UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED                           June 30, 2005                          

OR

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

FOR THE TRANSITION PERIOD FROM                                                     

COMMISSION FILE NUMBER                           1-5005                          

INTRICON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA	23-1069060
(STATE OR OTHER JURISDICTION OF	(IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1260 RED FOX ROAD, ARDEN HILLS, MINNESOTA	55112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	(ZIP CODE)
(651) 636-9770
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

x YES      o NO

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED BY RULE 12B-2 OF THE EXCHANGE ACT)

o YES      x NO

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

COMMON SHARES, $1.00 PAR VALUE	5,129,214 (exclusive of 515,754
CLASS	treasury shares)
	OUTSTANDING AT August 12, 2005

INTRICON CORPORATION

I N D E X

	Page Numbers
PART I:     FINANCIAL INFORMATION
Item 1.     Financial Statements
Consolidated Condensed (Unaudited) Balance Sheets as of June 30, 2005 and December 31, 2004	3, 4
Consolidated Condensed (Unaudited) Statements of Operations for the Three Months Ended June 30, 2005 and 2004	5
Consolidated Condensed (Unaudited) Statements of Operations for the Six Months Ended June 30, 2005 and 2004	6
Consolidated Condensed (Unaudited) Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004	7
Notes to Consolidated Condensed (Unaudited) Financial Statements	8-12
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-20
Item 3.     Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.     Controls and Procedures	22
PART II:     OTHER INFORMATION
Item 1.     Legal Proceedings	23
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.     Defaults Upon Senior Securities	23
Item 4.     Submission of Matters to a Vote of Security Holders	23
Item 5.     Other Information	23
Item 6.     Exhibits	24

2

PART I:   FINANCIAL INFORMATION

ITEM 1.    Financial Statements

INTRICON CORPORATION
Consolidated Condensed Balance Sheets
Assets
(Unaudited)

	June 30, 2005		December 31, 2004 (Restated)
Current assets:
Cash	$	155,603	$	246,430
Restricted cash		438,917		449,613
Accounts receivable (less allowance for doubtful accounts of $178,000
in 2005 and $177,000 in 2004)		5,907,846		4,996,705
Inventories		5,740,390		4,287,643
Refundable income tax		17,726		46,163
Other current assets		435,583		379,318
Assets of discontinued operations		—		6,834,256
Total current assets		12,696,065		17,240,128
Property, plant and equipment:
Land		170,500		170,500
Buildings		1,732,914		1,732,914
Machinery and equipment		26,305,746		25,635,452
		28,209,160		27,538,866
Less: Accumulated depreciation		21,149,999		20,260,792
Net property, plant and equipment		7,059,161		7,278,074
Note receivable from sale of discontinued operations		575,000		—
Goodwill		5,264,585		5,264,585
Other assets, net		1,098,892		1,156,449
	$	26,693,703	$	30,939,236

(See accompanying notes to the consolidated condensed financial statements)

3

INTRICON CORPORATION
Consolidated Condensed Balance Sheets
Liabilities and Shareholders’ Equity
(Unaudited)

	June 30, 2005			December 31, 2004 (Restated)
Current liabilities:
Notes payable	$	3,222,324		$	3,740,393
Checks written in excess of cash		153,555			665,098
Current maturities of long-term debt		54,051			1,458,470
Accounts payable		3,441,754			2,211,909
Income taxes payable		282,582			—
Customer’s advance payments on contracts		78,616			75,000
Liabilities of discontinued operations		—			4,266,899
Other accrued liabilities		2,930,098			2,638,889
Total current liabilities		10,162,980			15,056,658
Long term debt, less current maturities		218,040			—
Other postretirement benefit obligations		2,404,964			2,710,106
Deferred income taxes		29,586			143,902
Accrued pension liabilities		875,416			900,713
Commitments and contingencies (Notes 11 and 12)
Shareholders’ equity:
Common shares, $1 par; 10,000,000 shares
authorized; 5,644,968 shares issued		5,644,968			5,644,968
Additional paid-in capital		12,025,790			12,025,790
Accumulated deficit		(3,153,540	)		(3,680,704	)
Accumulated other comprehensive loss		(249,423	)		(597,119	)
Less: 515,754 common shares held
in treasury, at cost		(1,265,078	)		(1,265,078	)
Total shareholders’ equity		13,002,717			12,127,857
	$	26,693,703		$	30,939,236

(See accompanying notes to the consolidated condensed financial statements)

4

INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(Unaudited)

	Three Months Ended
	June 30, 2005			June 30, 2004 (Restated)
Sales, net	$	11,601,372		$	8,354,419
Cost of sales		8,190,267			6,296,374
Gross margin		3,411,105			2,058,045
Operating expenses:
Selling expense		884,615			937,488
General and administrative expense		1,284,518			1,330,172
Research and development expense		358,819			415,149
Total operating expenses		2,527,952			2,682,809
Gain on sale of asset held for sale		—			3,109,627
Operating income		883,153			2,484,863
Interest expense		(107,622	)		(151,825	)
Interest income		19,538			504
Other income, net		70,882			4,388
Income from continuing operations
before income taxes		865,951			2,337,930
Income tax expense		192,595			979,004
Income from continuing operations		673,356			1,358,926
Income (loss) from discontinued operations,
net of income tax expense		(356,415	)		608,778
Net income	$	316,941		$	1,967,704
Income (loss) per share:
Basic:
Continuing operations	$	.13		$	.26
Discontinued operations		(.07	)		.12
	$	.06		$	.38
Diluted:
Continuing operations	$	.13		$	.26
Discontinued operations		(.07	)		.12
	$	.06		$	.38
Average shares outstanding:
Basic		5,129,214			5,129,214
Diluted		5,129,214			5,151,436

(See accompanying notes to the consolidated condensed financial statements)

5

INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(Unaudited)

	Six Months Ended
	June 30, 2005			June 30, 2004 (Restated)
Sales, net	$	21,387,546		$	17,692,497
Cost of sales		15,594,065			13,213,643
Gross margin		5,793,481			4,478,854
Operating expenses:
Selling expense		1,688,214			1,928,296
General and administrative expense		2,536,933			2,895,387
Research and development expense		765,754			875,783
Total operating expenses		4,990,901			5,699,466
Gain on sale of asset held for sale		—			3,109,627
Operating income		802,580			1,889,015
Interest expense		(219,665	)		(247,901	)
Interest income		18,582			1,345
Other income, net		106,754			99,251
Income from continuing operations
before income taxes		708,251			1,741,710
Income tax expense		288,421			1,096,410
Incoming from continuing operations		419,830			645,300
Income from discontinued operations, net of income tax expense		107,341			529,891
Net income	$	527,171		$	1,175,191
Income per share:
Basic:
Continuing operations	$	.08		$	.13
Discontinued operations		.02			.10
	$	.10		$	.23
Diluted:
Continuing operations	$	.08		$	.13
Discontinued operations		.02			.10
	$	.10		$	.23
Average shares outstanding:
Basic		5,129,214			5,129,214
Diluted		5,129,214			5,149,467

(See accompanying notes to the consolidated condensed financial statements)

6

INTRICON CORPORATION
Consolidated Condensed Statements of Cash Flows
(Unaudited)

	Six Months Ended
	June 30, 2005			June 30, 2004 (Restated)
Cash flows from operating activities:
Net income	$	527,171		$	1,175,191
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Income from discontinued operations		(107,341	)		(529,891	)
Depreciation and amortization		1,055,586			1,154,945
Provision for deferred income taxes		(112,727	)		890,230
Gain on disposition of property		(1,239	)		(3,114	)
Gain on sale of asset held for sale		—			(3,109,627	)
Changes in operating assets and liabilities:
Accounts receivable		(1,323,072	)		(889,796	)
Inventories		(1,492,821	)		897,354
Other assets		(671,872	)		86,542
Accounts payable		1,582,969			(532,160	)
Accrued expenses		644,597			(428,592	)
Customer advances		3,616			(10,733	)
Other liabilities		(295,082	)		94,235
Net cash used by continuing operations		(190,215	)		(1,205,416	)
Net cash provided by discontinued operations		3,102,433			820,765
Net cash provided (used) by operating activities		2,912,218			(384,651	)
Cash flows from investing activities:
Proceeds from sale of assets		2,950			3,800
Proceeds from sale of asset held for sale		—			3,649,802
Purchases of property, plant and equipment		(794,331	)		(350,381	)
Net cash provided (used) by investing activities		(791,381	)		3,303,221
Net cash used by discontinued operations		—			(4,418	)
Net cash provided (used) by investing activities		(791,381	)		3,298,803
Cash flows from financing activities:
(Repayment) Proceeds from bank borrowings		(75,012	)		339,903
Repayments of short-term bank borrowings		(428,000	)		(432,806	)
Proceeds from long term borrowings		294,132			800,001
Change in checks written in excess of cash		(511,543	)		(71,458	)
Change in restricted cash		(2,668	)		3,479
Repayments of long-term debt		(1,480,511	)		(3,492,805	)
Net cash used by financing activities		(2,203,602	)		(2,785,707	)
Effect of exchange rate changes on cash		(8,062	)		(53,036	)
Net increase (decrease) in cash and cash equivalents		(90,827	)		75,409
Cash and cash equivalents, beginning of period		246,430			193,812
Cash and cash equivalents, end of period	$	155,603		$	201,242

(See accompanying notes to the consolidated condensed financial statements)

7

INTRICON CORPORATION

Notes to Consolidated Condensed Financial Statements (Unaudited)

1. General

In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly IntriCon Corporation’s consolidated financial position as of June 30, 2005 and December 31, 2004, and the consolidated results of its operations for the three and six months ended June 30, 2005 and 2004.

2. Restatement of Prior Year Financial Statements

We have restated our consolidated financial statements for the years 2000 through 2004 (the “Restatement”). The determination to restate these financial statements was made after errors were discovered in May, 2005. In addition, certain disclosures in other notes to our consolidated financial statements have been restated to reflect the Restatement adjustments. In the Restatement, we have:

• Corrected the accounting for certain research and development expenditures that were erroneously capitalized on the balance sheet by recording charges to the statement of operations.

• Reversed amortization expense related to the erroneously capitalized research and development expenditures.

• Adjusted income tax reserves as a function of the impact on pre-tax income relating to the correction of accounting for certain research and development expenditures noted above.

Further information regarding the impact of these adjustments is provided in note 2 of the consolidated financial statements in Form 10-K/A for the year ended December 31, 2004.

3. New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Compensation, which supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity investments based on the fair value of the award at the date of grant. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. On April 14, 2005, the Securities and Exchange Commission issued a release announcing the adoption of a new rule delaying the required implementation of SFAS No. 123R. Under this new rule, SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. The impact on net earnings as a result of the adoption of SFAS No. 123R, from a historical perspective, can be found in Note 9 to the Consolidated Financial Statements in this Quarterly Report and in Note 1 to the Consolidated Financial Statements contained in our 2004 Annual Report. We are currently evaluating the provisions of SFAS No. 123R and will adopt it in the first quarter of 2006, as required.

8

4. Discontinued Operations

Burners and Components Business – In 2003, the Company initiated its plan to sell the remainder of its Heat Technology segment. This segment, which was sold on March 31, 2005, consisted of the operating assets of Selas Corporation of America, located in Dresher, Pennsylvania, Nippon Selas located in Tokyo, Japan and Selas Waermetechnik located in Ratingen, Germany. This business generated sales of $2.1 million, and $1.6 million and net income of $107,000 and $603,000 for the six months ended June 30, 2005 and 2004, respectively. The net income for the six months ended June 30, 2005, included a gain on the sale of the operations of $184,000. The total purchase price was approximately $3.7 million, subject to adjustment, of which approximately $2.8 million was paid in cash on April 1, 2005, and $900,000 was paid in the form of a subordinated promissory note. An adjustment to the purchase price of approximately $352,000 was recorded in the quarter ended June 30, 2005.

The consolidated condensed financial statements reflect the Company’s presentation of discontinued operations. A recap of discontinued operations for the three and six months ended June 30 is as follows:

	Three Months Ended June30,						Six Months Ended June 30,
	2005			2004			2005			2004
Income (loss) from operations
Gain from Sale of
Discontinued operations	$	(352,255	)	$	—		$	183,782		$	—
Small furnace		—			($ 47,726	)		—			($ 72,851	)
Burners and components		(4,160	)		656,504			(76,441	)		602,742
	$	(356,415	)	$	608,778		$	107,341		$	529,891

5. Business Segment Information

The Company has made a strategic decision to focus its future on the Precision Miniature Medical and Electronics business. The Company sold the remaining operations of its Heat Technology segment of the Burners and Components business on March 31, 2005. As a result of this decision and other divestures the Company has made over the past three years, the Company now operates in only one segment.

6. Inventories consist of the following at:

	June 30, 2005		December 31, 2004
Raw material	$	2,710,393	$	2,240,194
Work-in-process		1,665,393		1,008,706
Finished products and components		1,364,604		1,038,743
	$	5,740,390	$	4,287,643

9

7. Long term debt

Notes payable at June 30, 2005 and December 31, 2004 are summarized below:

	June 30, 2005		December 31, 2004
Notes payable:
Short term borrowings, domestic	$	2,743,447	$	3,171,447
Short term borrowings, Asia		478,877		568,946
Total notes payable	$	3,222,324	$	3,740,393

The Company and its domestic subsidiaries have a revolving credit loan facility which expires April 1, 2006. This loan facility, which originally had a maximum limit of $4,500,000, was reduced to a maximum limit of $4,000,000 after the completion of the sale of the burners and components business. This facility had outstanding borrowings of approximately $2,743,000 as of June 30, 2005 bearing an interest rate of 9.25% (Prime plus 3.0%). This facility carries a commitment fee of .25% per annum, payable on the unborrowed portion of the line.

At June 30, 2005 the Company was in compliance with all the financial covenants contained in its credit facility.

In addition, the Company’s operation in Singapore maintains an overdraft and letter of credit facility which as of June 30, 2005, had outstanding borrowings of approximately $479,000. Remaining availability under this facility as of June 30, 2005 was $587,000.

Long-term debt at June 30, 2005 and December 31, 2004 is summarized below:

	June 30, 2005		December 31, 2004
Long Term Debt:
Term loan, domestic	$	—	$	1,458,470
Equipment leases		272,091		—
		272,091		1,458,470
Less: current maturities		54,051		1,458,470
	$	218,040	$	—

The terms of the domestic term loan agreement required quarterly principal payments of $300,000 beginning in March 2005 through March 2006, with a balloon payment due at the end of the loan. The loan also required proceeds from the sale of certain assets be applied against the loan. The term loan was paid in full on April 1, 2005, upon receipt of the proceeds from the sale of discontinued operations.

Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and future performance. Our performance is affected by general economic conditions and by financial, competitive, political, business and other factors. Many of these factors are beyond our control.

We believe that funds expected to be generated from operations, the available borrowing capacity through our revolving credit loan facilities, and the control of capital spending will be sufficient to meet our anticipated cash requirements for operating needs through June 30, 2006. If, however, we do not generate sufficient cash from operations, or if we incur additional liabilities as a result of the Selas SAS insolvency (note 12), we may be required to seek additional financing or sell equity on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. While management believes that the Company will meet its liquidity needs through June 30, 2006, no assurance can be given that the Company will be able to do so.

10

8. Income Taxes

Income taxes for the three and six months ended June 30, 2005 were $193,000 and $288,000 respectively, compared to $979,000 and $1.1 million for the same periods in 2004. The effective tax rates for the three and six months ended June 30, 2005 were 22.2% and 40.7% respectively, compared to 41.8% and 62.9% for the same periods in 2004. The higher effective rate for the three and six months ended June 30, 2004 was primarily due to the elimination of the deferred tax asset of $890,230. The effective rate in 2005 was primarily due to foreign taxes on German and Singapore operations. The Company is in a net operating loss position for Federal income tax purposes and, consequently, no expense from the current period domestic operating income was recognized.

9. Stockholders’ Equity and Stock-based Compensation

The Company has adopted the disclosure provision of Statement of Financial Accounting Principles Board Opinion (SFAS) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. SFAS No. 148 amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation.

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share related to the Company’s employee stock option plan:

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Basic – weighted shares outstanding		5,129,214		5,129,214		5,129,214		5,129,214
Weighted shares assumed upon exercise
of stock options		—		22,222		—		20,253
Diluted – weighted shares outstanding		5,129,214		5,151,436		5,129,214		5,149,467

The dilutive impact summarized above relates to the periods when the average market price of Company stock exceeded the exercise price of the potentially dilutive option securities granted. For the three and six months ended June 30, 2005 the average market price was below the exercise price for all outstanding options.

The Company applies Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Therefore no compensation expense has been recognized for the stock option plans. SFAS No. 123 “Accounting for Stock-Based Compensation”, amended by SFAS No. 148 “Accounting for Stock-Based Compensation –Transition and Disclosure”, requires the Company to disclose pro forma net earnings and pro forma net earnings per share amounts as if compensation expense was recognized for all options granted (note 3). The proforma amounts are as follows:

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Reported net income	$	316,941		1,967,704		527,171		1,175,191
Stock-based employee compensation
expense, net of related tax effects		46,319		19,721		92,638		39,442
Pro forma net income	$	270,622		1,947,983		434,533		1,135,749
Reported basic and diluted   net income per share	$	.06		.38		.10		.23
Pro forma basic and diluted   net income per share	$	.05		.38		.08		.22

11

10. Income (Loss) Per Share

Excluded from the computation of diluted earnings per share at June 30, 2005 were options to purchase approximately 690,000 common shares, with an average exercise price of $4.18, because the effect would have been anti-dilutive. Excluded from the computation of diluted earnings per share at June 30, 2004 were options to purchase approximately 277,000 common shares, with an average exercise price of $7.01, because the effect would have been anti-dilutive.

11. Legal Proceedings

The Company is a defendant along with a number of other parties in approximately 123 lawsuits as of June 30, 2005(approximately 123 lawsuits as of December 31, 2004)alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants. Due to the noninformative nature of the complaints, the Company does not know whether any of the complaints state valid claims against the Company.  The lead insurance carrier has informed the Company that the primary policy for the period July 1, 1972 — July 1, 1975 has been exhausted and that the lead carrier will no longer provide a defense under that policy.  The Company has requested that the lead carrier substantiate its position.  The Company has contacted representatives of the Company’s excess insurance carrier for some or all of this period.  The Company does not believe that the asserted exhaustion of the primary insurance coverage for this period will have a material adverse effect on the financial condition, liquidity, or results of operations of the Company.  Management believes that the number of insurance carriers involved in the defense of the suits and the significant number of policy years and policy limits to which these insurance carriers are insuring the Company, make the ultimate disposition of these lawsuits not material to the Company’s consolidated financial position or results of operations.

As more fully described in Note 12, the Company’s wholly owned French subsidiary, Selas SAS filed insolvency in France and is being managed by a court appointed judiciary administrator. The Company may be subject to additional litigation or liabilities as a result of the French insolvency.

The Company is also involved in other lawsuits arising in the ordinary course of business. While it is not possible to predict with certainty the outcome of these matters, management is of the opinion that the disposition of these lawsuits and claims will not materially affect the Company’s consolidated financial position, liquidity, or results of operations.

12. Subsidiary Insolvency

On August 4, 2003 the Company’s wholly owned French subsidiary, Selas SAS, filed insolvency in the Commercial Court of Nanterre, France and is being managed through a court appointed judiciary administrator. Historical financial information has been restated to include this European operation in discontinued operations. In addition, the Company may be subject to additional litigation or liabilities as a result of the French insolvency.

13. Statements of Cash Flows

Supplemental disclosures of cash flow information:

	Six months Ended
	June 30, 2005		June 30, 2004
Interest received	$	18,705	$	257
Interest paid	$	234,430	$	206,308
Income taxes paid	$	32,264	$	5,000

12

ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Headquartered in Arden Hills, Minnesota, IntriCon Corporation (formerly Selas Corporation of America) is an international firm that designs, develops, engineers and manufactures micro-miniature medical and electronic products. The Company supplies micro-miniaturized components, systems and molded plastic parts, primarily to the hearing instrument manufacturing industry, as well as the computer, electronics, telecommunications and medical equipment industries. In addition to its Arden Hills headquarters, the Company has facilities in California, Singapore, and Germany. Within discontinued operations, the Company had facilities in Pennsylvania, Japan and Germany. See also notes 4 and 5 to the Condensed Consolidated Financial Statements.

Currently, the Company has one operating segment, its precision miniature medical and electronics products segment. In the past the Company had operated three segments, precision miniature medical and electronics products segment, heat technology segment, and tire holders, lifts and related products segment. In 2001, the Company began focusing on its precision miniature medical and electronics products segment and developing plans to exit the businesses that comprised the heat technology segment, and tire holders, lifts and related products segment. The Company exited the tire holders, lifts and related products business in 2003 and exited the heat technology segment on June 30, 2005. The Company classified its heat technology segment as discontinued operations in 2004.

With the completed sale of the burner and components business, the Company has successfully completed the shift from its traditional business segments to the emerging prospects in its precision miniature medical and electronic products business. To reflect the Company’s redefined focus, it has changed its name to IntriCon Corporation.

The Company manufactures micro-miniature components, systems and molded plastic parts for hearing instruments, medical equipment, electronics, telecommunications and computer industry manufacturers. These components consist of volume controls, microphones, trimmer potentiometers and switches. The Company also manufactures hybrid amplifiers and integrated circuit components (“hybrid amplifiers”), along with faceplates for in-the-ear and in-the-canal hearing instruments. Components are offered in a variety of sizes, colors and capacities in order to accommodate a hearing manufacturer’s individualized specifications. Sales to hearing instrument manufacturers represented approximately 51% of net sales for the Company’s precision miniature medical and electronic products business in the first six months of fiscal 2005.

In the medical market, the Company is focused on sales of microelectronics, micromechanical assemblies and high-precision plastic molded components to medical device manufacturers. Targeted customers include medical product manufacturers of portable and lightweight battery powered devices, large AC-powered units often found in clinics and hospitals, as well as a variety of sensors designed to connect a patient to an electronic device.

The medical industry is faced with pressures to reduce the costs of healthcare. The Company offers medical manufacturers the capabilities to design, develop and manufacture components for medical devices that are easier to use, measure with greater accuracy and provide more functions while reducing the costs to manufacture these devices. Examples of the Company’s products used by medical device manufacturers include components found in intravenous fluid administration pumps that introduce drugs into the bloodstream, and bubble sensors and flow restrictors that monitor and control the flow of fluid in an intravenous infusion system.

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The Company also manufactures a family of safety needle products for an OEM customer that utilizes the Company’s insert and straight molding capabilities. These products are assembled using full automation including built-in quality checks within the production lines. Other examples include sensors used to detect pathologies in specific organs of the body and monitoring devices to detect cardiac and respiratory functions. The early and accurate detection of pathologies allows for increased likelihood for successful treatment of chronic diseases and cancers. Accurate monitoring of multiple functions of the body, such as heart rate and breathing, aids in generating more accurate diagnosis and treatments for patients.

The Company has also expanded its micro-miniature components business through the manufacture of thermistors and film capacitors. The Company manufactures and sells thermistors and thermistor assemblies, which are solid state devices that produce precise changes in electrical resistance as a function of any change in absolute body temperature. The Company’s Surge-Gard TM product line, an inrush electric current limiting device used primarily in computer power supplies, represented approximately 5% of the Company’s sales in the first six months of fiscal 2005. The balance of sales represent various industrial, commercial and military sales for thermistor and thermistor assemblies to domestic and international markets.

Forward-Looking and Cautionary Statements

Certain statements included in this Quarterly Report on Form 10-Q or documents the Company files with the Securities and Exchange Commission, which are not historical facts, are forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which are intended to be covered by the safe harbors created thereby. These statements may include, but are not limited to:

• statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” such as, new digital products to gain market share, recovery of the telecommunications market, potential growth in the Company’s medical profits, future gross profit margins, future cost savings, net operating loss carryforwards, the impact of future cash flows, the ability to maintain financial covenants, the ability to meet working capital requirements, future level of funding of employee benefit plans, the ability to negotiate extension on purchases, the impact of foreign currencies and litigation; and

• statements in “Notes to the Company’s Condensed Consolidated Financial Statements”.

Forward-looking statements also include, without limitation, statements as to the Company’s:

• expected future results of operations and growth;

• ability to meet working capital requirements;

• business strategy;

• expected benefits from staff reductions;

• expected increases in operating efficiencies;

• anticipated trends in the hearing-health market; and

• estimate of goodwill impairment and amortization expense of the intangible assets.

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In addition, forward-looking statements also include the effects of changes in accounting pronouncements, the effects of litigation and the amount of insurance coverage, and statements as to trends or the Company’s or management’s beliefs, expectations and opinions. Forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this Quarterly Report on Form 10-Q, certain risks, uncertainties and other factors can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including, without limitation, the following:

• the ability to implement the Company’s business strategy;

• risks arising in connection with the insolvency of Selas SAS, and potential liabilities and actions arising in connection therewith;

• the volume and timing of orders received by the Company;

• changes in estimated future cash flows;

• foreign currency movements in markets the Company services;

• changes in the global economy and financial markets;

• changes in the mix of products sold;

• acceptance of the Company’s products;

• reliance on two customers in the Company’s medical products business;

• competitive pricing pressures;

• pending and potential future litigation;

• availability of electronic components for the Company’s products;

• ability to create and market products in a timely manner;

• ability to pay debt when it comes due; and

• the risks associated with terrorist attacks, war and threats of attacks.

For a description of these and other risks see “Risk Factors” in Part 1, Item 1: Business in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, or in other filings the Company makes from time to time with the Securities and Exchange Commission. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

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2005 compared with 2004

Sales, net

Consolidated net sales for the three and six months ended June 30, were as follows (in thousands):

					Change
	2005		2004		Dollars		Percent
Three months ended June 30	$	11,601	$	8,354	$	3,247		38.9	%
Six months ended June 30	$	21,388	$	17,692	$	3,696		20.9	%

The Company’s sales for both the three and six months ended June 30, 2005 increased for all four product sectors over the same periods in the prior year. For the quarter ended June 30, 2005 sales increased by 123.8% for professional audio and military products, 75.9% for medical products, 28.3% for hearing health products, and 4.9% for electronics products. For the six months ended June 30, 2005 sales increased by 12.1% for professional audio and military products, 75.9% for medical products, 19.2% for hearing health products, and 5.5% for electronics products. The sales increase for professional audio and military products was primarily due to sales of a new microphone to a specific customer; for hearing health products the increase was primarily due to new product offerings in the Company’s advance line of amplifier assemblies and systems based on Digital Signal Processing (DSP). The sales increase for medical products was due to strengthened orders for design and contract manufacturing with several medical OEM customers. The sales increase for electronics products was primarily attributable to thermistor sales to a specific customer.

Gross profit

Gross profit margins for the three and six months ended June 30 were as follows (in thousands):

	2005					Restated 2004					Change
	Dollars		Percent of Sales			Dollars		Percent of Sales			Dollars		Percent
Three months ended June 30	$	3,411		29.4	%	$	2,058		24.6	%	$	1,353		4.8	%
Six months ended June 30	$	5,793		27.1	%	$	4,479		25.3	%	$	1,314		1.8	%

The gross profit margin as a percentage of sales, improved over the three and six month periods ended June 30, 2005 from the previous year periods due to higher sales and lower manufacturing costs for some products which are now manufactured in Asia.

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Selling, general and administrative expenses (SG&A)

Selling, general and administrative expenses (SG&A) for the three months ended June 30 were as follows (in thousands):

	2005					Restated 2004					Change
	Dollars		Percent of Sales			Dollars		Percent of Sales			Dollars			Percent
Selling	$	884		7.6	%	$	937		11.2	%	$	(53	)		(5.7	)%
General and administrative		1,284		11.1	%		1,330		15.9	%	$	(46	)		(3.5	)%
Research and development		359		3.1	%		415		5.0	%	$	(56	)		(13.5	)%

Selling, general and administrative expenses (SG&A) for the six months ended June 30 were as follows (in thousands):

	2005					Restated 2004					Change
	Dollars		Percent of Sales			Dollars		Percent of Sales			Dollars			Percent
Selling	$	1,688		7.9	%	$	1,928		10.9	%	$	(240	)		(12.4	)%
General and administrative		2,537		11.9	%		2,895		16.3	%	$	(358	)		(12.4	)%
Research and development		766		3.6	%		876		5.0	%	$	(110	)		(12.6	)%

The lower selling, administrative, and research and development expense for the three and six month periods ended June 30, 2005 as compared to the prior year periods was the result of a reduction in staffing that occurred in November 2004. The staffing adjustment was a combination of reductions due to the transfer of a portion of manufacturing to an overseas operation and an effort to streamline administrative functions.

Operating income

There was a decrease in operating income for the three and six months ended June 30, 2005, of $1.6 million and $1.1 million, respectively, compared to the prior year periods because the three and six months ended June 30, 2004 included a gain on sale of our Dresher property of approximately $3.1 million. This had been carried on the balance sheet under the title, “Asset held for sale”.

Interest expense

Interest expense for the three and six months ended June 30, 2005 was $108,000 and $220,000 respectively, compared to $152,000 and $248,000 for the same periods in 2004, respectively. The decrease from the prior year’s expense was due to the lower outstanding debt balance, partially offset by higher interest rates.

Interest income

Interest income for the three and six months ended June 30, 2005 was $20,000 and $19,000, respectively, compared to $1,000 for the same periods in 2004. The increase in 2005 interest income was attributable to interest on the note receivable from the buyer of the discontinued operations that were sold on March 31, 2005.

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Other income

Other income for the three and six months ended June 30, 2005 was $71,000 and $107,000 respectively, compared to $4,000 and $99,000 for the same periods in 2004, respectively. The increase in other income in 2005 was attributable to the sale of securities the Company had received in settlement of an outstanding debt with one of its former customers. The majority of the other income in 2004 was attributable to foreign exchange gain on a portion of the Company’s debt that was Euro denominated until its amendment in March 2004.

Income taxes

Income taxes for the three and six months ended June 30, 2005 were $193,000 and $288,000, respectively, compared to $979,000 and $1.1 million for the same periods in 2004, respectively. The effective tax rates for the three and six months ended June 30, 2005 were 22.2% and 40.7% respectively, compared to 41.8% and 62.9% for the same periods in 2004. The higher effective rate for the three and six months ended June 30, 2004 was primarily due to the elimination of the deferred tax asset of $890,230. The effective rate in 2005 was primarily due to foreign taxes on German and Singapore operations. The Company is in a net operating loss position for Federal income tax purposes and, consequently, no expense from the current period domestic operating income was recognized.

Income (loss) from continuing operations

For the three and six months ended June 30, 2005, the net income from continuing operations was $673,000 and $420,000, respectively, compared with a net income of $1.4 million and $645,000 for the same periods in 2004, respectively. The net income from continuing operations in 2004 was attributable to a gain of $3.1 million on an asset held for sale.

Discontinued Operations

Discontinued operations generated a net loss of $356,000 for the three months ended June 30, 2005 and net income of $107,000 for the six months ended June 30, 2005, compared to a net income of $609,000 and $530,000 for the three and six months ended June 30, 2004, respectively. The loss for the three months ended June 30, 2005 was a result of a purchase price adjustment related to the sale of the discontinued operations that were sold on March 31, 2005. As of this date no additional purchase price adjustments regarding the sale of the discontinued operations are expected. The income for the six months ended June 30, 2005 included a gain on the sale of these operations of $184,000. See note 4 of the Consolidated Condensed Financial Statements.

Liquidity and Capital Resources

Consolidated net working capital increased $400,000 to approximately $2.5 million at June 30, 2005 compared to $2.1 million December 31, 2004. The increase was mainly attributable to the sales of the discontinued operations and the pay down of debt from the proceeds. Other factors included increases in inventory, accounts receivable and accounts payable related to the increase in sales for the quarter.

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The Company’s cash flows from operating, investing and financing activities, as reflected in the statement of cash flows, are summarized as follows (in thousands):

	Six months Ended
	June 30, 2005			Restated June 30, 2004
Cash provided (used) by:
Continuing operations	$	(190	)	$	(1,205	)
Discontinued operations *		3,102			816
Investing activities		(791	)		3,303
Financing activities		(2,204	)		(2,786	)
Effect of exchange rate changes on cash		(8	)		(53	)
Increase (decrease) in cash	$	(91	)	$	75
*Includes proceeds from the sale of discontinued operations of $2.8 million.

The Company had the following bank arrangements (in thousands):

	June 30, 2005		December 31, 2004
Total availability under existing facilities	$	5,065	$	7,056
Borrowings and commitments:
Notes payable		3,222		3,740
Current maturities of long-term debt		—		1,458
Total outstanding borrowings and commitments		3,222		5,198
Remaining availability under existing facilities	$	1,843	$	1,858

Borrowings under the majority of the Company’s credit facilities bear interest at prime plus 3%. See Note 7 of the Consolidated Condensed Financial Statements.

In March 2005, the Company and its domestic subsidiaries entered into an amended and restated revolving credit loan facility maturing April 1, 2006 for which borrowings of $4,500,000 could be outstanding at any one time. The Company had borrowings of approximately $2,743,000 as of June 30, 2005 bearing an interest rate of 9.25% (prime plus 3.0%). The loan carries a commitment fee of .25% per annum, payable on the unborrowed portion of the line. After the Company’s discontinued operations were sold on June 30, 2005 the maximum outstanding balance of the facility was reduced to $4,000,000, representing a permanent reduction in the Company’s availability under the facility.

In addition, the Company’s operation in Singapore maintains an overdraft and letter of credit facility which as of June 30, 2005, had outstanding borrowings of approximately $479,000, bearing an interest rate of 6.0%. Remaining availability under this facility as of June 30, 2005 was $586,000.

The Company and its domestic subsidiaries entered into a $1,458,470 note scheduled to mature April 1, 2006. This facility required quarterly principal payments of $300,000 commencing March 31, 2004 and bore interest of 8.75% (prime plus 3.0%). Proceeds from the sale the Company’s burner and components business which was sold on March 31, 2005, were used to payoff the loan on April 1, 2005, representing a permanent reduction in the Company’s availability under the facility.

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IntriCon believes that funds expected to be generated from operations, the available borrowing capacity through its revolving credit loan facilities, curtailment of the dividend payment and control of capital spending will be sufficient to meet its anticipated cash requirements for operating needs through April 1, 2006. However, the Company’s ability to pay the principal and interest on its indebtedness as it comes due will depend upon current and future performance. Performance is affected by general economic conditions and by financial, competitive, political, business and other factors. Many of these factors are beyond the Company’s control. If, however, the Company does not generate sufficient cash or complete such financings on a timely basis, it may be required to seek additional financing or sell equity on terms, which may not be as favorable as it could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity will be possible when needed, or that IntriCon will be able to negotiate acceptable terms. In addition, access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as the Company’s financial condition.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Compensation, which supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity investments based on the fair value of the award at the date of grant. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. On April 14, 2005, the Securities and Exchange Commission issued a release announcing the adoption of a new rule delaying the required implementation of SFAS No. 123R. Under this new rule, SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. The impact on net earnings as a result of the adoption of SFAS No. 123R, from a historical perspective, can be found in Note 9 to the Consolidated Financial Statements in this Quarterly Report and in Note 1 to the Consolidated Financial Statements contained in our 2004 Annual Report. We are currently evaluating the provisions of SFAS No. 123R and will adopt it in the first quarter of 2006, as required.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Certain accounting estimates and assumptions are particularly sensitive because their significance to the consolidated condensed financial statements and the possibility that future events affecting them may differ markedly. The accounting policies of the Company with significant estimates and assumptions include the Company’s revenue recognition, accounts receivable reserves, inventory reserves, discontinued operations, goodwill, long-lived assets and deferred taxes policies. These and other significant accounting policies, except for revenue recognition which is described in the paragraphs below, are described in and incorporated by reference from “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 1 to the financial statements contained in or incorporated by reference in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004.

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The Company’s continuing operations recognizes revenue when products are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Under contractual terms shipments are generally FOB shipment point.

Customers have 30 days to notify the Company if the product is damaged or defective. Beyond that, there are no significant obligations that remain after shipping other than warranty obligations. Contracts with customers do not include product return rights, however, the Company may elect in certain circumstances to accept returns for product. The Company records revenue for product sales net of returns. Net sales also include amounts billed to customers for shipping and handling, if applicable. The corresponding shipping and handling costs are included in the cost of sales.

In general, the Company warrants its products to be free from defects in material and workmanship and will fully conform to and perform to specifications for a period of one year. While the Company’s warranty costs have historically been within its expectations, the Company cannot guarantee that it will continue to experience the same warranty return rates or repair costs that it has experienced in the past.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

For information regarding the Company’s exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004. There have been no material changes in the Company’s portfolio of financial instruments or market risk exposures which have occurred since December 31, 2004.

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ITEM 4.    Controls and Procedures

On May 31, 2005, the Company concluded, after discussions among the Audit Committee of the Board of Directors of the Company and management, that it would restate financial results for the years 2000 through 2004 in order to correct the accounting for certain research and development expenditures that were erroneously capitalized on the balance sheet instead of being recorded as charges on the statement of operations. The methodology for accounting for the Company’s research and development expenses was corrected prior to the end of the quarter covered by this report and the Company initiated the policies and procedures described below:

• The Company implemented education programs within the Company to ensure that all finance and accounting employees are adequately trained and supervised in the application of US GAAP.

• The Company created stronger communication protocols and relationships between the Company’s management and its finance and accounting personnel to ensure for proper accounting analysis and treatment.

• The Company added internal review controls to insure that capitalized projects appearing on the balance sheet are reviewed and approved by management on a quarterly basis.

The Company also restated its financial statements and corrected its accounting practices as further described in Note 2 of the Notes to Consolidated Condensed Financial Statements.

The Company’s management, with the participation of its chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of June 30, 2005 (the “Disclosure Controls Evaluation”). Based upon the Disclosure Controls Evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective to provide a reasonable level of assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the specified time periods in the Securities and Exchange Commission’s rules and forms.

Other than disclosed above, there were no changes in our internal controls over financial reporting during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II – OTHER INFORMATION

ITEM 1.    Legal Proceedings

The information contained in Notes 11 and 12 to the Consolidated Condensed Financial Statements in part 1 of this quarterly report is incorporated by reference herein.

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3.    Defaults upon Senior Securities

None.

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

The 2005 Annual Meeting of Shareholders of the Company was held on May 4, 2005, adjourned to and reconvened May 18, 2005.

At the 2005 Annual Meeting on May 18, 2005:

Mr. Robert N. Masucci was elected to the Board of Directors of the Company for terms expiring at the 2008 Annual Meeting. In the election, 2,191,725 votes were cast for Mr. Masucci. Under Pennsylvania law, votes cannot be cast against a candidate. Proxies filed at the 2005 Annual Meeting by the holders of 2,706 shares withheld authority to vote for Mr. Masucci. The terms of the following directors continued after the Annual Meeting: Michael J. McKenna, Nicholas A. Giordano, and Mark S. Gorder.

ITEM 5.    Other Information

None.

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ITEM 6.    Exhibits and Reports on Form 8-K

(a) Exhibits

31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of principal financial officer to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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INTRICON CORPORATION

SIGNATURE

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

	INTRICON CORPORATION (Registrant)
Date:   August 12, 2005	By:	/s/   Mark S. Gorder
		Mark S. Gorder President and Chief Executive Officer (principal executive officer)

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EXHIBIT INDEX

31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of principal financial officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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