U.S.
        SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-Q
 
 [X]  Quarterly
        Report Pursuant to Section 13 or 15(d) of the
 Securities
        Exchange Act of 1934
 For
        the
        Quarter Ended June 30, 2005
 
 [ 
        ]  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
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  No.)
 
 206
        Van
        Vorst Street, Jersey City, New Jersey 07302
 (201)
        432-0463
 (Address
        and telephone number, including area code, of registrant's principal executive
        office)
 
 Indicate
        by check mark whether the Registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the Registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes
x  No o
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Securities Exchange Act of 1934)   Yes x  No
o
 
 At
        August
        1, 2005, there were 2,702,677 shares of Class A Common Stock, $.10 par value,
        outstanding and 8,886,589 shares of Class B Common Stock, $.10 par value,
        outstanding.







BEL
                    FUSE INC.INDEXPagePart
                    I
                
                Financial
                    InformationItem
                    1.
                
                Financial
                    Statements
                
                
                
                1Consolidated
                    Balance Sheets as of June 30, 2005 (unaudited)
                    and December 31, 2004
                
                2-3Consolidated
                    Statements of Operations for the Six
                    and Three Months Ended June 30, 2005 and 2004
                    (unaudited)
                
                4Consolidated
                    Statements of Stockholders' Equity for
                    the Years Ended December 31, 2004 and 2003 and the
                    Six Months Ended June 30, 2005
                    (unaudited)
                
                5-6Consolidated
                    Statements of Cash Flows for the Six Months
                    Ended June 30, 2005 and 2004 (unaudited)
                
                7-9Notes
                    to Consolidated Financial Statements
                    (unaudited)
                
                10-26Item
                  2.
                
                Management's
                      Discussion and Analysis of Financial Condition and Results of
                      Operations
                
                27-45Item
                  3.
                
                Quantitative
                    and Qualitative Disclosures About Market
                    Risk
                
                45Item
                  4.
                
                Controls
                    and Procedures
                
                46Part
                  II
                
                Other
                    InformationItem
                  1.
                
                Legal
                    Proceedings
                
                47Item
                  4.
                
                Submission
                    of Matters to a Vote of Security Holders
                
                48Item
                  6.
                
                Exhibits
                
                48Signatures
                
                
                
                
                
                49







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 six and three months ended June 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**June
                    30,
                
                December
                    31,2005
                
                2004(Unaudited)**ASSETS**Current
                    Assets:Cash
                  and cash equivalents
                
                $
                54,051,516
                
                $
                71,197,891Marketable
                    securities
                
                
                18,456,292
                
                
                23,120,028Accounts
                    receivable - less allowance for doubtfulaccounts
                    of $1,273,000 and $1,610,000 as ofJune
                    30, 2005 and December 31, 2004, respectively
                
                
                40,436,358
                
                
                33,247,911Inventories
                
                
                33,003,754
                
                
                29,101,060Prepaid
                    expenses and other currentassets
                
                
                1,997,279
                
                
                2,404,718Deferred
                    income taxes
                
                
                248,000
                
                
                -Assets
                    held for sale
                
                
                797,724
                
                
                696,013Total
                    Current Assets
                
                
                148,990,923
                
                
                159,767,621Property,
                    plant and equipment - net
                
                
                42,599,973
                
                
                41,244,759Intangible
                    assets - net
                
                
                4,016,544
                
                
                2,691,682Goodwill
                
                
                24,425,055
                
                
                9,881,854Prepaid
                    pension costs
                
                
                1,127,941
                
                
                1,127,941Other
                    assets
                
                
                2,772,413
                
                
                3,062,714TOTAL
                    ASSETS
                
                $
                223,932,849
                
                $
                217,776,571
 See
          Notes
          to Unaudited Consolidated Financial Statements.
 -
            2
            -
 
 
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEETS**June
                    30,
                
                December
                    31,2005
                
                2004(Unaudited)**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Current
                    Liabilities:Current
                  portion of long-term debt
                
                $
                -
                
                $
                2,000,000Short-term
                    debt
                
                
                482,509
                
                
                -Accounts
                    payable
                
                
                14,007,266
                
                
                8,814,161Accrued
                    expenses
                
                
                9,115,296
                
                
                10,293,576Deferred
                    income taxes
                
                
                -
                
                
                3,322,000Income
                    taxes payable
                
                
                9,093,026
                
                
                7,172,955Dividends
                    payable
                
                
                545,000
                
                
                541,000Total
                    Current Liabilities
                
                
                33,243,097
                
                
                32,143,692Long-term
                    Liabilities:Minimum
                    pension obligation
                
                
                2,602,583
                
                
                2,261,583Long-term
                    debt - net of current portion
                
                
                -
                
                
                4,500,000Deferred
                    income taxes
                
                
                1,234,000
                
                
                410,000Total
                    Long-term Liabilities
                
                
                3,836,583
                
                
                7,171,583Total
                    Liabilities
                
                
                37,079,680
                
                
                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 8,778,589and
                    8,660,589 shares, respectively(net
                    of 3,218,310 treasury shares)
                
                
                877,859
                
                
                866,059Additional
                    paid-in capital
                
                
                24,235,077
                
                
                21,989,174Retained
                    earnings
                
                
                159,841,414
                
                
                149,949,283Accumulated
                    other comprehensiveincome
                
                
                1,628,551
                
                
                5,386,512Total
                    Stockholders' Equity
                
                
                186,853,169
                
                
                178,461,296TOTAL
                    LIABILITIES ANDSTOCKHOLDERS'
                    EQUITY
                
                $
                223,932,849
                
                $
                217,776,571


See
        Notes
        to Unaudited Consolidated Financial Statements.




-
          3
          -




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(Unaudited)**Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  Sales
              
              $
              102,983,706
              
              $
              90,747,265
              
              $
              57,545,421
              
              $
              48,390,242Costs
                  and expenses:Cost
                  of sales
              
              
              73,380,908
              
              
              62,987,015
              
              
              40,692,097
              
              
              33,196,001Selling,
                  general and administrative
              
              
              15,839,939
              
              
              15,069,585
              
              
              8,618,636
              
              
              8,118,713Fixed
                  asset impairment
              
              
              -
              
              
              1,032,786
              
              
              -
              
              
              1,032,78689,220,847
              
              
              79,089,386
              
              
              49,310,733
              
              
              42,347,500Income
                  from operations
              
              
              13,762,859
              
              
              11,657,879
              
              
              8,234,688
              
              
              6,042,742Interest
                  expense
              
              
              (207,469
              )
              
              (116,474
              )
              
              (140,319
              )
              
              (59,708
              )Interest
                  income
              
              
              632,650
              
              
              279,579
              
              
              407,306
              
              
              175,219Lawsuit
                  proceeds
              
              
              -
              
              
              2,935,000
              
              
              -
              
              
              2,935,000Earnings
                  before provision for income taxes
              
              
              14,188,040
              
              
              14,755,984
              
              
              8,501,675
              
              
              9,093,253Income
                  tax provision
              
              
              3,206,000
              
              
              2,956,000
              
              
              1,833,000
              
              
              1,948,000Net
                  earnings
              
              $
              10,982,040
              
              $
              11,799,984
              
              $
              6,668,675
              
              $
              7,145,253Earnings
                  per common share - basic
              
              $
              0.96
              
              $
              1.05
              
              $
              0.58
              
              $
              0.64Earnings
                  per common share - diluted
              
              $
              0.95
              
              $
              1.03
              
              $
              0.58
              
              $
              0.63Weighted
                  average common sharesoutstanding
                  - basic
              
              
              11,420,305
              
              
              11,225,389
              
              
              11,468,398
              
              
              11,247,242Weighted
                  average common sharesoutstanding
                  - diluted
              
              
              11,519,992
              
              
              11,418,840
              
              
              11,532,455
              
              
              11,426,868


See
        Notes
        to Unaudited Consolidated Financial Statements.




-
          4
          -




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY****(Unaudited)**CumulativeOtherCompre-
              
              
              
              Compre-
              
              Class
                  A
              
              Class
                  B
              
              Additionalhensive
              
              Retained
              
              hensive
              
              Common
              
              Common
              
              Paid-InTotal
              
              Income
                  (loss)
              
              Earnings
              
              Income
                  (loss)
              
              Stock
              
              Stock
              
              CapitalBalance,
                  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-
              
              Class
                  A
              
              Class
                  B
              
              Additionalhensive
              
              Retained
              
              hensive
              
              Common
              
              Common
              
              Paid-InTotal
              
              Income
                  (loss)
              
              Earnings
              
              Income
                  (loss)
              
              Stock
              
              Stock
              
              CapitalExercise
                  of stockoptions
              
              
              2,067,330
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              11,800
              
              
              2,055,530Tax
                  benefits arisingfrom
                  the disposition ofnon-qualifiedincentive
                  stock options
              
              
              190,373
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              190,373Cash
                  dividends on Class Acommon
                  stock
              
              
              (215,470
              )
              
              
              
              
              (215,470
              )Cash
                  dividends on Class Bcommon
                  stock
              
              
              (874,439
              )
              
              
              
              
              (874,439
              )Currency
                  translationadjustment
                  - net of taxes
              
              
              (614,665
              )
              $
              (614,665
              )
              
              
              
              
              (614,665
              )Decrease
                  in unrealized gain onmarketable
                  securities-net of taxes
              
              
              (3,143,296
              )
              
              (3,143,296
              )
              
              
              
              
              (3,143,296
              )Net
                  earnings
              
              
              10,982,040
              
              
              10,982,040
              
              
              10,982,040Comprehensive
                  income
              
              
              
              
              $
              7,224,079Balance,
                  June 30, 2005 (unaudited)
              
              $
              186,853,169
              
              
              
              
              $
              159,841,414
              
              $
              1,628,551
              
              $
              270,268
              
              $
              877,859
              
              $
              24,235,077


See
        Notes
        to Unaudited Consolidated Financial Statements.




-
          6
          -




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(Unaudited)**Six
                  Months EndedJune
                  30,2005
              
              2004Cash
                  flows from operatingactivities:Net
                  earnings
              
              $
              10,982,040
              
              $
              11,799,984Adjustments
                  to reconcile netearnings
                  to net cash providedby
                  operating activities:Depreciation
                  and amortization
              
              
              4,502,560
              
              
              4,372,332Fixed
                  asset impairment
              
              
              -
              
              
              1,032,786Other
              
              
              531,373
              
              
              674,000Deferred
                  income taxes
              
              
              (1,423,000
              )
              
              1,665,000Changes
                  in operating assetsand
                  liabilities (net of acquisitions)
              
              
              (650,121
              )
              
              (4,431,561
              )Net
                  Cash Provided byOperating
                  Activities
              
              
              13,942,852
              
              
              15,112,541Cash
                  flows from investing activities:Purchase
                  of property, plantand
                  equipment
              
              
              (3,405,163
              )
              
              (2,010,767
              )Purchase
                  of marketablesecurities
              
              
              (643,424
              )
              
              (1,392,146
              )Payment
                  for acquisitions - net ofcash
                  acquired
              
              
              (20,340,853
              )
              
              (74,539
              )Proceeds
                  from repaymentby
                  contractors
              
              
              -
              
              
              14,500Proceeds
                  from sale of marketablesecurities
              
              
              -
              
              
              4,953,449Net
                  Cash Used InInvesting
                  Activities
              
              
              (24,389,440
              )
              
              1,490,497




See
        Notes
        to Unaudited Consolidated Financial Statements.


-
          7
          -




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**Six
                  Months EndedJune
                  30,2005
              
              2004Cash
                  flows from financingactivities:Proceeds
                  from borrowings
              
              
              8,000,000
              
              
              -Loan
                  repayments
              
              
              (15,360,694
              )
              
              (1,000,000
              )Proceeds
                  from exercise ofstock
                  options
              
              
              2,067,330
              
              
              2,927,226Dividends
                  paid to commonshareholders
              
              
              (1,086,095
              )
              
              (1,088,950
              )Net
                  Cash Provided By (Used In)Financing
                  Activities
              
              
              (6,379,459
              )
              
              838,276Effect
                  of exchange rate changes on cash
              
              
              (320,328
              )
              
              (71,490
              )Net
                  Increase (Decrease) inCash
                  and Cash Equivalents
              
              
              (17,146,375
              )
              
              17,369,824Cash
                  and Cash Equivalents-
                  beginning of period
              
              
              71,197,891
              
              
              57,461,152Cash
                  and Cash Equivalents-
                  end of period
              
              $
              54,051,516
              
              $
              74,830,976Changes
                  in operating assetsand
                  liabilities (net of acquisitions) consist of:Increase
                  in accounts receivable
              
              $
              (3,735,125
              )
              $
              (4,165,495
              )Increase
                  in inventories
              
              
              (1,181,135
              )
              
              (4,244,931
              )(Increase)
                  decrease in prepaidexpenses
                  and othercurrent
                  assets
              
              
              480,706
              
              
              (645,237
              )Increase
                  in other assets
              
              
              (624,818
              )
              
              (104,682
              )Increase
                  in accounts payable
              
              
              3,075,709
              
              
              3,628,710Increase
                  in income taxes payable
              
              
              1,925,559
              
              
              410,097Increase
                  (decrease) in accrued expenses
              
              
              (591,017
              )
              
              689,977$
              (650,121
              )
              $
              (4,431,561
              )


See
        Notes
        to Unaudited Consolidated Financial Statements.




-
          8
          -




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**Six
                  Months EndedJune
                  30,2005
              
              2004Supplementary
                  information:Cash
                  paid during the six months for:Income
                  taxes
              
              $
              2,389,322
              
              $
              410,021Interest
              
              $
              207,469
              
              $
              116,474Details
                  of acquisitions:Fair
                  value of assetsacquired
                  (excluding acquired cash of$311,856
                  in 2005)
              
              $
              3,977,256
              
              $
              -Intangibles
              
              
              2,302,905
              
              
              74,539Goodwill
              
              
              14,543,201
              
              
              -20,823,362
              
              
              74,539Less:
                  Amounts due on acquisition payment
              
              
              482,509
              
              
              -Cash
                  paid for acquisition
              
              $
              20,340,853
              
              $
              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 June 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
        June
        30, 2005 and December 31, 2004, cash equivalents approximated $24,363,000
        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 ($105,000) and ($12,000) for the six months
        ended
        June 30, 2005 and 2004, and ($25,000) and ($54,000) for the three months
        ended
        June 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 **.**
 
 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.
 
 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.
  -
            12
            -
  
 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 SFAS No. 123, "Accounting for Stock-Based Compensation".
 
 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 Statement on Financial
        Accounting Standards ("SFAS") No. 123 (R), "Share-Based Payment" (revised).
        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
        Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting
        for Stock-Based Compensation". 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:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  earnings - as reported
              
              $
              10,982,040
              
              $
              11,799,984
              
              $
              6,668,675
              
              $
              7,145,253Deduct:
                  Total stock-basedemployee
                  compensation expensedetermined
                  under fair value basedmethod
                  for all awards
              
              
              (321,736
              )
              
              (619,797
              )
              
              (160,868
              )
              
              (309,899
              )Net
                  earnings- pro forma
              
              $
              10,660,304
              
              $
              11,180,187
              
              $
              6,507,807
              
              $
              6,835,354Earnings
                  per common share -basic-as
                  reported
              
              $
              0.96
              
              $
              1.05
              
              $
              0.58
              
              $
              0.64Earnings
                  per common share -basic-pro
                  forma
              
              $
              0.93
              
              $
              0.99
              
              $
              0.57
              
              $
              0.61Earnings
                  per common share -diluted-as
                  reported
              
              $
              0.95
              
              $
              1.03
              
              $
              0.58
              
              $
              0.63Earnings
                  per common share -diluted-pro
                  forma
              
              $
              0.93
              
              $
              0.98
              
              $
              0.56
              
              $
              0.60




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 six months ended June 30,
        2005.
  -
            13
            -
  
 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 six months ended June 30, 2005
        and
        2004 amounted to $3.8 million and $3.7 million, respectively, and for the
        three
        months ended June 30, 2005 and 2004 amounted to $1.9 million and $1.9 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.
 
 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:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Weighted
                  average shares outstanding - basic
              
              
              11,420,305
              
              
              11,225,389
              
              
              11,468,398
              
              
              11,247,242Dilutive
                  impact of options outstanding
              
              
              99,687
              
              
              193,451
              
              
              64,057
              
              
              179,626Weighted
                  average shares oustanding - diluted
              
              
              11,519,992
              
              
              11,418,840
              
              
              11,532,455
              
              
              11,426,868




During
        the six and three months ended June 30, 2005 185,589 and 185,589 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.
  -
            14
            -
  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 $.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 will adjust the purchase price allocations accordingly. Management has
        estimated approximately $13.6 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 financial statements from March 23, 2005.
 
 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.S.O., located
        in
        Prague, the Czech Republic, for approximately $1.9 million in cash of which
        $.5
        million is due to the sellers by June 30, 2006. Netwatch 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.
  -
            15
            -
  
 The
        following unaudited pro forma summary results of operations assume that Galaxy
        and Netwatch had been acquired as of January 1, 2004 (in thousands, except
        per
        share data):


Six
                  Months EndedJune
                  30,2005
              
              2004Net
                  sales
              
              $
              108,295
              
              $
              101,478Net
                  earnings
              
              
              10,758
              
              
              12,226Earnings
                  per share - diluted
              
              
              0.93
              
              
              1.07




The
        information above is not necessarily indicative of the results of operations
        that would have occurred if the Galaxy and Netwatch 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, as of their acquisition dates is as follows:


Cash
              
              $
              311,856Accounts
                  receivable
              
              
              3,687,331Inventories
              
              
              2,862,571Prepaid
                  expenses
              
              
              96,120Property,
                  plant andequipment
              
              
              1,545,526Other
                  assets
              
              
              32,083Goodwill
              
              
              14,543,201Intangible
                  assets
              
              
              2,010,000Notes
                  payable
              
              
              (860,694
              )Accounts
                  payable
              
              
              (2,129,165
              )Accrued
                  expenses
              
              
              (465,002
              )Income
                  taxes receivable
              
              
              5,488Deferred
                  income taxes payable
              
              
              (800,000
              )Net
                  assets acquired
              
              $
              20,839,315




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.
  -
            16
            -
  
 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 $981,000
        and
        $575,000 for the six months ended June 30, 2005 and 2004, respectively and
        $666,000 and $290,000 for the three months ended June 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 June 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 six months ended June 30, 2005
        and
        2004, the Company paid $296,000 and $75,000, respectively, in contingent
        price
        payments to Current Concepts. During the three months ended June 30, 2005
        and
        2004, the Company paid approximately $182,000 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 intangible assets when such payment obligations are incurred.
 
 The
        changes in the carrying value of goodwill classified by geographic reporting
        units for the six months ended June 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
                
                
                14,543,201
                
                
                -
                
                
                13,554,381
                
                
                988,820Balance,
                    June 30, 2005
                
                $
                24,425,055
                
                $
                6,407,435
                
                $
                16,423,473
                
                $
                1,594,147






-
          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
              
              $
              1,400,311June
                  30, 2005Total
              
              
              Asia
              
              
              North
                  AmericaGross
                  Carrying
              
              
              Accumulated
              
              
              Gross
                  Carrying
              
              
              Accumulated
              
              
              Gross
                  Carrying
              
              
              AccumulatedAmount
              
              
              Amortization
              
              
              Amount
              
              
              Amortization
              
              
              Amount
              
              
              AmortizationPatents
                  and ProductInformation
              
              $
              3,380,112
              
              $
              1,633,010
              
              $
              2,653,000
              
              $
              1,411,610
              
              $
              727,112
              
              $
              221,400Customer
                  relationship
              
              
              500,000
              
              
              26,923
              
              
              -
              
              
              -
              
              
              500,000
              
              
              26,923Covenants
                  not-to-compete
              
              
              4,918,712
              
              
              3,122,347
              
              
              3,818,712
              
              
              2,868,501
              
              
              1,100,000
              
              
              253,846$
              8,798,824
              
              $
              4,782,280
              
              $
              6,471,712
              
              $
              4,280,111
              
              $
              2,327,112
              
              $
              502,169




Estimated
      amortization expense for intangible assets for the next five years is as
      follows:


EstimatedYear
                  Ending
              
              AmortizationDecember
                  31,
              
              Expense2005
              
              $
              2,011,7702006
              
              
              646,2812007
              
              
              107,5952008
              
              
              65,2872009
                  and thereafter
              
              
              107,324






-
          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 June 30, 2005, the Company has recorded an unrealized gain,
        net of income taxes, of approximately $821,000, 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 June 30, 2005, the Company has accrued a fee in the amount of approximately
        $279,000. Such amount has been classified 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
        June
        30, 2005 and December 31, 2004, respectively, marketable securities have
        a cost
        of approximately $17,159,000 and $16,516,000, an estimated fair value of
        approximately $18,456,000 and $23,120,000 and gross unrealized gains of
        approximately $1,297,000 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:


June
                  30,
              
              December
                  31,2005
              
              2004Raw
                  material
              
              $
              19,758,766
              
              $
              15,236,393Work
                  in progress
              
              
              2,253,676
              
              
              1,607,052Finished
                  goods
              
              
              10,991,312
              
              
              12,257,615$
              33,003,754
              
              $
              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:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Total
                  segment revenuesNorth
                  America
              
              $
              37,119,158
              
              $
              39,703,801
              
              $
              19,158,205
              
              $
              20,090,468Asia
              
              
              71,509,916
              
              
              64,730,050
              
              
              40,691,564
              
              
              34,244,781Europe
              
              
              7,414,308
              
              
              8,019,194
              
              
              3,415,866
              
              
              4,235,094Total
                  segment revenues
              
              
              116,043,382
              
              
              112,453,045
              
              
              63,265,635
              
              
              58,570,343Reconciling
                  items:Intersegment
                  revenues
              
              
              (13,059,676
              )
              
              (21,705,780
              )
              
              (5,720,214
              )
              
              (10,180,101
              )Net
                  sales
              
              $
              102,983,706
              
              $
              90,747,265
              
              $
              57,545,421
              
              $
              48,390,242Income
                  (loss) from Operations:North
                  America
              
              $
              3,841,040
              
              $
              1,740,892
              
              $
              2,556,574
              
              $
              355,906Asia
              
              
              9,799,777
              
              
              8,829,494
              
              
              5,714,850
              
              
              4,974,342Europe
              
              
              122,042
              
              
              1,087,493
              
              
              (36,736
              )
              
              712,494$
              13,762,859
              
              $
              11,657,879
              
              $
              8,234,688
              
              $
              6,042,742




7. DEBT
 
 a.  Short-term
        debt
 
 Previously
        the Company had available one domestic line of credit of $10 million; the
        outstanding balance was paid off in its entirety on June 20, 2005. During
        March
        2005, the Company borrowed $8 million against the line of credit to partially
        finance the acquisition of Galaxy. During July 2005, the Company amended
        its
        credit agreement to increase the line of credit to $20 million which expires
        on
        July 27, 2009.
  -
            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. As of June 30, 2005, the
        balance due on the term loan was paid in full. This term loan facility is
        no
        longer available. For the six months ended June 30, 2005 and 2004, the Company
        recorded interest expense of approximately $207,000 and $116,000, respectively.
        For the three months ended June 30, 2005 and 2004, the Company recorded interest
        expense of approximately $140,000 and $60,000, respectively.
 
 8.  ACCRUED
        EXPENSES
 
 Accrued
        expenses consist of the following:


June
                  30,
              
              December
                  31,2005
              
              2004Sales
                  commissions
              
              $
              1,474,751
              
              $
              1,431,169Investment
                  banking commissions
              
              
              278,956
              
              
              1,000,000Subcontracting
                  labor
              
              
              1,687,468
              
              
              1,624,963Salaries,
                  bonuses andrelated
                  benefits
              
              
              2,462,588
              
              
              3,480,213Other
              
              
              3,211,533
              
              
              2,757,231$
              9,115,296
              
              $
              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 six months ended June 30, 2005 and 2004 amounted to
        approximately $248,000 and $148,000, respectively. The expense for the three
        months ended June 30, 2005 and 2004 amounted to approximately $137,000 and
        $39,000, 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 June 30, 2005, the plans owned
        19,080 and 129,202 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 six months ended
        June
        20, 2005 and 2004 amounted to approximately $208,000 and $218,000, respectively.
        The expense for the three months ended June 30, 2005 and 2004 amounted to
        approximately $105,000 and $111,000, respectively. As of June 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 six months ended June 20, 2005 and 2004 amounted to approximately
        $341,000 and $204,000, respectively. The expense for the three months ended
        June
        30, 2005 and 2004 amounted to approximately $121,000 and $110,000, respectively.
  -
            22
            -
  The
        components of SERP expense are as follows:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Service
                  cost
              
              $
              154,000
              
              $
              71,000
              
              $
              55,000
              
              $
              43,000Interest
                  cost
              
              
              113,000
              
              
              80,000
              
              
              36,000
              
              
              40,000Amortization
                  of adjustments
              
              
              74,000
              
              
              53,000
              
              
              30,000
              
              
              27,000Total
                  SERP expense
              
              $
              341,000
              
              $
              204,000
              
              $
              121,000
              
              $
              110,000




June
                  30,
              
              December
                  31,2005
              
              2004Balance
                  sheet amounts:Accrued
                  pension liability
              
              $
              2,602,583
              
              $
              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 June 30,
        2005, the Company had 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 six and three months ended June 30, 2005 and 2004 consists
        of:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  earnings
              
              $
              10,982,040
              
              $
              11,799,984
              
              $
              6,668,675
              
              $
              7,145,253Currency
                  translation adjustment-net
                  of taxes
              
              
              (614,665
              )
              
              (203,460
              )
              
              (424,138
              )
              
              18,978Increase
                  (decrease) in unrealizedgain
                  on marketable securities-
                  net of taxes
              
              
              (3,143,296
              )
              
              7,200
              
              
              32,446
              
              
              (8,500
              )Comprehensive
                  income
              
              $
              7,224,079
              
              $
              11,603,724
              
              $
              6,276,983
              
              $
              7,155,731






-
          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 $140,000 has been paid as of June 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 $797,724 and $696,013 on the Company's
        balance
        sheet at June 30, 2005 and December 31, 2004, respectively. The Company
        anticipates the sale to take place prior to December 31, 2005.
 
 13.  NEW
        FINANCIAL ACCOUNTING STANDARDS
 
 In
        December 2004, the 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 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 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 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.
  -
            26
            -
  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 six months of 2005, approximately $5.1 million of the sales increase
        compared to the first six months of 2004 is attributable to the acquisition
        by
        the Company of Galaxy Power, Inc. (“Galaxy”) which occurred on March 22, 2005.  Gross
        profit margins were lower during the first six months of 2005 compared to
        the
        first six 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.
  -
            27
            -
 
 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.
  -
            28
            -
 
 
 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. Management intends to retain the balance of
        this
        inventory for possible use in 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.
 
 The
        following is a quarterly schedule of material reintroduced into production
        since
        the initial $12 million charge.


Prior
                  Quarters
              
              
              
              $
                  164,3291st
                  Quarter
              
              
              2002
              
              
              4,5382nd
                  Quarter
              
              
              2002
              
              
              68,0983rd
                  Quarter
              
              
              2002
              
              
              38,9144th
                  Quarter
              
              
              2002
              
              
              271,1631st
                  Quarter
              
              
              2003
              
              
              77,0692nd
                  Quarter
              
              
              2003
              
              
              80,0463rd
                  Quarter
              
              
              2003
              
              
              28,8514th
                  Quarter
              
              
              2003
              
              
              98,2631st
                  Quarter
              
              
              2004
              
              
              31,0512nd
                  Quarter
              
              
              2004
              
              
              78,2323rd
                  Quarter
              
              
              2004
              
              
              72,8574th
                  Quarter
              
              
              2004
              
              
              53,2951st
                  Quarter
              
              
              2005
              
              
              7772nd
                  Quarter
              
              
              2005
              
              
              26,737$
              1,094,220




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
        $.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 $13.6 million of goodwill and $2.0 million of the 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.
  -
            29
            -
  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.
 
 On
        June
        30, 2005, the Company acquired the common stock of Netwatch S.S.O., located
        in
        Prague, The Czech Republic, for approximately $1.9 million of which $.5 million
        is due to the sellers by June 30, 2006. Netwatch 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 acquisition is the
        establishment of a European manufacturing presence for the Company and the
        addition of fiber optic capability to the Bel Stewart and 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 had been acquired as of January 1, 2004 (in thousands except
        per
        share data):


Six
                  Months EndedJune
                  30,2005
              
              2004Net
                  sales
              
              $
              108,295
              
              $
              101,478Net
                  earnings
              
              
              10,758
              
              
              12,226Earnings
                  per share-diluted
              
              
              0.93
              
              
              1.07




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.
  -
            30
            -
  
 A
        condensed combined balance sheet of the major assets and liabilities of Galaxy
        and Netwatch as of their acquisition dates is as follows:


Cash
              
              $
              311,856Accounts
                  receivable
              
              
              3,687,331Inventories
              
              
              2,862,571Prepaid
                  expenses
              
              
              96,120Property,
                  plant andequipment
              
              
              1,545,526Other
                  assets
              
              
              32,083Goodwill
              
              
              14,543,201Intangible
                  assets
              
              
              2,010,000Notes
                  payable
              
              
              (860,694
              )Accounts
                  payable
              
              
              (2,129,165
              )Accrued
                  expenses
              
              
              (465,002
              )Income
                  taxes receivable
              
              
              5,488Deferred
                  income taxes payable
              
              
              (800,000
              )Net
                  assets acquired
              
              $
              20,839,315




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.
  -
            31
            -
  The
        Company is not contractually obligated to accept returns 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. 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 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 results of operations and financial position.
 
 Results
        of Operations
 
 The
        following table sets forth, for the second quarters of 2005 and 2004, and
        the
        first six 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 SalesSix
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  sales
              
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              71.3
              
              
              69.4
              
              
              70.7
              
              
              68.6Selling,
                  general andadministrative
                  expenses
              
              
              15.4
              
              
              16.6
              
              
              15.0
              
              
              16.8Fixed
                  asset impairment
              
              
              -
              
              
              1.1
              
              
              -
              
              
              2.1Interest
                  income - net
              
              
              0.4
              
              
              0.2
              
              
              0.5
              
              
              0.2Lawsuit
                  proceeds
              
              
              -
              
              
              3.2
              
              
              -
              
              
              6.1Earnings
                  before provisionfor
                  income taxes
              
              
              13.7
              
              
              16.3
              
              
              14.8
              
              
              18.8Income
                  tax provision
              
              
              3.1
              
              
              3.3
              
              
              3.2
              
              
              4.0Net
                  earnings
              
              
              10.6
              
              
              13.0
              
              
              11.6
              
              
              14.8






-
          32
          -


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
                  PeriodSix
                  Months Ended
              
              Three
                  Months EndedJune
                  30, 2005
              
              June
                  30, 2005compared
                  with Six
              
              compared
                  with ThreeMonths
                  Ended June
              
              Months
                  Ended June30,
                  2004
              
              30,
                  2004Net
                  sales
              
              
              
              
              
              13.5
              %
              
              18.9
              %Cost
                  of sales
              
              
              
              
              
              16.5
              
              
              22.6Selling,
                  general andadministrative
                  expenses
              
              
              
              
              
              5.1
              
              
              6.2Net
                  earnings
              
              
              
              
              
              (6.9
              )
              
              (6.7
              )




**SIX
      MONTHS ENDED JUNE 30, 2005 VERSUS** **SIX
      MONTHS ENDED JUNE 30, 2004**


Sales
 
 Net
        sales
        increased 13.5% from $90.7 million during the first six months of 2004 to
        $103.0
        million during the first six months of 2005. The Company attributes the increase
        to increased module sales of $7.6 million of which $5.1 million is from the
        acquisition of Galaxy, strong demand for interconnect products, resulting
        in an
        increase of $2.3 million in such sales, strong demand for magnetic sales,
        resulting in an increase of $2.7 million in such sales , offset in part by
        decreases in circuit protection sales of ($0.5) million.
 
 The
        significant components of the Company's first six months of 2005 sales were
        magnetic products of $62.4 million (as compared with $60.0 million during
        the
        first six months of 2004), circuit protection products of $9.6 million (as
        compared with $10.1 million during the first six months of 2004), interconnect
        products of $18.3 million (as compared with $15.5 million during the first
        six
        months of 2004), and module products of $12.7 million (as compared with $5.1
        million during the first six months of 2004), which includes $5.1 million
        from
        the acquisition of Galaxy.
  -
            33
            -
  
 Based
        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 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% (14%) of total sales during the six months ended June 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 69.4 % during the first
        six
        months of 2004 to 71.3% during the first six months of 2005. The increase
        in the
        cost of sales percentage is primarily attributable to a 3.7% 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 Galaxy products new in 2005), which have a higher raw material
        content than the Company’s other products and increases in obsolescence
        reserves. This was offset in part by lower labor, and overheads as a percentage
        of sales in part as a result of the Company's ability to leverage these expenses
        over a larger revenue base.
 
 Included
        in cost of sales are research and development expenses of $3.8 million and
        $3.7
        million for the first six months of 2005 and 2004, respectively. The Company
        has
        experienced minor increases in research and development expense primarily
        at its
        domestic facilities.
  -
            34
            -
  Selling,
        General and Administrative Expenses
 
 The
        percentage relationship of selling, general and administrative expenses to
        net
        sales decreased from 16.6% during the six months ended June 30, 2004 to 15.4%
        during the six months ended June 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 primarily to increased selling expenses of approximately $0.5
        million including $0.2 million in Galaxy related expenses.. In addition,
        the
        Company incurred a $0.3 million increase in general and administrative expenses,
        including $0.5 million related to Galaxy, additional bad debt expense of
        approximately $0.4 million principally due to the reduction of accounts
        receivable reserves during 2004 and additional amortization of identifiable
        intangibles in the amount of $0.3 million principally arising from the
        acquisition of Galaxy. This was offset in part by lower employment costs
        of $0.4
        million due to reduced bonuses and lower professional fees of $0.4 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 six month period ended June 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 - net
 
 Interest
        income earned on cash and cash equivalents increased by approximately $0.4
        million during the first six months ended June 30, 2005 compared to the
        comparable period in 2004. The increase is due primarily to increased earnings
        on higher 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. The loan bears interest
        at
        LIBOR plus 1.50% payable quarterly and was completely paid off by June 30,
        2005.
        Interest expense increased by approximately $0.1 during the six months ended
        June 30, 2005 compared with 2004. The increase is attributable in part to
        higher
        interest rates charged on the loan for the first six months of 2005 compared
        to
        the first six months of 2004 and in part due to the fact that during March
        2005,
        the Company borrowed $8.0 million against its domestic line of credit to
        partially finance the acquisition of Galaxy. During June 2005, both loans
        were
        paid off.
  -
            35
            -
  Lawsuit
        Proceeds
 
 During
        the six months ended June 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 six months ended June 30, 2005 was $3.2
        million compared to $3.0 million during the first six months of 2004. The
        Company's earnings before income taxes for the six months ended June 30,
        2005 is
        approximately $.6 million lower than 2004. The income tax effective rate
        is
        higher than the prior six 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.
 
 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.
 
 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.
 
 -
            36
            -
 
 **THREE
        MONTHS ENDED JUNE 30, 2005 VERSUS** **THREE
        MONTHS ENDED JUNE 30, 2004**
 
 Sales
 
 Net
        sales
        increased 18.9% from $48.4 million during the three months ended June 30,
        2004
        to $57.5 million during the three months ended June 20, 2005. The Company
        attributes the increase to increased module sales of $6.6 million of which
        $4.7
        million is from the acquisition of Galaxy and strong demand for magnetic
        sales,
        resulting in an increase of $3.1 million in such sales offset in part by
        decreases in circuit protection sales of $0.2 million and interconnect sales
        of
        $0.4 million.
 
 The
        significant components of the Company's sales for the three months ended
        June
        30, 2005 were from magnetic products of $33.4 million (as compared with $30.4
        million during the three months ended June 30, 2004), circuit protection
        products of $5.0 million (as compared with $5.2 million during the three
        months
        ended June 30, 2004), interconnect products of $9.9 million (as compared
        with
        $10.2 million during the three months ended June 30, 2004), and module products
        of $9.2 million (as compared with $2.6 million during the three months ended
        June 30, 2004) including $4.7 million in Galaxy sales.
 
 Based
        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 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% (14%) of total sales during the three months ended June 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.
  -
            37
            -
  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 68.6 % during the three
        months
        ended June 30, 2004 to 70.7 % in 2005. The increase in the cost of sales
        percentage is primarily attributable to a 5.4 % 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 and increases in obsolescence
        reserves. This was offset by lower labor and overhead as a percentage of
        sales
        in part as a result of the Company's ability to leverage these expenses over
        a
        larger revenue base.
 
 Included
        in cost of sales are research and development expenses of $1.9 million and
        $1.9
        million for the three months ended June 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 16.8 % during the three months ended June 30, 2004 to
        15.0%
        during the three months ended June 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 $0.5 million increase in the dollar
        amount of such expenses primarily to increased selling expenses of approximately
        $0.4 million including $0.2 million in Galaxy related expenses. The increase
        in
        selling expenses relates to increased sales. In addition, the Company's general
        and administrative expenses were approximately the same as 2004. The increases
        and decreases in general and administrative expenses were primarily attributable
        to the same reasons as set forth in the six month analysis.
 
 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).
  -
            38
            -
  Fixed
        Asset Impairment
 
 During
        the three month period ended June 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 - net
 
 Interest
        income earned on cash and cash equivalents increased by approximately $232,000
        during the three months ended June 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 increased
        by
        approximately $81,000 during the three months ended June 30, 2005 compared
        with
        2004. The increase is attributable in part to higher interest rates charged
        on
        the loan for the second three months of 2005 compared to 2004 and in part
        due to
        the fact that during March 2005, the Company borrowed $8.0 million against
        its
        domestic line of credit to partially finance the acquisition of Galaxy. During
        June 2005, both loans were paid in full.
 
 Lawsuit
        Proceeds
 
 During
        the three months ended June 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 three months ended June 30, 2005 was $1.8
        million compared to $1.9 million during the three months ended June 30, 2004.
        The Company's earnings before income taxes for the three months ended June
        30,
        2005 is approximately $.6 million lower than 2004. 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
        second quarter of 2005 compared to 2004 offset in part by lower U.S.
        taxes.
  -
            39
            -
  
 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 June 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.
 
 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 ($105,000)
        for the six months ended June 30, 2005 which are included in selling, general
        and administrative expense and approximately $615,000 in unrealized exchange
        losses relating to the translation of foreign subsidiary financial statements
        which 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.
  -
            40
            -
  
 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 20, 2005 in its entirety. During March 2005,
        the
        Company borrowed $8 million against the line of credit to partially finance
        the
        acquisition of Galaxy. During July 2005, the Company amended its credit
        agreement to increase the line of credit to $20 million which expires on
        July
        22, 2009.
 
 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. The term loan facility
        is no
        longer available. For the six months ended June 30, 2005 and 2004, the Company
        recorded interest expense of approximately $207,000 and $116,000, respectively.
 
 The
        Company's Hong Kong subsidiary has an unsecured line of credit of approximately
        $2 million, which was unused at June 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.
  -
            41
            -
  
 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 balance sheet as marketable securities. As of June 30, 2005,
        the Company has recorded an unrealized gain, net of income taxes, of
        approximately $0.8 million. In connection with this transaction the Company
        is
        obligated to pay an investment banker's advisory fee to a third party. As
        of
        June 30, 2005, the Company has accrued a fee in the amount of approximately
        $0.3
        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 six months ended June 30, 2005 the
        gross unrealized gain on marketable securities decreased $5.3 million from
        December 31, 2004.
 
 The
        Company is constructing a 117,000 square foot manufacturing facility in
        Zhongshan City, PRC for approximately $2.3 million. As of June 30, 2005,
        the
        Company has paid approximately $762,000 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 $140,000 has been paid as of June 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 $798,000 on the Company's consolidated balance
        sheet at June 30, 2005. The Company anticipates the sale to take place prior
        to
        December 31, 2005.
 
 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 six months ended June 30, 2005 and 2004, the Company
        paid
        approximately $296,000 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 June 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.
  -
            42
            -
   During
        the six months ended June 30, 2005, the Company's cash and cash equivalents
        decreased by approximately $17.1 million, reflecting approximately $20.4
        million
        used principally for acquisitions, $15.4 million for loan repayments, $3.4
        million for the purchase of property, plant and equipment, $0.7 million for
        the
        purchase of marketable securities and $1.1 million for payments of dividends
        offset by $13.9 million provided by operating activities (principally as
        a
        result of net income of $11.0. million and depreciation expense of $4.5
        million), borrowings of $8.0 million and proceeds of $2.1 million from the
        exercise of stock options.
 
 Cash,
        marketable securities and cash equivalents and accounts receivable comprised
        approximately 50.6% and 58.6% of the Company's total assets at June 30, 2005
        and
        December 31, 2004, respectively. The Company's current ratio (i.e., the ratio
        of
        current assets to current liabilities) was 4.5 to 1 and 5.0 to 1 at June
        30,
        2005 and December 31, 2004, respectively.
 
 The
        following table sets forth at June 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
              
              $
              482,509
              
              $
              482,509
              
              $
              -
              
              $
              -
              
              $
              -Long-term
                  debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Capital
                  expenditure obligations
              
              
              6,471,249
              
              
              6,471,249
              
              
              -Contingent
                  purchase pricecommitments
              
              
              1,249,270
              
              
              1,249,270
              
              
              -
              
              
              -
              
              
              -Operating
                  leases
              
              
              3,595,249
              
              
              735,762
              
              
              1,757,344
              
              
              1,102,139
              
              
              -Raw
                  material purchase obligations
              
              
              8,867,454
              
              
              7,999,454
              
              
              868,000
              
              
              -
              
              
              -Total
              
              $
              20,665,731
              
              $
              16,938,244
              
              $
              2,625,344
              
              $
              1,102,139
              
              $
              -




The
        Company is currently obligated to fund the Company's SERP. As of June 30,
        2005
        the SERP had an unfunded benefit obligation of approximately $2.6 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.
  -
            43
            -
  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 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 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 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 financial position or
        results of operations.
  -
            44
            -
  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.
  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
        of
        Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
        Value of Financial Instruments". The estimated fair values of financial
        instruments have been determined by the Company using available market
        information and appropriate valuation methodologies.
  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.
 
 -
            45
            -
  
 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.
 
  -
            46
            -
 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.
 
 -
            47
            -
 
 Item
        4.  Submission
        of Matters to a Vote of Security Holders
 
 The
        Company's annual meeting of security holders was held on May 12, 2005. At
        the
        meeting, the Board's nominees were elected to the Board of Directors for
        a term
        of one to three years. The votes were cast as follows:


For
              
              WithheldAvi
                  Eden
              
              
              2,443,005
              
              
              33,006Robert
                  H. Simandl
              
              
              2,310,316
              
              
              165,695




Item
        6. Exhibits
  (a)
        Exhibits:
 
 10.1 Amendment
            No. 1 to the Registrant's Amended and Restated Credit and Guarantee Agreement
            dated as of March 21, 2003 is incorporated by reference to the Registrant's
            Current Report on Form 8-K dated August 1, 2005.
 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.
  -
            48
            -
  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 and Chief
                  Executive Officer
 By:
                /s/ Colin
                  DunnColin
                  Dunn, Vice President of Finance
 
 Dated:
        August 5, 2005
  -
            49
            -
  EXHIBIT
        INDEX
  10.1  Amendment
        No. 1 to the Registrant's Amended and Restated Credit and Guarantee Agreement
        dated as of March 21, 2003 is incorporated by reference to the Registrant's
        Current Report on Form 8-K dated August 1, 2005.
 
 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.