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 September
                    30, 2005
 or
  o
              **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 0-11676
  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 StreetJersey
                  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  oNo
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).
  x
        Yes  oNo
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
  o
        Yes  x
        No
 
 At
        November 1, 2005, there were 2,702,677 shares of Class A Common Stock, $0.10
        par
        value, outstanding and 9,009,138 shares of Class B Common Stock, $0.10 par
        value, outstanding.
 
 
 
 
  BEL
                  FUSE INC.INDEXPagePart
                  I
              
              Financial
                  InformationItem
                  1.
              Financial
                  Statements
              1Consolidated
                  Balance Sheets as of September 30, 2005(unaudited)
                  and December 31, 2004
              2-3Consolidated
                  Statements of Operations for theNine
                  and Three Months Ended September 30, 2005 and2004
                  (unaudited)
              4Consolidated
                  Statements of Stockholders' Equityfor
                  the Years Ended December 31, 2004 and 2003 andthe
                  Nine Months Ended September 30, 2005 (unaudited)
              5-6Consolidated
                  Statements of Cash Flows for the NineMonths
                  Ended September 30, 2005 and 2004 (unaudited)
              7-9Notes
                  to Consolidated Financial Statements (unaudited)
              10-27Item
                  2.
              Management's
                  Discussion and Analysis ofFinancial
                  Condition and Results of Operations
              28-46Item
                  3.
              Quantitative
                  and Qualitative Disclosures AboutMarket
                  Risk
              47Item
                  4.
              Controls
                  and Procedures
              48Part
                    II
              
              Other
                    InformationItem
                  1.
              Legal
                  Proceedings
              49Item
                  6.
              Exhibits
              50Signatures
              
              51
  
 
 
 PART
        I.  Financial
        Information
 
 Item
        1.  Financial
        Statements
 
 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 consolidated financial statements pursuant to
        the
        rules and regulations of the Securities and Exchange Commission. It is suggested
        that the following consolidated financial statements 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,
        2004.
 
 The
        results of operations for the nine and three months ended September 30, 2005
        and
        2004 are not necessarily indicative of the results for the entire fiscal
        year or
        for any other period.
 
 1
 
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEETS**September
                    30,
                
                December
                    31,2005
                
                2004(Unaudited)**ASSETS**Current
                    Assets:Cash
                    and cash equivalents
                
                $
                61,966,283
                
                $
                71,197,891Marketable
                    securities
                
                
                20,547,904
                
                
                23,120,028Accounts
                    receivable - less allowance for doubtfulaccounts
                    of $1,172,000 and $1,610,000 as ofSeptember
                    30, 2005 and December 31, 2004, respectively
                
                
                39,738,422
                
                
                33,247,911Inventories
                
                
                34,785,707
                
                
                29,101,060Prepaid
                    expenses and other currentassets
                
                
                1,982,624
                
                
                2,404,718Assets
                    held for sale
                
                
                816,597
                
                
                696,013Total
                    Current Assets
                
                
                159,837,537
                
                
                159,767,621Property,
                    plant and equipment - net
                
                
                41,638,588
                
                
                41,244,759Deferred
                    income taxes
                
                
                2,401,000
                
                
                -Intangible
                    assets - net
                
                
                3,528,033
                
                
                2,691,682Goodwill
                
                
                22,339,505
                
                
                9,881,854Prepaid
                    pension costs
                
                
                1,127,941
                
                
                1,127,941Other
                    assets
                
                
                3,147,869
                
                
                3,062,714TOTAL
                    ASSETS
                
                $
                234,020,473
                
                $
                217,776,571
 
 See
        notes
        to unaudited consolidated financial statements.
  2
 
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEETS**September
                    30,
                
                December
                    31,2005
                
                2004(Unaudited)**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    Liabilities:Current
                    portion of long-term debt
                
                $
                -
                
                $
                2,000,000Short-term
                    debt
                
                
                480,885
                
                
                -Accounts
                    payable
                
                
                14,536,222
                
                
                8,814,161Accrued
                    expenses
                
                
                10,260,922
                
                
                10,293,576Deferred
                    income taxes
                
                
                229,000
                
                
                3,322,000Income
                    taxes payable
                
                
                10,502,892
                
                
                7,172,955Dividends
                    payable
                
                
                545,000
                
                
                541,000Total
                    Current Liabilities
                
                
                36,554,921
                
                
                32,143,692Long-term
                    Liabilities:Minimum
                    pension obligation
                
                
                2,722,583
                
                
                2,261,583Due
                    to employee
                
                
                303,561
                
                
                -Long-term
                    debt - net of current portion
                
                
                -
                
                
                4,500,000Deferred
                    income taxes
                
                
                -
                
                
                410,000Total
                    Long-term Liabilities
                
                
                3,026,144
                
                
                7,171,583Total
                    Liabilities
                
                
                39,581,065
                
                
                39,315,275Commitments
                    and ContingenciesStockholders'
                    Equity:Preferred
                    stock, no par value,authorized
                    1,000,000 shares;none
                    issued
                
                
                -
                
                
                -Class
                    A common stock, par value$.10
                    per share - authorized10,000,000
                    shares; outstanding2,702,677
                    and 2,702,677 shares, respectively(net
                    of 1,072,770 treasury shares)
                
                
                270,268
                
                
                270,268Class
                    B common stock, par value$.10
                    per share - authorized30,000,000
                    shares; outstanding 8,831,978and
                    8,660,589 shares, respectively(net
                    of 3,218,310 treasury shares)
                
                
                883,198
                
                
                866,059Additional
                    paid-in capital
                
                
                25,726,273
                
                
                21,989,174Retained
                    earnings
                
                
                165,278,811
                
                
                149,949,283Accumulated
                    other comprehensiveincome
                
                
                2,280,858
                
                
                5,386,512Total
                    Stockholders' Equity
                
                
                194,439,408
                
                
                178,461,296TOTAL
                    LIABILITIES ANDSTOCKHOLDERS'
                    EQUITY
                
                $
                234,020,473
                
                $
                217,776,571
  See
          notes to unaudited consolidated financial
          statements.
  3
  **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF OPERATIONS****(Unaudited)**Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Net
                    Sales
                
                $
                159,231,451
                
                $
                140,732,891
                
                $
                56,247,745
                
                $
                49,985,626Costs
                    and expenses:Cost
                    of sales
                
                
                113,800,708
                
                
                97,994,687
                
                
                40,419,800
                
                
                35,007,672Selling,
                    general and administrative
                
                
                24,650,866
                
                
                23,053,991
                
                
                8,810,927
                
                
                7,984,406Fixed
                    asset impairment
                
                
                -
                
                
                1,032,786
                
                
                -
                
                
                -138,451,574
                
                
                122,081,464
                
                
                49,230,727
                
                
                42,992,078Income
                    from operations
                
                
                20,779,877
                
                
                18,651,427
                
                
                7,017,018
                
                
                6,993,548Interest
                    expense
                
                
                (207,469
                )
                
                (176,931
                )
                
                -
                
                
                (60,457
                )Interest
                    income
                
                
                980,029
                
                
                448,835
                
                
                347,379
                
                
                169,256Lawsuit
                    proceeds
                
                
                -
                
                
                2,935,000
                
                
                -
                
                
                -Earnings
                    before provision for income taxes
                
                
                21,552,437
                
                
                21,858,331
                
                
                7,364,397
                
                
                7,102,347Income
                    tax provision
                
                
                4,584,000
                
                
                3,164,000
                
                
                1,378,000
                
                
                208,000Net
                    earnings
                
                $
                16,968,437
                
                $
                18,694,331
                
                $
                5,986,397
                
                $
                6,894,347Earnings
                    per common share - basic
                
                $
                1.48
                
                $
                1.66
                
                $
                0.52
                
                $
                0.61Earnings
                    per common share - diluted
                
                $
                1.47
                
                $
                1.63
                
                $
                0.52
                
                $
                0.60Weighted
                    average common sharesoutstanding
                    - basic
                
                
                11,447,675
                
                
                11,260,597
                
                
                11,500,704
                
                
                11,331,012Weighted
                    average common sharesoutstanding
                    - diluted
                
                
                11,542,205
                
                
                11,490,057
                
                
                11,575,205
                
                
                11,537,814
  See
          notes to unaudited consolidated financial
          statements.
  4
  **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS' EQUITY****(Unaudited)**CumulativeOtherCompre-
                
                
                
                Compre-hensive
                
                
                
                hensive
                
                Class
                      A
                
                Class
                      B
                
                AdditionalTotal
                
                Income
                    (loss)
                
                RetainedEarnings
                
                Income
                    (loss)
                
                CommonStock
                
                CommonStock
                
                Paid-InCapitalBalance,
                    January 1, 2003
                
                $
                130,659,147
                
                
                
                
                $
                115,632,819
                
                $
                (50,132
                )
                $
                267,623
                
                $
                826,149
                
                $
                13,982,688Exercise
                    of stockoptions
                
                
                2,580,224
                
                
                
                
                
                
                
                
                
                
                
                2,544
                
                
                19,920
                
                
                2,557,760Tax
                    benefits arisingfrom
                    the disposition ofnon-qualifiedincentive
                    stock options
                
                
                812,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                812,000Cash
                    dividends on Class Acommon
                    stock
                
                
                (322,234
                )
                
                
                
                
                (322,234
                )Cash
                    dividends on Class Bcommon
                    stock
                
                
                (1,667,586
                )
                
                
                
                
                (1,667,586
                )Currency
                    translationadjustment
                    - net of taxes
                
                
                1,014,808
                
                $
                1,014,808
                
                
                
                
                
                1,014,808Increase
                    in unrealized gain onmarketable
                    securities-net of taxes
                
                
                14,900
                
                
                14,900
                
                
                
                
                
                14,900Net
                    earnings
                
                
                13,763,694
                
                
                13,763,694
                
                
                13,763,694Comprehensive
                    income
                
                
                
                
                $
                14,793,402Balance,
                    December 31, 2003
                
                
                146,854,953
                
                
                
                
                
                127,406,693
                
                
                979,576
                
                
                270,167
                
                
                846,069
                
                
                17,352,448Exercise
                    of stockoptions
                
                
                3,891,266
                
                
                
                
                
                
                
                
                
                
                
                101
                
                
                19,990
                
                
                3,871,175Tax
                    benefits arisingfrom
                    the disposition ofnon-qualifiedincentive
                    stock options
                
                
                765,551
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                765,551Cash
                    dividends on Class Acommon
                    stock
                
                
                (430,707
                )
                
                
                
                
                (430,707
                )Cash
                    dividends on Class Bcommon
                    stock
                
                
                (1,748,292
                )
                
                
                
                
                (1,748,292
                )Currency
                    translationadjustment
                    - net of taxes
                
                
                386,257
                
                $
                386,257
                
                
                
                
                
                386,257Increase
                    in unrealized gain onmarketable
                    securities-net of taxes
                
                
                4,020,679
                
                
                4,020,679
                
                
                
                
                
                4,020,679Net
                    earnings
                
                
                24,721,589
                
                
                24,721,589
                
                
                24,721,589Comprehensive
                    income
                
                
                
                
                $
                29,128,525Balance,
                    December 31, 2004
                
                
                178,461,296
                
                
                
                
                
                149,949,283
                
                
                5,386,512
                
                
                270,268
                
                
                866,059
                
                
                21,989,174
  See
          notes to unaudited consolidated financial
          statements.
  5
  **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS' EQUITY****(Unaudited)**CumulativeOtherCompre-
                
                
                
                Compre-hensive
                
                
                
                hensive
                
                Class
                      A
                
                Class
                      B
                
                AdditionalTotal
                
                Income
                    (loss)
                
                Retained
                  Earnings
                
                Income
                    (loss)
                
                CommonStock
                
                CommonStock
                
                Paid-InCapitalExercise
                    of stockoptions
                
                
                3,351,046
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                17,139
                
                
                3,333,907Tax
                    benefits arisingfrom
                    the disposition ofnon-qualifiedincentive
                    stock options
                
                
                403,192
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                403,192Cash
                    dividends on Class Acommon
                    stock
                
                
                (323,205
                )
                
                
                
                
                (323,205
                )Cash
                    dividends on Class Bcommon
                    stock
                
                
                (1,315,704
                )
                
                
                
                
                (1,315,704
                )Currency
                    translationadjustment
                    - net of taxes
                
                
                (639,538
                )
                $
                (639,538
                )
                
                
                
                
                (639,538
                )Decrease
                    in unrealized gain onmarketable
                    securities-net of taxes
                
                
                (2,466,116
                )
                
                (2,466,116
                )
                
                
                
                
                (2,466,116
                )Net
                    earnings
                
                
                16,968,437
                
                
                16,968,437
                
                
                16,968,437Comprehensive
                    income
                
                
                
                
                $
                13,862,783Balance,
                    September 30, 2005 (unaudited)
                
                $
                194,439,408
                
                
                
                
                $
                165,278,811
                
                $
                2,280,858
                
                $
                270,268
                
                $
                883,198
                
                $
                25,726,273
  See
          notes to unaudited consolidated financial
          statements.
  6
  **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****(Unaudited)**Nine
                    Months EndedSeptember
                    30,2005
                
                2004Cash
                    flows from operatingactivities:Net
                    earnings
                
                $
                16,968,437
                
                $
                18,694,331Adjustments
                    to reconcile netearnings
                    to net cash providedby
                    operating activities:Depreciation
                    and amortization
                
                
                7,197,253
                
                
                7,112,701Fixed
                    asset impairment
                
                
                -
                
                
                1,032,786Other
                
                
                864,192
                
                
                928,000Deferred
                    income taxes
                
                
                (2,908,000
                )
                
                1,496,000Changes
                    in operating assetsand
                    liabilities (net of acquisitions)
                
                
                2,477,012
                
                
                (5,408,089
                )Net
                    Cash Provided byOperating
                    Activities
                
                
                24,598,894
                
                
                23,855,729Cash
                    flows from investing activities:Purchase
                    of property, plantand
                    equipment
                
                
                (4,551,341
                )
                
                (3,772,543
                )Purchase
                    of marketablesecurities
                
                
                (3,355,913
                )
                
                (17,723,615
                )Payment
                    for acquisitions - net ofcash
                    acquired
                
                
                (20,589,139
                )
                
                (74,539
                )Proceeds
                    from repaymentby
                    contractors
                
                
                -
                
                
                21,750Proceeds
                    from sale of marketablesecurities
                
                
                643,424
                
                
                5,599,894Net
                    Cash Used InInvesting
                    Activities
                
                
                (27,852,969
                )
                
                (15,949,053
                )
  See
          notes to unaudited consolidated financial
          statements.
  7
   **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**Nine
                    Months EndedSeptember
                    30,2005
                
                2004Cash
                    flows from financingactivities:Proceeds
                    from borrowings
                
                
                8,000,000
                
                
                -Loan
                    repayments
                
                
                (15,360,694
                )
                
                (1,500,000
                )Proceeds
                    from exercise ofstock
                    options
                
                
                3,351,046
                
                
                3,515,405Dividends
                    paid to commonshareholders
                
                
                (1,638,909
                )
                
                (1,628,199
                )Net
                    Cash (Used In) Provided ByFinancing
                    Activities
                
                
                (5,648,557
                )
                
                387,206Effect
                    of exchange rate changes on cash
                
                
                (328,976
                )
                
                (48,090
                )Net
                    (Decrease) Increase inCash
                    and Cash Equivalents
                
                
                (9,231,608
                )
                
                8,245,792Cash
                    and Cash Equivalents-
                    beginning of period
                
                
                71,197,891
                
                
                57,461,152Cash
                    and Cash Equivalents-
                    end of period
                
                $
                61,966,283
                
                $
                65,706,944Changes
                    in operating assetsand
                    liabilities (net of acquisitions) consist of:Increase
                    in accounts receivable
                
                $
                (3,043,507
                )
                $
                (3,241,831
                )Increase
                    in inventories
                
                
                (2,966,895
                )
                
                (7,879,365
                )Decrease
                    (increase) in prepaidexpenses
                    and othercurrent
                    assets
                
                
                495,361
                
                
                (888,907
                )Decrease
                    (increase) in other assets
                
                
                644,347
                
                
                (259,037
                )Increase
                    in accounts payable
                
                
                3,604,016
                
                
                4,830,008Increase
                    in income taxes payable
                
                
                3,335,425
                
                
                531,326Increase
                    in accrued expenses
                
                
                408,265
                
                
                1,499,717$
                2,477,012
                
                $
                (5,408,089
                )
  See
          notes to unaudited consolidated financial
          statements.
  8
 
 **BEL
                      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                      STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**Nine
                      Months EndedSeptember
                      30,2005
                  
                  2004Supplementary
                      information:Cash
                      paid during the nine months for:Income
                      taxes
                  
                  $
                  3,733,000
                  
                  $
                  879,000Interest
                  
                  $
                  207,469
                  
                  $
                  176,931Details
                      of acquisitions:Fair
                      value of assetsacquired
                      (excluding acquired cash of$311,856
                      in 2005)
                  
                  $
                  6,167,138
                  
                  $
                  -Intangibles
                  
                  
                  2,445,235
                  
                  
                  74,539Goodwill
                  
                  
                  12,457,651
                  
                  
                  -21,070,024
                  
                  
                  74,539Less:
                      Amounts due on acquisition payment
                  
                  
                  480,885
                  
                  
                  -Cash
                      paid for acquisition
                  
                  $
                  20,589,139
                  
                  $
                  74,539
  See
            notes to unaudited consolidated financial
            statements.
  9
  BEL
        FUSE
        INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  1. BASIS
          OF
          PRESENTATION AND ACCOUNTING POLICIES
  The
        consolidated balance sheet as of September 30, 2005, and the consolidated
        statements of operations 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 and cash flows for all periods presented have been
        made.
        The information for the consolidated balance sheet as of December 31, 2004
        was
        derived from audited financial statements.
 
 Accounting
        Policies
  DESCRIPTION
        OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Bel
        Fuse Inc. and subsidiaries operate in one industry with three geographic
        reporting segments and are engaged in the design, manufacture and sale of
        a
        broad array of magnetics, modules, circuit protection devices and interconnect
        products. The Company manages its operations geographically through its three
        reporting units: North America, Asia and Europe. Sales are predominantly
        in
        North America, Europe and Asia.
  
 PRINCIPLES
        OF CONSOLIDATION - The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiaries including the businesses acquired since their
        respective dates of acquisition. All intercompany transactions and balances
        have
        been eliminated.
 
 USE
        OF
        ESTIMATES - The
        preparation of the consolidated financial statements in conformity with
        accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reporting period. Actual results could differ
        from those estimates.
 
 CASH
        EQUIVALENTS - Cash
        equivalents include short-term investments in U.S. treasury bills and commercial
        paper with an original maturity of three months or less when purchased. At
        September 30, 2005 and December 31, 2004, cash equivalents approximated
        $24,202,000 and $38,355,000, respectively.
 
 MARKETABLE
        SECURITIES - The
        Company classifies its equity securities as "available for sale", and
        accordingly, reflects unrealized gains and losses, net of deferred income
        taxes,
        as other comprehensive income.
 
 The
        fair
        values of marketable securities are based on quoted market prices. Realized
        gains or losses from the sale of marketable securities are based on the specific
        identification method.
 
  10
  
 ACQUISITION
        EXPENSES - The
        Company capitalizes all direct costs associated with proposed acquisitions.
        If
        the proposed acquisitions are consummated, such costs will be included as
        a
        component of the overall cost of the acquisition. Such costs are expensed
        at
        such time as the Company deems the consummation of a proposed acquisition
        to be
        unsuccessful.
 
 FOREIGN
        CURRENCY TRANSLATION - The
        functional currency for some foreign operations is the local currency. Assets
        and liabilities of foreign operations are translated at balance sheet date
        rates
        of exchange and income, expense and cash flow items are translated at the
        average exchange rate for the period. Translation adjustments are recorded
        in
        Other Comprehensive Income. The U.S. Dollar is used as the functional currency
        for certain foreign operations that conduct their business in U.S. Dollars.
        A
        combination of current and historical exchange rates is used in measuring
        the
        local currency transactions of these subsidiaries and the resulting exchange
        adjustments are included in the statement of operations. Current exchange
        rates
        are used for all foreign subsidiaries except for two subsidiaries in the
        Far
        East which use both current and historical exchange rates. Realized foreign
        currency (gains) losses were $(78,000) and $(2,000) for the nine months ended
        September 30, 2005 and 2004, and $27,000 and $(76,000) for the three months
        ended September 30, 2005 and 2004, respectively, and are included in Selling,
        General and Administrative expenses in the consolidated statement of operations.
 
 CONCENTRATION
        OF CREDIT RISK - Financial
        instruments which potentially subject the Company to concentrations of credit
        risk consist principally of accounts receivable and temporary cash investments.
        The Company grants credit to customers that are primarily original equipment
        manufacturers and to subcontractors of original equipment manufacturers based
        on
        an evaluation of the customer's financial condition, without requiring
        collateral. Exposure to losses on receivables is principally dependent on
        each
        customer's financial condition. The Company controls its exposure to credit
        risk
        through credit approvals, credit limits and monitoring procedures and
        establishes allowances for anticipated losses.
 
 The
        Company places its temporary cash investments with quality financial
        institutions and commercial issuers of short-term paper and, by policy, limits
        the amount of credit exposure in any one financial instrument.
 
 INVENTORIES
        - Inventories
        are stated at the lower of weighted average cost or market.
 
 REVENUE
        RECOGNITION - The
        Company recognizes revenue in accordance with the guidance contained in SEC
        Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements"
        ("SAB 104"). Revenue is recognized when the product has been delivered and
        title
        and risk of loss has passed to the customer, collection of the resulting
        receivable is deemed probable by management, persuasive evidence of an
        arrangement exists and the sales price is fixed and determinable. Substantially
        all of the Company's shipments are FCA (free carrier) which provides for
        title
        to pass upon delivery to the customer's freight carrier. Some product is
        shipped
        DDP/DDU with title passing when the product arrives at the customer's
        dock.
 
 11
  For
        certain customers, the Company provides consigned inventory, either at the
        customer’s facility or at a third party warehouse. Sales of consigned inventory
        are recorded when the customer withdraws inventory from consignment **.** During
        all periods in 2005 and 2004, inventory on consignment was
        immaterial.
 
 The
        Company typically has a twelve-month warranty policy for workmanship defects.
        Warranty returns have historically averaged at or below 1% of annual net
        sales.
        The Company establishes warranty reserves when a warranty issue becomes known
        as
        warranty claims have historically been immaterial. No general reserves for
        warranties have been established.
 
 The
        Company is not contractually obligated to accept returns except for defective
        product or in instances where the product does not meet the customer's quality
        specifications. However, the Company may permit its customers to return product
        for other reasons. In these instances, the Company would generally require
        a
        significant cancellation penalty payment by the customer. The Company estimates
        such returns, where applicable, based upon management's evaluation of historical
        experience, market acceptance of products produced and known negotiations
        with
        customers. Such estimates are deducted from gross sales and provided for
        at the
        time revenue is recognized.
 
 GOODWILL
        AND OTHER INTANGIBLES - The
        Company tests goodwill for impairment annually (fourth quarter), using a
        fair
        value approach at the reporting unit level. A reporting unit is an operating
        segment or one level below an operating segment for which discrete financial
        information is available and reviewed regularly by management. Assets and
        liabilities of the Company have been assigned to the reporting units to the
        extent that they are employed in or are considered a liability related to
        the
        operations of the reporting unit and were considered in determining the fair
        value of the reporting unit.
 
 DEPRECIATION
        - Property,
        plant and equipment are stated at cost less accumulated depreciation and
        amortization. Depreciation and amortization are calculated primarily using
        the
        declining-balance method for machinery and equipment and the straight-line
        method for buildings and improvements over their estimated useful lives.
 
 INCOME
        TAXES - The
        Company accounts for income taxes using an asset and liability approach under
        which deferred income taxes are recognized by applying enacted tax rates
        applicable to future years to the differences between the financial statement
        carrying amounts and the tax bases of reported assets and
        liabilities.
 
 Except
        for a portion of foreign earnings, an income tax provision has not been recorded
        for U.S. federal income taxes on the undistributed earnings of foreign
        subsidiaries as such earnings are intended to be permanently reinvested in
        those
        operations. Such earnings would become taxable upon the sale or liquidation
        of
        these foreign subsidiaries or upon the repatriation of earnings.
  
 12
 
 During
        the fourth quarter of 2005, the Company anticipates repatriating up to $35.0
        million of foreign subsidiary earnings to take advantage of the temporary
        85%
        dividends received deductions for cash dividends in excess of the historical
        "base-period" average. This favorable tax treatment created under the American
        Jobs Creation Act of 2004 expires on December 31, 2005. The dividend
        repatriation will result in an additional income tax of up to approximately
        $1.8
        million, which will be recorded at the time of repatriation.
 
 The
        principal items giving rise to deferred taxes are unrealized gains on marketable
        securities available for sale, the use of accelerated depreciation methods
        for
        machinery and equipment, timing differences between book and tax amortization
        of
        intangible assets and goodwill and certain expenses which have been deducted
        for
        financial reporting purposes which are not currently deductible for income
        tax
        purposes.
 
 STOCK-OPTION
        PLAN - The
        Company accounts for equity-based compensation issued to employees in accordance
        with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
        Stock
        Issued to Employees". APB No. 25 requires the use of the intrinsic value
        method,
        which measures compensation cost as the excess, if any, of the quoted market
        price of the stock at the measurement date over the amount an employee must
        pay
        to acquire the stock. The Company makes disclosures of pro forma net earnings
        and earnings per share as if the fair-value-based method of accounting had
        been
        applied as required by Statement of Financial Accounting Standards ("SFAS")
        No.
        123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
 
 Subsequent
        to the end of the quarter, during October and November 2005, the Company
        issued
        156,200 class B common shares under a restricted stock plan to various officers
        and employees. The shares vest 25% after two years of employment with an
        additional 25% vesting in each of years three through five.
 
 The
        Company grants stock options with exercise prices at fair market value at
        the
        date of the grant. The Company will continue to account for stock-based employee
        compensation under the recognition and measurement principle of APB Opinion
        No.
        25 and related interpretations through December 31, 2005. Thereafter, the
        Company will account for stock based compensation under SFAS No. 123 (R),
        "Share-Based Payment" . The Company is currently evaluating its position
        and
        will make its determination to account for stock-based compensation costs
        either
        prospectively or retroactively at the time of adoption.
 
 13
  The
        Company has adopted the disclosure-only provisions of SFAS No. 123. Had
        compensation cost for the Company's stock option plan been determined based
        on
        the fair value at the grant date for awards in 2005 and 2004 consistent with
        the
        provisions of SFAS No. 123, the Company's net earnings and earnings per share
        would have been reduced to the pro forma amounts indicated below:
  Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Net
                    earnings - as reported
                
                $
                16,968,437
                
                $
                18,694,331
                
                $
                5,986,397
                
                $
                6,894,347Deduct:
                    Total stock-basedemployee
                    compensation expensedetermined
                    under fair value basedmethod
                    for all awards
                
                
                (482,604
                )
                
                (929,696
                )
                
                (160,868
                )
                
                (309,899
                )Net
                    earnings- pro forma
                
                $
                16,485,833
                
                $
                17,764,635
                
                $
                5,825,529
                
                $
                6,584,448Earnings
                    per common share -basic-as
                    reported
                
                $
                1.48
                
                $
                1.66
                
                $
                0.52
                
                $
                0.61Earnings
                    per common share -basic-pro
                    forma
                
                $
                1.44
                
                $
                1.58
                
                $
                0.51
                
                $
                0.58Earnings
                    per common share -diluted-as
                    reported
                
                $
                1.47
                
                $
                1.63
                
                $
                0.52
                
                $
                0.60Earnings
                    per common share -diluted-pro
                    forma
                
                $
                1.43
                
                $
                1.55
                
                $
                0.50
                
                $
                0.57
  The
        fair
        value of each option grant is estimated on the date of grant using the
        Black-Scholes option-pricing model with the following weighted-average
        assumptions used for grants in 2004: dividend yield of .9%, expected volatility
        of 35% for Class B; risk-free interest rate of 5% and expected lives of 5
        years.
        No options were granted during the nine months ended September 30, 2005 or
        2004.
 
 RESEARCH
        AND DEVELOPMENT - Research
        and development costs are expensed as incurred, and are included in cost
        of
        sales. Generally all research and development is performed internally for
        the
        benefit of the Company. The Company does not perform such activities for
        others.
        Research and development costs include salaries, building maintenance and
        utilities, rents, materials, administration costs and miscellaneous other
        items.
        Research and development expenses for the nine months ended September 30,
        2005
        and 2004 amounted to $5.5 million and $5.6 million, respectively, and for
        the
        three months ended September 30, 2005 and 2004 amounted to $1.8 million and
        $1.8
        million, respectively.
 
 EVALUATION
        OF LONG-LIVED ASSETS - The
        Company reviews property and equipment for impairment whenever events or
        changes
        in circumstances indicate the carrying value may not be recoverable in
        accordance with guidance in SFAS No. 144, “Accounting for the Impairment or
        Disposal of Long-Lived Assets.” If the carrying value of the long-lived asset
        exceeds the present value of the related estimated future cash flows, the
        asset
        would be adjusted to its fair value and an impairment loss would be charged
        to
        operations in the period identified.


14
 EARNINGS
        PER SHARE - Basic
        earnings per common share are computed by dividing net earnings by the weighted
        average number of common shares outstanding during the period. Diluted earnings
        per common share are computed by dividing net earnings by the weighted average
        number of common shares and potential common shares outstanding during the
        period. Potential common shares used in computing diluted earnings per share
        relate to stock options and warrants which, if exercised, would have a dilutive
        effect on earnings per share.
 
 The
        following table includes a reconciliation of shares used in the calculation
        of
        basic and diluted earnings per share:
 Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Weighted
                    average shares outstanding - basic
                
                
                11,447,675
                
                
                11,260,597
                
                
                11,500,704
                
                
                11,331,012Dilutive
                    impact of options outstanding
                
                
                94,530
                
                
                229,460
                
                
                74,501
                
                
                206,802Weighted
                    average shares oustanding - diluted
                
                
                11,542,205
                
                
                11,490,057
                
                
                11,575,205
                
                
                11,537,814
  During
        the nine and three months ended September 30, 2005, 20,000 and 20,000
        outstanding options, respectively, were not included in the foregoing
        computations because they were antidilutive. No such exclusion occurred during
        2004.
 
 FAIR
        VALUE OF FINANCIAL INSTRUMENTS - For
        financial instruments, including cash, accounts receivable, accounts payable
        and
        accrued expenses, it was assumed that the carrying amount approximated fair
        value because of the short maturities of such instruments. Interest rates
        that
        are currently available to the Company for issuance of debt with similar
        terms
        and remaining maturities are used to estimate fair value for bank debt.
        Management believes that the carrying amount of bank debt is a reasonable
        estimate of its fair value.
 
 2. ACQUISITIONS
 
 On
        March
        22, 2005, the Company acquired the common stock of Galaxy Power Inc. ("Galaxy"),
        located in Westborough, Massachusetts, for approximately $18.8 million in
        cash
        including transaction costs of approximately $0.2 million. Galaxy is a designer
        and manufacturer of high-density dc-dc converters for distributed power and
        telecommunication applications. Purchase price allocations have been initially
        estimated by management and are subject to adjustment. Management is in the
        process of obtaining independent valuations and independent formal appraisals
        and may adjust the purchase price allocations accordingly. Management has
        estimated approximately $11.5 million of goodwill and $2.0 million of
        identifiable intangible assets arose from the transaction. The identifiable
        intangible assets and related deferred tax liabilities are being amortized
        on a
        straight-line basis over their estimated useful lives.
 
 The
        acquisition has been accounted for using the purchase method of accounting
        and,
        accordingly, the results of operations of Galaxy have been included in the
        Company's consolidated financial statements from March 23, 2005.
   15
 
 There
        was
        no in-process research and development acquired as part of this
        acquisition.
 
 On
        June
        30, 2005, the Company acquired the common stock of Netwatch s.r.o., located
        in
        Prague, the Czech Republic, for approximately $1.9 million in cash of which
        $0.5
        million is due to the sellers by June 30, 2006. Netwatch s.r.o. is a designer
        and manufacturer of high-performance fiber optic and copper cable assemblies
        for
        data and telecommunication applications. Purchase price allocations have
        been
        estimated by management and are subject to adjustment. Management has estimated
        approximately $1.0 million of goodwill arose from the transaction.
 
 There
        was
        no in-process research and development acquired as part of this
        acquisition.
 
 The
        following unaudited pro forma summary results of operations assume that Galaxy
        and Netwatch s.r.o. had been acquired as of January 1, 2004 (in thousands,
        except per share data):
 
 Nine
                    Months EndedSeptember
                    30,2005
                
                2004Net
                    sales
                
                $
                164,543
                
                $
                156,786Net
                    earnings
                
                
                16,692
                
                
                19,362Earnings
                    per share - diluted
                
                
                1.45
                
                
                1.69
 
 The
        information above is not necessarily indicative of the results of operations
        that would have occurred if the Galaxy and Netwatch s.r.o. acquisitions had
        been
        consummated as of January 1, 2004. Such information should not be construed
        as a
        representation of the future results of operations of the Company.
 
 A
        condensed combined balance sheet of the major assets and liabilities of Galaxy
        and Netwatch s.r.o., as of their acquisition dates is as follows:
 
 Cash
                
                $
                311,856Accounts
                    receivable
                
                
                3,687,331Inventories
                
                
                2,862,571Prepaid
                    expenses
                
                
                96,120Income
                    taxes receivable
                
                
                5,488Property,
                    plant andequipment
                
                
                1,545,526Other
                    assets
                
                
                32,083Deferred
                    tax asset
                
                
                1,392,850Goodwill
                
                
                12,457,651Intangible
                    assets
                
                
                1,960,000Notes
                    payable
                
                
                (860,694
                )Accounts
                    payable
                
                
                (2,129,165
                )Accrued
                    expenses
                
                
                (465,002
                )Net
                    assets acquired
                
                $
                20,896,615
   16
  3. GOODWILL
          AND OTHER INTANGIBLES
 
 Goodwill
        and intangible assets deemed to have indefinite lives are not amortized,
        but are
        subject to, at a minimum, an annual impairment test which is performed during
        the fourth quarter. If the carrying value of goodwill or intangible assets
        exceeds its fair market value, an impairment loss would be recorded.
 
 Other
        intangibles include patents, product information, covenants not-to-compete
        and
        supply agreements. Amounts assigned to these intangibles have been determined
        by
        management. Management considered a number of factors in determining the
        allocations, including valuations and independent appraisals. Other intangibles
        are being amortized over 1 to 10 years. Amortization expense was $1,610,000
        and
        $1,069,000 for the nine months ended September 30, 2005 and 2004, respectively
        and $629,000 and $494,000 for the three months ended September 30, 2005 and
        2004, respectively.
 
 Under
        the
        terms of the E-Power and Current Concepts, Inc. acquisition agreements of
        May
        11, 2001, the Company is required to make contingent purchase price payments
        up
        to an aggregate of $7.6 million should the acquired companies attain specified
        sales levels. E-Power will be paid $2.0 million in contingent purchase price
        payments if sales, as defined, reach $15.0 million and an additional $4.0
        million if sales reach $25.0 million on a cumulative basis through May 2007.
        No
        payments have been required through September 30, 2005 with respect to E-Power.
        Current Concepts will be paid 16% of sales, as defined, on the first $10.0
        million of sales through May 2007. During the nine months ended September
        30,
        2005 and 2004, the Company paid $485,000 and $75,000, respectively, in
        contingent price payments to Current Concepts. During the three months ended
        September 30, 2005 and 2004, the Company paid approximately $189,000 and
        $-0-,
        respectively, in contingent purchase price payments to Current Concepts.
        The
        contingent purchase price payments are accounted for as additional purchase
        price and as an increase to covenants not to compete within intangible assets
        when such payment obligations are incurred.
 
 The
        changes in the carrying value of goodwill classified by geographic reporting
        units for the nine months ended September 30, 2005 and the year ended December
        31, 2004 are as follows:
 
 Total
                
                Asia
                
                North
                    America
                
                EuropeBalance,
                    January 1, 2004
                
                $
                9,881,854
                
                $
                6,407,435
                
                $
                2,869,092
                
                $
                605,327Goodwill
                    allocationrelated
                    to acquisitions
                
                
                -
                
                
                -
                
                
                -
                
                
                -Balance,
                    December 31, 2004
                
                
                9,881,854
                
                
                6,407,435
                
                
                2,869,092
                
                
                605,327Goodwill
                    allocationrelated
                    to acquisitions
                
                
                12,457,651
                
                
                -
                
                
                11,454,643
                
                
                1,003,008Balance,
                    September 30, 2005
                
                $
                22,339,505
                
                $
                6,407,435
                
                $
                14,323,735
                
                $
                1,608,335
   17
  
 The
        components of intangible assets other than goodwill by geographic reporting
        unit
        are as follows:
  December
                      31, 2004Total
                  
                  Asia
                  
                  North
                      AmericaGross
                      Carrying
                  
                  Accumulated
                  
                  Gross
                      Carrying
                  
                  Accumulated
                  
                  Gross
                      Carrying
                  
                  AccumulatedAmount
                  
                  Amortization
                  
                  Amount
                  
                  Amortization
                  
                  Amount
                  
                  AmortizationPatents
                      and ProductInformation
                  
                  $
                  2,935,000
                  
                  $
                  1,338,765
                  
                  $
                  2,653,000
                  
                  $
                  1,188,654
                  
                  $
                  282,000
                  
                  $
                  150,111Covenants
                      not-to-compete
                  
                  
                  3,523,516
                  
                  
                  2,428,069
                  
                  
                  3,523,516
                  
                  
                  2,428,069
                  
                  
                  -
                  
                  
                  -Supply
                      agreement
                  
                  
                  2,660,000
                  
                  
                  2,660,000
                  
                  
                  1,409,800
                  
                  
                  1,409,800
                  
                  
                  1,250,200
                  
                  
                  1,250,200$
                  9,118,516
                  
                  $
                  6,426,834
                  
                  $
                  7,586,316
                  
                  $
                  5,026,523
                  
                  $
                  1,532,200
                  
                  $
                  1,400,311
  September
                      30, 2005Total
                  
                  Asia
                  
                  North
                      AmericaGross
                      Carrying
                  
                  Accumulated
                  
                  Gross
                      Carrying
                  
                  Accumulated
                  
                  Gross
                      Carrying
                  
                  AccumulatedAmount
                  
                  Amortization
                  
                  Amount
                  
                  Amortization
                  
                  Amount
                  
                  AmortizationPatents
                      and ProductInformation
                  
                  $
                  2,935,000
                  
                  $
                  1,694,331
                  
                  $
                  2,653,000
                  
                  $
                  1,523,088
                  
                  $
                  282,000
                  
                  $
                  171,243Customer
                      relationship
                  
                  
                  1,160,000
                  
                  
                  120,833
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,160,000
                  
                  
                  120,833Covenants
                      not-to-compete
                  
                  
                  4,809,543
                  
                  
                  3,561,346
                  
                  
                  4,009,543
                  
                  
                  3,204,263
                  
                  
                  800,000
                  
                  
                  357,143$
                  8,904,543
                  
                  $
                  5,376,510
                  
                  $
                  6,662,543
                  
                  $
                  4,727,291
                  
                  $
                  2,242,000
                  
                  $
                  649,219
 Estimated
        amortization expense for intangible assets for the next five years is as
        follows:
 
 EstimatedYear
                    Ending
                
                AmortizationDecember
                    31,
                
                Expense2005
                
                $
                2,395,0872006
                
                
                1,282,9012007
                
                
                638,1662008
                
                
                363,1762009
                
                
                404,528
 
 18
  
 4.  MARKETABLE
        SECURITIES
 
 The
        Company has acquired a total of 2,037,500 shares of the common stock of Artesyn
        Technologies, Inc. (“Artesyn”) at a total purchase price of $16,331,469. These
        purchases were reflected on the Company's consolidated statement of cash
        flows
        in the third quarter of 2004 as purchases of marketable securities and have
        since been reflected on the Company's consolidated balance sheet as marketable
        securities. As of September 30, 2005, the Company has recorded an unrealized
        gain, net of income taxes, of approximately $1,498,000, which is included
        in
        accumulated other comprehensive income as stated in the consolidated statement
        of stockholders' equity. In connection with this transaction, the Company
        is
        obligated to pay an investment banker's advisory fee to a third party of
        20% of
        the appreciation in the stock of Artesyn, or $1 million, whichever is lower.
        As
        of September 30, 2005, the Company has accrued a fee in the amount of
        approximately $523,000. Such amount has been deferred as deferred acquisition
        costs and recorded within other assets. The Company has proposed to Artesyn
        that
        the Company acquire Artesyn, but to date Artesyn has not indicated any interest
        in negotiating such a transaction with the Company. If the proposed acquisition
        of Artesyn is consummated, the fee will be capitalized as part of the
        acquisition costs. Such amount will be expensed at such time as the Company
        deems the consummation of the proposed acquisition to be
        unsuccessful.
 
 At
        September 30, 2005 and December 31, 2004, respectively, marketable securities
        have a cost of approximately $18,054,000 and $16,516,000, an estimated fair
        value of approximately $20,548,000 and $23,120,000 and gross unrealized gains
        of
        approximately $2,494,000 and $6,604,000. Such unrealized gains, net of tax,
        are
        included in other comprehensive income.
 
 5. INVENTORIES
 
 The
        components of inventories are as follows:
  September
                    30,
                
                December
                    31,2005
                
                2004Raw
                    materials
                
                $
                20,153,572
                
                $
                15,236,393Work
                    in progress
                
                
                2,151,554
                
                
                1,607,052Finished
                    goods
                
                
                12,480,581
                
                
                12,257,615$
                34,785,707
                
                $
                29,101,060
 19
  
 6. 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:
 
 Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Total
                    segment revenuesNorth
                    America
                
                $
                62,002,064
                
                $
                59,572,098
                
                $
                24,882,906
                
                $
                19,868,199Asia
                
                
                106,420,536
                
                
                99,815,521
                
                
                34,910,620
                
                
                35,085,095Europe
                
                
                11,633,694
                
                
                12,281,273
                
                
                4,219,386
                
                
                4,262,553Total
                    segment revenues
                
                
                180,056,294
                
                
                171,668,892
                
                
                64,012,912
                
                
                59,215,847Reconciling
                    items:Intersegment
                    revenues
                
                
                (20,824,843
                )
                
                (30,936,001
                )
                
                (7,765,167
                )
                
                (9,230,221
                )Net
                    sales
                
                $
                159,231,451
                
                $
                140,732,891
                
                $
                56,247,745
                
                $
                49,985,626Income
                    (loss) from Operations:North
                    America
                
                $
                5,481,830
                
                $
                3,953,654
                
                $
                1,640,800
                
                $
                2,212,762Asia
                
                
                15,329,791
                
                
                13,583,612
                
                
                5,530,004
                
                
                4,754,118Europe
                
                
                (31,744
                )
                
                1,114,161
                
                
                (153,786
                )
                
                26,668$
                20,779,877
                
                $
                18,651,427
                
                $
                7,017,018
                
                $
                6,993,548
 
 7. DEBT
 
 a.  Short-term
        debt
 
 Previously
        the Company had available one domestic line of credit of $10 million. During
        March 2005, the Company borrowed $8 million against the line of credit to
        partially finance the acquisition of Galaxy. The outstanding balance was
        paid
        off in its entirety on June 20, 2005. During July 2005, the Company amended
        its
        credit agreement to increase the line of credit to $20 million, which expires
        on
        July 21, 2008. There was no balance outstanding as of September 30, 2005.
 
 Subsequent
        to the end of the quarter during October 2005 the Company borrowed approximately
        $2.0 million against its line of credit. The loan currently bears interest
        at
        4.87% annually. The interest rate is based on LIBOR plus the applicable margin,
        which is based on the estimated term of the loan (from one to six
        months).
  20
  b.  Long-term
        debt
 
 On
        March
        21, 2003, the Company entered into a $10 million secured term loan, which
        was
        paid off in June 2005. The loan was used to partially finance the Company's
        acquisition of Insilco's Passive Components Group. This term loan facility
        is no
        longer available.
 
 For
        the
        nine months ended September 30, 2005 and 2004, the Company recorded interest
        expense of approximately $207,000 and $177,000, respectively. For the three
        months ended September 30, 2005 and 2004, the Company recorded interest expense
        of approximately $-0- and $60,000, respectively.
 
 8.  ACCRUED
        EXPENSES
 
 Accrued
        expenses consist of the following:
 September
                    30,
                
                December
                    31,2005
                
                2004Sales
                    commissions
                
                $
                1,549,663
                
                $
                1,431,169Investment
                    banking commissions
                
                
                523,000
                
                
                1,000,000Subcontracting
                    labor
                
                
                1,501,022
                
                
                1,624,963Salaries,
                    bonuses andrelated
                    benefits
                
                
                3,961,490
                
                
                3,480,213Other
                
                
                2,725,747
                
                
                2,757,231$
                10,260,922
                
                $
                10,293,576
  9.  RETIREMENT
        FUND AND PROFIT SHARING PLAN
 
 The
        Company maintains a domestic profit sharing plan and a contributory stock
        ownership and savings 401(K) plan, which combines stock ownership and individual
        voluntary savings provisions to provide retirement benefits for plan
        participants. The plan provides for participants to voluntarily contribute
        a
        portion of their compensation, subject to certain legal maximums. The Company
        will match, based on a sliding scale, up to $350 for the first $600 contributed
        by each participant. Matching contributions plus additional discretionary
        contributions will be made with Company stock purchased in the open market.
        The
        expense for the nine months ended September 30, 2005 and 2004 amounted to
        approximately $400,000 and $316,000, respectively. The expense for the three
        months ended September 30, 2005 and 2004 amounted to approximately $152,000
        and
        $168,000, respectively. These expenses are included as a component of cost
        of
        sales and selling, general and administrative expenses on the accompanying
        consolidated statements of operations. As of September 30, 2005, the plans
        owned
        18,710 and 132,688 shares of Bel Fuse Inc. Class A and Class B common stock,
        respectively.
 
  21
  The
        Company's Far East subsidiaries have a retirement fund covering substantially
        all of their Hong Kong based full-time employees. Eligible employees contribute
        up to 5% of salary to the fund. In addition, the Company may contribute an
        amount up to 7% of eligible salary, as determined by Hong Kong government
        regulations, in cash or Company stock. The expense for the nine months ended
        September 30, 2005 and 2004 amounted to approximately $298,000 and $301,000,
        respectively. The expense for the three months ended September 30, 2005 and
        2004
        amounted to approximately $89,000 and $96,000, respectively. As of September
        30,
        2005, the plan owned 3,323 and 17,756 shares of Bel Fuse Inc. Class A and
        Class
        B common stock, respectively.
 
 The
        Supplemental Executive Retirement Plan (the “Plan” or "SERP") is designed to
        provide a limited group of key management and highly compensated associates
        of
        the Company supplemental retirement and death benefits. The Plan was established
        by the Company in 2002. Employees are selected at the sole discretion of
        the
        Board of Directors of the Company to participate in the Plan. The Plan is
        unfunded. The Company utilizes life insurance to partially cover its obligations
        under the Plan. The benefits available under the Plan vary according to when
        and
        how the participant terminates employment with the Company. If a participant
        retires (with the prior written consent of the Company) on his normal retirement
        date (65 years old, 20 years of service, and 5 years of Plan participation),
        his
        normal retirement benefit under the Plan would be annual payments equal to
        40%
        of his average base compensation (calculated using compensation from the
        highest
        5 consecutive calendar years of Plan participation), payable in monthly
        installments for the remainder of his life.
  If
        a
        participant retires early from the Company (55 years old, 20 years of service,
        and 5 years of Plan participation), his early retirement benefit under the
        Plan
        would be an amount (i) calculated as if his early retirement date were in
        fact
        his normal retirement date, (ii) multiplied by a fraction, with the numerator
        being the actual years of service the participant has with the Company and
        the
        denominator being the years of service the participant would have had if
        he had
        retired at age 65, and (iii) actuarially reduced to reflect the early retirement
        date. If a participant dies prior to receiving 120 monthly payments under
        the
        Plan, his beneficiary would be entitled to continue receiving benefits for
        the
        shorter of (i) the time necessary to complete 120 monthly payments or (ii)
        60
        months.
  If
        a
        participant dies while employed by the Company, his beneficiary would receive,
        as a survivor benefit, an annual amount equal to (i) 100% of the participant’s
        annual base salary at date of death for one year, and (ii) 50% of the
        participant’s annual base salary at date of death for each of the following 4
        years, each payable in monthly installments. The Plan also provides for
        disability benefits, and a forfeiture of benefits if a participant terminates
        employment for reasons other than those contemplated under the Plan. The
        expense
        for the nine months ended September 30, 2005 and 2004 amounted to approximately
        $461,000 and $306,000, respectively. The expense for the three months ended
        September 30, 2005 and 2004 amounted to approximately $120,000 and $102,000,
        respectively.
  22
 The
        components of SERP expense are as follows:
 Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Service
                    cost
                
                $
                208,000
                
                $
                107,000
                
                $
                54,000
                
                $
                36,000Interest
                    cost
                
                
                153,000
                
                
                120,000
                
                
                40,000
                
                
                40,000Amortization
                    of adjustments
                
                
                100,000
                
                
                79,000
                
                
                26,000
                
                
                26,000Total
                    SERP expense
                
                $
                461,000
                
                $
                306,000
                
                $
                120,000
                
                $
                102,000
 
 September
                    30,
                
                December
                    31,2005
                
                2004Balance
                    sheet amounts:Accrued
                    pension liability
                
                $
                2,722,583
                
                $
                2,261,583Intangible
                    asset
                
                
                1,127,941
                
                
                1,127,941
 10.
        COMMON STOCK
 
 During
        2000, the Board of Directors of the Company authorized the purchase of up
        to ten
        percent (10%) of the Company’s outstanding Class B common shares. As of
        September 30, 2005, the Company had cumulatively purchased and retired 23,600
        Class B common shares at a cost of approximately $808,000 which reduced the
        number of Class B common shares outstanding.
 
 The
        Company maintains two classes of outstanding common stock, Class A Common
        Stock
        (“Class A”) and Class B Common Stock (“Class B”). The following is a summary of
        the pertinent rights and privileges of each class outstanding:
 
 ·
              Voting
                  - Class A receives one vote per share; Class B is
                  non-voting;
 
 ·
              Dividends
                  (cash) - Cash dividends are payable at the discretion of the Board
                  of
                  Directors and is subject to a 5% provision whereby cash dividends
                  paid out
                  to Class B must be at least 5% higher per share annually than Class
                  A. At
                  the discretion of the Board of Directors, Class B may receive a
                  cash
                  dividend without Class A receiving a cash
                  dividend.
 
 ·
              Dividends
                  (other than cash) and distributions in connection with any
                  recapitalization and upon liquidation, dissolution or winding up
                  of the
                  Company - Shared equally among Class A and Class B;
 
 ·
              Mergers
                  and consolidations - Equal amount and form of consideration per
                  share
                  among Class A and Class B;
 
 23
  ·
              Class
                  B Protection - Any person or group that purchases 10% or more of
                  the
                  outstanding Class A (excluding certain shares, as defined) must
                  make a
                  public cash tender offer (within 90 days) to acquire additional
                  shares of
                  Class B to avoid disproportionate voting rights. Failure to do
                  so will
                  result in forfeiture of voting rights for those shares acquired
                  after the
                  recapitalization. Alternatively, the purchaser can sell Class A
                  shares to
                  reduce the purchaser's holdings below 10% (excluding shares owned
                  prior to
                  recapitalization). Above 10%, this protection transaction is triggered
                  every 5% (i.e., 15%, 20%, 25%,
                  etc.);
 
 ·
              Convertibility
                  - Not convertible into another class of Common Stock or any other
                  security
                  by the Company, unless by resolution by the Board of Directors
                  to convert
                  such shares as a result of either class becoming excluded from
                  quotation
                  on NASDAQ, or if total outstanding shares of Class A falls below
                  10% of
                  the aggregate number of outstanding shares of both classes (in
                  which case,
                  all Class B shares will be automatically converted in Class A
                  shares).
 
 ·
              Transferability
                  and trading - Both Class A and Class B are freely transferable
                  and
                  publicly traded on NASDAQ National
                  Market;
 
 ·
              Subdivision
                  of shares - Any split, subdivision or combination of the outstanding
                  shares of Class A or Class B must be proportionately split with
                  the other
                  class in the same manner and on the same
                  basis.
 
 11.
        COMPREHENSIVE INCOME
  Comprehensive
        income for the nine and three months ended September 30, 2005 and 2004 consists
        of:
  Nine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Net
                    earnings
                
                $
                16,968,437
                
                $
                18,694,331
                
                $
                5,986,397
                
                $
                6,894,347Currency
                    translation adjustment-net
                    of taxes
                
                
                (639,538
                )
                
                (90,175
                )
                
                (24,873
                )
                
                113,285Increase
                    (decrease) in unrealizedgain
                    on marketable securities-
                    net of taxes
                
                
                (2,466,116
                )
                
                2,879,601
                
                
                677,180
                
                
                2,872,401Comprehensive
                    income
                
                $
                13,862,783
                
                $
                21,483,757
                
                $
                6,638,704
                
                $
                9,880,033
  24
  12. ASSETS
          HELD FOR SALE
 
 On
        July
        15, 2004, the Company entered into an agreement for the sale of a certain
        parcel
        of land located in Jersey City, New Jersey. The sales agreement is subject
        to a
        due diligence period by the buyer. The seller and buyer are aware that a
        portion
        of the property may be subject to tidelands claims by the State of New Jersey.
        Additionally, the Company is obligated for environmental remediation costs
        of up
        to $440,000 of which $92,000 has been paid as of September 30, 2005. The
        buyer
        has agreed in principle to pay all additional remediation costs. As these
        costs
        are incurred the Company capitalizes them on the consolidated balance sheet
        as a
        component of assets held for sale. The Company has classified the asset as
        held
        for sale with a net book value of $816,597 and $696,013 on the Company's
        balance
        sheet at September 30, 2005 and December 31, 2004, respectively. The Company
        anticipates the sale to take place by June 30, 2006.
 
 13. NEW
        FINANCIAL ACCOUNTING STANDARDS
 
 In
        December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
        No.
        123(R), that will require compensation costs related to share-based payment
        transactions to be recognized in the financial statements. With limited
        exceptions, the amount of compensation cost will be measured based on the
        grant-date fair value of the equity or liability instruments issued. In
        addition, if granted, liability awards will be remeasured each reporting
        period.
        Compensation cost will be recognized over the period that an employee provides
        service in exchange for the reward. SFAS No. 123(R) is effective as to the
        Company as of the beginning of the Company's 2006 fiscal year. The Company
        is
        currently evaluating its position and will make its determination to account
        for
        stock-based compensation costs either prospectively or retroactively at the
        time
        of adoption. The adoption of SFAS 123(R) is expected to have a material effect
        on the Company's consolidated results of operations.
 
 In
        December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
        "Application of FASB Statement No. 109, Accounting for Income Taxes, to the
        Tax
        Deduction on Qualified Production Activities Provided by the American Jobs
        Creation Act of 2004" to provide guidance on the application of Statement
        109 to
        the provision within the American Jobs Creations Act of 2004 (the "Act")
        that
        provides tax relief to U.S. domestic manufacturers. The FSP states that the
        deduction provided for under the Act should be accounted for as a special
        deduction in accordance with FASB Statement No. 109 and not as a tax rate
        reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
        could
        have a material effect on the Company's consolidated results of operations
        and
        financial position.
 
 In
        December 2004, the FASB staff issued FSP FAS 109-2, "Accounting and Disclosure
        Guidance for the Foreign Earnings Repatriation Provision Within the American
        Jobs Creation Act of 2004" to provide accounting and disclosure guidance
        for the
        repatriation provisions included in the Act. The Act introduced a special
        limited-time dividends received deduction on the repatriation of certain
        foreign
        earnings to a U.S. taxpayer. The FSP is effective upon issuance. The adoption
        of
        FAS 109-2 could have a material effect on the Company's consolidated results
        of
        operations and financial position.
 
 25
  In
        December 2004, the FASB issued SFAS No. 153, an amendment of APB Opinion
        No. 29
        "Exchanges of Nonmonetary Assets". SFAS No. 153 amends APB Opinion No. 29
        by
        eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of the entity are expected
        to
        change significantly as a result of the exchange. SFAS No. 153 is effective
        for
        periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
        expected to have a material effect on the Company's financial position or
        results of operations.
 
 In
        November 2004, the FASB issued SFAS No. 151, an amendment to Accounting Research
        Bulletin No. 43 chapter 4 "Inventory Costs". SFAS No. 151 requires that abnormal
        costs of idle facility expenses, freight, handling costs and wasted material
        (spoilage) be recognized as current-period charges. SFAS No. 151 is effective
        for fiscal years beginning after June 15, 2005. Adoption of SFAS No. 151
        is not
        expected to have a material impact on the Company's results of operations
        or
        financial position.
 
 In
        May
        2005 the FASB issued SFAS No. 154, "Accounting Changes and Error Correction"
        - a
        replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement
        applies to all voluntary changes in accounting principles. It also applies
        to
        changes required by an accounting pronouncement in the unusual instance that
        the
        pronouncement does not include specific transition provisions. This statement
        requires retrospective application to prior periods' financial statements
        of
        changes in accounting principles, unless it is impracticable to determine
        either
        the period-specific effects or the cumulative effect of the change. This
        statement is effective for accounting changes and corrections made in fiscal
        years beginning after December 31, 2005.
  26
  14. Legal
        Proceedings
  The
        Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
        Ltd.
        v. Bel Fuse Inc et al and brought in Illinois Federal District Court. Plaintiff
        claims that its patent covers all of the Company's modular jack products.
        That
        party had previously advised the Company that it was willing to grant a
        non-exclusive license to the Company under the patent for a 3% royalty on
        all
        future gross sales of ICM products; payment of a lump sum of 3% of past sales
        including sales of applicable Insilco products; an annual minimum royalty
        of
        $500,000; payment of all attorney fees; and marking of all licensed ICM's
        with
        the third party's patent number. The Company is also a defendant in a lawsuit,
        captioned Regal Electronics, Inc. v. Bel Fuse Inc. and brought in California
        Federal District Court. Plaintiff claims that its patent covers certain of
        the
        Company's modular jack products. That party had previously advised the Company
        that it was willing to grant a non transferable license to the Company for
        an up
        front fee of $500,000 plus a 6% royalty on future sales. The District Court
        has
        granted summary judgment in the Company's favor dismissing Regal Electronics'
        infringement claims, while at the same time the Court dismissed the Company's
        invalidity counterclaim against Regal Electronics. As of the date hereof,
        the
        Company has not been advised as to whether Regal will appeal the Court's
        rejection of its infringement claims. The Company believes that none of its
        products are covered by these patents and intends to vigorously defend its
        position and no accrual has been provided in the accompanying consolidated
        financial statements.
 
 The
        Company cannot predict the outcome of these matters; however, management
        believes that the ultimate resolution of these matters will not have a material
        impact on the Company's consolidated financial condition or results of
        operations.
 
 The
        Company is not a party to any other legal proceeding, the adverse outcome
        of
        which is expected to have a material adverse effect on the Company's
        consolidated financial condition or results of operations.
 27
  Item
        2.
        Management’s Discussion and Analysis of Financial Condition and Results of
        Operations
  The
        Company’s quarterly and annual operating results are affected 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, 2004. 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 1 of the Company’s Annual Report on Form 10-K
        for the year ended December 31, 2004, 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
 
 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, 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.
 
 During
        the first nine months of 2005, approximately $8.5 million of the sales increase
        compared to the first nine months of 2004 is attributable to the acquisition
        by
        the Company of Galaxy Power, Inc. (“Galaxy”) which occurred on March 22, 2005
        and Netwatch s.r.o. (now named Bel Stewart Net s.r.o.) which occurred on
        June
        30, 2005. Gross profit margins were lower during the first nine months of
        2005
        compared to the first nine months of 2004 principally due to increased raw
        material costs due to changes in the Company’s product mix and additional
        inventory obsolescence adjustments. During June 2005, the Company repatriated
        earnings from a controlled foreign corporation in the amount of $25.6 million
        to
        take advantage of the lower federal tax rate of 5.25% which was created under
        the American Jobs Creation Act of 2004. Additionally, the Company repaid
        bank
        debt during June 2005 in the amount of $14.0 million.
   28
  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, 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.
 
 The
        Company believes the following critical accounting policies affect its more
        significant judgments and estimates used in the preparation of its consolidated
        financial statements.
 
 Allowance
        for Doubtful Accounts
 
 The
        Company maintains allowances for doubtful accounts for estimated losses from
        the
        inability of its customers to make required payments. The Company determines
        its
        reserves by both specific identification of customer accounts where appropriate
        and the application of historical loss experience to non-specific accounts.
        If
        the financial condition of the Company's customers were to deteriorate,
        resulting in an impairment of their ability to make payments, additional
        allowances may be required.
 
 Inventory
 
 The
        Company makes purchasing decisions principally based upon firm sales orders
        from
        customers, the availability and pricing of raw materials and projected customer
        requirements. Future events that could adversely affect these decisions and
        result in significant charges to the Company’s operations include miscalculating
        customer requirements, technology changes which render certain raw materials
        and
        finished goods obsolete, loss of customers and/or cancellation of sales orders,
        stock rotation with distributors and termination of distribution agreements.
        The
        Company writes down its inventory for estimated obsolescence or unmarketable
        inventory equal to the difference between the cost of inventory and the
        estimated market value based upon the aforementioned assumptions. If actual
        market conditions are less favorable than those projected by management,
        additional inventory write-downs may be required.
 
 
 29
 
 When
        inventory is written-off, it is never written back up; the cost remains at
        zero
        or the level to which it has been written-down. When inventory that has been
        written-off is subsequently used in the manufacturing process, the lower
        adjusted cost of the material is charged to cost of sales. During 2001 the
        Company wrote down or reserved $12 million of inventory, including
        non-cancelable purchase commitments. At December 31, 2004, approximately
        $1.4
        million of inventory (at original cost before the write-down or reserve in
        2001)
        was on hand. During 2003 and 2004, approximately $2.5 million and $7.0 million
        of this inventory was scrapped. The amount of inventory used in the
        manufacturing process during the first nine months of 2005 and 2004 were
        not
        material. Management intends to retain the balance of this inventory for
        possible future orders. Should any of this inventory be used in the
        manufacturing process for customer orders, the improved gross profit will
        be
        recognized at the time the completed product is shipped and the sale is
        recorded.
  Acquisitions
 
 On
        March
        22, 2005, the Company acquired the common stock of Galaxy Power Inc. for
        approximately $18.8 million in cash including transaction costs of approximately
        $0.2 million. Purchase price allocations have been initially estimated by
        management and are subject to adjustment. Management is in the process of
        obtaining independent valuations and independent formal appraisals and will
        adjust purchase price allocations accordingly. Management has estimated that
        approximately $11.5 million of goodwill and $2.0 million of identifiable
        intangible assets arose from the transaction. The identifiable intangible
        assets
        and related deferred tax liabilities are being amortized on a straight-line
        basis over their estimated useful lives.
 
 The
        Company believes that the purchase of Galaxy’s Power Group is a logical
        strategic fit with Bel’s Power Products group. The Company believes that the
        products are highly complementary with minimal overlap. The customer base
        is
        similar but still affords ample opportunity for cross selling. While Bel
        offers
        Galaxy a much-needed cost competitive manufacturing base in China, Galaxy
        brings
        a portfolio of products and technologies aimed at higher end markets. In
        addition to these strategic synergies, there is significant opportunity for
        expense reduction and the elimination of redundancies.
 
 This
        acquisition was accounted for using the purchase method of accounting and
        accordingly, the results of operations of Galaxy have been included in the
        Company’s financial statements from March 23, 2005.
 
 There
        was
        no in-process research and development acquired as part of this
        acquisition.
 
 30
 
 On
        June
        30, 2005, the Company acquired the common stock of Netwatch s.r.o., located
        in
        Prague, The Czech Republic, for approximately $1.9 million of which $0.5
        million
        is due to the sellers by June 30, 2006. Netwatch s.r.o. is a designer and
        manufacturer of high-performance fiber optic and copper cable assemblies
        for
        data and telecommunication applications. Purchase price allocations have
        been
        estimated by management and are subject to adjustment. Management has estimated
        approximately $1.0 million of goodwill arose from the transaction.
 
 The
        Company believes that strategic value of the Netwatch s.r.o. acquisition
        is the
        establishment of a European manufacturing presence for the Company and the
        addition of fiber optic capability to the Bel Stewart Connector Group to
        complement the Company's current copper-based product portfolio. The Company
        believes that Bel Stewart is now capable of supporting the Company's customer
        base, including the world's largest structured cabling providers, with a
        broad
        range of both copper and fiber based components and assemblies.
 
 There
        was
        no in-process research and development acquired as part of this
        acquisition.
 
 The
        following unaudited proforma summary results of operations assumes that Galaxy
        and Netwatch s.r.o. had been acquired as of January 1, 2004 (in thousands
        except
        per share data):
  Nine
                    Months EndedSeptember
                    30,2005
                
                2004Net
                    sales
                
                $
                164,543
                
                $
                156,786Net
                    earnings
                
                
                16,692
                
                
                19,362Earnings
                    per share-diluted
                
                
                1.45
                
                
                1.69
 
 The
        information above is not necessarily indicative of the results of operations
        that would have occurred if the acquisition had been consummated as of January
        1, 2004. Such information should not be construed as being a representation
        of
        the future results of operations of the Company.
 
 31
  A
        condensed combined balance sheet of the major assets and liabilities of Galaxy
        and Netwatch s.r.o. as of their acquisition dates is as follows:
  Cash
                
                $
                311,856Accounts
                    receivable
                
                
                3,687,331Inventories
                
                
                2,862,571Prepaid
                    expenses
                
                
                96,120Income
                    taxes receivable
                
                
                5,488Property,
                    plant andequipment
                
                
                1,545,526Other
                    assets
                
                
                32,083Deferred
                    tax asset
                
                
                1,392,850Goodwill
                
                
                12,457,651Intangible
                    assets
                
                
                1,960,000Notes
                    payable
                
                
                (860,694
                )Accounts
                    payable
                
                
                (2,129,165
                )Accrued
                    expenses
                
                
                (465,002
                )Net
                    assets acquired
                
                $
                20,896,615
 
 Income
        Taxes
 
 The
        Company files income tax returns in every jurisdiction in which it has reason
        to
        believe it is subject to tax. Historically, the Company has been subject
        to
        examination by various taxing jurisdictions. To date, none of these examinations
        has resulted in any material additional tax. Nonetheless, any tax jurisdiction
        may contend that a filing position claimed by the Company regarding one or
        more
        of its transactions is contrary to that jurisdiction's laws or
        regulations.
 
 Revenue
        Recognition
 
 The
        Company recognizes revenue in accordance with the guidance contained in SEC
        Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”
        (“SAB 104”). Revenue is recognized when the product has been delivered and title
        and risk of loss have passed to the customer, collection of the resulting
        receivable is deemed probable by management, persuasive evidence of an
        arrangement exists and the sale price is fixed and determinable.
 
 Historically
        the Company has been successful in mitigating the risks associated with its
        revenue recognition. Some issues relate to product warranty, credit worthiness
        of its customers and concentration of sales among a few major
        customers.
 
 32
  The
        Company is not contractually obligated to accept returns from non-distributor
        customers except for defective product or in instances where the product
        does
        not meet the Company’s quality specifications. If these conditions existed, the
        Company would be obligated to repair or replace the defective product or
        make a
        cash settlement with the customer. Distributors generally have the right
        to
        return up to 5% of their purchases over the previous three to six months
        and are
        obligated to purchase an amount at least equal to the return. If the financial
        conditions of the Company’s customers were to deteriorate, resulting in an
        impairment of their ability to make payments, additional allowances for bad
        debt
        may be required which could have a material adverse effect on the Company’s
        consolidated results of operations and financial condition. The Company has
        a
        significant amount of sales with several major customers. The loss of any
        one of
        these customers could have a material adverse effect on the Company’s
        consolidated results of operations and financial position.
 
 Results
        of Operations
 
 The
        following table sets forth, for the third quarters of 2005 and 2004, and
        the
        first nine months of 2005 and 2004, the percentage relationship to net sales
        of
        certain items included in the Company’s consolidated statements of
        operations.
 Percentage
                    of Net Sales
                
                Percentage
                    of Net SalesNine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30,
                
                September
                    30,2005
                
                2004
                
                2005
                
                2004Net
                    sales
                
                
                100.0
                %
                
                100.0
                %
                
                100.0
                %
                
                100.0
                %Cost
                    of sales
                
                
                71.5
                
                
                69.6
                
                
                71.9
                
                
                70.0Selling,
                    general andadministrative
                    expenses
                
                
                15.5
                
                
                16.4
                
                
                15.7
                
                
                16.0Fixed
                    asset impairment
                
                
                -
                
                
                0.7
                
                
                -
                
                
                -Interest
                    income - net
                
                
                0.5
                
                
                0.2
                
                
                0.6
                
                
                0.2Lawsuit
                    proceeds
                
                
                -
                
                
                2.0
                
                
                -
                
                
                -Earnings
                    before provisionfor
                    income taxes
                
                
                13.5
                
                
                15.5
                
                
                13.0
                
                
                14.2Income
                    tax provision
                
                
                2.9
                
                
                2.2
                
                
                2.4
                
                
                0.4Net
                    earnings
                
                
                10.6
                
                
                13.3
                
                
                10.6
                
                
                13.8
 
 
 33
 
 The
        following table sets forth the year over year percentage increase or decrease
        of
        certain items included in the Company's consolidated statements of
        operations.
 
 Increase
                    (decrease) from
                
                Increase
                    (decrease) fromPrior
                    Period
                
                Prior
                    PeriodNine
                    Months Ended
                
                Three
                    Months EndedSeptember
                    30, 2005
                
                September
                    30, 2005compared
                    with Nine
                
                compared
                    with ThreeMonths
                    Ended September
                
                Months
                    Ended September30,
                    2004
                
                30,
                    2004Net
                    sales
                
                
                13.1
                %
                
                12.5
                %Cost
                    of sales
                
                
                16.1
                
                
                15.5Selling,
                    general andadministrative
                    expenses
                
                
                6.9
                
                
                10.4Net
                    earnings
                
                
                (9.2
                )
                
                (13.2
                )
 
 **NINE
        MONTHS ENDED SEPTEMBER 30, 2005 VERSUS** **NINE
        MONTHS ENDED SEPTEMBER 30, 2004**
 
 Sales
 
 Net
        sales
        increased 13.1% from $140.7 million during the first nine months of 2004
        to
        $159.2 million during the first nine months of 2005. The Company attributes
        the
        increase to increased module sales of $12.7 million of which $7.9 million
        is
        from the acquisition of Galaxy, strong demand for interconnect products
        resulting in an increase of $2.6 million in such sales, and strong demand
        for
        magnetic sales resulting in an increase of $3.8 million in such sales, offset
        in
        part, by decreases in circuit protection sales of ($0.6) million.
 
 The
        significant components of the Company's first nine months of 2005 sales were
        magnetic products of $94.8 million (as compared with $91.0 million during
        the
        first nine months of 2004), circuit protection products of $14.7 million
        (as
        compared with $15.2 million during the first nine months of 2004), interconnect
        products of $28.8 million (as compared with $23.4 million during the first
        nine
        months of 2004), and module products of $20.9 million (as compared with $8.1
        million during the first nine months of 2004), which includes $7.9 million
        from
        the acquisition of Galaxy.
 
 
 34
  Based
        in
        part on conflicting opinions the Company received from customers and competitors
        in the electronics industry pertaining to revenue growth during 2005, the
        Company can not predict with any degree of certainty sales revenue for the
        balance of 2005. Although the Company's backlog has been stable, the Company
        feels that this is not a good indicator of revenues. The Company continues
        to
        have limited visibility as to future customer requirements. The Company had
        one
        customer with sales in excess of 10% (16.0%) of total sales during the nine
        months ended September 30, 2005. The loss of this customer could have a material
        adverse effect on the Company's results of operations, financial position
        and
        cash flows.
 
 The
        Company cannot quantify the extent of sales growth arising from unit sales
        mix
        and/or price changes. Given the change in the nature of the products purchased
        by customers from period to period, the Company believes that neither unit
        changes nor price changes are meaningful. Over the past year, newer and more
        sophisticated products with higher unit selling prices have been introduced.
        Through the Company's engineering and research effort, the Company has been
        successful in adding additional value to existing product lines, which tends
        to
        increase sales prices initially until that generation of products becomes
        mature
        and sales prices experience price degradation. In general, as products become
        mature, average selling prices decrease.
 
 Cost
        of Sales
 
 Bel
        generally enters into processing arrangements with five independent third
        party
        contractors in the Far East. Costs are recorded as incurred for all products
        manufactured either at the Company's third party contractors 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 and Mexico. See "Critical Accounting Policies" above for
        information regarding the use of inventories in the manufacturing process
        that
        have been written down in prior years.
 
 Cost
        of
        sales as a percentage of net sales increased from 69.6 % during the first
        nine
        months of 2004 to 71.5% during the first nine months of 2005. The increase
        in
        the cost of sales percentage is primarily attributable to a 3.0% increase
        in
        material costs as a percentage of sales. The increase in raw material costs
        is
        principally related to increased manufacturing of value-added products
        (including new Galaxy products in 2005), which have a higher raw material
        content than the Company’s other products and increases in obsolescence
        reserves, due to excess raw material quantities the Company identified. This
        was
        offset in part principally by lower depreciation expense during the first
        nine
        months of 2005 compared to the first nine months of 2004 as a percentage
        of
        sales, because of lower depreciation expense, principally in the U.S., due
        to
        fixed assets being fully amortized.
 
 Included
        in cost of sales are research and development expenses of $5.5 million and
        $5.6
        million for the first nine months of 2005 and 2004, respectively. The Company
        has experienced minor decreases in research and development expense primarily
        at
        its domestic facilities.
   35
  Selling,
        General and Administrative Expenses
 
 The
        percentage relationship of selling, general and administrative expenses to
        net
        sales decreased from 16.4% during the nine months ended September 30, 2004
        to
        15.5% during the nine months ended September 30, 2005, in part as a result
        of
        the Company's ability to leverage general and administrative expenses over
        a
        larger revenue base. The Company attributes the $1.6 million increase in
        the
        dollar amount of such expenses primarily to increased selling expenses of
        approximately $0.9 million including $0.5 million in Galaxy related expenses.
        In
        addition, the Company incurred a $0.7 million increase in general and
        administrative expenses, including $0.8 million related to Galaxy, additional
        bad debt expense of approximately $0.2 million and additional amortization
        of
        identifiable intangibles in the amount of $0.5 million principally arising
        from
        the acquisition of Galaxy. This was offset in part by lower employment costs
        of
        $0.2 million due to reduced bonuses and lower professional fees of $0.8 million
        due to lower Sarbanes-Oxley compliance costs.
 
 During
        2006, the Company will be required to expense share based compensation costs
        in
        accordance with SFAS No. 123(R). This charge will be principally included
        in
        selling, general and administrative expenses. See "New Financial Accounting
        Standards" included in Management's Discussion and Analysis of Financial
        Condition and Results of Operations for information regarding SFAS No.
        123(R).
 
 Fixed
        Asset Impairment
 
 During
        the nine month period ended September 30, 2004, the Company wrote down fixed
        assets, principally machinery and equipment, with a net book value of
        $1,033,000, at its Far East manufacturing facilities. The Company considered
        these fixed assets to be surplus equipment which was replaced by equipment
        with
        more advanced technology.
 
 Interest
        Income
 
 Interest
        income earned on cash and cash equivalents increased by approximately $0.5
        million during the first nine months ended September 30, 2005 compared to
        the
        comparable period in 2004. The increase is due primarily to increased earnings
        on higher cash and cash equivalent balances.
 
  36
  Interest
        Expense
 
 A
        $10
        million term loan was entered into on March 21, 2003, which was borrowed
        for the
        acquisition of Insilco's Passive Components Group. The loan bore interest
        at
        LIBOR plus 1.50% payable quarterly and was completely paid off by June 30,
        2005.
        Interest expense increased by approximately $30,000 during the nine months
        ended
        September 30, 2005 compared with 2004. The increase is attributable in part
        to
        higher interest rates charged on the loan during 2005 compared to 2004 and
        that
        during March 2005 the Company borrowed $8.0 million against its domestic
        line of
        credit to partially finance the acquisition of Galaxy. There was no debt
        outstanding as of September 30, 2005. Subsequent to the end of the quarter,
        during October 2005 the Company borrowed approximately $2.0 million against
        its
        line of credit. The loan currently bears interest at 4.87% annually. The
        interest rate is based on LIBOR plus the applicable margin, which is based
        on
        the estimated term of the loan (from one to six months).
 
 Lawsuit
        Proceeds
 
 During
        the nine months ended September 30, 2004, the Company settled an arbitration
        proceeding related to a 1998 acquisition. The Company received $2,935,000
        (net
        of $65,000 of related legal expenses incurred during the period) pursuant
        to
        that settlement.
 
 
 Provision
        for Income Taxes
 
 The
        provision for income taxes for the nine months ended September 30, 2005 was
        $4.6
        million compared to $3.2 million during the first nine months of 2004. The
        Company's earnings before income taxes for the nine months ended September
        30,
        2005 is approximately the same as in 2004. The income tax effective rate
        is
        higher than the prior nine months provision primarily due to higher foreign
        taxes. Recent developments in Hong Kong suggest that the authorities are
        applying different standards in the treatment of offshore income. In addition,
        during the three months ended September 30, 2004, the Company reversed tax
        accruals no longer required in the amount of approximately $0.5 million,
        utilized certain tax credits amounting to $0.7 million and utilized net
        operating loss carry forwards with a tax effect of approximately $0.1
        million.
 
 The
        Company conducts manufacturing activities in the Far East. More specifically,
        the Company manufactures the majority of its products in the People’s Republic
        of China (“PRC”), Hong Kong and Macau and has not been subject to corporate
        income tax in the PRC. The Company's activities in Hong Kong have generally
        consisted of administration, quality control and accounting, as well as some
        limited manufacturing activities. Hong Kong imposes corporate income tax
        at a
        rate of 17.5 percent solely on income sourced to Hong Kong. That is, its
        tax
        system is a territorial one which only seeks to tax activities conducted
        in Hong
        Kong. Since the Bel entity in Hong Kong conducts most of its manufacturing
        and
        quality control activities in the PRC, a portion of this entity’s income is
        deemed “offshore” and thus not fully taxable in Hong Kong. Although the
        statutory tax rate in Hong Kong is 17.5 percent, the Company generally pays
        an
        effective Hong Kong rate of less than 4 percent.
  37
  The
        Company also conducts manufacturing operations in Macau. Macau has a statutory
        corporate income tax rate of 16 percent. However, the Company, as a result
        of
        investing in a certain location in Macau, was able to obtain a 10-year tax
        holiday in Macau, thereby reducing its effective Macau income tax rate from
        16
        percent to 8 percent. The tax holiday in Macau expired in April 2004. Since
        most
        of the Company's operations are conducted in the Far East, the majority of
        its
        profits are sourced in these three Far East jurisdictions. Accordingly, the
        profits earned in the U.S. are comparatively small in relation to its profits
        earned in the Far East. Therefore, there is generally a significant difference
        between the statutory U.S. tax rate and the Company's effective tax rate.
  
 **THREE
        MONTHS ENDED SEPTEMBER 30, 2005 VERSUS** **THREE
        MONTHS ENDED SEPTEMBER 30, 2004**
 
 Sales
 
 Net
        sales
        increased 12.5% from $50.0 million during the three months ended September
        30,
        2004 to $56.2 million during the three months ended September 30, 2005. The
        Company attributes the increase to increased module sales of $5.0 million
        of
        which $2.8 million is from the acquisition of Galaxy and strong demand for
        magnetic sales, resulting in an increase of $0.9 million in such sales, as
        well
        as increased interconnect sales of $0.3 million, with no change in circuit
        protection sales.
 
 The
        significant components of the Company's sales for the three months ended
        September 30, 2005 were from magnetic products of $32.6 million (as compared
        with $31.7 million during the three months ended September 30, 2004), circuit
        protection products of $5.1 million (as compared with $5.1 million during
        the
        three months ended September 30, 2004), interconnect products of $10.5 million
        (as compared with $10.2 million during the three months ended September 30,
        2004), and module products of $8.0 million (as compared with $3.0 million
        during
        the three months ended September 30, 2004) including $2.8 million in Galaxy
        sales.
 
 Based
        in
        part on conflicting opinions the Company received from customers and competitors
        in the electronics industry pertaining to revenue growth during 2005, the
        Company can not predict with any degree of certainty sales revenue for the
        balance of 2005. On a sequential basis, sales for the third quarter of 2005
        were
        $1.3 million less than the second quarter of 2005. Although the Company's
        backlog has been stable, the Company feels that this is not a good indicator
        of
        revenues. The Company continues to have limited visibility as to future customer
        requirements. The Company had one customer with sales in excess of 10% (16.0%)
        of total sales during the three months ended September 30, 2005. The loss
        of
        this customer could have a material adverse effect on the Company's results
        of
        operations, financial position and cash flows.
  38
  The
        Company cannot quantify the extent of sales growth arising from unit sales
        mix
        and/or price changes. Given the change in the nature of the products purchased
        by customers from period to period, the Company believes that neither unit
        changes nor price changes are meaningful. Over the past year, newer and more
        sophisticated products with higher unit selling prices have been introduced.
        Through the Company's engineering and research effort, the Company has been
        successful in adding additional value to existing product lines, which tends
        to
        increase sales prices initially until that generation of products becomes
        mature
        and sales prices experience price degradation. In general, as products become
        mature, average selling prices decrease.
 
 Cost
        of Sales
  Cost
        of
        sales as a percentage of net sales increased from 70.0 % during the three
        months
        ended September 30, 2004 to 71.9 % in 2005. This result also reflects a
        sequential increase from the three months ended June 30, 2005, when cost
        of
        sales as a percentage of net sales amounted to 70.7%. The increase in the
        cost
        of sales percentage from the third quarter of 2004 is primarily attributable
        to
        a 2.0 % increase in material costs as a percentage of sales. The increase
        in raw
        material costs is principally related to increased manufacturing of module
        products, which have a higher raw material content than the Company’s other
        products, increased prices particularly for copper and steel, and increases
        in
        obsolescence reserves for the same reasons described in the nine month analysis
        (as compared with the third quarter 2004, when the Company recorded a reversal
        of certain reserves for raw material obsolescence as the reserves were in
        excess
        of the amounts management determined were necessary. These increases were
        offset
        in part by lower depreciation expense as a percentage of sales during the
        three
        months ended September 30, 2005 compared to the three months ended September
        30,
        2004.
 
 Included
        in cost of sales are research and development expenses of $1.8 million and
        $1.8
        million for the three months ended September 30, 2005 and 2004, respectively.
        The Company's research and development expense remained constant despite
        the
        addition of Galaxy during the second quarter of 2005.
  Selling,
        General and Administrative Expenses
 
 The
        percentage relationship of selling, general and administrative expenses to
        net
        sales decreased from 16.0 % during the three months ended September 30, 2004
        to
        15.7% during the three months ended September 30, 2005, in part as a result
        of
        the Company's ability to leverage general and administrative expenses over
        a
        larger revenue base. The Company attributes the $0.8 million increase in
        the
        dollar amount of such expenses in part to increased selling expenses of
        approximately $0.4 million including $0.3 million in Galaxy related expenses.
        In
        addition, the Company incurred a $0.4 million increase in general and
        administrative expenses, including $0.3 million related to Galaxy, and
        additional amortization expense of $0.1 million related to Galaxy offset
        in part
        by lower professional fees of $0.3 million due to lower Sarbanes-Oxley
        compliance costs. The Galaxy expenses include retention bonuses paid in
        connection with the Galaxy acquisition.
  39
  During
        2006, the Company will be required to expense share based compensation costs
        in
        accordance with SFAS No. 123(R). This charge will be principally included
        in
        selling, general and administrative expenses. See "New Financial Accounting
        Standards" included in Management's Discussion and Analysis of Financial
        Condition and Results of Operations for information regarding SFAS No.
        123(R).
 
 Fixed
        Asset Impairment
 
 During
        the three month period ended September 30, 2004, the Company wrote down fixed
        assets, principally machinery and equipment, with a net book value of $1,033,000
        at its Far East manufacturing facilities. The Company considered these fixed
        assets to be surplus equipment which was replaced by equipment with more
        advanced technology.
 
 Interest
        Income
 
 Interest
        income earned on cash and cash equivalents increased by approximately $178,000
        during the three months ended September 30, 2005 compared to the comparable
        period in 2004. The increase is due primarily to higher interest rates earned
        on
        cash and cash equivalent balances.
 
 Interest
        Expense
 
 A
        $10
        million term loan was entered into on March 21, 2003 which was borrowed for
        the
        acquisition of Insilco's Passive Components Group. Interest expense decreased
        by
        approximately $60,000 during the three months ended September 30, 2005 compared
        with 2004. The decrease is attributable to the loans being paid off during
        June
        2005. There was no debt outstanding as of September 30, 2005. Subsequent
        to the
        end of the quarter, during October 2005 the Company borrowed $2.0 million
        against its line of credit. The loan bears interest based on Libor plus the
        applicable margin, which is based on the estimated term of the loan (from
        one to
        six months).
 
 Provision
        for Income Taxes
 
 The
        provision for income taxes for the three months ended September 30, 2005
        was
        $1.4 million compared to $0.2 million during the three months ended September
        30, 2004. The Company's earnings before income taxes for the three months
        ended
        September 30, 2005 is approximately the same as 2004. The increase in the
        provision for income taxes during the three months ended September 30, 2005
        compared to September 30, 2004 results principally from the fact that during
        the
        three months ended September 30, 2004 the Company reversed tax accruals no
        longer required in the amount of approximately $0.5 million, utilized certain
        tax credits amounting to $0.7 million and utilized net operating loss
        carryforwards with a tax effect of approximately $0.1 million. Recent
        developments in Hong Kong suggest that the authorities are applying different
        standards in the treatment of offshore income, which resulted in higher foreign
        taxes during the third quarter of 2005 compared to 2004, offset in part by
        lower
        U.S. taxes.
   40
  The
        Company has historically followed a practice of reinvesting a portion of
        the
        earnings of foreign subsidiaries in the expansion of its foreign operations.
        If
        the unrepatriated earnings were distributed to the parent corporation rather
        than reinvested in the Far East, such funds would be subject to United States
        Federal income taxes. Through September 30, 2005, management has repatriated
        approximately $25.6 million of foreign earnings which are eligible for the
        reduced tax rate of 5.25% under the American Jobs Creations Act of 2004.
 
 Net
        Income
 
 The
        Company reported net income of $5,986,000 or $0.52 per diluted share for
        the
        third quarter of 2005, down from $6,894,000 or $0.60 per diluted share for
        the
        third quarter of 2004 and down sequentially from $6,669,000 or $0.63 per
        diluted
        share during the second quarter of 2005. The Company attributes the decline
        from
        the third quarter of 2004 principally to the increase in the Company's tax
        provision and the inclusion in earnings during 2004 of the above-mentioned
        proceeds from the settlement of legal proceedings.
 
 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 Macau Pataca or the Chinese
        Renminbi. Commencing with the acquisition of the Passive Components Group,
        the
        Company's European entity has sales transactions which are denominated
        principally in Euros and British Pounds. Conversion of these transactions
        into
        U.S. dollars has resulted in currency exchange gains of approximately $78,000
        for the nine months ended September 30, 2005 which are included in selling,
        general and administrative expense. Additionally, approximately $640,000
        increased unrealized exchange losses relating to the translation of foreign
        subsidiary financial statements are included in other comprehensive income.
        Any
        change in linkage of the U.S. Dollar and the Hong Kong Dollar, the Chinese
        Renminbi or the Macau Pataca could have a material effect on the Company's
        consolidated financial position or results of operations.
 
 41
  Liquidity
        and Capital Resources
 
 Historically,
        the Company has financed its capital expenditures primarily through cash
        flows
        from operating activities. Currently, due to the recent acquisitions of the
        Passive Components Group of Insilco Technologies, Inc. and Galaxy, the Company
        has borrowed money under a secured term loan and line of credit and has unused
        lines of credit as described below. Management believes that the cash flow
        from
        operations after payments of dividends and scheduled repayments of its bank
        debt, combined with its existing capital base and the Company's available
        lines
        of credit, will be sufficient to fund its operations for the near term. Such
        statement constitutes a Forward Looking Statement. Factors which could cause
        the
        Company to require additional capital include, among other things, a 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.
 
 Previously,
        the Company had one domestic line of credit of $10 million; the outstanding
        balance was paid off on June 30, 2005 in its entirety. During March 2005,
        the
        Company borrowed $8 million against this line of credit to partially finance
        the
        acquisition of Galaxy. The outstanding balance was paid off in its entirety
        on
        June 20, 2005. During July 2005, the Company amended its credit agreement
        to
        increase the line of credit to $20million, which expires on July 31, 2008.
        There
        was no balance outstanding as of September 30, 2005. Subsequent to the end
        of
        the quarter, during October 2005 the Company borrowed $2.0 million against
        its
        line of credit. The loan bears interest at 4.87% annually. The interest rate
        is
        based on LIBOR plus the applicable margin, which is based on the estimated
        term
        of the loan (from one to six months).
 
 For
        the
        nine months ended September 30, 2005 and 2004, the Company recorded interest
        expense of approximately $207,000 and $177,000, respectively.
 
 The
        Company's Hong Kong subsidiary has an unsecured line of credit of approximately
        $2 million, which was unused at September 30, 2005. This line of credit expires
        on May 31, 2006. Borrowing on this line of credit was guaranteed by the Company.
 
 For
        information regarding further commitments under the Company's operating leases,
        see Note 15 of Notes to the Company's Consolidated Financial Statements in
        its
        Annual Report on Form 10-K for the year ended December 31, 2004.
  42
  As
        previously announced, the Company has acquired a total of 2,037,500 shares
        of
        the common stock of Artesyn Technologies, Inc. at a total purchase price
        of
        $16,331,469. These purchases were reflected on the Company's consolidated
        statement of cash flows as purchases of marketable securities and are reflected
        on the Company's consolidated balance sheet as marketable securities. As
        of
        September 30, 2005, the Company has recorded an unrealized gain, net of income
        taxes, of approximately $1.5 million. In connection with this transaction
        the
        Company is obligated to pay an investment banker's advisory fee to a third
        party. As of September 30, 2005, the Company has accrued a fee in the amount
        of
        approximately $0.5 million. The Company has proposed to Artesyn that the
        Company
        acquire Artesyn, but to date Artesyn has not indicated any interest in
        negotiating such a transaction with the Company. During the nine months ended
        September 30, 2005 the gross unrealized gain on marketable securities decreased
        $4.1 million from December 31, 2004.
 
 The
        Company is constructing an 117,000 square foot manufacturing facility in
        Zhongshan City, PRC for approximately $2.3 million. As of September 30, 2005,
        the Company has paid approximately $1.1 million toward the construction.
        The
        Company expects to complete the construction during 2006.
 
 On
        July
        15, 2004, the Company entered into an agreement for the sale of a certain
        parcel
        of land located in Jersey City, New Jersey. The sales agreement is subject
        to a
        due diligence period by the buyer. The seller and buyer are aware that a
        portion
        of the property may be subject to tidelands claims by the State of New Jersey.
        Additionally, the Company is obligated for environmental remediation costs
        of up
        to $440,000 of which $92,000 has been paid as of September 30, 2005. As these
        costs are incurred, the Company capitalizes them on the Company's consolidated
        balance sheet as assets held for sale. The Company has classified the asset
        as
        held for sale with a net book value of approximately $817,000 on the Company's
        consolidated balance sheet at September 30, 2005. The Company presently
        anticipates the sale to take place by June 30, 2006.
 
 Under
        the
        terms of the E-Power and Current Concepts, Inc. acquisition agreements of
        May
        11, 2001, the Company will be required to make contingent purchase price
        payments up to an aggregate of $7.6 million should the acquired companies
        attain
        specified related sales levels. E-Power will be paid $2.0 million in contingent
        purchase price payments if sales reach $15.0 million and an additional $4.0
        million if sales reach $25.0 million on a cumulative basis through May 2007.
        No
        payments have been required to date with respect to E-Power. Current Concepts
        will be paid 16% of related sales on the first $10.0 million in sales through
        May 2007. During the nine months ended September 30, 2005 and 2004, the Company
        paid approximately $485,000 and $75,000, respectively, in contingent purchase
        price payments to Current Concepts. The contingent purchase price payments
        have
        been accounted for as additional purchase price and as an increase other
        intangibles when such payment obligations are incurred.
 
 On
        May 9,
        2000, the Board of Directors authorized the repurchase of up to 10% of the
        Company’s outstanding common shares from time to time in market or privately
        negotiated transactions. As of September 30, 2005, the Company had purchased
        and
        retired 23,600 Class B shares at a cost of approximately $808,000, which
        reduced
        the number of Class B common shares outstanding. No shares were repurchased
        during the nine months ended September 30, 2005.
   43
  During
        the nine months ended September 30, 2005, the Company's cash and cash
        equivalents decreased by approximately $9.2 million, reflecting approximately
        $20.6 million used principally for acquisitions, $15.4 million for loan
        repayments, $4.6 million for the purchase of property, plant and equipment,
        $2.2
        million for the purchase of marketable securities, $1.2 million payment to
        the
        Company's SERP and $1.6 million for payments of dividends offset by $24.6
        million provided by operating activities (principally as a result of net
        income
        of $17.0 million and depreciation and amortization expense of $7.2 million),
        borrowings of $8 million, proceeds of $3.4 million from the exercise of stock
        options and $0.6 million proceeds from the sale of marketable
        securities.
 
 Cash,
        marketable securities and cash equivalents and accounts receivable comprised
        approximately 52.2% and 58.6% of the Company's total assets at September
        30,
        2005 and December 31, 2004, respectively. The Company's current ratio (i.e.,
        the
        ratio of current assets to current liabilities) was 4.4 to 1 and 5.0 to 1
        at
        September 30, 2005 and December 31, 2004, respectively.
 
 The
        following table sets forth at September 30, 2005 the amounts of payments
        due
        under specific types of contractual obligations, aggregated by category of
        contractual obligation, for the time periods described below.
  Payments
                    due by periodContractual
                    Obligations
                
                Total
                
                Less
                    than
                  1
                    year
                
                1-3
                  years
                
                3-5
                  years
                
                More
                    than
                  5
                    yearsShort-term
                    debt
                
                $
                480,885
                
                $
                480,885
                
                $
                -
                
                $
                -
                
                $
                -Capital
                    expenditure obligations
                
                
                2,251,464
                
                
                2,251,464
                
                
                -Contingent
                    purchase pricecommitments
                
                
                1,595,870
                
                
                1,595,870
                
                
                -
                
                
                -
                
                
                -Operating
                    leases
                
                
                3,703,208
                
                
                732,584
                
                
                1,850,901
                
                
                1,119,723
                
                
                -Raw
                    material purchase obligations
                
                
                12,743,027
                
                
                11,572,863
                
                
                1,170,164
                
                
                -
                
                
                -Total
                
                $
                20,774,454
                
                $
                16,633,666
                
                $
                3,021,065
                
                $
                1,119,723
                
                $
                -
 The
        Company is required to pay the SERP obligations at the occurrence of certain
        events. As of September 30, 2005 the SERP had an unfunded benefit obligation
        of
        approximately $2.7 million.
 
 Other
        Matters
 
 The
        Company believes that it has sufficient cash reserves to fund its foreseeable
        working capital needs. It may, however, seek to expand such resources through
        bank borrowings, at favorable lending rates, from time to time. Should the
        Company pursue additional acquisitions during 2005, the Company may be required
        to pursue public or private equity or debt transactions to finance the
        acquisitions and to provide working capital to the acquired
        companies.
  44
  New
        Financial Accounting Standards
 
 In
        December 2004, the Financial Accounting Standard Board (“FASB”) issued Statement
        on Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment"
        (revised), that will require compensation costs related to share-based payment
        transactions to be recognized in the financial statements. With limited
        exceptions, the amount of compensation cost will be measured based on the
        grant-date fair value of the equity or liability instruments issued. In
        addition, liability awards will be remeasured each reporting period.
        Compensation cost will be recognized over the period that an employee provides
        service in exchange for the reward. SFAS No. 123(R) is effective as to the
        Company as of the beginning of the Company's 2006 fiscal year. The Company
        is
        currently evaluating its position and will make its determination to account
        for
        the stock-based compensation costs either prospectively or retroactively
        at the
        time of adoption. The adoption of SFAS 123(R) is expected to have a material
        effect on the Company's consolidated results of operations.
 
 In
        December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
        "Application of FASB Statement No. 109, Accounting for Income Taxes, to the
        Tax
        Deduction on Qualified Production Activities Provided by the American Jobs
        Creation Act of 2004" to provide guidance on the application of FASB Statement
        No. 109 to the provision within the American Jobs Creations Act of 2004 (the
        "Act") that provides tax relief to U.S. domestic manufacturers. The FSP states
        that the deduction provided for under the Act should be accounted for as
        a
        special deduction in accordance with Statement 109 and not as a tax rate
        reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
        could
        have a material effect on the Company's consolidated results of operations
        or
        financial position.
 
 In
        December 2004, the FASB staff issued FSP No. FAS 109-2, "Accounting and
        Disclosure Guidance for the Foreign Earnings Repatriation Provision Within
        the
        American Jobs Creation Act of 2004" to provide accounting and disclosure
        guidance for the repatriation provisions included in the Act. The Act introduced
        a special limited-time dividends received deduction on the repatriation of
        certain foreign earnings to a U.S. taxpayer. The FSP is effective upon issuance.
        The adoption of FAS 109-2 could have a material effect on the Company's
        consolidated results of operations and financial position.
 
 In
        December 2004, the FASB issued SFAS No. 153, an amendment of APB Opinion
        No. 29
        "Exchanges of Nonmonetary Assets". SFAS No. 153 amends APB Opinion No. 29
        by
        eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of the entity are expected
        to
        change significantly as a result of the exchange. SFAS No. 153 is effective
        for
        periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
        expected to have a material effect on the Company's consolidated financial
        position or results of operations.
  45
 In
        November 2004 the FASB issued SFAS No. 151, an amendment to Accounting Research
        Bulletin No. 43 chapter 4 "Inventory Costs". SFAS No. 151 requires that abnormal
        costs of idle facility expenses, freight, handling costs and wasted material
        (spoilage) be recognized as current-period charges. SFAS No. 151 is effective
        for fiscal years beginning after June 15, 2005. Adoption of SFAS No. 151
        is not
        expected to have a material impact on the Company's results of operations
        or
        financial position.
 
 In
        May
        2005 the FASB issued SFAS No. 154, "Accounting Changes and Error Correction"
        - a
        replacement of APB Opinion No. 20 and FASB statement No. 3. This statement
        applies to all voluntary changes in accounting principles. It also applies
        to
        changes required by an accounting pronouncement in the unusual instance that
        the
        pronouncement does not include specific transition provisions. This statement
        requires retrospective application to prior periods' financial statements
        of
        changes in accounting principle, unless it is impracticable to determine
        either
        the period-specific effects or the cumulative effect of the change. The
        statement also carries forward the guidance in APB Opinion No. 20 requiring
        justification of a change in accounting principle on the basis of preferability.
        This statement is effective for accounting changes and corrections made in
        fiscal years beginning after December 31, 2005.
  46
 
 
 Item
        7A. Quantitative
        and Qualitative Disclosures About Market Risk
 
 Fair
        Value of Financial Instruments — The following disclosure of the estimated fair
        value of financial instruments is made in accordance with the requirements
        SFAS
        No. 107. The estimated fair values of financial instruments have been determined
        by the Company using available market information and appropriate valuation
        methodologies.
  However,
        considerable judgment is required in interpreting market data to develop
        the
        estimates of fair value. Accordingly, the estimates presented herein are
        not
        necessarily indicative of the amounts that the Company could realize in a
        current market exchange.
  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 enters into transactions denominated in U.S. Dollars, Hong Kong Dollars,
        the Macau Pataca, the Chinese Renminbi, Euros and British Pounds. 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 consolidated statement of operations or
        balance
        sheet.
  47
  Item
        4. Controls
        and Procedures
 
 a)
              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 of finance, of the effectiveness
                  of
                  the Company’s disclosure controls and procedures pursuant to Securities
                  Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s chief
                  executive officer and vice president of finance 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 is recorded,
                  processed, summarized and reported, within the time periods specified
                  in
                  the SEC’s rules and forms.
 
 b.)
              Changes
                  in internal controls over financial reporting:
                  There have been no 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
                  reasonable likely to materially affect, the Company internal control
                  over
                  financial reporting.
 
 48
  PART
        II.
        Other Information
 
 Item
        1.  Legal
        Proceedings
  The
        Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
        Ltd.
        v. Bel Fuse Inc et al and brought in Illinois Federal District Court. Plaintiff
        claims that its patent covers all of the Company's modular jack products.
        That
        party had previously advised the Company that it was willing to grant a
        non-exclusive license to the Company under the patent for a 3% royalty on
        all
        future gross sales of ICM products; payment of a lump sum of 3% of past sales
        including sales of applicable Insilco products; an annual minimum royalty
        of
        $500,000; payment of all attorney fees; and marking of all licensed ICM's
        with
        the third party's patent number. The Company is also a defendant in a lawsuit,
        captioned Regal Electronics, Inc. v. Bel Fuse Inc. and brought in California
        Federal District Court. Plaintiff claims that its patent covers certain of
        the
        Company's modular jack products. That party had previously advised the Company
        that it was willing to grant a non transferable license to the Company for
        an up
        front fee of $500,000 plus a 6% royalty on future sales. The District Court
        has
        granted summary judgment in the Company's favor dismissing Regal Electronics'
        infringement claims, while at the same time the Court dismissed the Company's
        invalidity counterclaim against Regal Electronics. As of the date hereof,
        the
        Company has not been advised as to whether Regal will appeal the Court's
        rejection of its infringement claims. The Company believes that none of its
        products are covered by these patents and intends to vigorously defend its
        position and no accrual has been provided in the accompanying consolidated
        financial statements.
 
 The
        Company cannot predict the outcome of these matters; however, management
        believes that the ultimate resolution of these matters will not have a material
        impact on the Company's consolidated financial condition or results of
        operations.
 
 The
        Company is not a party to any other legal proceeding, the adverse outcome
        of
        which is expected to have a material adverse effect on the Company's
        consolidated financial condition or results of operations.
  49
 
 Item
        6. Exhibits
 (a)
        Exhibits:
  31.1 Certification
          of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
          Act
          of 2002
 
 31.2 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.
  50
  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 Officer
 By:
                /s/ Colin
                  DunnColin
                  Dunn, Vice President of FinanceDated: November 7, 2005
 
 51
 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.
 
  52