Goodwill


32


Total deferred tax liabilities

$
586

$
599Net deferred taxes








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, 2002 was a decrease of $227,000. At December 31, 2002, the Company has net operating loss carryforwards for Federal income tax purposes of approximately
$8,298,000, which are available to offset future Federal taxable income, if any, through 2021. The Company also has alternative minimum tax credit carryforwards of approximately $73,000, 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 in 2007.

15

---

Note 10.    EARNINGS PER SHARE

During 2002, 2001 and 2000, the Company issued a five percent (5%) stock dividend payable to all common stock shareholders. The stock dividend resulted in the
issuance of 260,310, 242,151 and 228,582 additional common shares in 2002, 2001 and 2000, respectively. All reported earnings per share disclosures have been retroactively restated to reflect this
dividend. 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,:

(in $000's except for per share data)

2002

2001

2000Basic earnings (loss) per common share:Earnings (loss) from continuing operations

$
763

$
(2,894
)
$
1,092Loss on discontinued operations





(2,813
)

(241
)Cumulative effect of change in accounting principle

$
52





Net earnings (loss)

$
815

$
(5,707
)
$
851Weighted average common shares outstanding


5,469


5,375


5,423Continuing operations

$
0.14

$
(0.54
)
$
0.20Discontinued operations




$
(0.52
)
$
(0.04
)Cumulative effect of change in accounting principle

$
0.01





Basic earnings (loss) per common share

$
0.15

$
(1.06
)
$
0.16Diluted earnings (loss) per common share:Earnings (loss) from continuing operations

$
763

$
(2,894
)
$
1,092Loss on discontinued operations





(2,813
)

(241
)Cumulative effect of change in accounting principle

$
52





Net earnings (loss)

$
815

$
(5,707
)
$
851Weighted average common shares outstanding


5,469


5,375


5,423Add: Effect of dilutive stock options


71





90Adjusted weighted average common shares outstanding


5,540


5,375


5,513Continuing operations

$
0.14

$
(0.54
)
$
0.20Discontinued operations




$
(0.52
)
$
(0.04
)Cumulative effect of change in accounting principle

$
0.01





Diluted earnings (loss) per common share

$
0.15

$
(1.06
)
$
0.16


Options
which had an anti-dilutive effect at December 31, 2002, 2001 and 2000 were 1,240,729, 767,148 and 991,786, respectively and were excluded from the diluted
earnings per share calculation.

Note 11.    JOINT VENTURE & ACQUISITION

On January 4, 2000, the Company entered into a 50/50 joint venture with Eastern Asia Technology Limited of Singapore to produce and manufacture video
monitors in Malaysia. The joint venture is accounted for under the equity method of accounting. As of December 31, 2002 and 2001, the Company had a net payable due to the joint venture of
$398,000 and a net receivable due from the joint venture of $97,000, respectively. The Company recorded equity in earnings of the joint venture of $187,000 and $153,000 in 2002 and 2001, respectively
and a loss on investment in joint venture of $58,000 in 2000.

Due
to the timing of the audit of the joint venture's financial statements, the Company records the results for a twelve month period ended November 30th. As of
November 30, 2002 and 2001 total assets of the joint venture were approximately $8,059,000 and $5,182,000 respectively and total liabilities were approximately $6,963,000 and $4,356,000
respectively. Sales of products from the joint venture for the twelve month periods ended November 30, 2002, 2001 and 2000 were approximately $11,563,000, $6,097,000 and $3,694,000,
respectively.

On
January 12, 2000, the Company acquired certain assets of American Gaming and Electronics of Las Vegas, New Jersey and Florida. This acquisition was accounted for under the
purchase method of accounting and is operated as a wholly-owned subsidiary.

16

---

Note 12.    DISCONTINUED OPERATIONS

On December 3, 2001, the Company announced the sale of assets as of November 30, 2001 of its coin door division for a purchase price of $315,000. In
accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company recorded a loss on discontinued
operations of $2,813,000 in 2001, which is comprised of a loss from operations of $419,000 and a loss on disposal of $2,394,000, and $241,000 in 2000, respectively. Net sales of the discontinued
operations were $2,006,000 in 2001 and $4,130,000 in 2000.

Note 13.    LEASE COMMITMENTS

The Company leases certain buildings, data processing and other equipment under operating lease agreements expiring through the year 2008. The future minimum
lease payments required under operating leases are as follows:

(in $000's)

Years ending
December 31,2003

$
7912004


7082005


5692006


5462007


529Thereafter


182$
3,325


Rent
expense related to operating leases was approximately $863,000, $872,000 and $427,000 during the years ended December 31, 2002, 2001 and 2000, respectively.

Note 14.    UNAUDITED QUARTERLY FINANCIAL DATA

Selected quarterly data for 2002 and 2001 are as follows:

2002(in $000's except per share data)First

Second

Third

FourthNet sales

$
11,303

$
12,077

$
11,886

$
14,043Net earnings

$
202

$
229

$
122

$
262Basic net earnings per share

$
0.04

$
0.04

$
0.02

$
0.05Diluted net earnings per share

$
0.04

$
0.04

$
0.02

$
0.05


2001(in $000's except per share data)First

Second

Third

FourthNet sales

$
11,570

$
10,579

$
9,883

$
10,518Net loss

$
(680
)
$
(2,111
)
$
(337
)
$
(2,579
)Basic net loss per share

$
(0.13
)
$
(0.39
)
$
(0.06
)
$
(0.48
)Diluted net loss per share

$
(0.13
)
$
(0.39
)
$
(0.06
)
$
(0.48
)


17

---

[KPMG LLP Logo]

INDEPENDENT AUDITORS' REPORT

The
Board of Directors and Shareholders of
Wells-Gardner Electronics Corporation:

We
have audited the accompanying consolidated balance sheets of Wells-Gardner Electronics Corporation and subsidiary as of December 31, 2002 and 2001 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wells-Gardner Electronics Corporation and
subsidiary at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,on January 1, 2002.

/s/
KPMG LLP
Chicago, Illinois
February 5, 2003

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|BOARD OF DIRECTORS                                                                                                                                                                                                            |  | EXECUTIVE OFFICERS                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------
|Anthony SpierChairman, President & Chief Executive Officer                                                                                                                                                                    |  | Anthony SpierChairman, President & Chief Executive Officer                                                
|Marshall L. BurmanCounsel to Wildman, Harrold, Allen & Dixon                                                                                                                                                                  |  | George B. Toma CPA, CMAVice President of Finance, Chief Financial Officer, Treasurer & Corporate Secretary
|Jerry KalovPresident of Kay Consulting                                                                                                                                                                                        |  |                                                                                                           
|Frank R. MartinSenior Partner of Righeimer, Martin & Cinquino, P.C.                                                                                                                                                           |  |                                                                                                           
|CORPORATE INFORMATION                                                                                                                                                                                                         |  |                                                                                                           
|ANNUAL MEETINGThe annual meeting of shareholders will take place at 2:00 p.m. on Tuesday, April 22, 2003 at the corporate offices of the Company.                                                                             |  | BANKERSBank One
Chicago, Illinois                                                                         
|                                                                                                                                                                                                                              |  | INVESTMENT BANKERSLincoln Partners
Chicago, Illinois                                                      
|FORM 10-KA 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 George B. Toma at the corporate offices of the Company. |  | AUDITORSKPMG LLP
Chicago, Illinois                                                                        
|TRANSFER AGENTLaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
800-246-5761                                                                                                                             |  | COUNSELPedersen & Houpt
Chicago, Illinois                                                                 

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