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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**


(Mark
      One)





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





For
      the
      quarterly period ended March
      31, 2006




or





o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
      the
      transition period from ______________ to ______________





Commission
      File Number: 0-11676





**BEL
      FUSE INC.**


(Exact
      name of registrant as specified in its charter)





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





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





(201)
      432-0463


(Registrant's
      telephone number, including area code)









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





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


x
      Yes o No





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of "accelerated
      filer and large accelerated filer" in Rule 12b-12 of the Exchange
      Act.




o
      Large accelerated
      filer   x
      Accelerated filer o Non-accelerated filer





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


o
      Yes x No




At
      May 1,
      2006, there were 2,702,677 shares of Class A Common Stock, $0.10 par value,
      outstanding and 9,067,178 shares of Class B Common Stock, $0.10 par value,
      outstanding.









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BEL
                FUSE INC.INDEX




PagePart
                I
            Financial
                InformationItem
                1.
            Financial
                Statements
            1Consolidated
                Balance Sheets as of March 31,
                2006(unaudited)
                and December 31, 2005
            2-3Consolidated
                Statements of Operations for
                theThree
                Months Ended March 31, 2006 and 2005
            4Consolidated
                Statements of Stockholders' Equity
                forthe
                years ended December 31, 2005 and 2004
                andthe
                Three Months Ended March 31, 2006
                (unaudited)
            5-6Consolidated
                Statements of Cash Flows for the
                ThreeMonths
                Ended March 31, 2006 and 2005
                (unaudited)
            7-9Notes
                to Consolidated Financial Statements
                (unaudited)
            10-32Item
                2.
            Management's
                Discussion and Analysis ofFinancial
                Condition and Results of
                Operations
            33-49Item
                3.
            Quantitative
                and Qualitative Disclosures
                AboutMarket
                Risk
            50Item
                4.
            Controls
                and Procedures
            51Part
                II
            Other
                InformationItem
                1.
            Legal
                Proceedings
            52-53Item
                6.
            Exhibits
            54Signatures
            
            55






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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,
      2005.





The
      results of operations for the three months ended March 31, 2006 and 2005 are
      not
      necessarily indicative of the results for the entire fiscal year or for any
      other period.




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**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE
                  SHEETS**
  March
                  31,
              
              December
                  31,2006
              
              2005(Unaudited)**ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              53,250,439
              
              $
              51,997,634Marketable
                  securities
              
              
              43,200,591
              
              
              38,463,108Accounts
                  receivable - less allowance for doubtfulaccounts
                  of $1,008,000 and $1,107,000 atMarch
                  31, 2006 and December 31, 2005, respectively
              
              
              39,880,962
              
              
              39,304,984Inventories
              
              
              35,694,948
              
              
              32,947,103Prepaid
                  expenses and other currentassets
              
              
              3,201,557
              
              
              1,691,017Assets
                  held for sale
              
              
              828,131
              
              
              828,131Total
                  Current Assets
              
              
              176,056,628
              
              
              165,231,977Property,
                  plant and equipment - net
              
              
              42,712,791
              
              
              42,379,356Deferred
                  income taxes
              
              
              3,937,000
              
              
              3,901,000Intangible
                  assets - net
              
              
              2,835,585
              
              
              2,782,188Goodwill
              
              
              24,117,742
              
              
              22,427,934Prepaid
                  pension costs
              
              
              1,655,362
              
              
              1,655,362Other
                  assets
              
              
              3,758,279
              
              
              3,678,100TOTAL
                  ASSETS
              
              $
              255,073,387
              
              $
              242,055,917


See
      notes
      to consolidated financial statements.






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**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS**
  March
                  31,
              
              December
                  31,2006
              
              2005(Unaudited)**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Accounts
                  payable
              
              $
              17,065,730
              
              $
              14,560,827Accrued
                  expenses
              
              
              11,416,322
              
              
              10,667,558Deferred
                  income taxes
              
              
              2,810,000
              
              
              1,412,000Income
                  taxes payable
              
              
              10,177,678
              
              
              9,840,295Dividends
                  payable
              
              
              552,000
              
              
              548,000Total
                  Current Liabilities
              
              
              42,021,730
              
              
              37,028,680Long-term
                  Liabilities:Minimum
                  pension obligation
              
              
              3,660,114
              
              
              3,450,688Total
                  Liabilities
              
              
              45,681,844
              
              
              40,479,368Commitments
                  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 1,072,769 treasury shares)
              
              
              270,268
              
              
              270,268Class
                  B common stock, par value$.10
                  per share - authorized30,000,000
                  shares; outstanding 9,065,178and
                  9,013,264 shares, respectively(net
                  of 3,218,307 treasury shares)
              
              
              906,518
              
              
              901,327Additional
                  paid-in capital
              
              
              29,911,819
              
              
              31,713,608Retained
                  earnings
              
              
              171,440,521
              
              
              167,991,188Deferred
                  stock-based compensation
              
              
              —
              
              
              (3,562,709
              )Accumulated
                  other comprehensive income
              
              
              6,862,417
              
              
              4,262,867Total
                  Stockholders' Equity
              
              
              209,391,543
              
              
              201,576,549TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              255,073,387
              
              $
              242,055,917


See
        notes
        to consolidated financial statements.




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**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF
                  OPERATIONS**(Unaudited)
  Three
                  Months EndedMarch
                  31,2006
              
              2005Net
                  Sales
              
              $
              54,626,248
              
              $
              45,438,285Costs
                  and expenses:Cost
                  of sales
              
              
              39,986,889
              
              
              32,688,811Selling,
                  general and administrative
              
              
              9,377,185
              
              
              7,221,303Casualty
                  loss
              
              
              963,791
              
              
              —50,327,865
              
              
              39,910,114Income
                  from operations
              
              
              4,298,383
              
              
              5,528,171Interest
                  expense and other costs
              
              
              (115,680
              )
              
              (67,150
              )Interest
                  income
              
              
              512,596
              
              
              225,344Earnings
                  before provision for income taxes
              
              
              4,695,299
              
              
              5,686,365Income
                  tax provision
              
              
              698,000
              
              
              1,373,000Net
                  earnings
              
              $
              3,997,299
              
              $
              4,313,365Earnings
                  per common share - basic
              
              $
              0.34
              
              $
              0.38Earnings
                  per common share - diluted
              
              $
              0.34
              
              $
              0.38Weighted
                  average common sharesoutstanding
                  - basic
              
              
              11,749,645
              
              
              11,371,677Weighted
                  average common sharesoutstanding
                  - diluted
              
              
              11,813,017
              
              
              11,507,499


See
        notes
        to consolidated financial statements.




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**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS'
                  EQUITY****(Unaudited)**
  AccumulatedOther
              
              
              
              
              
              
              
              DeferredCompre-
              
              
              
              Compre-
              
              Class
                  A
              
              Class
                  B
              
              Additional
              
              Stock-hensive
              
              Retained
              
              hensive
              
              Common
              
              Common
              
              Paid-In
              
              BasedTotal
              
              Income
              
              Earnings
              
              Income
              
              Stock
              
              Stock
              
              Capital
              
              CompensationBalance,
                  January 1, 2005
              
              $
              178,461,296
              
              
              
              
              $
              149,949,283
              
              $
              5,386,512
              
              $
              270,268
              
              $
              866,059
              
              $
              21,989,174
              
              $
              —Exercise
                  of stockoptions
              
              
              4,115,508
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20,028
              
              
              4,095,480Tax
                  benefits arisingfrom
                  the disposition ofnon-qualifiedincentive
                  stock options
              
              
              429,802
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              429,802
              
              
              —Cash
                  dividends on Class Acommon
                  stock
              
              
              (430,940
              )
              
              
              
              
              (430,940
              )Cash
                  dividends on Class Bcommon
                  stock
              
              
              (1,760,432
              )
              
              
              
              
              (1,760,432
              )Issuance
                  of restrictedcommon
                  stock
              
              
              5,214,392
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15,240
              
              
              5,199,152Deferred
                  stock-basedcompensation
                  - net of taxes
              
              
              (3,810,840
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,810,840
              )Currency
                  translationadjustment
                  - net of taxes
              
              
              (669,153
              )
              $
              (669,153
              )
              
              
              
              
              (669,153
              )Decrease
                  in unrealized gain orloss
                  on marketable securities-net
                  of taxes
              
              
              (454,492
              )
              
              (454,492
              )
              
              
              
              
              (454,492
              )Stock-based
                  compensationexpense
                  - net of taxes
              
              
              248,131
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              248,131Net
                  earnings
              
              
              20,233,277
              
              
              20,233,277
              
              
              20,233,277Comprehensive
                  income
              
              
              
              
              $
              19,109,632Balance,
                  December 31, 2005
              
              
              201,576,549
              
              
              
              
              
              167,991,188
              
              
              4,262,867
              
              
              270,268
              
              
              901,327
              
              
              31,713,608
              
              
              (3,562,709
              )


See
        notes
        to consolidated financial statements.





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**BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS' EQUITY****(Unaudited)**
  AccumulatedOtherCompre-
                
                
                
                Compre-
                
                Class
                    A
                
                Class
                    B
                
                Additional
                
                Stock-hensive
                
                Retained
                
                hensive
                
                Common
                
                Common
                
                Paid-In
                
                BasedTotal
                
                Income
                
                Earnings
                
                Income
                
                Stock
                
                Stock
                
                Capital
                
                CompensationExercise
                    of stockoptions
                
                
                1,358,556
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,191
                
                
                1,353,365Tax
                    benefits arisingfrom
                    the disposition ofnon-qualifiedincentive
                    stock options
                
                
                107,105
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                107,105Cash
                    dividends on Class Acommon
                    stock
                
                
                (107,735
                )
                
                
                
                
                (107,735
                )Cash
                    dividends on Class Bcommon
                    stock
                
                
                (440,231
                )
                
                
                
                
                (440,231
                )Issuance
                    of restrictedcommon
                    stockCurrency
                    translationadjustment
                    - net of taxes
                
                
                91,879
                
                $
                91,879
                
                
                
                
                
                91,879Increase
                    in unrealized gain orloss
                    on marketable securities-net
                    of taxes
                
                
                2,507,671
                
                
                2,507,671
                
                
                
                
                
                2,507,671Stock-based
                    compensationexpense
                
                
                300,450
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                113,250
                
                
                187,200Adoption
                    of SFAS 123 (R)
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (3,375,509
                )
                
                3,375,509Net
                    earnings
                
                
                3,997,299
                
                
                3,997,299
                
                
                3,997,299Comprehensive
                    income
                
                
                
                
                $
                6,596,849Balance,
                    March 31, 2006
                
                $
                209,391,543
                
                
                
                
                $
                171,440,521
                
                $
                6,862,417
                
                $
                270,268
                
                $
                906,518
                
                $
                29,911,819
                
                $
                —
 See
          notes
          to consolidated financial statements.
  -6-
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            to Table of Contents**
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH
                    FLOWS****(Unaudited)**
  Three
                    Months EndedMarch
                    31, 20062006
                
                2005Cash
                    flows from operatingactivities:Net
                    income
                
                $
                3,997,299
                
                $
                4,313,365Adjustments
                    to reconcile netincome
                    to net cash providedby
                    operating activities:Depreciation
                    and amortization
                
                
                2,519,445
                
                
                2,039,027Casualty
                    loss
                
                
                963,791
                
                
                —Stock-based
                    compensation
                
                
                373,970
                
                
                —Excess
                    tax benefits from share-basedpayment
                    arrangements
                
                
                (107,105
                )
                
                —Other
                
                
                297,874
                
                
                335,716Deferred
                    income taxes
                
                
                (638,000
                )
                
                (118,000
                )Changes
                    in operating assetsand
                    liabilities (net of acquisitions)
                
                
                (2,545,566
                )
                
                5,844,168Net
                    Cash Provided byOperating
                    Activities
                
                
                4,861,708
                
                
                12,414,276Cash
                    flows from investing activities:Purchase
                    of property, plantand
                    equipment
                
                
                (2,472,483
                )
                
                (824,843
                )Purchase
                    of marketablesecurities
                
                
                —
                
                
                (643,424
                )Payment
                    for acquisitions - net ofcash
                    acquired
                
                
                (2,178,276
                )
                
                (18,803,978
                )Proceeds
                    from sale ofmarketable
                    securities
                
                
                93,500
                
                
                —Net
                    Cash Used inInvesting
                    Activities
                
                
                (4,557,259
                )
                
                (20,272,245
                )
 See
          notes
          to consolidated financial statements.
  -7-
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            to Table of Contents**
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**
  Three
                    Months EndedMarch
                    31,2006
                
                2005Cash
                    flows from financingactivities:Proceeds
                    from borrowings
                
                
                —
                
                
                8,000,000Loan
                    repayments
                
                
                —
                
                
                (1,360,694
                )Proceeds
                    from exercise ofstock
                    options
                
                
                1,358,556
                
                
                776,900Dividends
                    paid to commonshareholders
                
                
                (552,000
                )
                
                (541,000
                )Excess
                    tax benefits from share-basedpayment
                    arrangements
                
                
                107,105
                
                
                —Net
                    Cash Provided ByFinancing
                    Activities
                
                
                913,661
                
                
                6,875,206Effect
                    of exchange rate changes on cash
                
                
                34,695
                
                
                (128,841
                )Net
                    Increase (decrease) inCash
                    and Cash Equivalents
                
                
                1,252,805
                
                
                (1,111,604
                )Cash
                    and Cash Equivalents-
                    beginning of year
                
                
                51,997,634
                
                
                71,197,891Cash
                    and Cash Equivalents-
                    end of year
                
                $
                53,250,439
                
                $
                70,086,287Changes
                    in operating assetsand
                    liabilities (net of acquisitions) consist of:(Increase)
                    decrease in accountsreceivable
                
                $
                (572,712
                )
                $
                2,586,069(Increase)
                    decrease in inventories
                
                
                (2,849,918
                )
                
                799,766Increase
                    in prepaidexpenses
                    and othercurrent
                    assets
                
                
                (1,510,540
                )
                
                (160,393
                )(Increase)
                    decrease in other assets
                
                
                (574,188
                )
                
                124,490Increase
                    inaccounts
                    payable
                
                
                2,500,286
                
                
                3,780,810Increase
                    (decrease) in income taxes payable
                
                
                444,488
                
                
                (20,288
                )Increase
                    (decrease) in accrued expenses
                
                
                17,018
                
                
                (1,266,286
                )$
                (2,545,566
                )
                $
                5,844,168
 See
          notes
          to consolidated financial statements.
  -8-
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            Contents**


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (Concluded)****(Unaudited)**
  Three
                  Months EndedMarch
                  31,2006
              
              2005Supplementary
                  information:Cash
                  paid during the year for:Income
                  taxes
              
              $
              556,000
              
              $
              1,296,000Interest
              
              $
              27,232
              
              $
              67,000Details
                  of acquisitions:Fair
                  value of assets acquired (excludingcash
                  of $92,702 in 2005
              
              $
              —
              
              $
              4,088,383Intangibles
              
              
              178,276
              
              
              2,114,395Goodwill
              
              
              2,000,000
              
              
              12,601,200Cash
                  paid for acquisitions
              
              $
              2,178,276
              
              $
              18,803,978


See
        notes
        to consolidated financial statements.




-9-
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BEL
      FUSE
      INC. AND SUBSIDIARIES


NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




1.
            BASIS
                OF PRESENTATION AND ACCOUNTING
                POLICIES




The
      consolidated balance sheet as of March 31, 2006, and the consolidated statements
      of operations, stockholders' equity and cash flows for the periods presented
      herein have been prepared by Bel Fuse Inc. (the "Company" or "Bel") and are
      unaudited. In the opinion of management, all adjustments (consisting solely
      of
      normal recurring adjustments) necessary to present fairly the financial
      position, results of operations, changes in stockholders' equity and cash flows
      for all periods presented have been made. The information for the consolidated
      balance sheet as of December 31, 2005 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
      products used in local area networking, telecommunication, business equipment
      and consumer electronic applications. 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 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
      March
      31, 2006 and December 31, 2005, cash equivalents approximated $22,652,000 and
      $13,444,000, 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 accumulated 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-
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          to Table of Contents**





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
      Accumulated 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 $41,000 and ($83,000)
      for
      the three months ended March 31, 2006 and 2005, respectively, and have been
      expensed in the consolidated statements 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". 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.




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For
      certain customers, the Company provides consigned inventory, either at the
      customer’s facility or at a third party warehouse. Sales of consigned inventory
      are recorded when the customer withdraws inventory from consignment **.** During
      all periods in 2006 and 2005, inventory on consignment was
      immaterial.





The
      Company typically has a twelve-month warranty policy for workmanship defects.
      Warranty returns have historically averaged at or below 1% of annual net sales.
      The Company establishes warranty reserves when a warranty issue becomes known
      as
      warranty claims have historically been immaterial. No general reserves for
      warranties have been established.





The
      Company is not contractually obligated to accept returns except for defective
      product or in instances where the product does not meet the customer's quality
      specifications. However, the Company may permit its customers to return product
      for other reasons. In these instances, the Company would generally require
      a
      significant cancellation penalty payment by the customer. The Company estimates
      such returns, where applicable, based upon management's evaluation of historical
      experience, market acceptance of products produced and known negotiations with
      customers. Such estimates are deducted from gross sales and provided for at
      the
      time revenue is recognized.





GOODWILL- 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.





For
      that
      portion of foreign earnings that have not been repatriated, 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.




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The
      principal items giving rise to deferred taxes are unrealized gains on marketable
      securities available for sale, the use of accelerated depreciation methods
      for
      machinery and equipment, timing differences between book and tax amortization
      of
      intangible assets and goodwill and certain expenses which have been deducted
      for
      financial reporting purposes which are not currently deductible for income
      tax
      purposes.





STOCK-BASED
      COMPENSATION - The
      Company has one stock-based compensation plan under which both incentive
      stock-options and restricted stock awards are granted to employees and
      directors. Effective January 1, 2006, the Company accounts for stock based
      compensation under Statement of Financial Accounting Standards ("SFAS") No.
      123
      (R), "Share-Based Payment". The Company adopted SFAS 123(R) using the modified
      prospective method. Under modified prospective application, this SFAS applies
      to
      new awards and to awards modified, repurchased, or cancelled after the required
      effective date. Additionally, compensation cost for the portion of the awards
      for which the requisite service has not been rendered that are outstanding
      as of
      the required effective date shall be recognized as the requisite service is
      rendered on or after the required effective date. The compensation cost for
      the
      portion of awards shall be based on the grant-date fair value of those awards
      as
      calculated for either recognition or pro forma disclosures under SFAS 123.
      Changes to the grant-date fair value of equity awards granted before the
      required effective date of this Statement are precluded. The compensation cost
      for those earlier awards shall be attributed to periods beginning on or after
      the required effective date of this SFAS using the attribution method that
      was
      used under SFAS 123, except that the method of recognizing forfeitures only
      as
      they occur shall not be continued. Prior to January 1, 2006, the Company
      accounted for stock option grants issued to employees in accordance with SFAS
      No. 123, "Accounting for Stock-Based Compensation" and for periods prior to
      January 1, 2006, 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"
      .





During
      2005, the Company issued 152,400 class B common shares under a restricted stock
      plan to various officers and employees. The shares vest 25% after two years
      of
      employment with an additional 25% vesting in each of years three through five.
      This resulted in compensation expense of $187,000, net of tax benefit, for
      the
      three months ended March 31, 2006. The balance of $3,376,000 of deferred
      stock-based compensation, net of taxes, is included within paid-in-capital
      on
      the Company’s consolidated balance sheet. Additionally, stock based compensation
      expense related to incentive stock options amounted to $120,000, (pre-tax)
      for
      the three months ended March 31, 2006.




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Prior
      to
      January 1, 2006, the Company adopted the disclosure-only provisions of SFAS
      No.
      123. Had compensation cost for the Company's stock option plan been determined
      based on the fair value at the grant date for awards for the three months ended
      March 31, 2005 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:




Three
                MonthsEndedMarch
                31,2005Net
                earnings - as reported
            
            $
            4,313,365Add:
                Stock-based compensationexpense
                included in net income,net
                of taxes, as reportedDeduct:
                Total stock-basedemployee
                compensation expensedetermined
                under fair value basedmethod
                for all awards,net
                of taxes
            
            
            160,868Net
                earnings- pro forma
            
            $
            4,152,497Earnings
                per common share -basic-as
                reported
            
            $
            0.38Earnings
                per common share -basic-pro
                forma
            
            $
            0.37Earnings
                per common share -diluted-as
                reported
            
            $
            0.38Earnings
                per common share -diluted-pro
                forma
            
            $
            0.36


No
      options or other stock based compensation were granted during the three months
      ended March 31, 2006 and 2005.




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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 three months ended March 31, 2006
      and
      2005 amounted to $1.6 million and $1.9 million, respectively.





EVALUATION
      OF LONG-LIVED ASSETS - The
      Company reviews property and equipment and finite-lived intangible assets 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.





CASUALTY
      LOSS - During
      February 2006, the Company incurred a $964,000 pre-tax casualty loss primarily
      for uninsured raw materials destroyed by a fire at the Company's leased
      manufacturing facility in the Dominican Republic.





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:


Three
                  Months EndedMarch
                  31,2006
              
              2005Weighted
                  average shares outstanding - basic
              
              
              11,749,645
              
              
              11,371,677Dilutive
                  impact of stock options andunvested
                  restricted stock awards
              
              
              63,372
              
              
              135,822Weighted
                  average shares oustanding - diluted
              
              
              11,813,017
              
              
              11,507,499




During
      the three months ended March 31, 2006 and 2005, respectively, 16,000 and 24,000
      outstanding options were not included in the foregoing computations because
      they
      were antidilutive.




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FAIR
      VALUE OF FINANCIAL INSTRUMENTS - For
      financial instruments, including cash, marketable securities, accounts
      receivable, accounts payable and accrued expenses, it was assumed that the
      carrying amount approximated fair value because of the short maturities of
      such
      instruments. Interest rates that are currently available to the Company for
      issuance of debt with similar terms and remaining maturities are used to
      estimate fair value for bank debt. Management believes that the carrying amount
      of bank debt is a reasonable estimate of its fair value.





2.
            ACQUISITIONS





On
      June
      30, 2005, the Company acquired the common stock of Netwatch s.r.o., located
      in
      Prague, the Czech Republic, for approximately $1.9 million in cash of which
      $0.5
      million is due to the sellers by June 30, 2006. Netwatch s.r.o. is a designer
      and manufacturer of high-performance fiber optic and copper cable assemblies
      for
      data and telecommunication applications. Purchase price allocations have been
      estimated by management, and are preliminary . Management has estimated
      approximately $1.0 million of goodwill arose from the transaction which is
      included in the Company’s European reporting unit.





The
      acquisition has been accounted for using the purchase method of accounting
      and,
      accordingly, the results of operation of Netwatch s.r.o. have been included
      in
      the Company’s consolidated financial statements from June 30, 2005.





There
      was
      no in process research and development acquired as part of this
      acquisition.





On
      March
      22, 2005, the Company acquired the common stock of Galaxy Power Inc. ("Galaxy"),
      located in Westborough, Massachusetts, for approximately $19.0 million in cash
      including transaction costs of approximately $0.4 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 preliminary and subject to adjustment. The
      purchase price has been allocated to both tangible and intangible assets and
      liabilities based on estimated fair values after considering an independent
      formal appraisal. Approximately $11.2 million of goodwill and $2.6 million
      of
      identifiable intangible assets arose from the transaction and are included
      in
      the Company’s North American reporting unit. The identifiable intangible assets
      and related deferred tax liabilities are being amortized on a straight-line
      basis over their estimated useful lives.





The
      acquisition has been accounted for using the purchase method of accounting
      and,
      accordingly, the results of operations of Galaxy have been included in the
      Company's consolidated financial statements from March 22, 2005.





There
      was
      no in process research and development acquired as part of this
      acquisition.




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The
      following unaudited pro forma summary results of operations assume that Galaxy
      and Netwatch s.r.o. had been acquired as of January 1, 2005 (in thousands,
      except per share data):


Three
                  Months EndedMarch
                  31,2005Net
                  sales
              
              $
              49,732Net
                  earnings
              
              
              4,039Earnings
                  per share - diluted
              
              
              0.35








The
      information above is not necessarily indicative of the results of operations
      that would have occurred if the acquisitions had been consummated as of January
      1, 2005. Such information should not be construed as a representation of the
      future results of operations of the Company.





A
      condensed combined balance sheet of the major assets and liabilities of Galaxy
      and Netwatch s.r.o., as of their acquisition dates is as follows:


Cash
              
              $
              311,856Accounts
                  receivable
              
              
              3,687,331Inventories
              
              
              2,862,571Prepaid
                  expenses
              
              
              96,120Income
                  taxes receivable
              
              
              5,488Property,
                  plant andequipment
              
              
              1,545,526Other
                  assets
              
              
              32,083Deferred
                  tax asset
              
              
              1,392,850Goodwill
              
              
              12,546,080Intangible
                  assets
              
              
              1,960,000Notes
                  payable
              
              
              (860,694
              )Accounts
                  payable
              
              
              (2,129,165
              )Accrued
                  expenses
              
              
              (465,002
              )Net
                  assets acquired
              
              $
              20,985,044






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3.
            GOODWILL
                AND OTHER INTANGIBLES





Goodwill
      represents the excess of the purchase price and related acquisition costs over
      the value assigned to the net tangible and other intangible assets with finite
      lives acquired in a business acquisition.





Effective
      January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
      Intangible Assets". Under SFAS No. 142, goodwill and intangible assets deemed
      to
      have indefinite lives are no longer amortized, but are subject to, at a minimum,
      an annual impairment test. If the carrying value of goodwill or intangible
      assets exceeds its fair market value, an impairment loss would be recorded.





Other
      intangibles include patents, product information, covenants not-to-compete
      and
      supply agreements. Amounts assigned to these intangibles have been determined
      by
      management. Management considered a number of factors in determining the
      allocations, including valuations and independent appraisals. Other intangibles
      are being amortized over 1 to 10 years. Amortization expense was $795,000 and
      $315,000 for the three months ended March 31, 2006 and 2005,
      respectively.





Under
      the
      terms of the E-Power Ltd (“E-Power”) and Current Concepts, Inc. (“Current
      Concepts”) 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. During February
      2006, E-Power was paid $2.0 million in contingent purchase price payments as
      E-Power's sales, as defined, reached $15.0 million. An additional $4.0 million
      will be paid if such sales reach $25.0 million on a cumulative basis through
      May
      2007. The contingent purchase price payments for E-Power are accounted for
      as
      additional purchase price and as an increase to goodwill when such payment
      obligations are incurred. Current Concepts will be paid 16% of sales, as
      defined, on the first $10.0 million of sales through May 2007. During the three
      months ended March 31, 2006 and 2005, the Company paid approximately $178,000
      and $114,000, respectively, in contingent purchase price payments to Current
      Concepts. The contingent purchase price payments for Current Concepts are
      accounted for as additional purchase price and as an increase to covenants
      not
      to compete within intangible assets when such payment obligations are
      incurred.




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The
      changes in the carrying value of goodwill classified by geographic reporting
      units, net of accumulated depreciation, for the three months ended March 31,
      2006 and the year ended December 31, 2005 are as follows:


Total
              
              Asia
              
              North
                  America
              
              EuropeBalance,
                  January 1, 2005
              
              $
              9,881,854
              
              $
              6,407,435
              
              $
              2,869,092
              
              $
              605,327Goodwill
                  allocationrelated
                  to acquisitions
              
              
              12,546,080
              
              
              —
              
              
              11,543,846
              
              
              1,002,234Balance,
                  December 31, 2005
              
              
              22,427,934
              
              
              6,407,435
              
              
              14,412,938
              
              
              1,607,561Goodwill
                  allocationrelated
                  to acquisitions
              
              
              1,689,808
              
              
              2,000,000
              
              
              (310,192
              )
              
              -Balance,
                  March 31, 2006
              
              $
              24,117,742
              
              $
              8,407,435
              
              $
              14,102,746
              
              $
              1,607,561





The
      components of intangible assets other than goodwill by geographic reporting
      unit
      are as follows:


December
                  31, 2005Total
              
              Asia
              
              North
                  AmericaGross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              AccumulatedAmount
              
              Amortization
              
              Amount
              
              Amortization
              
              Amount
              
              AmortizationPatents
                  and ProductInformation
              
              $
              2,935,000
              
              $
              1,812,853
              
              $
              2,653,000
              
              $
              1,634,566
              
              $
              282,000
              
              $
              178,287Customer
                  relationships
              
              
              1,160,000
              
              
              178,833
              
              
              —
              
              
              —
              
              
              1,160,000
              
              
              178,833Covenants
                  not-to-compete
              
              
              5,021,034
              
              
              4,342,160
              
              
              4,221,034
              
              
              3,813,589
              
              
              800,000
              
              
              528,571$
              9,116,034
              
              $
              6,333,846
              
              $
              6,874,034
              
              $
              5,448,155
              
              $
              2,242,000
              
              $
              885,691
  March
                  31, 2006Total
              
              Asia
              
              North
                  AmericaGross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              AccumulatedAmount
              
              Amortization
              
              Amount
              
              Amortization
              
              Amount
              
              AmortizationPatents
                  and ProductInformation
              
              $
              2,935,000
              
              $
              1,930,805
              
              $
              2,653,000
              
              $
              1,746,044
              
              $
              282,000
              
              $
              184,761Customer
                  relationships
              
              
              1,830,000
              
              
              333,148
              
              
              —
              
              
              —
              
              
              1,830,000
              
              
              333,148Covenants
                  not-to-compete
              
              
              5,199,310
              
              
              4,864,772
              
              
              4,399,310
              
              
              4,136,201
              
              
              800,000
              
              
              728,571$
              9,964,310
              
              $
              7,128,725
              
              $
              7,052,310
              
              $
              5,882,245
              
              $
              2,912,000
              
              $
              1,246,480






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


EstimatedYear
                  Ending
              
              AmortizationDecember
                  31,
              
              Expense2006
              
              $
              799,9012007
              
              
              809,2772008
              
              
              534,2872009
              
              
              427,5962010
              
              
              134,904




4.
            MARKETABLE
                SECURITIES





The
      Company has cumulatively acquired a total of 4,600,000 shares of the common
      stock of a publicly-held company (“Merger Candidate”) at a total purchase price
      of $14,393,032. The Merger Candidate had a market capitalization of
      approximately $363 million as of February 23, 2006. These purchases are
      reflected on the Company’s consolidated balance sheet as marketable securities .
      These marketable securities are considered to be available for sale under SFAS
      No. 115, “Accounting for Certain Investments in Debt and Equity Securities”.
      Thus, as of March 31, 2006, the Company has recorded an unrealized gain, net
      of
      income taxes, of approximately $2.8 million 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 the Merger Candidate, or $1 million, whichever
      is lower. As of March 31, 2006, the Company has accrued a fee in the amount
      of
      approximately $900,000. Such amount has been deferred within other assets.
      If
      the proposed acquisition of the Merger Candidate 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.





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 are reflected on the Company's consolidated balance sheet as
      marketable securities as available for sale. As of March 31, 2006, the Company
      has recorded an unrealized gain, net of investment banker fees and income taxes,
      of approximately $3.2 million, 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, of which $150,000
      has
      previously been paid. As of March 31, 2006, the Company has accrued a fee in
      the
      amount of approximately $850,000. Such amount has been deferred within other
      assets. On April 28, 2006, Artesyn was acquired by Emerson Network Power for
      $11.00 per share in cash. Accordingly, during the second quarter of 2006 the
      Company will recognize a gain of approximately $3.2 million, net of tax and
      investment banker’s advisory fees, associated with the Artesyn investment. The
      Company expects to pay bonuses to key employees in connection with this
      transaction in the approximate amount of $1.0 million during the second or
      third
      quarter of 2006.




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At
      March
      31, 2006 and December 31, 2005, respectively, marketable securities have a
      cost
      of approximately $32,709,000 and $32,893,000, an estimated fair value of
      approximately $43,201,000 and $38,463,000 and gross unrealized gains of
      approximately $10,492,000 and $5,570,000. Such unrealized gains are included,
      net of tax, in accumulated other comprehensive income. The Company had realized
      losses of approximately $88,000 for the three months ended March 31,
      2006.





5.
            INVENTORIES





The
      components of inventories are as follows:


March
                  31,
              
              December
                  31,2006
              
              2005Raw
                  materials
              
              $
              19,070,218
              
              $
              19,342,703Work
                  in progress
              
              
              6,346,471
              
              
              2,515,174Finished
                  goods
              
              
              10,278,259
              
              
              11,089,226$
              35,694,948
              
              $
              32,947,103




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:


Three
                  Months EndedMarch
                  31, 20062006
              
              2005Total
                  segment revenuesNorth
                  America
              
              $
              18,494,886
              
              $
              17,960,953Asia
              
              
              38,905,599
              
              
              31,135,372Europe
              
              
              5,684,833
              
              
              3,998,422Total
                  segment revenues
              
              
              63,085,318
              
              
              53,094,747Reconciling
                  items:Intersegment
                  revenues
              
              
              (8,459,070
              )
              
              (7,656,462
              )Net
                  sales
              
              $
              54,626,248
              
              $
              45,438,285Income
                  (loss) from Operations:North
                  America
              
              $
              (893,902
              )
              $
              1,284,654Asia
              
              
              4,840,319
              
              
              4,084,950Europe
              
              
              351,966
              
              
              158,567$
              4,298,383
              
              $
              5,528,171







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7.
            DEBT





a.
            Short-term
                debt





Previously
      the Company had available one domestic line of credit of $10 million. During
      March 2005, the Company borrowed $8 million against the line of credit to
      partially finance the acquisition of Galaxy. The outstanding balance was paid
      off in its entirety on June 20, 2005. During July 2005, the Company amended
      its
      credit agreement to increase the line of credit to $20 million, which expires
      on
      July 21, 2008. During October 2005, the Company borrowed $4 million against
      the
      line of credit. The outstanding balance was paid off in its entirety during
      December 2005. There was no balance outstanding as of March 31, 2006. At that
      date, the entire $20 million line of credit was available to the Company to
      borrow. The loan is collateralized with a first priority security interest
      in
      and lien on 65% of all the issued and outstanding shares of the capital stock
      of
      certain of the foreign subsidiaries of the Company and all other personal
      property and certain real property of the Company. The loan bears interest
      at
      LIBOR plus 0.75% to 1.25% based on certain financial statement ratios maintained
      by the Company. As of March 31, 2006 the Company is in compliance with its
      debt
      covenants.





The
      Company’s Hong Kong subsidiary has an unsecured line of credit of approximately
      $2 million which was unused as of March 31, 2006. The line of credit expires
      May
      31, 2006. Borrowing on the line of credit is guaranteed by the U.S. parent.
      The
      line of credit bears interest at a rate determined by the bank as the financing
      is extended.





b.
            Long-term
                debt





On
      March
      21, 2003, the Company entered into a $10 million secured term loan, which was
      paid off in June 2005. The loan was used to partially finance the Company's
      acquisition of Insilco's Passive Components Group. This term loan facility
      is no
      longer available to the Company.





For
      the
      three months ended March 31, 2006 and 2005, the Company recorded interest
      expense of $27,000 and $67,000, respectively.





8.
            ACCRUED
                EXPENSES





Accrued
      expenses consist of the following:


March
                  31,
              
              December
                  31,2006
              
              2005Sales
                  commissions
              
              $
              1,742,192
              
              $
              1,812,135Investment
                  banking commissions
              
              
              1,752,593
              
              
              1,105,510Subcontracting
                  labor
              
              
              1,686,096
              
              
              1,597,279Salaries,
                  bonuses andrelated
                  benefits
              
              
              3,199,844
              
              
              2,642,729Other
              
              
              3,035,597
              
              
              3,509,905$
              11,416,322
              
              $
              10,667,558








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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 is made with Company stock purchased in the open market. The
      expense for the three months ended March 31, 2006 and 2005 amounted to
      approximately, $136,000 and $123,000, respectively. As of March 31, 2006, the
      plans owned 18,374 and 133,709 shares of Bel Fuse Inc. Class A and Class B
      common stock, respectively.





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 three months ended
      March 31, 2006 and 2005 amounted to approximately $126,000 and $104,000,
      respectively. As of March 31, 2006, the plan owned 3,323 and 17,342 shares
      of
      Bel Fuse Inc. Class A and Class B common stock, respectively.





The
      Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
      provide a limited group of key management and highly compensated employees
      of
      the Company 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 three months ended March 31, 2006 and 2005 amounted to
      approximately $414,000 and $220,000, respectively.




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The
      components of SERP expense are as follows:


Three
                  Months EndedMarch
                  31,2006
              
              2005Service
                  cost
              
              $
              313,000
              
              $
              99,000Interest
                  cost
              
              
              61,000
              
              
              77,000Amortization
                  of adjustments
              
              
              40,000
              
              
              44,000Total
                  SERP expense
              
              $
              414,000
              
              $
              220,000




March
                  31,
              
              December
                  31,2006
              
              2005Balance
                  sheet amounts:Accrued
                  pension liability
              
              $
              3,660,114
              
              $
              3,450,688Intangible
                  asset
              
              
              1,655,362
              
              
              1,655,362




10.
            SHARE-BASED
                COMPENSATION





On
      January 1, 2006, the Company adopted SFAS No. 123 (R) "Share-Based Payment"
      requiring the recognition of compensation expense in the Consolidated Statements
      of Operations related to the fair value of its employee share-based options
      and
      awards. SFAS No. 123 (R) revises SFAS No. 123 "Accounting for Stock-Based
      Compensation" and supercedes APB Opinion No. 25 "Accounting for Stock Issued
      to
      Employees." SFAS No. 123(R) is supplemented by SEC Staff Accounting Bulletin
      ("SAB") No. 107 "Share-Based Payment." SAB No. 107 expresses the SEC staff's
      views regarding the interaction between SFAS No. 123(R) and certain SEC rules
      and regulations including the valuation of share-based payment
      arrangements.





The
      Company will recognize the cost of all employee stock options on a straight-line
      attribution basis over their respective vesting periods, net of estimated
      forfeitures. The Company has selected the modified prospective method of
      transition; accordingly, prior periods have not been restated. Prior to adopting
      SFAS No. 123(R), the Company applied APB Opinion No. 25, and related
      interpretations in accounting for its stock-based compensation plans. All
      employee stock options were granted at or above the grant date market price.
      Accordingly, no compensation cost was recognized for fixed stock option
      grants.




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On
      March
      31, 2006, the Company has two share-based compensation plans, which are
      described below. In the first quarter of 2006, the adoption of SFAS No. 123
      (R)
      resulted in incremental stock-based compensation expense of $113,000. The
      incremental stock-based compensation expense caused earnings before provision
      for income taxes and net earnings to decrease by ($113,000) and basic and
      diluted earnings per common share to decrease by $0.01 per share. In addition,
      in connection with the adoption of SFAS No. 123 (R), net cash provided by
      operating activities decreased and net cash provided by financing activities
      increased in the first quarter of 2006 by $107,105 related to excess tax
      benefits from stock-based payment arrangements..





The
      aggregate compensation cost recognized in net earnings for stock based
      compensation (including incentive stock options, restricted stock and dividends
      on restricted stock, as further discussed below) amounted to $381,000 and $-0-
      for the three months ended March 31, 2006 and 2005, respectively. The Company
      did not use any cash to settle any equity instruments granted under share based
      arrangements during the three months ended March 31, 2006 and 2005.





Under
      the
      provisions of SFAS 123 (R), the recognition of deferred compensation,
      representing the amount of unrecognized restricted stock expense that is reduced
      as expense is recognized, at the date restricted stock is granted, is no longer
      required.  Therefore, in the first quarter of 2006, the amount that had
      been in "Deferred compensation" in the Consolidated Balance Sheet was reversed
      to zero.




Incentive
      Stock Options





The
      Company has a Qualified Stock Option Plan (the "Plan") which provides for the
      granting of "Incentive Stock Options" to key employees within the meaning of
      Section 422 of the Internal Revenue Code of 1986, as amended. The Company
      believes that such awards better align the interest of its employees with those
      of its shareholders. The Plan provides for the issuance of 2,400,000 common
      shares. Substantially all options outstanding become exercisable twenty-five
      percent (25%)  one
      year
      from the date of grant and twenty-five percent (25%) for each year of the three
      years thereafter. Upon exercise the Company will issue new shares. The exercise
      price of the options granted pursuant to the Plan is not to be less than 100
      percent of the fair market value of the shares on the date of grant. An option
      may not be exercised within one year from the date of grant, and in general,
      no
      option will be exercisable after five years from the date granted.





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, which was the last year options were
      granted; dividends yield of 0.9%, 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 year ended December 31, 2005 or during the three months
      ended
      March 31, 2006. Expected lives of options previously granted was estimated
      using
      the historical exercise behavior of employees. Expected volatilities are based
      on implied volatilities from historical volatility of the Company's stock.
      The
      Company uses historical data to estimate employee forfeitures . The risk free
      rate is based on the U.S. Treasury yield curve in effect at the time of the
      grant.




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A
      summary
      of option activity under the plan as of December 31, 2005 and changes during
      the
      three months ended March 31, 2006 is presented below:


WeightedAverageWeighted
              
              Remaining
              
              AggregateAverage
              
              Contractual
              
              IntrinsicOptions
              
              Shares
              
              Exercise
                  Price
              
              Term
              
              ValueOutstanding
                  at January 1, 2006
              
              
              286,013
              
              $
              24.96Granted
              
              
              —Exercised
              
              
              (51,913
              )
              
              26.17
              
              
              
              
              $
              565,102Forfeited
                  or expired
              
              
              (6,000
              )
              
              30.96Outstanding
                  at March 31, 2006
              
              
              228,100
              
              $
              24.52
              
              
              1.5
              
              $
              2,396,328Exercisable
                  at March 31, 2006
              
              
              56,600
              
              $
              25.86
              
              
              1.5
              
              $
              219,303


During
      the three months ended March 31, 2006 and 2005 the Company received $1,358,556
      and $776,900 from the exercise of share options and realized tax benefits of
      $107,000 and $116,000, respectively. The total intrinsic value of options
      exercised during the three months ended March 31, 2006 and 2005 was $565,102
      and
      $542,105, respectively.





A
      summary
      of the status of the Company's nonvested shares as of December 31, 2005 and
      changes during the three months ended March 31, 2006 is presented
      below:


Weighted-AverageGrant-DateNonvested
                  Shares
              
              Shares
              
              Fair
                  ValueNonvested
                  at December 31, 2005
              
              
              177,500
              
              $
              24.28Granted
              
              
              —Vested
              
              
              —Forfeited
              
              
              (6,000
              )
              
              (30.96
              )Nonvested
                  at March 31, 2006
              
              
              171,500
              
              $
              24.04




At
      March
      31, 2006 there was $391,883 of total unrecognized compensation cost related
      to
      non vested share-based compensation arrangements granted under the Plan. The
      cost is expected to be recognized over a weighted average period of 2 years.
      The
      total fair value of shares vested during the three months ended March 31, 2006
      and 2005 was $-0- and $-0-, respectively.




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Restricted
      Stock Awards





The
      Company provides common stock awards to certain officers and key employees.
      The
      Company grants these awards, at its discretion, from the shares available under
      the Stock Option plan. The shares awarded are earned in 25% increments on the
      second, third, forth and fifth anniversaries of the award, respectively, and
      are
      distributed provided the employee has remained employed by the Company through
      such anniversary dates; otherwise the unearned shares are forfeited. The market
      value of these shares at the date of award is recorded as compensation expense
      on the straight-line method over the five-year periods from the respective
      award
      dates, as adjusted for forfeitures of unvested awards. Deferred stock-based
      compensation expense of $3.4 million associated with unearned shares under
      this
      plan as of March 31, 2006, is reported within Stockholders' equity on the
      Company's consolidated balance sheets, net of deferred tax benefit. Pretax
      compensation expense was $261,000 for the three months ended March 31, 2006
      and
      $248,000 for the year ended December 31, 2005.





A
      summary
      of the activity under the Restricted Stock Awards Plan as of December 31, 2005
      and for the three months ended March 31, 2006 is presented below:


WeightedWeighted
              
              AverageAverage
              
              Remaining
              
              AggregateRestricted
                  Stock
              
              
              
              Award
              
              Contractual
              
              IntrinsicAwards
              
              Shares
              
              Price
              
              Term
              
              ValueOutstanding
                  at January 1, 2006
              
              
              152,400
              
              $
              35.64Granted
              
              
              —Awardd
              
              
              —Forfeited
              
              
              (2,200
              )
              
              (37.00
              )Outstanding
                  at March 31, 2006
              
              
              150,200
              
              
              35.62
              
              
              4.5
              
              $
              —Exercisable
                  at March 31, 2006
              
              
              —
              
              
              
              
              
              —
              
              $
              —


As
      of
      March 31, 2006 there was $4.7 million of total pre-tax unrecognized compensation
      cost related to non-vested share based compensation arrangements granted under
      the restricted stock award plan; that cost is expected to be recognized over
      a
      period of 4.5 years.





The
      Company's policy is to issue new shares to satisfy Restricted Stock Awards
      and
      incentive stock option exercises.




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11.
            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 December
      31, 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. No stock was repurchased during the three months ended
      March
      31, 2006.





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;





·
            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).






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·
            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.





12.
            COMPREHENSIVE
                INCOME




Comprehensive
      income for the three months ended March 31, 2006 and 2005 consists
      of:


Three
                  Months EndedMarch
                  31,2006
              
              2005Net
                  earnings
              
              $
              3,997,299
              
              $
              4,313,365Currency
                  translation adjustment-net
                  of taxes
              
              
              91,879
              
              
              (190,527
              )Increase
                  (decrease) in unrealizedgain
                  on marketable securities-
                  net of taxes
              
              
              2,507,671
              
              
              (3,175,742
              )Comprehensive
                  income
              
              $
              6,596,849
              
              $
              947,096




13.
            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 sales agreement expired during January
      2006. The buyer and seller are continuing to negotiate about certain
      environmental matters among themselves and with the State of New Jersey. The
      seller and buyer are aware that a portion of the property may be subject to
      tidelands claims by the State of New Jersey. The Company believes that the
      property will be sold during 2006. Additionally, the Company is obligated for
      environmental remediation costs of up to $350,000. As of March 31, 2006, the
      Company had also paid $195,000 of legal, site testing and State of New Jersey
      Environmental Protection Agency fees. As these costs are incurred, the Company
      capitalizes them on the Company's consolidated balance sheet as assets held
      for
      sale. The Company has classified the asset as held for sale with a net book
      value of approximately $828,000 on the Company's consolidated balance sheet
      at
      March 31, 2006.




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14.
            NEW
                FINANCIAL ACCOUNTING STANDARDS





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
      "Accounting Changes and Error Correction" - a replacement of APB Opinion No.
      20
      and FASB Statement No. 3. This Statement applies to all voluntary changes in
      accounting principles. It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. This Statement requires retrospective
      application to prior periods' financial statements of changes in accounting
      principle, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. The Statement also carries
      forward the guidance in APB Opinion No. 20 requiring justification of a change
      in accounting principle on the basis of preferability. This Statement is
      effective for accounting changes and corrections made in fiscal years beginning
      after December 31, 2005.





In
      December 2004, FASB issued SFAS No. 123(R), "Share-Based Payment" , that
      requires compensation costs related to share-based payment transactions to
      be
      recognized in the financial statements. With limited exceptions, the amount
      of
      compensation cost is measured based on the grant-date fair value of the equity
      or liability instruments issued. In addition, liability awards are to 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 accounted for the stock-based compensation costs using
      the modified prospective method at the time of adoption. The adoption of SFAS
      123(R) resulted in incremental stock-based compensation expense of $113,000
      during the three months ended March 31, 2006. The adoption of SFAS 123(R) did
      not have a material effect on the consolidated balance sheet as of March 31,
      2006 or the consolidated statement of cash flows for the three months ended
      March 31, 2006.





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 had
      no
      effect on the provision for income taxes during the three months ended March
      31,
      2006.




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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 had no effect on the provision for income taxes during
      the three months ended March 31, 2006.





In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets",
      an amendment of APB Opinion No. 29. 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 did not
      have
      a material effect on the Company's consolidated financial position or results
      of
      operations.





In
      November 2004 the FASB issued SFAS No. 151, “Inventory Costs”, an amendment to
      Accounting Research Bulletin No. 43 chapter 4. 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 did not have a material impact on the Company's consolidated financial
      position or results of operations.




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15.
            Legal
                Proceedings





The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc., a New Jersey
      corporation, and Bel Power, Inc., a Massachusetts corporation, v. Andrew
      Ferencz, Gregory Zovonar, Bernhard Schroter, EE2GO, Inc., a Massachusetts
      corporation, Howard E. Kaepplein and William Ng, Defendants brought in the
      Supreme Court of the Commonwealth of Massachusetts. The Company was granted
      injunctive relief and is seeking damages against the former stockholders of
      Galaxy Power, Inc, the Company’s recent acquisition, and key employees of Galaxy
      and a corporation formed by some or all of the individual defendants. The
      Company has alleged that the defendants violated their written non-competition,
      non-disclosure and non-solicitation agreements, diverted business and usurped
      substantial business opportunities with key customers, misappropriated
      confidential information and trade secrets, and harmed the Company’s business.




In
      a
      related matter, the Company is a defendant in a lawsuit captioned Robert
      Chimielnski, P.C. on behalf of the stockholder representatives and the former
      stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al brought in the
      Superior Court of the Commonwealth of Massachusetts. This complaint for damages
      and injunctive relief is based on an alleged breach of contract and other
      allegedly illegal acts in a corporate context arising out of the defendants'
      objection to the release of nearly $2.0 million held in escrow under the terms
      of the stock purchase agreement between Galaxy and the Company.




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.




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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, 2005. As a result of these
      and other factors, the Company may experience material fluctuations in future
      operating results on a quarterly or annual basis, which could materially and
      adversely affect its business, financial condition, operating results, and
      stock
      prices. Furthermore, this document and other documents filed by the Company
      with
      the Securities and Exchange Commission (the “SEC”) contain certain
      forward-looking statements under the Private Securities Litigation Reform Act
      of
      1995 (“Forward-Looking Statements”) with respect to the business of the Company.
      These Forward-Looking Statements are subject to certain risks and uncertainties,
      including those detailed in Item 1A of the Company’s Annual Report on Form 10-K
      for the year ended December 31, 2005, 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.





We
      design
      our products to enhance the systems in which they operate. As our products
      typically become components in other third-party’s systems, our revenues are
      largely driven by the extent to which our customers can design and develop
      new
      applications and the extent to which those customers have needs for the types
      of
      components that we can provide. We are problem-solvers; we design most of our
      products to combine various discrete components in a manner that will allow
      the
      systems designer to save space and to offer a more efficient
      product.





Our
      expenses are driven principally by the cost of the materials that we use and
      the
      cost of labor where our factories are located. In recent years, the increasing
      cost of copper, steel and petroleum-based products, increased transportation
      costs and the increased wage structure in the Far East have contributed to
      increases in manufacturing costs.




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During
      the first quarter of 2006, approximately $3.9 million of the Company’s sales
      increase was attributable to the acquisition by the Company of Galaxy Power,
      Inc. (“Galaxy”), which occurred on March 22, 2005, and Netwatch s.r.o. (now
      named Bel Stewart Net s.r.o.), which occurred on June 30, 2005. Excluding the
      2005 acquisitions, the Company had an organic sales increase of 11.7% for the
      first quarter of 2006. With these acquisitions, the Company's sales increased
      by
      20.2%. The disclosure of the Company's revenues excluding the 2005 acquisitions
      may constitute a "Non-GAAP Financial Measure". The Company has enabled a
      reconciliation by also including a reference to total revenues. The Company
      believes that the reference to revenues excluding the 2005 acquisitions improves
      the comparability of its disclosures. The 2005 acquisitions resulted in
      additional Cost of Sales and Selling, General and Administrative expenses in
      the
      first quarter of 2006 of $2.9 million and $1.1 million, respectively. Galaxy
      reflected a loss of approximately $0.3 million, net of tax benefit, including
      amortization of intangibles of approximately $0.4 million
      (pre-tax).




Gross
      profit margins were lower during the three months ended March 31, 2006 compared
      to March 31, 2005, principally due to increased raw material costs resulting
      from higher commodity prices for copper, steel, and petroleum-based products
      and
      changes in the Company’s product mix. Sales of the Company’s DC-DC power
      products have increased. While these products are strategic to Bel’s growth and
      important to total earnings, they return lower gross profit percentage margins
      as a larger percentage of their bills of material are purchased components.
      As
      these sales continue to increase, the Company’s average gross profit percentage
      will likely decrease unless offset by increased sales of higher margin products.
      The increasing sales of the Company's DC-DC power products also have an impact
      on the accelerated write off of intangible assets related to the acquisition
      of
      Current Concepts. The contingent purchase price payments are accounted for
      as
      additional purchase price and as an increase to covenants not to compete within
      intangible assets when such payment obligations are incurred. Due to the shorter
      remaining lives of the covenants not to compete, any additional contingent
      purchase price payments that are allocated to covenants not to compete will
      be
      amortized over a shorter remaining life, or will be expensed as incurred if
      the
      applicable covenant to compete has expired.




During
      the three months ended March 31, 2006, the Company incurred increased
      amortization expense in the pretax amount of $0.5 million related to
      identifiable intangibles arising from contingent payments which were made under
      the terms of the Current Concepts acquisition and from the Galaxy acquisition.





The
      Company also incurred $0.4 million in pre-tax stock compensation expense during
      the three months ended March 31, 2006 in connection with its Restricted Stock
      Award and Incentive Stock Option Plan. This expense is reflected in the
      Company’s selling, general and administrative expenses which is principally
      consistent with the classification of employee compensation expense. During
      the
      three months ended March 31, 2005 the Company did not incur an expense for
      stock
      compensation.





During
      February 2006, the Company incurred a $964,000 pre-tax casualty loss primarily
      for uninsured raw materials destroyed by a fire at the Company's leased
      manufacturing facility in the Dominican Republic.




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The
      Company repaid bank debt during June 2005 in the amount of $14.5 million and
      during December 2005 in the amount of $4.0 million. Such debt was incurred
      partially to fund the acquisition of Galaxy and the purchase of the capital
      stock of a publicly-held company ("Merger Candidate"). The Company also repaid
      bank and other obligations associated with the Galaxy acquisition in the amount
      of approximately $0.9 million.





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 unanticipated 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.




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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. Should any of this
      inventory be used in the manufacturing process for customer orders, the improved
      gross profit will be recognized at the time the completed product is shipped
      and
      the sale is recorded.




Acquisitions





Acquisitions
      continue to be a key element in the Company's growth strategy. If the Company's
      evaluation of an acquisition candidate misjudges its technology, estimated
      future sales and profitability levels, ability to keep pace with the latest
      technology, or working capital needs these factors could impair the value of
      the
      investment, which could materially adversely affect the Company's profitability.
      The Company recorded a goodwill impairment charge of $5.2 million in
      2002.





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”. 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.




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The
      Company is not contractually obligated to accept returns from non-distributor
      customers except for defective product or in instances where the product does
      not meet the Company’s quality specifications. If these conditions existed, the
      Company would be obligated to repair or replace the defective product or make
      a
      cash settlement with the customer. Distributors generally have the right to
      return up to 5% of their purchases over the previous three to six months and
      are
      obligated to purchase an amount at least equal to the return. If the Company
      terminates a distributor, the Company is obligated to accept as a return all
      of
      the distributor’s inventory from the Company. If the financial conditions of the
      Company’s customers were to deteriorate, resulting in an impairment of their
      ability to make payments, additional allowances for bad debt may be required
      which could have a material adverse effect on the Company’s consolidated results
      of operations and financial condition. The Company has a significant amount
      of
      sales with several major customers. The loss of any one of these customers
      could
      have a material adverse effect on the Company’s consolidated results of
      operations and financial position.





Results
      of Operations





The
      following table sets forth, for the first quarters of 2006 and 2005, the
      percentage relationship to net sales of certain items included in the Company’s
      consolidated statements of operations.


Percentage
                  of Net SalesThree
                  Months EndedMarch
                  31,2006
              
              2005Net
                  sales
              
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              73.2
              
              
              71.9Selling,
                  general andadministrative
                  expenses
              
              
              17.2
              
              
              15.9Casualty
                  loss
              
              
              1.8
              
              
              —Interest
                  expense and other costs
              
              
              (0.2
              )Interest
                  income - net
              
              
              1.0
              
              
              0.3Earnings
                  before provisionfor
                  income taxes
              
              
              8.6
              
              
              12.5Income
                  tax provision
              
              
              1.3
              
              
              3.0Net
                  earnings
              
              
              7.3
              
              
              9.5






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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) fromPrior
                  PeriodThree
                  Months EndedMarch
                  31, 2006compared
                  with ThreeMonths
                  Ended March31,
                  2005Net
                  sales
              
              
              20.2
              %Cost
                  of sales
              
              
              22.3Selling,
                  general andadministrative
                  expenses
              
              
              29.9Net
                  earnings
              
              
              (7.3
              )





**THREE
      MONTHS ENDED MARCH 31, 2006 VERSUS** **THREE
      MONTHS ENDED MARCH 31, 2005**





Sales





Net
      sales
      increased 20.2% from $45.4 million during the three months ended March 31,
      2005
      to $54.6 million during the three months ended March 31, 2006. The Company
      attributes the increase to increased module sales of $3.8 million of which
      $3.4
      million is attributable to the acquisition of Galaxy, strong demand for
      interconnect products resulting in an increase of $2.8 million in such sales,
      of
      which $0.5 million is attributable to the acquisition of Netwatch, and strong
      demand for magnetic sales resulting in an increase of $2.9 million in such
      sales, and a decrease in circuit protection sales of $0.3 million. Bel had
      an
      organic sales increase of 11.7% for the three months ended March 31, 2006.





The
      significant components of the Company's revenues for the three months ended
      March 31, 2006 were magnetic products of $31.8 million (as compared with $28.9
      million during the three months ended March 31, 2005), interconnect products
      of
      $11.1 million (as compared with $8.3 million during the three months ended
      March
      31, 2005), module products of $7.4 million (as compared with $3.6 million during
      the three months ended March 31, 2005), and circuit protection products of
      $4.3
      million (as compared with $4.6 million during the three months ended March
      31,
      2005.)




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Based
      in
      part on conflicting opinions the Company received from customers and competitors
      in the electronics industry pertaining to revenue growth during 2005, the
      Company cannot predict with any degree of certainty sales revenue for 2006.
      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% (19%) of total sales during the three months ended March
      31, 2006. The loss of this customer could have a material adverse effect on
      the
      Company's consolidated 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 third party facilities or at the Company's own
      manufacturing facilities. Such amounts are determined based upon the estimated
      stage of production and include labor cost and fringes and related allocations
      of factory overhead. The Company manufactures finished goods at its own
      manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the
      Dominican Republic and Mexico.





Cost
      of
      sales as a percentage of net sales increased from 71.9 % during the three months
      ended March 31, 2005 to 73.2% during the quarter ended March 31, 2006. The
      increase in the cost of sales percentage is primarily attributable to the
      following:





t
              The
                  Company incurred a 9.2% increase in material costs as a percentage
                  of net
                  sales. The increase in raw material costs is principally related
                  to
                  increased manufacturing of value-added products (including new
                  Galaxy
                  products in 2005), which have a higher raw material content than
                  the
                  Company’s other products, and increased costs for raw materials such as
                  copper, steel and petroleum-based products and increased transportation
                  costs.





t
              The
                  Company has also started to pay higher wage rates and benefits
                  to its
                  production workers in China. These higher rates and benefits are
                  reflected
                  in the Company’s cost of goods sold.




t
              Sales
                  of the Company’s DC-DC power products have increased. While these products
                  are strategic to Bel’s growth and important to total earnings, they return
                  lower gross profit percentage margins as a larger percentage of
                  their
                  bills of materials are purchased components. As these sales continue
                  to
                  increase, the Company’s average gross profit percentage will likely
                  decrease. The increasing sales also have an impact on the accelerated
                  write off of intangibles related to contingent purchase price payments
                  arising from the acquisition of Current
                  Concepts.






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Included
      in cost of sales are research and development expenses of $1.6 million and
      $1.9
      million for the three months ended March 31, 2006 and 2005, respectively.




Selling,
      General and Administrative Expenses





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales increased from 15.9 % during the three months ended March 31, 2005 to
      17.2% during the three months ended March 31, 2006. The Company attributes
      $.8
      million of the $2.2 million increase in the dollar amount of such expenses
      to
      increased selling expenses, including $.2 million in Galaxy related expenses.
      The $1.4 million increase in general and administrative expenses includes $1.0
      million related to Galaxy and Bel Net (including $.2 million of amortization
      of
      identifiable intangibles), additional stock compensation expense of $.4 million
      partially arising from the Company’s implementation of Statement of Financial
      Accounting Standards ("SFAS") 123 (R) during the first quarter of 2006 (see
      below and Notes 1 and 10 of the Notes to the Company's Consolidated Financial
      Statements) and additional professional fees of $0.3 million principally related
      to Sarbanes-Oxley compliance, offset in part by lower bad debt expense of $0.2
      million.




During
      the three months ended March 31, 2006, the Company expensed share based
      compensation costs in accordance with SFAS No. 123(R), “Share-based Payment".
      This expense is included in selling, general and administrative expenses in
      the
      amount of approximately $0.4 million, for the three months ended March 31,
      2006.




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Interest
      Income





Interest
      income earned on cash and cash equivalents increased by approximately $300,000
      during the three months ended March 31, 2006, as compared to the comparable
      period in 2005. The increase is due primarily to increased balances of cash
      and
      cash equivalent balances and marketable securities and increased yields on
      such
      balances.





Interest
      Expense and Other Costs





A
      $10
      million term loan was entered into on March 21, 2003, which was borrowed for
      the
      acquisition of Insilco's Passive Components Group. The loan bore interest at
      LIBOR plus 1.50% payable quarterly and was completely paid off by June 30,
      2005.
      Interest expense related to these borrowings amounted to $67,000 during the
      three months ended March 31, 2005. During the three months ended March 31,
      2006,
      interest and other expenses included $27,000 of financing expenses related
      to
      the Company's credit facility in the United States and $88,000 related to the
      loss from the sale of marketable securities.





Casualty
      Loss





The
      Company incurred an estimated loss of $1.0 million as a result of a fire at
      its
      leased manufacturing facility in the Dominican Republic for raw materials and
      equipment in excess of estimated insurance proceeds. The Company believes that
      production at this facility will be restored by the end of the second quarter
      of
      2006. This statements represents a Forward-Looking Statement. Actual results
      could differ materially as a result of unforeseen difficulties associated with
      raw materials and equipment scheduling.





Provision
      for Income Taxes





The
      provision for income taxes for the three months ended March 31, 2006 was $0.7
      million compared to $1.4 million during the three months ended March 31, 2005.
      The Company's earnings before income taxes for the three months ended March
      31,
      2006 are approximately $1.0 million less than in 2005. During the first quarter
      of 2006, the Company incurred lower taxes of approximately $0.7 million
      principally as a result of lower foreign taxes in the Far East due to the
      implementation by the Company of its Macao Commercial Offshore Company ("MOC")
      which is not subject to Macao corporation income taxes. This had an impact
      of
      reducing the effective tax rate from 24.1% for the three months ended March
      31,
      2005 to 14.1% for the three months ended March 31, 2006 as a percentage of
      earnings before provision for income taxes.




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The
      Company conducts manufacturing activities in the Far East. More specifically,
      the Company has the majority of its products manufactured in the People’s
      Republic of China (“PRC”), Hong Kong and Macao 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 Macao. Macao has a statutory
      corporate income tax rate of 16 percent. However, the Company, as a result
      of
      investing in a certain location in Macao, was able to obtain a 10-year tax
      holiday in Macao, thereby reducing its effective Macao income tax rate from
      16
      percent to 8 percent. The tax holiday in Macao 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 (i.e. PRC, Hong Kong
      and Macao). 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.




During
      2005, the Company was granted an offshore operating license from the government
      of Macao to set up a Commercial Offshore Company ("MCO") named Bel Fuse (Macao
      Commercial Offshore) Limited with the intent to handle all of the Company’s
      sales to third party customers in Asia. Sales to third party customers commenced
      during the first quarter of 2006. Sales will consist of products manufactured
      in
      the PRC. The MCO is not subject to Macao corporation income taxes. It is not
      possible at this time to determine the tax impact on the Company of the
      establishment of this new entity.





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. During 2005, $70.6 million of earnings were repatriated
      by
      the Company.




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Inflation
      and Foreign Currency Exchange




During
      the past two years, the effect of inflation on the Company's profitability
      was
      not material. Historically, fluctuations of the U.S. Dollar against other major
      currencies have not significantly affected the Company's foreign operations
      as
      most sales have been denominated in U.S. Dollars or currencies directly or
      indirectly linked to the U.S. Dollar. Most significant expenses, including
      raw
      materials, labor and manufacturing expenses, are either incurred in U.S. Dollars
      or the currencies of the Hong Kong Dollar, the Macao Pataca or the Chinese
      Renminbi. 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 losses of $41,000 and $83,000
      for
      the three months ended March 31, 2006 and 2005, respectively, which were charged
      to expense, and approximately $92,000 and ($190,000) for the three months ended
      March 31, 2006 and 2005, respectively, in unrealized exchange gains (losses)
      relating to the translation of foreign subsidiary financial statements which
      are
      included in accumulated other comprehensive income. Any change in linkage of
      the
      U.S. Dollar and the Hong Kong Dollar, the Chinese Renminbi or the Macao Pataca
      could have a material effect on the Company's consolidated financial position
      or
      results of operations.




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Liquidity
      and Capital Resources





Historically,
      the Company has financed its capital expenditures primarily through cash flows
      from operating activities, as supplemented by bank borrowings. Management
      believes that the cash flow from operations after payments of dividends combined
      with its existing capital base and the Company's available lines of credit,
      will
      be sufficient to fund its operations for at least the next 12 months. 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. During March 2005,
      the Company borrowed $8 million against this line of credit to partially finance
      the acquisition of Galaxy. The outstanding balance was paid off in its entirety
      on June 20, 2005. During July 2005, the Company amended its credit agreement
      to
      increase the line of credit to $20 million, which expires on July 31, 2008.
      During October 2005, the Company borrowed $4.0 million against the line of
      credit which was paid off during December 2005. As of March 31, 2006 there
      was
      no loan balance on the line of credit. The loan bears interest at LIBOR plus
      0.75% to 1.25% based on certain financial statement ratios maintained by the
      Company. As of December 31, 2005 and March 31, 2006, the entire $20 million
      line
      of credit was available to the Company to borrow. The loan is collateralized
      with a first priority security interest in and lien on 65% of all the issued
      and
      outstanding shares of the capital stock of certain of the foreign subsidiaries
      of the Company and all other personal property and certain real property of
      the
      Company.




The
      Company's Hong Kong subsidiary has an unsecured line of credit of approximately
      $2 million, which was unused at March 31, 2006. This line of credit expires
      on
      May 31, 2006. Borrowing on this line of credit is guaranteed by the Company.




For
      information regarding further commitments under the Company's operating leases,
      see Note 15 of Notes to Company's Consolidated Financial Statements in the
      Company's 2005 Annual Report on Form 10-K.




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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 are reflected on the Company's consolidated balance sheet as
      marketable securities as available for sale. As of March 31, 2006, the Company
      has recorded an unrealized gain, net of investment banker fees and income taxes,
      of approximately $3.2 million, 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, of which $150,000
      has
      previously been paid. As of March 31, 2006, the Company has accrued a fee in
      the
      amount of approximately $850,000. Such amount has been deferred within other
      assets. On April 28, 2006, Artesyn was acquired by Emerson Network Power for
      $11.00 per share in cash. Accordingly, during the second quarter of 2006 the
      Company will recognize a gain of approximately $3.2 million, net of tax and
      investment banker’s advisory fees, associated with the Artesyn investment. The
      Company expects to pay bonuses to key employees in connection with this
      transaction in the approximate amount of $1.0 million.





The
      Company has cumulatively acquired a total of 4,600,000 shares of the common
      stock of a publicly-held company (“Merger Candidate”) at a total purchase price
      of $14,393,032. The Merger Candidate had a market capitalization of
      approximately $363 million as of February 23, 2006. These purchases are
      reflected on the Company’s consolidated balance sheet as marketable securities .
      These marketable securities are considered to be available for sale under SFAS
      No. 115, “Accounting for Certain Investments in Debt and Equity Securities”.
      Thus, as of March 31, 2006, the Company has recorded an unrealized gain, net
      of
      income taxes, of approximately $2.8 million 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 the Merger Candidate, or $1 million, whichever
      is lower. As of March 31, 2006, the Company has accrued a fee in the amount
      of
      approximately $900,000. Such amount has been deferred within other assets.
      If
      the proposed acquisition of the Merger Candidate 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.





The
      Company is constructing a 117,000 square foot manufacturing facility in
      Zhongshan City, PRC for approximately $2.3 million. As of March 31, 2006, the
      Company has paid approximately $1.7 million toward the construction. The Company
      expects to complete the construction during 2006.




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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 sales agreement expired during January
      2006. The buyer and seller are continuing to negotiate about certain
      environmental matters among themselves and with the State of New Jersey. The
      seller and buyer are aware that a portion of the property may be subject to
      tidelands claims by the State of New Jersey. The Company believes that the
      property will be sold during 2006. Additionally, the Company is obligated for
      environmental remediation costs of up to $350,000. As of March 31, 2006, the
      Company had also paid $195,000 of legal, site testing and State of New Jersey
      Environmental Protection Agency Fees. As these costs are incurred, the Company
      capitalizes them on the Company's consolidated balance sheet as assets held
      for
      sale. The Company has classified the asset as held for sale with a net book
      value of approximately $828,000 on the Company's consolidated balance sheet
      at
      March 31, 2006.




Under
      the
      terms of the E-Power Ltd (“E-Power”) and Current Concepts, Inc. (“Current
      Concepts”) 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. During February
      2006, E-Power was paid $2.0 million in contingent purchase price payments as
      E-Power's sales, as defined, reached $15.0 million. An additional $4.0 million
      will be paid if such sales reach $25.0 million on a cumulative basis through
      May
      2007. The contingent purchase price payments for E-Power are accounted for
      as
      additional purchase price and as an increase to goodwill when such payment
      obligations are incurred. Current Concepts will be paid 16% of sales, as
      defined, on the first $10.0 million of sales through May 2007. During the three
      months ended March 31, 2006 and 2005, the Company paid approximately $178,000
      and $114,000, respectively, in contingent purchase price payments to Current
      Concepts. The contingent purchase price payments for Current Concepts are
      accounted for as additional purchase price and as an increase to covenants
      not
      to compete within intangible assets when such payment obligations are
      incurred.




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 March 31, 2006, the Company had purchased and
      retired 23,600 Class B shares at a cost of approximately $808,000, which reduced
      the number of Class B common shares outstanding. No shares were repurchased
      during the three months ended March 31, 2006.




During
      the three months ended March 31, 2006, the Company's cash and cash equivalents
      increased by $1.3 million reflecting approximately $5.0 million provided by
      operating activities (principally as a result of net income of $4.0 million
      and
      depreciation and amortization expense of $2.5 million), and proceeds of $1.4
      million from the exercise of stock options, offset in part by $2.2 million
      used
      principally for acquisitions, $2.5 million for the purchase of property, plant
      and equipment, and $.6 million for payments of dividends.




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Cash,
      marketable securities and cash equivalents and accounts receivable comprised
      approximately 53.4% and 53.6% of the Company's total assets at March 31, 2006
      and December 31, 2005, respectively. The Company's current ratio (i.e., the
      ratio of current assets to current liabilities) was 4.2 to 1 and 4.5 to 1 at
      March 31, 2006 and December 31, 2005, respectively.




The
      following table sets forth at March 31, 2006 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
                nine
                  months
              
              1-3
                years
              
              3-5
                years
              
              More
                  than
                5
                  yearsCapital
                  expenditure obligations
              
              $
              985,298
              
              $
              985,298
              
              $
              —
              
              $
              —
              
              $
              —Contingent
                  purchase price commitments
              
              
              951,477
              
              
              951,477
              
              
              —
              
              
              —
              
              
              —Operating
                  leases
              
              
              4,099,812
              
              
              1,427,898
              
              
              1,557,634
              
              
              1,114,280
              
              
              —Raw
                  material purchase obligations
              
              
              15,895,336
              
              
              15,895,336
              
              
              —
              
              
              —
              
              
              —Total
              
              $
              21,931,923
              
              $
              19,260,009
              
              $
              1,557,634
              
              $
              1,114,280
              
              $
              —




The
      Company is required to pay its SERP obligations at the occurrence of certain
      events. As of March 31, 2006 the SERP had an unfunded benefit obligation of
      approximately $3.7 million.





Other
      Matters





The
      Company believes that it has sufficient cash reserves to fund its foreseeable
      working capital needs. It may, however, seek to expand such resources through
      bank borrowings, at favorable lending rates, from time to time. Should the
      Company pursue additional acquisitions during 2006, 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.




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New
      Financial Accounting Standards





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
      "Accounting Changes and Error Correction" - a replacement of APB Opinion No.
      20
      and FASB Statement No. 3. This Statement applies to all voluntary changes in
      accounting principles. It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. This Statement requires retrospective
      application to prior periods' financial statements of changes in accounting
      principle, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. The Statement also carries
      forward the guidance in APB Opinion No. 20 requiring justification of a change
      in accounting principle on the basis of preferability. This Statement is
      effective for accounting changes and corrections made in fiscal years beginning
      after December 31, 2005.





In
      December 2004, FASB issued SFAS No. 123(R), "Share-Based Payment" , that
      requires compensation costs related to share-based payment transactions to
      be
      recognized in the financial statements. With limited exceptions, the amount
      of
      compensation cost is measured based on the grant-date fair value of the equity
      or liability instruments issued. In addition, liability awards are to 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 accounted for the stock-based compensation costs using
      the modified prospective method at the time of adoption. The adoption of SFAS
      123(R) resulted in incremental stock-based compensation expense of $113,000
      during the three months ended March 31, 2006. The adoption of SFAS 123(R) did
      not have a material effect on the consolidated balance sheet as of March 31,
      2006 or the consolidated statement of cash flows for the three months ended
      March 31, 2006.





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
      increased the provision for income taxes $3.1 million during the year ended
      December 31, 2005.





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 increased the provision for income taxes $3.1 million
      during the year ended December 31, 2005.




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In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets",
      an amendment of APB Opinion No. 29. 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 did not
      have
      a material effect on the Company's consolidated financial position or results
      of
      operations.





In
      November 2004 the FASB issued SFAS No. 151, “Inventory Costs”, an amendment to
      Accounting Research Bulletin No. 43 chapter 4. 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 did not have a material impact on the Company's results of operations or
      financial position.




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Item
              3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk





Fair
      Value of Financial Instruments — The following disclosure of the estimated fair
      value of financial instruments is made in accordance with the requirements
      SFAS
      No. 107. The estimated fair values of financial instruments have been determined
      by the Company using available market information and appropriate valuation
      methodologies.




However,
      considerable judgment is required in interpreting market data to develop the
      estimates of fair value. Accordingly, the estimates presented herein are not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange.




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




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





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





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




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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.








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PART
      II. Other Information





Item
              1.
            Legal
                Proceedings




The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc., a New Jersey
      corporation, and Bel Power, Inc., a Massachusetts corporation, v. Andrew
      Ferencz, Gregory Zovonar, Bernhard Schroter, EE2GO, Inc., a Massachusetts
      corporation, Howard E. Kaepplein and William Ng, Defendants brought in the
      Supreme Court of the Commonwealth of Massachusetts. The Company was granted
      injunctive relief and is seeking damages against the former stockholders of
      Galaxy Power, Inc, the Company’s recent acquisition, and key employees of Galaxy
      and a corporation formed by some or all of the individual defendants. The
      Company has alleged that the defendants violated their written non-competition,
      non-disclosure and non-solicitation agreements, diverted business and usurped
      substantial business opportunities with key customers, misappropriated
      confidential information and trade secrets, and harmed the Company’s business.





In
      a
      related matter, the Company is a defendant in a lawsuit captioned Robert
      Chimielnski, P.C. on behalf of the stockholder representatives and the former
      stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al brought in the
      Superior Court of the Commonwealth of Massachusetts. This complaint for damages
      and injunctive relief is based on an alleged breach of contract and other
      allegedly illegal acts in a corporate context arising out of the defendants
      objection to the release of nearly $2.0 million held in escrow under the terms
      of the stock purchase agreement between Galaxy and the Company.





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.




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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.




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Item
              6.
            Exhibits




(a)
            Exhibits:




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





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





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




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






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SIGNATURES








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




**BEL
              FUSE,
              INC.**Date: May
              9,
              2006
            By:
            /s/ Daniel
              BernsteinName:  
                Daniel Bernstein
              Title:    
                President and Chief Executive
                Officer




Date: May
              9,
              2006
            By:
            /s/ Colin
              DunnName:  
                Colin Dunn
              Title:    
                Vice President of Finance






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EXHIBIT
      INDEX





Exhibit3
              1.1
            -
                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.








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