Edgar Filing: BEL FUSE INC /NJ

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2006________________________________________________________

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)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $0.10 par value; Class B Common Stock, $0.10 par value

Indicate by checkmark if the registrant is a well-known issuer, as defined in Rule 405 of the

Securities Act. o Yes x No

Indicate by checkmark if the registrant is not required to file reports to Section 13 or 15(d)

of the Act. o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by checkmark 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-2 of the Securities Exchange Act of 1934.

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

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

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates (for this purpose, persons and entities other than executive officers, directors, and 5% or more shareholders) of the registrant, as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2006), was $312,206,369.

Number of shares of Common Stock outstanding as of March 1, 2007: 2,702,677 Class A Common Stock; 9,171,665- Class B Common Stock

Documents incorporated by reference:

Bel Fuse Inc.'s Definitive Proxy Statement for the 2007 Annual Meeting of Stockholders is incorporated by reference into Part III.

BEL FUSE INC.

INDEX

Forward Looking Information			Page
Part I

	Item 1.	Business	1

	Item 1A.	Risk Factors	11

	Item 1B.	Unresolved Staff Comments	17

	Item 2.	Properties	17

	Item 3.	Legal Proceedings	19

	Item 4.	Submission of Matters to a Vote of Security Holders	20

Part II

	Item 5.	Market for Registrant's Common Equity,
		Related Stockholder Matters and Issuer
		Purchases of Equity Securities	21

	Item 6.	Selected Financial Data	23

	Item 7.	Management's Discussion and Analysis of Financial
		Condition and Results of Operations	25

	Item 7A.	Quantitative and Qualitative Disclosures About
		Market Risk	45

	Item 8.	Financial Statements and Supplementary Data	45

	Item 9.	Changes in and Disagreements With Accountants
		on Accounting and Financial Disclosure	47

	Item 9A.	Controls and Procedures	47

	Item 9B.	Other Information	49

Part III

	Item 10.	Directors, Executive Officers and Corporate
		Governance	49

	Item 11.	Executive Compensation	49

	Item 12.	Security Ownership of Certain Beneficial Owners
		and Management and Related Stockholder
		Matters	49

BEL FUSE INC.

INDEX (Con't)

Forward Looking Information			Page
Part III (Con't)

	Item 13.	Certain Relationships and Related Transactions,
		and Director Independence	49

	Item 14.	Principal Accountant Fees and Services	49

Part IV

	Item 15.	Exhibits and Financial Statement Schedules	50

Signatures			53

*Page F-1 follows page 46

FORWARD LOOKING INFORMATION

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 Item 1A of the Company's Annual Report on Form 10-K. 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 mentioned above, and those detailed in Item 1A of this Annual Report on Form 10-K, 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 hereof or to reflect the occurrence of unanticipated events. An investment in the Company involves various risks, including those mentioned above and those which are detailed from time to time in the Company’s SEC filings.

PART I

Item 1. Business

General

Bel Fuse Inc. ("Bel" or the "Company") 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 portfolio of products also finds application in the automotive, medical and consumer electronics markets. These products are designed to protect, regulate, connect, isolate or manage a variety of electronic circuits.

With over 55 years in the electronics industry, Bel has reliably demonstrated the ability to succeed in a variety of product areas across multiple industries. Founded in 1949, the Company has a strong track record of technical innovation working with the engineering communities of market leaders. Bel has consistently proven itself a valuable supplier to the foremost companies in its chosen industries by developing cost-effective solutions for the challenges of new product development. By combining our strength in product design with our own specially-designed manufacturing facilities, Bel has established itself as a formidable competitor on a global basis.

The Company, which is organized under New Jersey law, operates in one industry with three geographic reporting segments as defined in Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". Bel’s principal executive offices are located at 206 Van Vorst Street, Jersey City, New Jersey 07302; (201) 432-0463. The Company operates other facilities in North America, Europe and the Far East and trades on the NASDAQ (BELFA and BELFB). For information regarding Bel's three geographic reporting units, see Note 11 of the Notes to Consolidated Financial Statements.

The terms “Company” and “Bel” as used in this Annual Report on Form 10-K refers to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.

Product Groups

Magnetics

Discrete components

Power transformers

MagJack^® integrated connector modules

The Company, a leading producer of discrete magnetics, markets an extensive line of products (transformers, diplex filters, common mode chokes and delay lines) used in networking, telecommunications and broadband applications. These magnetic devices condition, filter and isolate the signal as it travels through network equipment helping to ensure accurate data and/or voice transmission. Bel’s magnetic components are also used in the automotive and consumer products markets.

Power transformer products include standard and custom designs that have been added to the Company’s product mix as a result of the Company's Signal Transformer acquisition in 2003. Manufactured for use in alarm, security and medical products, these devices are designed to comply with international safety standards governing transformers, including UL, CSA, IEC, TUV and VDE.

Marketed under the brand MagJack®, Bel's connectors with integrated magnetics provide the signal conditioning, electromagnetic interference suppression and signal isolation previously performed by multiple, discrete magnetics.

Modules

Power conversion modules

Integrated analog front end modules

Custom modules

Bel’s Power conversion products include standard and custom non-isolated DC-DC converters designed specifically to power low voltage silicon devices. The need for converting one DC voltage to another voltage is growing rapidly as the developers of integrated circuits commonly adjust the supply voltage as a means of optimizing device performance. These DC-DC converters are used in data networking equipment, distributed power architecture, and telecommunication devices, as well as computers and peripherals.

The Company develops IC-compatible, integrated front end modules for broadband and telecommunication applications. These modules can eliminate the need for several discrete components by providing the same functionality in a single, compact device.

The Company continues to pursue market opportunities, where it can supply customized value-added modules to customers requiring integrated products that combine one or more of the Company's capabilities in surface mount assembly, automatic winding, hybrid fabrication and component encapsulation.

Circuit Protection

Miniature fuses

Micro fuses

Surface mount fuses and PTC devices

Radial PTC

The Company’s circuit protection products include board level fuse and PTC devices (miniature, micro and surface mount fuses) designed for the global electronic and telecommunication markets. Fuses and PTC devices prevent currents in an electrical circuit from exceeding certain predetermined levels, acting as a safety valve to protect expensive components from damage by cutting off high currents before they can generate enough heat to cause smoke or fire. Additionally, PTC devices are resettable and do not have to be replaced before normal operation of the end product can resume.

While the Company continues to manufacture traditional fuse types, its surface mount chip fuses are used in space-critical applications such as mobile phones and computers. Like the majority of Bel’s fuse products, the chip fuses comply with RoHS standards for the elimination of lead and other hazardous materials.

The Company’s circuit protection devices are used extensively in products such as televisions, consumer electronics, power supplies, computers, telephones and networking equipment.

Interconnect

Passive jacks

Plugs

Cable assemblies

The Company has a comprehensive line of modular connectors, including RJ45 and RJ11 passive jacks, plugs and cable assemblies. Passive jacks serve primarily as the connectivity device in networking equipment such as routers, hubs, switches and patch panels. Modular plugs and cable assemblies are utilized within the structured cabling system, often referred to as premise wiring. The Company’s connector products are designed to meet all major performance standards including Category 6 compliant products targeted to next generation network standards for Gigabit Ethernet and 10Gigabit Ethernet.

The following table describes, for each of Bel's product groups, the principal functions and applications associated with such product groups.

Product Group		Function	Application
Magnetics
	Discrete Components	Condition, filter and isolate the electronic signal to ensure accurate data and/or voice transmission.	Network switches, routers, hubs and PCs used in 10/100Base-TX, Gigabit, Voice over the Internet Protocol (”VoIP"), home networking and cable modem applications.
	Power Transformers	Safety isolation and distribution.	Power supplies, alarm, fire detection and security systems, HVAC, lighting and medical equipment.
	MagJack^® Integrated Connector Modules	Condition, filter and isolate an electronic signal to ensure accurate data and/or voice transmission and to provide RJ45 and USB connectivity	Network switches, routers, hubs and PCs used in 10/100Base-TX, Gigabit, and VoIP.
Modules
	Power Conversion Modules (DC-DC Converters)	Convert DC voltage level to other DC level as required to meet the power needs of low voltage silicon devices	Networking equipment, distributed power architecture, telecom devices, computers and peripherals.
	Integrated Analog Front End Modules	Condition, filter and isolate the electronic signal to ensure accurate data and/or voice transmission.	Broadband and telecom equipment supporting ISDN, T1/E1, xDSL technologies.
	Custom Modules	Integrate several discrete devices to provide customized, space-saving solution.	Networking products.
Circuit Protection
	Miniature Fuses	Protects devices by preventing current in an electrical circuit from exceeding acceptable levels.	Power supplies, electronic ballasts and consumer electronics.
	Micro Fuses and Radial PTC	Protects devices by preventing current in an electrical circuit from exceeding acceptable levels.	Cellular phone chargers, consumer electronics, power supplies and set top boxes.
	Surface Mount Fuses and PTC	Protects devices by preventing current in an electrical circuit from exceeding acceptable levels.	Cellular phones, mobile computers, IC and battery protection, power supplies and telecom line cards.

Interconnect
	Passive Jacks	RJ45 and RJ11 connectivity for data and/or voice transmission.	Network routers, hubs, switches and patch panels deployed in Category 5, 5e and 6 cable systems.
	Plugs	RJ45 and RJ11 connectivity for data and/or voice transmission.	Network routers, hubs, switches and patch panels deployed in Category 5, 5e and 6 cable systems.
	Cable Assemblies	RJ45 and RJ11 connectivity for data and voice transmission.	Structured Category 5, 5e and 6 cabling systems (premise wiring).

Acquisitions

Acquisitions have played a critical role in the growth of Bel and the expansion of both its product portfolio and its customer base. Furthermore, acquisitions continue to be a key element in the Company’s growth strategy. As part of the Company’s acquisition strategy, it may, from time to time, purchase equity positions in companies that are potential merger candidates. The Company frequently evaluates possible merger candidates that would provide an expanded product and technology base that will allow the Company to further penetrate its strategic customers and/or an opportunity to reduce overall operating expense as a percentage of revenue. Bel also looks at whether the merger candidates are positioned to take advantage of the Company's low cost manufacturing facilities; and whether a cultural fit will allow the acquired company to be integrated smoothly and efficiently.

On June 30, 2005, the Company acquired the common stock of Netwatch s.r.o., located in Prague, The Czech Republic, for approximately $1.9 million of which $0.5 million 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 Company believes that the strategic value of the Netwatch s.r.o. acquisition was the establishment of a European manufacturing presence for the Company and the addition of fiber optic capability to the Bel Stewart Connector Group to complement the Company’s existing copper-based product portfolio. The Company believes that this acquisition enabled Bel Stewart to support the Company's customer base, including the world's largest structured cabling providers, with a broad range of both copper and fiber based components and assemblies.

This acquisition was accounted for using the purchase method of accounting and accordingly, the results of operations of Netwatch s.r.o. have been included in the Company’s 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”) for approximately $19.0 million in cash including transaction costs of approximately $0.4 million. 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 $11.5 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 are being amortized on a straight-line basis over their estimated useful lives.

The Company believes that the purchase of Galaxy’s Power Group was a logical strategic fit with Bel’s Power Products group. The Company believes that the products are highly complementary with minimal overlap. The customer base is similar but still affords ample opportunity for cross selling. While Bel offers Galaxy a much-needed cost competitive manufacturing base in China, Galaxy brings a portfolio of products and technologies aimed at higher end markets. In addition to these strategic synergies, there is significant opportunity for expense reduction and the elimination of redundancies.

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

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

The following unaudited pro forma summary results of operations assume that Galaxy and Netwatch s.r.o. had been acquired as of January 1, 2004 (in thousands, except per share data):

	Year Ended
	December 31,
	2005		2004
Net sales	$	221,227	$	212,331
Net earnings		20,026		25,419
Earnings per share - diluted
Class A		1.65		2.14
Class B		1.75		2.23

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, 2004. Such information should not be construed as a representation of the future results of operations of the Company.

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

Cash	$ 311,856
Accounts receivable	3,687,331
Inventories	2,862,571
Prepaid expenses	96,120
Income taxes receivable		5,488
Property, plant and
equipment		1,545,526
Other assets		32,083
Deferred tax asset		1,392,850
Goodwill		11,786,080
Intangible assets		2,630,000
Notes payable		(860,694	)
Accounts payable		(2,129,165	)
Accrued expenses		(465,002	)

Net assets acquired	$	20,895,044

The Company has cumulatively acquired a total of 5,874,919 shares, or approximately 6% of the outstanding shares, of the common stock of Toko, Inc. (“Toko”) at a total purchase price of $18.0 million. Toko had a market capitalization of approximately $255 million as of December 31, 2006. These shares 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 December 31, 2006, the Company has recorded an unrealized loss, net of income tax benefit, of approximately $1.5 million which is included in accumulated other comprehensive income as stated in the consolidated statement of stockholders’ equity. The Company’s investment in Toko has been in an unrealized loss position for less than twelve months. As a result of the volatility of the Toko share price over the last year, management believes that the investment in Toko is not other-than-temporarily impaired. Furthermore, at March 14, 2007 the unrealized loss, net of income tax benefit, was approximately $.6 million. 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. During 2006 $300,000 was prepaid against this obligation. As of December 31, 2006, the Company has not accrued any additional fees to the investment banker as the Toko stock is at an unrealized loss position.

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 ($723,000) and cost of sales ($277,000) and was paid to key employees during January 2007.

Sales and Marketing

The Company sells its products to customers throughout North America, Western Europe and the Far East. Sales are made through one of three channels: direct strategic account managers, regional sales managers working with independent sales representative organizations or authorized distributors. Bel's strategic account managers are assigned to handle major accounts requiring global coordination.

Independent sales representatives and authorized distributors are overseen by the Company's sales management personnel located throughout the world. As of December 31, 2006, the Company had a sales and support staff of 50 persons that supported a network of 82 sales representative organizations and non-exclusive distributors. The Company has written agreements with all of its sales representative organizations and major distributors. These written agreements, terminable on short notice by either party, are standard in the industry.

Sales support functions have also been established and located in Bel international facilities to provide timely, efficient support for customers. This supplemental level of service, in addition to first-line sales support, enables the Company to be more responsive to customers’ needs on a global level. The Company’s marketing capabilities include product management which drives new product development, application engineering for technical support and marketing communications. Product marketing managers facilitate technical partnerships for engineering development of IC-compatible components and modules.

Research and Development

The Company’s engineering groups are strategically located around the world to facilitate communication with and access to customers’ engineering personnel. This collaborative approach enables partnerships with customers for technical development efforts. On occasion, Bel executes non-disclosure agreements with customers to help develop proprietary, next generation products destined for rapid deployment.

The Company also sponsors membership in technical organizations that allow Bel’s engineers to participate in developing standards for emerging technologies. It is management’s opinion that this participation is critical in establishing credibility and a reputable level of expertise in the marketplace, as well as positioning the Company as an industry leader in new product development.

Research and development costs are expensed as incurred, and are included in cost of sales. Generally, research and development is performed internally for the benefit of the Company. Research and development costs include salaries, building maintenance and utilities, rents, materials, administration costs and miscellaneous other items. Research and development expenses for the years ended December 31, 2006, 2005 and 2004 amounted to $6.6 million, $7.3 million and $7.3 million, respectively. The decrease from 2005 to 2006 is principally attributed to less research and development costs in the United States due to the consolidation of the Bel Power and Galaxy facilities in Massachusetts. This was offset in part by increased expenses at the Company’s China research and development facility which has a lower cost structure.

Competition

The Company operates in a variety of markets all of which are highly competitive. There are numerous independent companies and divisions of major companies that manufacture products that are competitive with one or more of Bel’s products. It is management’s opinion that Bel’s expanded product portfolio helps to differentiate the Company in these markets and, as a result, reduces the possibility of any single direct competitor operating across all product groups.

The Company's ability to compete is dependent upon several factors including product performance, quality, reliability, depth of product line, customer service, technological innovation, design, delivery time and price. Overall financial stability and global presence also play a significant role and give Bel a favorable position in relation to many of its competitors. Management intends to maintain a strong competitive posture in the Company's markets by continued expansion of the Company’s product lines and ongoing investment in research, development and manufacturing resources.

Associates

As of December 31, 2006, the Company had 1,956 full-time associates. The Company employed 616 people at its North American facilities, 1,270 people at its Asian facilities and 70 people at its European facilities, excluding workers supplied by independent contractors. The Company's manufacturing facility in New York is represented by a labor union. The Company believes that its relations with its associates are satisfactory.

Suppliers

The Company has multiple suppliers for most of the raw materials that it purchases. Where possible, the Company has contractual agreements with suppliers to assure a continuing supply of critical components.

With respect to those items which are purchased from single sources, the Company believes that comparable items would be available in the event that there was a termination of the Company's existing business relationships with any such supplier. While such a termination could produce a disruption in production, the Company believes that the termination of business with any one of its suppliers would not have a material adverse effect on its long-term operations. Actual experience could differ materially from this belief as a result of a number of factors, including the time required to locate an alternative supplier, and the nature of the demand for the Company’s products. In the past, the Company has experienced shortages in certain raw materials, such as capacitors, ferrites and integrated circuits (“IC’s”), when these materials were in great demand. Even though the Company may have more than one supplier for certain materials, it is possible that these materials may not be available to the Company in sufficient quantities or at the times desired by the Company.

Backlog

The Company typically manufactures products against firm orders and projected usage by customers. Cancellation and return arrangements are either negotiated by the Company on a transactional basis or contractually determined. The Company's backlog of orders as of February 28, 2007 was approximately $47.1 million, as compared with a backlog of $50.1 million as of February 28, 2006. Management expects that all of the Company's backlog as of February 28, 2007 will be shipped by December 31, 2007. Such expectation constitutes a Forward-Looking Statement. Factors that could cause the Company to fail to ship all such orders by year-end include unanticipated supply difficulties, changes in customer demand and new customer designs. The Company's major customers have negotiated reduced lead times on purchase orders with the goal of reducing their inventories. Accordingly, backlog may not be a reliable indicator of the timing of future sales. See Item 1A of this Annual Report- "Risk Factors - Our backlog figures may not be reliable indicators."

Intellectual Property

The Company has been granted a number of U.S. patents and has additional U.S. patent applications pending relating to its products. While the Company believes that the issued patents are defendable and that the pending patent applications relate to patentable inventions, there can be no assurance that a patent will be obtained from the applications or that its existing patents can be successfully defended. It is management's opinion that the successful continuation and operation of the Company's business does not depend upon the ownership of patents or the granting of pending patent applications, but upon the innovative skills, technical competence and marketing and managerial abilities of its personnel. The patents have a life of seventeen years from the date of issue or twenty years from filing of patent applications. The Company's existing patents expire on various dates from August 25, 2009 to February 15, 2021.

The Company utilizes U.S. registered trademarks to identify various products that it manufactures. The trademarks survive as long as they are in use and the registrations of these trademarks are renewed.

Available Information

The Company maintains a website at www.belfuse.com where it makes available the proxy statements, press releases and reports on Form 4, 8-K, 10-K and 10-Q that it and its insiders file with the SEC. These forms are made available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Press releases are also issued via electronic transmission to provide access to the Company’s financial and product news. In addition, the Company provides notification of and access to voice and Internet broadcasts of its quarterly and annual results.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below, together with all other information contained in this Annual Report before making investment decisions with respect to our common stock.

We do business in a highly competitive industry

Our business is highly competitive worldwide, with relatively low barriers to competitive entry. We compete principally on the basis of product performance, quality, reliability, depth of product line, customer service, technological innovation, design, delivery time and price. The electronic components industry has become increasingly concentrated and globalized in recent years and our major competitors, some of which are larger than us, have significant financial resources and technological capabilities.

Our backlog figures may not be reliable indicators.

Many of the orders that comprise our backlog may be canceled by customers without penalty. Customers may on occasion double and triple order components from multiple sources to ensure timely delivery when backlog is particularly long. Customers often cancel orders when business is weak and inventories are excessive. Therefore, we cannot be certain that the amount of our backlog equals or exceeds the level of orders that will ultimately be delivered. Our results of operations could be adversely impacted if customers cancel a material portion of orders in our backlog.

There are several factors which can cause us to lower our prices.

a) The average selling prices for our products tend to decrease rapidly over their life cycle, and customers are increasing pressure on suppliers to lower prices. Our profits will suffer if we are not able to reduce our costs of production or induce technological innovations as sales prices decline.

b) Any drop in demand or increase in supply of our products due to the overcapacity of our competitors could cause a dramatic drop in our average sales prices causing a decrease in our gross margins.

c)Increased competition from low cost suppliers around the world has put further pressures on pricing. We continually strive to lower our costs, negotiate better pricing for components and raw materials and improve our operating efficiencies. Profit margins will be materially and adversely impacted if we are not able to reduce our costs of production or introduce technological innovations as sales prices decline.

We are dependent on our ability to develop new products.

Our future operating results are dependent, in part, on our ability to develop, produce and market new and more technologically advanced products. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to timely develop and bring to market new products and applications to meet customers’ changing needs.

Our acquisitions may not produce the anticipated results.

A significant portion of our recent growth is from acquisitions. We cannot assure you that we will identify or successfully complete transactions with suitable acquisition candidates in the future. We also cannot assure you that acquisitions we complete will be successful. If an acquired business fails to operate as anticipated or cannot be successfully integrated with our other businesses, our results of operations, enterprise value, market value and prospects could all be materially and adversely affected.

If our acquisitions fail to perform up to our expectations, or as the value of goodwill decreases, we could be required to record a loss from the impairment of assets. Integration of new acquisitions into our consolidated operations may result in lower average operating results for the group as a whole.

Our strategy also focuses on the reduction of selling, general and administrative expenses through the integration or elimination of redundant sales offices and administrative functions at acquired companies. Our inability to achieve these goals could have a material and adverse effect on our results of operations.

We intend to continue to seek additional acquisition candidates, although we cannot predict when or if we will make any additional acquisitions, and what the impact of any such acquisitions may have on our financial performance. If we were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through bank borrowings or the issuance of public or private debt or equity. If we borrow money to finance acquisitions, this would likely decrease our ratio of earnings to fixed charges and adversely affect other leverage criteria and could result in the imposition of material restrictive covenants. Under our existing credit facility, we are required to obtain our lenders’ consent for certain additional debt financing, to comply with other covenants including the application of specific financial ratios, and may be restricted from paying cash dividends on our capital stock. We cannot assure you that the necessary acquisition financing would be available to us on acceptable terms, or at all, when required. If we issue a substantial amount of stock either as consideration in an acquisition or to finance an acquisition, such issuance may dilute existing stockholders and may take the form of capital stock having preferences over our existing common stock.

We are exposed to weaknesses in international markets and other risks inherent in foreign trade.

We have operations in eight countries around the world outside the United States, and approximately 73 % of our revenues during 2006 were derived from sales to customers outside the United States. Some of the countries in which we operate have in the past experienced and may continue to experience political, economic, medical epidemic and military instability or unrest. These conditions could have a material and adverse impact on our ability to operate in these regions and, depending on the extent and severity of these conditions, could materially and adversely affect our overall financial condition and operating results.

Although our operations have traditionally been largely transacted in U.S. dollars or U.S. dollar linked currencies, recent world financial instability may cause additional foreign currency risks in the countries we operate in.

Other risks inherent in doing trade internationally include: expropriation and nationalization, trade restrictions, transportation delays, and changes in United States laws that may inhibit or restrict our ability to manufacture in or sell to any particular country. For information regarding risks associated with our presence in Hong Kong and Macao, see "Item 2 - Properties" of this Annual Report on Form 10-K.

While we have benefited from favorable tax treatment in many of the countries where we operate, the benefits we currently enjoy could change if laws or rules in the United States or those foreign jurisdictions change, incentives are changed or revoked, or we are unable to renew current incentives.

We may experience labor unrest.

As we implement transfers of certain of our operations, we may experience strikes or other types of labor unrest as a result of lay-offs or termination of employees in higher labor cost countries. Our manufacturing facility in New York is represented by a labor union.

Our results of operations may be materially and adversely impacted by environmental and other regulations.

Our manufacturing operations, products and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in our manufacturing processes, employee health and safety labeling or other notifications with respect to the content or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or on design aspects of our products or product packaging and responsibility for disposal of products or product packaging. More stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with these regulations.

Our results may vary substantially from period to period.

Our revenues and expenses may vary significantly from one accounting period to another accounting period due to a variety of factors, including customers' buying decisions, our product mix and general market and economic conditions. Such variations could significantly impact our stock price.

A shortage of availability or an increase in the cost of raw materials and components and our ability to procure high quality raw materials at cost effective prices may negatively impact profit margins.

Our results of operations may be adversely impacted by difficulties in obtaining raw materials, supplies, power, natural resources and any other items needed for the production of our products, as well as by the effects of quality deviations in raw materials and the effects of significant fluctuations in the prices on existing inventories and purchase commitments for these materials. Many of these materials and components are produced by a limited number of suppliers and may be constrained by supplier capacity.

As product life cycles shorten and during periods of market slowdowns, the risk of materials obsolescence increases and this may materially and adversely impact our financial results.

Rapid shifts in demand for various products may cause some of our inventory of raw materials, components or finished goods to become obsolete.

The life cycles and demand for our products are directly linked to the life cycles and demand for the end products into which they are designed. Rapid shifts in the life cycles or demand for these end products due to technological shifts, economic conditions or other market trends may result in material amounts of inventory of either raw materials or finished goods becoming obsolete. While the Company works diligently to manage inventory levels, rapid shifts in demand may result in obsolete or excess inventory and materially impact financial results.

A loss of the services of the Company’s executive officers or other skilled associates could negatively impact our operations and results.

The success of the Company’s operations is largely dependent upon the performance of its executive officers, managers, engineers and sales people. Many of these individuals have a significant number of years of experience within the Company and/or the industry in which we compete and would be extremely difficult to replace. The loss of the services of any of these associates may materially and adversely impact our results of operations if we are unable to replace them in a timely manner.

Our stock price, like that of many technology companies, has been and may continue to be volatile.

The market price of our common stock may fluctuate as a result of variations in our quarterly operating results and other factors beyond our control. These fluctuations may be exaggerated if the trading volume of our common stock is low. In addition, the market price of our common stock may rise and fall in response to a variety of factors, including:

·	announcements of technological or competitive developments;

·	acquisitions or strategic alliances by us or our competitors;

·	the gain or loss of a significant customer or order;

·	changes in estimates of our financial performance or changes in recommendations by securities analysts regarding us or our industry; or

·	general market or economic conditions.

In addition, equity securities of many technology companies have experienced significant price and volume fluctuations. These price and volume fluctuations often have been unrelated to the operating performance of the affected companies.

Our intellectual property rights may not be adequately protected under the current state of the law.

We cannot assure you we will be successful in protecting our intellectual property through patent or other laws. As a result, other companies may be able to develop and market similar products which could materially and adversely affect our business.

We may be sued by third parties for alleged infringement of their proprietary rights and we may incur defense costs and possibly royalty obligations or lose the right to use technology important to our business.

From time to time, we receive claims by third parties asserting that our products violate their intellectual property rights. Any intellectual property claims, with or without merit, could be time consuming and expensive to litigate or settle and could divert management attention from administering our business. A third party asserting infringement claims against us or our customers with respect to our current or future products may materially and adversely affect us by, for example, causing us to enter into costly royalty arrangements or forcing us to incur settlement or litigation costs.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company is headquartered in Jersey City, New Jersey where it currently owns 53,000 square feet of office and warehouse space. On July 15, 2004 the Company entered into an agreement for the sale of land and building of approximately 40,000 square feet located in Jersey City, New Jersey. 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. See Item 7 of this Annual Report on Form 10-K for additional information regarding this agreement.

The Company operated 13 manufacturing facilities in 7 countries as of December 31, 2006. An additional 117,000 square foot manufacturing facility has been constructed in the PRC to meet customer demand. This manufacturing facility was completed during November 2006 and was operational by December 31, 2006.

The following is a list of the locations of the Company's principal manufacturing facilities at December 31, 2006.

Location	Approximate Square Feet		Owned/ Leased		Percentage Used for Manufacturing

Donnguan, People's
Republic of China		346,000		Leased		61	%
Zhongshan, People's
Republic of China		416,000		Leased		81	%
Zhongshan, People's
Republic of China		128,000		Leased		74	%
Zhongshan, People's
Republic of China		117,000		Owned		83	%
Zhongshan, People's
Republic of China		77,000		Owned		81	%
Hong Kong		66,000		Owned		29	%
Macao		71,000		Owned		28	%
Louny, Czech Republic		15,000		Leased		76	%
Dominican Republic		41,000		Leased		85	%
Cananea, Mexico		28,000		Leased		65	%
Inwood, New York		35,000		Owned		60	%
Glen Rock, Pennsylvania		74,000		Owned		60	%
Westboro, MA		22,000		Leased		85	%


		1,436,000

Of this manufacturing space, 95,000 square feet of space is used for engineering, warehousing, sales and administrative support functions at various locations and 265,000 square feet of space is used for dormitories, canteen and other employee related facilities in the PRC and the Special Administrative Regions of Hong Kong and Macao in Asia.

The Territory of Hong Kong became a Special Administrative Region (“SAR”) of The People's Republic of China during 1997. The territory of Macao became a SAR of The People's Republic of China at the end of 1999. Management cannot presently predict what future impact, if any, this will have on the Company or how the political climate in China and the Dominican Republic will affect its contractual arrangements in China or labor relationships in the Dominican Republic. A significant portion of the Company's manufacturing operations and approximately 45% of its identifiable assets are located in Hong Kong, Macao, and The People's Republic of China. Accordingly, events resulting from any change in the "Most Favored Nation" status granted to China by the U.S. could have a material and adverse effect on the Company.

Approximately 33% of the 1.5 million square feet the Company occupies is owned while the remainder is leased. See Note 15 of the Notes to Consolidated Financial Statements for additional information pertaining to leases.

Item 3. 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, brought in the Superior 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 Company’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 believes it has adequate defenses regarding this lawsuit and accordingly has not accrued any liability in connection with such lawsuit.

The Company is a defendant in a lawsuit captioned Murata Manufacturing Company, Ltd. v. Bel Fuse Inc. et al, 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., 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. Regal has appealed the Court's rejection of its infringement claims to the U.S. Court of Appeals. The case was heard on February 6, 2007 and the U.S. Court of Appeals upheld the District Court’s ruling in favor of the Company.

The Company cannot predict the outcome of these matters; however, management believes that the ultimate resolution of these matters will not have a material impact on the Company's consolidated financial condition or results of operations.

The Company is not a party to any other legal proceeding, the adverse outcome of which is likely 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

No matters were submitted to a vote of the Company's shareholders during the fourth quarter of 2006.

PART II

Item 5. Market for Registrant's Common Equity and Related

Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information

The Company’s voting Class A Common Stock, par value $0.10 per share, and non-voting Class B Common Stock, par value $0.10 per share ("Class A" and "Class B," respectively), are traded on the NASDAQ National Market. The following table sets forth the high and low closing sales price range (as reported by The Nasdaq Stock Market Inc.) for the Common Stock on NASDAQ for each quarter during the past two years.

	Class A		Class A		Class B		Class B
	High		Low		High		Low
Year Ended December 31, 2005
First Quarter	$	29.79	$	24.10	$	34.92	$	28.42
Second Quarter		26.74		21.50		31.72		25.54
Third Quarter		29.50		24.50		36.48		29.72
Fourth Quarter		30.10		22.39		37.00		28.88

Year Ended December 31, 2006
First Quarter		34.50		24.59		40.16		31.83
Second Quarter		29.00		25.75		34.85		29.24
Third Quarter		31.25		24.95		37.61		29.49
Fourth Quarter		32.95		25.99		37.92		30.90

The Common Stock is reported under the symbols BELFA and BELFB in the NASDAQ National Market.

(b) Holders

As of February 28, 2007 there were 86 registered shareholders of the Company's Class A Common Stock and 108 registered shareholders of the Company’s Class B Common Stock. The Company estimates that there were 1,203 beneficial shareholders of Class A Common Stock and 3,258 beneficial shareholders of the Company’s Class B Common Stock as of February 28, 2007.

There are no contractual restrictions on the Company's ability to pay dividends provided the Company continues to comply with the financial tests in its credit agreement. On February 1, 2006, May 1, 2006, August 1, 2006 and November 1, 2006 the Company paid a $0.05 per share dividend to all shareholders of record of Class B Common Stock in the total amount of $443,589, $443,320, $447,410 and $458,205, respectively. On February 1, 2006, May 1, 2006, August 1, 2006 and November 1, 2006 the Company paid a $0.04 per share dividend to all shareholders of record of Class A Common Stock in the total amount of $107,735, $107,735, $107,735 and $107,735, respectively. On February 2, 2005, May 2, 2005, August 1, 2005, and November 1, 2005 the Company paid a $0.05 per share dividend to all shareholders of record of Class B Common Stock in the total amount of $433,450, $437,175, $439,450, and $442,356, respectively. On February 2, 2005, May 2, 2005, August 1, 2005 and November 1, 2005 the Company paid a $0.04 per share dividend to all shareholders of record of Class A Common Stock in the total amount of $107,735, $107,735, $107,735 and $107,735, respectively.

On February 1, 2007 the Company paid a $0.04 and $0.05 per share dividend to all shareholders of record at January 15, 2007 of Class A and Class B Common Stock, respectively, in the total amount of $107,735 and $450,404, respectively. The Company currently anticipates paying these dividends in the future.

(d) Securities authorized for issuance under the Equity Compensation Plans

Equity Compensation Plan Information

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) (c)
Equity compensation plans approved by security holders		137,813	$	25.59		811,785

Equity compensation plans not approved by security holders		-		-		-

Totals		137,813	$	25.59		811,785

Item 6. Selected Financial Data

	Years Ended December 31,
	2006		2005 (c)		2004		2003 (c)		2002
	(In thousands of dollars, except per share data)

Selected Statements of Operations Data: (c) (d)

Net sales	$	254,933	$	215,916	$	190,022	$	158,498	$	95,528
Cost of sales		192,985		156,147		132,776		113,813		72,420
Selling, general and
administrative expenses		37,800		33,152		31,302		26,757		22,270
Fixed asset impairment/casualty loss (e) (f)		1,030		-		1,033		-		-
Interest income - net		2,781		1,098		525		249		940
Gain on sale of marketable securities		5,150		-		-		-		-
Lawsuit proceeds (d)		-		-		2,935		-		-
Earnings before provision
for income taxes		31,048		27,715		28,371		18,177		1,778
Income tax provision		5,845		7,482		3,649		4,413		1,199
Net earnings		25,203		20,233		24,722		13,764		579
Earnings (loss) per Class A common
share - basic (a)		2.03		1.67		2.10		1.15		-
Earnings (loss) per Class A common
share - diluted (a)		2.03		1.67		2.10		1.15		-
Earnings per Class B common
share - basic (a)		2.16		1.79		2.22		1.28		0.07
Earnings per Class B common
share - diluted (a)		2.15		1.77		2.16		1.27		0.07
Cash dividends declared per
Class A common share		0.16		0.16		0.16		0.08		-
Cash dividends declared per
Class B common share		0.20		0.20		0.20		0.20		0.20

	As of December 31,
		2006		2005		2004		2003		2002
	(In thousands of dollars, except per share data and percentages)

Selected Balance Sheet Data and Ratios:

Working capital	$	144,677	$	128,203	$	127,624	$	102,370	$	82,986
Total assets		268,498		242,056		217,777		181,817		147,840
Long term debt		-		-		6,500		8,500		-
Stockholders' equity		222,150		201,577		178,461		146,855		130,659
Return on average
total assets, % (b)		9.65		8.83		12.37		7.95		0.40
Return on average
Stockholders'
equity, % (b)		11.81		10.75		15.20		9.93		0.44

(a) Previously reported earnings per share has been restated to present our earnings using the two-class method. See Note 1 of Notes to Consolidated Financial Statements.

(b) Returns on average total assets and stockholders’ equity are computed for any year by dividing net income for such year by the average balances of total assets or stockholders’ equity on the last day of each quarter during such year and on the last day of the immediately preceding year.

(c) See Item 1 for information regarding the acquisitions during 2005 of Galaxy and Netwatch. Further, during 2003, the Company acquired Advanced Power Components plc (“APC”) and the Passive Components Group of Insilco Technologies, Inc. These transactions were accounted for using the purchase method of accounting and, accordingly, the results of operations of Galaxy, Netwatch, the Passive Components Group of Insilco and APC have been included in the Company's financial statements since their respective dates of acquisition.

(d) The Company was a party to an arbitration proceeding related to the acquisition of its Telecom Components business in 1998. The Company asserted that the seller breached the terms of a related Global Procurement Agreement dated October 2, 1998 and sought damages related thereto. During December 2004, the Company and the seller settled this matter. The settlement resulted in a payment to the Company and an unconditional release by the seller of all counterclaims against the Company. The net gain of $2,935,000 from the settlement is included in the Company’s consolidated statement of operations for the year ended December 31, 2004.

(e) During 2006, the Company incurred a loss of $1.0 million as a result of a fire at its leased manufacturing facility in the Dominican Republic. The loss was for raw materials and equipment in excess of estimated insurance proceeds. The production at this facility was substantially restored during July 2006.

(f) During the year ended December 31, 2004 the Company wrote down fixed assets, principally machinery and equipment, with a net book value of $1,033,000, at its Far East manufacturing facilities. The Company considered these fixed assets to be surplus equipment which was replaced by equipment with more advanced technology.

Item 7.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and the notes related thereto. The discussion of results, causes and trends should not be construed to imply any conclusion that such results, causes or trends will necessarily continue in the future.

Critical Accounting Policies

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

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses from the inability of its customers to make required payments. The Company determines its reserves by both specific identification of customer accounts where appropriate and the application of historical loss experience to non-specific accounts. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory

The Company makes purchasing decisions principally based upon firm sales orders from customers, the availability and pricing of raw materials and projected customer requirements. Future events that could adversely affect these decisions and result in significant charges to the Company’s operations include miscalculating customer requirements, technology changes which render certain raw materials and finished goods obsolete, loss of customers and/or cancellation of sales orders, stock rotation with distributors and termination of distribution agreements. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon the aforementioned assumptions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

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.

Goodwill and Intangible Assets

The assets and liabilities of acquired businesses are recorded under the purchase method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing. The identification and measurement of goodwill impairment involves the estimation of the fair value of geographic reporting units. The estimates of fair value of geographic reporting units are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows and contemplate other valuation techniques. Future cash flows can be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities. There can be no assurances that goodwill impairments will not occur in the future. See Note 3 to the Consolidated Financial Statements for further discussion.

Income Taxes

Income taxes are accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” In accordance with SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as measured by enacted tax rates that are expected to be in effect in the periods when the deferred tax assets and liabilities are expected to be settled or realized. Significant judgment is required in determining the worldwide provisions for income taxes. In the ordinary course of a global business, the ultimate tax outcome is uncertain for many transactions. It is the Company’s policy to establish provisions for taxes that may become payable in future years as a result of an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure associated with permanent tax differences and tax credits applied to temporary difference adjustments. The tax provisions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments to those provisions.

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 reasonably assured 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. Some issues relate to product warranty, credit worthiness of its customers and concentration of sales among a few major customers.

The Company is not contractually obligated to accept returns from non-distributor customers except for defective product or in instances where the product does not meet the Company’s quality specifications. If these conditions existed, the Company would be obligated to repair or replace the defective product or make a cash settlement with the customer. Distributors generally have the right to return up to 5% of their purchases over the previous three to six months and are obligated to purchase an amount at least equal to the return. If the Company terminates a distributor, the Company is obligated to accept as a return all of the distributor’s inventory from the Company. The Company accrues an estimate for anticipated returns based on historical experience at the time revenue is recognized and adjusts such estimate as specific anticipated returns are identified. If a distributor terminates its relationship with the Company, the Company is not obligated to accept any inventory returns. The Company has a significant amount of sales with several customers, including one major customer with sales of $42,167,000 (16.5%) in 2006. 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.

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 and an increased wage structure in the Far East have contributed to increases in manufacturing costs. Effective September 1, 2006, local PRC authorities implemented a new revised standard work week, and new minimum wages and overtime rates, for areas where our factories are located.

During 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. The $4.6 million of sales increase attributable to Galaxy and Netwatch for the periods January 1, 2006 to March 22, 2006 and January 1, 2006 to June 30, 2006, respectively represents sales during these periods of 2006. There were no sales during these same periods in 2005 because it was prior to the acquisition of these entities. The Company had an organic sales increase of $34.5 million or 16.0% during 2006. The organic sales increase is measured by the difference between net sales for 2006, less net sales for 2005, less the $4.6 million sales increase attributed to Galaxy and Netwatch for the periods discussed above. The 2005 acquisitions resulted in additional Cost of Sales and Selling, General and Administrative expenses of $12.7 million and $3.3 million, respectively, during 2006.

Gross profit margins were lower during 2006 compared to 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, Inc. (“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. During 2006, Current Concepts reached its 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 associated with operating duplicate production lines but cannot attain premium pricing for such products.

The Company also incurred $1.6 million in pre-tax stock-based compensation expense during the year ended December 31, 2006 in connection with its stock incentive plans. This expense is reflected both in the Company’s cost of sales and selling, general and administrative expenses, consistent with the classification of employee compensation expense.

During the year ended December 31, 2006 the Company incurred a $1.0 million pre-tax casualty loss primarily for raw materials destroyed by a fire at a Company leased manufacturing facility in the Dominican Republic in excess of insured amounts.

During the year ended December 31, 2006, the Company realized a gain on marketable securities of $5.2 million from the sale of Artesyn common stock, net of investment banking fees, offset by a $1.0 million accrual (classified within selling, general and administrative expense for accounting purposes) for performance bonuses awarded by the Board of Directors in connection with the gain and was paid to key employees during January 2007. In connection with the decline in fair value of the Company’s investment in the common stock of Toko, Inc., the Company has recorded (as of December 31, 2006) an unrealized loss, net of income tax benefit, of approximately $1.5 million which is included in accumulated other comprehensive income as stated in the Company’s consolidated statements of stockholders’ equity.

Results of Operations

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

	Percentage of Net Sales
	Years Ended December 31,
	2006			2005			2004

Net sales		100.0	%		100.0	%		100.0	%
Cost of sales		75.7			72.3			69.9
Selling, general and
administrative expenses		14.8			15.4			16.5
Casualty loss		0.4			-			-
Fixed asset impairment		-			-			0.5
Interest income - net		(1.1	)		(0.5	)		(0.3	)
Gain on sale of marketable
securities		(2.0	)		-			-
Lawsuit proceeds		-			-			(1.5	)
Earnings before provision for
income taxes		12.2			12.8			14.9
Income tax provision		2.3			3.5			1.9
Net earnings		9.9			9.4			13.0

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

	Increase (Decrease) from Prior Period
	2006 compared with 2005		2005 compared with 2004
Net sales	18.1	%	13.6	%

Cost of sales	23.6		17.6

Selling, general and
administrative expenses	14.0		5.9

Net earnings	24.6		(18.2	)

Sales

Net sales increased 18.1% from $215.9 million during the year ended December 31, 2005 to $254.9 million during the year ended December 31, 2006. The Company attributes the increase to increased module sales of $21.3 million of which $3.4 million is attributable to the acquisition of Galaxy, which was included in our sales for a full year in 2006 and 9 months in 2005, strong demand for interconnect products resulting in an increase of $3.8 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 $14.3 million in such sales, while circuit protection sales decreased by $0.4 million. Bel had an organic sales increase of 16.0% for the year.

The significant components of the Company's revenues for the year ended December 31, 2006 were magnetic products of $141.5 million (as compared with $127.2 million during the year ended December 31, 2005), interconnect products of $44.5 million (as compared with $40.7 million during the year ended December 31, 2005), module products of $49.5 million (as compared with $28.2 million during the year ended December 31, 2005) and circuit protection products of $19.4 million(as compared with $19.8 million during the year ended December 31, 2005).

During the fourth quarter of 2006, the Company experienced a decrease in sales compared to the third quarter of 2006 of approximately $12.7 million across almost all product lines. The Company attributes the decrease in sales to increased customer inventories and uncertainty by customers relating to inventory management practices related to the annual first quarter of 2007 Lunar New Year factory closedowns.

Based in part on conflicting opinions the Company received from customers and competitors in the electronics industry pertaining to revenue growth during 2006, the Company cannot predict with any degree of certainty its sales revenue for 2007. Although the Company's backlog has been stable, the Company believes that this is not a good indicator of future revenues. The Company continues to have limited visibility as to future customer requirements. The Company had one customer with sales in excess of 10% (16.5%) of total sales during the year ended December 31, 2006. The loss of this customer could have a material adverse effect on the Company's results of operations, financial position and cash flows.

The Company cannot quantify the extent of sales growth arising from unit sales mix and/or price changes. Given the change in the nature of the products purchased by customers from period to period, the Company believes that neither unit changes nor price changes are meaningful. Over the past year, newer and more sophisticated products with higher unit selling prices have been introduced. Through the Company's engineering and research effort, the Company has been successful in adding additional value to existing product lines, which tends to increase sales prices initially until that generation of products becomes mature and sales prices experience price degradation. In general, as products become mature, average selling prices decrease.

Net sales increased 13.6% from $190.0 million during the year ended December 31, 2004 to $215.9 million during the year ended December 31, 2005. The Company attributes the increase to increased module sales of $14.4 million, of which $10.6 million is attributable to the acquisition of Galaxy, strong demand for interconnect products resulting in an increase of $6.6 million in such sales, of which $1.4 million is attributable to the acquisition of Netwatch, and strong demand for magnetic sales resulting in an increase of $4.9 million in such sales, while circuit protection sales remained substantially unchanged. Excluding 2005 acquisitions, Bel had an organic sales increase of 7.3% for the year.

The significant components of the Company's revenues for the year ended December 31, 2005 were magnetic products of $127.2 million (as compared with $122.4 million during the year ended December 31, 2004), interconnect products of $40.7 million (as compared with $34.0 million during the year ended December 31, 2004), module products of $28.2 million (as compared with $13.8 million during the year ended December 31, 2004 and circuit protection products of $19.8 million (as compared with $19.8 million during the year ended December 31, 2004).

Cost of Sales

Bel generally enters into processing arrangements with five independent third party contractors in the Far East. Costs are recorded as incurred for all products manufactured either at the Company's third party facilities or at the Company's own manufacturing facilities. Such amounts are determined based upon the estimated stage of production and include labor cost and fringes and related allocations of factory overhead. The Company manufactures finished goods at its own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the Dominican Republic, Mexico and the Czech Republic.

Cost of sales as a percentage of net sales increased from 72.3% during the year ended December 31, 2005 to 75.7% during the year ended December 31, 2006. The increase in the cost of sales percentage is primarily attributable to the following:

The Company incurred a 4.6% increase in material costs as a percentage of net sales. The increase in raw material costs is principally related to increased manufacturing of modules (including new Power products commencing in the second half of 2005), which have a higher raw material content than the Company’s other products, increased costs for raw materials such as mosfets, steel, integrated circuits, PCB’s and petroleum-based products and increased transportation costs.

The Company’s subcontracting processors have also started to pay higher wage rates and benefits to its production workers in China, resulting from a new revised standard work week, new minimum wages and new overtime rates. These higher rates and benefits are reflected in the Company’s cost of sales.

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 as the amortization life of the identifiable intangibles have expired and all payments are expensed in the period they were paid.

Included in cost of sales are research and development expenses of $6.6 million and $7.3 million for the years ended December 31, 2006 and 2005, respectively. The principal reason for the decrease is less research and development in the United States due to the consolidation of the Bel Power and the Galaxy facilities in Massachusetts. This was offset in part by increased expenses at the Company’s China research and development facility which has a lower cost structure.

Cost of sales as a percentage of net sales increased from 69.9% during the year ended December 31, 2004 to 72.3% during the year ended December 31, 2005. The increase in the cost of sales percentage is primarily attributable to the same factors that led to the increase in the cost of sales as a percentage of net sales from 2005 to 2006. From 2004 to 2005, the Company incurred a 2.1% increase in material costs as a percentage of net sales.

Included in cost of sales are research and development expenses of $7.3 million for both 2004 and 2005.

Selling, General and Administrative Expenses

The percentage relationship of selling, general and administrative expenses to net sales decreased from 15.4% during the year ended December 31, 2005 to 14.8% during the year ended December 31, 2006, in part as a result of the Company's ability to leverage general and administrative expenses over a larger revenue base. The $4.6 million increase in the dollar amount of such expenses included increased selling expenses of approximately $1.4 million, including $.2 million in Bel Power related expenses. The $3.2 million increase in general and administrative expenses included $1.0 million related to Bel Power, additional salaries, wages and bonuses of $2.3 million, 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, additional stock compensation expense of $.8 million, partially arising from the Company’s implementation of Statement of Financial Accounting Standards (“SFAS”) No. 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 $1.0 million principally related to Sarbanes-Oxley compliance and legal expenses in connection with various lawsuits in which the Company is involved. These increases were offset in part by other net decreases in several expense accounts totaling $1.9 million.

The percentage relationship of selling, general and administrative expenses to net sales decreased from 16.5% during the year ended December 31, 2004 to 15.4% during the year ended December 31, 2005, in part as a result of the Company's ability to leverage general and administrative expenses over a larger revenue base. The Company attributes the $1.8 million increase in the dollar amount of such expenses primarily to increased selling expenses of approximately $1.1 million, including $0.6 million in Galaxy related expenses. In addition, the Company incurred a $.7 million increase in general and administrative expenses. This increase includes $1.8 million related to Galaxy, additional bad debt expense of approximately $0.3 million, additional stock compensation expense of $0.2 million, arising from the grant of restricted stock, and additional amortization of identifiable intangibles in the amount of $.8 million principally arising from the acquisition of Galaxy. Of the $.8 million increase in amortization of intangibles, $.7 million is included in the $1.8 million increase in general and administrative expenses related to Galaxy. The Company incurred increased Supplemental Executive Retirement Plan (“SERP”) costs of approximately $0.2 million as additional employees were added to the plan. This was offset in part by lower employment costs of $0.6 million due to reduced bonuses and lower professional fees of $1.2 million due to lower Sarbanes-Oxley compliance costs.

Casualty Loss

During 2006, the Company incurred a $1.0 million pre-tax casualty loss as a result of a fire at its leased manufacturing facility in the Dominican Republic. The loss was for raw materials and equipment in excess of estimated insurance proceeds. The production at this facility was substantially restored during July 2006.

Fixed Asset Impairment

During the year ended December 31, 2004, the Company wrote down fixed assets, principally machinery and equipment, with a net book value of $1,033,000, at its Far East manufacturing facilities. The Company considered these fixed assets to be surplus equipment which was replaced by equipment with more advanced technology.

Interest Income

Interest income earned on cash and cash equivalents increased by approximately $1.4 million during the year ended December 31, 2006 as compared to the year ended December 31, 2005. The increase is due primarily to increased balances of cash and cash equivalent balances and higher yields on such balances.

Interest income earned on cash and cash equivalents increased by approximately $660,000 during the year ended December 31, 2005 as compared to the comparable period in 2004. The increase is due primarily to increased earnings on cash and cash equivalent balances and marketable securities.

Interest Expense

A $10 million term loan was entered into on March 21, 2003, representing borrowings 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 $325,000 during the year ended December 31, 2005. During the year ended December 31, 2006, interest expense amounted to $71,000, representing financing expenses related to the Company's credit facility in the United States.

Interest expense increased by approximately $90,000 during the year ended December 31, 2005 compared with 2004. The increase is attributable in part to higher interest rates charged on the above-mentioned term loan during 2005 compared to 2004 and in part to the fact that during March 2005 the Company borrowed $8.0 million against its domestic line of credit to partially finance the acquisition of Galaxy. During October and November of 2005 the Company borrowed $4.0 million against its line of credit. The loan was repaid during December 2005. The loan bore interest at LIBOR plus .75% to 1.25% annually, based on certain financial statement ratios maintained by the Company.

Lawsuit Proceeds

During the year ended December 31, 2004, the Company settled an arbitration proceeding related to a 1998 acquisition. The Company received $2,935,000 (net of $65,000 of related legal expenses incurred during the period) pursuant to that settlement.

Provision for Income Taxes

The provision for income taxes for the year ended December 31, 2006 was $5.8 million compared to $7.5 million during the year ended December 31, 2005. The Company's earnings before income taxes for the year ended December 31, 2006 were approximately $3.3 million higher than in 2005. During the year ended December 31, 2006, the Company incurred lower taxes of approximately $1.7 million principally as a result of lower foreign taxes in the Far East due to the implementation by the Company of its Macao Commercial Offshore Company (“MCO”), which is not subject to Macao corporate income taxes. This was offset in part by higher United States taxes resulting principally from the gain from the sale of marketable securities (Artesyn). This had an impact of reducing the effective tax rate from 27.0% for the year ended December 31, 2005 to 18.8% for the year ended December 31, 2006 (measured by reflecting the tax provision as a percentage of earnings before provision for income taxes). Additionally, during the year ended December 31, 2005, the Company repatriated $70.6 million of foreign earnings which resulted in higher taxes of $3.1 million during the year ended December 31, 2005.

The provision for income taxes for the year ended December 31, 2005 was $7.5 million compared to $3.6 million during the year ended December 31, 2004. The Company's earnings before income taxes for the year ended December 31, 2005 were approximately $0.6 million less than in 2004. The Company incurred higher taxes of approximately $3.1 million as a result of repatriating $70.6 million of foreign earnings during 2005. Additionally, the income tax effective rate was higher in 2005 than in 2004 primarily due to higher foreign taxes associated with the treatment by Hong Kong authorities of offshore income. This was offset in part by the utilization of approximately $0.6 million in research and development tax credits and the utilization of a $0.1 million net operating loss carryforward tax benefit related to a foreign subsidiary. In addition, during the year ended December 31, 2004, the Company reversed tax accruals no longer required in the amount of approximately $0.4 million, utilized certain tax credits amounting to $0.8 million and utilized net operating loss carry forwards with a tax effect of approximately $0.1 million.

The Company is currently being audited by the United States Internal Revenue Service (“IRS”) for the year ended December 31, 2004. As part of this audit the IRS is also reviewing the years ended December 31, 2003 and 2005. This examination is in its early stages and to date no adjustments have been proposed by the IRS.

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.

Macao currently has a statutory corporate income tax rate of 12 percent. However, the Company, in previous years, as a result of investing in a certain location in Macao, was able to obtain a 10-year tax holiday in Macao, thereby reducing its effective Macao income tax rate from 16 percent to 8 percent. The tax holiday in Macao expired in April 2004. Since most of the Company's operations are conducted in the Far East, the majority of its profits are sourced in these three Far East jurisdictions. 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 an 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 corporate income taxes.

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 the year ended December 31, 2005, management repatriated foreign earnings of approximately $70.6 million which were eligible for the reduced tax rate of 5.25% under the American Jobs Creations Act of 2004. See Note 8 of Notes to Consolidated Financial Statements. As a result of the favorable tax treatment afforded the repatriation of controlled foreign corporation (“CFC”) earnings and management’s decision to repatriate such funds in 2005, the Company recorded a $6,326,000 tax benefit in 2004 which resulted from the difference in tax rates between the Act and the tax rates previously provided on the portion of CFC earnings which were expected to be repatriated, leaving deferred income taxes in the amount of approximately $1,342,000 recorded in such earnings to be repatriated.

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. The Chinese Renminbi has appreciated in value during 2006. Further appreciation of the Renminbi would result in the Company incurring higher costs for all expenses incurred in China. 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) gains of ($201,000), $27,000 and $54,000 for the years ended December 31, 2006, 2005 and 2004, respectively, which were charged to expense, and approximately $388,000, ($669,000) and $386,000 for the years ended December 31, 2006, 2005 and 2004, respectively, in net unrealized exchange gains (losses) relating to the translation of foreign subsidiary financial statements which are included in other comprehensive income. Any change in linkage of the U.S. Dollar and the Hong Kong Dollar, the Chinese Renminbi or the Macao Pataca could have a material effect on the Company's consolidated financial position or results of operations.

Liquidity and Capital Resources

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

During March 2005, the Company borrowed $8 million against a $10 million line of credit to partially finance the acquisition of Galaxy. The outstanding balance was paid off in its entirety on June 30, 2005. During July 2005, the Company amended its credit agreement to increase the line of credit to $20 million. During October and November of 2005, the Company borrowed $4.0 million against the line of credit which was paid off during December 2005. As of December 31, 2006, the entire $20 million line of credit was available to the Company to borrow. The loan was initially collateralized with a first priority security interest in and lien on 100% of the issued and outstanding shares of the capital stock of the Company's material domestic subsidiaries and 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 of the Company. In July, 2005, the lender terminated it's security interest in assets of the Company other than the lender’s first priority security interest in 100% of the issued and outstanding shares of the capital stock of the Company's material domestic subsidiaries and 65% of all the issued and outstanding shares of the capital stock of certain of the foreign subsidiaries of the Company. During February, 2007, the Company replaced the $20 million line of credit with a $20 million line of credit from a different lender, on substantially the same terms and conditions as previously existed, except that the new lender did not receive a security interest in any assets of the Company.

For the years ended December 31, 2006, 2005 and 2004, the Company recorded interest expense of approximately $71,000, $325,000 and $239,000, respectively.

The Company's Hong Kong subsidiary has an unsecured line of credit of approximately $2 million, which was unused at December 31, 2006. This line of credit expires during July 2007. Borrowing on this 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.

For information regarding further commitments under the Company's operating leases, see Note 15 of the Notes to the Company's Consolidated Financial Statements.

For information regarding the Company's 2005 acquisitions of Galaxy Power Inc. and Netwatch s.r.o., see Item 1 of this Annual Report on Form 10-K.

For information regarding the Company’s acquisition of shares of the common stock of Toko, Inc., see Item 1 of this Annual Report on Form 10-K.

The Company completed construction of a 117,000 square foot manufacturing facility, during November 2006, in Zhongshan City, PRC for approximately $1.3 million.

During 2004, the Company completed construction of a 64,000 square foot manufacturing facility in Zhongshan City, PRC for approximately $1.0 million.

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. Additionally, the Company is obligated for environmental remediation costs of up to $350,000. As of December 31, 2006, the Company had also paid $247,000 of legal, site testing and State of New Jersey Environmental Protection Agency Fees. As these costs are incurred, the Company has capitalized 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 December 31, 2006 and expects to sell the property during the first half of 2007.

Under the terms of the E-Power LTD (“E-Power”) and Current Concepts, Inc. (“Current Concepts”) acquisition agreements of May 11, 2001, the Company was required to make contingent purchase price payments up to an aggregate of $7.6 million should the acquired companies attain specified related sales levels. E-Power was to be paid $2.0 million in contingent purchase price payments if sales reach $15.0 million and an additional $4.0 million if sales reach $25.0 million on a cumulative basis through May 2007. 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. The $25.0 million benchmark was reached during September 2006. As a result, $4.0 million was paid in November 2006, and accounted for as additional purchase price and as an increase to goodwill. No additional payments will be made under the E-Power agreement. Current Concepts is to be paid 16% of related sales on the first $10.0 million in 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 years ended December 31, 2006, 2005 and 2004, the Company paid approximately $447,000, $529,000 and $354,000, respectively, in contingent purchase price payments to Current Concepts. The contingent purchase price payments to Current Concepts have been accounted for as additional purchase price and as an increase to covenants not to compete within intangible assets.

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

During the year ended December 31, 2006, the Company's cash and cash equivalents increased by approximately $24.8 million, reflecting approximately $19.0 million provided by operating activities (principally as a result of net income of $25.2 million and depreciation and amortization expense of $9.0 million offset in part by a gain on the sale of marketable securities of $5.1 million), proceeds of $24.5 million from the sale of marketable securities and proceeds of $3.2 million from the exercise of stock options, offset in part by expenditures of $9.4 million for the purchase of property, plant and equipment, $7.0 million used principally for acquisitions, $3.6 million for the purchase of marketable securities and $2.2 million for payments of dividends.

During the year ended December 31, 2005, the Company's cash and cash equivalents decreased by approximately $19.2 million, reflecting approximately $20.8 million used principally for acquisitions, $19.4 million for loan repayments, $18.0 million for the purchase of marketable securities, $7.7 million for the purchase of property, plant and equipment, and $2.2 million for payments of dividends, offset, in part, by $31.3 million provided by operating activities (principally as a result of net income of $20.2 million and depreciation and amortization expense of $10.1 million), borrowings of $12.0 million, proceeds of $4.1 million from the exercise of stock options and $1.6 million in proceeds from the sale of marketable securities.

During the year ended December 31, 2004, the Company’s cash and cash equivalents increased by approximately $13.7 million, reflecting approximately $32.1 million provided by operating activities (principally as a result of net income of $24.7 million and depreciation expense of $9.0 million), $6.3 million provided from the sale of marketable securities and $3.9 million from proceeds from the exercise of stock options offset, in part, by $17.7 million for the purchase of marketable securities, $6.6 million for the purchase of property, plant and equipment, $2.0 million for loan repayments, $2.2 million for payment of dividends and $.4 million for contingent acquisition payments.

Cash, marketable securities and cash equivalents and accounts receivable comprised approximately 50.7% and 53.6% of the Company's total assets at December 31, 2006 and December 31, 2005, respectively. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 4.5 to 1 and 4.5 to 1 at December 31, 2006 and December 31, 2005, respectively.

Accounts receivable, net of allowances, were $43.8 million at December 31, 2006, as compared with $39.3 million at December 31, 2005, reflecting, among other things, pressures from certain customers to increase their credit terms. Inventories were $46.3 million at December 31, 2006, as compared with $32.9 million at December 31, 2005. The increase in inventories reflected increased sales during 2006, increased raw materials prices and an effort by the Company to build slighter higher inventory levels to assure that the Company is able to satisfy customer demand during the Lunar New Year holidays in China.

The following table sets forth at December 31, 2006 the amounts of payments due under specific types of contractual obligations, aggregated by category of contractual obligation, for the time periods described below.

	Payments due by period

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

Capital expenditure obligations	$	1,491,613	$	1,491,613	$	-	$	-	$	-
Operating leases		4,734,766		1,658,502		1,932,688		1,143,576
Raw material purchase obligations		14,641,552		14,641,552		-		-		-

Total	$	20,867,931	$	17,791,667	$	1,932,688	$	1,143,576	$	-

The Company is required to pay SERP obligations at the occurrence of certain events. As of December 31, 2006, the SERP had an unfunded benefit obligation of approximately $1.6 million, net of deferred income tax benefit. The gross unfunded benefit obligation in the amount of $4.7 million is included in long-term liabilities as an unfunded pension obligation on the Company’s consolidated balance sheet. The unfunded benefit obligation, net of deferred income tax benefits, is included in the accompanying consolidated balance sheet as a component of “Other Comprehensive Income.”

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. If the Company were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through bank borrowings or the issuance of public or private debt or equity. If the Company borrows money to finance acquisitions, this would likely decrease the Company’s ratio of earnings to fixed charges and adversely affect other leverage criteria and could result in the imposition of material restrictive covenants. Under its existing credit facility, the Company is required to obtain its lender’s consent for certain additional debt financing, to comply with other covenants including the application of specific financial ratios, and may be restricted from paying cash dividends on its common stock. The Company cannot assure that the necessary acquisition financing would be available to it on acceptable terms, or at all, when required. If the Company issues a substantial amount of stock either as consideration in an acquisition or to finance an acquisition, such issuance may dilute existing stockholders and may take the form of capital stock having preferences over its existing common stock.

New Financial Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans”, an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires employers to recognize their defined benefit plans’ overfunded or underfunded status in their balance sheets, requires employers to measure plan assets and plan obligations as of the balance sheet date, immediately recognize any remaining transition obligation currently being deferred, and recognize actuarial gains and losses through other comprehensive income. The statement is effective for fiscal years ending after December 15, 2006. For additional information regarding the accounting treatment and effect on the Consolidated Balance Sheet of SFAS No. 158, see Note 12 of Notes to the Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which enhances existing guidance for measuring assets and liabilities using fair value. This Standard provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that SFAS No. 157 will have a material impact on its financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”). SAB No. 108 provides guidance on the consideration of effects of the prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. We adopted SAB No. 108 in the fourth quarter of 2006 and adoption of SAB No. 108 did not impact our consolidated financial results.

In July 2006, 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. While the Company’s analysis of the impact of this Interpretation is not yet complete, we do not anticipate it will have a material impact on the Consolidated Financial Statements or with any of the Company’s debt covenants.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option for Financial Assets and Financial Liabilities”, providing companies with an option to report selected financial assets and liabilities at fair value. The Standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of the adoption of this Statement on its financial statements. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company’s choice to use fair value on its earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of the adoption of this Statement on its financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

The Company 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.

Item 8. Financial Statements and Supplementary Data

See the consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements for the information required by this item.

BEL FUSE INC.
INDEX

Financial Statements	Page

Report of Independent Registered
Public Accounting Firm	F-1

Consolidated Balance Sheets as of
December 31, 2006 and 2005	F-2 - F-3

Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 2006	F-4

Consolidated Statements of Stockholders' Equity
for Each of the Three Years in the Period Ended
December 31, 2006	F-5 - F-6

Consolidated Statements of Cash Flows for
Each of the Three Years in the Period Ended
December 31, 2006	F-7 - F-9

Notes to Consolidated Financial Statements	F-10 - F-43

Selected Quarterly Financial Data - Years Ended
December 31, 2006 and 2005 (Unaudited)	F-44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Bel Fuse Inc.

Jersey City, New Jersey

We have audited the accompanying consolidated balance sheets of Bel Fuse Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited management's assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule, an opinion on management's assessment, and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bel Fuse Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R),” effective December 31, 2006 and SFAS No. 123(R), “Share-Based Payment,” effective January 1, 2006.

As discussed in Note 1 to the consolidated financial statements, the Company has restated its 2005 and 2004 earnings per share disclosures to present earning per share using the two-class method.

DELOITTE & TOUCHE LLP

New York, New York

March 13, 2007

F-1

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31,
	2006		2005

ASSETS
Current Assets:
Cash and cash equivalents	$	76,760,543	$	51,997,634
Marketable securities		15,576,212		38,463,108
Accounts receivable - less allowance for doubtful
accounts of $1,087,000 and $1,107,000 at
December 31, 2006 and 2005, respectively		43,765,750		39,304,984
Inventories		46,297,208		32,947,103
Prepaid expenses and other current
assets		1,382,807		1,691,017
Deferred income taxes		1,665,857		-
Assets held for sale		848,049		828,131

Total Current Assets		186,296,426		165,231,977

Property, plant and equipment - net		44,289,159		42,379,356

Deferred income taxes		3,425,375		3,901,000
Intangible assets - net		1,892,417		2,782,188
Goodwill		28,117,143		22,427,934
Prepaid pension costs		-		1,655,362
Other assets		4,476,990		3,678,100

TOTAL ASSETS	$	268,497,510	$	242,055,917

F-2

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31,
	2006			2005

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	17,244,937		$	14,560,827
Accrued expenses		12,713,417			10,667,558
Deferred income taxes		-			1,412,000
Income taxes payable		11,094,107			9,840,295
Dividends payable		566,583			548,000
Total Current Liabilities		41,619,044			37,028,680

Long-term Liabilities:
Minimum pension obligation and
unfunded pension liability		4,728,286			3,450,688
Total Long-term Liabilities		4,728,286			3,450,688

Total Liabilities		46,347,330			40,479,368

Commitments and Contingencies

Stockholders' 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 1,072,770 treasury shares)		270,268			270,268
Class B common stock, par value
$.10 per share - authorized
30,000,000 shares; outstanding 9,167,665
and 9,013,264 shares, respectively
(net of 3,218,310 treasury shares)		916,767			901,327
Additional paid-in capital		31,826,046			31,713,608
Retained earnings		190,952,754			167,991,188
Deferred stock-based compensation		-			(3,562,709	)
Cumulative other comprehensive
income (loss)		(1,815,655	)		4,262,867
Total Stockholders' Equity		222,150,180			201,576,549

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	268,497,510		$	242,055,917

F-3

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2006			2005			2004

Net Sales	$	254,932,986		$	215,915,756		$	190,021,953

Costs and expenses:
Cost of sales		192,985,004			156,146,724			132,776,304
Selling, general and administrative		37,800,403			33,151,672			31,301,722
Casualty loss		1,029,853			-			-
Fixed asset impairment		-			-			1,032,786
		231,815,260			189,298,396			165,110,812

Income from operations		23,117,726			26,617,360			24,911,141
Interest expense		(70,703	)		(324,802	)		(238,552	)
Gain on sale of marketable securities		5,149,794			-			-
Interest income		2,851,536			1,422,719			763,000
Lawsuit proceeds		-			-			2,935,000

Earnings before provision for income taxes		31,048,353			27,715,277			28,370,589
Income tax provision		5,845,000			7,482,000			3,649,000

Net earnings	$	25,203,353		$	20,233,277		$	24,721,589
Earnings per share (2005 and 2004, as
restated - see Note 1)

Earnings per Class A common share
Basic	$	2.03		$	1.67		$	2.10

Diluted	$	2.03		$	1.67		$	2.10

Weighted average Class A common shares
outstanding - basic		2,702,677			2,702,677			2,702,677

Weighted average Class A common shares
outstanding - diluted		2,702,677			2,702,677			2,702,677

Earnings per Class B common share
Basic	$	2.16		$	1.79		$	2.22

Diluted	$	2.15		$	1.77		$	2.16

Weighted average Class B common shares
outstanding - basic		9,104,897			8,807,498			8,581,073

Weighted average Class B common shares
outstanding - diluted		9,149,445			8,890,581			8,808,418

F-4

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

										Cumulative
										Other									Deferred
				Compre-						Compre-			Class A		Class B		Additional		Stock-
				hensive			Retained			hensive			Common		Common		Paid-In		Based
	Total			Income			Earnings			Income (loss)			Stock		Stock		Capital		Compensation

Balance, January 1, 2004	$	146,854,953					$	127,406,693		$	979,576		$	270,167	$	846,069	$	17,352,448	$	-

Exercise of stock
options		3,891,266												101		19,990		3,871,175
Tax benefits arising
from the disposition of
non-qualified
incentive stock options		765,551																765,551
Cash dividends declared on Class A
common stock		(430,707	)					(430,707	)
Cash dividends declared on Class B
common stock		(1,748,292	)					(1,748,292	)
Currency translation
adjustment		386,257		$	386,257						386,257
Change in unrealized gain or
loss on marketable securities
-net of taxes		4,020,679			4,020,679						4,020,679
Net earnings		24,721,589			24,721,589			24,721,589
Comprehensive income				$	29,128,525

Balance, December 31, 2004		178,461,296						149,949,283			5,386,512			270,268		866,059		21,989,174		-

Exercise of stock
options		4,115,508														20,028		4,095,480
Tax benefits arising
from the disposition of
non-qualified
incentive stock options		429,802																429,802		-
Cash dividends declared on Class A
common stock		(430,940	)					(430,940	)
Cash dividends declared on Class B
common stock		(1,760,432	)					(1,760,432	)
Issuance of restricted
common stock		5,214,392														15,240		5,199,152
Deferred stock-based
compensation		(3,742,004	)																	(3,742,004	)
Currency translation
adjustment		(669,153	)	$	(669,153	)					(669,153	)
Change in unrealized gain or
loss on marketable securities
-net of taxes		(454,492	)		(454,492	)					(454,492	)
Stock-based compensation
expense