UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period
ended         June 30,
2009


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:           0-F11676





BEL FUSE INC.(Exact
      name of registrant as specified in its
charter)





NEW JERSEY
            22-1463699(State
      of other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





206 Van Vorst Street
              Jersey City, New Jersey
              07302(Address
      of principal executive offices)
              
              (Zip
      Code)





(201) 432-0463(Registrant's
      telephone number, including area
code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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 and 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.x  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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).    ̈  Yes     ̈  No      Not
applicable to the registrant.





Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
            Accelerated
      filer x
            Non-accelerated
      filer  ̈
            Smaller
      reporting company  ̈(Do
      not check if a smallerreporting
      company)





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


 ̈  Yes                      x  No





At August
10, 2009, there were 2,174,912 shares of Class A Common Stock, $0.10 par value,
outstanding and 9,326,043 shares of Class B Common Stock, $0.10 par value,
outstanding.








BEL FUSE
INC.





INDEX





PagePart I
                                                    Financial
      InformationItem
      1.
                                                    Financial
      Statements
                                                    1Condensed
      Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
      (unaudited)
                                                    2-3Condensed
      Consolidated Statements of Operations for the Three and Six Months Ended
      June 30, 2009 and 2008 (unaudited)
                                                    4Condensed
      Consolidated Statements of Stockholders' Equity for the Year Ended
      December 31, 2008 and the Six Months Ended June 30, 2009
      (unaudited)
                                                    5Condensed
      Consolidated Statements of Cash Flows for the Six Months Ended June 30,
      2009 and 2008 (unaudited)
                                                    6-7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                                                    8-24Item
      2.
                                                    Management's
      Discussion and Analysis ofFinancial Condition and Results of
      Operations
                                                    25-38Item
      3.
                                                    Quantitative and
      Qualitative Disclosures About Market
      Risk
                                                    39Item
      4.
                                                    Controls
      and Procedures
                                                    40Part II
                                                    Other
      InformationItem
      1.
                                                    Legal
      Proceedings
                                                    42Item
      4.
                                                    Submission
      of Matters to a Vote of Security Holders
                                                    42Item
      6.
                                                    Exhibits
                                                    42Signatures
                                                    43





PART
I.                      Financial
Information





Item
1.                      Financial Statements
(Unaudited)





Certain information and footnote
disclosures required under accounting principles generally accepted in the
United States of America have been condensed or omitted from the following
condensed consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission.  The following
condensed consolidated financial statements should be read in conjunction with
the year-end consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2008.





The results of operations for the three
and six months ended June 30, 2009 are not necessarily indicative of the results
for the entire fiscal year or for any other period.


1





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(dollars
in thousands)


(Unaudited)





June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  97,976
                  
                  
                  $
                  74,955Marketable
      securities
                  
                  
                  14,451
                  
                  
                  
                  13,735Short-term
      investments
                  
                  
                  2,345
                  
                  
                  
                  4,013Accounts
      receivable - less allowance for doubtfulaccounts
      of $596 and $660 at June 30, 2009and
      December 31, 2008, respectively
                  
                  
                  32,254
                  
                  
                  
                  46,047Inventories
                  
                  
                  31,619
                  
                  
                  
                  46,524Prepaid
      expenses and other current assets
                  
                  
                  1,514
                  
                  
                  
                  859Refundable
      income taxes
                  
                  
                  3,996
                  
                  
                  
                  2,498Assets
      held for sale
                  
                  
                  -
                  
                  
                  
                  236Deferred
      income taxes
                  
                  
                  2,830
                  
                  
                  
                  4,752Total
      Current Assets
                  
                  
                  186,985
                  
                  
                  
                  193,619Property,
      plant and equipment - net
                  
                  
                  37,960
                  
                  
                  
                  39,936Restricted
      cash
                  
                  
                  -
                  
                  
                  
                  2,309Long-term
      investments
                  
                  
                  807
                  
                  
                  
                  1,062Deferred
      income taxes
                  
                  
                  3,795
                  
                  
                  
                  5,205Intangible
      assets - net
                  
                  
                  694
                  
                  
                  
                  926Goodwill
                  
                  
                  14,359
                  
                  
                  
                  14,334Other
      assets
                  
                  
                  6,493
                  
                  
                  
                  4,393TOTAL
      ASSETS
                  
                  $
                  251,093
                  
                  
                  $
                  261,784





See notes
to unaudited condensed consolidated financial statements.


2





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS - CONTINUED


(dollars
in thousands, except per share data)


(Unaudited)





June 30,
                                                  
                                                  
                                                  December 31,2009
                                                  
                                                  
                                                  2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                                                  
                                                  $
                                                  10,848
                                                  
                                                  
                                                  $
                                                  14,285Accrued
      expenses
                                                  
                                                  
                                                  6,695
                                                  
                                                  
                                                  
                                                  9,953Accrued
      restructuring costs
                                                  
                                                  
                                                  154
                                                  
                                                  
                                                  
                                                  555Income
      taxes payable
                                                  
                                                  
                                                  3,985
                                                  
                                                  
                                                  
                                                  4,054Dividends
      payable
                                                  
                                                  
                                                  811
                                                  
                                                  
                                                  
                                                  787Total
      Current Liabilities
                                                  
                                                  
                                                  22,493
                                                  
                                                  
                                                  
                                                  29,634Long-term
      Liabilities:Accrued
      restructuring costs
                                                  
                                                  
                                                  586
                                                  
                                                  
                                                  
                                                  406Deferred
      gain on sale of property
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  4,616Liability
      for uncertain tax positions
                                                  
                                                  
                                                  3,509
                                                  
                                                  
                                                  
                                                  3,445Minimum
      pension obligation andunfunded pension
    liability
                                                  
                                                  
                                                  6,313
                                                  
                                                  
                                                  
                                                  5,910Total
      Long-term Liabilities
                                                  
                                                  
                                                  10,408
                                                  
                                                  
                                                  
                                                  14,377Total
      Liabilities
                                                  
                                                  
                                                  32,901
                                                  
                                                  
                                                  
                                                  44,011Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000shares;
      none issued
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Class
      A common stock, par value $.10 per share -authorized
      10,000,000 shares; outstanding2,174,912
      and 2,180,982 shares, respectively(net
      of 1,072,769 treasury shares)
                                                  
                                                  
                                                  217
                                                  
                                                  
                                                  
                                                  218Class
      B common stock, par value $.10 per share -authorized
      30,000,000 shares; outstanding9,326,543
      and 9,369,893 shares, respectively(net
      of 3,218,307 treasury shares)
                                                  
                                                  
                                                  933
                                                  
                                                  
                                                  
                                                  937Additional
      paid-in capital
                                                  
                                                  
                                                  20,995
                                                  
                                                  
                                                  
                                                  19,963Retained
      earnings
                                                  
                                                  
                                                  194,443
                                                  
                                                  
                                                  
                                                  196,467Accumulated
      other comprehensive income
                                                  
                                                  
                                                  1,604
                                                  
                                                  
                                                  
                                                  188Total
      Stockholders' Equity
                                                  
                                                  
                                                  218,192
                                                  
                                                  
                                                  
                                                  217,773TOTAL
      LIABILITIES ANDSTOCKHOLDERS' EQUITY
                                                  
                                                  $
                                                  251,093
                                                  
                                                  
                                                  $
                                                  261,784





See notes
to unaudited condensed consolidated financial statements.


3





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(dollars
in thousands, except per share data)


(Unaudited)





Three
      Months Ended
                
                
                Six
      Months EndedJune 30,
                
                
                June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      Sales
                
                $
                44,934
                
                
                $
                72,454
                
                
                $
                88,805
                
                
                $
                133,323Costs
      and expenses:Cost
      of sales
                
                
                40,192
                
                
                
                59,317
                
                
                
                78,403
                
                
                
                108,955Selling,
      general and administrative
                
                
                7,601
                
                
                
                9,284
                
                
                
                15,254
                
                
                
                18,217Restructuring
      charge
                
                
                -
                
                
                
                -
                
                
                
                413
                
                
                
                -Loss
      (gain) on sale of property, plant and equipment
                
                
                13
                
                
                
                -
                
                
                
                (4,652
                )
                
                
                -47,806
                
                
                
                68,601
                
                
                
                89,418
                
                
                
                127,172(Loss)
      Income from operations
                
                
                (2,872
                )
                
                
                3,853
                
                
                
                (613
                )
                
                
                6,151Other,
      net
                
                
                1
                
                
                
                (2
                )
                
                
                9
                
                
                
                (1
                )Realized
      gain (loss/impairment charge) on investment
                
                
                1,081
                
                
                
                (2,352
                )
                
                
                1,083
                
                
                
                (2,633
                )Interest
      income
                
                
                126
                
                
                
                605
                
                
                
                307
                
                
                
                1,518(Loss)
      earnings before (benefit) provision for income taxes
                
                
                (1,664
                )
                
                
                2,104
                
                
                
                786
                
                
                
                5,035Income
      tax (benefit) provision
                
                
                (392
                )
                
                
                293
                
                
                
                1,242
                
                
                
                1,057Net
      (loss) earnings
                
                $
                (1,272
                )
                
                $
                1,811
                
                
                $
                (456
                )
                
                $
                3,978(Loss)
      earnings per Class A common shareBasic
                
                $
                (0.11
                )
                
                $
                0.14
                
                
                $
                (0.05
                )
                
                $
                0.31Diluted
                
                $
                (0.11
                )
                
                $
                0.14
                
                
                $
                (0.05
                )
                
                $
                0.31Weighted-average
      Class A common shares outstandingBasic
                
                
                2,174,912
                
                
                
                2,524,978
                
                
                
                2,175,531
                
                
                
                2,528,693Diluted
                
                
                2,174,912
                
                
                
                2,524,978
                
                
                
                2,175,531
                
                
                
                2,528,693(Loss)
      earnings per Class B common shareBasic
                
                $
                (0.11
                )
                
                $
                0.16
                
                
                $
                (0.04
                )
                
                $
                0.34Diluted
                
                $
                (0.11
                )
                
                $
                0.16
                
                
                $
                (0.04
                )
                
                $
                0.34Weighted-average
      Class B common shares outstandingBasic
                
                
                9,343,090
                
                
                
                9,352,092
                
                
                
                9,352,550
                
                
                
                9,329,516Diluted
                
                
                9,343,090
                
                
                
                9,352,609
                
                
                
                9,352,550
                
                
                
                9,333,082





See notes
to unaudited condensed consolidated financial statements.


4





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


(dollars
in thousands)


(Unaudited)





AccumulatedOther
                  
                  
                  Class A
                  
                  
                  Class B
                  
                  
                  AdditionalComprehensive
                  
                  
                  Retained
                  
                  
                  Comprehensive
                  
                  
                  Common
                  
                  
                  Common
                  
                  
                  Paid-InTotal
                  
                  
                  (Loss)Income
                  
                  
                  Earnings
                  
                  
                  Income
                  
                  
                  Stock
                  
                  
                  Stock
                  
                  
                  CapitalBalance,
      January 1, 2008
                  
                  $
                  244,527
                  
                  
                  
                  
                  
                  $
                  214,580
                  
                  
                  $
                  (344
                  )
                  
                  $
                  255
                  
                  
                  $
                  929
                  
                  
                  $
                  29,107Exercise
      of stock options
                  
                  
                  312
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3
                  
                  
                  
                  309Tax
      benefits arising from the disposition of non-qualified incentive stock
      options
                  
                  
                  39
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  39Cash
      dividends declared on Class A common stock
                  
                  
                  (565
                  )
                  
                  
                  
                  
                  
                  (565
                  )Cash
      dividends declared on Class B common stock
                  
                  
                  (2,619
                  )
                  
                  
                  
                  
                  
                  (2,619
                  )Issuance
      of restricted common stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  6
                  
                  
                  
                  (6
                  )Termination
      of restricted common stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1
                  )
                  
                  
                  1Repurchase/retirement
      of Class A common stock
                  
                  
                  (11,002
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (37
                  )
                  
                  
                  
                  
                  
                  
                  (10,965
                  )Currency
      translation adjustment
                  
                  
                  (355
                  )
                  
                  $
                  (355
                  )
                  
                  
                  
                  
                  
                  
                  (355
                  )Unrealized
      holding losses on marketable securities arising during the year, net of
      taxes
                  
                  
                  (4,230
                  )
                  
                  
                  (4,230
                  )
                  
                  
                  
                  
                  
                  
                  (4,230
                  )Reclassification
      adjustment of unrealized holding losses for impairment charge included in
      net earnings, net of tax
                  
                  
                  5,551
                  
                  
                  
                  5,551
                  
                  
                  
                  
                  
                  
                  
                  5,551Stock-based
      compensation expense
                  
                  
                  1,478
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,478Change
      in unfunded SERP liability, net of taxes
                  
                  
                  (434
                  )
                  
                  
                  (434
                  )
                  
                  
                  
                  
                  
                  
                  (434
                  )Net
      loss
                  
                  
                  (14,929
                  )
                  
                  
                  (14,929
                  )
                  
                  
                  (14,929
                  )Comprehensive
      loss
                  
                  
                  
                  
                  
                  $
                  (14,397
                  )Balance,
      December 31, 2008
                  
                  $
                  217,773
                  
                  
                  
                  
                  
                  
                  $
                  196,467
                  
                  
                  $
                  188
                  
                  
                  $
                  218
                  
                  
                  $
                  937
                  
                  
                  $
                  19,963Cash
      dividends declared on Class A common stock
                  
                  
                  (260
                  )
                  
                  
                  
                  
                  
                  
                  (260
                  )Cash
      dividends declared on Class B common stock
                  
                  
                  (1,308
                  )
                  
                  
                  
                  
                  
                  
                  (1,308
                  )Termination
      of restricted common stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1
                  )
                  
                  
                  1Repurchase/retirement
      of Class A common stock
                  
                  
                  (92
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1
                  )
                  
                  
                  
                  
                  
                  
                  (91
                  )Currency
      translation adjustment
                  
                  
                  13
                  
                  
                  $
                  13
                  
                  
                  
                  
                  
                  
                  
                  13Unrealized
      holding gains on marketable securities arising during the period, net of
      taxes of $1,262
                  
                  
                  2,061
                  
                  
                  
                  2,061
                  
                  
                  
                  
                  
                  
                  
                  2,061Reclassification
      adjustment of unrealized holding gains included in net earnings, net of
      taxes of $403
                  
                  
                  (658
                  )
                  
                  
                  (658
                  )
                  
                  
                  
                  
                  
                  
                  (658
                  )Reduction
      in APIC pool associated with tax deficiencies related to restricted stock
      awards
                  
                  
                  (87
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (87
                  )Unauthorized
      issuance of common stock
                  
                  
                  852
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  852Return
      of unauthorized shares of common stock
                  
                  
                  (456
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (3
                  )
                  
                  
                  (453
                  )Stock-based
      compensation expense
                  
                  
                  810
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  810Net
      loss
                  
                  
                  (456
                  )
                  
                  
                  (456
                  )
                  
                  
                  (456
                  )Comprehensive
      income
                  
                  
                  
                  
                  
                  $
                  960Balance,
      June 30, 2009
                  
                  $
                  218,192
                  
                  
                  
                  
                  
                  
                  $
                  194,443
                  
                  
                  $
                  1,604
                  
                  
                  $
                  217
                  
                  
                  $
                  933
                  
                  
                  $
                  20,995





See notes
to unaudited condensed consolidated financial statements.


5





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(dollars
in thousands)


(Unaudited)





Six Months EndedJune 30,2009
                        
                        
                        2008Cash
      flows from operating activities:Net
      (loss) earnings
                        
                        $
                        (456
                        )
                        
                        $
                        3,978Adjustments
      to reconcile net (loss) earnings to netcash
      provided by operating activities:Depreciation
      and amortization
                        
                        
                        3,359
                        
                        
                        
                        3,601Stock-based
      compensation
                        
                        
                        810
                        
                        
                        
                        668Restructuring
      charges, net of cash payments
                        
                        
                        (221
                        )Excess
      tax benefits from share-basedpayment
      arrangements
                        
                        
                        -
                        
                        
                        
                        (40
                        )(Gain)
      loss on sale of property, plant and equipment
                        
                        
                        (4,652
                        )
                        
                        
                        2Realized
      (gain) loss/impairment charge on investment
                        
                        
                        (1,083
                        )
                        
                        
                        2,633Other,
      net
                        
                        
                        821
                        
                        
                        
                        166Deferred
      income taxes
                        
                        
                        2,335
                        
                        
                        
                        (1,059
                        )Changes
      in operating assets and liabilities
                        
                        
                        19,825
                        
                        
                        
                        (1,245
                        )Net
      Cash Provided by Operating Activities
                        
                        
                        20,738
                        
                        
                        
                        8,704Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                        
                        
                        (1,122
                        )
                        
                        
                        (3,144
                        )Purchase
      of intangible asset
                        
                        
                        -
                        
                        
                        
                        (300
                        )Purchase
      of marketable securities
                        
                        
                        (5,629
                        )
                        
                        
                        (12,524
                        )Proceeds
      from sale of marketable securities
                        
                        
                        4,680
                        
                        
                        
                        -Proceeds
      from sale of property, plant and equipment
                        
                        
                        2,554
                        
                        
                        
                        2,290Proceeds
      from cash surrender value of company-ownedlife
      insurance
                        
                        
                        1,518
                        
                        
                        
                        -Redemption
      of investment
                        
                        
                        1,945
                        
                        
                        
                        10,949Net
      Cash Provided by (Used in) Investing Activities
                        
                        
                        3,946
                        
                        
                        
                        (2,729
                        )





See notes
to unaudited condensed consolidated financial statements.


6





BEL
FUSE INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


(dollars
in thousands)


(Unaudited)





Six
      Months EndedJune 30,2009
                            
                            
                            2008Cash
      flows from financing activities:Proceeds
      from exercise of stock options
                            
                            $
                            -
                            
                            
                            $
                            312Dividends
      paid to common shareholders
                            
                            
                            (1,544
                            )
                            
                            
                            (1,572
                            )Purchase
      and retirement of Class A common stock
                            
                            
                            (92
                            )
                            
                            
                            (766
                            )Excess
      tax benefits from share-basedpayment
      arrangements
                            
                            
                            -
                            
                            
                            
                            40Net
      Cash Used In Financing Activities
                            
                            
                            (1,636
                            )
                            
                            
                            (1,986
                            )Effect
      of exchange rate changes on cash
                            
                            
                            (27
                            )
                            
                            
                            262Net
      Increase in Cash and Cash Equivalents
                            
                            
                            23,021
                            
                            
                            
                            4,251Cash
      and Cash Equivalents - beginning of period
                            
                            
                            74,955
                            
                            
                            
                            83,875Cash
      and Cash Equivalents - end of period
                            
                            $
                            97,976
                            
                            
                            $
                            88,126Changes
      in operating assetsand
      liabilities consist of:Decrease
      in accounts receivable
                            
                            $
                            13,760
                            
                            
                            $
                            907Decrease
      (increase) in inventories
                            
                            
                            14,914
                            
                            
                            
                            (6,990
                            )Increase
      in prepaid expenses and other current assets
                            
                            
                            (648
                            )
                            
                            
                            (360
                            )Increase
      in other assets
                            
                            
                            (20
                            )
                            
                            
                            (75
                            )(Decrease)
      increase in accounts payable
                            
                            
                            (3,441
                            )
                            
                            
                            4,604Decrease
      in accrued expenses
                            
                            
                            (3,249
                            )
                            
                            
                            (313
                            )(Decrease)
      increase in income taxes payable
                            
                            
                            (1,491
                            )
                            
                            
                            982$
                            19,825
                            
                            
                            $
                            (1,245
                            )Supplementary
      information:Cash
      paid during the period for income taxes
                            
                            $
                            348
                            
                            
                            $
                            854





See notes
to unaudited condensed consolidated financial statements.


7


BEL FUSE
INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.
            BASIS
      OF PRESENTATION AND ACCOUNTING
POLICIES




The
condensed consolidated balance sheet as of June 30, 2009, and the condensed
consolidated statements of operations, stockholders' equity and cash flows for
the periods presented herein have been prepared by Bel Fuse Inc. (the "Company"
or "Bel") and are unaudited. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position, results of operations, changes in stockholders' equity
and cash flows for all periods presented have been made.  The results
for the three and six months ended June 30, 2009 should not be viewed as
indicative of the Company’s annual results or the Company’s results for any
other period.  The information for the condensed consolidated balance
sheet as of December 31, 2008 was derived from audited financial
statements.  These financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Bel Fuse Annual Report on Form 10-K for the year ended December 31,
2008.





2.
            (LOSS)
      EARNINGS PER SHARE





The
Company utilizes the two-class method to report its (loss) earnings per
share.  The two-class method is a (loss) earnings allocation formula
that determines (loss) earnings per share for each class of common stock
according to dividends declared and participation rights in undistributed (loss)
earnings.  The Company’s Certificate of Incorporation, as amended,
states that Class B common shares are entitled to dividends at least 5% greater
than dividends paid to Class A common shares, resulting in the two-class method
of computing (loss) earnings per share.  In computing (loss) earnings
per share, the Company has allocated dividends declared to Class A and Class B
based on amounts actually declared for each class of stock and 5% more of the
undistributed (loss) earnings have been allocated to Class B shares than to the
Class A shares on a per share basis.  Basic (loss) earnings per common
share are computed by dividing net (loss) earnings by the weighted-average
number of common shares outstanding during the period.  Diluted
earnings per common share, for each class of common stock, are computed by
dividing net earnings by the weighted-average number of common shares and
potential common shares outstanding during the period. In periods in which a
loss from continuing operations is presented, potential common shares are not
included in the diluted loss per common share calculation, as they would be
antidilutive.  During the three and six months ended June 30, 2008,
potential common shares used in computing diluted (loss) earnings per share
relate to stock options for Class B common shares which, if exercised, would
have a dilutive effect on (loss) earnings per share.  There were no
stock options outstanding during the three and six months ended June 30, 2009
which would have had a dilutive effect on (loss) earnings per
share.


8


The
(loss) earnings and weighted-average shares outstanding used in the computation
of basic and diluted (loss) earnings per share are as follows (dollars in
thousands, except share and per share data):





Three
      Months Ended
                
                
                Six
      Months EndedJune 30,
                
                
                June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Numerator:Net
      (loss) earnings
                
                $
                (1,272
                )
                
                $
                1,811
                
                
                $
                (456
                )
                
                $
                3,978Less
      Dividends:Class
      A
                
                
                128
                
                
                
                152
                
                
                
                260
                
                
                
                306Class
      B
                
                
                654
                
                
                
                655
                
                
                
                1,308
                
                
                
                1,305Undistributed
      (loss) earnings
                
                $
                (2,054
                )
                
                $
                1,004
                
                
                $
                (2,024
                )
                
                $
                2,367Undistributed
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                
                
                (373
                )
                
                
                205
                
                
                
                (367
                )
                
                
                486Class
      B undistributed (loss) earnings
                
                
                (1,681
                )
                
                
                799
                
                
                
                (1,657
                )
                
                
                1,881Total
      undistributed (loss) earnings
                
                $
                (2,054
                )
                
                $
                1,004
                
                
                $
                (2,024
                )
                
                $
                2,367Undistributed
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                
                
                (373
                )
                
                
                205
                
                
                
                (367
                )
                
                
                486Class
      B undistributed (loss) earnings
                
                
                (1,681
                )
                
                
                799
                
                
                
                (1,657
                )
                
                
                1,881Total
      undistributed (loss) earnings
                
                $
                (2,054
                )
                
                $
                1,004
                
                
                $
                (2,024
                )
                
                $
                2,367Net
      (loss) earnings allocation - basic:Class
      A allocated (loss) earnings
                
                
                (245
                )
                
                
                357
                
                
                
                (107
                )
                
                
                792Class
      B allocated (loss) earnings
                
                
                (1,027
                )
                
                
                1,454
                
                
                
                (349
                )
                
                
                3,186Net
      (loss) earnings
                
                $
                (1,272
                )
                
                $
                1,811
                
                
                $
                (456
                )
                
                $
                3,978Net
      (loss) earnings allocation - diluted:Class
      A allocated (loss) earnings
                
                
                (245
                )
                
                
                357
                
                
                
                (107
                )
                
                
                792Class
      B allocated (loss) earnings
                
                
                (1,027
                )
                
                
                1,454
                
                
                
                (349
                )
                
                
                3,186Net
      (loss) earnings
                
                $
                (1,272
                )
                
                $
                1,811
                
                
                $
                (456
                )
                
                $
                3,978Denominator:Weighted-average
      shares outstanding:Class
      A - basic and diluted
                
                
                2,174,912
                
                
                
                2,524,978
                
                
                
                2,175,531
                
                
                
                2,528,693Class
      B - basic
                
                
                9,343,090
                
                
                
                9,352,092
                
                
                
                9,352,550
                
                
                
                9,329,516Dilutive
      impact of stock options
                
                
                -
                
                
                
                517
                
                
                
                -
                
                
                
                3,566Class
      B - diluted
                
                
                9,343,090
                
                
                
                9,352,609
                
                
                
                9,352,550
                
                
                
                9,333,082(Loss)
      Earnings per share:Class
      A - basic
                
                $
                (0.11
                )
                
                $
                0.14
                
                
                $
                (0.05
                )
                
                $
                0.31Class
      A - diluted
                
                $
                (0.11
                )
                
                $
                0.14
                
                
                $
                (0.05
                )
                
                $
                0.31Class
      B - basic
                
                $
                (0.11
                )
                
                $
                0.16
                
                
                $
                (0.04
                )
                
                $
                0.34Class
      B - diluted
                
                $
                (0.11
                )
                
                $
                0.16
                
                
                $
                (0.04
                )
                
                $
                0.34


9


During
the three and six months ended June 30, 2009 and 2008, 53,000 outstanding
options were not included in the foregoing computations for Class B common
shares because their effect would be antidilutive.





3.           MARKETABLE
SECURITIES





At June
30, 2009 and December 31, 2008, marketable securities with an adjusted cost
basis of approximately $12.2 million and $13.7 million had a fair market value
of $14.5 million and $13.7 million, respectively.  During the three
and six months ended June 30, 2009, the Company recorded realized gains on its
investments in the amount of $1.1 million in each period.  During the
three and six months ended June 30, 2008, the Company recorded realized
losses/impairment charges on its investments in the amount of $2.4 million and
$2.6 million, respectively.  At June 30, 2009 and December 31, 2008,
respectively, gross unrealized gains on other marketable securities of
approximately $2.3 million and $0.1 million are included, net of tax, in
accumulated other comprehensive income.





Columbia Strategic Cash
Portfolio (“Columbia Portfolio”):





At June
30, 2009, the Company’s investment securities included privately placed units of
beneficial interests in the Columbia Portfolio, which is an enhanced cash fund
sold as an alternative to money-market funds.  In December 2007, due
to adverse market conditions, the fund was overwhelmed with withdrawal requests
from investors and it was closed with a restriction placed upon the cash
redemption ability of its holders.  At the time the liquidation was
announced, the Company held 25.7 million units of the Columbia Portfolio at a
book value of $25.7 million.





As of
June 30, 2009, the Company has received total cash redemptions to date of $20.8
million (including $1.9 million during the six months ended June 30, 2009) at a
weighted-average net asset value (NAV) of $.9523 per unit.  As of June
30, 2009, the Company holds 3.8 million units with a book value of $3.2 million
and a fair market value of $3.3 million.  Due to the restrictions
placed on these investments, the balance in the Columbia Portfolio as of June
30, 2009 is categorized as an other investment on the accompanying condensed
consolidated balance sheet, allocated into short-term and long-term based on the
projected redemption schedule as issued by the portfolio manager.  The
information and the markets relating to these investments remain
dynamic.  There may be further declines in the value of these
investments, in the value of the collateral held by these entities, and in the
liquidity of the Company’s investments.  To the extent that the
Company determines that there is a further decline in fair value, the Company
may recognize impairment charges in future periods up to the aggregate carrying
amount of these investments.





Toko, Inc.
(“Toko”):





As of
June 30, 2009, the Company owned a total of 1,840,919 shares, or approximately
1.9%, of the outstanding shares, of the common stock of Toko.  Toko
develops, manufactures and sells power supply related components and radio
frequency related components primarily in Japan.  Toko had a market
capitalization of approximately $162.2 million as of June 30,
2009.   These shares are reflected on the Company’s condensed
consolidated balance sheets as marketable securities.  These
marketable securities are considered to be available for sale under Statement of
Financial Accounting Standards No. (“SFAS”) 115, “Accounting for Certain
Investments in Debt and Equity Securities”.  During the six months
ended June 30, 2008, the Company recorded an impairment charge of $2.4 million
related to this investment.  At June 30, 2009 and December 31, 2008,
this investment had an adjusted basis of $2.0 million at each date, and a fair
market value of $3.1 million and $2.1 million, respectively.  The
gross unrealized gain of $1.0 million and $0.1 million at June 30, 2009 and
December 31, 2008, respectively, is included, net of tax, in accumulated other
comprehensive income.


10


Power-One, Inc.
(“Power-One”):





As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock representing, to the Company’s knowledge, 8.4% of Power-One’s
outstanding common stock, at a total purchase price of $14.1 million ($1.92 per
share).  Power-One’s common stock is quoted on the NASDAQ Global
Market.  Power-One is a designer and manufacturer of power conversion
and power management products.  During the second quarter of 2009, the
Company sold 3,041,393 shares of its Power-One common stock at an aggregate fair
market value of $4.7 million, resulting in a book gain of $1.1
million.  As of June 30, 2009, the Company owned 4,297,605 shares of
Power-One common stock, representing, to the Company’s knowledge, 4.9% of
Power-One’s outstanding common stock.  At June 30, 2009, this
investment had an adjusted basis of $5.1 million ($1.19 per share) and a fair
market value of $6.4 million ($1.49 per share).  The gross unrealized
gain at June 30, 2009 of $1.3 million is included, net of income tax, in
accumulated other comprehensive income in stockholders’ equity.





CDARS:





During
2008, the Company invested a total of $4.9 million in certificates of deposit
(CDs) through Stephens, Inc., with whom the Company has an investment banking
relationship.  These investments are part of the Certificate of
Deposit Account Registry Service (CDARS) program whereby the funds are invested
with various banks in order to achieve FDIC insurance on the full invested
amount.  The CDs had an initial maturity of 26-weeks and an early
redemption feature with a 30-day interest penalty.  During December
2008, $2.0 million of the CD’s matured and were temporarily renewed for a period
of 29 days and, accordingly, were considered to be a cash equivalent as of
December 31, 2008, due to the short-term nature of the
investment.  These CDs were renewed in January 2009 for a period of 13
weeks.  The full $5.0 million investment (including interest) was
renewed again in May 2009 for a period of 13 weeks.  These CDs have
been classified as marketable securities in the condensed consolidated balance
sheet at June 30, 2009.





4.   FAIR
VALUE MEASUREMENT





The
Company adopted SFAS No. 157, “Fair Value Measurements”, as amended by Financial
Accounting Standards Board (“FASB”) Staff Position (“FSP”) 157-1, FSP 157-2, and
FSP 157-3 (collectively referred to as SFAS No. 157), on January 1, 2008,
for all financial assets and liabilities that are recognized or disclosed at
fair value in the condensed consolidated financial statements on a recurring
basis or on a nonrecurring basis during the reporting period. While the Company
adopted the provisions of SFAS No. 157 for nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis, no such assets or liabilities existed at the
balance sheet date. The Company, in accordance with FSP 157-2, delayed
implementation of SFAS No. 157 for all nonfinancial assets and liabilities
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis and adopted these provisions effective January 1,
2009.





In
accordance with the provisions of SFAS No. 157, which clarifies that fair value
is an exit price, representing the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, the Company utilizes market data or
assumptions that market participants would use in pricing the asset or
liability.  SFAS No. 157 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair
value.  These tiers include:  Level 1, defined as observable
inputs such as quoted market prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs about which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.


11


As of
June 30, 2009, the Company held certain financial assets that are measured at
fair value on a recurring basis.  These consisted of the Company’s
investments in Toko stock, Power-One stock and CDARS (categorized as
available-for-sale securities). In addition, the Company holds certain
investments in a Rabbi Trust which are intended to fund the Company’s SERP
obligations.  These are also categorized as available-for-sale
securities, and are included as other assets in the accompanying condensed
consolidated balance sheet at June 30, 2009. The fair value of these investments
is determined based on quoted market prices in public markets and is categorized
as Level 1.  The Company does not have any financial assets measured
at fair value on a recurring basis categorized as Level 2 or Level 3, and there
were no transfers in or out of Level 2 or Level 3 during the six months ended
June 30, 2009.





The
following table sets forth by level, within SFAS No. 157’s fair value hierarchy,
the Company’s financial assets accounted for at fair value on a recurring basis
as of June 30, 2009 (dollars in thousands).





Assets at Fair Value as of June 30, 2009 UsingTotal
                        
                        
                        Quoted Prices
                          in Active
                          Markets for
                          Identical
                          Assets
                          (Level 1)
                        
                        
                        Significant
                          Other
                          Observable
                          Inputs
                          (Level 2)
                        
                        
                        Significant
                          Unobservable
                          Inputs
                          (Level 3)Available-for-sale
      securities:Marketable
      securities
                        
                        $
                        14,451
                        
                        
                        $
                        14,451
                        
                        
                        
                        -
                        
                        
                        
                        -Investments
      held in Rabbi Trust
                        
                        
                        3,553
                        
                        
                        
                        3,553
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        18,004
                        
                        
                        $
                        18,004
                        
                        
                        
                        -
                        
                        
                        
                        -





The
following table sets forth by level, within SFAS No. 157’s fair value hierarchy,
the Company’s financial assets accounted for at fair value on a nonrecurring
basis as of June 30, 2009 (dollars in thousands).  These consisted of
the Company’s investment in the Columbia Portfolio (categorized as an other
investment in the table below).  The fair value of these investments
is determined based on the net asset value as issued by the portfolio manager as
of June 30, 2009.   The Company has categorized this as a
significant other observable input (Level 2).





Assets at Fair Value as of June 30, 2009 Using
                                  
                                  
                                  Total GainsTotal
                                  
                                  
                                  Quoted Prices
                                    in Active
                                    Markets for
                                    Identical
                                    Assets
                                    (Level 1)
                                  
                                  
                                  Significant
                                    Other
                                    Observable
                                    Inputs
                                    (Level 2)
                                  
                                  
                                  Significant
                                    Unobservable
                                    Inputs
                                    (Level3)
                                  
                                  
                                  Three Months
                                    Ended
                                    June 30, 2009
                                  
                                  
                                  Six Months
                                    Ended
                                    June 30, 2009Other
      investments
                                  
                                  $
                                  3,323
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  3,323
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  19
                                  
                                  
                                  $
                                  21Total
                                  
                                  $
                                  3,323
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  3,323
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  19
                                  
                                  
                                  $
                                  21


12


There
were no changes to the Company’s valuation techniques used to measure asset fair
values on a recurring or nonrecurring basis during the six months ended June 30,
2009 and the Company did not have any financial liabilities as of June 30,
2009.




The
Company has other financial instruments, such as accounts receivable, accounts
payable and accrued expenses, which have been excluded from the tables
above.  Due to the short-term nature of these instruments, the
carrying value of accounts receivable, accounts payable and accrued expenses
approximate their fair values.
  Nonfinancial
assets and liabilities, such as goodwill and long-lived assets, are accounted
for at fair value on a nonrecurring basis.   These items are
tested for impairment charges upon the occurrence of a triggering event or in
the case of goodwill, on at least an annual basis.  While the
Company's actual revenue stream for the six months ended June 30, 2009 was lower
than the financial projections utilized in the annual goodwill impairment
analysis (performed in the fourth quarter of 2008), there are signs of
improvement as the Company enters its third quarter.  The Company will
continue to monitor its financial results as well as the overall economic
conditions into the third quarter.  In the event the Company's
projected cash flows do not rebound to adequate levels, the Company may perform
an interim impairment test, which could lead to goodwill impairment charges in
future periods.  We cannot predict at this time when, or if, there
will be a triggering event in 2009 which would cause the Company to test for
impairment on an interim basis.  In any event, the Company's annual
impairment analysis will be performed in the fourth quarter of
2009.  The carrying value of the Company's goodwill was $14.4 million
and $14.3 million at June 30, 2009 and December 31, 2008,
respectively.


5.   OTHER
ASSETS





In
conjunction with the Company’s supplemental executive retirement plan (“SERP
plan”), the Company has invested in life insurance policies related to certain
employees and marketable securities held in a Rabbi Trust to satisfy future
obligations of the SERP plan.





Company-Owned Life
Insurance





Investments
in company-owned life insurance policies (“COLI”) were made with the intention
of utilizing them as a long-term funding source for the Company’s supplemental
retirement plan (“SERP”) obligations, which amounted to $6.3 million at June 30,
2009. However, the cash surrender value of the COLI does not represent a
committed funding source for these obligations.  Any proceeds from
these policies are subject to claims from creditors.  The fair market
value of the COLI at December 31, 2008 was $3.8 million.  During the
second quarter of 2009, the Company surrendered certain of the policies within
the COLI at a cash surrender value of $1.5 million and purchased an additional
$0.3 million in new COLI policies.  During the first half of 2009,
significant volatility in global equity markets had a significant effect on the
cash surrender value and as a result, the Company recorded income to account for
the increase in cash surrender value in the amount of $0.3 million and $0.1
million during the three and six months ended June 30, 2009,
respectively.  This increase in cash surrender value was allocated
between cost of sales and selling, general and administrative expenses on the
condensed consolidated statements of operations for the six months ended June
30, 2009.  The allocation is consistent with the costs associated with
the long-term employee benefit obligations that the COLI is intended to
fund.  At June 30, 2009, the fair market value of the COLI was $2.4
million and is included in other assets in the accompanying condensed
consolidated balance sheets.





Other
Investments





During
the second quarter of 2009, the Company invested $3.5 million in various
marketable securities. Together with the COLI described above, these investments
are intended to fund the Company’s SERP obligations and are classified as other
assets in the accompanying condensed consolidated balance
sheets.   These investments are classified as available for sale
and the Company monitors these investments for impairment on an ongoing
basis.  At June 30, 2009, the fair market value of these investments
was $3.5 million.  There was an immaterial unrealized gain at June 30,
2009 which has been included in accumulated other comprehensive
income.


13


6.           INVENTORIES





The
components of inventories are as follows (dollars in thousands):





June 30,
                      
                      
                      December 31,2009
                      
                      
                      2008Raw
      materials
                      
                      $
                      20,735
                      
                      
                      $
                      25,527Work
      in progress
                      
                      
                      1,323
                      
                      
                      
                      1,650Finished
      goods
                      
                      
                      9,561
                      
                      
                      
                      19,347$
                      31,619
                      
                      
                      $
                      46,524





Inventories
are shown net of an allowance for excess and obsolete inventory of $3.1 million
and $4.1 million as of June 30, 2009 and December 31, 2008,
respectively.





7.           
BUSINESS SEGMENT INFORMATION





The
Company operates in one industry with three reportable segments.  The
segments are geographic and include North America, Asia and
Europe.  The primary criteria by which financial performance is
evaluated and resources are allocated are revenues and operating
income.  The following is a summary of key financial data (dollars in
thousands):





Three Months Ended
                                    
                                    
                                    Six Months EndedJune 30,
                                    
                                    
                                    June 30,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008Total
      segment revenuesNorth
      America
                                    
                                    $
                                    12,585
                                    
                                    
                                    $
                                    24,022
                                    
                                    
                                    $
                                    23,891
                                    
                                    
                                    $
                                    47,014Asia
                                    
                                    
                                    35,120
                                    
                                    
                                    
                                    53,234
                                    
                                    
                                    
                                    68,918
                                    
                                    
                                    
                                    95,374Europe
                                    
                                    
                                    4,684
                                    
                                    
                                    
                                    7,624
                                    
                                    
                                    
                                    9,724
                                    
                                    
                                    
                                    14,410Total
      segment revenues
                                    
                                    
                                    52,389
                                    
                                    
                                    
                                    84,880
                                    
                                    
                                    
                                    102,533
                                    
                                    
                                    
                                    156,798Reconciling
      items:Intersegment
      revenues
                                    
                                    
                                    (7,455
                                    )
                                    
                                    
                                    (12,426
                                    )
                                    
                                    
                                    (13,728
                                    )
                                    
                                    
                                    (23,475
                                    )Net
      sales
                                    
                                    $
                                    44,934
                                    
                                    
                                    $
                                    72,454
                                    
                                    
                                    $
                                    88,805
                                    
                                    
                                    $
                                    133,323Income
      (loss) from Operations:North
      America
                                    
                                    $
                                    (215
                                    )
                                    
                                    $
                                    1,647
                                    
                                    
                                    $
                                    2,356
                                    
                                    
                                    $
                                    2,745Asia
                                    
                                    
                                    (2,674
                                    )
                                    
                                    
                                    1,464
                                    
                                    
                                    
                                    (2,867
                                    )
                                    
                                    
                                    2,304Europe
                                    
                                    
                                    17
                                    
                                    
                                    
                                    742
                                    
                                    
                                    
                                    (102
                                    )
                                    
                                    
                                    1,102$
                                    (2,872
                                    )
                                    
                                    $
                                    3,853
                                    
                                    
                                    $
                                    (613
                                    )
                                    
                                    $
                                    6,151





Net sales
to external customers are attributed to individual segments based on the
geographic source of the billing for such customer sales.  Transfers
between geographic areas include finished products manufactured in foreign
countries which are then transferred to the United States and Europe for sale;
finished goods manufactured in the United States which are transferred to Europe
and Asia for sale; and semi-finished components manufactured in the United
States which are sold to Asia for further processing. Income from operations
represents gross profit less operating expenses.


14





8.           DEBT





The
Company has an unsecured credit agreement in the amount of $20 million, which
expires on September 10, 2011.  There have not been any borrowings
under the credit agreement and, as such, there was no balance outstanding as of
June 30, 2009.  At that date, the entire $20 million line of credit
was available to the Company to borrow.  The credit agreement bears
interest at LIBOR plus 0.75% to 1.25% based on certain financial statement
ratios maintained by the Company.  In the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008, it was noted that the Company
was not in compliance with one of the covenants related to this credit
agreement.  Upon further clarification of the covenant calculation
received from the lender subsequent to that filing, this matter has been
resolved and the Company is in compliance with its debt covenants as of June 30,
2009.





The
Company’s Hong Kong subsidiary had an unsecured line of credit of approximately
$2 million which was unused as of June 30, 2009.  The line of credit
expired on January 31, 2009 and was renewed on February 10, 2009.  Any
borrowing on the line of credit will be guaranteed by the U.S.
parent.  The line of credit bears interest at a rate determined by the
bank as the financing is extended.





9.           INCOME
TAXES





In
accordance with the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainties in Income Taxes”, as of June 30, 2009 and December 31, 2008, the
Company has approximately $7.4 million and $7.3 million, respectively, of
liabilities for uncertain tax positions ($3.9 million and $3.9 million,
respectively, included in income tax payable and $3.5 million and $3.4 million,
respectively, included in liability for uncertain tax positions) all of which,
if recognized, would reduce the Company’s effective tax rate.





The
Company and its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal examinations by tax authorities for
years before 2005 and for state examinations before
2004.   Regarding foreign subsidiaries, the Company is no longer
subject to examination by tax authorities for years before 2002 in the Far East
and generally 2004 in Europe.





As a
result of the expiration of the statute of limitations for specific
jurisdictions, it is reasonably possible that the related unrecognized benefits
for tax positions taken regarding previously filed tax returns may change
materially from those recorded as liabilities for uncertain tax positions in the
Company’s condensed consolidated financial statements at June 30,
2009.   A total of $3.9 million of previously recorded
liabilities for uncertain tax positions relates to the 2005 tax
year.  The statute of limitations related to this liability is
scheduled to expire on September 15, 2009.





The
Company’s policy is to recognize interest and penalties related to uncertain tax
positions as a component of the current provision for income
taxes.  During the six months ended June 30, 2009 and 2008, the
Company recognized $0.1 million and $0.2 million, respectively, in interest and
penalties in the condensed consolidated statements of operations.  The
Company has approximately $1.6 million accrued for the payment of interest and
penalties at both June 30, 2009 and December 31, 2008, which is included in both
income taxes payable and liability for uncertain tax positions in the condensed
consolidated balance sheets.


15





10.           ACCRUED
EXPENSES





Accrued
expenses consist of the following (dollars in thousands):





June 30,
                    
                    
                    December 31,2009
                    
                    
                    2008Sales
      commissions
                    
                    $
                    1,173
                    
                    
                    $
                    1,598Contract
      labor
                    
                    
                    1,530
                    
                    
                    
                    2,939Salaries,
      bonuses and related benefits
                    
                    
                    1,866
                    
                    
                    
                    2,834Other
                    
                    
                    2,126
                    
                    
                    
                    2,582$
                    6,695
                    
                    
                    $
                    9,953





See Note
19 for discussion and details associated with restructuring
accruals.





11.         RETIREMENT
FUND AND PROFIT SHARING PLAN





The
Company maintains a domestic 401(K) plan, which consists of profit sharing,
contributory stock ownership and individual voluntary savings to provide
retirement benefits for plan participants.  The expense for the six
months ended June 30, 2009 and 2008 amounted to approximately $0.2 million in
each period. The expense for the three months ended June 30, 2009 and 2008
amounted to approximately $0.1 million in each period. As of June 30, 2009, the
plans owned 17,086 and 168,378 shares of Bel Fuse Inc. Class A and Class B
common stock, respectively.





The
Company's subsidiaries in Asia have a retirement fund covering substantially all
of their Hong Kong based full-time employees.  The expense for the six
months ended June 30, 2009 and 2008 amounted to approximately $0.2 million in
each period.  The expense for the three months ended June 30, 2009 and
2008 amounted to approximately $0.1 million in each period. As of June 30,
2009, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class
B common stock, respectively.





The
Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
provide a limited group of key management and highly compensated employees of
the Company with supplemental retirement and death benefits.





The
components of SERP expense are as follows (dollars in thousands):




Three Months Ended
                        
                        
                        Six Months EndedJune
      30,
                        
                        
                        June
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Service
      cost
                        
                        $
                        96
                        
                        
                        $
                        73
                        
                        
                        $
                        192
                        
                        
                        $
                        146Interest
      cost
                        
                        
                        88
                        
                        
                        
                        76
                        
                        
                        
                        176
                        
                        
                        
                        152Amortization
      of adjustments
                        
                        
                        37
                        
                        
                        
                        33
                        
                        
                        
                        74
                        
                        
                        
                        66Total
      SERP expense
                        
                        $
                        221
                        
                        
                        $
                        182
                        
                        
                        $
                        442
                        
                        
                        $
                        364




16




June 30,
                    
                    
                    December 31,2009
                    
                    
                    2008Balance
      sheet amounts:Minimum
      pension obligation and unfunded pension liability
                    
                    $
                    6,313
                    
                    
                    $
                    5,910Accumulated
      other comprehensive (loss) income
                    
                    
                    (1,588
                    )
                    
                    
                    (1,588
                    )





12.  SHARE-BASED
COMPENSATION





The
Company records compensation expense in its condensed consolidated statements of
operations related to employee stock-based options and awards in accordance with
SFAS No. 123(R), “Share-Based Payment”.  The aggregate pretax
compensation cost recognized in net (loss) earnings for stock-based compensation
(including incentive stock options and restricted stock, as further discussed
below) amounted to approximately $0.8 million and $0.7 million, respectively,
for the six months ended June 30, 2009 and 2008.  For the three months
ended June 30, 2009 and 2008 the aggregate compensation cost recognized in net
earnings amounted to $0.4 million in each period.  The Company did not
use any cash to settle any equity instruments granted under share-based
arrangements during the six months ended June 30, 2009 and 2008.





Stock
Options





The
Company has an equity compensation program (the "Program") which provides for
the granting of "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, non-qualified stock options and
restricted stock awards.  No stock options were granted during the six
months ended June 30, 2009 and 2008.





Information
regarding the Company’s stock options for the six months ended June 30, 2009 is
as follows.  All of the stock options noted below relate to options to
purchase shares of the Company’s Class B common stock.


WeightedAverageWeighted
                                    
                                    Remaining
                                    
                                    AggregateAverage
                                    
                                    Contractual
                                    
                                    IntrinsicOptions
                                    
                                    Shares
                                    
                                    
                                    ExercisePrice
                                    
                                    Term
                                    
                                    Value(000's)Outstanding
      at January 1, 2009
                                    
                                    
                                    53,000
                                    
                                    
                                    $
                                    31.48Granted
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Forfeited
      or expired
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Outstanding
      at June 30, 2009
                                    
                                    
                                    53,000
                                    
                                    
                                    $
                                    31.48
                                    
                                    0.74 years
                                    
                                    $
                                    -Exercisable
      at June 30, 2009
                                    
                                    
                                    53,000
                                    
                                    
                                    $
                                    31.48
                                    
                                    0.74 years
                                    
                                    $
                                    -





No stock
options were exercised during the six months ended June 30,
2009.  During the six months ended June 30, 2008, a nominal amount of
stock options were exercised and, as a result, the amount received from the
exercise of stock options and the associated intrinsic value and tax benefits
related to these exercises were minimal. Stock compensation expense applicable
to stock options was minimal for the six months ended June 30, 2009 and
2008.


17





A summary
of the status of the Company's unvested stock options as of December 31, 2008
and changes during the six months ended June 30, 2009 is presented
below:





Weighted-AverageGrant-DateUnvested Stock Options
                  
                  Shares
                  
                  
                  Fair ValueUnvested
      at December 31, 2008
                  
                  
                  15,000
                  
                  
                  $
                  29.50Granted
                  
                  
                  -
                  
                  
                  
                  -Vested
                  
                  
                  (15,000
                  )
                  
                  
                  29.50Forfeited
                  
                  
                  -
                  
                  
                  
                  -Unvested
      at June 30, 2009
                  
                  
                  -
                  
                  
                  
                  -





Restricted
Stock Awards





The
Company provides common stock awards to certain officers and key
associates.  The Company grants these awards, at its discretion, from
the shares available under the Program.  Unless otherwise provided at
the date of grant or unless subsequently accelerated, the shares awarded vest in
25% increments on the second, third, fourth and fifth anniversaries of the
award, respectively, and are distributed provided the employee has remained
employed by the Company through such anniversary dates; otherwise the unearned
shares are forfeited.  The market value of these shares at the date of
award is recorded as compensation expense on the straight-line method over the
fiveyear periods
from the respective award dates, as adjusted for forfeitures of unvested awards.
No common stock awards were granted by the Company during the six months ended
June 30, 2009.  During the six months ended June 30, 2008, the Company
issued 56,300 Class B common shares under a restricted stock plan to various
employees.  In connection with awards granted in prior years, the
Company recorded pre-tax compensation expense of $0.8 million and $0.7 million
for the six months ended June 30, 2009 and 2008, respectively and $0.4 million
for each of the three months ended June 30, 2009 and 2008.





A summary
of the activity under the Restricted Stock Awards Plan as of January 1, 2009 and
for the six months ended June 30, 2009 is presented below:


WeightedWeighted
                        
                        AverageAverage
                        
                        RemainingRestricted Stock
                        
                        
                        
                        
                        Award
                        
                        ContractualAwards
                        
                        Shares
                        
                        
                        Price
                        
                        TermOutstanding
      at January 1, 2009
                        
                        
                        202,900
                        
                        
                        $
                        32.58
                        
                        3.06
      yearsGranted
                        
                        
                        -
                        
                        
                        
                        -Vested
                        
                        
                        (20,550
                        )
                        
                        
                        35.52Forfeited
                        
                        
                        (16,150
                        )
                        
                        
                        30.80Outstanding
      at June 30, 2009
                        
                        
                        166,200
                        
                        
                        $
                        32.38
                        
                        2.55
      years





As of
June 30, 2009, there was $3.4 million of total pre-tax unrecognized compensation
cost included within additional paid-in-capital related to non-vested stock
based compensation arrangements granted under the restricted stock award plan;
that cost is expected to be recognized over a period of 3.9
years.  The Company's policy is to issue new shares to satisfy
Restricted Stock Awards and incentive stock option exercises.  In
calculating the stock-based compensation expense related to stock awards, the
Company has estimated that 5% of the outstanding unvested stock awards will
forfeit each year related to employee attrition.


18


The
Company has elected to apply the long-form method to determine the hypothetical
additional paid-in capital (“APIC”) pool provided by FASB Staff Position
No. FAS 123(R)-3, Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards.  The
Company had determined that a hypothetical pool of excess tax benefits existed
in APIC as of January 1, 2006, the date of adoption of SFAS No. 123R,
related to historical stock option exercises.  In future periods, excess
tax benefits resulting from disqualifying dispositions of incentive stock
options and the vesting of restricted stock awards will be recognized as
additions to APIC in the period the benefit is realized.  In the event of a
shortfall (that is, the tax benefit realized is less than the amount previously
recognized through periodic stock-based compensation expense recognition and
related deferred tax accounting), the shortfall would be charged against APIC to
the extent of previous excess benefits, if any, including the amounts included
in the hypothetical APIC pool and then to tax expense.  During the six
months ended June 30, 2009, the Company recorded a $0.1 million reduction to the
APIC pool associated with tax deficiencies related to restricted stock
awards.





13.  COMMON
STOCK





During
2000, the Board of Directors of the Company authorized the purchase of up to ten
percent of the Company’s outstanding common shares. As of June 30, 2009, the
Company had purchased and retired 23,600 Class B common shares at a cost of
approximately $0.8 million and had purchased and retired 527,817 Class A common
shares at a cost of approximately $16.8 million.  No shares of Class B
common stock were repurchased during the six months ended June 30, 2009 and
6,070 shares of Class A common stock were repurchased during the six months
ended June 30, 2009 at a cost of $0.1 million.





As of
June 30, 2009, to the Company’s knowledge, there were two shareholders of the
Company’s common stock with ownership in excess of 10% of Class A outstanding
shares with no ownership of the Company’s Class B common stock.  In
accordance with the Company’s certificate of incorporation, the Class B
Protection clause is triggered if a shareholder owns 10% or more of the
outstanding Class A common stock and does not own an equal or greater percentage
of all then outstanding shares of both Class A and Class B common stock (all of
which common stock must have been acquired after the date of the 1998
recapitalization).  In such a circumstance, such shareholder must,
within 90 days of the trigger date, purchase Class B common shares, in an amount
and at a price determined in accordance with a formula described in the
Company’s certificate of incorporation, or forfeit its right to vote its Class A
common shares.  As of June 30, 2009, to the Company’s knowledge, these
shareholders had not purchased any Class B shares to comply with these
requirements.  In order to vote their shares at Bel’s next
shareholders’ meeting, these shareholders must either purchase the required
number of Class B common shares or sell or otherwise transfer Class A common
shares until their Class A holdings are under 10%.  As of June 30,
2009, to the Company’s knowledge, these shareholders owned 17.0% and 14.3%,
respectively, of the Company’s Class A common stock in the aggregate and had not
taken steps to either purchase the required number of Class B common shares or
sell or otherwise transfer Class A common shares until their Class A holdings
fall below 10%.


19





There are
no contractual restrictions on the Company's ability to pay dividends provided
the Company is not in default immediately before such payment and after giving
effect to such payment. Dividends paid during the six months ended June 30, 2009
and 2008 were as follows:





Dividend per Share
                      
                      
                      Payment (in thousands)Class A
                      
                      
                      Class B
                      
                      
                      Class A
                      
                      
                      Class BSix
      Months Ended June 30, 2009:February
      1, 2009
                      
                      $
                      0.06
                      
                      
                      $
                      0.07
                      
                      
                      $
                      130
                      
                      
                      $
                      642May
      1, 2009
                      
                      
                      0.06
                      
                      
                      
                      0.07
                      
                      
                      
                      130
                      
                      
                      
                      642Six
      Months Ended June 30, 2008:February
      1, 2008
                      
                      
                      0.06
                      
                      
                      
                      0.07
                      
                      
                      
                      153
                      
                      
                      
                      638May
      1, 2008
                      
                      
                      0.06
                      
                      
                      
                      0.07
                      
                      
                      
                      152
                      
                      
                      
                      638





14.         COMPREHENSIVE
(LOSS) INCOME




Comprehensive
(loss) income for the three and six months ended June 30, 2009 and 2008 consists
of the following (dollars in thousands):




Three Months Ended
                                    
                                    
                                    Six Months EndedJune 30,
                                    
                                    
                                    June 30,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008Net
      (loss) earnings
                                    
                                    $
                                    (1,272
                                    )
                                    
                                    $
                                    1,811
                                    
                                    
                                    $
                                    (456
                                    )
                                    
                                    $
                                    3,978Currency
      translation adjustment
                                    
                                    
                                    538
                                    
                                    
                                    
                                    85
                                    
                                    
                                    
                                    13
                                    
                                    
                                    
                                    804Increase
      (decrease) in unrealized gain on marketable securities - net of
      taxes
                                    
                                    
                                    1,184
                                    
                                    
                                    
                                    (4,229
                                    )
                                    
                                    
                                    2,061
                                    
                                    
                                    
                                    (1,336
                                    )Reclassification
      adjustment for gains included in net loss, net of tax
                                    
                                    
                                    (658
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (658
                                    )
                                    
                                    
                                    -Reclassification
      adjustment for impairment charge included in net earnings, net of
      tax
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,459
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,459Comprehensive
      (loss) income
                                    
                                    $
                                    (208
                                    )
                                    
                                    $
                                    (874
                                    )
                                    
                                    $
                                    960
                                    
                                    
                                    $
                                    4,905





The
components of accumulated other comprehensive income as of June 30, 2009 and
December 31, 2008 are summarized below (dollars in thousands):





June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Foreign
      currency translation adjustment
                  
                  $
                  1,759
                  
                  
                  $
                  1,746Unrealized
      holding gains on available-for-sale securities under SFAS No. 115, net of
      taxes of $882 and $23 as of June 30, 2009 and December 31,
      2008
                  
                  
                  1,433
                  
                  
                  
                  30Unfunded
      SERP liability, net of taxes of ($606) as of June 30, 2009 and December
      31, 2008
                  
                  
                  (1,588
                  )
                  
                  
                  (1,588
                  )Accumulated
      other comprehensive income
                  
                  $
                  1,604
                  
                  
                  $
                  188


20


15.         SALE
OF PROPERTY





During
May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
for $6.0 million.  In December 2007, the Tidelands Resource Council
voted to approve the Bureau of Tideland Management’s recommendation for a
Statement of No Interest.  On March 14, 2008, the Commissioner of the
Department of Environmental Protection signed a letter to approve the Statement
of No Interest.  As final approval of the Statement of No Interest was
still pending as of December 31, 2008, the Company continued to defer the
estimated gain on sale of the land, in the amount of $4.6 million.  Of
the $6.0 million sales price, the Company received cash of $1.5 million before
closing costs, and $4.6 million (including interest) was being held in escrow
pending final resolution of the State of New Jersey tideland claim and certain
environmental costs.  During 2007, the Company paid $0.4 million
related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008,
the title company released $2.3 million of the escrow and, as such, $2.3
remained in escrow and had been classified as restricted cash as of December 31,
2008.  In February 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  In March 2009,
the title company released the remaining escrow of $2.3 million and
corresponding guarantees and the Company recognized the gain associated with the
sale of this property in the amount of $4.6 million.





16.         NEW
FINANCIAL ACCOUNTING STANDARDS





In April
2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP
107-1”).  FSP 107-1 requires disclosures about fair values of
financial instruments in interim and annual financial statements. Prior to the
issuance of FSP 107-1, disclosures about fair values of financial instruments
were only required to be disclosed annually. The Company adopted FSP
107-1 in the second quarter of 2009. Since FSP 107-1 requires only
additional disclosures of fair values of financial instruments in interim
financial statements, the adoption did not affect the Company’s financial
position or results of operations.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS
165”).  This pronouncement establishes standards for accounting for
and disclosing subsequent events (events which occur after the balance sheet
date but before financial statements are issued or are available to be issued).
SFAS 165 requires an entity to disclose the date subsequent events were
evaluated and whether that evaluation took place on the date financial
statements were issued or were available to be issued. It is effective for
interim and annual periods ending after June 15, 2009. The implementation
of SFAS 165 did not have a material impact on the Company’s financial
condition or results of operations.  The Company adopted SFAS 165
effective June 30, 2009, as required, and has evaluated all subsequent events
through August 10, 2009 (the date the Company’s financial statement are
issued).





In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets, an amendment of SFAS No. 140” (“SFAS 166”). SFAS 166 is intended to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets, the effects of a transfer on its financial
position, financial performance, and cash flows, and a transferor’s continuing
involvement, if any, in transferred financial assets. This statement must be
applied as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009. The Company does not expect the
adoption of SFAS 166 to have an impact on the Company’s results of operations,
financial condition or cash flows.


21


In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles, a Replacement of
FASB Statement 162” (“SFAS 168”). SFAS 168 will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. On the effective date of this statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative. This statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The Company does not expect the adoption of SFAS 168 to
have an impact on the Company’s results of operations, financial condition or
cash flows.





17.         LEGAL
PROCEEDINGS





The
Company is, from time to time, a party to litigation arising in the normal
course of its business, including various claims of patent
infringement.  See the Company’s 2008 Annual Report on Form 10-K for
the details of all of Bel’s pending lawsuits.  There were no material
developments related to any of the Company’s lawsuits since the filing of the
Company’s 2008 Annual Report on Form 10-K.







18.         RELATED
PARTY TRANSACTIONS





As of
June 30, 2009, the Company has $2.0 million invested in a money market fund with
GAMCO Investors, Inc. (“GAMCO”).  GAMCO is a current shareholder of
the Company, with holdings of its Class A stock of approximately
14.3%.  However, as discussed in Note 13, GAMCO’s voting rights are
currently suspended.





19.         RESTRUCTURING
ACTIVITY





The
Company ceased all manufacturing operations at its Bel Power Inc. facility in
Westborough, Massachusetts as of December 31, 2008.  The costs
associated with this closure are being accounted for under SFAS No. 146
“Accounting for Costs Associated with Exit or Disposal
Activities”.  The Company incurred $0.4 million of restructuring
charges during the six months ended June 30, 2009, including $0.1 million
related to severance and related benefits. The Company has been unable to
sublease the facility in Westborough, Massachusetts and in light of the current
real estate market, it is not anticipated that a sublease can be reasonably
obtained for this facility.  As a result, the Company recorded an
additional charge of $0.3 million related to its facility lease obligation
during the first quarter of 2009.  These charges impacted the
operating profit of the Company’s North America operating segment.





Activity
and liability balances related to the restructuring charges for the six months
ended June 30, 2009 are as follows:





Liability at
                        
                        
                        New
                        
                        
                        Cash Payments &
                        
                        
                        Liability atDecember 31, 2008
                        
                        
                        Charges
                        
                        
                        Other Settlements
                        
                        
                        June 30, 2009Termination
      benefit charges
                        
                        $
                        437
                        
                        
                        $
                        121
                        
                        
                        $
                        (558
                        )
                        
                        $
                        -Facility
      lease obligation
                        
                        
                        524
                        
                        
                        
                        292
                        
                        
                        
                        (76
                        )
                        
                        
                        740$
                        961
                        
                        
                        $
                        413
                        
                        
                        $
                        (634
                        )
                        
                        $
                        740


22


The
Company has included the current portion of $0.2 million in accrued
restructuring in the condensed consolidated balance sheet at June 30, 2009, and
has classified the remaining $0.6 million of the liability related to the
facility lease obligation as noncurrent.





20.         UNAUTHORIZED
TRANSACTIONS





In April
2009, as part of the March 31, 2009 quarter-end review, the Company's internal
accounting personnel identified a questionable entry in the Company's stock
option exercise records. After questioning by management, a Company employee
(the "Employee") responsible for certain aspects of the Company's benefit plan
administration admitted fabricating certain Company records for his own benefit
in order to enable him to exercise stock options that had not been granted to
him by the Company's Compensation Committee. The Company's management
immediately terminated the employment of the Employee and reported the matter to
the Company's Audit Committee. The Audit Committee, in turn, directed internal
accounting personnel to investigate this matter and directed counsel to engage a
forensic accounting firm to supplement the Company's internal
review.





The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:





·
            With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated.  The fair value of
      these 30,000 shares at the times of issuance approximated $0.8
      million.  Option exercises covering an additional 1,000 shares
      are questionable but have not, as yet, been determined to be based on
      fabricated documentation. At this time, the Company does not believe that
      it will be able to obtain sufficient evidentiary documents to conclusively
      determine that these are fraudulent transactions.  The Employee
      has returned 30,000 shares to the Company for cancellation with a fair
      market value on the dates of their return of approximately $0.4
      million.





·
            With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not withdrawn any funds in his 401(k) account. Accordingly,
      the Company intends to recoup the amount directly from the Employee's
      401(k) account.  In addition, the Employee initiated special
      401(k) stock distributions directly into the Employee’s IRA account
      representing 3,420 shares of Class B Common Stock and 65 shares of Class A
      Common Stock.  The fair value of these shares at the time of
      transfer approximated $0.1 million.  The Employee has returned
      1,200 shares of Class B Common Stock to the Company for cancellation with
      a fair market value on the dates of their return of approximately
      $16,000.





·
            With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not withdrawn any funds in his profit-sharing account. The Company
      intends to recoup such $3,600 directly from the
  Employee.


23


The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee.  The Company's forensic accounting firm performed an email
search designed to ascertain whether there was any evidence that the Employee's
actions extended beyond his own personal accounts or whether other employees
were directly involved in such actions. To date, the Company has not discovered
any evidence that suggests that the fraudulent practices identified pursuant to
the internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.





During
the second quarter of 2009, the Company recorded an unauthorized issuance of
common stock charge of $0.9 million related to this theft.  This
charge was offset by $0.5 million related to the fair market value of shares
returned by the Employee during the second quarter of 2009.  In
addition, the Company incurred $0.2 million in legal and professional fees
related to this activity.  These charges are included within selling,
general and administrative expenses in the accompanying condensed consolidated
statement of operations for the three and six months ended June 30,
2009.


24





Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations




The
Company’s quarterly and annual operating results are impacted by a wide variety
of factors that could materially and adversely affect revenues and
profitability, including the risk factors described in the Company's Annual
Report on Form 10-K for the year ended December 31, 2008. As a result of these
and other factors, the Company may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect its business, financial condition, operating results, and stock
prices.  Furthermore, this document and other documents filed by the
Company with the Securities and Exchange Commission (the “SEC”) contain certain
forward-looking statements under the Private Securities Litigation Reform Act of
1995 (“Forward-Looking Statements”) with respect to the business of the
Company.  These Forward-Looking Statements are subject to certain
risks and uncertainties, including those detailed in Item 1A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008, which could
cause actual results to differ materially from these Forward-Looking
Statements.  The Company undertakes no obligation to publicly release
the results of any revisions to these Forward-Looking Statements which may be
necessary to reflect events or circumstances after the date such statements are
made or to reflect the occurrence of unanticipated events.  An
investment in the Company involves various risks, including those which are
detailed from time to time in the Company’s SEC filings.




Overview





Our
Company





Bel is a
leading producer of electronic products that help make global connectivity a
reality. The Company designs, manufactures and markets a broad array of
magnetics, modules (including power conversion and integrated modules), circuit
protection devices and interconnect products.  While these products
are deployed primarily in the computer, networking and telecommunication
industries, Bel’s expanding portfolio of products also finds application in the
automotive, medical and consumer electronics markets.   Bel's
products are designed to protect, regulate, connect, isolate or manage a variety
of electronic circuits.





Bel’s
business is operated through three geographic segments:  North
America, Asia and Europe.  During the six months ended June 30, 2009,
68% of the Company’s revenues were derived from Asia, 22% from North America and
10% from its Europe operating segment.  Sales of the Company’s
magnetic products represented approximately 46% of the Company’s total net sales
for the six months ended June 30, 2009.  These sales are primarily
driven by working closely with the Company’s customers’ engineering staffs and
aligning them with industry standards committees and various integrated circuit
(IC) manufacturers.  The remaining revenues related to sales of the
Company’s modules products (32%), interconnect products (17%) and circuit
protection products (5%).





The
Company’s expenses are driven principally by the cost of labor where Bel’s
factories are located and the cost of the materials that it uses.  As
labor and material costs vary by product line, any significant shift in product
mix has an associated impact on the Company’s costs of sales.  Bel
generally enters into processing arrangements with several independent third
party contractors in Asia.  Costs are recorded as incurred for all
products manufactured either at third party facilities or at the Company's own
manufacturing facilities.  Such amounts are determined based upon the
estimated stage of production and include labor cost and fringes and related
allocations of factory overhead. The Company manufactures finished goods at its
own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the
Dominican Republic, Mexico, and the Czech Republic.


25





Trends
Affecting our Business





The
Company believes the key factors affecting Bel’s second quarter 2009 and future
results include the following:





·
            Increasing
      pressures in the U.S. and global economy related to the global economic
      downturn, the credit crisis, volatility in interest rates, investment
      returns, energy prices and other elements that impact commercial and
      end-user consumer spending are creating a highly challenging environment
      for Bel and its customers.





·
            These
      weakening economic conditions have resulted in reductions in capital
      expenditures by end-user consumers of our products, resulting in a
      decreased backlog of orders in
2009.





·
            With
      the overall reduction in demand in our industry, competition will continue
      to increase. As a result, Bel is being faced with pricing pressures, which
      will impact Bel’s future profit
margins.





·
            Commodity
      prices, especially those pertaining to gold and copper, have been highly
      volatile.  Fluctuations in these prices and other commodity
      prices associated with Bel’s raw materials will have a corresponding
      impact on our profit margins.





·
            The
      costs of labor, particularly in the People’s Republic of China where
      several of Bel’s factories are located, have risen significantly as a
      result of government mandates for new minimum wage and overtime
      requirements (effective April 2008).  These higher labor rates
      will continue to have a negative impact on Bel’s profit
      margins.





·
            The
      global nature of Bel’s business exposes Bel to earnings volatility
      resulting from exchange rate
fluctuations.





These
factors are expected to continue into the foreseeable future.  With
reduced demand for Bel’s products, coupled with maintaining competitive pricing
and the challenge of curbing internal costs, the Company anticipates that its
results of operations for the remainder of 2009 will be materially adversely
affected by the continuing economic crisis.


26


Overview
of Financial Results





The current market conditions have
impacted the Company considerably during the six months ended June 30,
2009.





·
            Net
      Sales.The Company’s sales decreased by $27.5 million
      and $44.5 million or 38.0% and 33.4% during the three and six months ended
      June 30, 2009 as compared to the same periods of 2008, primarily due to a
      reduction in demand across all product lines related to weakening global
      economic conditions.





·
            Loss from
      Operations.  During the six months ended June 30, 2009,
      income from operations decreased $6.8 million from income of operations of
      $6.2 million for the six months ended June 30, 2008 to a loss from
      operations of $0.6 million for the six months ended June 30, 2009,
      primarily due to the decrease in sales noted above.  Other
      factors impacting the Company’s loss from operations for the six months
      ended June 30, 2009 were as
follows:





§
            Rising
      Bill of Material Costs.  Bel manufactures a particular product
      line within the modules group that is comprised of a larger percentage of
      purchased components than most of the Company’s other
      products.  The proportion of total sales represented by this
      product line has increased in the six months ended June 30, 2009 as
      compared to the same period of 2008, resulting in reduced gross
      margins.





§
            Restructuring
      Charges.  The Company ceased manufacturing at its Bel Power
      manufacturing facility in Westborough, Massachusetts as of December 31,
      2008.  Related to this closure, the Company incurred severance
      costs of $0.1 million and costs associated with its facility lease
      obligation of $0.3 million during the six months ended June 30,
      2009.





§
            Reduced
      Labor Costs.  The Company experienced a significant increase in
      customer demand after the Lunar New Year in early February 2008, leading
      to large number of new workers being hired, which resulted in associated
      training costs, production inefficiencies and excessive
      overtime.  Due to reduced demand in the first half of 2009,
      additional workforce was not
needed.





§
            Reduction
      in Selling, General and Administrative (“SG&A”)
      Expenses.  SG&A expenses were $3.0 million lower during the
      six months ended June 30, 2009 as compared to the same period of
      2008.  This reduction was primarily due to lower commissions
      from the reduced sales volume, administrative headcount reductions and
      travel restrictions put in place during the first quarter of
      2009.





§
            Gain
      on Sale of Property.  The Company recorded a $4.6 million gain
      on the sale of property in Jersey City, New Jersey in early
      2009.  This gain was an offsetting factor to the loss from
      operations.





·
            Net
      Loss.  The Company’s net earnings decreased significantly
      from income of $4.0 million for the six months ended June 30, 2008 to a
      loss of $0.5 million for the six months ended June 30, 2009.  In
      addition to the factors impacting loss from operations discussed above,
      the following non-operating factors impacted net earnings during the six
      months ended June 30, 2009:


27





§
            Gain
      on Sale of Investment.  During the six months ended June 30,
      2009, the Company sold 3.0 million shares of its investment in Power-One
      stock resulting in a book gain of $1.1
million.





§
            Reduced
      Interest Rates.  Interest income decreased from $1.5 million
      during the six months ended June 30, 2008 to $0.3 million during the six
      months ended June 30, 2009 as a result of significantly lower interest
      rates earned on invested balances during
2009.





§
            Income
      tax expense of $1.7 million was recognized related to the gain on sale of
      property described above, partially offset by the tax benefit associated
      with operating losses in the U.S.





Critical Accounting
Policies





The Company’s discussion and analysis
of its financial condition and results of operations are based upon the
Company’s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to product returns, bad debts, inventories, intangible
assets, investments, SERP expense, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.  For a discussion of the Company’s critical
accounting policies, see the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008.





Results of
Operations





The following table sets forth, for the
periods presented, the percentage relationship to net sales of certain items
included in the Company’s condensed consolidated statements of
operations.





Percentage
      of Net Sales
                                  
                                  
                                  Percentage
      of Net SalesThree
      Months Ended
                                  
                                  
                                  Six
      Months EndedJune
      30,
                                  
                                  
                                  June
      30,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009
                                  
                                  
                                  2008Net
      sales
                                  
                                  
                                  100.0
                                  %
                                  
                                  
                                  100.0
                                  %
                                  
                                  
                                  100.0
                                  %
                                  
                                  
                                  100.0
                                  %Cost
      of sales
                                  
                                  
                                  89.4
                                  
                                  
                                  
                                  81.9
                                  
                                  
                                  
                                  88.3
                                  
                                  
                                  
                                  81.7Selling,
      general and administrative expenses
                                  
                                  
                                  16.9
                                  
                                  
                                  
                                  12.8
                                  
                                  
                                  
                                  17.2
                                  
                                  
                                  
                                  13.7Restructuring
      charge
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0.5
                                  
                                  
                                  
                                  -Gain
      on sale of property, plant and equipment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5.2
                                  
                                  
                                  
                                  -Realized
      gain (loss/impairment charge) on investment
                                  
                                  
                                  2.4
                                  
                                  
                                  
                                  (3.2
                                  )
                                  
                                  
                                  1.2
                                  
                                  
                                  
                                  (2.0
                                  )Interest
      income
                                  
                                  
                                  0.3
                                  
                                  
                                  
                                  0.8
                                  
                                  
                                  
                                  0.3
                                  
                                  
                                  
                                  1.1Earnings
      before (benefit) provision for income taxes
                                  
                                  
                                  (3.7
                                  )
                                  
                                  
                                  2.9
                                  
                                  
                                  
                                  0.9
                                  
                                  
                                  
                                  3.8Income
      tax (benefit) provision
                                  
                                  
                                  (0.9
                                  )
                                  
                                  
                                  0.4
                                  
                                  
                                  
                                  1.4
                                  
                                  
                                  
                                  0.8Net
      (loss) earnings
                                  
                                  
                                  (2.8
                                  )
                                  
                                  
                                  2.5
                                  
                                  
                                  
                                  (0.5
                                  )
                                  
                                  
                                  3.0





28





The following table sets forth the year
over year percentage increase or decrease of certain items included in the
Company's condensed consolidated statements of operations.





Increase
      (decrease) from
                            
                            Increase
      (decrease) fromPrior
      Period
                            
                            Prior
      PeriodThree
      Months Ended
                            
                            Six
      Months EndedJune
      30, 2009
                            
                            June
      30, 2009Compared
      with
                            
                            Compared
      withThree
      Months Ended
                            
                            Six
      Months EndedJune 30,
      2008
                            
                            June 30,
      2008Net
      sales
                            
                            
                            (38.0
                            )%
                            
                            
                            (33.4
                            )%Cost
      of sales
                            
                            
                            (32.2
                            )
                            
                            
                            (28.0
                            )Selling,
      general andadministrative expenses
                            
                            
                            (18.1
                            )
                            
                            
                            (16.3
                            )Net
      loss
                            
                            
                            (170.2
                            )
                            
                            
                            (111.5
                            )





THREE MONTHS ENDED JUNE 30,
2009 VERSUS


THREE MONTHS ENDED JUNE 30,
2008





Sales





Net sales decreased 38.0% from $72.5
million during the three months ended June 30, 2008 to $44.9 million during the
three months ended June 30, 2009. The Company attributes the decrease
principally to a reduction in demand across all major product groups as a result
of the weakening economic conditions.





The significant components of the
Company's revenues for the three months ended June 30, 2009 were magnetic
products of $20.9 million (as compared with $31.8 million during the three
months ended June 30, 2008), interconnect products of $8.0 million (as compared
with $14.2 million during the three months ended June 30, 2008), module products
of $13.7 million (as compared with $22.0 million during the three months ended
June 30, 2008), and circuit protection products of $2.3 million (as compared
with $4.5 million during the three months ended June 30, 2008).





Cost of
Sales





Cost of sales as a percentage of net
sales increased from 81.9% during the three months ended June 30, 2008 to 89.4%
during the three months ended June 30, 2009. The increase in the cost of sales
percentage is primarily attributable to the following:





 ̈
            Material
      costs as a percentage of sales have increased from 50.4% during the three
      months ended June 30, 2008 to 58.7% during the three months ended June 30,
      2009.  Bel manufactures a particular product line within the
      modules group that consists of a larger percentage of purchased components
      than most of the Company’s other products.  The proportion of
      total sales attributable to this product has increased to 15% of total
      sales for the three months ended June 30, 2009 as compared to 11% of total
      sales in the same period in 2008, mainly due to relatively larger revenue
      declines in other product lines.  While these products are
      strategic to Bel’s growth and important to total earnings, they return
      lower gross profit margins due to their higher material content, and the
      Company’s average gross profit percentage will likely decline as these
      sales continue to account for an increasing proportion of total
      sales.


29





 ̈
            While
      other fixed costs within cost of sales, such as support labor and
      depreciation and amortization, have decreased in dollar amount during the
      second quarter of 2009 as compared to 2008, as a percentage of sales these
      costs have increased due to the lower sales volume in
  2009.





As a
partially offsetting factor, the Company experienced a reduction in labor costs
during the three months ended June 30, 2009 (9.8% of sales as compared to 16.1%
of sales for the three months ended June 30, 2008).  A significant
increase in customer demand after the Lunar New Year in February 2008 resulted
in the hiring of approximately 5,000 new workers, which resulted in training
expenses, production inefficiencies and excessive overtime.  With
lower customer demand in 2009, additional manpower was not needed after Lunar
New Year and Bel has effectively eliminated overtime costs.  In
addition, the Company continues to transition the labor intensive assembly
operations to lower cost regions of the PRC.





Included
in cost of sales are research and development expenses of $2.0 million for each
of the three month periods ended June 30, 2009 and 2008,
respectively.





Selling, General and
Administrative Expenses (“SG&A”)





The percentage relationship of selling,
general and administrative expenses to net sales increased from 12.8% during the
three months ended June 30, 2008 to 16.9% during the three months ended June 30,
2009.  While the percentage of sales increased from the comparable
period last year, the dollar amount of selling, general and administrative
expense for the three months ended June 30, 2009 was $1.7 million lower as
compared to the same period of 2008.  The overall reduction in dollar
amount was the result of the following factors:





 ̈
            Sales
      commissions decreased by $0.8 million due to the 2009 lower sales
      volume.


 ̈
            Travel
      expenses were reduced by $0.3 million, as management implemented travel
      restrictions during the first quarter of
2009.


 ̈
            General
      and administrative salaries and fringe benefits decreased as compared to
      the second quarter of 2008 as a result savings of approximately $0.7
      million from company-wide reductions in headcount and a of reduction of
      $0.3 million in bonus expense, partially offset by severance expense of
      $0.3 million.


 ̈
            The
      Company recorded charges totaling $0.6 million for compensation and fees
      related to the unauthorized issuance of
stock.


 ̈
            Other
      reductions in SG&A of $0.5 million included reductions in various
      expense categories that were not individually
  significant.





Gain on Sale of
Investment





During the three months ended June 30,
2009, the Company sold 3,041,393 shares of Power-One Inc. common
stock.  As the sales proceeds exceeded the Company’s adjusted cost
basis in this investment, the sale resulted in a gain of $1.1 million which was
recorded during the second quarter of 2009.


30





Interest
Income





Interest income earned on cash and cash
equivalents decreased by approximately $0.5 million during the three months
ended June 30, 2009, as compared to the comparable period in 2008. The decrease
is due primarily to significantly lower interest rates on invested balances
during the three months ended June 30, 2009 as compared to 2008.





(Benefit) Provision for
Income Taxes





The benefit from income taxes for the
three months ended June 30, 2009 was $(0.4) million compared to a provision for
income taxes of $0.3 million for the three months ended June 30,
2008.  The Company incurred a loss before income taxes for the three
months ended June 30, 2009 versus earnings before income taxes for the three
months ended June 30, 2008 which resulted in $3.8 million lower earnings before
income taxes during the three months ended June 30, 2009 compared to the three
months ended June 30, 2008.  The Company’s effective tax rate, the
income tax (benefit) provision as a percentage of earnings (loss) before
(benefit) provision  for income taxes, was (23.6)% and 13.9% for the
three months ended June 30, 2009 and June 30, 2008, respectively.  The
Company’s effective tax rate will fluctuate based on the geographic segment the
pretax profits are earned in.  Of the geographic segments in which the
Company operates, the U.S. has the highest tax rates; Europe’s tax rates are
generally lower than U.S. tax rates; and the Far East has the lowest tax rates.
The tax (benefit) for the three months ended June 30, 2009 is attributable to
losses in the U.S. and capital loss and foreign tax credit carryback claims
offset in part by losses in the Far East with minimal tax benefit compared to
the three months ended June 30, 2008.





SIX MONTHS ENDED JUNE 30,
2009 VERSUS


SIX MONTHS ENDED JUNE 30,
2008





Sales





Net sales decreased 33.4% from $133.3
million during the six months ended June 30, 2008 to $88.8 million during the
six months ended June 30, 2009. The Company attributes the decrease principally
to a reduction in demand across all major product groups as a result of the
weakening economic conditions.





The significant components of the
Company's revenues for the six months ended June 30, 2009 were magnetic products
of $40.9 million (as compared with $56.7 million during the six months ended
June 30, 2008), interconnect products of $15.4 million (as compared with $26.2
million during the six months ended June 30, 2008), module products of $28.1
million (as compared with $41.9 million during the six months ended June 30,
2008), and circuit protection products of $4.4 million (as compared with $8.5
million during the six months ended June 30, 2008).


31


Cost of
Sales





Cost of sales as a percentage of net
sales increased from 81.7% during the six months ended June 30, 2008 to 88.3%
during the six months ended June 30, 2009. The increase in the cost of sales
percentage is primarily attributable to the following:





 ̈
            Material
      costs as a percentage of sales have increased from 51.7% during the six
      months ended June 30, 2008 to 57.9% during the six months ended June 30,
      2009.  Bel manufactures a particular product line within the
      modules group that consists of a larger percentage of purchased components
      than most of the Company’s other products.  The proportion of
      total sales attributable to this product has increased to 15% of total
      sales for the six months ended June 30, 2009 as compared to 11% of total
      sales in the same period in 2008, mainly due to relatively larger revenue
      declines in other product lines.  While these products are
      strategic to Bel’s growth and important to total earnings, they return
      lower gross profit margins due to their higher material content, and the
      Company’s average gross profit percentage will likely decrease as these
      sales continue to account for an increasing proportion of total
      sales.





 ̈
            Included
      in cost of sales are research and development expenses of $4.2 million and
      $3.9 million for the six months ended June 30, 2009 and 2008,
      respectively.   The increase in research and development
      expenses during the six months ended June 30, 2009 was primarily related
      to Bel’s power products and new integrated connector
    modules.





 ̈
            While
      other fixed costs within cost of sales, such as support labor and
      depreciation and amortization, have decreased in dollar amount during the
      six months ended June 30, 2009 as compared to 2008, as a percentage of
      sales these costs have increased due to the lower sales volume in
      2009.





 ̈
            As
      a partially offsetting factor, the Company experienced a reduction in
      labor costs during the six months ended June 30, 2009 (9.1% of sales as
      compared to 13.8% of sales for the six months ended June 30,
      2008).  A significant increase in customer demand after the
      Lunar New Year in February 2008 resulted in the hiring of approximately
      5,000 new workers, which resulted in training expenses, production
      inefficiencies and excessive overtime.  With lower customer
      demand in 2009, additional manpower was not needed after Lunar New Year
      and Bel has effectively eliminated overtime costs.  In addition,
      the Company continues to transition the labor intensive assembly
      operations to lower cost regions of the
PRC.





Selling, General and
Administrative Expenses





The percentage relationship of selling,
general and administrative expenses to net sales increased from 13.7% during the
six months ended June 30, 2008 to 17.2% during the six months ended June 30,
2009.  While the percentage of sales increased from last year, the
dollar amount of selling, general and administrative expense for the six months
ended June 30, 2009 was $3.0 million lower as compared to the same period of
2008.  The overall reduction in dollar amount was the result of the
following factors:





 ̈
            Sales
      commissions decreased by $1.5 million due to the 2009 lower sales
      volume.


 ̈
            Travel
      expenses were reduced by $0.5 million, as management implemented travel
      restrictions during the first quarter of
2009.


 ̈
            General
      and administrative salaries and fringe benefits decreased as compared to
      the first half of 2008 as a result of savings of approximately $0.9
      million from company-wide reductions in headcount and a reduction of $0.3
      million in bonus expense, partially offset by severance expense of $0.3
      million.


32





 ̈
            The
      Company recorded charges totaling $0.6 million for compensation expense
      and fees related to the unauthorized issuance of
  stock.


 ̈
            Other
      reductions in SG&A of $0.7 million included reductions in various
      other expense categories that were not individually
      significant.





Restructuring
Charge





In connection with the closing of the
Company’s Westborough, Massachusetts facility in December 2008, the Company
incurred $0.1 million of termination benefit charges and $0.3 million related to
its facility lease obligation during the six months ended June 30, 2009. See
“Liquidity and Capital Resources” for further information on the restructuring
charges.





Sale of Property, Plant and
Equipment





During the six months ended June 30,
2009, the Company realized the gain from the sale of property in Jersey City,
New Jersey in the amount of $4.6 million.





Realized (Gain)
Loss/Impairment Charge on Investment





During the six months ended June 30,
2009, the Company sold 3,041,393 shares of Power-One Inc. common
stock.  As the sales proceeds exceeded the Company’s adjusted cost
basis in this investment, the sale resulted in a book gain of $1.1 million which
was recorded during the second quarter of 2009. During the six months ended
June 30, 2008, the Company recorded a pre-tax other-than-temporary impairment
charge of $2.4 million associated with its investment in Toko,
Inc.  The Company also recorded an other-than-temporary impairment
charge of $0.3 million related to its investment in the Columbia Strategic Cash
Portfolio during the six months ended June 30, 2008.  See “Liquidity
and Capital Resources” for further information on these impairment
charges.  The Company did not record any impairment charges during the
six months ended June 30, 2009.





Interest
Income





Interest income earned on cash and cash
equivalents decreased by approximately $1.2 million during the six months ended
June 30, 2009, as compared to the comparable period in 2008. The decrease is due
primarily to significantly lower interest rates on invested balances during the
six months ended June 30, 2009 as compared to 2008.





Provision for Income
Taxes





The provision for income taxes for the
six months ended June 30, 2009 was $1.2 million compared to $1.1 million for the
six months ended June 30, 2008.  The Company's earnings before income
taxes for the six months ended June 30, 2009 are approximately $4.2 million
lower than the same period in 2008.  The Company’s effective tax rate,
the income tax provision as a percentage of earnings before provision for income
taxes, was 158.0% and 21.0% for the six months ended June 30, 2009 and June 30,
2008, respectively.  The Company’s effective tax rate will fluctuate
based on the geographic segment the pretax profits are earned in.  Of
the geographic segments in which the Company operates, the U.S. has the highest
tax rates; Europe’s tax rates are generally lower than U.S. tax rates; and the
Far East has the lowest tax rates. The increase in the effective tax rate during
the six months ended June 30, 2009 is attributable to a disproportionately high
amount of earnings before taxes in North America due to the gain on sale of
property described above and losses in the Far East with minimal tax benefit as
compared to the six months ended June 30, 2008.


33





Inflation and Foreign
Currency Exchange





During the past two years, the effect
of inflation on the Company's profitability was not
material.  Historically, fluctuations of the U.S. dollar against other
major currencies have not significantly affected the Company's foreign
operations as most sales have been denominated in U.S. Dollars or currencies
directly or indirectly linked to the U.S. dollar.  Most significant
expenses, including raw materials, labor and manufacturing expenses, are either
incurred in U.S. Dollars or the currencies of the Hong Kong Dollar, the Macao
Pataca or the Chinese Renminbi.  However, the Chinese Renminbi
appreciated in value (approximately 3.3%) during the six months ended June 30,
2009 as compared with the same period of 2008.  Further appreciation
of the Renminbi would result in the Company’s incurring higher costs for all
expenses incurred in the PRC.  The Company's European entities, whose
functional currencies are Euros, Czech Korunas, and U.S. dollars, enter into
transactions which include sales which are denominated principally in Euros,
British Pounds and various other European currencies, and purchases that are
denominated principally in U.S. dollars.    Settlement of
such transactions resulted in net realized and unrealized currency exchange
gains of $0.1 million for the six months ended June 30, 2009 which were included
in income from operations.  Exchange gains recognized during the six
months ended June 30, 2008 were minimal. Translation of subsidiaries’ foreign
currency financial statements into U.S. dollars resulted in translation gains of
$0.8 million for the six months ended June 30, 2008 and a minimal amount for the
six months ended June 30, 2009.  These amounts are included in
accumulated other comprehensive income.  Any change in the linkage of
the U.S. dollar and the Hong Kong Dollar could have a material effect on the
Company's consolidated financial position or results of operations.





Liquidity and Capital
Resources





Historically, the Company has financed
its capital expenditures primarily through cash flows from operating activities
and has financed acquisitions both through cash flows from operating activities
and borrowings.  Management believes that the cash flow from
operations after payments of dividends combined with its existing capital base
and the Company's available lines of credit, will be sufficient to fund its
operations for at least the next twelve months.  Such statement
constitutes a Forward Looking Statement.  Factors which could cause
the Company to require additional capital include, among other things, a further
softening in the demand for the Company’s existing products, an inability to
respond to customer demand for new products, potential acquisitions requiring
substantial capital, future expansion of the Company's operations and net losses
that would result in net cash being used in operating, investing and/or
financing activities which result in net decreases in cash and cash
equivalents.  Net losses may result in the loss of domestic and
foreign credit facilities and preclude the Company from raising debt or equity
financing in the capital markets on affordable terms or otherwise.





The Company has an unsecured credit
agreement in the amount of $20 million, which expires on September 10,
2011.  There have not been any borrowings under the credit agreement
and as such, there was no balance outstanding as of June 30, 2009.  At
that date, the entire $20 million line of credit was available to the Company to
borrow.  The credit agreement bears interest at LIBOR plus 0.75% to
1.25% based on certain financial statement ratios maintained by the
Company.  In the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, it was noted that the Company was not in compliance
with one of the covenants related to this credit agreement.  Upon
further clarification of the covenant calculation received from the lender
subsequent to that filing, this matter has been resolved and the Company is in
compliance with its debt covenants as of June 30, 2009.


34





The Company's Hong Kong subsidiary had
an unsecured line of credit of approximately $2 million, which was unused at
June 30, 2009.  The line of credit expired on January 31, 2009 and was
renewed on February 10, 2009. Borrowing on the line of credit was guaranteed by
the U.S. parent.  The line of credit bears interest at a rate
determined by the lender as the financing is extended.





For information regarding further
commitments under the Company's operating leases, see Note 15  of
Notes to the Company's consolidated financial statements in the Company's 2008
Annual Report on Form 10-K.





During May 2007, the Company sold a
parcel of land located in Jersey City, New Jersey for $6.0
million.  In December 2007, the Tidelands Resource Council voted to
approve the Bureau of Tideland’s Management’s recommendation for a Statement of
No Interest.  On March 14, 2008, the Commissioner of the Department of
Environmental Protection signed a letter to approve the Statement of No
Interest.  As final approval of the Statement of No Interest was still
pending as of December 31, 2008, the Company continued to defer the estimated
gain on sale of the land, in the amount of $4.6 million.  Of the $6.0
million sales price, the Company received cash of $1.5 million before closing
costs, and $4.6 million (including interest) was being held in escrow pending
final resolution of the State of New Jersey tideland claim and certain
environmental costs.  During 2007, the Company paid $0.4 million
related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008,
the title company released $2.3 million of the escrow and as such, $2.3 remained
in escrow and had been classified as restricted cash as of December 31,
2008.  In February 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  In March 2009,
the title company released the remaining escrow of $2.3 million and
corresponding guarantees and, during the first quarter of 2009, the Company
recognized the gain associated with the sale of this property in the amount of
$4.6 million.





Columbia Strategic Cash
Portfolio (“Columbia Portfolio”):





At June 30, 2009, the Company’s
investment securities included privately placed units of beneficial interests in
the Columbia Portfolio, which is an enhanced cash fund sold as an alternative to
money-market funds.  In December 2007, due to adverse market
conditions, the fund was overwhelmed with withdrawal requests from investors and
it was closed with a restriction placed upon the cash redemption ability of its
holders.  At the time the liquidation was announced, the Company held
25.7 million units of the Columbia Portfolio at a book value of $25.7
million.





As of June 30, 2009, the Company has
received total cash redemptions to date of $20.8 million (including $1.9 million
during the six months ended June 30, 2009) at a weighted-average net asset value
(NAV) of $.9523 per unit.  As of June 30, 2009, the Company holds 3.8
million units with a book value of $3.2 million and a fair market value of $3.3
million.  Due to the restrictions placed on these investments, the
balance in the Columbia Portfolio as of June 30, 2009 is categorized as an other
investment on the accompanying condensed consolidated balance sheet, allocated
into short-term and long-term based on the projected redemption schedule as
issued by the portfolio manager.  The information and the markets
relating to these investments remain dynamic.  There may be further
declines in the value of these investments, in the value of the collateral held
by these entities, and in the liquidity of the Company’s
investments.  To the extent that the Company determines that there is
a further decline in fair value, the Company may recognize impairment charges in
future periods up to the aggregate carrying amount of these
investments.


35





Toko, Inc.
(“Toko”):





As of
June 30, 2009, the Company owned a total of 1,840,919 shares, or approximately
1.9%, of the outstanding shares, of the common stock of Toko.  Toko
develops, manufactures and sells power supply related components and radio
frequency related components primarily in Japan.  Toko had a market
capitalization of approximately $162.2 million as of June 30,
2009.   These shares are reflected on the Company’s condensed
consolidated balance sheets as marketable securities.  These
marketable securities are considered to be available for sale under Statement of
Financial Accounting Standards No. (“SFAS”) 115, “Accounting for Certain
Investments in Debt and Equity Securities”.  During the six months
ended June 30, 2008, the Company recorded an impairment charge of $2.4 million
related to this investment.  At June 30, 2009 and December 31, 2008,
this investment had an adjusted basis of $2.0 million, and a fair market value
of $3.1 million and $2.1 million, respectively.  The gross unrealized
gain of $1.0 million and $0.1 million at June 30, 2009 and December 31, 2008,
respectively, is included, net of tax, in accumulated other comprehensive income
(loss).





Power-One, Inc.
(“Power-One”):





As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock representing, to the Company’s knowledge, 8.4% of Power-One’s
outstanding common stock, at a total purchase price of $14.1 million ($1.92 per
share).  Power-One’s common stock is quoted on the NASDAQ Global
Market.  Power-One is a designer and manufacturer of power conversion
and power management products.  During the second quarter of 2009, the
Company sold 3,041,393 shares of its Power-One common stock at an aggregate fair
market value of $4.7 million, resulting in a book gain of $1.1
million.  As of June 30, 2009, the Company owned 4,297,605 shares of
Power-One common stock, representing, to the Company’s knowledge, 4.9% of
Power-One’s outstanding common stock.  At June 30, 2009, this
investment had an adjusted basis of $5.1 million ($1.19 per share) and a fair
market value of $6.4 million ($1.49 per share).  The gross unrealized
gain at June 30, 2009 of $1.3 million is included, net of income tax, in
accumulated other comprehensive income in stockholders’ equity.





CDARS:





During
2008, the Company invested a total of $4.9 million in certificates of deposit
(CDs) through Stephens, Inc., with whom the Company has an investment banking
relationship.  These investments are part of the Certificate of
Deposit Account Registry Service (CDARS) program whereby the funds are invested
with various banks in order to achieve FDIC insurance on the full invested
amount.  The CDs had an initial maturity of 26-weeks and an early
redemption feature with a 30-day interest penalty.  During December
2008, $2.0 million of the CD’s matured and were temporarily renewed for a period
of 29 days and, accordingly, were considered to be a cash equivalent as of
December 31, 2008, due to the short-term nature of the
investment.  These CDs were renewed in January 2009 for a period of 13
weeks.  The full $5.0 million investment (including interest) was
renewed again in May 2009 for a period of 13 weeks.  These CDs have
been classified as marketable securities in the condensed consolidated balance
sheet at June 30, 2009.





Stock
Repurchases





During 2000, the Board of Directors of
the Company authorized the purchase of up to ten percent of the Company’s
outstanding common shares. As of June 30, 2009, the Company had purchased and
retired 23,600 Class B common shares at a cost of approximately $0.8 million and
had purchased and retired 527,817 Class A common shares at a cost of
approximately $16.8 million.  No shares of Class B common stock were
repurchased during the six months ended June 30, 2009 and 6,070 shares of Class
A common stock were repurchased during the six months ended June 30, 2009 at a
cost of $0.1 million.


36





Cash
Flows





During the six months ended June 30,
2009, the Company's cash and cash equivalents increased by $23.0 million,
reflecting approximately $20.7 million provided by operating activities, $1.9
million from the partial redemption of the Columbia Portfolio, $1.5 million of
proceeds from the cash surrender value of company-owned life insurance policies,
$4.7 million from the sale of marketable securities and $2.6 million of proceeds
from the sale of property, plant and equipment, offset, in part, by $1.1 million
for the purchase of property, plant and equipment, $0.1 million for the
repurchase of the Company’s common stock, $5.6 million for the purchase of
marketable securities and $1.6 million for payments of dividends.





Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 58.6% and 53.0% of the Company's total assets at June 30, 2009 and
December 31, 2008, respectively. The Company's current ratio (i.e., the ratio of
current assets to current liabilities) was 8.3 to 1 and 6.5 to 1 at June 30,
2009 and December 31, 2008, respectively.





During the current worldwide financial
downturn, the Company believes that several of its vendors, particularly those
located in Asia, are seeking to shorten established credit terms or eliminate
credit entirely.





In connection with the closure of the
Company’s Westborough, Massachusetts facility in December 2008, the Company
recorded restructuring charges of $0.4 million during the six months ended June
30, 2009 related to termination benefit charges and charges associated with its
facility lease obligation.




The
Company's goodwill and long-lived assets are accounted for at fair value on a
nonrecurring basis.   These items are tested for impairment
charges upon the occurrence of a triggering event or in the case of goodwill, on
at least an annual basis.  While the Company's actual revenue stream
for the six months ended June 30, 2009 was lower than the financial projections
utilized in the annual goodwill impairment analysis (performed in the fourth
quarter of 2008), there are signs of improvement as the Company enters its third
quarter.  The Company will continue to monitor its financial results
as well as the overall economic conditions into the third quarter.  In
the event the Company's projected cash flows do not rebound to adequate levels,
the Company may perform an interim impairment test, which could lead to goodwill
impairment charges in future periods.  We cannot predict at this time
when, or if, there will be a triggering event in 2009 which would cause the
Company to test for impairment on an interim basis.  In any event, the
Company's annual impairment analysis will be performed in the fourth quarter of
2009.  The carrying value of the Company's goodwill was $14.4 million
and $14.3 million at June 30, 2009 and December 31, 2008 ,
respectively.


New Financial Accounting
Standards





In April
2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP
107-1”).  FSP 107-1 requires disclosures about fair values of
financial instruments in interim and annual financial statements. Prior to the
issuance of FSP 107-1, disclosures about fair values of financial instruments
were only required to be disclosed annually. The Company adopted FSP
107-1 in the second quarter of 2009. Since FSP 107-1 requires only
additional disclosures of fair values of financial instruments in interim
financial statements, the adoption did not affect the Company’s financial
position or results of operations.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS
165”).  This pronouncement establishes standards for accounting for
and disclosing subsequent events (events which occur after the balance sheet
date but before financial statements are issued or are available to be issued).
SFAS 165 requires an entity to disclose the date subsequent events were
evaluated and whether that evaluation took place on the date financial
statements were issued or were available to be issued. It is effective for
interim and annual periods ending after June 15, 2009. The implementation
of SFAS 165 did not have a material impact on the Company’s financial
condition or results of operations. The Company adopted SFAS 165, effective
June 30, 2009, as required, and has evaluated all subsequent events through
August 10, 2009 (the date the Company’s financial statement are
issued).


37




In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets, an amendment of SFAS No. 140” (“SFAS 166”). SFAS 166 is intended to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets, the effects of a transfer on its financial
position, financial performance, and cash flows, and a transferor’s continuing
involvement, if any, in transferred financial assets. This statement must be
applied as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009. The Company does not expect the
adoption of SFAS 166 to have an impact on the Company’s results of operations,
financial condition or cash flows.




In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles, a Replacement of
FASB Statement 162” (“SFAS 168”). SFAS 168 will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. On the effective date of this statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative. This statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The Company does not expect the adoption of SFAS 168 to
have an impact on the Company’s results of operations, financial condition or
cash flows.


38





Item
3.  Quantitative and Qualitative
Disclosures About Market Risk





Fair Value of Financial Instruments —
The estimated fair values of financial instruments have been determined by the
Company using available market information and appropriate valuation
methodologies.




The
Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments.





The
Company's carrying values of cash, marketable securities, accounts receivable,
accounts payable and accrued expenses are a reasonable approximation of their
fair value.





The
Company’s investment in the Columbia Portfolio has also been sensitive to market
volatility.  As of June 30, 2009, the Company owned 3.8 million units
in the Columbia Portfolio with a fair market value of $3.3
million.  While the NAV associated with this investment has remained
consistent over the six months ended June 30, 2009, the portfolio manager of
this fund has extended the projected timeline of liquidations for approximately
3.8% of the original unit balance beyond June 30, 2010, noting that no reliable
estimate of the schedule for redemption for that portion of the assets can be
provided, including if it will occur in 2009 or 2010.  Most of the
remaining securities in this category are comprised of securities that are in
default, extremely impaired or have significantly extended weighted-average
lives.  While the NAV at June 30, 2009 was $0.8717 per share, the
Company cannot predict the NAV at which the remaining units will ultimately be
redeemed.  If the NAV were to decline by $0.09 per unit (10% of the
NAV at June 30, 2009), the net impact to the Company’s results of operations and
cash flows would be a decrease of income before provision for income taxes and
cash flows from operating activities of approximately $0.3 million.





The Company enters into transactions
denominated in U.S. Dollars, Hong Kong Dollars, the Chinese Renminbi, Euros,
British Pounds and the Czech Koruna.  Fluctuations in the U.S. dollar
exchange rate against these currencies could significantly impact the Company's
consolidated results of operations.





The Company believes that a change in
interest rates of 1% or 2% would not have a material effect on the Company's
condensed consolidated statement of operations or balance
sheet.


39





Item
4.   Controls and
Procedures





Disclosure controls and
procedures.  As of the end of the Company’s most recently
completed fiscal quarter covered by this report, the Company carried out an
evaluation, with the participation of the Company’s management, including the
Company’s Chief Executive Officer and Vice President - Finance, of the
effectiveness of the Company’s disclosure controls and procedures pursuant to
Securities Exchange Act Rule 13a-15.  As part of the March 31, 2009
quarter-end review, the Company's internal accounting personnel identified a
questionable entry in the Company's stock option exercise records. After
questioning by management, a Company employee (the "Employee") responsible for
certain aspects of the Company's benefit plan administration admitted
fabricating certain Company records for his own benefit in order to enable him
to exercise stock options that had not been granted to him by the Company's
Compensation Committee. The Company's management immediately terminated the
employment of the Employee and reported the matter to the Company's Audit
Committee. The Audit Committee, in turn, directed internal accounting personnel
to investigate this matter and directed counsel to engage a forensic accounting
firm to supplement the Company's internal review.





The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:





·
            With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated.  The fair value of
      these 30,000 shares at the times of issuance approximated $0.8
      million.  Option exercises covering an additional 1,000 shares
      are questionable but have not, as yet, been determined to be based on
      fabricated documentation. At this time, the Company does not believe that
      it will be able to obtain sufficient evidentiary documents to conclusively
      determine that these are fraudulent transactions.  The Employee
      has returned 30,000 shares to the Company for cancellation with a fair
      market value on the dates of their return of approximately $0.4
      million.





·
            With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not withdrawn any funds in his 401(k) account. Accordingly,
      the Company intends to recoup the amount directly from the Employee's
      401(k) account.  In addition, the Employee initiated special
      401(k) stock distributions directly into the Employee’s IRA account
      representing 3,420 shares of Class B Common Stock and 65 shares of Class A
      Common Stock.  The fair value of these shares at the time of
      transfer approximated $0.1 million.  The Employee has returned
      1,200 shares of Class B Common Stock to the Company for cancellation with
      a fair market value on the dates of their return of approximately
      $16,000.





·
            With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not withdrawn any funds in his profit-sharing account. The Company
      intends to recoup such $3,600 directly from the
  Employee.


40


The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee.  The Company's forensic accounting firm performed an email
search designed to ascertain whether there was any evidence that the Employee's
actions extended beyond his own personal accounts or whether other employees
were directly involved in such actions. To date, the Company has not discovered
any evidence that suggests that the fraudulent practices identified pursuant to
the internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.





Based
upon the information discovered to date:





·
            The
      Company does not believe that the Employee's actions have had or will have
      a material effect on the Company's consolidated financial
      statements.





·
            The
      Audit Committee directed the Company's internal audit staff to assess
      whether existing controls should be enhanced to assure that employees
      engaged in benefit plan administration do not have the ability to allocate
      employment benefits to themselves absent a third party
      approval.  The Company’s internal audit staff has completed this
      assessment and has implemented certain enhancements to the Company’s
      internal control structure related to the Company’s benefit plan
      administration.





·
            Management
      recommended to the Company's Compensation Committee that no stock options
      or restricted stock be granted by the Company until such time as the Audit
      Committee determines that enhanced controls have been implemented or are
      not necessary. The Company’s Audit Committee has reviewed the enhancements
      to the control procedures implemented during the second quarter of 2009
      and has cleared the Company for future issuances of stock options and
      restricted stock.





·
            The
      Company's Chief Executive Officer and Vice President - Finance have
      concluded that the Company’s disclosure controls and procedures are
      effective in ensuring that information required to be disclosed by the
      Company in the reports that it files or submits under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and
      forms.





Changes in internal controls
over financial reporting:  During the second quarter of 2009,
management identified a significant deficiency with regards to the fraudulent
activity described above.  A significant deficiency is a deficiency,
or a combination of deficiencies, that is less severe than a material weakness,
yet important enough to merit attention by those responsible for oversight of
the registrant’s financial reporting.  During the affected periods,
there were certain internal controls in place related to the Company’s benefit
plan administration which would have identified a material fraudulent event in
any individual period on a timely basis.  However, the internal
controls in place were not effective in identifying immaterial fraudulent
activity occurring during individual periods and as a result, the Company’s
internal audit staff has implemented certain enhancements to the internal
controls in place to assure that employees engaged in benefit plan
administration do not have the ability to allocate employment benefits to
themselves absent a third party approval. Other than these enhancements, there
were no significant changes in the Company's internal controls over financial
reporting that occurred during the Company's last fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.


41





PART
II.     Other Information





Item
1.         Legal
Proceedings





The
Company is, from time to time, a party to litigation arising in the normal
course of its business, including various claims of patent
infringement.  See the Company’s 2008 Annual Report on Form
10-K.  There were no material developments related to any of the
Company’s lawsuits since the filing of the Company’s 2008 Annual Report on Form
10-K.





Item
4.   Submission of Matters to a Vote of Security
Holders





The
Company’s annual meeting of security holders was held on May 15,
2009.  At the meeting the Board’s nominees were elected to the Board
of Directors for terms of three years.  The votes were cast as
follows:





For
                    
                    
                    WithheldHoward
      B. Bernstein
                    
                    
                    1,808,118
                    
                    
                    
                    280,609John
      F. Tweedy
                    
                    
                    2,045,275
                    
                    
                    
                    43,452





With
respect to the ratification of the designation of Deloitte & Touche LLP to
audit the Company’s books and accounts for 2009, the votes were cast as
follows:





For
                      
                      Against
                      
                      
                      Abstain2,060,201
                      
                      
                      27,188
                      
                      
                      
                      1,338





Item
6.  Exhibits


(a)
Exhibits:





31.1
                Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                Certification
      of the Vice President of Finance pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                Certification
      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes -
      Oxley Act of 2002.32.2
                Certification
      of the Vice-President of Finance pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.


42





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.





BEL
      FUSE INC.By:
              /s/ Daniel BernsteinDaniel
      Bernstein, President andChief
      Executive OfficerBy:
              /s/ Colin DunnColin
      Dunn, Vice President of
Finance





Dated:
August 10, 2009


43





EXHIBIT
INDEX





Exhibit
31.1 - Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.





Exhibit
31.2 - Certification of the Vice President of Finance pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.





Exhibit
32.1 - Certification of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.





Exhibit
32.2 - Certification of the Vice President of Finance pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.


44