~~Table~~UNITED ofSTATES SECURITIES ~~Contents~~AND EXCHANGE COMMISSION

~~UNITED~~Washington, ~~STATES SECURITIES~~D.C. ~~AND EXCHANGE COMMISSION~~20549

~~Washington,~~FORM ~~D.C. 20549~~8-K

~~FORM~~CURRENT ~~8-K~~REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~CURRENT~~Date ~~REPORT Pursuant~~of toReport ~~Section 13 or 15~~(d)Date of ~~the~~ ~~Securities~~earliest ~~Exchange~~event ~~Act~~reported): ofJanuary 13, ~~1934~~ 2005

~~Date~~THREE ofFIVE ~~Report (Date of earliest event reported): August 23~~SYSTEMS, ~~2005~~INC.

~~THREE~~(Exact ~~FIVE~~name ~~SYSTEMS,~~of ~~INC.~~ registrant as specified in its charter)

(Exact name of Company as specified in its charter)


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

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

7702 E. Doubletree Ranch Road, Suite 300
Scottsdale, AZ
85258
(Address of Principal Executive Offices)
(Zip Code)

~~1600~~Registrant’s N.telephone ~~DESERT DRIVE TEMPE~~number, ~~AZ 85281 (Address~~including ofarea ~~Principal~~code: ~~Executive Offices) (Zip Code)~~ 602-389-8600

~~Company’s~~Check ~~telephone~~the ~~number,~~appropriate ~~including~~box ~~area~~below ~~code:~~if ~~602~~the Form 8-~~389-8600~~K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

~~Check~~o ~~the~~Written ~~appropriate~~communications ~~box~~pursuant ~~below~~to ifRule 425 under the ~~Form~~Securities ~~8-K~~Act ~~filing~~(17 isCFR ~~intended~~230.425) o Soliciting material pursuant to ~~simultaneously~~Rule ~~satisfy~~14a-12 under the ~~filing~~ ~~obligation~~Exchange ofAct ~~the~~(17 ~~Company~~CFR ~~under~~240.14a-12) ~~any~~o ofPre-commencement communications pursuant to Rule 14d-2(b) under the ~~following~~Exchange ~~provisions~~Act (~~see~~17 ~~General~~CFR ~~Instruction A~~240.14d-2.(b)) ~~below~~o Pre-commencement communications pursuant to Rule 13e-4(c): under the Exchange Act (17 CFR 240.13e-4(c))

~~o Written communications pursuant to Rule~~Item ~~425~~8.01 ~~under~~Other ~~the Securities Act (17 CFR 230~~Events.~~425)~~

~~o Soliciting material pursuant to Rule 14a~~Three-12Five ~~under~~Systems ~~the~~Files ~~Exchange~~Bankruptcy ~~Act~~Plan Awaits ~~(17~~Bankruptcy ~~CFR~~Court ~~240.14a-12)~~Approval

oOn ~~Pre~~Friday, January 13, 2006, Three-~~commencement~~Five ~~communications~~Systems, ~~pursuant~~Inc. to(the ~~Rule 14d~~“Registrant”) released a statement informing investors that it has filed a joint plan of reorganization (the “Plan”) with its wholly owned subsidiary, TFS-2DI, Inc. (b“TFS-DI”) ~~under~~in their respective bankruptcy cases. The Plan proposes a reorganization of the ~~Exchange~~Registrant ~~Act~~and TFS-DI into one post-bankruptcy entity (17“Reorganized ~~CFR~~TFS”). ~~240~~If the Bankruptcy Court approves the Plan, Reorganized TFS’s operations will be limited to the liquidation and monetization of all Reorganized TFS’s non-cash assets.~~14d~~ These assets comprise the cash and non-~~2(b))~~cash assets of both the Registrant and TFS-DI, which will be substantively consolidated under the Plan. The Registrant anticipates that sufficient cash will exist in the consolidated estate on the Plan’s effective date to pay all claims of all creditors in all classes under the Plan in full, with interest at the legal rate, and that there will be final cash distributions to the Registrant’s shareholders. The complete press release is attached hereto as Exhibit 99.1.

~~o Pre-commencement communications pursuant to Rule~~Item ~~13e-4(c)~~9.01 ~~under the Exchange Act (17 CFR~~Exhibits ~~240.13e-4(c))~~

~~TABLE~~Exhibit OF99.1 ~~CONTENTS~~Press release of Three-Five Systems, Inc. dated January 13, 2005.

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

SIGNATURES

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

Item 1.01 Entry into a Material Definitive Agreement.


	THREE FIVE SYSTEMS, INC.
Date: January 16, 2005	By:	/s/ Carl H. Young
	Name:	Carl H. Young III
	Title:	Chief Restructuring Officer

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

The term of Executive’s employment under the agreement commenced on the date of the agreement and will continue until the earliest of: the death of the Executive, the resignation of the Executive with the prior approval of the Board of Directors of the Company, the termination of the Executive for Cause (as defined in the agreement), or the Company has a plan of reorganization confirmed under the United States bankruptcy code.

During the term of the agreement the Executive may resign from his current positions of President and Chief Executive Officer, but will remain employed in a capacity assisting, and reporting to, the Chief Restructuring Officer. During the term of the agreement the Executive’s salary and benefits will be the same as those prior to the new agreement. However, if the Executive remains in the employ of the Company through the term of the agreement, unless the Company has terminated the Executive’s employment for Cause, the Executive will receive a lump sum amount equal to the Executive’s base salary for a period of sixteen months less the length of his service under the new agreement.

If the Executive remains in the employ of the Company through the term of the agreement, unless 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.

Item 8.01 Other Events

(A) The Company continues to review and prepare its financial results for the quarter ended June 30, 2005. Certain recent developments, including, but not limited to, the previously announced sale of the majority of the assets of its subsidiary, TFS Electronic Manufacturing Services, Inc., the reduction in support staff employees at the Company, and the Company's analysis of the carrying value of its assets as of June 30, 2005 have combined to delay the preparation and filing of the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

(B) The Company has a supply agreement with Avocent Corporation (“Avocent”), dated March 1, 2004, (the “Supply Agreement”), under which the Company is obligated to manufacture and sell, and Avocent is obligated to purchase, various products. The Supply Agreement is attached hereto as Exhibit 99.1.

Avocent was 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

Company’s 10-Q for the quarter ended March 31, 2005. Additionally, in the first quarter of 2005, Avocent accounted for approximately 90% of net sales at the Company’s Penang operations.

The Company has been informed by representatives of Avocent that it is qualifying another supplier for products supplied by the Company under the Supply Agreement. The Company is in negotiations with Avocent regarding the ongoing relationship between the parties, the Supply Agreement and the amount of future business between the parties. The Company is currently unable to determine how much or when Avocent may begin to transition its purchases under the Supply Agreement from the Company to another supplier. A material reduction in the amount of revenue from Avocent would have a material impact on the Company’s 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

99.1 Supply Agreement, dated March 1, 2004, between the Company and Avocent Corporation.

SIGNATURES

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

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

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