10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2013
or
[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ____________

Commission File Number 1-8250

WELLS-GARDNER ELECTRONICS CORPORATION

(Exact name of registrant as specified in its charter)

Illinois	36-1944630
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

9500 West 55th Street, Suite A, McCook, Illinois	60525-3605
(Address of principal executive offices)	(Zip Code)

(708) 290-2100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

As of November 9, 2013 approximately 11,706,000 shares of the Common Stock, $1.00 par value of the registrant were outstanding.

WELLS-GARDNER ELECTRONICS CORPORATION

FORM 10-Q TABLE OF CONTENTS

For The Three Months and Nine Months Ended September 30, 2013

PART I – FINANCIAL INFORMATION

Financial Statements:

Condensed Consolidated Statements of Earnings (unaudited)
-	Three Months and Nine Months Ended September 30, 2013 & 2012
Condensed Consolidated Balance Sheets
-	September 30, 2013 & 2012 (unaudited) & December 31, 2012
Condensed Consolidated Statements of Cash Flows (unaudited)
-	Three Months and Nine Months Ended September 30, 2013 & 2012
Notes to the Unaudited Condensed Consolidated Financial Statements

Management's Discussion & Analysis of Financial Condition & Results of Operations

Quantitative & Qualitative Disclosures about Market Risk

Controls & Procedures

Legal Proceedings

Risk Factors

Other Information

Exhibits

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WELLS-GARDNER ELECTRONICS CORPORATION

Condensed Consolidated Statements of Earnings (unaudited)

Three Months and Nine Months Ended September 30, 2013 and 2012

	Three Months Ended Sept 30						Nine Months Ended Sept 30
	2013			2012			2013			2012
Net sales	$	12,246,000		$	11,727,000		$	44,353,000		$	36,913,000
Cost of sales		10,310,000			9,678,000			37,201,000			30,377,000
Gross margin		1,936,000			2,049,000			7,152,000			6,536,000
Engineering, selling & administrative expenses		1,967,000			2,258,000			6,555,000			6,589,000
Operating (Loss) Earnings		(31,000	)		(209,000	)		597,000			(53,000	)
Interest expense		15,000			26,000			60,000			86,000
Other income, net		(6,000	)		0			(6,000	)		(1,000	)
Income tax expense		0			0			2,000			21,000
Net (Loss) Earnings	$	(40,000	)	$	(235,000	)	$	541,000		$	(159,000	)
Earnings per share:
Basic (loss)earnings per share	$	(0.00	)	$	(0.02	)	$	0.05		$	(0.01	)
Diluted (loss) earnings per share	$	(0.00	)	$	(0.02	)	$	0.05		$	(0.01	)
Basic average common shares outstanding		11,703,139			11,664,224			11,707,321			11,651,099
Diluted average common shares outstanding		11,703,229			11,667,535			11,708,663			11,654,647

See accompanying notes to the unaudited condensed consolidated financial statements

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WELLS-GARDNER ELECTRONICS CORPORATION

Condensed Consolidated Balance Sheets

	Sept 30, 2013 (unaudited)			Sept 30, 2012 (unaudited)				December 31, 2012
Assets:
Current assets:
Cash	$	237,000		$	225,000		$	768,000
Accounts receivable, net		8,305,000			6,582,000			8,678,000
Accounts receivable, subcontractor		3,431,000			3,841,000			5,093,000
Inventory		11,833,000			9,334,000			10,817,000
Other current assets		903,000			574,000			855,000
Total current assets	$	24,709,000		$	20,556,000		$	26,211,000
Property, plant & equipment, net		181,000			254,000			257,000
Other assets:
Deferred tax asset, net		469,000			471,000			469,000
Other long term asset		186,000			17,000			49,000
Goodwill		1,329,000			1,329,000			1,329,000
Total other assets		1,984,000			1,817,000			1,847,000
Total assets	$	26,874,000		$	22,627,000		$	28,315,000
Liabilities:
Current liabilities:
Accounts payable	$	6,173,000		$	1,872,000		$	4,167,000
Accounts payable, subcontractor		2,980,000			1,781,000			3,581,000
Accrued expenses		1,212,000			1,286,000			1,040,000
Total current liabilities	$	10,365,000		$	4,939,000		$	8,788,000
Long-term liabilities:
Note payable		72,000			2,206,000			3,701,000
Total liabilities	$	10,437,000		$	7,145,000		$	12,489,000
Shareholders' Equity:
Common stock: authorized 25,000,000 shares $1.00 par value; shares issued and outstanding: 11,706,286 shares as of September 30, 2013 11,666,898 shares as of September 30, 2012 11,666,898 shares as of December 31, 2012	$	11,706,000		$	11,667,000		$	11,667,000
Additional paid-in capital		5,162,000			5,131,000			5,131,000
Accumulated deficit		(183,000	)		(1,047,000	)		(725,000	)
Unearned compensation		(248,000	)		(269,000	)		(247,000	)
Total shareholders' equity		16,437,000			15,482,000			15,826,000
Total liabilities & shareholders' equity	$	26,874,000		$	22,627,000		$	28,315,000

See accompanying notes to the unaudited condensed consolidated financial statements

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WELLS-GARDNER ELECTRONICS CORPORATION

Condensed Consolidated Statements of Cash Flows (unaudited)

Three Months and Nine Months Ended September 30, 2013 and 2012

	Three Months Ended						Nine Months Ended
	Sept 30,			Sept 30,			Sept 30			Sept 30
	2013			2012			2013			2012
Cash flows from operating activities:
Net (loss) earnings	$	(40,000	)	$	(235,000	)	$	541,000		$	(159,000	)
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		29,000			40,000			104,000			119,000
Bad debt recovery		2,000			13,000			1,000			(43,000	)
Amortization of unearned compensation		8,000			21,000			52,000			61,000
Issuance of long term asset		(22,000	)		(17,000	)		(122,000	)		(17,000	)
Changes in current assets & liabilities
Accounts receivable		(416,000	)		1,486,000			357,000			(176,000	)
Inventory		(1,394,000	)		(1,987,000	)		(1,016,000	)		(225,000	)
Prepaid expenses & other		(265,000	)		433,000			(48,000	)		(64,000	)
Accounts payable		2,613,000			857,000			2,006,000			1,087,000
Due to/from subcontractor		623,000			(448,000	)		1,061,000			(1,615,000	)
Accrued expenses		(61,000	)		175,000			172,000			(14,000	)
Net cash provided by (used in) operating activities	$	1,077,000		$	338,000		$	3,108,000		$	(1,046,000	)
Cash used in investing activities:
Additions to plant & equipment, net		(4,000	)		(23,000	)		(28,000	)		(116,000	)
Net cash used in investing activities	$	(4,000	)	$	(23,000	)	$	(28,000	)	$	(116,000	)
Cash (used in) provided by financing activities:
(Repayments) borrowings - note payable		(912,000	)		(130,000	)		(3,629,000	)		1,148,000
Proceeds from shares issued, options exercised and purchase plan		15,000			0			18,000			18,000
Net cash (used in) provided by financing activities	$	(897,000	)	$	(130,000	)	$	(3,611,000	)	$	1,166,000
Net increase (decrease) in cash		176,000			185,000			(531,000	)		4,000
Cash at beginning of period		61,000			40,000			768,000			221,000
Cash at end of period	$	237,000		$	225,000		$	237,000		$	225,000
Supplemental cash flow disclosure:
Interest paid		15,000			26,000			60,000			86,000
Taxes paid		0			0			2,000			21,000

See accompanying notes to the unaudited condensed consolidated financial statements

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WELLS-GARDNER ELECTRONICS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

1.       In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the financial position and results of operations for the periods presented. These condensed financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information or footnotes necessary for a complete presentation in conformity with accounting principles generally accepted in the United States. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company's 2012 Annual Report to Shareholders. The results of operations for the three months and nine months ended September 30, 2013 are not necessarily indicative of the operating results for the full year.

2.       Basic earnings per share are based on the weighted average number of shares outstanding whereas diluted earnings per share include the dilutive effect of unexercised common stock equivalents. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss.

3.       Revenue from video gaming terminal sales with standard payment terms is recognized upon the passage of title and transfer of the risk of loss. The Company recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable the Company to recover the products in the event of a customer payment default and the arrangement does not prohibit the customer’s use of the product in the ordinary course of business.

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

5.       The Company maintains an Incentive Stock Option Plan and a Stock Award Plan under which officers and key employees may acquire up to a maximum of 2,052,408 common shares.

Stock Options

The Company’s Stock Option Plan ended on December 31, 2008. Options could 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 September 30, 2013, 1 person held outstanding options and was eligible to participate in the plan. Such options expire on various dates through April 8, 2014.

Under the stock option plan, 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, the fair value of each grant was estimated on the date of grant using the Black-Scholes option-pricing model. The Company has not issued any Incentive Stock Options since 2004, except for adjustments to previous grants for the 5% stock dividend declared in subsequent years. It is the Company’s policy to issue new stock certificates to satisfy stock option exercises.

The following table summarizes information about stock options outstanding for the nine months ending September 30, 2013:

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	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at beginning of year	18,931	$2.00
Granted	0	$0.00
Forfeited	0	$0.00
Exercised	(11,358)	$1.58
Outstanding, Sept 30, 2013	7,573	$2.62	0.5	$0
Exercisable, Sept 30, 2013	7,573	$2.62	0.5	$0

Restricted Shares

All restricted shares granted are governed by the Company’s Stock Award Plan, which was approved by shareholders in 2000. As of September 30, 2013, 153,130 restricted shares are outstanding on a dividend adjusted basis. The employees will earn the restricted shares in exchange for services to be provided to the Company over a three-year or five-year vesting period. Total unrecognized compensation cost related to unvested stock awards is approximately $248,000 and is expected to be recognized over a weighted average period of 2 years.

The following table summarizes information regarding Restricted Share activity for the nine months ending September 30, 2013:

	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2012	171,246	$2.14
Granted	64,000	$1.99
Vested	(46,146)	$1.94
Forfeited	(35,970)	$2.08
Unvested, September 30, 2013	153,130	$2.16

6.       Our inventory detail as of September 30, 2013, September 30, 2012 and December 31, 2012 was as follows:

(in $000's)	Sept 30, 2013 (unaudited)		Sept 30, 2012 (unaudited)		December 31, 2012
Inventory:
Raw materials	$	2,690	$	2,834	$	2,662
In transit finished goods		1,570		1,034		950
Finished goods		7,573		5,466		7,205
Total	$	11,833	$	9,334	$	10,817

7.       On March 8, 2013, the Company signed an amendment to extend the term of its credit agreement with Wells Fargo Bank one year to August 21, 2016. The total credit line of $12 million and the annual maintenance fees remained the same while the interest rate was lowered to LIBOR plus 275 basis points. The amendment decreased the year end minimum earnings covenant to $200,000 for 2013 and all future years. The amendment also includes provisions to allow permitted acquisitions and permitted redemptions of Company stock up to $1,250,000 as long as the Company has excess availability of $2,500,000 both before and after the completion of permitted acquisitions and permitted redemptions. As of September 30, 2013, the Company had total outstanding bank debt of $0.1 million at an average interest rate of 3.125%. The Company is in compliance with all of its covenants at September 30, 2013.

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8.       An income tax 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 nine months ended September 30, 2013 was a decrease of $93,000 to recognize the decrease in deferred tax assets during the first nine months. The net deferred tax asset of $469,000 as of September 30, 2013 represents the Company’s belief that it is more likely than not that a profit will be generated over the next twelve to eighteen months which will allow the Company to use a portion of the current net operating loss carry forwards. As of December 31, 2012, the Company has net operating loss carry forwards for Federal income tax purposes of approximately $5,901,000, which are available to offset future Federal taxable income, if any, that begin to expire in 2021. The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately $5,923,000 as of December 31, 2012. The Company also has alternative minimum tax credit carry forwards of approximately $136,000, which are available to reduce future Federal regular income taxes, if any, over an indefinite period. No unrecognized tax benefits are set to expire in the next twelve months that may have an impact upon the Company’s effective tax rate. The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years 2010, 2011 and 2012 remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the nine months ended September 30, 2013, the Company did not recognize expense for interest or penalties related to income tax, and do not have any amounts accrued at September 30, 2013, as the Company does not believe it has taken any uncertain income tax positions.

9.       The Company’s goodwill resulting from its purchase of American Gaming and Electronics, Inc. (AGE) is tested for impairment at least annually, which the Company does in the fourth quarter or more often if circumstances warrant. The Company determined that there was no impairment of goodwill in 2012 and 2011 by utilization of a discounted cash flow analysis. The model utilizes numerous assumptions, including but not limited to future sales estimates of AGEs traditional products and of Video Gaming Terminals (VGTs) related to the new Illinois VGT business. Due to the nature of such estimates, there is no certainty in future periods that the Fair Value of the American Gaming & Electronics reporting unit will exceed its carrying value.

10.     The Company has evaluated subsequent events through the date the financial statements were issued for the nine months ended September 30, 2013.

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Item 2. Management's Discussion & Analysis of Financial Condition & Results of Operations

Three Months Ended September 30, 2013 & 2012

For the third quarter ended September 30, 2013, net sales increased $0.5 million or 4% to $12.24 million compared to $11.73 million in the third quarter 2012. Gaming sales increased $0.7 million or 6% to $11.5 million in the third quarter 2013 compared to $10.8 million in the third quarter 2012 representing 94% of total sales in the 2013 period compared to 92% in 2012. Amusement sales decreased $0.16 million or 18% to $0.77 million in the third quarter 2013 compared to $0.93 million in the third quarter 2012 representing 6% of total sales in the 2013 period compared to 8% in 2012. By product category, video gaming terminal (VGT) sales increased $1.5 million or 69% to $3.7 million in the third quarter 2013 compared to $2.2 million in the third quarter 2012. Gaming and amusement display sales declined $0.9 million or 12 % in the third quarter 2013 compared to the same period in 2012. This was due to the total display unit volume decrease of 7% to 21,700 units in 2013 compared to 23,300 units in 2012 plus an average selling price decrease of 5%. Gaming and amusement parts sales decreased by $0.1 million or 5% in the third quarter 2013 compared to the same period in 2012.

Gross margin for the third quarter 2013 decreased $113,000 to $1.94 million or 15.8% of sales compared to $2.05 million or 17.5% in the third quarter 2012. The significant gaming and amusement video display unit volume decline resulted in less overhead absorption accounting for about two thirds of the decline in the consolidated gross margin. The gaming VGT gross margin percentages are lower than the gaming gross margin percentage averages which resulted in approximately one third of the decline in the consolidated gross margin. The parts gross margin percentage increased in the third quarter 2013 compared to the third quarter 2012 causing a small increase in the consolidated gross margin.

Operating expenses decreased $291,000 to $1.97 million in the third quarter 2013 compared to $2.26 million in the third quarter 2012. Operating expenses decreased $68,000 to support the VGT sales in the third quarter 2013, $95,000 to support additional engineering resources, and $22,000 for other gaming and amusement operating expenses. These operating expense decreases totaling $185,000 were further offset due to no Oracle upgrade expenses this year compared to $106,000 expense in the same period last year resulting in the $291,000 third quarter net operating expense decline. Due to sales increasing and operating expense decreasing, operating expenses as a percent of sales decreased to 16.1% in the quarter from 19.3% of sales in the same quarter last year.

Operating losses were $(31,000) in the third quarter 2013 compared to $(209,000) in the third quarter 2012 or a $178,000 operating earnings improvement due to lower operating expenses for the third quarter this year compared to the third quarter last year partially offset by lower gross margin dollars.

Interest expense was $15,000 in the third quarter 2013 compared to $26,000 in the third quarter 2012 due to very low debt balances. Other income was $6,000 in the third quarter 2013 and zero in the third quarter 2012.

Income tax expense was zero in the third quarter 2013 compared to zero in the third quarter 2012. The Company has available a net operating loss carry forward of approximately $5.9 million as of December 31, 2012.

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There was a net loss of $(40,000) in the third quarter 2013 compared to a net loss of $(235,000) in the third quarter 2012. For the third quarter 2013 basic and diluted earnings per share was $0.00 compared to basic and diluted loss per share of $(0.02) in the third quarter 2012.

Nine Months Ended September 30, 2013 & 2012

For the nine months ended September 30, 2013, net sales increased $7.4 million or 20% to $44.35 million compared to $36.91 million in the nine months 2012. Gaming sales increased $8.9 million or 27% to $42.35 million in the nine months 2013 compared to $33.41 million in the nine months 2012 representing 95% of total sales in the 2013 period compared to 91% in 2012. Amusement sales decreased $1.5 million or 43 % to $2.0 million in the nine months 2013 compared to $3.5 million in the nine months 2012 representing 5% of total sales in the 2013 period compared to 9% in 2012. By product category, video gaming terminal (VGT) sales increased $13.1 million to $15.3 million in the nine months 2013 compared to $2.2 million in the nine months 2012. Gaming and amusement display sales declined $5.7 million or 19% in the nine months 2013 compared to the same period in 2012. This was due to display average selling price declining by 7% and the total display unit volume declining by 12% to 75,400 units in 2013 compared to 86,200 units in 2012. Gaming and amusement parts sales increased by $0.01 million in the nine months 2013 compared to the same period in 2012.

Gross margin for the nine months 2013 increased $0.6 million to $7.15 million or 16.1% of sales compared to $6.54 million or 17.7% in the nine months 2012. Gross margin increased due to significantly higher sales from the VGT product line, but was partially offset by the significant gaming and amusement video display unit volume and average selling price decline. Less overhead absorption by the gaming and amusement video display product line accounted for about one half of the percentage decline in the consolidated gross margin. The gaming VGT gross margin percentages are lower than the gaming gross margin percentage averages accounted for the other half of the percentage decline in the consolidated gross margin. The parts gross margin percentage increased in the nine months 2013 compared to the nine months 2012 causing a small increase in the consolidated gross margin.

Operating expenses decreased $34,000 to $6.56 million in the nine months 2013 compared to $6.59 million in the nine months 2012. Operating expenses increased $113,000 to support the VGT sales in the nine months 2013, $152,000 to support additional engineering resources, and $148,000 for other gaming and amusement operating expense, primarily sales personnel expense and bad debt expense. These operating expense increases totaling $413,000 were significantly offset due to no Oracle upgrade expenses this year compared to $447,000 expense in the same period last year resulting in the $34,000 nine months net operating expense decrease. Due to sales increasing more than operating expense increases, operating expenses as a percent of sales decreased to 14.8% in the nine months 2013 from 17.9% of sales in the same nine months last year.The Company continues to place great emphasis on operating expense control.

Operating earnings were $597,000 in the nine months 2013 compared to a loss of $(53,000) in the nine months 2012 due to noticeably higher sales and gross margin dollars with a slightly lower margin percentage and flat operating expenses.

Interest expense was $60,000 in the nine months 2013 compared to $86,000 in the nine months 2012 due to very low debt balances. Other income was $6,000 in the nine months 2013 and $1,000 in the nine months 2012.

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Income tax expense was $2,000 in the nine months 2013 compared to $21,000 in the nine months 2012. The Company has available a net operating loss carry forward of approximately $5.9 million as of December 31, 2012.

Net income was $541,000 in the nine months 2013 compared to net loss of $(159,000) in the nine months 2012. For the nine months 2013 basic and diluted earnings per share was $0.05 compared to basic and diluted loss per share of $(0.01) in the nine months 2012.

 Outlook

Based on its best estimates and information available at this time, management believes full year 2013 net sales will increase in a range of 11 percent to 14 percent, or between $56.5 million and $58 million, compared to $51.1 million in full year 2012 with a meaningful percentage increase in net earnings versus 2012. In addition, the Company continues to work on several new products that we expect will contribute to improved sales and margins in future years. We will continue to aggressively control costs and inventory levels.

 Liquidity & Capital Resources

Net income plus non cash adjustments for the third quarter 2013 was a $(23,000) loss.

Notwithstanding a sizeable sales decrease from the second quarter to the third quarter, accounts receivable increased $416,000 to $8,305,000 in the third quarter due to one large video display customer slowing payment late in the quarter. Accounts receivable days outstanding increased to 62 days on September 30, 2013 from 51 days on June 30, 2013. Inventory increased by $1.4 million to $11,833,000 on September 30, 2013 due to slower VGT sales in the third quarter. Due to lower sales and higher inventory, days in inventory increased to 104 days at September 30, 2013 compared to 80 days on June 30, 2013. Prepaid expenses decreased by $265,000 during the third quarter 2013 due to lower LCD panel purchases. Accounts payable increased $2.6 million in the third quarter 2013 to $6,173,000 due to the VGT inventory build. Accounts payable days outstanding increased to 125 days on September 30, 2013 from 63 days at June 30, 2013. Due to subcontractors increased more than due from subcontractors by $623,000 in the third quarter 2013 due to higher production late in the quarter. Accrued expenses decreased by $61,000 in the third quarter.

As a result, cash provided by operating activities during the third quarter ended September 30, 2013 was $1,077,000.

During the third quarter 2013, cash used by investing activities was $4,000 for the purchase of IT software and equipment.

Long-term notes payable decreased $912,000 to $72,000 on September 30, 2013 from $984,000 on June 30, 2013. Proceeds from options exercised were $15,000 during the third quarter 2013.

The net increase in cash was $176,000 from June 30, 2013 to September 30, 2013 leaving the Company’s cash balance at $237,000 at September 30, 2013.

Net income plus non cash adjustments for the nine months 2013 was $576,000.

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Accounts receivable decreased $357,000 in the nine months 2013 to $8,305,000 on September 30, 2013 compared to $8,678,000 at December 31, 2012. Accounts receivable should have declined more due to a sizeable decrease in sales in the third quarter 2013 compared to the fourth quarter last year, but did not due to one large video display customer slowing payment late in the third quarter. Accounts receivable days outstanding increased to 62 days on September 30, 2013 from 55 days on December 31, 2012. Inventory increased by $1.0 million to $11,833,000 on September 30, 2013 due to slowing VGT sales. As a result, days in inventory increased to 104 days at September 30, 2013 compared to 84 days on December 31, 2012. Prepaid expenses decreased by $48,000 during the nine months 2013. Accounts payable increased $2.0 million in the nine months 2013 to $6,173,000 due to the VGT inventory build. Accounts payable days outstanding increased to 125 days on September 30, 2013 from 75 days at December 31, 2012. Due to subcontractors increased more than due from subcontractors by $1,061,000 in the nine months 2013 due to lower LCD panel inventory at subcontractors. Accrued expenses increased by $172,000 in the nine months of 2013 due to freight.

As a result, cash provided by operating activities during the nine months ended September 30, 2013 was $3,108,000.

Capital additions for the nine months 2013, primarily IT software and equipment, were $28,000 of cash used by investing activities.

Long-term liabilities decreased to $72,000 during the nine months 2013 compared to $3.7 million at year end 2012, which was a $3,629,000 use of cash. Cash provided by sales of stock issued under the employee stock option plan and stock grants was $18,000 in the nine months 2013. These two items resulted in $3.6 million of net cash used by financing activities.

The net change in cash provided by operations and used in investing activities and financing activities for the nine months 2013 was a $531,000 reduction in cash. Cash at the beginning of the year was $768,000 and at the end of the third quarter 2013 was $237,000.

The Company is subject to certain market risks, mainly interest rates. On August 21, 2006, the Company entered into its first credit facility with Wells Fargo Bank NA. On September 15, 2009, the Company amended the term of the credit agreement extending it to August 21, 2013. The amended credit agreement is a $12 million revolving credit facility. The credit facility has several financial covenants including a minimum book net worth, minimum net earnings, maximum capital expenditures and maximum compensation increases. The financial covenants included a provision that any future write off of goodwill will be an add back to the net worth and earnings covenants.

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On March 4, 2011, the Company amended the term of the credit agreement to August 21, 2014, the interest rate to LIBOR plus 375 basis points, and the minimum book net worth and minimum net earnings covenants were modified for the first three quarters of 2011 to account for the investment the Company was making into the Video Gaming Terminal market with the year end 2011 covenants remaining the same. On March 5, 2012, the Company amended the term of the credit agreement to August 21, 2015. The amendment included a waiver for the fourth quarter 2011 minimum book net worth and minimum net earnings covenants and eliminated the book net worth covenant for future periods. The financial covenants for the first three quarters 2012 were modified to account for the investment the Company was making into the Video Gaming Terminal market with the year end 2012 covenants remaining the same. The amendment also increased the year end minimum earnings covenant to $300,000 for 2013 and 2014, and raised the capital expenditure limit to $400,000 per year for 2013, 2014 and 2015. On March 8, 2013, the Company amended the term of the credit agreement to August 21, 2016, the interest rate to LIBOR plus 275 basis points, changed the year end minimum net earnings to $200,000 for 2013, 2014 and 2015, reduced the borrowing base block to $250,000, and created a basket of $1,250,000 for small acquisitions or stock buy backs as long as the Company has excess availability of $2,500,000 both before and after making the permitted acquisition or permitted redemption of Company stock.

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; however, monthly interest charges are not less than $5,000 per month to termination. All bank debt is due and payable on August 21, 2016.As of September 30, 2013, the Company had total outstanding bank debt of $72,000 at an average interest rate of 3.125%. In addition, the Company pays $19,000 credit insurance on selected foreign receivables.

Forward Looking Statements

Because the Company wants to provide shareholders and potential investors with more meaningful and useful information, this report may contain certain forward-looking statements (as such term is defined in the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that reflect the Company’s current expectations regarding the future results of operations, performance and achievements of the Company. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company has tried, wherever possible, to identify these forward-looking statements by using words such as "anticipate," "believe," "estimate," "expect" and similar expressions. These statements reflect the Company’s current beliefs and are based on information currently available to it. Accordingly, these statements are subject to certain risks, uncertainties and assumptions which could cause the Company’s future results, performance or achievements to differ materially from those expressed in, or implied by, any of these statements, which are more fully described in our Securities and Exchange Commission Form 10-K filing. The Company undertakes no, and hereby disclaims any, obligation to release publicly the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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Item 3. Quantitative & Qualitative Disclosures about Market Risk

There have been no material changes to the Company’s market risk during the three months and nine months ended September 30, 2013. For additional information on market risk, refer to the “Quantitative and Qualitative Disclosures about Market Risk” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The Company is subject to certain market risks, mainly interest rate risk. In August 2006, the Company entered into its first credit facility with Wells Fargo Bank. In September 2010, the Company entered into a three-year extension of the credit facility. On March 4, 2011, March 5, 2012, and March 8, 2013, respectively, the Company entered into another additional one year extension of the credit facility and each time made certain other modifications to covenants primarily related to delays in the start up of the Illinois VGT business. The credit agreement currently expires in August, 2016.

As of September 30, 2013, the Company had total outstanding bank debt of $72,000 at an average interest rate of 3.125%. The loan is at three month Libor plus 2.75% with a minimum interest charge of $5,000 per month. All of the Company’s debt is subject to variable interest rates at this time. An adverse change in interest rates during the time that this debt is outstanding would cause an increase in the amount of interest paid. If the debt would exceed approximately $1.9 million, then a 100 basis point increase in interest rates would result in additional interest expense recognized in the financial statements. The Company may make payments towards the loans at any time without penalty.

The Company is exposed to credit risk on certain assets, primarily accounts receivable. The currency risk is minimal as substantially all of the Company’s sales are billed in US dollars. 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 limited except for the Company’s largest customers.

Item 4. Controls & Procedures

The Company has established a Disclosure Committee, which is made up of the Company’s Chief Executive Officer, Chief Financial Officer and other members of management. The Disclosure Committee conducts an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. While the Company has limited resources and cost constraints due to its size, based on the evaluation required by Rule 13a-15(b), the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them. As of September 30, 2013, there have been no known significant changes in internal controls or in other factors that could significantly affect these controls.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

NONE

Item 1A. Risk Factors

There have been no material changes to the description of the risk factors associated with the Company's business previously disclosed in Part I, Item 1 "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in the Company's Annual Report on Form 10-K as they could materially affect our business, financial condition and future results. The risks described in the Company's Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known, or that are currently deemed to be immaterial, also may materially and adversely affect the Company's business, financial condition or operating results.

Item 5.Other Information

NONE

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Item 6. Exhibits

(a).	Exhibits:
	Exhibit 31.1	-	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	-	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	-	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 101.INS	-	XBRL Instance Document
	Exhibit 101.SCH	-	XBRL Taxonomy Extension Schema
	Exhibit 101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase
	Exhibit 101.DEF	-	XBRL Taxonomy Extension Definition Linkbase
	Exhibit 101.LAB	-	XBRL Taxonomy Extension Label Linkbase
	Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase

(b). Press Releases:

The following press releases have been issued by the Company during the Company’s Nine months 2013, which are available on the Company’s website (www.wellsgardner.com) under its Investor Information section:

DATE	TITLE
02/14/13	WELLS-GARDNER REPORTS FOURTH QUARTER AND FULL YEAR 2012 RESULTS
02/28/13	WELLS-GARDNER HAS RECEIVED PURCHASE ORDERS FOR OVER $30 MILLION OF VGTs
04/11/13	WELLS-GARDNER ELECTRONICS CORPORATION RETAINS LYTHAM PARTNERS FOR INVESTOR RELATIONS
04/15/13	WELLS-GARDNER HAS RECEIVED PURCHASE ORDERS FOR OVER $35 MILLION OF VGTs
05/08/13	WELLS-GARDNER REPORTS FINANCIAL RESULTS FOR THE FIRST QUARTER 2013
06/19/13	WELLS-GARDNER ANNOUNCES CHANGES IN ENGINEERING DEPARTMENT
06/20/13	WELLS-GARDNER HAS RECEIVED TOTAL AGGREGATE PURCHASE ORDERS OF APPROXIMATELY 440 MILLION OF VGTs
08/07/13	WELLS-GARDNER REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF 2013
10/09/13	WELLS-GARDNER ELECTRONICS CORPORATION INTRODUCES NEW PRODUCTS AT 2013 GLOBAL GAMING EXPO
11/07/13	WELLS-GARDNER REPORTS FINANCIAL RESULTS FOR THIRD QUARTER OF 2013
11/12/13	WELLS-GARDNER ANNOUNCES DISTRIBUTION AGREEMENT BETWEEN FUTURELOGIC AND AMERICAN GAMING & ELECTRONICS

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WELLS-GARDNER ELECTRONICS CORPORATION
Date:	November 13, 2013	By:
			James F. Brace
			Executive Vice President,
			Chief Financial Officer,
			Treasurer & Corporate Secretary

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Spier, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q of Wells-Gardner Electronics Corporation;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d)	Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: November 13, 2013	By:
		Anthony Spier
		Chairman, President &
		Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James F. Brace, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q of Wells-Gardner Electronics Corporation;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d)	Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: November 13, 2013	By:
		James F. Brace
		Executive Vice President
		& Chief Financial Officer, Secretary &Treasurer

EX-32

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Spier, and I, James F Brace certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Wells-Gardner Electronics Corporation (the “Company”) on Form 10-Q for the Three Months and Nine Months Ended September 30, 2013:

(1)	Fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	That the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-Q. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 13, 2013	By:
		Anthony Spier
		Chairman, President &
		Chief Executive Officer
Date: November 13, 2013	By:
		James F. Brace
		Executive Vice President
		& Chief Financial Officer, Secretary &Treasurer

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Note 6 (Tables)

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

(in $000's)	Sept 30, 2013 (unaudited)		Sept 30, 2012 (unaudited)		December 31, 2012
Inventory:
Raw materials	$	2,690	$	2,834	$	2,662
In transit finished goods		1,570		1,034		950
Finished goods		7,573		5,466		7,205
Total	$	11,833	$	9,334	$	10,817

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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Common stock, shares authorized (in Shares)	25,000,000	25,000,000	25,000,000
Common stock, par value (in Dollars per share)	$ 1.00	$ 1.00	$ 1.00
Common stock, shares issued (in Shares)	11,706,286	11,666,898	11,666,898
Common stock, shares outstanding (in Shares)	11,706,286	11,666,898	11,666,898

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Note 5

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5.       The Company maintains an Incentive Stock Option Plan and a Stock Award Plan under which officers and key employees may acquire up to a maximum of 2,052,408 common shares.

Stock Options

The Company’s Stock Option Plan ended on December 31, 2008. Options could 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 September 30, 2013, 1 person held outstanding options and was eligible to participate in the plan. Such options expire on various dates through April 8, 2014.

Under the stock option plan, 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, the fair value of each grant was estimated on the date of grant using the Black-Scholes option-pricing model. The Company has not issued any Incentive Stock Options since 2004, except for adjustments to previous grants for the 5% stock dividend declared in subsequent years. It is the Company’s policy to issue new stock certificates to satisfy stock option exercises.

The following table summarizes information about stock options outstanding for the nine months ending September 30, 2013:

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at beginning of year	18,931	$2.00
Granted	0	$0.00
Forfeited	0	$0.00
Exercised	(11,358)	$1.58
Outstanding, Sept 30, 2013	7,573	$2.62	0.5	$0
Exercisable, Sept 30, 2013	7,573	$2.62	0.5	$0

Restricted Shares

All restricted shares granted are governed by the Company’s Stock Award Plan, which was approved by shareholders in 2000. As of September 30, 2013, 153,130 restricted shares are outstanding on a dividend adjusted basis. The employees will earn the restricted shares in exchange for services to be provided to the Company over a three-year or five-year vesting period. Total unrecognized compensation cost related to unvested stock awards is approximately $248,000 and is expected to be recognized over a weighted average period of 2 years.

The following table summarizes information regarding Restricted Share activity for the nine months ending September 30, 2013:

	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2012	171,246	$2.14
Granted	64,000	$1.99
Vested	(46,146)	$1.94
Forfeited	(35,970)	$2.08
Unvested, September 30, 2013	153,130	$2.16

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Note 5 (Details) (USD $)		9 Months Ended	12 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013 Employee Stock Option [Member]	Dec. 31, 2008 Employee Stock Option [Member] Minimum [Member]	Dec. 31, 2008 Employee Stock Option [Member] Maximum [Member]	Sep. 30, 2013 Restricted Stock [Member]	Sep. 30, 2013 Restricted Stock [Member] Minimum [Member]	Sep. 30, 2013 Restricted Stock [Member] Maximum [Member]
Note 5 (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	2,052,408
Share-based Compensation Arrangement by Share-based Payment Award, Exercisable Period			6 months	10 years
Number of Eligible Participants		1
Common Stock Dividend, Percentage		5.00%
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number (in Shares)					153,130
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period						3 years	5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)					$ 248,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition					2 years

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Note 1

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.       In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the financial position and results of operations for the periods presented. These condensed financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information or footnotes necessary for a complete presentation in conformity with accounting principles generally accepted in the United States. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company's 2012 Annual Report to Shareholders. The results of operations for the three months and nine months ended September 30, 2013 are not necessarily indicative of the operating results for the full year.

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Note 3

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

3.       Revenue from video gaming terminal sales with standard payment terms is recognized upon the passage of title and transfer of the risk of loss. The Company recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable the Company to recover the products in the event of a customer payment default and the arrangement does not prohibit the customer’s use of the product in the ordinary course of business.

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Note 6

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

6.       Our inventory detail as of September 30, 2013, September 30, 2012 and December 31, 2012 was as follows:

(in $000's)	Sept 30, 2013 (unaudited)		Sept 30, 2012 (unaudited)		December 31, 2012
Inventory:
Raw materials	$	2,690	$	2,834	$	2,662
In transit finished goods		1,570		1,034		950
Finished goods		7,573		5,466		7,205
Total	$	11,833	$	9,334	$	10,817

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Note 4

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Current assets:
Cash	$ 237,000	$ 768,000	$ 225,000
Accounts receivable, net	8,305,000	8,678,000	6,582,000
Accounts receivable, subcontractor	3,431,000	5,093,000	3,841,000
Inventory	11,833,000	10,817,000	9,334,000
Other current assets	903,000	855,000	574,000
Total current assets	24,709,000	26,211,000	20,556,000
Property, plant & equipment, net	181,000	257,000	254,000
Other assets:
Deferred tax asset, net	469,000	469,000	471,000
Other long term asset	186,000	49,000	17,000
Goodwill	1,329,000	1,329,000	1,329,000
Total other assets	1,984,000	1,847,000	1,817,000
Total assets	26,874,000	28,315,000	22,627,000
Current liabilities:
Accounts payable	6,173,000	4,167,000	1,872,000
Accounts payable, subcontractor	2,980,000	3,581,000	1,781,000
Accrued expenses	1,212,000	1,040,000	1,286,000
Total current liabilities	10,365,000	8,788,000	4,939,000
Long-term liabilities:
Note payable	72,000	3,701,000	2,206,000
Total liabilities	10,437,000	12,489,000	7,145,000
Shareholders' Equity:
Common stock: authorized 25,000,000 shares $1.00 par value; shares issued and outstanding: 11,706,286 shares as of September 30, 2013 11,666,898 shares as of September 30, 2012 11,666,898 shares as of December 31, 2012	11,706,000	11,667,000	11,667,000
Additional paid-in capital	5,162,000	5,131,000	5,131,000
Accumulated deficit	(183,000)	(725,000)	(1,047,000)
Unearned compensation	(248,000)	(247,000)	(269,000)
Total shareholders' equity	16,437,000	15,826,000	15,482,000
Total liabilities & shareholders' equity	$ 26,874,000	$ 28,315,000	$ 22,627,000

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Note 9

9 Months Ended

Sep. 30, 2013

Disclosure Text Block Supplement [Abstract]

Goodwill Disclosure [Text Block]

9.       The Company’s goodwill resulting from its purchase of American Gaming and Electronics, Inc. (AGE) is tested for impairment at least annually, which the Company does in the fourth quarter or more often if circumstances warrant. The Company determined that there was no impairment of goodwill in 2012 and 2011 by utilization of a discounted cash flow analysis. The model utilizes numerous assumptions, including but not limited to future sales estimates of AGEs traditional products and of Video Gaming Terminals (VGTs) related to the new Illinois VGT business. Due to the nature of such estimates, there is no certainty in future periods that the Fair Value of the American Gaming & Electronics reporting unit will exceed its carrying value.

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Condensed Consolidated Statements of Cash Flows (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net (loss) earnings	$ (40,000)	$ (235,000)	$ 541,000	$ (159,000)
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	29,000	40,000	104,000	119,000
Bad debt recovery	2,000	13,000	1,000	(43,000)
Amortization of unearned compensation	8,000	21,000	52,000	61,000
Issuance of long term asset	(22,000)	(17,000)	(122,000)	(17,000)
Changes in current assets & liabilities
Accounts receivable	(416,000)	1,486,000	357,000	(176,000)
Inventory	(1,394,000)	(1,987,000)	(1,016,000)	(225,000)
Prepaid expenses & other	(265,000)	433,000	(48,000)	(64,000)
Accounts payable	2,613,000	857,000	2,006,000	1,087,000
Due to/from subcontractor	623,000	(448,000)	1,061,000	(1,615,000)
Accrued expenses	(61,000)	175,000	172,000	(14,000)
Net cash provided by (used in) operating activities	1,077,000	338,000	3,108,000	(1,046,000)
Cash used in investing activities:
Additions to plant & equipment, net	(4,000)	(23,000)	(28,000)	(116,000)
Net cash used in investing activities	(4,000)	(23,000)	(28,000)	(116,000)
Cash (used in) provided by financing activities:
(Repayments) borrowings - note payable	(912,000)	(130,000)	(3,629,000)	1,148,000
Proceeds from shares issued, options exercised and purchase plan	15,000	0	18,000	18,000
Net cash (used in) provided by financing activities	(897,000)	(130,000)	(3,611,000)	1,166,000
Net increase (decrease) in cash	176,000	185,000	(531,000)	4,000
Cash at beginning of period	61,000	40,000	768,000	221,000
Cash at end of period	237,000	225,000	237,000	225,000
Supplemental cash flow disclosure:
Interest paid	15,000	26,000	60,000	86,000
Taxes paid	$ 0	$ 0	$ 2,000	$ 21,000

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Condensed Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net sales	$ 12,246,000	$ 11,727,000	$ 44,353,000	$ 36,913,000
Cost of sales	10,310,000	9,678,000	37,201,000	30,377,000
Gross margin	1,936,000	2,049,000	7,152,000	6,536,000
Engineering, selling & administrative expenses	1,967,000	2,258,000	6,555,000	6,589,000
Operating (Loss) Earnings	(31,000)	(209,000)	597,000	(53,000)
Interest expense	15,000	26,000	60,000	86,000
Other income, net	(6,000)	0	(6,000)	(1,000)
Income tax expense	0	0	2,000	21,000
Net (Loss) Earnings	$ (40,000)	$ (235,000)	$ 541,000	$ (159,000)
Earnings per share:
Basic (loss)earnings per share (in Dollars per share)	$ 0.00	$ (0.02)	$ 0.05	$ (0.01)
Diluted (loss) earnings per share (in Dollars per share)	$ 0.00	$ (0.02)	$ 0.05	$ (0.01)
Basic average common shares outstanding (in Shares)	11,703,139	11,664,224	11,707,321	11,651,099
Diluted average common shares outstanding (in Shares)	11,703,229	11,667,535	11,708,663	11,654,647

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Note 8 (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Valuation Allowance, Deferred Tax Asset, Change in Amount	$ (93,000)
Deferred Tax Assets, Net of Valuation Allowance	469,000
Deferred Tax Assets, Operating Loss Carryforwards, Domestic		5,901,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local		5,923,000
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	$ 136,000

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Note 8

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

8.       An income tax 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 nine months ended September 30, 2013 was a decrease of $93,000 to recognize the decrease in deferred tax assets during the first nine months. The net deferred tax asset of $469,000 as of September 30, 2013 represents the Company’s belief that it is more likely than not that a profit will be generated over the next twelve to eighteen months which will allow the Company to use a portion of the current net operating loss carry forwards. As of December 31, 2012, the Company has net operating loss carry forwards for Federal income tax purposes of approximately $5,901,000, which are available to offset future Federal taxable income, if any, that begin to expire in 2021. The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately $5,923,000 as of December 31, 2012. The Company also has alternative minimum tax credit carry forwards of approximately $136,000, which are available to reduce future Federal regular income taxes, if any, over an indefinite period. No unrecognized tax benefits are set to expire in the next twelve months that may have an impact upon the Company’s effective tax rate. The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years 2010, 2011 and 2012 remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the nine months ended September 30, 2013, the Company did not recognize expense for interest or penalties related to income tax, and do not have any amounts accrued at September 30, 2013, as the Company does not believe it has taken any uncertain income tax positions.

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Note 5 (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at beginning of year	18,931	$2.00
Granted	0	$0.00
Forfeited	0	$0.00
Exercised	(11,358)	$1.58
Outstanding, Sept 30, 2013	7,573	$2.62	0.5	$0
Exercisable, Sept 30, 2013	7,573	$2.62	0.5	$0

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2012	171,246	$2.14
Granted	64,000	$1.99
Vested	(46,146)	$1.94
Forfeited	(35,970)	$2.08
Unvested, September 30, 2013	153,130	$2.16

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Note 7

9 Months Ended

Sep. 30, 2013

Line Of Credit Facilities [Abstract]

Line Of Credit Facilities [Text Block]

7.       On March 8, 2013, the Company signed an amendment to extend the term of its credit agreement with Wells Fargo Bank one year to August 21, 2016. The total credit line of $12 million and the annual maintenance fees remained the same while the interest rate was lowered to LIBOR plus 275 basis points. The amendment decreased the year end minimum earnings covenant to $200,000 for 2013 and all future years. The amendment also includes provisions to allow permitted acquisitions and permitted redemptions of Company stock up to $1,250,000 as long as the Company has excess availability of $2,500,000 both before and after the completion of permitted acquisitions and permitted redemptions. As of September 30, 2013, the Company had total outstanding bank debt of $0.1 million at an average interest rate of 3.125%. The Company is in compliance with all of its covenants at September 30, 2013.

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Note 2

9 Months Ended

Sep. 30, 2013

Earnings per share: [Abstract]

Earnings Per Share [Text Block]

2.       Basic earnings per share are based on the weighted average number of shares outstanding whereas diluted earnings per share include the dilutive effect of unexercised common stock equivalents. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss.

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Note 5 (Details) - Stock Options Outstanding (USD $)	9 Months Ended
	Sep. 30, 2013
Stock Options Outstanding [Abstract]
Outstanding at beginning of year	18,931
Outstanding at beginning of year (in Dollars per share)	$ 2.00
Granted	0
Granted (in Dollars per share)	$ 0.00
Forfeited	0
Forfeited (in Dollars per share)	$ 0.00
Exercised	(11,358)
Exercised (in Dollars per share)	$ 1.58
Outstanding, Sept 30, 2013	7,573
Outstanding, Sept 30, 2013 (in Dollars per share)	$ 2.62
Outstanding, Sept 30, 2013	6 months
Outstanding, Sept 30, 2013 (in Dollars)	$ 0
Exercisable, Sept 30, 2013	7,573
Exercisable, Sept 30, 2013 (in Dollars per share)	$ 2.62
Exercisable, Sept 30, 2013	6 months
Exercisable, Sept 30, 2013 (in Dollars)	$ 0

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Note 10

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

10.     The Company has evaluated subsequent events through the date the financial statements were issued for the nine months ended September 30, 2013.

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Note 7 (Details) (USD $)	0 Months Ended
	Mar. 08, 2013	Sep. 30, 2013
Line Of Credit Facilities [Abstract]
Line of Credit Facility, Maximum Borrowing Capacity	$ 12,000,000
Debt Instrument, Basis Spread on Variable Rate (in Basis Points)	2.75%
Year End Minimum Earnings Covenant	200,000
Debt Covenants, Permitted Acquisitions and Redemptions	1,250,000
Excess Availability Threshold Amount	2,500,000
Loans Payable to Bank		$ 100,000
Debt, Weighted Average Interest Rate		3.125%

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Note 5 (Details) - Restricted Share Activity (Restricted Stock [Member], USD $)	9 Months Ended
	Sep. 30, 2013
Restricted Stock [Member]
Note 5 (Details) - Restricted Share Activity [Line Items]
Unvested at December 31, 2012	171,246
Unvested at December 31, 2012 (in Dollars per share)	$ 2.14
Granted	64,000
Granted (in Dollars per share)	$ 1.99
Vested	(46,146)
Vested (in Dollars per share)	$ 1.94
Forfeited	(35,970)
Forfeited (in Dollars per share)	$ 2.08
Unvested, September 30, 2013	153,130
Unvested, September 30, 2013 (in Dollars per share)	$ 2.16

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 09, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	WELLS GARDNER ELECTRONICS CORP
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		11,706,000
Amendment Flag	false
Entity Central Index Key	0000105608
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Note 6 (Details) - Inventory Detail (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Inventory:
Raw materials	$ 2,690,000	$ 2,662,000	$ 2,834,000
In transit finished goods	1,570,000	950,000	1,034,000
Finished goods	7,573,000	7,205,000	5,466,000
Total	$ 11,833,000	$ 10,817,000	$ 9,334,000