UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1923, 2005

THREE FIVE SYSTEMS, INC.

(Exact name of ~~registrant~~Company as specified in its charter)

DELAWARE	1-4373	86-0654102
(State or other jurisdiction	(Commission	(IRS Employer
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
of incorporation)	File Number)	Identification No.)

1600 N. DESERT DRIVE
TEMPE, AZ
85281
(Address of Principal Executive Offices)
(Zip Code)

~~Registrant~~Company’s telephone number, including area code: 602-389-8600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the ~~registrant~~Company under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01 Entry into a Material Definitive Agreement.
	Item 8.01 Other Events.
	Item 8.01 Other Events
	Item 9.01 Exhibits
SIGNATURES
Exhibit 99.1

Overview of Events

On August 19, 2005, Three Five Systems, Inc. (the “Registrant”) announced that its wholly owned subsidiary, TFS Electronic Manufacturing Systems, Inc. (the “Subsidiary”), will sell the majority of assets of its electronic manufacturing systems (“EMS”) operations in Redmond, Washington, to Catalyst Manufacturing Services, Inc. The Registrant’s press release regarding this transaction is attached hereto as Exhibit 99.1. In order to implement the sale of its EMS operation, the Subsidiary will be reorganizing under Chapter 11 of the United States Bankruptcy Code. The Registrant has agreed to provide certain financing to the Registrant during such reorganization through an unsecured debtor-in-possession credit facility.

Item 1.01 Entry into a Material Definitive Agreement.

~~DIP~~ On August 29, 2005, Three Five Systems, Inc. (the “Company”) entered into an executive ~~Credit~~retention ~~Agreement~~agreement with its President and Chief Executive Officer, Jack L. Saltich (the “Executive”).

OnThe ~~August 19,~~term ~~2005,~~of ~~the~~Executive’s ~~Registrant~~employment ~~signed~~under athe ~~Debtor-in-Possession~~agreement ~~Credit~~commenced ~~Agreement~~on ~~with~~ the ~~Subsidiary,~~ ~~under~~date ~~which~~of the ~~Registrant~~agreement and ~~has~~will ~~agreed~~continue tountil ~~extend~~the anearliest ~~unsecured~~of: ~~revolving~~the ~~credit~~death ~~line~~of the Executive, in the ~~amount~~resignation of ~~$2,500,000,~~the Executive towith the ~~Subsidiary.~~prior ~~The~~approval ~~purpose~~ of the ~~revolving~~Board ~~credit~~of ~~line~~Directors isof ~~to provide~~the Company, the ~~Subsidiary~~termination ~~funds~~of tothe Executive befor ~~used~~Cause to(as ~~pay~~defined in the ~~Subsidiary’s~~agreement), ~~operating~~or ~~expenses~~the ~~during~~Company ~~its reorganization~~has ~~under~~a ~~Chapter 11~~plan of reorganization confirmed under the United ~~State~~States ~~Bankruptcy~~bankruptcy ~~Code~~code.

~~The~~During ~~agreement~~the ~~contains~~term ~~customary~~of ~~representations~~the ~~and~~agreement ~~warranties~~the asExecutive ~~well~~may asresign ~~covenants~~from ~~relating to~~his ~~the~~current ~~incurrence~~positions of President ~~debt~~and Chief Executive Officer, ~~sales~~but ofwill ~~assets~~remain employed in a capacity assisting, and reporting ~~other~~to, ~~customary~~the ~~lending~~Chief ~~covenants~~Restructuring Officer. ~~Under~~During the ~~terms~~ term of the agreement, the ~~Subsidiary~~Executive’s salary isand ~~required~~benefits towill ~~pay~~be ~~back,~~the ~~with~~same ~~five~~as ~~percent~~those (5prior to the new agreement.~~0%)~~ ~~interest~~However, ~~all~~ ~~borrowed~~if ~~amounts~~the Executive ~~under~~remains in the ~~loan,~~employ onof orthe ~~before~~Company ~~January 15,~~through ~~2006,~~the ~~though~~term ~~certain~~of ~~events~~the ~~provided~~agreement, unless the ~~for~~Company inhas terminated the ~~agreement~~Executive’s ~~can~~employment ~~accelerate~~for Cause, the ~~loan~~Executive ~~maturity~~will ~~date.~~receive ~~The~~a ~~agreement~~lump issum amount ~~subject~~equal to the ~~approval~~ ofExecutive’s ~~the~~base ~~bankruptcy~~salary ~~court~~for ina ~~the~~period ~~Subsidiary’s~~of ~~bankruptcy~~sixteen ~~proceeding,~~months asless ~~discussed~~the ~~below~~length inof his ~~Item 8~~service under the new agreement.~~01.~~

~~Asset~~ If the Executive remains in the employ of the Company through the term of the agreement, ~~Purchase~~unless ~~Agreement~~the Company has terminated the Executive’s employment for Cause, the Executive will be entitled to an incentive bonus based upon any amount paid to the shareholders in the event that there is a reorganization of the Company that distributes cash to the shareholders. If there is a shareholder distribution and it is greater than $4 million, the incentive amount will be 1.25% of the first $2 million by which a shareholder distribution exceeds $4 million, plus 2.5% of any amount by which a shareholder distribution exceeds $6 million.

~~On August~~Item ~~18, 2005, the Subsidiary of the Registrant signed an asset purchase agreement to sell the majority of assets of its EMS operation in Redmond, Washington, to Catalyst Manufacturing Services, Inc~~8.01 ~~The~~Other ~~EMS assets of the Subsidiary include substantially all of the company’s~~Events ~~manufacturing operations in Redmond, Washington.~~

(A) The ~~value~~Company ofcontinues ~~the~~to ~~transaction~~review isand ~~made~~prepare upits offinancial ~~$3.6~~results for the quarter ended June ~~million~~30, in2005. ~~cash~~Certain torecent bedevelopments, ~~paid~~including, but not limited to, the ~~Subsidiary~~previously announced sale of atthe ~~closing~~majority ~~and~~of the ~~assumption~~assets of ~~certain~~its ~~liabilities~~subsidiary, byTFS ~~Catalyst~~Electronic Manufacturing Services, Inc., ~~The~~the reduction ~~Registrant~~in ~~estimates~~support staff employees at the Company, and the Company's ~~total~~analysis of the carrying value of ~~the~~its ~~transaction~~assets ~~will~~as beof ~~approximately~~June ~~$6.6 million~~30, ~~subject~~2005 tohave ~~adjustments~~combined ~~relating~~ to ~~accounts~~delay ~~receivable~~the preparation and filing ~~inventory~~of ~~valuations~~the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

(B) The ~~asset~~Company ~~purchase~~has a supply agreement iswith ~~subject~~Avocent toCorporation ~~customary~~(“Avocent”), ~~closing~~dated ~~conditions~~March 1, 2004, as(the ~~well~~“Supply asAgreement”), ~~approval~~under of which the ~~bankruptcy~~Company ~~court~~is inobligated ~~the~~to ~~Subsidiary’s~~manufacture ~~bankruptcy~~and ~~proceeding~~sell, asand Avocent ~~discussed~~is ~~below~~obligated into ~~Section~~purchase, various products. The Supply Agreement is attached hereto as Exhibit 899.011.

~~Item 8.01~~ Avocent ~~Other~~was ~~Events.~~the Company’s largest customer in fiscal 2004 and the first quarter of 2005, accounting for approximately 66% of net sales during the first quarter of 2005 as reported in the

In order to implement the asset purchase agreement discussed in Item 1.01 herein, on August 19, 2005, the Subsidiary filed a voluntary petition for reorganization under Chapter 11 of

~~the~~Company’s ~~United~~10-Q ~~State~~for ~~Bankruptcy Code, in~~ the ~~United~~quarter ~~States~~ended ~~Bankruptcy~~March 31, ~~Court for the District of Arizona~~2005. ~~The~~Additionally, ~~Subsidiary will continue to manage its properties and operate its businesses as a “debtor-~~in~~-possession”~~ ~~under~~ the ~~jurisdiction~~first quarter of 2005, ~~the~~Avocent ~~Bankruptcy~~accounted ~~Court~~for ~~and~~approximately in90% ~~accordance~~of ~~with~~net ~~the provisions~~sales ofat the ~~Bankruptcy~~Company’s ~~Code~~Penang operations.

InThe ~~order~~Company tohas ~~facilitate~~been ~~the~~informed ~~Subsidiary’s~~by ~~reorganization~~representatives of Avocent that it is qualifying another supplier for products supplied by the Company under ~~Chapter 11~~the Supply Agreement. The Company is in negotiations with Avocent regarding the ongoing relationship between the parties, the ~~Registrant~~Supply Agreement ~~has~~and the amount of future business between the parties. The Company is currently unable to ~~agreed~~determine how much or when Avocent may begin to ~~provide~~transition its purchases under the ~~Subsidiary~~Supply ~~with~~Agreement from athe ~~debtor-in-possession~~Company ~~credit~~to ~~facility~~another assupplier. ~~described~~A material reduction in ~~Item 1.01~~the ~~herein.~~amount Toof ~~date,~~revenue nofrom ~~reorganization~~Avocent would ~~plan~~have ~~has~~a ~~been~~material ~~submitted~~impact toon the ~~Bankruptcy~~Company’s ~~Court~~results of operations.

The Company continues to explore a variety of options, including, but not limited to, the possibility of a bankruptcy filing or the sale or other disposition of its remaining operating subsidiaries and assets, which could materially effect the value of the Company’s outstanding securities.

Item 9.01 Exhibits

~~The~~99.1 ~~Registrant’s~~Supply ~~press~~Agreement, ~~release~~dated ~~related~~March to1, ~~these~~2004, ~~events~~between isthe ~~attached~~Company ~~hereto~~and asAvocent ~~Exhibit 99~~Corporation.1.

SIGNATURES

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

	THREE FIVE SYSTEMS, INC.
Date: August 19, 2005	By:	/s/ Carl H. Young III
Date: August 29, 2005	By:	/s/ Carl H. Young III
	Name:	Carl H. Young III
	Title:	Chief Restructuring Officer

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