UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-Q


(Mark
      One)





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





For
      the
      quarterly period ended  June
      30, 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.  xYes  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         xAccelerated
      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
      August
      1, 2006, there were 2,702,677 shares of Class A Common Stock, $0.10 par value,
      outstanding and 9,109,278 shares of Class B Common Stock, $0.10 par value,
      outstanding.









BEL
                    FUSE INC.INDEXPagePart
                    I
                Financial
                  InformationItem
                    1.
                Financial
                    Statements
                
                1Consolidated
                    Balance Sheets as of June 30, 2006 (unaudited) and December 31,
                    2005
                
                2
                    -
                    3Consolidated
                    Statements of Operations for the Three and Six Months Ended June
                    30, 2006
                    and 2005 (unaudited)
                
                4Consolidated
                    Statements of Stockholders' Equity for the Years ended December
                    31, 2005
                    and 2004 and the Six Months Ended June 30, 2006
                    (unaudited)
                
                5
                    -
                    6Consolidated
                    Statements of Cash Flows for the Six Months Ended June 30, 2006
                    and 2005
                    (unaudited)
                
                7
                    -
                    9Notes
                    to Consolidated Financial Statements (unaudited)
                
                10
                    - 32Item
                    2.
                Management's
                    Discussion and Analysis of Financial Condition and Results of
                    Operations
                
                33
                    - 52Item
                    3.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                
                53Item
                    4.
                Controls
                    and Procedures
                
                54Part
                    II
                Other
                  InformationItem
                    1.
                Legal
                    Proceedings
                
                55
                    - 56Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                
                56Item
                    6.
                Exhibits
                
                57Signatures
                
                58










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 six and three months ended June 30, 2006 and
      2005
      are not necessarily indicative of the results for the entire fiscal year or
      for
      any other period.




-1-




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS**
  June
                  30,
              
              December
                  31,2006
              
              2005(Unaudited)**ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              78,446,271
              
              $
              51,997,634Marketable
                  securities
              
              
              15,874,250
              
              
              38,463,108Accounts
                        receivable - less allowance for doubtful accounts of $777,603
                        and
                        $1,107,000 at  June 30, 2006 and December 31, 2005,
                        respectively
              
              
              47,341,622
              
              
              39,304,984Inventories
              
              
              38,873,293
              
              
              32,947,103Prepaid
                      expenses and other current assets
              
              
              2,904,216
              
              
              1,691,017Deferred
                  income taxes
              
              
              510,000
              
              
              -Assets
                  held for sale
              
              
              848,049
              
              
              828,131Total
                  Current Assets
              
              
              184,797,701
              
              
              165,231,977Property,
                  plant and equipment - net
              
              
              42,528,691
              
              
              42,379,356Deferred
                  income taxes
              
              
              3,986,000
              
              
              3,901,000Intangible
                  assets - net
              
              
              2,599,295
              
              
              2,782,188Goodwill
              
              
              24,189,248
              
              
              22,427,934Prepaid
                  pension costs
              
              
              1,655,362
              
              
              1,655,362Other
                  assets
              
              
              2,938,523
              
              
              3,678,100TOTAL
                  ASSETS
              
              $
              262,694,820
              
              $
              242,055,917




See
      notes
      to consolidated financial statements.




-2-




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS**June
                  30,
              
              December
                  31,2006
              
              2005(Unaudited)**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Accounts
                  payable
              
              $
              19,771,545
              
              $
              14,560,827Accrued
                  expenses
              
              
              13,198,695
              
              
              10,667,558Deferred
                  income taxes
              
              
              -
              
              
              1,412,000Income
                  taxes payable
              
              
              12,301,445
              
              
              9,840,295Dividends
                  payable
              
              
              570,000
              
              
              548,000Total
                  Current Liabilities
              
              
              45,841,685
              
              
              37,028,680Long-term
                  Liabilities:Minimum
                  pension obligation
              
              
              3,822,020
              
              
              3,450,688Total
                  Liabilities
              
              
              49,663,705
              
              
              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 - authorized
                            10,000,000 shares;
                            outstanding 2,702,677 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 - authorized
                            30,000,000 shares;
                            outstanding 9,107,453 and 9,013,264 shares, respectively
                            (net of 3,218,307
                            treasury shares)
              
              
              910,746
              
              
              901,327Additional
                  paid-in capital
              
              
              30,756,822
              
              
              31,713,608Retained
                  earnings
              
              
              179,649,971
              
              
              167,991,188Deferred
                  stock-based compensation
              
              
              -
              
              
              (3,562,709
              )Accumulated
                      other comprehensive income
              
              
              1,443,308
              
              
              4,262,867Total
                  Stockholders' Equity
              
              
              213,031,115
              
              
              201,576,549TOTAL
                      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              262,694,820
              
              $
              242,055,917
   See
        notes
        to consolidated financial statements.




-3-




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF OPERATIONS**(Unaudited)Six
                    Months Ended
                  June
                    30,
              
              Three
                    Months Ended
                  June
                    30,2006
              
              2005
              
              2006
              
              2005Net
                  Sales
              
              $
              121,100,346
              
              $
              102,983,706
              
              $
              66,474,098
              
              $
              57,545,421Costs
                  and expenses:Cost
                  of sales
              
              
              90,248,564
              
              
              73,380,908
              
              
              50,261,675
              
              
              40,692,097Selling,
                  general and administrative
              
              
              19,610,167
              
              
              15,839,939
              
              
              10,232,982
              
              
              8,618,636Casualty
                  loss
              
              
              1,097,271
              
              
              -
              
              
              133,480
              
              
              -110,956,002
              
              
              89,220,847
              
              
              60,628,137
              
              
              49,310,733Income
                  from operations
              
              
              10,144,344
              
              
              13,762,859
              
              
              5,845,961
              
              
              8,234,688Interest
                  and financing expense
              
              
              (44,386
              )
              
              (207,469
              )
              
              (17,186
              )
              
              (140,319
              )Gain
                  on sale of marketable securities, net
              
              
              5,151,039
              
              
              -
              
              
              5,239,519
              
              
              -Interest
                  income
              
              
              1,173,758
              
              
              632,650
              
              
              661,162
              
              
              407,306Earnings
                  before provision for income taxes
              
              
              16,424,755
              
              
              14,188,040
              
              
              11,729,456
              
              
              8,501,675Income
                  tax provision
              
              
              3,664,000
              
              
              3,206,000
              
              
              2,966,000
              
              
              1,833,000Net
                  earnings
              
              $
              12,760,755
              
              $
              10,982,040
              
              $
              8,763,456
              
              $
              6,668,675Earnings
                  per common share - basic
              
              $
              1.08
              
              $
              0.96
              
              $
              0.74
              
              $
              0.58Earnings
                  per common share - diluted
              
              $
              1.08
              
              $
              0.95
              
              $
              0.74
              
              $
              0.58Weighted
                      average common shares outstanding - basic
              
              
              11,768,667
              
              
              11,420,305
              
              
              11,796,484
              
              
              11,468,398Weighted
                      average common shares outstanding - diluted
              
              
              11,829,885
              
              
              11,519,992
              
              
              11,845,259
              
              
              11,532,455




See
        notes
        to consolidated financial statements.


-4-




**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 non-qualified disposition of incentive
                        stock options
                
                
                429,802
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                429,802
                
                
                -Cash
                      dividends on Class A common
                      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
                
                
                (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.


-5-




**BEL
                      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                      STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)****(Unaudited)**Total
                  
                  Compre-
                      hensive
                      Income
                  
                  RetainedEarnings
                  
                  Accumulated
                        Other
                        Compre-
                        hensive
                        Income
                  
                  Class
                        A
                      Common
                      Stock
                  
                  Class
                        B
                      Common
                      Stock
                  
                  Additional
                      Paid-In
                      Capital
                  
                  Deferred
                          Stock-
                          Based
                          CompensationExercise
                        of stock options
                  
                  
                  1,887,037
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7,259
                  
                  
                  1,879,778Tax
                        benefits arising from the non-qualified disposition of incentive
                        stock
                        options
                  
                  
                  112,345
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  112,345Cash
                        dividends on Class A common stock
                  
                  
                  (215,470
                  )
                  
                  
                  
                  
                  (215,470
                  )Cash
                        dividends on Class B common stock
                  
                  
                  (886,502
                  )
                  
                  
                  
                  
                  (886,502
                  )Currency
                        translation adjustment
                  
                  
                  204,968
                  
                  $
                  204,968
                  
                  
                  
                  
                  
                  204,968Decrease
                        in unrealized gain or loss on marketable securities -net
                        of
                        taxes
                  
                  
                  (3,024,527
                  )
                  
                  (3,024,527
                  )
                  
                  
                  
                  
                  (3,024,527
                  )Issuance
                        of restricted common stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,160
                  
                  
                  (2,160
                  )Stock-based
                        compensation expense - net of tax
                  
                  
                  615,960
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  615,960Adoption
                      of SFAS 123 (R)
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (3,562,709
                  )
                  
                  3,562,709Net
                      earnings
                  
                  
                  12,760,755
                  
                  
                  12,760,755
                  
                  
                  12,760,755Comprehensive
                      income
                  
                  
                  
                  
                  $
                  9,941,196Balance,
                      June 30, 2006
                  
                  $
                  213,031,115
                  
                  
                  
                  
                  $
                  179,649,971
                  
                  $
                  1,443,308
                  
                  $
                  270,268
                  
                  $
                  910,746
                  
                  $
                  30,756,822
                  
                  $
                  -


See
        notes
        to consolidated financial statements.


-6-




**BEL
        FUSE INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 Six
                    Months Ended
                    June
                      30,2006
              
              2005Cash
                      flows from operating activities:Net
                  income
              
              $
              12,760,755
              
              $
              10,982,040Adjustments
                        to reconcile net income to net cash provided by operating
                        activities:Depreciation
                  and amortization
              
              
              4,775,968
              
              
              4,502,560Casualty
                  loss
              
              
              1,097,271
              
              
              -Stock-based
                  compensation
              
              
              790,960
              
              
              -Excess
                      tax benefits from share-based payment
                      arrangements
              
              
              (112,345
              )
              
              -Gain
                  on sale of marketable securities
              
              
              (5,151,039
              )
              
              -Other
              
              
              441,869
              
              
              531,373Deferred
                  income taxes
              
              
              (548,000
              )
              
              (1,423,000
              )Changes
                      in operating assets and liabilities (net of
                      acquisitions)
              
              
              (5,367,143
              )
              
              (650,121
              )Net
                      Cash Provided by Operating Activities
              
              
              8,688,296
              
              
              13,942,852Cash
                  flows from investing activities:Purchase
                      of property, plant and equipment
              
              
              (4,333,017
              )
              
              (3,405,163
              )Purchase
                      of marketable securities
              
              
              (729,088
              )
              
              (643,424
              )Payment
                      for acquisitions - net of cash acquired
              
              
              (2,692,974
              )
              
              (20,340,853
              )Proceeds
                      from sale of marketable securities
              
              
              24,489,966
              
              
              -Net
                      Cash Provided by (Used in) Investing
                      Activities
              
              
              16,734,887
              
              
              (24,389,440
              )


See
        notes
        to consolidated financial statements.


-7-




**BEL
        FUSE INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (Continued)**
 **(Unaudited)**
  Six
                  Months EndedJune
                  30,2006
              
              2005Cash
                      flows from financing activities:Proceeds
                  from borrowings
              
              
              -
              
              
              8,000,000Loan
                  repayments
              
              
              -
              
              
              (15,360,694
              )Proceeds
                      from exercise of stock options
              
              
              1,887,037
              
              
              2,067,330Dividends
                      paid to common shareholders
              
              
              (1,104,078
              )
              
              (1,086,095
              )Excess
                      tax benefits from share-based payment
                      arrangements
              
              
              112,345
              
              
              -Net
                      Cash Provided By (Used In) Financing
                      Activities
              
              
              895,304
              
              
              (6,379,459
              )Effect
                    of exchange rate changes on cash
              
              
              130,150
              
              
              (320,328
              )Net
                      Increase (decrease) in Cash and Cash
                      Equivalents
              
              
              26,448,637
              
              
              (17,146,375
              )Cash
                      and Cash Equivalents - beginning of year
              
              
              51,997,634
              
              
              71,197,891Cash
                      and Cash Equivalents - end of year
              
              $
              78,446,271
              
              $
              54,051,516Changes
                      in operating assets and liabilities (net of acquisitions) consist
                      of:Increase
                      in accounts receivable
              
              $
              (7,931,062
              )
              $
              (3,735,125
              )Increase
                  in inventories
              
              
              (5,853,897
              )
              
              (1,181,135
              )(Increase)
                        decrease in prepaid expenses and other current
                        assets
              
              
              (1,213,199
              )
              
              480,706Increase
                  in other assets
              
              
              (359,959
              )
              
              (624,818
              )Increase
                    inaccounts
                    payable
              
              
              5,193,397
              
              
              3,075,709Increase
                  in income taxes payable
              
              
              2,573,495
              
              
              1,925,559Increase
                  (decrease) in accrued expenses
              
              
              2,224,082
              
              
              (591,017
              )$
              (5,367,143
              )
              $
              (650,121
              )


See
        notes
        to consolidated financial statements.


-8-




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (Concluded)****(Unaudited)**




Six
                  Months EndedJune
                  30,2006
              
              2005Supplementary
                  information:Cash
                  paid during the year for:Income
                  taxes
              
              $
              1,240,000
              
              $
              2,389,322Interest
              
              $
              44,000
              
              $
              207,469Details
                  of acquisitions:Fair
                      value of assets acquired (excluding cash acquired of $311,856
                      in
                      2005)
              
              $
              -
              
              $
              6,021,377Intangibles
              
              
              446,571
              
              
              2,255,905Goodwill
              
              
              2,000,000
              
              
              12,546,080Acquisition
                  costs
              
              
              2,446,571
              
              
              20,823,362Less:
                      Amounts paid (held back) on acquisition
                      payment
              
              
              514,403
              
              
              (482,509
              )Amounts
                  accrued
              
              
              (268,000
              )
              
              -Cash
                  paid for acquisitions
              
              $
              2,692,974
              
              $
              20,340,853


See
        notes
        to consolidated financial statements.


-9-




BEL
      FUSE
      INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




1. BASIS
        OF
        PRESENTATION AND ACCOUNTING POLICIES




The
      consolidated balance sheet as of June 30, 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
      June
      30, 2006 and December 31, 2005, cash equivalents approximated $34,966,000 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 a component of 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-




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) were $(203,000) and ($105,000) for
      the
      six months ended June 30, 2006 and 2005, and $(245,000) and ($25,000) for the
      three months ended June 30, 2006 and 2005, respectively, and have been expensed
      in the consolidated statements of operations included in selling, general and
      administration expense.





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.




-11-





For
      certain customers, the Company provides consigned inventory, either at the
      customer’s facility or at a third party warehouse. Sales of consigned inventory
      are recorded when the customer withdraws inventory from consignment **.** During
      all periods in 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 (during the 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 in the United States upon the sale or liquidation of these foreign
      subsidiaries or upon the repatriation of earnings.





-12-




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
        Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
        Employees", and had adopted the disclosure only requirements of SFAS No.
        123,
        "Accounting for Stock-Based Compensation", as amended by SFAS No. 148,
        "Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment
        of FASB Statement No. 123." As such, for periods prior to January 1, 2006,
        the
        Company presents pro forma net earnings and earnings per share as if the
        fair-value-based method of accounting had been applied under SFAS No.
        123.





During
      2005 and 2006, the Company issued 152,400 and 21,600 class B common shares,
      respectively, 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 pre-tax compensation
      expense of $564,000 and $296,000 ($413,000 and $226,000, net of tax benefit)
      for
      the six and three months ended June 30, 2006, respectively. The balance of
      $3,600,000 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 $226,000 and $113,000 (pre-tax) for the six and three months
      ended June 30, 2006, respectively.




-13-







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 and six
      months ended June 30, 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
                        Months
                      Ended
                      June
                        30,2005
              
              Six
                          Months
                        Ended
                        June
                          30,2005Net
                  earnings - as reported
              
              $
              6,668,675
              
              $
              10,982,040Add:
                  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
              
              
              (160,868
              )
              
              (321,736
              )Net
                  earnings- pro forma
              
              $
              6,507,807
              
              $
              10,660,304Earnings
                  per common share -basic-as
                  reported
              
              $
              0.58
              
              $
              0.96Earnings
                  per common share -basic-pro
                  forma
              
              $
              0.57
              
              $
              0.93Earnings
                  per common share -diluted-as
                  reported
              
              $
              0.58
              
              $
              0.95Earnings
                  per common share -diluted-pro
                  forma
              
              $
              0.56
              
              $
              0.93


-14-





RESEARCH
      AND DEVELOPMENT - Research
      and development costs are expensed as incurred, and are included in cost of
      sales. Generally all research and development is performed internally for the
      benefit of the Company. The Company does not perform such activities for others.
      Research and development costs include salaries, building maintenance and
      utilities, rents, materials, administration costs and miscellaneous other items.
      Research and development expenses for the six months ended June 30, 2006 and
      2005 amounted to $3.5 million and $3.8 million, respectively, and for the three
      months ended June 30, 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
      the six months ended June 30, 2006, the Company incurred a $1.1 million pre-tax
      casualty loss primarily for uninsured raw materials destroyed by a fire at
      a
      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:


Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2006
              
              2005
              
              2006
              
              2005Weighted
                  average shares outstanding - basic
              
              
              11,768,667
              
              
              11,420,305
              
              
              11,796,484
              
              
              11,468,398Dilutive
                  impact of stock options andunvested
                  restricted stock awards
              
              
              61,218
              
              
              99,687
              
              
              48,775
              
              
              64,057Weighted
                  average shares oustanding - diluted
              
              
              11,829,885
              
              
              11,519,992
              
              
              11,845,259
              
              
              11,532,455




During
      the six and three months ended June 30, 2006, 14,000 and 14,000 outstanding
      options were not included in the foregoing computations because they were
      antidilutive.


-15-





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 was due to the sellers and was paid by the Company during June 2006.
      Netwatch s.r.o. is a designer and manufacturer of high-performance fiber optic
      and copper cable assemblies for data and telecommunication applications.
      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. 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.


-16-




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):




SIx
                        Months Ended
                      June
                        30,
                      2005Net
                  sales
              
              $
              108,295Net
                  earnings
              
              
              10,758Earnings
                  per share - diluted
              
              
              0.93


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


-17-





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 $1,299,000
      and
      $981,000 for the six months ended June 30, 2006 and 2005, respectively and
      $504,000 and $666,000 for the three months ended June 30, 2006 and
      2005.





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. This $10 million
      benchmark was reached during the second quarter of 2006 and therefore no
      additional payments will be made. During the six months ended June 30, 2006
      and
      2005, the Company paid or accrued approximately $447,000 and $296,000,
      respectively, in contingent purchase price payments to Current Concepts. During
      the three months ended June 30, 2006 and 2005, the Company paid or accrued
      approximately $268,000 and $182,000, 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.


-18-


The
      changes in the carrying value of goodwill classified by geographic reporting
      units, net of accumulated depreciation, for the six months ended June 30, 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
              
              
              2,000,000
              
              
              2,000,000
              
              
              -
              
              
              -Reclassification
                  to intangible asset
              
              
              (670,000
              )
              
              -
              
              
              (670,000
              )
              
              -Other
                  purchase price and foreignexchange
                  adjustments
              
              
              431,314
              
              
              -
              
              
              395,690
              
              
              35,624Balance,
                  June 30, 2006
              
              $
              24,189,248
              
              $
              8,407,435
              
              $
              14,138,628
              
              $
              1,643,185


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


December
                  31, 2005Total
              
              Asia
              
              North
                  AmericaGross
                    Carrying
                  Amount
              
              Accumulated
                Amortization
              
              Gross
                    Carrying
                  Amount
              
              Accumulated
                Amortization
              
              Gross
                    CarryingAmount
              
              AccumulatedAmortizationPatents
                  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
  June
                  30, 2006Total
              
              
              Asia
              
              
              North
                  AmericaGross
                    Carrying
                  Amount
              
              
              Accumulated
                Amortization
              
              
              Gross
                    CarryingAmount
              
              
              Accumulated
                Amortization
              
              
              Gross
                    CarryingAmount
              
              
              Accumulated
                AmortizationPatents
                  and ProductInformation
              
              $
              2,935,000
              
              $
              2,042,808
              
              $
              2,653,000
              
              $
              1,850,397
              
              $
              282,000
              
              $
              192,411Customer
                  relationships
              
              
              1,830,000
              
              
              465,124
              
              
              -
              
              
              -
              
              
              1,830,000
              
              
              465,124Covenants
                  not-to-compete
              
              
              5,467,605
              
              
              5,125,378
              
              
              4,667,605
              
              
              4,408,711
              
              
              800,000
              
              
              716,667$
              10,232,605
              
              $
              7,633,310
              
              $
              7,320,605
              
              $
              6,259,108
              
              $
              2,912,000
              
              $
              1,374,202




-19-





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


Year
                      Ending
                    December
                      31,
              
              Estimated
                    Amortization
                    Expense2006
              
              $
              563,2742007
              
              
              809,2772008
              
              
              534,2872009
              
              
              427,5962010
              
              
              134,904




2006
      represents amortization from July 1, 2006 through December 31,
      2006.





4.  MARKETABLE
      SECURITIES





The
        Company has cumulatively acquired a total of 4,926,000 shares, or 5%, of
        the
        common stock of Toko, Inc. (“Toko”) at a total purchase price of $15.6 million.
        Of these amounts, the Company acquired 101,000 shares at a cost of $329,000
        during July and August 2006 and currently plans to acquire additional shares.
        Toko had a market capitalization of approximately $327 million as of August
        1,
        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 June 30, 2006, the Company has recorded
        an unrealized gain, net of income taxes, of approximately $.5 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 Toko, or $1 million, whichever
        is
        lower. As of June 30, 2006, the Company has accrued a fee in the amount of
        approximately $150,000. Such amount has been deferred within other assets.
        If
        the proposed acquisition of Toko 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 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. On
      April 28, 2006, Artesyn was acquired by Emerson Network Power for $11.00 per
      share in cash. During the second quarter of 2006, in connection with the
      Company's sale of its Artesyn common stock, the Company recognized a gain of
      approximately $5.2 million, net of investment banker’s advisory fees of
      $850,000. The Company accrued bonuses of $1.0 million in connection with the
      gain. For financial statement presentation purposes, the $1.0 million bonus
      was
      classified within selling, general and administrative expenses and will be
      paid
      to key employees by December 31, 2006.


-20-




At
      June
      30, 2006 and December 31, 2005, respectively, marketable securities have a
      cost
      of approximately $15,122,000 and $32,893,000, an estimated fair value of
      approximately $15,874,000 and $38,463,000 and gross unrealized gains of
      approximately $752,000 and $5,570,000. Such unrealized gains are included,
      net
      of tax, in accumulated other comprehensive income. The Company had realized
      gains of $5.2 million and realized losses of $88,000 for the six months ended
      June 30, 2006.





5.
            INVENTORIES





The
      components of inventories are as follows:




June
                  30,
              
              December
                  31,2006
              
              2005Raw
                  materials
              
              $
              21,073,927
              
              $
              19,342,703Work
                  in progress
              
              
              7,767,316
              
              
              2,515,174Finished
                  goods
              
              
              10,032,050
              
              
              11,089,226$
              38,873,293
              
              $
              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:




Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2006
              
              2005
              
              2006
              
              2005Total
                  segment revenuesNorth
                  America
              
              $
              39,531,004
              
              $
              37,119,158
              
              $
              21,036,118
              
              $
              19,158,205Asia
              
              
              88,243,885
              
              
              71,509,916
              
              
              49,338,286
              
              
              40,691,564Europe
              
              
              13,355,532
              
              
              7,414,308
              
              
              7,670,699
              
              
              3,415,866Total
                  segment revenues
              
              
              141,130,421
              
              
              116,043,382
              
              
              78,045,103
              
              
              63,265,635Reconciling
                  items:Intersegment
                  revenues
              
              
              (20,030,075
              )
              
              (13,059,676
              )
              
              (11,571,005
              )
              
              (5,720,214
              )Net
                  sales
              
              $
              121,100,346
              
              $
              102,983,706
              
              $
              66,474,098
              
              $
              57,545,421Income
                  (loss) from Operations:North
                  America
              
              $
              (927,078
              )
              $
              3,841,040
              
              $
              874,823
              
              $
              2,556,574Asia
              
              
              10,430,590
              
              
              9,799,777
              
              
              4,865,271
              
              
              5,714,850Europe
              
              
              640,832
              
              
              122,042
              
              
              105,867
              
              
              (36,736
              )$
              10,144,344
              
              $
              13,762,859
              
              $
              5,845,961
              
              $
              8,234,688







-21-


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 June 30, 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 June 30, 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 June 30, 2006. The line of credit expires
        during July 2007. 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
        six months ended June 30, 2006 and 2005, the Company recorded interest expense
        of $44,000 and $207,000, respectively. For the three months ended June 30,
        2006
        and 2005, the Company recorded interest expense of $17,000 and $140,000,
        respectively.
 
 8.  ACCRUED
        EXPENSES
 
 Accrued
        expenses consist of the following:
  June
                    30,
                
                December
                    31,2006
                
                2005Sales
                    commissions
                
                $
                2,022,569
                
                $
                1,812,135Investment
                    banking commissions
                
                
                150,426
                
                
                1,105,510Subcontracting
                    labor
                
                
                1,799,445
                
                
                1,597,279Salaries,
                    bonuses andrelated
                    benefits
                
                
                3,382,995
                
                
                2,642,729Other
                
                
                5,843,260
                
                
                3,509,905$
                13,198,695
                
                $
                10,667,558
 
 -22-
 
 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 six months ended June 30, 2006 and 2005 amounted to
        approximately $280,000 and $248,000, respectively. The expense for the three
        months ended June 30, 2006 and 2005 amounted to approximately $144,000 and
        $137,000, respectively. As of June 30, 2006, the plans owned 18,374 and 138,083
        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 six months ended
        June
        30, 2006 and 2005 amounted to approximately $351,000 and $208,000, respectively.
        The expense for the three months ended June 30, 2006 and 2005 amounted to
        approximately $169,000 and $105,000, respectively. As of June 30, 2006, the
        fund
        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 six months ended June 30, 2006 and 2005 amounted to approximately
        $640,000 and $341,000, respectively. The expense for the three months ended
        June
        30, 2006 and 2005 amounted to approximately $226,000 and $121,000, respectively.
   -23-
  The
        components of SERP expense are as follows:
  Six
                    Months Ended
                
                Three
                    Months EndedJune
                    30,
                
                June
                    30,2006
                
                2005
                
                2006
                
                2005Service
                    cost
                
                $
                486,000
                
                $
                154,000
                
                $
                173,000
                
                $
                55,000Interest
                    cost
                
                
                96,000
                
                
                113,000
                
                
                35,000
                
                
                36,000Amortization
                    of adjustments
                
                
                58,000
                
                
                74,000
                
                
                18,000
                
                
                30,000Total
                    SERP expense
                
                $
                640,000
                
                $
                341,000
                
                $
                226,000
                
                $
                121,000
  June
                    30,
                
                December
                    31,2006
                
                2005Balance
                    sheet amounts:Accrued
                    pension liability
                
                $
                3,822,020
                
                $
                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 recognizes 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.
  -24-
  On
        June
        30, 2006, the Company has one stock-based compensation plan, which is described
        below. During the six months and three months ended June 30, 2006, the adoption
        of SFAS No. 123(R) resulted in incremental stock-based compensation expense
        of
        $226,000 and $113,000, respectively. The incremental stock-based compensation
        expense caused the basic and diluted earnings per common share to decrease
        by
        $.02 and $.01 per share, respectively. 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 during
        the six
        months ended June 30, 2006 by $112,345 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 $790,000 and
        $-0-
        for the six months ended June 30, 2006 and 2005, respectively. For the three
        months ended June 30, 2006 and 2005 the aggregate compensation cost recognized
        in net earnings amounted to $409,000 and $-0-. The Company did not use any
        cash
        to settle any equity instruments granted under share based arrangements during
        the six months ended June 30, 2006 and 2005.
 
 Under
          the
          provisions of SFAS 123 (R), the recognition of deferred compensation as
          a
          component of equity 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 six and three
          months ended June 30, 2006. Expected lives of options previously granted
          were
          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.
 
  -25-
 
 A
        summary
        of option activity under the plan as of December 31, 2005 and changes during
        the
        six months ended June 30, 2006 is presented below:
  WeightedAverageWeighted
                
                Remaining
                
                AggregateAverage
                
                Contractual
                
                IntrinsicOptions
                
                Shares
                
                Exercise
                    Price
                
                Term
                
                ValueOutstanding
                    at January 1, 2006
                
                
                286,013
                
                $
                24.96Granted
                
                
                -Exercised
                
                
                (72,588
                )
                
                26.00
                
                
                
                
                $
                696,879Forfeited
                    or expired
                
                
                (12,400
                )
                
                29.71Outstanding
                    at June 30, 2006
                
                
                201,025
                
                $
                24.29
                
                
                1.5
                
                $
                1,712,676Exercisable
                    at June 30, 2006
                
                
                90,025
                
                $
                23.12
                
                
                1.5
                
                $
                872,235
  During
        the six months ended June 30, 2006 and 2005 the Company received $1,887,037
        and
        $2,067,330 from the exercise of share options and realized tax benefits of
        $112,000 and $190,000, respectively. The total intrinsic value of options
        exercised during the six months ended June 30, 2006 and 2005 was $696,879
        and
        $1,455,859, respectively. Stock compensation expense for the six months ended
        June 30, 2006 and June 30, 2005 was $226,000 and $-0-.
 
 A
        summary
        of the status of the Company's nonvested options as of December 31, 2005
        and
        changes during the six months ended June 30, 2006 is presented
        below:
 Weighted-AverageGrant-DateNonvested
                      Options
                  
                  Options
                  
                  Fair
                      ValueNonvested
                      at December 31, 2005
                  
                  
                  177,500
                  
                  $
                  24.28Granted
                  
                  
                  -Vested
                  
                  
                  (54,100
                  )
                  
                  19.84Forfeited
                  
                  
                  (12,400
                  )
                  
                  29.71Nonvested
                      at June 30, 2006
                  
                  
                  111,000
                  
                  $
                  25.24
 At
        June
        30, 2006 there was $278,883 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 six months ended June 30, 2006
        and
        2005 was $-0- and $-0-, respectively.
  -26-
 
 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, fourth and fifth anniversaries of the award, respectively,
        and
        are distributed provided the employee has remained employed by the Company
        through such anniversary dates; otherwise the unearned shares are forfeited.
        The
        market value of these shares at the date of award is recorded as compensation
        expense on the straight-line method over the five-year periods from the
        respective award dates, as adjusted for forfeitures of unvested awards. Deferred
        stock-based compensation expense of $3.6 million associated with unearned
        shares
        under this plan as of June 30, 2006, is reported within Stockholders' equity
        on
        the Company's consolidated balance sheets, net of deferred tax benefit. Pretax
        compensation expense was $564,000 for the six months ended June 30, 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 six months ended June 30, 2006 is presented below:
  WeightedWeighted
                
                AverageAverage
                
                Remaining
                
                AggregateRestricted
                    Stock
                
                
                
                Award
                
                Contractual
                
                IntrinsicAwards
                
                Shares
                
                Price
                
                Term
                
                ValueOutstanding
                    at January 1, 2006
                
                
                152,400
                
                $
                35.64Granted
                
                
                -Awarded
                
                
                21,600
                
                
                30.00Forfeited
                
                
                (4,000
                )
                
                37.00Outstanding
                    at June 30, 2006
                
                
                170,000
                
                
                34.89
                
                
                4.5
                
                $
                -Exercisable
                    at June 30, 2006
                
                
                -
                
                
                
                
                
                -
                
                $
                -
  As
        of
        June 30, 2006 there was $5.0 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.
  -27-
 
 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 six and three months
        ended June 30, 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).
 
  -28-
 
 ·
              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 six and three months ended June 30, 2006 and 2005 consists
        of:
  Six
                    Months Ended
                
                Three
                    Months EndedJune
                    30,
                
                June
                    30,2006
                
                2005
                
                2006
                
                2005Net
                    earnings
                
                $
                12,760,755
                
                $
                10,982,040
                
                $
                8,763,456
                
                $
                6,668,675Currency
                    translation adjustment
                
                
                204,968
                
                
                (614,665
                )
                
                113,089
                
                
                (424,138
                )Increase
                    (decrease) in unrealizedgain
                    on marketable securities-
                    net of taxes
                
                
                (3,024,527
                )
                
                (3,143,296
                )
                
                (5,532,198
                )
                
                32,446Comprehensive
                    income
                
                $
                9,941,196
                
                $
                7,224,079
                
                $
                3,344,347
                
                $
                6,276,983
   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 June 30, 2006, the
        Company had also paid $203,000 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 $848,000 on the Company's consolidated balance sheet
        at
        June 30, 2006. Management anticipates the property will be sold by December
        31,
        2006.
 
 -29-
 
 14.
              NEW
                  FINANCIAL ACCOUNTING STANDARDS
 
 In
          July
          2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
          No. 48 “Accounting for Uncertainty in Income Taxes" ("FIN 48"). The
          interpretation requires a two step approach for recognizing and measuring
          tax
          benefits based on a recognition threshold of “more likely than not”. FIN 48 also
          requires explicit disclosures about uncertainties in tax positions including
          a
          detailed rollforward of tax benefits that do not qualify for financial
          statement
          recognition. The adoption of FIN 48 is effective for fiscal years beginning
          after December 15, 2006.  The
          implementation of FIN 48 could have a material effect on the consolidated
          balance sheet and results of operations but the effect of such implementation
          is
          not determinable at this time.
 
 In
          December 2004, the 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 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 $226,000 during
          the
          six months ended June 30, 2006. The adoption of SFAS 123(R) did not have
          a
          material effect on the consolidated balance sheet as of June 30, 2006 or
          the
          consolidated statement of cash flows for the six months ended June 30,
          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.
  -30-
  15.  Legal
        Proceedings
 
 The
          Company and two of its officers are defendants in a wrongful termination
          lawsuit
          brought in the District Court of Frankfurt am Main, Germany by a former
          employee
          at a foreign subsidiary of the Company. The Company believes it has adequately
          accrued sufficient amounts for this liability in accordance with the terms
          of
          the ex-employee's employment agreement.
 
 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., 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.
 
  -31-
  The
        Company cannot predict the outcome of these matters; or the 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.
 
  -32-
 
 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.
 
 -33-
 
 During
          the six months ended June 30, 2006, approximately $4.6 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. Galaxy
          was
          renamed Bel Power Inc. (“Power”). Excluding the 2005 acquisitions, the Company
          had an organic sales increase of 13.1% for the six months ended June 30,
          2006.
          With these acquisitions, the Company's sales increased by 17.6%. The disclosure
          of the Company's revenues excluding the 2005 acquisitions may constitute
          a
          "Non-GAAP Financial Measure". The Company has provided 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 six months ended June
          30,
          2006 of $3.6 million and $1.1 million, respectively.
 
 Gross
          profit margins were lower during the six months ended June 30, 2006 compared
          to
          June 30, 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
          are
          amortized over a shorter remaining life, or will be expensed as incurred
          if the
          applicable covenant to compete has expired. During the quarter ended June
          30,
          2006, Current Concepts reached their benchmark sales target and no additional
          contingent purchase price payments will be made. Gross profit margins are
          also
          adversely affected to the extent that the Company manufactures lead-free
          products, as the Company has additional labor and manufacturing costs but
          cannot
          attain premium pricing for such products.
 
 The
        Company also incurred $0.8 million in pre-tax stock compensation expense
        during
        the six months ended June 30, 2006 in connection with its Restricted Stock
        Award
        and Incentive Stock Option Plan. This expense is reflected both in the Company’s
        cost of sales and selling, general and administrative expenses which is
        principally consistent with the classification of employee compensation expense.
        During the six months ended June 30, 2005, the Company did not incur an expense
        for stock compensation.
 
 During
        the six months ended June 30, 2006, the Company incurred a $1.1 million pre-tax
        casualty loss primarily for uninsured raw materials destroyed by a fire at
        a
        Company leased manufacturing facility in the Dominican Republic.
 
 -34-
 
 During
        the six months ended June 30, 2006, the Company realized a gain on marketable
        securities of $5.2 million, net of investment banking fees, offset by a $1.0
        million accrual (classified as a selling, general and administrative charge
        for
        accounting purposes) for performance bonuses awarded by the Board of Directors
        in connection with the gain.
 
 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.
 
  -35-
  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.
 
 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.
 
 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.
  -36-




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





Results
      of Operations





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





Percentage
                      of Net Sales
                    Six
                      Months Ended
                    June
                      30,
            
            Percentage
                      of Net Sales
                    Three
                      Months Ended
                    June
                      30,2006
            
            2005
            
            2006
            
            2005Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            74.5
            
            
            71.3
            
            
            75.6
            
            
            70.7Selling,
                    general and administrative expenses
            
            
            16.2
            
            
            15.4
            
            
            15.4
            
            
            15.0Casualty
                loss
            
            
            0.9
            
            
            -
            
            
            0.2
            
            
            -Interest
                    income and interest and financing expense
            
            
            0.9
            
            
            0.4
            
            
            1.0
            
            
            0.5Gain
                    on sale of marketable securities - net
            
            
            4.3
            
            
            -
            
            
            7.9
            
            
            -Earnings
                    before provision for income taxes
            
            
            13.6
            
            
            13.7
            
            
            17.6
            
            
            14.8Income
                tax provision
            
            
            3.0
            
            
            3.1
            
            
            4.5
            
            
            3.2Net
                earnings
            
            
            10.5
            
            
            10.6
            
            
            13.2
            
            
            11.6




-37-





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





Increase
                from
              Prior
                Period
            
            Increase
                from
              Prior
                PeriodSix
                Months Ended June 30, 2006
              compared
                with Six Months Ended June30, 2005
            
            Three
                Months Ended June 30, 2006
              compared
                with Three Months Ended June
              30,
                2006Net
                sales
            
            
            17.6
            %
            
            15.5
            %Cost
                of sales
            
            
            23.0
            
            
            23.6Selling,
                    general and administrative expenses
            
            
            23.8
            
            
            18.7Net
                earnings
            
            
            16.2
            
            
            31.4





**SIX
      MONTHS ENDED JUNE 30, 2006 VERSUS** **SIX
      MONTHS ENDED JUNE 30, 2005**





Sales





Net
      sales
      increased 17.6% from $103.0 million during the six months ended June 30, 2005
      to
      $121.1 million during the six months ended June 30, 2006. The Company attributes
      the increase to increased module sales of $6.6 million, of which $3.4 million
      is
      attributable to the acquisition of Galaxy, strong demand for interconnect
      products resulting in an increase of $5.1 million in such sales, of which $1.2
      million is attributable to the acquisition of Netwatch, and strong demand for
      magnetic sales resulting in an increase of $6.4 million in such sales,
      offsetting a decrease in circuit protection sales of $0.1 million. Bel had
      an
      organic sales increase of 13.1% for the six months ended June 30, 2006.





The
      significant components of the Company's revenues for the six months ended June
      30, 2006 were magnetic products of $68.8 million (as compared with $62.4 million
      during the six months ended June 30, 2005), interconnect products of $23.4
      million (as compared with $18.3 million during the six months ended June 30,
      2005), module products of $19.4 million (as compared with $12.7 million during
      the six months ended June 30, 2005), and circuit protection products of $9.5
      million (as compared with $9.6 million during the six months ended June 30,
      2005).


-38-





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.
      During the second quarter of 2006, several customers have requested deliveries
      in excess of their forecasts. The Company has also received several last minute
      order changes. 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 no
      customer with sales in excess of 10% of net sales during the six months ended
      June 30, 2006.





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 three independent third
      party
      contractors in the Far East. The Company uses the services of three additional
      sub-contractors without formal agreements. Costs are recorded as incurred for
      all products manufactured either at third party facilities or at the Company's
      own manufacturing facilities. Such amounts are determined based upon the
      estimated stage of production and include labor cost and fringes and related
      allocations of factory overhead. The Company manufactures finished goods at
      its
      own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York,
      the
      Dominican Republic, Mexico, the Czech Republic and Macao.





Cost
      of
      sales as a percentage of net sales increased from 71.3 % during the six months
      ended June 30, 2005 to 74.5% during the six months ended June 30, 2006. The
      increase in the cost of sales percentage is primarily attributable to the
      following:





 ̈
              The
                  Company incurred a 4.2% 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
                  Power
                  products in the second half of 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.





 ̈
            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.


-39-





 ̈
            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.





Included
      in cost of sales are research and development expenses of $3.5 million and
      $3.8
      million for the six months ended June 30, 2006 and 2005, respectively. The
      principal reason for the decrease is less research and development expense
      in
      the United States offset in part by higher expenditures in the Far
      East.




Selling,
      General and Administrative Expenses





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales increased from 15.4 % during the six months ended June 30, 2005 to 16.2%
      during the six months ended June 30, 2006. The Company attributes $1.3 million
      of the $3.8 million increase in the dollar amount of such expenses to increased
      selling expenses, including $.2 million in Power related expenses. The $2.5
      million increase in general and administrative expenses includes $1.0 million
      related to Power and Bel Net additional salaries, wages and bonuses of $1.7
      million, principally attributable to a $1.0 million bonus approved by the Board
      of Directors in connection with the gain from the sale of Artesyn stock, raises
      and other bonus accruals, additional stock compensation expense of $.5 million
      partially arising from the Company’s implementation of Statement of Financial
      Accounting Standards ("SFAS") 123 (R) during 2006 (see below and Notes 1 and
      10
      of the Notes to the Company's Consolidated Financial Statements) and additional
      professional fees of $.3 million principally related to Sarbanes-Oxley
      compliance, offset in part by lower bad debt expense of $.4 million and other
      decreases in several expense categories totaling $.4 million.





During
      the six months ended June 30, 2006, the Company expensed share based
      compensation costs in accordance with SFAS No. 123(R), “Share-based Payment".
      This expense is included in both cost of sales and selling, general and
      administrative expenses in the amount of approximately $270,000 and $520,000,
      respectively, for the six months ended June 30, 2006.


-40-


Casualty
      Loss





The
      Company incurred an estimated loss of $1.1 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 production at this
      facility has been substantially restored during July 2006.





Interest
      Income





Interest
      income represents interest earned on cash and cash equivalents which increased
      by approximately $541,000 during the six months ended June 30, 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
      higher yields on such balances.





Interest
      Expense





A
      $10
      million term loan was entered into on March 21, 2003, which was borrowed for
      the
      acquisition of Insilco's Passive Components Group. The loan 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 $207,000 during the
      six
      months ended June 30, 2005. During the six months ended June 30, 2006, interest
      expense included $44,000 of financing expenses related to the Company's credit
      facility in the United States.





Provision
      for Income Taxes





The
      provision for income taxes for the six months ended June 30, 2006 was $3.7
      million compared to $3.2 million during the six months ended June 30, 2005.
      The
      Company's earnings before income taxes for the six months ended June 30, 2006
      are approximately $2.2 million higher than in 2005. During the six months ended
      June 30, 2006, the Company incurred higher taxes of approximately $.5 million
      principally as a result of higher United States taxes resulting from the gain
      from the sale of marketable securities (Artesyn) and higher United States
      taxable income from operations offset in part by lower foreign taxes in the
      Far
      East due to the implementation by the Company of its Macao Commercial Offshore
      Company ("MCO") which is not subject to Macao corporation income taxes. This
      had
      an impact of reducing the effective tax rate from 22.6% for the six months
      ended
      June 30, 2005 to 22.3% for the six months ended June 30, 2006 (measured as
      the
      provision as a percentage of earnings before provision for income
      taxes).


-41-


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 was
      deemed “offshore” and thus not fully taxable in Hong Kong.





The
      Company also conducts manufacturing operations in Macao. Macao has a statutory
      corporate income tax rate of 16 percent.




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 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.


-42-




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 gains of $(203,000) and
      $(105,000) for the six months ended June 30, 2006 and 2005, respectively, which
      were charged to expense, and approximately $(205,000) and $(615,000) for the
      six
      months ended June 30, 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. The Company’s investment in Toko is
      denominated in Japanese yen. A significant change in the value of the yen versus
      the U.S. dollar could have a material effect on the investment value of Toko.





**THREE
      MONTHS ENDED JUNE 30, 2006 VERSUS** **THREE
      MONTHS ENDED JUNE 30, 2005**





Sales





Net
      sales
      increased 15.5% from $57.5 million during the three months ended June 30, 2005
      to $66.5 million during the three months ended June 30, 2006. The Company
      attributes the increase to increased module sales of $2.8 million, strong demand
      for interconnect products resulting in an increase of $2.4 million in such
      sales, of which $0.7 million is attributable to the acquisition of Netwatch,
      strong demand for magnetic sales resulting in an increase of $3.5 million in
      such sales, and an increase in circuit protection sales of $0.3 million. Bel
      had
      an organic sales increase of 14.4% for the three months ended June 30, 2006.





The
      significant components of the Company's revenues for the three months ended
      June
      30, 2006 were magnetic products of $36.9 million (as compared with $33.4 million
      during the three months ended June 30, 2005), interconnect products of $12.3
      million (as compared with $9.9 million during the three months ended June 30,
      2005), module products of $12.0 million (as compared with $9.2 million during
      the three months ended June 30, 2005), and circuit protection products of $5.3
      million (as compared with $5.0 million during the three months ended June 30,
      2005.)


-43-





Cost
      of Sales





Bel
      generally enters into processing arrangements with three independent third
      party
      contractors in the Far East. The Company uses the services of three additional
      subcontractors without formal agreements. 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, the Czech Republic and Macao.





Cost
      of
      sales as a percentage of net sales increased from 70.7% during the three months
      ended June 30, 2005 to 75.6% during the three months ended June 30, 2006. The
      increase in the cost of sales percentage is primarily attributable to the
      following:





 ̈
              The
                  Company incurred a 5.8% 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
                  Power
                  products in the second half of 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.





 ̈
            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.





 ̈
            The
                Company incurred a pre-tax amortization charge of $289,000 related
                to
                intangibles acquired in the Power and Insilco
                acquisitions.





 ̈
            The
                Company incurred $270,000 of compensation expense pursuant to SFAS
                No.
                123R that was charged to cost of
                sales.





 ̈
            The
                Company has been required to run duplicate ROHS and non-ROHS production
                lines to support its customers as they convert to “lead free”
                products.


-44-





 ̈
            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.





Included
      in cost of sales are research and development expenses of $1.6 million and
      $1.9
      million for the three months ended June 30, 2006 and 2005, respectively.




Selling,
      General and Administrative Expenses





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales increased from 15.0% during the three months ended June 30, 2005 to 15.4%
      during the three months ended June 30, 2006. The Company attributes $.5 million
      of the $1.6 million increase in the dollar amount of such expenses to increased
      selling expenses. The $1.1 million increase in general and administrative
      expenses is principally attributable to the $1.0 million bonus approved by
      the
      Board of Directors in connection with the gain from the sale of Artesyn Stock.





During
      the three months ended June 30, 2006, the Company expensed share based
      compensation costs in accordance with SFAS No. 123(R), “Share-based Payment".
      This expense is included in both cost of sales and selling, general and
      administrative expenses in the amount of approximately $270,000 and $120,000,
      respectively, for the three months ended June 30, 2006.


-45-


Casualty
      Loss





The
      Company incurred an estimated loss of $.1 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 production at this
      facility has been substantially restored during July 2006.





Interest
      Income





Interest
      income represents interest earned on cash and cash equivalents which increased
      by approximately $254,000 during the three months ended June 30, 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





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 $140,000 during the
      three months ended June 30, 2005. During the three months ended June 30, 2006,
      interest and other expenses included $17,000 of financing expenses related
      to
      the Company's credit facility in the United States.





Provision
      for Income Taxes





The
      provision for income taxes for the three months ended June 30, 2006 was $3.0
      million compared to $1.8 million during the three months ended June 30, 2005.
      The Company's earnings before income taxes for the three months ended June
      30,
      2006 are approximately $3.2 million higher than in 2005. The reasons for the
      increase in taxes and pre-tax income are principally attributable to the same
      reasons as set forth in the six month analysis.


-46-





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 $245,000 and $22,000
      for the three months ended June 30, 2006 and 2005, respectively, which were
      charged to expense, and approximately $113,000 and $425,000 for the three months
      ended June 30, 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.


-47-




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 June 30, 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 June 30, 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 June 30, 2006. This line of credit expires
      during July 2007. 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.


-48-


The
      Company has cumulatively acquired a total of 4,926,000 shares, or 5%, of the
      common stock of Toko, Inc. (“Toko”) at a total purchase price of $15.6 million.
      Of these amounts, the Company acquired 101,000 shares at a cost of $329,000
      subsequent to June 30, 2006. Toko had a market capitalization of approximately
      $327 million as of August 1, 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
      June 30, 2006, the Company has recorded an unrealized gain, net of income taxes,
      of approximately $.5 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 Toko, or $1 million, whichever is lower. As of June 30, 2006,
      the
      Company has accrued a fee in the amount of approximately $150,000. Such amount
      has been deferred within other assets. If the proposed acquisition of the Toko
      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 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. On
        April 28, 2006, Artesyn was acquired by Emerson Network Power for $11.00
        per
        share in cash. During the second quarter of 2006, in connection with the
        Company's sale of Artesyn stock, the Company recognized a gain of approximately
        $5.2 million, net of investment banker’s advisory fees of $850,000. The Company
        accrued bonuses of $1.0 million in connection with the gain. For financial
        statement presentation purposes, the $1.0 million bonus was classified as
        a
        selling, general and administrative expense to be paid to key employees by
        December 31, 2006.





The
      Company is constructing a 117,000 square foot manufacturing facility in
      Zhongshan City, PRC for approximately $2.3 million. As of June 30 2006, the
      Company has paid approximately $2.1 million toward the construction. The Company
      expects to complete the construction during 2006.


-49-





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 June 30, 2006, the
      Company had also paid $203,000 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 $848,000 on the Company's consolidated balance sheet
      at
      June 30, 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. This $10.0
      million benchmark was reached during the second quarter of 2006 and therefore
      no
      additional payments will be made. During the six months ended June 30, 2006
      and
      2005, the Company paid approximately $447,000 and $296,000, 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 June 30, 2006, the Company had cumulatively
      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 six months ended June 30, 2006.





During
      the six months ended June 30, 2006, the Company's cash and cash equivalents
      increased by $26.4 million reflecting approximately $8.7 million provided by
      operating activities (principally as a result of the Company's net income of
      $12.8 million), and proceeds of $1.9 million from the exercise of stock options,
      offset in part by $2.7 million used principally for acquisitions, $4.3 million
      for the purchase of property, plant and equipment, and $1.1 million for payments
      of dividends.


-50-





Cash,
      marketable securities and cash equivalents and accounts receivable comprised
      approximately 53.9% and 53.6% of the Company's total assets at June 30, 2006
      and
      December 31, 2005, respectively. The Company's current ratio (i.e., the ratio
      of
      current assets to current liabilities) was 4.0 to 1 and 4.5 to 1 at June 30,
      2006 and December 31, 2005, respectively.





The
      following table sets forth at June 30, 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
                one
                  year
              
              1-3
                years
              
              3-5
                years
              
              More
                  than
                5
                  yearsCapital
                  expenditure obligations
              
              $
              2,715,548
              
              $
              2,715,548
              
              $
              -
              
              $
              -
              
              $
              -Contingent
                  purchase price commitments
              
              
              2,383,516
              
              
              2,383,516Operating
                  leases
              
              
              3,802,996
              
              
              1,392,957
              
              
              1,546,563
              
              
              863,476Raw
                  material purchase obligations
              
              
              19,349,197
              
              
              19,349,197
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              28,251,257
              
              $
              25,841,218
              
              $
              1,546,563
              
              $
              863,476
              
              $
              -




The
      Company is required to pay its SERP obligations at the occurrence of certain
      events. As of June 30, 2006 the SERP had an estimated unfunded benefit
      obligation of approximately $3.8 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.


-51-





New
      Financial Accounting Standards





In
        July
        2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
        No. 48 “Accounting for Uncertainty in Income Taxes" ("FIN 48"). The
        interpretation requires a two step approach for recognizing and measuring
        tax
        benefits based on a recognition threshold of “more likely than not”. The FASB
        also requires explicit disclosures about uncertainties in tax positions
        including a detailed rollforward of tax benefits that do not qualify for
        financial statement recognition. The adoption of FIN 48 is effective for
        fiscal
        years beginning after December 15, 2006.  The
        implementation of FIN 48 could have a material effect on the consolidated
        balance sheet and results of operations but the effect of such
        implementation is not determinable at this time.





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 $226,000
      (pre-tax) during the six months ended June 30, 2006. The adoption of SFAS 123(R)
      did not have a material effect on the consolidated balance sheet as of June
      30,
      2006 or the consolidated statement of cash flows for the six months ended June
      30, 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 results of operations or
      financial position.


-52-





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 Macao 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.




-53-





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, and is accumulated and communicated to our
                  management, including our Chief Executive Officer and our Vice
                  President
                  of Finance, as appropriate to allow timely decisions regarding
                  required
                  disclosure.





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.




-54-


PART
      II.
      Other Information





Item
      1.  Legal
      Proceedings





The
        Company and two of its officers are defendants in a wrongful termination
        lawsuit
        brought in District Court of Frankfurt am Main, Germany by a former employee
        at
        a foreign subsidiary of the Company. The Company believes it has adequately
        accrued sufficient amounts for this liability in accordance with the terms
        of
        the ex-employee's employment agreement.





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 defendant's
        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.


-55-





The
        Company cannot predict the outcome of these matters or the 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.





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





The
        Company’s annual meeting of security holders was held on May 17, 2006. At the
        meeting the Board’s nominees were elected to the Board of Directors for
        terms of three years. The votes were cast as follows:





For
            
            WithheldHoward
                Bernstein
            
            
            2,428,653
            
            
            16,326John
                Tweedy
            
            
            2,428,653
            
            
            16,326


-56-





Item
      6. Exhibits


(a)
      Exhibits:




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


-57-


SIGNATURES





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


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




Dated:
      August 9, 2006


-58-




EXHIBIT
      INDEX





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





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





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





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