##### Table of Contents



UNITED
    STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the year ended
    December 31, 2006o

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 1-11471
  BELL INDUSTRIES, INC.
 (Exact Name of Registrant as
    Specified in its Charter)
  California

95-2039211(State or other
    jurisdiction

(I.R.S. Employerof incorporation or
    organization)

Identification No.)8888 Keystone
    Crossing

46240Suite 1700

(Zip Code)Indianapolis, Indiana(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (317) 704-6000
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon stock

American Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None.
    o þ
    o þ
    þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2).
 o o þ
  Rule 12b-2).
  o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




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##### 



TABLE OF
    CONTENTS
  PART IItem 1.


Business


1Item 1A.


Risk
    Factors


3Item 1B.


Unresolved Staff
    Comments


10Item 2.


Properties


10Item 3.


Legal
    Proceedings


11Item 4.


Submission of
    Matters to a Vote of Security Holders


11PART IIItem 5.


Market for the
    Registrants Common Equity, Related Shareholder Matters and
    Issuer Purchases of Equity Securities


12Item 6.


Selected
    Consolidated Financial Data


14Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


15Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


26Item 8.


Financial
    Statements and Supplementary Data


26Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


49Item 9A.


Controls and
    Procedures


49Item 9B.


Other
    Information


49PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance of the
    Registrant


50Item 11.


Executive
    Compensation


50Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Shareholder Matters


50Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


50Item 14.


Principal
    Accountant Fees and Services


50PART IVItem 15.


Exhibits and
    Financial Statement Schedule


50SIGNATURES


53EXHIBIT
    INDEX


54EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS




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##### Table of Contents



PART I  Item 1.
    Business    Technology
    Solutions
      state-of-the-art,
    on-site
     1




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##### Table of Contents



Recreational
    Products
        SkyTel
      Company
    Information
  (317) 704-6000 (317) 704-0064.
  Availability
    of Reports and Other Information
  Form 10-K, Form 10-Q, Form 8-K,
  
    its corporate Code of Ethics for Directors, Officers and
    Employees, which qualifies as a code of ethics as
    defined by Item 406 of
    Regulation S-K
    of the Securities and Exchange Act of 1934;
    charters for its Audit Committee, Nominating Committee and
    Compensation Committee. 2




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Item 1A.
    Risk
    Factors  and/or Form 10-K, Form 10-K,
  Risks
    Relating to the Companys Capital Structure
  The
    Companys ability to make payments on its debt will be
    contingent on the Companys future operating performance,
    which will depend on a number of factors that are outside of its
    control.
      
    the Company must dedicate a substantial portion of its cash
    flows from operations to the payment of its indebtedness,
    reducing the funds available for future working capital
    requirements, capital expenditures, acquisitions or other
    general corporate requirements;
    a portion of its borrowings are, and will continue to be, at
    variable rates of interest, which may result in higher interest
    expense in the event of increases in interest rates;
    the Company may be more vulnerable to a downturn in the
    industries in which it operates or a downturn in the economy in
    general;
    the Company may be limited in its flexibility to plan for, or
    react to, changes in its businesses and the industries in which
    it operates;
    the Company may be placed at a competitive disadvantage compared
    to its competitors that have less debt;
    the Company may be limited in its ability to react to unforeseen
    increases in certain costs and obligations arising in its
    existing or previously owned businesses, including
    environmental, legal and tax liabilities;
    the Company may determine it to be necessary to dispose of
    certain assets or one or more of its businesses to reduce its
    debt; and
    the Companys ability to borrow additional funds may be
    limited.   3




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The
    Company is subject to restrictive debt covenants pursuant to its
    indebtedness. These covenants may restrict its ability to
    finance its business and, if the Company does not comply with
    the covenants or otherwise default under them, the Company may
    not have the funds necessary to pay all amounts that could
    become due and the lenders could foreclose on substantially all
    of its assets.
    
    incur additional debt;
    create or incur liens;
    pay dividends or make other equity distributions to the
    Companys shareholders;
    purchase or redeem share capital;
    make investments;
    sell assets;
    issue or sell share capital of certain subsidiaries;
    engage in transactions with affiliates;
    issue or become liable on a guarantee;
    voluntarily prepay, repurchase or redeem debt;
    create or acquire new subsidiaries; and
    effect a merger or consolidation of, or sell all or
    substantially all of its assets.  and/or
      Risks
    Related to the Companys Operations
  We
    have a history of operating losses.
   4




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We
    face certain significant risks related to the currently pending
    Williams litigation and from other potential litigation that
    could materially adversely affect our financial condition and
    results of operations.
  and/or
  Our
    previously owned businesses subject us to potential
    environmental liabilities, which could adversely affect our
    results of operations.
    We may
    not be able to compete effectively with other companies in our
    business segments, which will cause our net sales and market
    share to decline and adversely affect our business, financial
    condition and results of operations.
    If we
    are unable to recruit and retain key personnel necessary to
    operate our businesses, our ability to compete successfully will
    be adversely affected.
   5




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We may
    pursue and execute acquisitions, which could adversely affect
    our business, financial condition and results of
    operations.
  non-amortizable
  We may
    need to implement additional finance and accounting systems,
    procedures and controls to satisfy new reporting
    requirements.
    Future
    changes in financial accounting standards or practices affect
    our reported results of operations.
    Risks
    Related to the Companys Technology Solutions
    Business
  We
    rely on a limited number of hardware and software vendors to
    supply us with products in our technology solutions business and
    the loss of our ability to rely upon any of those vendors, or to
    obtain their products in the future would adversely affect our
    results of operations.
   6




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Our
    technology solutions business is dependent on a limited number
    of major clients and the loss of any of these major clients
    would materially and adversely affect our business, financial
    condition and results of operations.
      Our
    technology solutions business could be adversely impacted by
    conditions affecting the information technology
    market.
    Many
    of our contracts can be terminated by our clients on short
    notice and in many cases without penalty. We also generally do
    not have exclusive arrangements with our clients or a minimum
    revenue commitment from our clients, which creates uncertainty
    about the volume of services we will provide and the amount of
    revenues we will generate from these clients.
    Risks
    Related to the Companys Recreational Products
    Business
  Our
    recreational products business is seasonal and is subject to
    fluctuations, based upon various economic and climatic
    conditions that could harm us.
  period-to-period
 7




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Our
    recreational products business relies heavily upon vendors with
    which we have no long-term contracts.
    Risks
    Related to the Companys SkyTel Business
  We may
    not be able to successfully integrate the business of SkyTel
    with ours and realize the anticipated benefits of the
    acquisition.
  and/or
  
    developing and deploying next generation wireless technologies;
    combining and simplifying diverse product and service offerings,
    subscriber plans and sales and marketing approaches;
    preserving subscriber, supplier and other important
    relationships;
    consolidating and integrating duplicative facilities and
    operations, including back-office systems; and
    addressing differences in business cultures, preserving employee
    morale and retaining key employees, while maintaining focus on
    providing consistent, high quality customer service and meeting
    our operational and financial goals.    If we
    are not able to attract and retain customers for our SkyTel
    business unit, our financial performance could be
    impaired.
    
    our marketing and sales and service delivery activities, and our
    credit and collection policies;
    our ability to anticipate and develop new or enhanced products
    and services that are attractive to existing or potential
    customers; and
    our ability to anticipate and respond to various competitive
    factors affecting the industry, including new services that may
    be introduced by our competitors, changes in consumer
    preferences, demographic trends, economic conditions, and other
    strategies that may be implemented by our competitors. 8




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Technological
    changes in the market for wireless services could negatively
    affect our subscriber churn, our ability to attract new
    subscribers and operating costs, which would adversely affect
    our revenues, growth and profitability.
    If we
    are unable to meet our future capital needs relating to
    investment in our SkyTel network and other obligations, it may
    be necessary for us to curtail, delay or abandon our business
    growth plans. If we incur significant additional indebtedness to
    fund our plans, it could cause a decline in our credit rating
    and could increase our borrowing costs or limit our ability to
    raise additional capital.
    Government
    regulation could adversely affect the prospects and results of
    operations for our SkyTel business unit; the FCC and state
    regulatory commissions may adopt new regulations or take other
    actions that could adversely affect the business prospects or
    results of operations of our SkyTel business unit.
      
    how radio spectrum is used by licensees;
    the nature of the services that licensees may offer and how such
    services may be offered; and
    resolution of issues of interference between spectrum bands. 9




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Risks
    Related to our Common Stock
  The
    exercise of the Companys Convertible Promissory Note could
    create substantial dilution, or there may be other events which
    would have a dilutive effect on its common stock.
      Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Area in square feet(number of locations)Owned


LeasedTechnology Solutions










208,000



(14
)Recreational Products










221,000



(4
)Corporate










3,000



(1
)Sold business


20,000



(1
)20,000



(1
)


432,000



(19
)      10




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##### Table of Contents



Item 3.
    Legal
    Proceedings  Williams Electronics Games litigation:
    Other litigation:
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   11




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PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Shareholder
    Matters and Issuer Purchases of Equity Securities    Quarter endedMar. 31


Jun. 30


Sep. 30


Dec. 31Year ended December 31, 2006High

$
2.75


$
3.15


$
3.18


$
3.90Low


2.40



2.25



2.70



2.77Close


2.68



2.77



2.99



3.80Year ended December 31, 2005High

$
3.35


$
2.95


$
2.75


$
2.75Low


2.65



2.00



1.98



2.42Close


2.89



2.29



2.67



2.61     Equity
    Compensation Plan Information
    Number of SecuritiesRemaining Available forNumber of Securities





Future Issuanceto be Issued upon


Weighted-Average


Under EquityExercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants, and Rights


Warrants, and Rights


Reflected in Column (a))(a)


(b)


(c)Equity compensation plans approved
    by shareholders


200,000


$
2.96



Equity compensation plans not
    approved by shareholders


1,733,000


$
4.44



215,000Total


1,933,000


$
4.29



215,000  12




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Performance
    Graph
      
   2001


2002


2003


2004


2005


2006Bell Industries, Inc.



100.0




73.73




118.43




150.23




120.28




175.12Peer Group (A)



100.0




62.76




116.48




172.71




159.31




124.33Amex Market Index



100.0




96.01




130.68




149.65




165.03




184.77   (A)
    
    The Peer Group consists of the following computer technology
    solution companies:  En Pointe Technologies, Inc.

MTM Technologies, Inc.Halifax Corporation

Sento Corporation  13




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##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data  Year ended December 312006


2005


2004


2003


2002(Dollars in thousands, except per share data)Operating ResultsNet revenues

$
120,296


$
122,563


$
136,178


$
135,579


$
135,207Operating loss (1)

$
(10,042
)

$
(2,924
)

$
(2,565
)

$
(3,683
)

$
(4,049
)Loss from continuing operations,
    before cumulative effective of accounting  change (1)

$
(7,364
)

$
(2,068
)

$
(1,960
)

$
(4,407
)

$
(2,356
)Income from discontinued
    operations, net of tax

$
441


$
1,269


$
1,007


$
620


$
323Gain on sale of discontinued
    operations, net of tax

$
4,030Cumulative effect of accounting
    change (2)

















$
(1,280
)Net loss

$
(2,893
)

$
(799
)

$
(953
)

$
(3,787
)

$
(3,313
)Financial PositionWorking capital

$
11,543


$
18,571


$
19,085


$
17,826


$
19,609Total assets

$
43,114


$
44,353


$
45,189


$
46,633


$
49,390Long-term liabilities

$
3,622


$
4,518


$
5,025


$
2,520


$
2,496Shareholders equity

$
18,254


$
20,304


$
20,816


$
21,597


$
25,546Share and Per Share
    DataBASICLoss from continuing operations,
    before cumulative effect of accounting change (1)

$
(.86
)

$
(.24
)

$
(.23
)

$
(.53
)

$
(.27
)Income from discontinued
    operations, net of tax

$
.05


$
.15


$
.12


$
.08


$
.03Gain on sale of discontinued
    operations, net of tax

$
.47Cumulative effect of accounting
    change (2)

















$
(.14
)Net loss

$
(.34
)

$
(.09
)

$
(.11
)

$
(.45
)

$
(.38
)Weighted average common shares
    (000s)


8,568



8,466



8,385



8,367



8,743DILUTEDLoss from continuing operations,
    before cumulative effect of accounting change (1)

$
(.86
)

$
(.24
)

$
(.23
)

$
(.53
)

$
(.27
)Income from discontinued
    operations, net of tax

$
.05


$
.15


$
.12


$
.08


$
.03Gain on sale of discontinued
    operations, net of tax

$
.47Cumulative effect of accounting
    change (2)

















$
(.14
)Net loss

$
(.34
)

$
(.09
)

$
(.11
)

$
(.45
)

$
(.38
)Weighted average common shares
    (000s)


8,568



8,466



8,385



8,367



8,743OTHER PER SHARE DATAShareholders equity

$
2.12


$
2.37


$
2.47


$
2.58


$
3.05Market price  high

$
3.90


$
3.35


$
3.70


$
2.94


$
2.59Market price  low

$
2.25


$
1.98


$
2.36


$
1.47


$
1.33Financial RatiosCurrent ratio


1.5



2.0



2.0



1.8



1.9Long-term liabilities to total
    capitalization


16.6
%


18.2
%


19.4
%


10.4
%


8.9
%     (1)
    
    Includes a before-tax charge of $325 in connection with a
    severance agreement for a former executive in 2005 and a
    before-tax charge of $700 in connection with an employment
    agreement for another former executive in 2004.(2)
    
    Represents a goodwill impairment loss of $2,100, $1,280 after
    tax, recorded upon the adoption of SFAS No. 142,
    Goodwill and Other Intangible Assets. 14




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations      Critical
    Accounting Policies and Estimates
    Revenue
    Recognition
    No. 00-21
  No. 99-19,
 15




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Valuation
    of Receivables
    Valuation
    of Inventory
    Income
    Taxes
    Accrued
    Liabilities
    Environmental
    Matters
    Recent
    Accounting Pronouncements
   16




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17




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##### Table of Contents



Results
    of Operations
      2006


2005


2004Net revenuesTechnology SolutionsProducts

$
43,477


$
46,035


$
60,149Services


32,076



30,670



30,12275,553



76,705



90,271Recreational Products


44,743



45,858



45,907$
120,296


$
122,563


$
136,178Operating income (loss)Technology Solutions

$
(6,774
)

$
(1,532
)

$
(780
)Recreational Products


1,276



1,408



1,319Special items






(325
)


(700
)Corporate costs


(4,544
)


(2,475
)


(2,404
)(10,042
)


(2,924
)


(2,565
)Interest income, net


456



275



161Income tax benefit


2,222



581



444Loss from continuing operations


(7,364
)


(2,068
)


(1,960
)Discontinued operations:Income from discontinued
    operations, net of tax


441



1,269



1,007Gain on sale of discontinued
    operations, net of tax


4,030Discontinued operations, net of tax


4,471



1,269



1,007Net loss

$
(2,893
)

$
(799
)

$
(953
)     2006


2005


2004Net revenuesProducts


73.3
%


75.0
%


77.9
%Services


26.7



25.0



22.1100.0



100.0



100.0Cost of products sold


(59.8
)


(60.9
)


(65.0
)Cost of services provided


(21.8
)


(20.5
)


(17.8
)Selling and administrative costs
    and expenses


(25.7
)


(19.6
)


(17.3
)Depreciation


(1.0
)


(1.0
)


(1.2
)Special items






(.3
)


(.5
)Interest income, net


.4



.2



.1Loss from continuing operations
    before income taxes


(7.9
)


(2.1
)


(1.7
)Income tax benefit


1.8



.4



.3Loss from continuing operations


(6.1
)%


(1.7
)%


(1.4
)%     Cost of products sold as a
    percentage of products revenues


81.5
%


81.2
%


83.5
%Cost of services provided as a
    percentage of services revenues


81.9
%


82.1
%


80.4
%  18




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##### Table of Contents



Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net
    revenues
    Operating
    income (loss)
    Corporate
    costs
    Special
    item
    Interest,
    net
    Technology
    Solutions
   19




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Recreational
    Products
    Cost of
    products sold
    Cost of
    services provided
    Selling
    and administrative expenses
    Income
    tax
   20




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Loss from
    continuing operations
    Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
  Net
    revenues
    Operating
    income (loss)
    Corporate
    costs
    Special
    items
    Interest,
    net
   21




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##### Table of Contents



Technology
    Solutions
  higher-than-usual
    Recreational
    Products
    Cost of
    products sold
    Cost of
    services provided
    Selling
    and administrative expenses
   22




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Income
    tax
    Loss from
    continuing operations
    Changes
    in Financial Condition
  Liquidity
    and Capital Resources
    December 31,2006


2005Cash and cash equivalents

$
3,637


$
7,331Working capital

$
11,543


$
18,571Current ratio


1.5



2.0Long-term liabilities to total
    capitalization


16.6
%


18.2
%Shareholders equity per share

$
2.12


$
2.37Days sales in receivables


59



51Days sales in inventories


37



50    23




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##### Table of Contents



Payments due by period2008 -


2010 -


BeyondTotal


2007


2009


2011


2011Contractual
    obligationsOperating leases

$
12,045


$
2,899


$
5,143


$
3,417


$
586Capital leases


94



94Deferred compensation,
    environmental matters and other (1)


3,622







3,622$
15,761


$
2,993


$
8,765


$
3,417


$
586     (1)
    
    Amounts are estimated to be paid in one to three years from
    December 31, 2006.  SkyTel
    Acquisition
  pay-in-kind
 24




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and/or
       25




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Off-Balance
    Sheet Arrangements
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
  Financial Statements:Report of
    Independent Registered Public Accounting Firm


27Report of
    Independent Registered Public Accounting Firm


28Consolidated
    Statements of Operations for the three years ended
    December 31, 2006


29Consolidated
    Balance Sheets at December 31, 2006 and 2005


30Consolidated
    Statements of Shareholders Equity for the three years
    ended December 31, 2006


31Consolidated
    Statements of Cash Flows for the three years ended
    December 31, 2006


32Notes to
    Consolidated Financial Statements


33Supplementary
    Data


47Financial Statement Schedule:Schedule II 
    Valuation and Qualifying Accounts


49    26




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REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  27




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 28




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##### Table of Contents



BELL
    INDUSTRIES, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
  Year ended December 31,2006


2005


2004Net revenuesProducts

$
88,220


$
91,893


$
106,056Services


32,076



30,670



30,122120,296



122,563



136,178Costs and expensesCost of products sold


71,872



74,614



88,585Cost of services provided


26,260



25,184



24,227Selling and administrative


30,969



24,081



23,544Depreciation and amortization


1,237



1,283



1,687Interest income, net


(456
)


(275
)


(161
)Special items






325



700129,882



125,212



138,582Loss from continuing operations
    before income taxes


(9,586
)


(2,649
)


(2,404
)Income tax benefit


2,222



581



444Loss from continuing operations


(7,364
)


(2,068
)


(1,960
)Discontinued operations:Income from discontinued
    operations, net of tax


441



1,269



1,007Gain on sale of discontinued
    operations, net of tax


4,030Discontinued operations, net of tax


4,471



1,269



1,007Net loss

$
(2,893
)

$
(799
)

$
(953
)Share and per share
    dataBasic and dilutedLoss from continuing operations

$
(.86
)

$
(.24
)

$
(.23
)Discontinued operations


.52



.15



.12Net loss

$
(.34
)

$
(.09
)

$
(.11
)Weighted average common shares
    outstanding


8,568



8,466



8,385    29




---



##### Table of Contents



BELL
    INDUSTRIES, INC.
  CONSOLIDATED
    BALANCE SHEETS
 (Dollars in thousands)
  December 31,2006


2005ASSETSCurrent assetsCash and cash equivalents

$
3,637


$
7,331Accounts receivable, less
    allowance for doubtful accounts of $547 and $811


16,835



15,306Inventories


9,548



12,764Prepaid expenses and other


2,761



2,701Total current assets


32,781



38,102Fixed assets, at costLand, buildings and improvements


565



565Leasehold improvements


1,170



938Computer equipment and software


11,390



10,123Furniture, fixtures and other


4,541



4,66717,666



16,293Less accumulated depreciation and
    amortization


(14,113
)


(13,150
)Total fixed assets


3,553



3,143Other assets


1,641



3,108Acquisition deposit


3,450Acquisition related costs


1,689$
43,114


$
44,353LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesFloor plan payables

$
213


$
68Accounts payable


12,419



11,023Accrued payroll


1,922



1,885Accrued liabilities


6,684



6,555Total current liabilities


21,238



19,531Deferred compensation,
    environmental matters and other


3,622



4,518Total liabilities


24,860



24,049Commitments and contingenciesShareholders equityPreferred stockAuthorized 
    1,000,000 shares, outstanding  noneCommon stockAuthorized 
    35,000,000 shares, outstanding  8,593,224 and
    
    8,559,224 shares


33,400



32,832Accumulated deficit


(15,421
)


(12,528
)Accumulated other comprehensive
    income


275Total shareholders equity


18,254



20,304$
43,114


$
44,353    30




---



##### Table of Contents



BELL
    INDUSTRIES, INC.
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
 (Dollars in thousands)
  Accumulatedother


TotalCommon stock


Accumulated


comprehensive


shareholdersShares


Amount


deficit


income


equityBalance at December 31, 2003


8,366,724


$
32,373


$
(10,776
)

$



$
21,597Employee stock plans


71,000



172











172Net loss










(953
)






(953
)Balance at December 31, 2004


8,437,724



32,545



(11,729
)






20,816Employee stock plans


121,500



287











287Net loss










(799
)






(799
)Balance at December 31, 2005


8,559,224



32,832



(12,528
)






20,304Employee stock plans


34,000



68











68Stock-based compensation






500











500Adoption of
    SFAS No. 158, 
    net of tax














275



275Net loss










(2,893
)






(2,893
)Balance at December 31, 2006


8,593,224


$
33,400


$
(15,421
)

$
275


$
18,254    31




---



##### Table of Contents



BELL
    INDUSTRIES, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (In thousands)
  Year ended December 31,2006


2005


2004Cash flows from operating
    activities:Net loss

$
(2,893
)

$
(799
)

$
(953
)Income from discontinued
    operations, net of tax


(441
)


(1,269
)


(1,007
)Gain on sale of discontinued
    operations, net of tax


(4,030
)Depreciation and amortization


2,193



1,630



1,687Stock-based compensation


500Provision for losses on accounts
    receivable


134



181



114Changes in assets and liabilities,
    net of disposals:Accounts receivable


(2,469
)


(3,600
)


5,060Inventories


2,008



1,583



(3,143
)Accounts payable


1,934



1,839



(10
)Accrued liabilities and other


542



(1,171
)


(2,127
)Net cash used in operating
    activities for continuing operations


(2,522
)


(1,606
)


(379
)Net cash provided by (used in)
    operating activities for discontinued operations


(1,954
)


1,199



1,183Net cash provided by (used in)
    operating activities


(4,476
)


(407
)


804Cash flows from investing
    activities:Purchases of fixed assets and other


(2,711
)


(885
)


(589
)Proceeds on note from sale of
    business










166Acquisition deposits


(3,450
)Acquisition related costs


(1,047
)Net cash used in investing
    activities for continuing operations


(7,208
)


(885
)


(423
)Net cash provided by (used in)
    investing activities for discontinued operations


8,142



(12
)


(16
)Net cash provided by (used in)
    investing activities


934



(897
)


(439
)Cash flows from financing
    activities:Net proceeds (payments) of floor
    plan payables


145



(2,104
)


(1,939
)Employee stock plans


68



287



172Principal payments on capital
    leases


(365
)


(349
)Net cash used in financing
    activities


(152
)


(2,166
)


(1,767
)Net decrease in cash and cash
    equivalents


(3,694
)


(3,470
)


(1,402
)Cash and cash equivalents at
    beginning of year


7,331



10,801



12,203Cash and cash equivalents at end
    of year

$
3,637


$
7,331


$
10,801Supplemental cash flow information:Interest paid

$



$



$
Income taxes paid

$
79


$
85


$
95Capital lease obligations incurred

$



$
805


$
    32




---



##### Table of Contents



BELL
    INDUSTRIES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    Summary of Accounting Policies
  Principles of consolidation
  Cash and cash equivalents
    Revenue recognition and receivables
  Technology
    Solutions
  00-21 No. 00-21.
  No. 99-19,
 33




---



##### Table of Contents



Recreational
    Products Group
      Inventories first-in,
  Shipping and handling costs
  Deferred catalog and advertising costs
  Vendor rebates
  Fixed assets, depreciation and amortization
  Long-lived assets
 34




---



##### Table of Contents



Income taxes
  Accrued liabilities
  Environmental matters
  Retiree medical program
  Comprehensive income (loss)
  Stock-based compensation
  2005


2004Net loss, as reported

$
(799
)

$
(953
)Compensation expense as determined
    under SFAS No. 123


(90
)


(150
)Pro forma net loss

$
(889
)

$
(1,103
)Net loss per shareBasic and diluted  as
    reported

$
(.09
)

$
(.11
)Basic and diluted  pro
    forma

$
(.10
)

$
(.13
)    35




---



##### Table of Contents



Per share data
  2006


2005


2004Basic weighted average common
    shares outstanding


8,568



8,466



8,385Potentially dilutive stock options


53



39



89Anti-dilutive stock options due to
    net loss during year


(53
)


(39
)


(89
)Diluted weighted average common
    shares outstanding


8,568



8,466



8,385       Use of estimates
  New Pronouncements
   36




---



##### Table of Contents



Note 2 
    Sale of J. W. Miller Division
        Note 3 
    Subsequent Event
   37




---



##### Table of Contents



pay-in-kind
    and/or
 38




---



##### Table of Contents



Note 4 
    Special Items
    Note 5 
    Floor Plan Arrangements
    Note 6 
    Stock Repurchase Program
    Note 7 
    Stock Plans
     39




---



##### Table of Contents



Market price onNumber of shares


Grant price


date of grant


Option life250,000


$
2.67


$
2.46



10 years250,000


$
4.00


$
2.46



10 years250,000


$
6.00


$
2.46



10 years250,000


$
8.00


$
2.46



10 years          40




---



##### Table of Contents



WeightedWeighted


averageaverage


remainingexercise


contractual term


AggregateShares


price


(in years)


intrinsic valueOutstanding at December 31,
    2003


1,037,729


$
3.54Granted


20,000



3.00Exercised


(71,000
)


2.42Canceled or expired


(455,229
)


4.52Outstanding at December 31,
    2004


531,500



2.83Granted


40,000



2.35Exercised


(121,500
)


2.36Canceled or expired


(182,000
)


3.09Outstanding at December 31,
    2005


268,000



2.78Granted to John A. Fellows


1,000,000



5.17Other non qualified grants


448,000



3.25Granted from 2001 Plan


285,000



3.78Exercised


(34,000
)


2.00Canceled or expired


(34,000
)


2.52Outstanding at December 31,
    2006


1,933,000


$
4.29



8.3


$
926,000Exercisable at December 31,
    2006


780,600


$
4.17



7.2


$
437,000     Weightedaveragegrant dateShares


fair valueNon vested at December 31,
    2005


20,000


$
.95Granted


1,733,000



.86Vested


(596,600
)


.78Canceled


(4,000
)


.95Non vested at December 31,
    2006


1,152,400


$
.90   in-the-money
   41




---



##### Table of Contents



Note 8 
    Income Taxes
    2006


2005


2004CurrentFederal

$
(2,302
)

$
(654
)

$
(519
)State


80



73



75$
(2,222
)

$
(581
)

$
(444
)     2006


2005


2004Federal statutory tax rate


(34.0
)%


(34.0
)%


(34.0
)%State taxes, net of federal benefit


.6



1.8



2.1Valuation allowance against net
    deferred tax assets


9.8



8.4



11.6Nondeductible items and other, net


.4



1.9



1.8Effective tax rate


(23.2
)%


(21.9
)%


(18.5
)%     December 31,2006


2005Deferred tax assets:Discontinued operations

$
1,213


$
1,287Net operating loss carryforwards


4,085



3,273Employee benefit accruals


311



343Stock-based compensation


194Deferred rent


260Goodwill


180



256Receivables allowance


202



297Inventory reserves


65



896,510



5,545Deferred tax liabilities:Prepaid items


(102
)


(106
)Depreciation and amortization


(37
)


(75
)Other


(40
)


(183
)Net deferred tax balance before
    valuation allowance


6,331



5,181Valuation allowance


(6,331
)


(5,181
)Net deferred tax balance after
    valuation allowance

$



$
      42




---



##### Table of Contents



Note 9 
    Employee Benefit and Deferred Compensation Plans
      Note 10 
    Retiree Medical Program
      Before application





After applicationof SFAS No. 158


Adjustment


of SFAS No. 158Deferred compensation,
    environmental matters and other

$
3,897,000


$
(275,000
)

$
3,622,000Accumulated other comprehensive
    income






275,000



275,000Total shareholders equity


17,979,000



275,000



18,254,000     Note 11 
    Environmental Matters
     43




---



##### Table of Contents



Note 12 
    Litigation
  Williams Electronic Games litigation:
   44




---



##### Table of Contents



Other litigation:
  Note 13 
    Commitments and Contingencies
      December 312006


2005Hardware and software

$
454,000


$
805,000Less accumulated amortization


(366,000
)


(347,000
)$
88,000


$
458,000       Operating


Capitalleases


leases2007

$
2,899,000


$
94,0002008


2,609,0002009


2,534,0002010


2,014,0002011 and thereafter


1,989,000$
12,045,000



94,000Less amount representing interest






(3,000
)Capital lease obligations





$
91,000   Note 14 
    Business Segment and Related Information
   45




---



##### Table of Contents



Year ended December 31,2006


2005


2004Net revenuesTechnology SolutionsProducts

$
43,477


$
46,035


$
60,149Services


32,076



30,670



30,12275,553



76,705



90,271Recreational Products


44,743



45,858



45,907$
120,296


$
122,563


$
136,178Operating income (loss)Technology Solutions

$
(6,774
)

$
(1,532
)

$
(780
)Recreational Products


1,276



1,408



1,319Special items






(325
)


(700
)Corporate costs


(4,544
)


(2,475
)


(2,404
)(10,042
)


(2,924
)


(2,565
)Interest income, net


456



275



161Loss from continuing operations
    before income taxes

$
(9,586
)

$
(2,649
)

$
(2,404
)Depreciation and amortizationTechnology Solutions

$
1,703


$
850


$
577Recreational Products


355



382



365Corporate


135



398



745$
2,193


$
1,630


$
1,687Total assetsTechnology Solutions

$
16,085


$
11,582


$
8,543Recreational Products


13,033



16,374



17,099Corporate


13,996



13,973



17,426Discontinued operations






2,424



2,121$
43,114


$
44,353


$
45,189Capital expendituresTechnology Solutions

$
2,333


$
705


$
94Recreational Products


152



93



405Corporate


226



87



90Discontinued operations






12



16$
2,711


$
897


$
605  46




---



##### Table of Contents



Supplementary
    DataQUARTERLY RESULTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data) Quarter endedMar. 31


Jun. 30


Sep. 30


Dec. 31Year ended December 31,
    2006Net revenues:Products

$
17,093


$
24,302


$
28,654


$
18,171Services


7,870



6,859



8,025



9,32224,963



31,161



36,679



27,493Costs and expenses:Cost of products sold


13,690



19,466



23,867



14,849Cost of services provided


6,657



5,220



6,695



7,688Selling and administrative


6,218



7,223



8,513



9,015Depreciation and amortization


316



258



313



350Interest income, net


(75
)


(134
)


(166
)


(81
)26,806



32,033



39,222



31,821Loss from continuing operations
    before income taxes


(1,843
)


(872
)


(2,543
)


(4,328
)Income tax benefit


(168
)


(709
)


(843
)


(502
)Loss from continuing operations


(1,675
)


(163
)


(1,700
)


(3,826
)Discontinued operations:Income (loss) from discontinued
    operations, net of tax


355



222



(85
)


(51
)Gain (loss) on sale of
    discontinued operations, net of tax






5,153



(710
)


(413
)Discontinued operations, net of tax


355



5,375



(795
)


(464
)Net income (loss)

$
(1,320
)

$
5,212


$
(2,495
)

$
(4,290
)Share and Per Share
    DataBasic:Loss from continuing operations

$
(.20
)

$
(.02
)

$
(.20
)

$
(.45
)Discontinued operations


.04



.63



(.09
)


(.05
)Net income (loss)

$
(.16
)

$
.61


$
(.29
)

$
(.50
)Weighted average common shares
    outstanding


8,563



8,565



8,568



8,576Diluted:Loss from continuing operations

$
(.20
)

$
(.02
)

$
(.20
)

$
(.45
)Discontinued operations


.04



.63



(.09
)


(.05
)Net income (loss)

$
(.16
)

$
.61


$
(.29
)

$
(.50
)Weighted average common shares
    outstanding


8,563



8,593



8,568



8,576 47




---



##### Table of Contents



Quarter endedMar. 31


Jun. 30


Sep. 30


Dec. 31Year ended December 31,
    2005Net revenues:Products

$
19,619


$
27,815


$
29,304


$
15,155Services


7,204



7,462



7,772



8,23226,823



35,277



37,076



23,387Costs and expenses:Cost of products sold


15,892



22,276



24,277



12,169Cost of services provided


6,012



5,835



6,185



7,152Selling and administrative


5,732



6,412



6,098



5,839Depreciation and amortization


326



322



314



321Interest income, net


(52
)


(36
)


(93
)


(94
)Special item (1)










32527,910



34,809



37,106



25,387Income (loss) from continuing
    operations before income taxes


(1,087
)


468



(30
)


(2,000
)Income tax expense (benefit)


(130
)


(35
)


4



(420
)Income (loss) from continuing
    operations


(957
)


503



(34
)


(1,580
)Income from discontinued
    operations, net of tax


280



445



457



87Net income (loss)

$
(677
)

$
948


$
423


$
(1,493
)Basic:Income (loss) from continuing
    operations

$
(.11
)

$
.06


$



$
(.19
)Discontinued operations


.03



.05



.05



.01Net income (loss)

$
(.08
)

$
.11


$
.05


$
(.18
)Weighted average common shares
    outstanding


8,454



8,460



8,460



8,490Diluted:Income (loss) from continuing
    operations

$
(.11
)

$
.06


$



$
(.19
)Discontinued operations


.03



.05



.05



.01Net income (loss)

$
(.08
)

$
.11


$
.05


$
(.18
)Weighted average common shares
    outstanding


8,454



8,493



8,479



8,490     (1)
    
    Represents a before-tax charge in connection with a severance
    agreement for a former executive. 48




---



##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS

(In thousands) Balance at


Charge to





Balancebeginning


costs and





at end ofDescription

of period


expenses


Deductions


periodYear ended December 31, 2006:Allowance for doubtful accounts

$
811


$
134


$
398
(1)

$
547Inventory reserves


865



75



373
(1)


567Deferred tax valuation allowance


5,181



1,150







6,331$
6,857


$
1,359


$
771


$
7,445Year ended December 31, 2005:Allowance for doubtful accounts

$
727


$
181


$
97


$
811Inventory reserves


929



127



191



865Deferred tax valuation allowance


4,903



278







5,181$
6,559


$
586


$
288


$
6,857Year ended December 31, 2004:Allowance for doubtful accounts

$
936


$
114


$
323


$
727Inventory reserves


871



229



171



929Deferred tax valuation allowance


3,353



1,550







4,903$
5,160


$
1,893


$
494


$
6,559     (1)
    
    Amount includes balances related to the discontinued operations
    of J. W. Miller.  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
  Rules 13a-15(f) 15d-15(f)
  Item 9B.
    Other
    Information   49




---



##### Table of Contents



PART III  Item 10.
    Directors
    and Executive Officers of the Registrant      Regulation S-K Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedule  Financial Statements:
  Form 10-K.
  Financial Statement Schedule:
  Form 10-K.
  Exhibits:
  Number

Exhibit Title2
.

Agreement and Plan of Merger,
    dated as of November 26, 1996 among Registrant, ME
    Acquisitions, Inc., and Milgray Electronics, Inc. is
    incorporated by reference to Exhibit 2.1 of the
    Form 8-K
    dated January 7, 1997.3
.

The Restated Articles of
    Incorporation and Restated By-laws are incorporated by reference
    to Exhibits 3.1 and 3.2, respectively, to Registrants
    Form 8-B
    dated March 22, 1995, as amended.4
.

The Specimen of Registrants
    Common Stock certificates is incorporated by reference to
    Exhibit 5 to Amendment number 1 to Registrants
    Form 8-B
    filed January 15, 1980. 50




---



##### Table of Contents



Number

Exhibit Title10
.a.

The 1993 Employees Stock
    Purchase Plan is incorporated by reference to Exhibit A of
    Registrants definitive Proxy Statement (File
    No. 1-7899) filed in connection with the Annual Meeting of
    Shareholders held November 2, 1993.b
.

Form of Indemnity Agreement
    between the Registrant and its executive officers and directors
    is incorporated by reference to Exhibit 10.10 to
    Registrants
    Form 8-B
    dated March 22, 1995, as amended.c
.

Non-Employee Directors Stock
    Option Plan, as revised is, incorporated by reference to
    Exhibit 10.1 to Registrants
    Form 10-K
    dated December 31, 1995.d
.

Form of Stock Option Agreement
    between the Registrant and Non-employee Directors is
    incorporated by reference to Exhibit 10.m to
    Registrants
    Form 10-K
    dated December 31, 1995.e
.

1997 Deferred Compensation Plan
    dated August 27, 1997 is incorporated by reference to
    Exhibit 4.1 to Registrants
    Form S-8
    dated August 28, 1997.f
.

The Agreement of Purchase and Sale
    dated October 1, 1998 between Bell Industries, Inc. and
    Arrow Electronics, Inc. is incorporated by reference to
    Exhibit 2.1 of the Registrants
    Form 8-K,
    event date October 1, 1998.g
.

The Bell Industries, Inc. 2001
    Stock Option Plan is incorporated by reference to
    Exhibit 99. of the Registrants Quarterly Report on
    Form 10-Q
    dated September 30, 2001.h
.

Agreement for Wholesale Financing
    dated as of May 11, 2001 between the Registrant and
    Deutsche Financial Services Corporation is incorporated by
    reference to Exhibit 10.1 of the Registrants
    Quarterly Report on
    Form 10-Q
    dated June 30, 2001.i
.

Amended and Restated Agreement for
    Wholesale Financing dated as of July 18, 2002 between the
    Registrant and IBM Credit Corporation is incorporated by
    reference to Exhibit 10.r of the Registrants Annual
    Report on
    Form 10-K
    dated December 31, 2004.j
.

The Severance Agreement between
    the Registrant and Russell A. Doll dated as of December 1,
    2003 is incorporated by reference to Exhibit 10.2 of the
    Registrants Quarterly Report on
    Form 10-Q
    dated September 30, 2004.k
.

Amendment to Agreement for
    Wholesale financing dated as of December 12, 2003 between
    the Registrant and GE Commercial Distribution Finance
    Corporation (formerly known as Deutsche Financial Corporation)
    is incorporated by reference to Exhibit 10.v of the
    Registrants Annual Report on
    Form 10-K
    dated December 31, 2004.l
.

Letter Agreement dated as of
    May 11, 2004 between the Registrant and IBM Credit LLC
    (formerly IBM Credit Corporation) is incorporated by reference
    to Exhibit 10.w of the Registrants Annual Report on
    Form 10-K
    dated December 31, 2004.m
.

The Employment Agreement between
    the Registrant and John A. Fellows dated as of
    September 30, 2005 is incorporated by reference to
    Exhibit 10.1 of the Registrants Current Report on
    Form 8-K
    dated October 4, 2005.n
.

The Asset Purchase Agreement by
    and between the Registrant and Bourns, Inc. is incorporated by
    reference to Exhibit 10.1 of the Registrants Current
    Report on
    Form 8-K
    dated April 28, 2006.o
.

The Asset Purchase Agreement
    between SkyTel Corp. and the Registrant is incorporated by
    reference to Exhibit 10.1 of the Registrants Current
    Report on
    Form 8-K
    dated November 10, 2006.p
.

The Amendment No. 1 to the
    Asset Purchase Agreement between SkyTel Corp. and the Registrant
    is incorporated by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated November 16, 2006.q
.

The Employment Letter between the
    Registrant and Kevin Thimjon dated as of January 5, 2007 is
    incorporated by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated January 5, 2007.r
.

The Release and Amended Employment
    Agreement between the Registrant and Mitchell I. Rosen dated as
    of January 5, 2007 is incorporated by reference to
    Exhibit 10.2 of the Registrants Current Report on
    Form 8-K
    dated January 5, 2007.s
.

Credit Agreement, dated as of
    January 31, 2007 between the Registrant and Wells Fargo
    Foothill, Inc. is incorporated by reference to Exhibit 10.1
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007. 51




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##### Table of Contents



Number

Exhibit Titlet
.

$10,000,000 Amended and Restated
    Convertible Promissory Note, dated March 12, 2007 issued by
    the Registrant to Newcastle Partners, L.P. is incorporated by
    reference to Exhibit 4.1 of the Registrants Current
    Report on
    Form 8-K
    dated March 12, 2007.u
.

Purchase Agreement, dated as of
    January 31, 2007 between the Registrant and Newcastle
    Partners, L.P. is incorporated by reference to Exhibit 4.1
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007.v
.

Security Agreement, dated as of
    January 31, 2007 between the Registrant and Wells Fargo
    Foothill, Inc. is incorporated by reference to Exhibit 10.2
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007.w
.

Security Agreement, dated as of
    March 12, 2007 between the Registrant and Newcastle
    Partners, L.P. is incorporated by reference to Exhibit 10.1
    of the Registrants Current Report on
    Form 8-K
    dated March 12, 2007.x
.

Registration Rights Agreement,
    dated as of January 31, 2007 between the Registrant and
    Newcastle Partners, L.P. is incorporated by reference to
    Exhibit 4.3 of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007.21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered
    Public Accounting Firm.23
.2

Consent of Independent Registered
    Public Accounting Firm31
.1

Certification of John A. Fellows,
    Chief Executive Officer of Registrant pursuant to
    Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Kevin J. Thimjon,
    Chief Financial Officer of Registrant, pursuant to
    Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of John A. Fellows,
    Chief Executive Officer of Registrant furnished pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Kevin J.Thimjon,
    Chief Financial Officer of Registrant furnished pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.  52




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##### Table of Contents



SIGNATURES    Bell Industries, Inc.
  By:
    /s/  John
    A. Fellows   President and Chief Executive Officer
      Signature

Title/s/  Mark
    E. SchwarzMark
    E. Schwarz

Director and Chairman of the Board/s/  John
    A. FellowsJohn
    A. Fellows

President and Chief Executive
    Officer
    (Principal Executive Officer)
    Director/s/  Kevin
    J. ThimjonKevin
    J. Thimjon

Executive Vice President and 
    Chief Financial Officer
    (Principal Financial and Accounting Officer)/s/  Clinton
    J. ColemanClinton
    J. Coleman

Director/s/  L.
    James
    LawsonL.
    James Lawson

Director/s/  Michael
    R. ParksMichael
    R. Parks

Director  53




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##### Table of Contents



EXHIBIT INDEX  ExhibitNumber

Description2
.

Agreement and Plan of Merger,
    dated as of November 26, 1996 among Registrant, ME
    Acquisitions, Inc., and Milgray Electronics, Inc. is
    incorporated by reference to Exhibit 2.1 of the
    Form 8-K
    dated January 7, 1997. (*)3
.

The Restated Articles of
    Incorporation and Restated By-laws are incorporated by reference
    to Exhibits 3.1 and 3.2, respectively, to Registrants
    Form 8-B
    dated March 22, 1995, as amended. (*)4
.

The Specimen of Registrants
    Common Stock certificates is incorporated by reference to
    Exhibit 5 to Amendment number 1 to Registrants
    Form 8-B
    filed January 15, 1980. (*)10
.a.

The 1993 Employees Stock
    Purchase Plan is incorporated by reference to Exhibit A of
    Registrants definitive Proxy Statement (File
    No. 1-7899) filed in connection with the Annual Meeting of
    Shareholders held November 2, 1993. (*)b
.

Form of Indemnity Agreement
    between the Registrant and its executive officers and directors
    is incorporated by reference to Exhibit 10.10 to
    Registrants
    Form 8-B
    dated March 22, 1995, as amended. (*)c
.

Non-Employee Directors Stock
    Option Plan, as revised is, incorporated by reference to
    Exhibit 10.1 to Registrants
    Form 10-K
    dated December 31, 1995. (*)d
.

Form of Stock Option Agreement
    between the Registrant and Non-employee Directors is
    incorporated by reference to Exhibit 10.m to Registrants
    Form 10-K
    dated December 31, 1995.(*)e
.

1997 Deferred Compensation Plan
    dated August 27, 1997 is incorporated by reference to
    Exhibit 4.1 to Registrants
    Form S-8
    dated August 28, 1997. (*)f
.

The Agreement of Purchase and Sale
    dated October 1, 1998 between Bell Industries, Inc. and
    Arrow Electronics, Inc. is incorporated by reference to
    Exhibit 2.1 of the Registrants
    Form 8-K,
    event date October 1, 1998. (*)g
.

Agreement for Wholesale Financing
    dated as of May 11, 2001 between the Registrant and
    Deutsche Financial Services Corporation is incorporated by
    reference to Exhibit 10.1 of the Registrants
    Quarterly Report on
    Form 10-Q
    dated June 30, 2001. (*)h
.

The Bell Industries, Inc. 2001
    Stock Option Plan is incorporated by reference to
    Exhibit 99. of the Registrants Quarterly Report on
    Form 10-Q
    dated September 30, 2001. (*)i
.

Amended and Restated Agreement for
    Wholesale Financing dated as of July 18, 2002 between the
    Registrant and IBM Credit Corporation is incorporated by
    reference to Exhibit 10.r of the Registrants Annual
    Report on
    Form 10-K
    dated December 31, 2004. (*)j
.

The Severance Agreement between
    the Registrant and Russell A. Doll dated as of December 1,
    2003 is incorporated by reference to Exhibit 10.2 of the
    Registrants Quarterly Report on
    Form 10-Q
    dated September 30, 2004. (*)k
.

Amendment to Agreement for
    Wholesale financing dated as of December 12, 2003 between
    the Registrant and GE Commercial Distribution Finance
    Corporation (formerly known as Deutsche Financial Corporation)
    is incorporated by reference to Exhibit 10.v of the
    Registrants Annual Report on
    Form 10-K
    dated December 31, 2004. (*)l
.

Letter Agreement dated as of
    May 11, 2004 between the Registrant and IBM Credit LLC
    (formerly IBM Credit Corporation) is incorporated by reference
    to Exhibit 10.w of the Registrants Annual Report on
    Form 10-K
    dated December 31, 2004. (*)m
.

The Employment Agreement between
    the Registrant and John A. Fellows dated as of
    September 30, 2005 is incorporated by reference to
    Exhibit 10.1 of the Registrants Current Report on
    Form 8-K
    dated October 4, 2005. (*)n
.

The Asset Purchase Agreement by
    and between the Registrant and Bourns, Inc. is incorporated by
    reference to Exhibit 10.1 of the Registrants Current
    Report on
    Form 8-K
    dated April 28, 2006. (*)o
.

The Asset Purchase Agreement
    between SkyTel Corp. and the Registrant is incorporated by
    reference to Exhibit 10.1 of the Registrants Current
    Report on
    Form 8-K
    dated November 10, 2006. (*) 54




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##### Table of Contents



ExhibitNumber

Descriptionp
.

The Amendment No. 1 to the
    Asset Purchase Agreement between SkyTel Corp. and the Registrant
    is incorporated by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated November 16, 2006. (*)q
.

The Employment Letter between the
    Registrant and Kevin Thimjon dated as of January 5, 2007 is
    incorporated by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated January 5, 2007. (*)r
.

The Release and Amended Employment
    Agreement between the Registrant and Mitchell I. Rosen dated as
    of January 5, 2007 is incorporated by reference to
    Exhibit 10.2 of the Registrants Current Report on
    Form 8-K
    dated January 5, 2007. (*)s
.

Credit Agreement, dated as of
    January 31, 2007 between the Registrant and Wells Fargo
    Foothill, Inc. is incorporated by reference to Exhibit 10.1
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007. (*)t
.

$10,000,000 Amended and Restated
    Convertible Promissory Note, dated March 12, 2007 issued by
    the Registrant to Newcastle Partners, L.P. is incorporated by
    reference to Exhibit 4.1 of the Registrants Current
    Report on
    Form 8-K
    dated March 12, 2007. (*)u
.

Purchase Agreement, dated as of
    January 31, 2007 between the Registrant and Newcastle
    Partners, L.P. is incorporated by reference to Exhibit 4.1
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007. (*)v
.

Security Agreement, dated as of
    January 31, 2007 between the Registrant and Wells Fargo
    Foothill, Inc. is incorporated by reference to Exhibit 10.2
    of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007. (*)w
.

Security Agreement, dated as of
    March 12, 2007 between the Registrant and Newcastle
    Partners, L.P. is incorporated by reference to Exhibit 10.1
    of the Registrants Current Report on
    Form 8-K
    dated March 12, 2007. (*)x
.

Registration Rights Agreement,
    dated as of January 31, 2007 between the Registrant and
    Newcastle Partners, L.P. is incorporated by reference to
    Exhibit 4.3 of the Registrants Current Report on
    Form 8-K
    dated January 31, 2007. (*)21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered
    Public Accounting Firm.23
.2

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification of John A. Fellows,
    Chief Executive Officer of Registrant pursuant to
    Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Kevin J. Thimjon,
    Chief Financial Officer of Registrant pursuant to
    Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of John A. Fellows,
    Chief Executive Officer of Registrant furnished pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Kevin J. Thimjon,
    Chief Financial Officer of Registrant furnished pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     (*)
    
    Incorporated by reference. 55