SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2006

or

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

For the transition period from                    to          

Commission file number 1-11471

Bell Industries, Inc.

(Exact name of Registrant as specified in its charter)

California	95-2039211
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1960 E. Grand Avenue, Suite 560, El Segundo, California	90245
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (310) 563-2355

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

Yes R      No £

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £     Accelerated filer £     Non-accelerated filer R

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

Yes £     No R

      As of the close of business on August 11, 2006, there were 8,566,224 outstanding shares of the Registrant’s Common Stock.

BELL INDUSTRIES, INC.

INDEX

	Page
Part I — FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2006 and 2005		3
Consolidated Condensed Balance Sheets as of June 30, 2006 and December 31, 2005		4
Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2006 and 2005		5
Notes to Consolidated Condensed Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures About Market Risk		15
Item 4. Controls and Procedures		15
PART II — OTHER INFORMATION		15
Item 1. Legal Proceedings		15
Item 1A. Risk Factors		15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3. Defaults Upon Senior Securities		19
Item 4. Submission of Matters to a Vote of Security Holders		20
Item 5. Other Information		20
Item 6. Exhibits		20
SIGNATURES		20
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

2

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

BELL INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

	Three months ended						Six months ended
	June 30						June 30
	2006			2005			2006			2005
Net revenues:
Products	$	24,302		$	27,815		$	41,395		$	47,434
Services		6,859			7,462			14,729			14,666
		31,161			35,277			56,124			62,100
Costs and expenses:
Cost of products sold		19,466			22,276			33,156			38,168
Cost of services provided		5,220			5,835			11,877			11,847
Selling and administrative		7,481			6,734			14,015			12,792
Interest, net		(134	)		(36	)		(209	)		(88	)
		32,033			34,809			58,839			62,719
Income (loss) from continuing operations before income taxes		(872	)		468			(2,715	)		(619	)
Income tax expense (benefit)		(892	)		30			(877	)		45
Income (loss) from continuing operations		20			438			(1,838	)		(664	)
Discontinued operations:
Income from discontinued operations, net of tax		39			510			577			935
Gain on sale of discontinued operations, net of tax		5,153			—			5,153			—
Discontinued operations, net of tax		5,192			510			5,730			935
Net income	$	5,212		$	948		$	3,892		$	271
Share and Per Share Data:
Basic
Income (loss) from continuing operations	$	—		$	0.05		$	(0.22	)	$	(0.08	)
Discontinued operations		0.61			0.06			0.67			0.11
Net income	$	0.61		$	0.11		$	0.45		$	0.03
Weighted average common shares		8,565			8,460			8,564			8,457
Diluted
Income (loss) from continuing operations	$	—		$	0.05		$	(0.22	)	$	(0.08	)
Discontinued operations		0.61			0.06			0.67			0.11
Net income	$	0.61		$	0.11		$	0.45		$	0.03
Weighted average common shares		8,593			8,493			8,590			8,513

See Accompanying Notes to Consolidated Condensed Financial Statements.

3

BELL INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, dollars in thousands)

	June 30			December 31
	2006			2005
ASSETS
Current assets
Cash and cash equivalents	$	14,455		$	7,331
Accounts receivable, less allowance for doubtful accounts of $541 and $811		15,645			15,306
Inventories		10,079			12,764
Prepaid expenses and other		2,906			2,701
Total current assets		43,085			38,102
Fixed assets, net		2,313			3,143
Other assets		2,557			3,108
	$	47,955		$	44,353
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Floor plan payables	$	57		$	68
Accounts payable		11,624			11,023
Accrued liabilities and payroll		7,854			8,440
Total current liabilities		19,535			19,531
Deferred compensation, environmental matters and other		4,041			4,518
Commitments and contingencies
Shareholders’ equity:
Preferred stock
Authorized — 1,000,000 shares, outstanding — none
Common stock
Authorized — 35,000,000 shares, outstanding — 8,566,224 and 8,559,224 shares		33,015			32,832
Accumulated deficit		(8,636	)		(12,528	)
Total shareholders’ equity		24,379			20,304
	$	47,955		$	44,353

See Accompanying Notes to Consolidated Condensed Financial Statements.

4

BELL INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	Six months ended
	June 30
	2006			2005
Cash flows from operating activities:
Net income	$	3,892		$	271
Income from discontinued operations, net of tax		(577	)		(935	)
Gain on sale of discontinued operations, net of tax		(5,153	)		—
Depreciation and amortization		1,040			647
Stock-based compensation		169			—
Provision for losses on accounts receivable		51			106
Changes in assets and liabilities, net of disposals		992			(943	)
Net cash provided by (used in) operating activities for continuing operations		414			(854	)
Net cash provided by (used in) operating activities for discontinued operations		(695	)		875
Net cash provided by (used in) operating activities		(281	)		21
Cash flows from investing activities:
Purchases of fixed assets and other		(296	)		(301	)
Net cash used in investing activities for continuing operations		(296	)		(301	)
Net cash provided by (used in) investing activities for discontinued operations		7,945			(12	)
Net cash provided by (used in) investing activities		7,649			(313	)
Cash flows from financing activities:
Net payments of floor plan payables		(11	)		(1,922	)
Employee stock plans		14			55
Principal payments on capital leases		(247	)		—
Net cash used in financing activities		(244	)		(1,867	)
Net increase (decrease) in cash and cash equivalents		7,124			(2,159	)
Cash and cash equivalents at beginning of period		7,331			10,801
Cash and cash equivalents at end of period	$	14,455		$	8,642
Changes in assets and liabilities, net of disposals:
Accounts receivable	$	(1,273	)	$	(7,537	)
Inventories		1,477			3,393
Accounts payable		1,139			4,545
Accrued liabilities and other		(351	)		(1,344	)
Net change	$	992		$	(943	)

See Accompanying Notes to Consolidated Condensed Financial Statements.

5

BELL INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Accounting Principles

The accompanying consolidated condensed financial statements of Bell Industries, Inc. (the “Company”) for the three and six month periods ended June 30, 2006 and 2005 have been prepared in accordance with generally accepted accounting principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements have not been audited by an independent registered public accounting firm, but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. The accompanying consolidated condensed balance sheet as of December 31, 2005 has been derived from audited financial statements, but does not include all disclosures required by GAAP.

Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to guidelines of the Securities and Exchange Commission (the “SEC”). Management believes that the disclosure included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but the disclosure contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents.

Included in cash and cash equivalents are repurchase agreements which are transactions involving the purchase of a security and the simultaneous commitment to return the security to the seller at an agreed upon price on an agreed upon date. These agreements mature the following day and the Company is paid principal plus interest. The U.S. Government Agency securities committed in these agreements are segregated by a third party custodian under the Company’s name and serve as collateral under such agreement. As of June 30, 2006 and December 31, 2005, these transactions amounted to approximately $13.0 million and $7.3 million, respectively. Based on the maturity date of the resell agreements, the Company considers that the amounts presented in the financial statements are reasonable estimates of fair value.

Shipping and Handling Costs

Shipping and handling costs, consisting primarily of freight paid to carriers, Company-owned delivery vehicle expenses and payroll related costs incurred in connection with storing, moving, preparing, and delivering products totaled approximately $1.1 million and $1.8 million during the three and six month periods ended June 30, 2006 and $1.0 million and $1.8 million during the three and six month periods ended June 30, 2005. These costs are included within selling and administrative expenses in the Consolidated Condensed Statements of Operations.

Floor Plan Arrangements

The Company finances certain inventory purchases in its Technology Solutions business unit through floor plan arrangements with two finance companies. At June 30, 2006 and December 31, 2005, the Company had outstanding floor plan obligations of $57,000 and $68,000, respectively.

Accrued Liabilities

The Company accrues for liabilities associated with disposed businesses, including amounts related to legal and environmental matters. Accrued liabilities include approximately $4.2 million of amounts attributable to disposed businesses at June 30, 2006 and December 31, 2005.

6

Stock-Based Compensation

The Company maintains the 2001 Stock Option Plan (“2001 Plan”) which provides for the issuance of common stock to be available for purchase by employees and by non-employee directors of the Company. Under the 2001 Plan, both incentive and nonqualified stock options, stock appreciation rights and restricted stock may be granted. Options outstanding have terms of between five and ten years, vest over a period of up to four years and were issued at a price equal to or greater than fair value of the shares on the date of grant.

The Company from time to time, grants stock options for a fixed number of shares to certain employees and directors. Prior to the January 1, 2006 adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,” the Company accounted for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, because the stock option exercise price was equal to or greater than the fair value of the shares at the date of grant, no compensation expense was recognized for Company-issued stock options. As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation”, stock-based compensation was included as a pro forma disclosure in the notes to the consolidated financial statements. The following table illustrates the effect on net income and net income per share for the three and six month periods ended June 30, 2005 if the Company had applied the fair value method as prescribed by SFAS No. 123, net of taxes (dollars in thousands):

	Three			Six
	months ended			months ended
	June 30, 2005			June 30, 2005
Net income, as reported	$	948		$	271
Compensation expense as determined under SFAS No. 123		(19	)		(32	)
Pro forma net income	$	929		$	239
Net income per share
Basic and diluted — as reported	$	.11		$	.03
Basic and diluted — pro forma	$	.11		$	.03

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) using the modified prospective transition method and, as a result, did not retroactively adjust results from prior periods. Under this transition method, stock-based compensation expense for the six months ended June 30, 2006 includes compensation expense for all stock options granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and expense related to all stock options granted on or subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123 (revised 2004). Stock-based compensation expense recognized in the Consolidated Condensed Statements of Operations totaled $164,000 and $169,000 for the three and six month periods ended June 30, 2006 of which $3,000 and $8,000, respectively, represented compensation expense related to stock options granted prior to January 1, 2006.

During June 2006 pursuant to his employment agreement, John A. Fellows, President and Chief Executive Officer, received the following non qualified option grants to purchase shares of common stock:

			Market price on
Number of shares	Grant price		date of grant		Option life
250,000	$	2.67	$	2.46	10 years
250,000	$	4.00	$	2.46	10 years
250,000	$	6.00	$	2.46	10 years
250,000	$	8.00	$	2.46	10 years

Each of these options vest at 20% on the date of grant and an additional 20% on October 3, 2006, October 3, 2007, October 3, 2008, and October 3, 2009, and provide for accelerated vesting if there is a change in control (as defined in the stock option agreement). These options are standalone grants and were not granted from the 2001 Plan.

7

The Company utilizes the Black-Scholes valuation model in determining the fair value of stock-based grants. The resulting compensation expense is recognized over the requisite service period, which is generally the option vesting term of four years. The weighted average fair value at the grant date for options issued during the three months ended June 30, 2006 and 2005 was $.91 and $1.16 per option, respectively. The fair value of options at the date of grant was estimated using the following assumptions during the second quarter of 2006 and 2005, respectively: (a) no dividend yield on the Company’s stock, (b) expected stock price volatility of 39% and 60%, (c) a risk-free interest rate of 4.95% and 4%, and (d) an expected option term of 4.37 to 5.73 years and 4 years.

The expected term of the options granted in 2006 is calculated using the simplified method as prescribed by Staff Accounting Bulletin No. 107. The expected term for each option grant represents the vesting term plus the original contract term divided by two. For 2006, expected stock price volatility represent the one year historical annualized volatility calculated using weekly closing market prices for the Company’s common stock. The risk-free interest rate is based on the five year U.S. Treasury yield at the date of grant. The Company has not paid dividends in the past and does not currently anticipate paying any dividends in the near future.

The following summarizes stock option activity during the six months ended June 30, 2006:

				Weighted		Weighted average
				average		remaining
				exercise		contractual term		Aggregate
	Shares			price		(in years)		intrinsic value
Outstanding at December 31, 2005		268,000		$	2.78
Granted to John A. Fellows		1,000,000		$	5.17
Granted from 2001 Plan		235,000		$	3.89
Exercised		(7,000	)	$	2.00
Canceled or expired		(34,000	)	$	2.52
Outstanding at June 30, 2006		1,462,000		$	4.60		9.3	$	141,000
Exercisable at June 30, 2006		468,000		$	3.95		6.0	$	90,000

The aggregate intrinsic value in the table above represents the intrinsic value (the difference between the Company’s closing stock price on June 30, 2006 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2006. The total intrinsic value of options exercised during the three and six month periods ended June 30, 2006 was approximately $2,000 and $4,000, respectively. As of June 30, 2006, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $648,000 which is expected to be recognized over a weighted average period of approximately 1.5 years. As of June 30, 2006 there were 265,000 shares of common stock available for issuance pursuant to future stock option grants under the Plan.

Per Share Data

Basic earnings per share data are based upon the weighted average number of common shares outstanding. Diluted earnings per share data are based upon the weighted average number of common shares outstanding plus the number of common shares potentially issuable for dilutive securities such as stock options and warrants. The weighted average number of common shares outstanding for each of the three and six month periods ended June 30, 2006 and 2005 is set forth in the following table:

	Three months ended				Six months ended
	June 30				June 30
	2006		2005		2006		2005
Basic weighted average shares outstanding		8,565,000		8,460,000		8,564,000		8,457,000
Potentially dilutive stock options		28,000		33,000		26,000		56,000
Diluted weighted average shares outstanding		8,593,000		8,493,000		8,590,000		8,513,000

For each of the three and six month periods ended June 30, 2006 the number of stock option shares not included in the table above, because the impact would have been antidilutive, was 1,180,000. For each of the three and six month periods ended June 30, 2005 the number of stock option shares not included in the table above, because the impact would have been antidilutive, was 200,000.

8

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” which establishes that the financial statement effects of a tax position taken or expected to be taken in a tax return are to be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In November 2005, the FASB issued Staff Position No. 123(R)-3 (“FSP 123 (R)-3”), “Transition Election Relating to Accounting for the Tax Effects of Share-Based Payment Awards,” which provides an optional alternative transition election for calculating the pool of excess tax benefits (“APIC pool”) available to absorb tax deficiencies recognized under SFAS No. 123 (revised 2004). Under FSP 123(R)-3, an entity can make a one time election to either use the alternative simplified method or use the guidance in SFAS No. 123 (revised 2004) to calculate the APIC pool. This election must be made by January 1, 2007. The Company is currently evaluating the available transition alternatives.

Environmental Matters

Reserves for environmental matters primarily relate to the cost of monitoring and remediation efforts, which commenced in 1998, at a former leased facility site of the Company’s Electronics circuit board manufacturer (“ESD”). The ESD business was closed in the early 1990s. At June 30, 2006 and December 31, 2005, ESD estimated future remediation and related costs totaled approximately $3.4 million and $3.7 million, respectively. At June 30, 2006, approximately $1.7 million (estimated current portion) is included in accrued liabilities and $1.7 million (estimated non-current portion) is included in deferred compensation, environmental matters and other in the Consolidated Condensed Balance Sheets. At June 30, 2006 and December 31, 2005, the estimated future amounts to be recovered from insurance totaled $2.4 million and $2.9 million, respectively. At June 30, 2006, approximately $1.7 million (estimated current portion) is included in prepaid expenses and other and approximately $700,000 (estimated non-current portion) is included in other assets in the Consolidated Condensed Balance Sheets.

Litigation

Williams Electronic Games litigation: In May 1997, Williams Electronics Games, Inc. (“Williams”) filed a complaint in the United States District Court for the Northern District of Illinois (“US District Court”) against a former Williams employee and several other defendants alleging common law fraud and several other infractions related to Williams’ purchase of electronic components at purportedly inflated prices from various electronics distributors under purported kickback arrangements during the period from 1991 to 1996. In May 1998, Williams filed an amended complaint adding several new defendants, including Milgray Electronics, Inc., a publicly traded New York corporation (“Milgray”), which was acquired by Bell in a stock purchase completed in January 1997. The complaint sought an accounting and restitution representing alleged damages as a result of the infractions. Bell has not been named in any complaint and was not a party to the alleged infractions. Bell, as the successor company to Milgray, has vigorously defended the case on several grounds and continues to assert that Milgray did not defraud Williams, and that Williams suffered no damages as electronic components were purchased by Williams at prevailing market prices.

The case proceeded to trial, which commenced and ended in March 2002, with a jury verdict resulting in Milgray having no liability to Williams. In July 2002, Williams appealed the jury verdict and, in April 2004, the United States Court of Appeals for the 7th Circuit (“US Appellate Court”) rendered its decision. The US Appellate Court concluded that jury instructions issued by the US District Court were in error and the case was ordered for retrial of Williams’ fraud and restitution claims. The case was remanded to the US District Court and a new judge was assigned. In September 2005, the US District Court entered its order declining to exercise supplemental jurisdiction over Williams’ claims and dismissing Williams’ case without prejudice. The US District Court noted in its order that Williams could pursue its claims in Illinois State Courts. In October 2005, Williams filed a Notice of Appeal to the US Appellate Court from the judgment of dismissal entered by the US District Court. Williams’ claim for compensatory damages is approximately $8.7 million, not including an additional claim for pre-judgment interest. While the Company cannot predict the outcome of this litigation, a final judgment favorable to Williams could have a material adverse effect on the Company’s results of operations, cash flows or financial position. Management intends to continue a vigorous defense.

Other litigation: The Company is involved in other litigation, which is incidental to its current and discontinued businesses. The resolution of the other litigation is not expected to have a material adverse effect on the Company’s results of operations, cash flows or financial position.

9

Sale of J.W. Miller Division

On April 28, 2006, the Company, as seller, entered into an Asset Purchase Agreement (the “Agreement”) with Bourns, Inc., as buyer, and simultaneously closed the asset purchase and sale transaction contemplated by the Agreement, thereby completing the sale of substantially all of the assets, excluding real estate, of the Company’s J.W. Miller division. Pursuant to the Agreement, the Company received $8.5 million in cash in April 2006 and approximately $0.2 million in July 2006 attributable to post closing adjustments. The sale resulted in a pre-tax gain of approximately $6.1 million ($5.2 million net of tax). The results of the J.W. Miller division have been classified as discontinued operations in the accompanying financial statements. For the six months ended June 30, 2006 and 2005, the J.W. Miller division had sales of approximately $3.0 million and $3.9 million, respectively. For 2006, sales are included through the date of sale.

Business Segment Information

The Company has two reportable business segments: Technology Solutions, a provider of integrated technology solutions and Recreational Products, a distributor of replacement parts and accessories for recreational and other leisure-time vehicles.

The following summarizes financial information for the Company’s reportable segments (in thousands):

	Three months ended						Six months ended
	June 30						June 30
	2006			2005			2006			2005
Net revenues:
Technology Solutions
Products	$	9,803		$	13,895		$	16,239		$	22,123
Services		6,859			7,462			14,729			14,666
		16,662			21,357			30,968			36,789
Recreational Products		14,499			13,920			25,156			25,311
	$	31,161		$	35,277		$	56,124		$	62,100
Operating income (loss):
Technology Solutions	$	(914	)	$	307		$	(2,158	)	$	(460	)
Recreational Products		922			834			1,112			1,052
Corporate costs		(1,014	)		(709	)		(1,878	)		(1,299	)
		(1,006	)		432			(2,924	)		(707	)
Interest, net		134			36			209			88
Income tax benefit (expense)		892			(30	)		877			(45	)
Income (loss) from continuing operations		20			438			(1,838	)		(664	)
Discontinued operations:
Income from discontinued operations, net of tax		39			510			577			935
Gain on sale of discontinued operations, net of tax		5,153			—			5,153			—
Discontinued operations, net of tax		5,192			510			5,730			935
Net income	$	5,212		$	948		$	3,892		$	271

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

The following discussion of financial condition and results of operations of the Company should be read in conjunction with, and is qualified in its entirety by, the consolidated condensed financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q, within the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and within other filings with the SEC. This discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, regarding, among other things, our plans, strategies and prospects, both business and financial. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Many of the forward looking statements contained in this Quarterly Report may be identified by the use of forward-looking words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “will,” “may,” and “estimated,” among others. Important factors that could cause actual results to differ materially from the forward-looking statements that we make in this Quarterly Report are set forth below, are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and are set forth in other reports or documents that we file from time to time with the SEC. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

10

Critical Accounting Policies

In the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, the critical accounting policies were identified which affect the more significant estimates and assumptions used in preparing the consolidated financial statements. These policies have not changed from those previously disclosed.

Recent Accounting Pronouncements

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” which establishes that the financial statement effects of a tax position taken or expected to be taken in a tax return are to be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In November 2005, the FASB issued FSP 123 (R)-3, “Transition Election Relating to Accounting for the Tax Effects of Share-Based Payment Awards,” which provides an optional alternative transition election for calculating the APIC pool available to absorb tax deficiencies recognized under SFAS No. 123 (revised 2004). Under FSP 123(R)-3, an entity can make a one time election to either use the alternative simplified method or use the guidance in SFAS No. 123 (revised 2004) to calculate the APIC pool. This election must be made by January 1, 2007. The Company is currently evaluating the available transition alternatives.

Results of Operations

The Note to Consolidated Condensed Financial Statements under the heading titled “Business Segment Information” includes a tabular summary of results of operations by business segment for the three and six month periods ended June 30, 2006 and 2005.

In April 2006, the Company sold its J. W. Miller division. Accordingly, the results of the J. W. Miller division have been classified as discontinued operations in the accompanying financial statements.

Net revenues

Net revenues for the three months ended June 30, 2006 decreased 11.7% to $31.2 million from $35.3 million in 2005. For the six months ended June 30, 2006, net revenues decreased 9.6% to $56.1 million from $62.1 million in 2005. Net revenues are further discussed in “Technology Solutions” and “Recreational Products” below.

Operating income (loss)

Operating loss for the three months ended June 30, 2006 totaled $1.0 million compared to operating income of $432,000 in the corresponding 2005 period. For the six months ended June 30, 2006, operating loss increased 313.6% to $2.9 million from $707,000 in 2005. Operating results are further discussed in “Technology Solutions” and “Recreational Products” below.

Corporate costs

Corporate costs for the three months ended June 30, 2006 increased 43.0% to $1.0 million from $709,000 in 2005. For the six months ended June 30, 2006 corporate costs increased 44.6% to $1.9 million from $1.3 million in 2005. The increase is primarily attributable to approximately $160,000 in stock-based compensation expense for stock options granted in June 2006, higher payroll costs and increased travel related expenditures.

Interest, net

Net interest income for the three months ended June 30, 2006 increased 272.2% to $134,000 from $36,000 in 2005. For the six months ended June 30, 2006, net interest income increased 137.5% to $209,000 from $88,000 in 2005. The increase is attributable to higher average cash balances related to the $8.5 million in proceeds received during April 2006 from the sale of the J.W. Miller division and increased interest rates in 2006 as compared to 2005.

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Technology Solutions

Technology Solutions revenues for the three months ended June 30, 2006 decreased 22.0% to $16.7 million from $21.4 million in 2005. For the six months ended June 30, 2006, Technology Solutions revenues decreased 15.8% to $31.0 million from $36.8 million in 2005. Product revenues for three months ended June 30, 2006 decreased 29.4% to $9.8 million from $13.9 million in 2005. For the six months ended June 30, 2006, product revenues decreased 26.6% to $16.2 million from $22.1 million in 2005. The decrease in product revenues is primarily attributable to the loss of two large licensing resale engagements in a competitive bid process during the second quarter of 2006 and the loss of a large product account during 2005. There continues to be intense price competition in the resale of technology hardware and software. The gross margin percentage on product sales decreased during the three months ended June 30, 2006 as compared to the prior year due to the loss of the two large licensing resale engagements. Services revenues for the three months ended June 30, 2006 decreased 8.1% to $6.9 million from $7.5 million in 2005. Services revenues for both the six months ended June 30, 2006 and 2005 were approximately $14.7 million. The decrease in services revenues during the three months ended June 30, 2006 is primarily attributable to the decrease in revenues from the service desk engagement with Philip Morris USA that terminated on April 1, 2006 offset partially by net increases in services revenues from new reverse logistics and depot repair engagements. Operating loss for the three months ended June 30, 2006 totaled $914,000 compared to operating income of $307,000 in 2005. For the six months ended June 30, 2006, operating loss increased 369.1% to $2.2 million from $460,000 in 2005. The increase in operating loss during the six months ended June 30, 2006 is primarily attributable to approximately $1 million in reduced contribution from the decrease in product revenues and decrease in gross margin percentage and approximately $800,000 in losses from start up and related costs associated with a new depot services contract with a large printer manufacturer that commenced in the fourth quarter of 2005.

During September 2005, written notification was received from Philip Morris USA terminating the service desk portion of our outsourcing services and product sales contractual engagement, effective April 1, 2006. For the three and six month periods ended June 30, 2006, services revenue from the service desk portion of the engagement totaled approximately $0 and $700,000 compared to approximately $800,000 and $1.6 million for the corresponding periods in 2005. Extensions through August 2006 have been finalized on the other contractual portions of the engagement that had an April 2006 termination date. We are currently finalizing multiyear extensions with Philip Morris USA on all engagements for which an extension was received through August 2006. Additionally, other multiyear service opportunities are being finalized with Philip Morris USA.

Recreational Products

Recreational Products revenues for the three months ended June 30, 2006 increased 4.2% to $14.5 million from $13.9 million in 2005, and operating income increased 10.6% to $922,000 from $834,000. For the six months ended June 30, 2006, Recreational Products revenues decreased slightly to $25.2 million from $25.3 million in 2005, and operating income increased slightly to $1,112,000 from $1,052,000. Operating results for the three months ended June 30, 2006 reflect higher marine product sales as compared to the corresponding period in the prior year. Gross margin percentage was relatively consistent during the three months ended June 30, 2006 as compared to the prior year.

Cost of products sold

As a percentage of product revenues, cost of products sold for both the three months ended June 30, 2006 and 2005 were 80.1%. For the six months ended June 30, 2006, this percentage decreased to 80.1% from 80.5% in 2005. The slight decrease is attributable to improvement in gross margin percentage at the Recreational Products business unit offset partially by the decrease in gross margin percentage at the Technology Solutions business unit.

Cost of services provided

As a percentage of services revenues, cost of services provided for the three months ended June 30, 2006 decreased to 76.1% from 78.2% in 2005. For the six months ended June 30, 2006 this percentage decreased to 80.6% from 80.8% in 2005. The decrease for the three months ended June 30, 2006 is primarily attributable to reductions in direct payroll costs associated with services engagements, partially offset by higher direct labor costs associated with the new depot services contract at the Technology Solutions business unit.

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Selling and administrative expenses

As a percentage of sales, selling and administrative expenses for the three months ended June 30, 2006 increased to 24.0% from 19.1% in 2005. For the six months ended June 30, 2006, this percentage increased to 25.0% from 20.6% in 2005. These increases are primarily attributable to higher corporate payroll and travel costs, the increase in stock-based compensation expense related to stock options issued in June 2006, professional fees and printing costs associated with the restatement of prior year’s financial statements, the higher administrative costs associated with the new depot services contract, and the overall decrease in revenues at the Technology Solutions business unit during 2006 as compared to 2005.

Income tax

Income tax benefit for the three months ended June 30, 2006 totaled $892,000 compared to income tax expense of $30,000 for 2005. For the six months ended June 30, 2006, income tax benefit totaled $877,000 compared to income tax expense of $45,000 for 2005. Income tax benefit for the three and six month periods ended June 30, 2006 include a benefit totaling $923,000 related to the discontinued operations of the J.W. Miller division. This $923,000 benefit is offset by the recording of income tax expense of $832,000 related to the gain on sale of discontinued operations and $91,000 related to income from discontinued operations. The income tax benefit for the three and six months ended June 30, 2006 also includes a provision for state taxes totaling $31,000 and $46,000, respectively. The gain on sale of discontinued operations also includes a $120,000 provision related to Federal alternative minimum taxes. The income taxes expense for the three and six months ended June 30, 2005 primarily relates to state taxes. As of June 30, 2006, the Company continues to record a full valuation allowance against net deferred tax asset balances.

Income (loss) from continuing operations

Income from continuing operations for the three months ended June 30, 2006 totaled $20,000 compared to $438,000 in the prior year period. For the six months ended June 30, 2006, loss from continuing operations totaled $1.8 million compared to $664,000 in the prior year period. The changes in income (loss) from continuing operations resulted from the factors described above.

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Changes in Financial Condition

Liquidity and Capital Resources

Selected financial data are set forth in the following tables (dollars in thousands, except per share amounts):

	June 30			December 31
	2006			2005
Cash and cash equivalents	$	14,455		$	7,331
Working capital	$	23,550		$	18,571
Current ratio		2.2:1			2.0:1
Long-term liabilities to total capitalization		14.2	%		18.2	%
Shareholders’ equity per share	$	2.85		$	2.37
	Three months ended
	June 30
	2006			2005
Days’ sales in receivables		46			45
Days’ sales in inventories		38			34

Net cash provided by operating activities for continuing operations was $414,000 for the six months ended June 30, 2006 compared to net cash used in operating activities for continuing operations of $854,000 in 2005. The cash provided by operating activities for continuing operations in 2006 reflects a decrease in inventories and an increase in accounts payable partially offset by an increase in accounts receivable. The decrease in inventory is primarily attributable to reduced inventory levels at the Recreational Products business unit. The increase in accounts payable relates to increased purchasing to support higher levels of sales in June 2006 as compared to December 2005. The increase in accounts receivable is primarily attributable to higher sales during June 2006 as compared to December 2005 and the timing of receivables collections. The cash used in operating activities for continuing operations in 2005 reflects a decrease in inventories and an increase in accounts payable offset by an increase in accounts receivable. The decrease in inventory is primarily attributable to reduced inventory levels at the Recreational Products business unit. The increase in accounts payable relates to increased purchasing to support higher sales levels during June 2005 as compared to December 2004 and to utilizing open payment terms offered by distributor suppliers for inventory purchases in 2005 at the Technology Solutions business unit and less financing through the use of floor plan arrangements. The increase in accounts receivable is primarily attributable to the higher sales during June 2005 as compared to December 2004 and the timing of receivable collections.

Net cash used in investing activities for continuing operations was $296,000 for the six months ended June 30, 2006 compared to $301,000 in 2005. The cash used in investing activities from continuing operations during 2006 and 2005 represents purchases of technology related products and other fixed assets.

Net cash used in financing activities totaled $244,000 for the six months ended June 30, 2006 compared to $1.9 million in 2005. The cash used in financing activities in 2006 represents $247,000 in payments on capital lease obligations and net payments of $11,000 on floor plan arrangements partially offset by the proceeds from the exercise of employee stock options. The cash used in financing activities in 2005 represents net payments of $1.9 million on floor plan arrangements partially offset by the proceeds from the exercise of employee stock options.

The Company believes that sufficient cash resources exist for the foreseeable future to support requirements for its operations and commitments through available cash, including cash generated from the sale of the J.W. Miller division, and cash generated by operations.

Off-Balance Sheet Arrangements

The Company does not have any material off-balance sheet arrangements.

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Contractual Obligations and Commercial Commitments

During April 2006, the Company entered into a new lease for its Technology Solutions business in Indianapolis, Indiana. This lease for the new headquarters facility, which is effective July 1, 2006, replaced the existing facility lease that expired on June 30, 2006. The total contractual obligation related to this new lease, which expires on October, 31 2012, is approximately $2.9 million. During July 2006, the Company entered into a new lease, effective July 1, 2006, for its Technology Solutions business in Springfield, Missouri. This facility will be utilized to provide customer relationship management solutions for a leading broadband phone organization. The total contractual obligation related to this lease, which expires on June 30, 2011, is approximately $5.1 million. Other than these new leases, there have been no material changes to the Company’s contractual obligations and commercial commitments as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company has no investments in market risk-sensitive investments for either trading purposes or purposes other than trading purposes.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2006. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2006, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer and Chief Financial Officer by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Note to Consolidated Condensed Financial Statements under the heading titled “Litigation”, included in Part I of this report, is incorporated herein by reference.

Item 1A. Risk Factors

In addition to other information contained in this report, we are subject to the following risks, which could materially adversely affect our business, financial condition and/or results of operations in the future.

We have a history of operating losses.

We have incurred net losses in each of the past five fiscal years. As of June 30, 2006 we had an accumulated deficit of approximately $8.6 million. If our future revenues in each of our business units do not meet our expectations, or if operating expenses exceed what we anticipate, our business, financial condition and results of operations could be materially and adversely affected.

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We face certain significant risks related to the currently pending Williams litigation and from other potential litigation that could materially adversely affect our financial condition and results of operations.

We have been engaged in ongoing litigation in connection with our 1997 purchase of Milgray Electronics, Inc., a publicly traded New York corporation, which was named as a defendant by the plaintiff, Williams Electronics Games, Inc. (“Williams”), in an action alleging common law fraud and other infractions related to Williams’ purchase of electronic components at allegedly inflated prices from 1991 to 1996. Although the outcome of this litigation cannot be predicted, an adverse verdict could have a materially adverse effect on us. The defense of this lawsuit has required a significant amount of our management’s time and attention and, even if we prevail in defending this lawsuit, we will incur additional legal and related expenses. The disruptive effect and expense of this litigation could adversely affect our business, financial condition, results of operations and/or cash flows. We also may become subject to other litigation in the future.

Our previously owned businesses subject us to potential environmental liabilities, which could adversely affect our results of operations.

We are subject to various federal, state and local environmental statutes, ordinances and regulations relating to disposal of certain toxic, volatile or otherwise hazardous substances and wastes used or generated in connection with previously owned businesses. Such laws may impose liability without regard to whether we knew of, or caused, the release of such hazardous substances. Although we establish reserves for specifically identified potential environmental liabilities, which reserves we believe to be adequate, there may be potential undisclosed environmental liabilities or liability in excess of the amounts reserved. Compliance with these environmental laws could require us to incur substantial expenses.

We rely on a limited number of hardware and software vendors to supply us with products in our technology solutions business and the loss of our ability to rely upon any of those vendors, or to obtain their products in the future would adversely affect our results of operations.

Our technology solutions business is heavily dependent on our relationships with leading hardware and software vendors and on our status as an authorized service provider. Although we are currently authorized to service the products of many industry-leading hardware and software vendors, we may not be able to maintain our relationships, or attract new relationships, with the computer hardware and software vendors that may be necessary for our technology solutions business. Since we rely upon our vendor relationships as a marketing tool, any change in these relationships could adversely affect our results of operations while we seek to establish alternative relationships with other vendors. In general, our authorization agreements with vendors include termination provisions, some of which are immediate, and we cannot predict whether vendors will continue to authorize us as an approved service provider. In addition, we cannot predict whether those vendors will authorize us as an approved service provider for new products, which they may introduce. Any impairment of these vendor relationships, or the loss of authorization as an approved service provider, could adversely affect our ability to provide the products and services which our technology solutions business requires and harm our competitive position. In addition, significant product supply shortages have resulted from time to time because manufacturers have been unable to produce sufficient quantities of certain products to meet demand. We expect to experience difficulty from time to time in obtaining an adequate supply of products from our major vendors, which may result in delays in completing sales.

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We may not be able to compete effectively with other companies in our business segments, which will cause our net sales and market share to decline and adversely affect our business, financial condition and results of operations.

Our businesses are highly competitive and we face strong competition from competitors that are substantially larger and have considerably greater financial, technical and marketing resources than us. We believe that our prices and delivery terms are competitive; however, our competitors may offer more aggressive pricing than we do. We have experienced and expect to continue to experience intense competitive pricing pressures in our businesses, which could require us to reduce prices, with a corresponding adverse impact on our operating results. Additionally, as competition in the technology industry has intensified, certain of our key technology suppliers have heightened their direct marketing initiatives. These initiatives have resulted in some of our clients electing to purchase technology products directly from the manufacturer, rather than through us. While we expect these initiatives to continue, there could be a material adverse impact on our business if the shift of clients to purchase directly from manufacturers occurs more quickly than anticipated.

Our technology solutions business is dependent on a limited number of major clients and the loss of any of these major clients would materially and adversely affect our business, financial condition and results of operations.

Sales of our products and services in our technology solutions business has been and will likely continue to be concentrated in a small number of clients. Two of our clients accounted for approximately 33% of our total revenues for 2005 in our technology solutions business, with one client, Philip Morris USA, accounting for approximately 10% of our total consolidated net revenues for the year. In the event that any of these major clients should cease to purchase products or services from us, or purchase significantly fewer products and services in the future, we could experience materially adverse effects on our business, financial condition and results of operations.

During September 2005, written notification was received from Philip Morris USA terminating the service desk portion of our outsourcing services and product sales contractual engagement, effective April 1, 2006. For the three and six month periods ended June 30, 2006, services revenue from the service desk portion of the engagement totaled approximately $0 and $700,000 compared to approximately $800,000 and $1.6 million for the corresponding periods in 2005. Extensions through August 2006 have been finalized on the other contractual portions of the engagement that had an April 2006 termination date. We are currently finalizing multiyear extensions with Philip Morris USA on all engagements for which an extension was received through August 2006. Additionally, other multiyear service opportunities are being finalized with Philip Morris USA.

Our recreational products business is seasonal and is subject to fluctuations, based upon various economic and climatic conditions that could harm us.

Sales of our recreational products are affected directly by the usage levels and purchases of recreational vehicles, snowmobiles, motorcycles and ATVs, and marine products. The purchase and, in particular, the usage of these types of vehicles, are affected by weather conditions. As a result, sales of our recreational products business are highly susceptible to unpredictable events, and ordinarily decline in the winter months resulting in losses during these periods of the year. Additionally, unusual weather conditions in a particular season, such as unusually cold weather in the spring or summer months, can cause period-to-period fluctuations in our sales of recreational products. The usage and purchases of recreational vehicles, snowmobiles, motorcycles and ATVs, and marine products are also affected by consumers’ level of discretionary income and their confidence about economic conditions and changes in interest rates and in the availability and cost of gasoline. As a result, sales of our recreational products can fluctuate based upon unpredictable circumstances that are outside of our control.

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Our recreational products business relies heavily upon vendors with which we have no long-term relationships.

We do not have long term supply contracts with our recreational products suppliers, which may adversely affect the terms on which we purchase products for resale or result in our inability to purchase products from one or more of such vendors in the future. These vendors may choose to distribute their products directly to aftermarket dealers or establish exclusive supply relationships with other distributors. Additionally, manufacturers of new recreational vehicles, snowmobiles, motorcycles and ATVs, and marine products may choose to incorporate optional equipment as standard equipment on their vehicles at the time of manufacture that are similar to products available for sale to dealers by distributors such as us. In addition to decreased sales, we would encounter increased competition in our markets, or may be unable to offer certain products to our customers, upon any such changes in our relationships with our recreational products vendors.

If we are unable to recruit and retain key personnel necessary to operate our businesses, our ability to compete successfully will be adversely affected.

We are heavily dependent on our current executive officers, management and technical personnel. The loss of any key employee or the inability to attract and retain qualified personnel could adversely affect our ability to execute our current business plans and successfully develop commercially viable products and services. Competition for qualified personnel is intense, and we might not be able to retain our existing key employees or attract and retain any additional personnel. In addition, our recent financial operating results may make it more difficult for us to attract and retain qualified personnel.

Our technology solutions business could be adversely impacted by conditions affecting the information technology market.

The demand for our technology products and services depends substantially upon the general demand for business-related computer hardware and software, which fluctuates based on numerous factors, including capital spending levels, the spending levels and growth of our current and prospective customers and general economic conditions. Fluctuations in the demand for our products and services could have a material adverse effect on our business, results of operations and financial condition. In the past, adverse economic conditions decreased demand for our products and negatively impacted our financial results. Future economic projections for the information technology sector are uncertain. If an uncertain information technology spending environment persists, it could negatively impact our business, results of operations and financial condition.

If we fail to maintain effective internal controls over financial reporting and disclosure controls and procedures in the future, we may not be able to accurately report our financial results or prevent fraud, which would have an adverse affect on our business.

Effective internal controls over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial information and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, it could have an adverse affect on our business. We have in the past discovered and may in the future discover areas of our internal control over financial reporting that need improvement.

We are in the process of beginning a review and analysis of our internal control over financial reporting for Sarbanes-Oxley compliance. As part of that process we may discover additional control deficiencies in our internal control over financial reporting or our disclosure controls and procedures that we believe require remediation. If we discover additional deficiencies, we will make efforts to remediate these deficiencies; however, there is no assurance that we will be successful either in identifying deficiencies or in their remediation. Any failure to maintain effective controls in the future could adversely affect our business or cause us to fail to meet our reporting obligations.

We may need to implement additional finance and accounting systems, procedures and controls to satisfy new reporting requirements.

As a non-accelerated filer, we must comply with certain reporting requirements set forth in Section 404 of the Sarbanes-Oxley Act for our fiscal year ending December 31, 2007. Compliance with Section 404 of the Sarbanes-Oxley Act and other requirements may significantly increase our costs and require additional management time and resources.

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Changes in stock option accounting rules may adversely impact our reported operating results.

In December 2004, the FASB issued SFAS No. 123 (revised 2004) “Share-Based Payment.” SFAS No. 123 (revised 2004) revises SFAS No. 123 and APB No. 25 and related interpretations. Effective January 1, 2006, SFAS No. 123 (revised 2004) required compensation cost relating to all share-based payments to employees to be recognized in the financial statements based on their fair values. The pro forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. Based on the outstanding stock options not vested as of December 31, 2005, the adoption of SFAS No. 123 (revised 2004) did not have a material impact on the Company’s consolidated financial position or results of operations. Although the adoption of this statement did not have a material impact, the impact in future periods may be significant based on the number of stock options granted as we will be required to expense the fair value of our stock options rather than disclosing the impact on our consolidated results of operations within our footnotes.

Future changes in financial accounting standards or practices affect our reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations or accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.

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

(a)	None
(b)	None
(c)	None
(d)	None

Item 3. Defaults Upon Senior Securities

      None

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

The Annual Meeting of Shareholders was held on June 6, 2006 to vote on the election of four directors to hold office until the next Annual Meeting of Shareholders. All of management’s nominees for director as listed in the proxy statement were elected with the following vote:

			Votes		Votes
Directors	Votes for		against		withheld
John A. Fellows		7,072,410		-0-		388,390
L. James Lawson		7,018,862		-0-		441,938
Michael R. Parks		7,018,762		-0-		442,038
Mark E. Schwarz		6,634,373		-0-		826,427

Item 5. Other Information

      None

Item 6. Exhibits

31.1	Certification of John A. Fellows, Chief Executive Officer of Registrant pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Mitchell I. Rosen, Chief Financial Officer of Registrant pursuant to Rule 13a-14 adopted under the Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of John A. Fellows, Chief Executive Officer of Registrant furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Mitchell I. Rosen, Chief Financial Officer of Registrant furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	BELL INDUSTRIES, INC.
Dated: August 14, 2006	By:	/s/ John A. Fellows
		John A. Fellows
		President and Chief Executive Officer (authorized officer of registrant)
Dated: August 14, 2006	By:	/s/ Mitchell I. Rosen
		Mitchell I. Rosen
		Vice President and Chief Financial Officer (principal financial and accounting officer)

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