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

                                   FORM 10-QSB


        X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
             For the quarterly period ended March 31, 2004

                                       OR

             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
             For the transition period from ____________ to ________________


                          Commission File No.: 0-11353

                           CIRCUIT RESEARCH LABS, INC.
        (Exact name of small business issuer as specified in its charter)


      Arizona                                              86-0344671
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)


                    1302 W. Drivers Way, Tempe, Arizona  85284
               (Address of principal executive offices)  (Zip code)

       Registrant's telephone number, including area code: (480) 403-8300


    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 X      No


The number of shares outstanding of each class of our common equity as of May
15, 2004 is as follows:

Class of Common Equity                              Number of Shares Common
----------------------                              -----------------------
Stock, par value $.10                                    4,172,533



Transitional Small Business Disclosure Format (check one): Yes /_/ No /X/

                                        1
<PAGE>
                           CIRCUIT RESEARCH LABS, INC.
                           INDEX TO FORM 10-QSB FILING
                      FOR THE QUARTER ENDED MARCH 31, 2004


                                TABLE OF CONTENTS


                                                                           PAGE

PART I  -  FINANCIAL INFORMATION  . . . . . . . . . . . . . . . . . . . . . . 3

     ITEM 1.   FINANCIAL STATEMENTS  . . . . . . . . . .. . . . . . . . . . . 3

        Condensed Consolidated Balance Sheets - March 31, 2004 (unaudited)
        and December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . 3

        Condensed Consolidated Statements of Operations - Three Months ended
        March 31, 2004 and 2003 (unaudited) . . . . . . . . . . . . . . . . . 5

        Condensed Consolidated Statements of Cash Flows - Three Months ended
        March 31, 2004 and 2003 (unaudited)   . . . . . . . . . . . . . . . . 6

        Notes to Condensed Consolidated Financial Statements  . . . . . . . . 8

     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS  . . . . . . . . . . . . . . . . .  14

     ITEM 3.   CONTROLS AND PROCEDURES  . . . . . . . . . . . . . . . . . .  28


PART II  -  OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .  29

     ITEM 1.   LEGAL PROCEDINGS . . . . . . . . . . . . . . . . . . . . . .  29

     ITEM 2.   CHANGES IN SECURITIES  . . . . . . . . . . . . . . . . . . .  30

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . .  31

SIGNATURE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

                                        2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                  CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                                     March 31,      December 31,
                                                       2004            2003
                                                    ----------      ----------
                                                    (Unaudited)
ASSETS

CURRENT ASSETS:
     Cash                                             $330,742        $222,631
     Accounts receivable, trade, (net of allowance
       for doubtful accounts of $33,362 at March 31,
       2004 and December 31, 2003)                     750,840         866,451
     Inventories                                     2,171,511       2,112,614
     Other current assets                              200,971         168,896
                                                    ----------      ----------
          Total current assets                       3,454,064       3,370,592

PROPERTY, PLANT AND EQUIPMENT, NET                     569,938         569,183
                                                    ----------      ----------
OTHER ASSETS:
     Goodwill, net                                   7,476,008       7,476,008
     Other                                             371,707         351,503
                                                    ----------      ----------
                                                     7,847,715       7,827,511

TOTAL                                              $11,871,717     $11,767,286
                                                   ===========     ===========


                                        3
<PAGE>
(continued)
                  CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES

                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                                     March 31,      December 31,
                                                       2004            2003
                                                    ----------      ----------
                                                    (Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
     Accounts payable                               $1,073,829      $1,103,452
     Notes payable to stockholders                      55,000          92,500
     Notes payable                                   8,482,000       8,482,000
     Current portion of long-term debt               1,083,938       1,340,709
     Accrued salaries and benefits                     658,371         535,017
     Customer deposits                                  78,140          39,266
     Other accrued expenses and liabilities          1,152,026       1,001,097
                                                    ----------      ----------
          Total current liabilities                 12,583,304      12,594,041

LONG-TERM DEBT, LESS CURRENT PORTION                   178,716          39,662
                                                    ----------      ----------
          Total Liabilities                         12,762,020      12,663,703
                                                    ----------      ----------
STOCKHOLDERS' DEFICIT:
     Preferred stock, $100 par value - authorized
        500,000 shares, none issued
     Common stock, $.10 par value - (authorized
        20,000,000 shares, 4,172,533 issued as of
        March 31, 2004 and 4,153,574 as of
        December 31, 2003)                             417,254         415,358
     Additional paid-in capital                      5,567,498       5,555,932
     Accumulated deficit                            (6,875,055)     (6,837,707)
                                                    ----------      ----------
          Total stockholders' deficit                 (890,303)       (866,417)
                                                    ----------      ----------
TOTAL                                              $11,871,717      $11,767,286
                                                   ===========      ===========


See accompanying notes to consolidated condensed financial statements.


                                        4
<PAGE>
                   CIRCUIT RESEARCH LABS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)

                                                     March 31,       March 31,
                                                       2004            2003
                                                    ----------      ----------
NET SALES                                           $3,291,364      $2,775,575
COST OF GOODS SOLD                                   1,383,257       1,312,088
                                                    ----------      ----------
         Gross profit                                1,908,107       1,463,487
                                                    ----------      ----------
OPERATING EXPENSES
    Selling, general and administrative              1,244,181       1,041,877
    Research and development                           375,176         379,195
    Depreciation                                        34,916          82,973
                                                    ----------      ----------
         Total operating expenses                    1,654,273       1,504,045
                                                    ----------      ----------
INCOME (LOSS) FROM OPERATIONS                          253,834         (40,558)
                                                    ----------      ----------
OTHER EXPENSE (INCOME):
    Sundry                                               9,610         (11,393)
    Interest                                           281,572         297,974
                                                    ----------      ----------
         Total other expense                           291,182         286,581
                                                    ----------      ----------

LOSS BEFORE INCOME TAXES                               (37,348)       (327,139)

PROVISION FOR INCOME TAXES                                   0               0
                                                    ----------      ----------
NET LOSS                                              ($37,348)      ($327,139)
                                                    ==========      ==========

NET LOSS PER COMMON SHARE - BASIC AND DILUTED           ($0.01)         ($0.09)
                                                    ==========      ==========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
    Basic and diluted                                4,166,133       3,806,846
                                                    ==========      ==========


See accompanying notes to consolidated condensed financial statements.


                                        5
<PAGE>
                   CIRCUIT RESEARCH LABS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                      Three Months Ended
                                                             March 31,
                                                   ---------------------------
                                                       2004            2003
                                                   -----------      ----------
OPERATING ACTIVITIES:
   Net Loss                                           ($37,348)      ($327,139)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities
        Depreciation and amortization                   56,961         105,992
        Stock compensation                              13,462          27,096

   Changes in assets and liabilities:
        Accounts receivable                            115,611        (261,725)
        Inventories                                    (58,897)        (65,195)
        Prepaid expenses and other assets              (52,279)        (60,402)
        Accounts payable and accrued expenses          283,534         452,974
                                                   -----------      ----------
             Net cash provided by (used in)
               operating activities                    321,044        (128,399)
                                                   -----------      ----------
INVESTING ACTIVITIES:
   Capital expenditures                                (57,716)        (13,724)
                                                   -----------      ----------
             Net cash used in investing activities     (57,716)        (13,724)
                                                   -----------      ----------
FINANCING ACTIVITIES:
   Proceeds from stockholders advances                       0         168,000
   Principal payments on notes payable to stockholders (37,500)             (0)
   Principal payments on long-term debt               (117,717)        (55,983)
                                                   -----------      ----------
             Net cash provided by (used in)
               financing activities                   (155,217)        112,017
                                                   -----------      ----------

NET INCREASE (DECREASE) IN CASH                        108,111         (30,106)

CASH AT BEGINNING OF PERIOD                            222,631         214,401
                                                   -----------      ----------
CASH AT END OF PERIOD                                 $330,742        $184,295
                                                   ===========      ==========


See accompanying notes to consolidated condensed financial statements.


                                        6
<PAGE>
(continued)
                   CIRCUIT RESEARCH LABS INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)

                                                      Three Months Ended
                                                             March 31,
                                                   ---------------------------
                                                       2004            2003
                                                   -----------      ----------
Supplemental Disclosures of Cash Flow Information

   Cash paid for interest                             $195,564        $107,916


Supplemental schedule of non-cash financing activities:

   Common stock issued for compensation                $13,462         $27,096


                                        7
<PAGE>
                   CIRCUIT RESEARCH LABS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

     The Consolidated Condensed Financial Statements included herein have been
prepared by Circuit Research Labs, Inc. ("CRL" or the "Company"), pursuant to
the rules and regulations of the Securities and Exchange Commission.  The
Consolidated Condensed Balance Sheet as of March 31, 2004 and the Consolidated
Condensed Statements of Operations for the three months ended March 31, 2004 and
2003 and the Consolidated Condensed Statements of Cash Flows for the three
months ended March 31, 2004 and 2003 have been prepared without audit.

     Certain information and note disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.  These Consolidated
Condensed Financial Statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2003.

     In the opinion of management, the Consolidated Condensed Financial
Statements for the unaudited interim periods presented herein include all
adjustments, consisting only of normal recurring adjustments, necessary to
present a fair statement of the results of operations for such interim periods.
Net operating results for any interim period may not be comparable to the same
interim period in previous years, nor necessarily indicative of the results that
may be expected for the full year.


2.   Significant Accounting Policies are as follows:

a.   Net loss per share

     In calculating net loss per share for the three months ended March 31,
2004, the effects of 2,815,000 shares relating to options to purchase common
stock were not used for computing diluted earnings per share because the results
would be anti-dilutive.  For the three months ended March 31, 2003, the effects
of 2,815,000 shares relating to options to purchase common stock and 1,395,690
shares relating to warrants were not used for computing diluted earnings per
share because the result would be anti-dilutive. Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share," establishes
standards for computing and presenting earnings per share.  It also requires the
dual presentation of basic and diluted earnings per share on the face of the
statement of operations.  Earnings per share is calculated as follows:

                                        8
<PAGE>
                                      Three Months Ended
                                          March 31,
                                      ------------------
                                       2004          2003
                                    ----------    ----------

     Numerator
       Net loss                      ($37,348)    ($327,139)
                                    ==========    ==========

     Denominator
     Weighted average shares        4,166,133     3,806,846
                                    ==========    ==========

     Basic and diluted loss per share  ($0.01)       ($0.09)
                                       ======        =======


b.   New accounting pronouncements

     In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). The requirements of
this statement apply to issuers' classification and measurement of freestanding
financial instruments, including those that comprise more than one option or
forward contract. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. Adoption of SFAS 150 did
not have any impact on the Company's results of operations or financial
position.

     In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, which expands on the accounting
guidance of Statements No. 5, 57, and 107 and incorporates without change the
provisions of FASB Interpretation No. 34, which is being superseded.  This
Interpretation requires a guarantor to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. Finally, guarantors are required to make significant new
disclosures, even if the likelihood of the guarantor making payments under the
guarantee is remote. Adoption of FIN 45 did not have any impact on the Company's
results of operations or financial position.

     In January 2003, the FASB issued Interpretation No 46 ("FIN 46"),
Consolidation of Variable Interest Entities.  The objective of this
interpretation is to provide guidance on how to identify a VIE and determine
when the assets, liabilities, non controlling interests and results of
operations of a VIE need to be included in a company's consolidated financial
statements.  A company that holds variable interests in an entity will need to
consolidate the entity if the company's interest in the variable interest entity
is such that the company will absorb a majority of the variable interest
entity's expected losses and/or receive a majority of the entity's expected
residual returns, if they occur. The Company has no interests in VIE and FIN 46
did not have an impact on the Company's results of operations or financial
position.

     In December 2003, the FASB issued FIN 46R, "Consolidation of Variable
Interest Entities, an Interpretation of ARB 51," replacing FIN 46.  FIN 46R
provides guidance on which


                                        9
<PAGE>
certain entities should be consolidated or the interests in those entities
should be disclosed by enterprises that do not control them through majority
voting interest.  Under FIN 46R, entities are required to be consolidated by
enterprises that lack majority voting interest when equity investors of those
entities have insignificant capital at risk or they lack voting rights, the
obligation to absorb expected losses, or the right to receive expected returns.
Entities identified with these characteristics are called VIEs and the interests
that enterprises have in these entities are called variable interests.  These
interests can derive from certain guarantees, leases, loans or other
arrangements that result in risks and rewards that are disproportionate to the
voting interests in the entities.

     The provisions of FIN 46R must be applied for VIEs created after January
31, 2003 and for variable interests in entities commonly referred to as "special
purpose entities."  For all other VIEs, implementation is required by March 31,
2004. The Company has no interest in a VIE. Our adoption of FIN 46R did not have
an impact on our consolidated financial statements or disclosures.


3.   INVENTORIES

Inventories consist of the following at March 31, 2004 and December 31, 2003:

                                                     March 31,      December 31,
                                                       2004            2003
                                                    ----------      ----------
                                                    (Unaudited)

     Raw materials and supplies                     $2,354,250      $2,336,617
     Work in process                                   905,433         792,334
     Finished goods                                    453,222         525,057
                                                    ----------      ----------
     Total                                           3,712,905       3,654,008
     Less obsolescence reserve                      (1,541,394)     (1,541,394)
                                                    ----------      ----------
     Inventories, net                               $2,171,511      $2,112,614
                                                    ==========      ==========


4.   LONG-TERM DEBT

Long term-debt at March 31, 2004 consisted of the following:


     Note to stockholder                              $178,905
     Avocet Instruments, Inc.                           32,824
     Dialog4 Engineering GmbH                          597,055
     Solectron GmbH                                    436,891
     Accounts payable converted to debt                 16,979
                                                     ---------
     Total long-term debt                            1,262,654
     Less current portion                           (1,083,938)
                                                     ---------
     Total long-term debt, less current portion       $178,716
                                                     =========


                                       10
<PAGE>
     In connection with our acquisition on May 31, 2000,  of the assets of
Orban, Inc. ("Orban"), the Company issued $205,000 in long-term debt to a
stockholder in consideration for his role in such acquisition.  The note bears
interest at 7.5 percent per annum.  On November 12, 2001, the Company and the
stockholder agreed to defer the payments to January 2002 with interest accruing
at the rate of 7.5% per annum. As of March 31, 2004, the Company has made
partial payments on the accrued interest and no further payments to reduce the
principal. As of March 31, 2004, the outstanding principal balance of this debt
was $178,905, plus past due interest of $ 334.

     On May 31, 2001, CRL acquired the assets of Avocet Instruments, Inc. for
$82,980 plus other costs of $3,350. The remaining unpaid purchase price is being
paid in monthly installments of $1,200, including interest at the rate of five
percent per annum through June 30, 2006. As of March 31, 2004, $32,824 is the
balance of the note.

     The Company still owes Dialog4 approximately $597,000, which is payable
$37,500 monthly plus interest, for the purchase of the Dialog4 assets, and we
still need to register the 1,250,000 shares issued to Dialog4 for the purchase
of the assets. The Company has not been making payments since August 2002 due to
disputes with Dialog4 and  with Solectron and other vendors to Dialog4 that have
claims against Dialog4 that pre-date our acquisition of Dialgo4's assets, but
for which we may have liability under German Law. The Company made an
unsuccessful effort to negotiate with the Dialog4's creditors to assume some of
Dialog4's liabilities in lieu of making payments directly to Dialog4. Dialog4
has since given us notice of default for non-payment and has accelerated all
amounts due.  On February 14, 2003, Dialog4 demanded the Company register the
1,250,000 shares issued to Dialog4 for the purchase of the assets. On April 29,
2003, the Company and Dialog4 entered formal Arbitral proceedings. We are
currently in arbitration and there is no assurance that the Company can achieve
a satisfactory settlement with Dialog4. (see Item 1 in Part II "Legal
Proceedings" elsewhere in this Report).

     On August 9, 2002, the Company agreed to purchase all existing inventory of
parts related to its Sountainer product from Solectron GmbH for a total price of
$829,328, payable in 24 equal monthly installments including interest. Solectron
had purchased the inventory pursuant to an agreement with Dialog4 approximately
two years prior to the purchase of the assets of Dialog4 by the Company.  The
price was equal to the amount paid by Solectron for the inventory, which the
Company expects to realize from future sales of that inventory.  The agreement
settled a dispute between the Company and Solectron in which Solectron claimed
the Company became liable for the obligation of Dialog4 to purchase the
inventory when the Company acquired the assets of Dialog4.  The Company
maintains it did not undertake the obligation of Dialog4, but to settle the
dispute, agreed to purchase the inventory, which it will use in the manufacture
of Sountainer products.  On January 20, 2004 we renegotiated the terms and
agreed  to pay monthly installments of principal and interest in the amount of
$25,000. The final installment will be due October 15, 2005 in the amount of
$15,681. We currently owe Solectron $436,891 as of March 31, 2004. and are
current with the existing payment plan. As a result of the new payment terms the
Company was able to reclassify $234,139 as non current maturities of long term
debt in January 2004. As of March 31, 2004, the Company has cumulatively paid
$281,591 in principal and $57,632 in interest. Mr. Brentlinger, President and
CEO  has also signed a personal guarantee under the revised Settlement
Agreement. The Company further agreed to indemnify Mr. Brentlinger should he be
required to make any payment under this guarantee.  An amount of $233,000 is
reported in other assets pending delivery of that amount of inventory by
Solectron.


                                       11
<PAGE>
5.   NOTES PAYABLE

Payable to others

     On May 31, 2000, our wholly owned subsidiary, CRL Systems, Inc., acquired
the assets of Orban, Inc., a wholly owned subsidiary of Harman International
Industries, Inc.  The purchase price was $10.5 million, of which $2 million was
paid in cash and the balance of which was paid by means of a combination of
short-term and long-term promissory notes that we issued to Harman.  On October
1, 2001, we entered into an amendment to credit agreement with Harman under
which both the long-term and the short-term notes were converted to demand notes
payable on the demand of Harman or, if no demand is sooner made, on the dates
and in the amounts specified in the amended credit agreement. At March 31, 2004,
$8,482,000 is outstanding, and the notes bear interest at 12% per annum.

     Management for some time has been negotiating with Harman Acquisition
Corp., a wholly owned subsidiary of Harman International Industries, Inc., with
respect to restructuring the existing debt of the Company to Harman. If such a
restructuring occurs under the terms presently being discussed, the Company will
need to make a principal payment of $1,000,000 (which can be made in
installments), following which the interest rate on the unpaid balances will be
reduced to 1.5% per annum above prime  rate retroactive to April 1, 2003.
$3,500,000 of the unpaid balance will be converted into 19% of the common stock
of the Company, and the remaining unpaid balance will be payable over five years
in accordance with a payment schedule.  No agreement has yet been entered into
with Harman, and if no agreement is reached, the principal balance of $8,482,000
plus interest at the rate of 12% per annum will continue to be payable on
demand.  There is no assurance that the Company can reach a final agreement with
Harman for restructuring of the debt, or that any agreement, reached would
contain the same terms presently being discussed. As of March 31, 2004, we are
in arrears on interest installments on the Harman obligation in an aggregate
amount of $803,991(computed at a rate of 12% per annum).


Payable to stockholders

     On January 23, 2003, Jayson Russell Brentlinger, the father of the
Company's president, Charles Jayson Brentlinger, loaned the Company $100,000 for
its short term working capital needs. On May 9, 2003, the loan was paid in full.
To induce Jayson Russell Brentlinger to make the loan, the Company issued
options to him to purchase 1,250,000 shares of common stock of the Company for a
purchase price of $0.55 per share, the market price of the shares on the date
the option was issued.  Jayson Russell Brentlinger may exercise the options at
any time prior to January 23, 2006, and has not exercised any of the options as
of March 31, 2004.

     On February 20, 2003, Robert Orban, the Company's Vice President and Chief
Engineer, loaned the Company $68,000 for short term working capital needs. The
loan was paid in full on May 20, 2003 with interest at the rate of 16 percent
per annum. To induce Mr. Orban to make the loan, the Company gave him a choice
to receive options to purchase 68,000 shares of common stock or to receive 1
(one) share of common stock per dollar loaned. As of March 31, 2004, Mr. Orban
has not made a decision under his right to elect.

     On May 19, 2003, Phillip T Zeni, the Company's Executive Vice President and
Chief Operating Officer, loaned the Company $100,000 to be applied to the Harman
debt. The loan was due August 19, 2003, with interest at a rate of 16 percent
per annum. To induce Mr. Zeni to make the loan, the Company


                                       12
<PAGE>
granted 2 (two) shares of common stock per dollar loaned. The Company will also
issue options to Mr. Zeni to purchase 200,000 shares of common stock of the
Company for a purchase price of $0.45 per share. These options will be issued up
to one year after the maturity date of the note, or when and if a private
placement is offered to raise the $1,000,000 to satisfy the terms of the
proposed Harman debt restructure, whichever last occurs.  As of March 31, 2004
the Company has repaid $75,000 of loan  to Mr. Zeni.

     Two stockholders loaned the Company $10,000 and $20,000, pursuant to one
year notes accruing interest at rate of 9% per annum. Both notes will be due and
payable with interest in June 2004. The proceeds from these notes were used to
reduce the accrued interest to Harman.

     Interest expense on all stockholder loans for the three months ended March
31, 2004 was $2,561.


6.   ACQUISITION OF DIALOG4 ASSETS

     On January 18, 2002, the Company acquired the assets of Dialog4 System
Engineering GmbH ("Dialog4").  Dialog4, a German corporation based in
Ludwigsburg, Germany, is a worldwide leader in ISO/MPEG, audio, ISDN, satellite
transmission, networking and storage. Dialog4 has been designing and
manufacturing equipment for the codec market for over ten years.  Its products,
available in Europe since 1993, include the MusicTaxi codec for encoding and
decoding audio and data over TCP/IP on the Internet, ISDN and satellite, whose
technology is to be considered state of the art at that time.

     The Company purchased the assets of Dialog4 pursuant to an Asset Sale and
Purchase Agreement for $2 million, comprised of 1,250,000 shares of restricted
common stock, valued at $1.00 per share, and $750,000 cash to be paid at a later
date either by the Company from its working capital or by the Company's
President and Chief Executive Officer, Charles Jayson Brentlinger.


7.   CONTINENCIES AND LITIGATION

Dialog4

     On April 29, 2003, the Company was notified that Dialog4 filed a demand for
arbitration in Germany. On June 30, 2003, we gave notice of various claims
pertaining the representations and warranties made by Dialog4 in the Asset Sale
and Purchase Agreement. The Company then filed a formal statement of defense
along with counterclaims against Dialog4 on August 25, 2003, within the time
limits as by the Arbiter. Dailog4 filed its response on October 16, 2003. The
Company submitted a response on December 1, 2003.  Dialog4 submitted a further
response on January 12, 2004, and amended its original demand for arbitration
with additional claims. On February 17, 2004, the Company filed a response. On
April 28, 2004, an evidentiary hearing was held in Stuttgart, Germany and both
sides presented evidence and testified before the Arbiter. Each side will next
submit a posterior brief due June 10, 2004, after which the Arbiter may rule
within 60 to 90 days.


Formosa International Systems Co., Inc.,

     The Company leased space at 1330 West Auto Drive, Tempe, Arizona (the
"Building") beginning January 2, 2003.  The owner of the Building, Formosa
International Systems Co., Inc., was also a tenant in the Building.  An informal
lease was executed which provided that the owner would vacate the Building upon
request and that the Company would pay rent partly in cash and partly in stock
of the Company (subject to compliance with Securities Laws).  The Company made
all payments of the cash portion of the rent, but refused to pay the stock
portion until the owner vacated the Building so the Company could use all of the
space it was renting.  The owner refused to vacate.  In addition, the owner
requested the Company to execute a subordination agreement with its lender on
terms the Company found unacceptable and the Company refused to execute it
without modifications.  The owner then locked out the Company for nonpayment of
the stock portion of the rent on November 10, 2003.  The Company immediately
sought and obtained a Temporary Restraining Order ("TRO") from the Superior
Court of Maricopa County, Arizona requiring the owner to allow the Company
continued use of the Building, and the Company moved back into the Building that
day.

     The Company declared the lockout to be a default under the lease and
vacated the Building in late November, 2003, entering into the present lease for
a building located at 1302 West Drivers Way, Tempe, Arizona.  The Company
thereafter amended its complaint in the Superior Court alleging breach of lease
and constructive eviction, seeking from the owner of the Building its actual
damages, which it alleges to be at least $100,000.  The owner of the Building
has counterclaimed for breach of lease, claiming damages of $177,500, and for
the allegedly wrongful conduct of the Company in refusing to execute the
subordination agreement requested by the owner, claiming unspecified damages.
The Company has denied the allegations of the counterclaim and the matter is
pending.

                                       13
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

     The following discussion of our financial condition and results of
operations should be read together with the financial statements and the
accompanying notes included elsewhere in this report.  This discussion contains
statements about future events, expectations, risks and uncertainties that
constitute forward-looking statements, as do discussions elsewhere in this
report. Forward-looking statements are based on management's beliefs,
assumptions and expectations of our future economic performance, taking into
account the information currently available to management.  These statements are
not statements of historical fact. Forward-looking statements involve risks and
uncertainties that may cause actual results, performance or financial condition
to differ materially from the expectations of future results, performance or
financial condition we express or imply in any forward-looking statements.  The
words "believe," "may," "will," "should," "anticipate," "estimate," "expect,"
"intend," "objective," "seek," "strive" or similar words, or the negative of
these words, identify forward-looking statements. Our actual results may differ
materially from those anticipated in those forward-looking statements as a
result of certain factors, including, but not limited to, those described below
under this Item 2, "Management's Discussion and Analysis or Plan of Operation -
Risk Factors."  We qualify any forward-looking statements entirely by these
cautionary factors.


Overview and Recent Developments

     We develop, manufacture and market high-quality electronic audio
processing, transmission encoding and noise reduction equipment for the
worldwide radio, television, cable, Internet and professional audio markets. In
recent periods, we have acquired the assets of other companies within our
industry or in related industries into which we desire to expand.  On May 31,
2000, we acquired the assets of Orban, Inc., a producer of audio editing and
processing equipment.  On May 31, 2001, we acquired the assets of Avocet
Instruments, Inc., a supplier of quality audio receivers and coders for the
television and post-production industry.  On January 18, 2002, we acquired the
assets of Dialog4 System Engineering GmbH, a producer of ISO/MPEG, audio, ISDN,
satellite transmission, networking and storage


Harman Debt

     Management for some time has been negotiating with Harman Acquisition
Corp., a wholly owned subsidiary of Harman International Industries, Inc., with
respect to restructuring the existing debt of the Company to Harman of
$8,482,000 in principal at March 31, 2004 is outstanding and bears interest of
12% per annum. If such a restructuring occurs under the terms presently being
discussed, the Company will need to make a principal payment of $1,000,000
(which can be made in installments), following which the interest rate on the
unpaid balances will be reduced to 6% per annum retroactive to April 1, 2003.
$3,500,000 of the unpaid balance will be converted into 19% of the common stock
of the Company, and the remaining unpaid balance will be payable over five years
in accordance with a payment schedule.  No agreement has yet been entered into
with Harman, and if no agreement is reached, the principal balance of $8,482,000
plus interest at the rate of 12% per annum will continue to be payable on
demand. There is no assurance that the Company can reach a final agreement with
Harman for restructuring of the debt, nor that the agreement, if entered into,
will contain the same terms presently being discussed.  As of March 31, 2004, we
are in arrears on interest installments on the Harman obligation in an aggregate
amount of $803,991 (computed at a rate of 12% per annum).


                                       14
<PAGE>
Dialog4

     The Company still owes Dialog4 approximately $597,000, which was payable
$37,500 monthly plus interest, for the purchase of the Dialog4 assets and we
still need to register the 1,250,000 shares issued to Dialog4 for the purchase
of the assets. The Company has not been making payments since August 2002 due to
disputes with Solectron and other companies that have claims against Dialog4
that pre-date our acquisition of Dialgo4's assets, but for which we may have
liability under German Law. The company made an unsuccessful effort to negotiate
with the Dialog4's creditors to assume some of Dialog4's liabilities in lieu of
making payments directly to Dialog4. Dialog4 has since given us notice of
default for non-payment  and has accelerated all amounts due.  On February 14,
2003, Dialog4 demanded the Company register the 1,250,000 shares issued to
Dialog4 for the purchase of the assets.

     On April 29, 2003, the Company was notified that Dialog4 filed a demand for
arbitration in Germany. On June 30, 2003, we gave notice of various claims
pertaining the representations and warranties made by Dialog4 in the Asset Sale
and Purchase Agreement. The Company then filed a formal statement of defense
along with counterclaims against Dialog4 on August 25, 2003, within the time
limits as by the Arbiter. Dailog4 filed its response on October 16, 2003. The
Company submitted a response on December 1, 2003.  Dialog4 submitted a further
response on January 12, 2004, and amended its original demand for arbitration
with additional claims. On February 17, 2004, the Company filed a response.
There is no assurance that the Company can achieve a satisfactory settlement
with Dialog4. On April 28, 2004, an evidentiary hearing was held in Stuttgart,
Germany and both parties presented evidence and testified before the Arbiter.
Each side will next submit a posterior brief due June 10, 2004, after which the
Arbiter may rule within 60 to 90 days.

     If we do not prevail in the arbitration, we will need to satisfy or settle
the demands of Dialog4 for payment under the original Asset Sale and Purchase
Agreement.  The Company believes it has defenses and claims against Dialog4
arising from the asset sale.  The acceleration of indebtedness by Dialog4
constitutes a default under the existing credit agreements between the Company
and Harman International, Inc. and would continue to constitute a default even
if our proposal to  Harman relating to the restructuring of the $8.5 million in
notes that we currently owe Harman.

     We are still in the process of integrating the operations of our most
recently acquired operations.  Once this integration is complete, we expect to
begin to benefit from cost savings produced by combined research and
development, marketing, sales and administration, manufacturing efficiencies and
cross-selling opportunities.  Our acquisition of the Dialog4 product line has
led to the establishment of our new Orban Europe division offices in
Ludwigsburg, Germany.  We continue to work through the challenge of integrating
Dialog4 as well as the challenge of overcoming obstacles produced as a result of
different corporate cultures, a difficult legal system and different accounting
and reporting regulations.  We will also face new risks arising from foreign
currency fluctuations.


Solectron

     On August 9, 2002, the Company agreed to purchase all existing inventory of
parts related to its Sountainer product from Solectron GmbH for a total price of
$829,328, payable in 24 equal monthly installments including interest.
Solectron had purchased the inventory pursuant to an agreement with Dialog4
approximately two years prior to the purchase of the assets of Dialog4 by the
Company.  The price was equal to the amount paid by Solectron for the inventory,
which the Company expects to realize from future sales of that inventory.  The
agreement settled a dispute between the Company and Solectron in which Solectron
claimed the Company became liable for the obligation of Dialog4 to purchase the
inventory when the Company acquired the assets of Dialog4.  The Company
maintains it did not


                                        15
<PAGE>
undertake the obligation of Dialog4, but to settle the dispute, agreed to
purchase the inventory, which it will use in the manufacture of Sountainer
products.  On January 20, 2004 we renegotiated the terms and agreed  to pay
monthly installments of principal and interest in the amount of $25,000. The
final installment will be due October 15, 2005 in the amount of $15,681. We
currently owe Solectron $436,891 as of March 31, 2004. and are current with the
existing payment plan. As a result of the new payment terms the Company was able
to reclassify $234,139 as non current maturities of long term debt in January
2004. As of March 31, 2004, the Company has cumulatively paid $281,591 in
principal and $57,632 in interest. Mr. Brentlinger, has also signed a personal
guarantee under the revised Settlement Agreement. The Company further agreed to
indemnify Mr. Brentlinger should he be required to make any payment under this
guarantee.  An amount of $233,000 is reported in other assets pending delivery
of that amount of inventory by Solectron


Overview

     The events of September 11, 2001, have had a significant impact on the
market for audio processing equipment.  We have experienced a reduction in
orders for new audio equipment from many radio and television stations. We
believe this reduction is due in part to the decrease in advertising revenue
realized by these stations.  The market for audio processing equipment has been
slowly showing increased demand throughout 2003, effectively beginning to
reverse the trend caused by September 11, 2001. We believe that 2004 could
continue the trend of increased demand.

     We have reduced our net loss from $2,135,039 in 2002 to $384,877 during
2003. Despite this encouraging trend, our previous financial results have
strained our liquidity, causing us, in 2001 to renegotiate our $8.5 million loan
agreement with Harman.  Under the terms of our debt agreement with Harman
International as now in effect, Harman can demand at any time that we
immediately pay in full the outstanding balance of our debt.  Should this
happen, we would immediately be forced to file for protection under Chapter 11
of the United States Bankruptcy Code.  Our inability to pay the remaining $8.5
million in principal and $0.8 million in accrued interest to Harman, should
payment be demanded, our difficulties in meeting our financing needs and our
negative working capital position have resulted in our independent public
accountants adding a "going concern" emphasis paragraph to their reports on our
financial statements by including a statement that such factors raise
substantial doubt about our ability to continue as a going concern.

     In addition to our efforts to reduce costs and increase sales, we are
currently seeking sources of long-term financing.  However, the inclusion of a
going concern emphasis paragraph by our independent accountants generally makes
it significantly more difficult to obtain trade credit or additional capital
through public or private debt or equity financings. We have renewed our
engagement with HD Brous & Co., Inc. to advise and assist us in capital raising
efforts. We cannot offer any assurances that we will be able to attract
additional capital or that additional financing, if obtained, will be sufficient
to meet our current obligations.  If we cannot meet our current obligations, our
ability to continue as a going concern will be jeopardized.

     Management for some time has been negotiating with Harman Acquisition
Corp., a wholly owned subsidiary of Harman International Industries, Inc., with
respect to restructuring the existing debt of the Company to Harman, which
amounted to $8,482,000 in principal at March 31, 2004 and which bears interest
of 12% per annum.  If such a restructuring occurs under the terms presently
being discussed, the Company will need to make a principal payment of $1,000,000
(which can be made in installments), following which the interest rate on the
unpaid balances will be reduced to 6% per annum retroactive to April 1, 2003.
$3,500,000 of the unpaid balance will be converted into 19% of the common stock
of the Company, and the remaining unpaid balance will be payable over five years
in accordance


                                        16
<PAGE>
with a payment schedule.  No agreement has yet been reached with Harman, and if
no agreement is reached, the principal balance of $8,482,000 plus interest at
the rate of 12% per annum will continue to be payable on demand.  There is no
assurance that the Company can reach a final agreement with Harman for
restructuring of the debt, or that the agreement, if reached, will contain the
same terms presently being discussed.  As of March 31, 2004, we are in arrears
on interest installments on the Harman obligation in an aggregate amount of
$803,991 (computed at a rate of 12% per annum).


                                        17
<PAGE>
Results of Operations

     The following table sets forth for the periods indicated certain summary
operating results:
                                                   For the Three Months Ended
                                                             March 31,
                                                   ---------------------------
                                                       2004            2003
                                                   -----------      ----------
     Revenues:
       Net sales                                    $3,291,364      $2,775,575
       Other income                                          0          11,393
                                                   -----------      ----------
         Total revenues                             $3,291,364      $2,786,968
                                                   ===========      ==========
     Gross profit on net sales                      $1,908,107      $1,463,487
     Gross profit margin                                    58%             53%
     Net cash provided by (used in)
       operating activities                           $321,044       ($128,399)
     Net cash used in investing activities            ($57,716)        $13,724
     Net cash  provided by (used in)
       financing activities                          ($155,217)       $112,017
     Net loss                                         ($37,348)      ($327,139)
     Net loss as a percent of net sales                   ( 1%)           (12%)
     Loss per share - basic and diluted                 ($0.01)        ($0.09)


THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2003

     Net Sales.  Net sales during the three months ended March 31, 2004 were
$3.3 million compared to $2.8 million during the comparable period in 2003,
reflecting an increase of 18%.  The increase in net sales was primarily
attributable to an increase in demand for our product. Our Orban division
reported net sales of $3.0 million for the three months ended March 31, 2004 as
compared to $2.7 million for the same period in 2003. Demand for our Orban
Optimod products increased 10% during the three months ended March 31, 2004
compared to same period in 2003. Our CRL division reported net sales of $146,000
for the three months ended March 31, 2004 as compared to $64,000 for the same
period in 2003, an increase of 128%.  This increase was the result of increased
demand for our TV products in Canada. Orban Europe reported net sales of
$162,000 during the three months ended March 31, 2004 compared to $71,000 during
the comparable period in 2003, an increase of 128%. This increase was primarily
a result from our inability to ship product from our German location during the
three months ended March 31, 2003 due to the change in suppliers for its Codec
products.

     Gross Profit.   Gross profit was 58% of net sales for the three months
ended March 31, 2004 compared to 53% for the same period in 2003.  The 5%
increase in gross profit is primarily due  to increased production at our San
Leandro facility caused by a increased demand for our products, coupled with our
ability to increase production runs and reduce costs associated with set up, and
labor. Contributing factors also include a percentage decrease in our variable
expenses as a result of larger quantity raw material purchases creating a modest
discount in the purchase price.


                                        18
<PAGE>
     Selling, General and Administrative.  Selling, general and administrative
expenses ("SG&A") for the three months ended March 31, 2004 was $1,244,000, an
increase of 19% compared to $1,042,000 for the first quarter of 2003. As a
percentage of net sales, SG&A was 38% for the three months ended March 31, 2004
and for the same period in 2003.  The increase in SG&A expense is due in part to
the variable component of SG&A relating to our domestic and international sales
and marketing expenses coupled with an increase in attorney's fees associated
with Dialog4 arbitration.

     Research and Development.  Research and development expense was $375,000
for the three months ended March 31, 2004, a decrease of 1% compared to $379,000
for the same period in 2003.  The decrease resulted from a decrease in
personnel.

     Other (Income) Expense.   Other expense, net for the three months ended
March 31, 2004 was $290,000 of which $255,000 represents interest expense to
Harman International Industries, Inc. in connection with the seller carry-back
loan that financed a portion of our purchase price for the Orban assets. Other
expense, net for the three months ended March 31, 2003 was $287,000, of which
$254,000 represented interest expense to Harman. Interest expense was $282,000
for the three months ended March 31, 2004, a 5% decrease from $298,000 reported
for the same period in 2003.  The decrease is associated with paying down some
of our long-term obligations.

     Net Loss.  Net loss was $37,348 for the three months ended March 31, 2004
compared to $327,139 for the same period in 2003.  The decrease is primarily a
result of increased sales and gross profit as discussed above.


LIQUIDITY AND CAPITAL RESOURCES

     We had negative net working capital of approximately $9.1 million at March
31, 2004, and the ratio of current assets to current liabilities was .27 to 1.
At March 31, 2003, we had net negative working capital of approximately $9.0
million and a current ratio of .29 to 1. The decrease in working capital is a
result of our increased debt associated with the accrued interest in arrears due
Harman.

     The negative working capital primarily resulted from the conversion in 2001
to demand notes of the $3.5 million short-term note and the $5 million
     long-term notes payable to Harman.

     Our substantial obligation to Harman may have important consequences for
us, including the following:

     *  Our ability to continue as a going concern will depend in part on
        whether Harman demands payment on the $8.5 million debt, or any portion
        thereof;
     *  A significant portion of our cash flow from operations will be dedicated
        to servicing our debt obligations, including interest payments, and will
        not be available for other business purposes;
     *  The terms and conditions of our indebtedness limit our flexibility in
        planning for and reacting to changes in our business, and in making
        strategic acquisitions;
     *  Our ability to obtain additional financing in the future for working
        capital, capital expenditures and other purposes may be substantially
        impaired; and


                                        19
<PAGE>
     *  Our substantial leverage may make us more vulnerable to economic
        downturns and competitive pressures.

     Our ability to meet our debt service obligations and reduce our total
indebtedness to Harman depends in part on our future operating performance. Our
future operating performance will depend on our ability to expand our business
operations by growing our core audio processing business, expanding our product
offerings and penetrating new and emerging markets, which we anticipate will
require additional financing.  In addition, our future operating performance
will depend on economic, competitive, regulatory and other factors affecting our
business that are largely beyond our control. If we are unable to expand our
business operations as planned, we may not be able to service our outstanding
indebtedness to Harman.

     In addition to our efforts to reduce costs and increase sales, we are
currently seeking sources of long-term financing.  However, the inclusion of a
going concern emphasis paragraph by our independent accountants generally makes
it significantly more difficult to obtain trade credit or additional capital
through public or private debt or equity financings. We have currently engaged
HD Brous & Co., Inc. to advise and assist us in capital raising efforts. We
cannot offer any assurances that we will be able to attract additional capital
or that additional financing, if obtained, will be sufficient to meet our
current obligations.  If we cannot meet our current obligations, our ability to
continue as a going concern will be jeopardized.

     On March 27, 2003, we entered into discussions with Harman that will allow
a restructuring of the approximately $8.5 million of debt we owe Harman if the
Company privately places $1.5 million in common stock for cash. The Company
would then make a $1 million cash principal payment on its debt to Harman.
Harman would allow the Company to retain the remaining cash raised by the sale
of its common stock in excess of the payment to Harman. Harman would agree to
exchange $3.5 million principal amount of the debt owed to Harman by the Company
and its outstanding warrant to purchase shares of our common stock, for a number
of shares of our common stock such that Harman would own 19% of the
then-outstanding shares of our common stock on a fully-diluted basis after
giving effect to our private placement of equity securities by CRL referred to
above. The shares of our common stock issued to Harman would be subject to (i) a
registration rights agreement with terms similar to the registration rights
granted to Harman in the warrant to be surrendered, including multiple demand
rights, and (ii) anti-dilution protection for issuances of equity securities
following the restructuring.

     Harman would exchange the remaining $3,982,000 of debt plus accrued
interest of $803,991 due from the Company into a single, senior note with an
interest fixed at 1.5% above the prime rate. Interest would be paid monthly.
Mandatory principal payments will also be required on the anniversary of
restructuring for the next five years at the rate of $250,000 per year for the
first two years, $500,000 per year for the following two years, and the balance
due at the balance due at the end of the five years. The transaction is
conditioned upon the $1,000,000 principal payment.

     On January 18, 2002, with Harman's consent, we acquired the assets of
Dialog4 System Engineering GmbH.  We purchased the assets of Dialog4 pursuant to
an Asset Sale and Purchase Agreement for $2 million, comprised of 1,250,000
shares of our common stock, valued at $1.00 per share, and $750,000 cash to be
paid at a later date either by us from our working capital or by our President
and Chief Executive Officer, Charles Jayson Brentlinger.  On April 8, 2002 we
executed an amendment to the Asset Sales and Purchase Agreement with Dialog4.
The amended agreement extends the term of our payment installments to $37,500
plus interest on the remaining principal balance at a rate.


                                         20
<PAGE>
of 10 percent per annum.  The monthly installments of principal and interest are
due and payable on the twentieth day of each month commencing April 20, 2002.

     The Company still owes Dialog4 approximately $597,000, which was payable in
monthly installments of $37,500 plus interest, for the purchase of the Dialog4
assets and we still need to register the 1,250,000 shares issued to Dialog4 for
the purchase of the assets. The Company has not been making payments since
August 2002 due to disputes with Solectron and other companies that have claims
against Dialog4 that pre-date our acquisition of Dialgo4's assets, but for which
we may have liability under German Law. The company made an unsuccessful effort
to negotiate with the Dialog4's creditors to assume some of Dialog4's
liabilities in lieu of making payments directly to Dialog4. Dialog4 has since
given us notice of default for non-payment and has accelerated all amounts due.
On February 14, 2003, Dialog4 demanded the Company register the 1,250,000 shares
issued to Dialog4 for the purchase of the assets. On April 29, 2003, the Company
and Dialog4 entered formal Arbitral proceedings. We are currently in arbitration
and there is no assurance the company can achieve a satisfactory settlement with
Dialog4. (see Item 1 Part II "Legal Proceedings" elsewhere in this Report).

     We owe Solectron GmbH $436,891 as of March 31, 2004. This obligation was a
result of claims originating between Solectron GmbH and Dialog4. We are
currently making monthly installments of principal and interest in the amount of
$25,000. The final installment will be due October 15, 2005 in the amount of
$15,681. The company is current with the existing payment plan. As of March 31,
2004 the company has cumulatively paid $281,591 in principal and $57,632 in
interest.


     Working capital generated from 2004 operations will be used to service our
commitments as detailed above, excluding our obligations to Harman. Any excess
working capital generated from 2004 operations will be applied to expand our
business operations. The terms of the Harman debt restrict our ability to obtain
financing for these types of expansion expenditures, as well as financing for
other purposes.  Accordingly, our ability to expand will primarily depend on our
ability to generate sufficient working capital from operations.  We will closely
monitor our working capital in 2004 as we evaluate any expenditure related to
expansion.

     Accounts receivable were $751,000 at March 31, 2004 compared to $866,000 at
December 31, 2003 representing a net decrease of $115,000 or 13%.  The decrease
is primarily due to a decrease of $75,000 in the allowance for doubtful accounts
and an increase in customers paying cash in advance to take advantage of sales
discounts for the quarter ended March 31, 2004 compared to the quarter ended
December 31, 2003.

     Total inventories were $2,172,000 at March 31, 2004 compared to total
inventories of $2,113,000 at December 31, 2003.  The increase of $59,000 or 3%
is due in part to the increased work in process to meet the increased demand for
our Optimod products.

     For the year ending December 31, 2004, our principal working capital
requirements will be the payment of normal recurring operating costs. Management
believes that these requirements can be met from the operating cash flows.


     On May 31, 2000, our wholly owned subsidiary, CRL Systems, Inc., acquired
the assets of Orban, Inc., a wholly owned subsidiary of Harman International
Industries, Inc.  The total stated purchase price was $10.5 million, of which $2
million was paid in cash and the balance of which was paid by means of a
combination of short-term and long-term promissory notes that we issued to
Harman.


                                         21
<PAGE>
     On October 1, 2001, we entered into an Amendment to Credit Agreement with
Harman under which both the long-term and the short-term notes were converted to
demand notes payable on the demand of Harman or, if no demand is sooner made, on
the dates and in the amounts specified in the Amended Credit Agreement.
Effective May 1, 2002, we entered into a Second Amendment to Credit Agreement
with Harman under which both demand notes were amended and restated to remove
the requirement for quarterly payments on the long-term note and to extend the
maturity dates for the notes to December 31, 2003, unless Harman demands payment
at an earlier date. Interest only payments remain payable monthly at 12 percent
per annum for both notes and are also due on demand.

     Approximately $9,549,000 of our total indebtedness is due and payable as at
March 31, 2004, except that respect to the $8,482,000 due Harman, payment is due
upon demand of Harman, which may be made at any time at Harman's discretion. Our
President, Mr. Charles Jayson Brentlinger, has committed to exercise his
outstanding stock options, if necessary, to satisfy a portion of the Company's
debt payment requirements if operating cash flows are inadequate to retire the
debt.  If Mr. Brentlinger exercised all of his options to purchase shares of our
common stock, we would realize gross proceeds of approximately $1,250,000.  We
are actively pursuing opportunities to raise additional capital through a
private equity placement of our common stock, asset based lending, or a
combination of the two.  We have currently engaged HD Brous & Co., Inc. to
advise and assist us in capital raising efforts. We cannot offer any assurances
that we will be able to attract additional capital or that additional financing,
if obtained, will be sufficient to meet our current obligations.  If we cannot
meet our current obligations, our ability to continue as a going concern will be
jeopardized.


RISK FACTORS

     You should carefully consider the following risk factors and all other
information contained in this report in evaluating us and our business. You
should also keep these risk factors in mind when you read and consider the
forward-looking statements in this report and other reports we file with the
SEC.  The risks and uncertainties described below are not the only ones facing
us.  Additional risks and uncertainties that we are unaware of, or that we
currently deem less material, also may become important factors that affect us.


AS A RESULT OF OUR LARGE OUTSTANDING DEBT OBLIGATIONS, WE HAVE SIGNIFICANT
ONGOING DEBT SERVICE REQUIREMENTS WHICH MAY ADVERSELY AFFECT OUR FINANCIAL AND
OPERATING FLEXIBILITY.

     On May 31, 2000, we acquired the assets of Orban, a wholly-owned subsidiary
of Harman International Industries, Inc.  Including the $250,000 previously paid
to Harman as non-refundable deposits in 1999, the total stated purchase price
was $10.5 million, of which $2 million was paid in cash and the balance of which
was paid by means of a combination of short-term and long-term promissory notes
that we issued to Harman.  As of September 30, 2001, our total indebtedness was
approximately $8.5 million.  Effective October 1, 2001, this indebtedness was
converted to demand notes payable on the demand of Harman or, if no demand is
sooner made, on the dates and in the amounts set forth in the amended Credit
Agreement that we entered into with Harman.  Our substantial leverage may have
important consequences for us, including the following:


                                         22
<PAGE>

     *  our ability to continue as a going concern will depend in part on
     whether Harman demands payment on the $8.5 million debt, or any portion
     thereof; a significant portion of our cash flow from operations will be
     dedicated to servicing our debt obligations and will not be available for
     other business purposes;

     *  the terms and conditions of our indebtedness limit our flexibility in
     planning for and reacting to changes in our business, and in making
     strategic acquisitions;

     *  our ability to obtain additional financing in the future for working
     capital, capital expenditures, and other purposes may be substantially
     impaired; and

     *  our substantial leverage may make us more vulnerable to economic
     downturns and competitive pressures.

     Our ability to meet our debt service obligations and reduce our total
indebtedness to Harman depends in part on our future operating performance. Our
future operating performance will depend on our ability to expand our business
operations by growing our core audio processing business, expanding our product
offerings and penetrating new and emerging markets, which we anticipate will
require additional financing.  In addition, our future operating performance
will depend on economic, competitive, regulatory and other factors affecting our
business that are beyond our control.  If we are unable to expand our business
operations as planned, we may not be able to service our outstanding
indebtedness to Harman.


THE EXISTENCE OF AN UNQUALIFIED OPINION CONTAINING A GOING CONCERN EMPHASIS
PARAGRAPH MAY MAKE IT MORE DIFFICULT FOR US TO OBTAIN CREDIT OR ADDITIONAL
CAPITAL AND MAY JEOPARDIZE OUR RELATIONSHIP WITH EXISTING AND NEW CUSTOMERS.

     Our inability to pay the $8.5 million debt to Harman should payment be
demanded, our difficulties in meeting our financing needs and our negative
working capital position created by the demand notes have resulted in our
independent public accountants adding a going concern emphasis paragraph in
their reports by including a statement that such factors raise substantial doubt
about our ability to continue as a going concern. The inclusion of a going
concern emphasis paragraph generally makes it more difficult to obtain trade
credit, insurance or additional capital through public or private debt or equity
financings.  We may also find it more difficult to maintain existing customer
relationships and to initiate new customer relationships.


WE WILL NEED ADDITIONAL DEBT OR EQUITY TO SERVICE THE DEBT PAYABLE AS A RESULT
OF OUR ACQUISITION OF ORBAN, AND WE MAY NOT BE ABLE TO OBTAIN THIS FINANCING ON
ACCEPTABLE TERMS.

     Upon our acquisition of the assets of Orban, we issued a $3.5 million
short-term note and a $5 million long-term note payable to Harman. Effective
October 1, 2001, both of these notes were converted to demand notes payable on
the demand of Harman or, if no demand is sooner made, on the dates and in the
amounts set forth in the amended Credit Agreement that we entered into with
Harman.  Our ability to service this debt will depend on our ability to obtain
either additional debt or equity financing, or a combination thereof. We cannot
be sure, however, that we will be able to obtain the necessary debt or equity
financing on acceptable terms.  Also, additional debt financing or the sale of
additional equity securities may cause the market price of our common stock to
decline.  If we are unable to obtain additional debt or equity financing on
acceptable terms, we may have to negotiate further restructuring of the debt
with Harman.  If Harman is unwilling to restructure the debt, we may default on
the debt and our ability to continue as a going concern would be jeopardized.


                                         23
<PAGE>
OUR ABILITY TO OBTAIN AN OUTSIDE LINE OF CREDIT IS SUBJECT TO THE APPROVAL OF
OUR CURRENT CREDITORS AND, IF SUCH APPROVAL IS WITHHELD, OUR ABILITY TO COMPETE
EFFECTIVELY IN OUR INDUSTRY COULD BE JEOPARDIZED.

     In connection with our acquisition of Orban, we entered into a Credit
Agreement with Harman.  Under the terms of the Credit Agreement, we are bound by
certain covenants that prevent us from obtaining additional credit facilities
without the prior written approval of Harman.  This limitation on our ability to
obtain additional outside lines of credit may curtail our ability to make
strategic acquisitions and to conduct research and development. This in turn
could jeopardize our competitive position within our industry.


FOREIGN CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

     On January 18, 2002, we acquired the assets of Dialog4 System Engineering
GmbH. Our acquisition of this new product line has led to the establishment of
our new Orban Europe offices in Ludwigsburg, Germany.  Transactions and expenses
of our Orban Europe operations will be conducted in Euros which will expose us
to market risks related to foreign currency exchange rate fluctuations that
could adversely affect our operating results.  For instance, a strengthening of
the U.S. dollar against the Euro could reduce the amount of cash and income we
receive and recognize from Orban Europe. Furthermore, it is likely that for
accounting purposes we will recognize foreign currency gains or losses arising
from our operations in Europe on weighted average rates of exchange in the
period incurred and translate assets and liabilities of these operations into
U.S. dollars based on year-end foreign currency exchange rates, both of which
are subject to currency fluctuations between the U.S. dollar and the Euro.  As
foreign exchange rates vary, our results from operations and profitability may
be adversely affected.

     We expect to derive approximately 5% of our total revenues from our Orban
Europe operations.  This percentage may increase in future years as we further
develop and expand our operations in Europe.  We cannot predict the effects of
exchange rate fluctuations on our operating results.  We do not currently intend
to engage in foreign currency exchange hedging transactions to manage our
foreign currency exposure.  If and when we do engage in foreign currency
exchange hedging transactions, we cannot assure you that our strategies will
adequately protect our operating results from the effects of exchange rate
fluctuations.


WE SERVE A MARKET IN WHICH THERE ARE A LIMITED NUMBER OF CUSTOMERS AND OUR
FINANCIAL WELL-BEING IS DIRECTLY TIED TO THE FINANCIAL HEALTH OF THESE
CUSTOMERS.

     In recent years, the radio and television industry in the United States has
experienced a great deal of consolidation of ownership.  As a result, several
corporations each now own a substantial number of radio and television stations.
These corporations are the largest purchasers of our audio processing and
post-production equipment.  Moreover, a significant amount of our revenue is
derived from audio processing replacement orders that come from these customers.
Our financial stability and well-being is thus directly tied to the financial
health of these customers.  If these customers experience financial difficulty,
regardless of the cause, they may delay, reduce or cancel orders for new audio
processing or post-production equipment.  If this occurs, our results of
operations could decline and we could experience difficulty in servicing our
debt obligations.


                                         24
<PAGE>
WE MUST ADAPT TO RAPID TECHNOLOGICAL CHANGE AND INCREASED COMPETITION IF WE ARE
GOING TO BE ABLE TO COMPETE EFFECTIVELY IN OUR INDUSTRY.

     While audio processing has been and will continue to be our core business,
we are using our existing technologies to enter the emerging markets of digital
audio broadcasting, cable television and Internet-related audio delivery. These
markets are characterized by rapid technological change and require a
significant commitment of capital and human resources.  We intend to engage
continually in research and development activities so that we can improve our
current products and develop new products.  However, our significant debt
obligations may limit the amount of resources, both capital and human, that we
can commit to research and development.  This could jeopardize the success and
reception of our products in these emerging markets.  In addition, because of
the rapid pace of change and the intense competition that characterizes these
markets, our products may become unmarketable or obsolete by a competitor's more
rapid introduction to the marketplace.


WE MAY NOT BE ABLE TO RETAIN OUR EXISTING PERSONNEL OR HIRE AND RETAIN THE
ADDITIONAL PERSONNEL THAT WE NEED TO SUSTAIN AND GROW OUR BUSINESS.

     Our future success will depend on our ability to attract, retain and
motivate employees with the necessary skills and expertise required by our
business. Competition for employees who possess the technical expertise to
develop and manufacture our products is intense.  A shortage in available
skilled labor could require us to increase our wages and benefits to attract and
retain enough employees.  An increase in our labor costs, or our inability to
attract, retain and motivate employees, would likely harm our growth plans and
may adversely affect our business and results of operations.


WE DEPEND ON A NUMBER OF VENDORS TO SUPPLY US WITH COMPONENT PARTS THAT ARE
NECESSARY TO THE PRODUCTION OF OUR AUDIO PROCESSING AND POST-PRODUCTION
EQUIPMENT.

     We rely on certain vendors to provide component parts for use in the
manufacturing of our audio processing and post-production equipment.  As
technology improves, some of these parts have become obsolete and vendors have
discontinued their production of such parts.  When this occurs, we must either
obtain these necessary parts from alternative sources, or design around these
parts so that we are able to continue producing our audio processing and
post-production equipment.  If any of the component parts that we require become
unavailable and we are not able to design around these parts, we may not be able
to offer some of our products and our sales revenues may decline.


                                         25
<PAGE>
OUR PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD EXERCISES
SIGNIFICANT CONTROL OVER US.

     Charles J. Brentlinger, our President, Chief Executive Officer and Chairman
of the Board, currently owns 824,012 shares of our common stock and holds
options to purchase 1,365,005 additional shares.  Based on a total of 4,172,533
shares of our common stock issued and outstanding as of March 31, 2004, if Mr.
Brentlinger exercises all of his options he will own of record and beneficially
approximately 39.5% of our issued and outstanding shares. This means that Mr.
Brentlinger exercises, and will continue to exercise, significant control over
the business and affairs of our company. Mr. Brentlinger's exercise of this
control may, in certain circumstances, deter or delay a merger, tender offers,
other possible takeover attempts or changes in our management, which may be
favored by some or all of our minority shareholders.


WE DEPEND ON A FEW KEY MANAGEMENT PERSONS.

     We are substantially dependent on the personal efforts and abilities of
Charles Jayson Brentlinger, our Chairman, President and Chief Executive Officer,
and Robert Orban, our Vice President and Chief Engineer.  The loss of either of
these officers or our other key management persons could harm our business and
prospects for growth.  As a result, we have obtained key man life insurance
policies on the lives of each of these officers.  We also have employment
agreements with each of these officers which are more fully described elsewhere
in this report.


THE LOCATION OF OUR ORBAN DIVISION SUBJECTS US TO A NUMBER OF RISKS THAT ARE
BEYOND OUR CONTROL WHICH COULD RESULT IN PRODUCTION INTERRUPTIONS.

     Our business depends on the efficient and uninterrupted production of our
audio processing equipment and other products.  Our Orban division is currently
located in San Leandro, California, and we expect to maintain our operations at
this facility for the foreseeable future.  While we have taken precautions
against production interruptions, interruptions could nevertheless result from
natural disasters such as earthquakes, fires or floods.  In addition, the power
shortages, which occur in California from time to time, have resulted in planned
and unplanned power outages and increased energy costs, which we may not be able
to pass on to our customers. Power outages, which last beyond our backup and
alternative power arrangements, could harm our customers and our business.
Finally, our location in the Silicon Valley corridor of California subjects us
to increased operating costs and labor shortages, which could adversely affect
our production capabilities and result in reduced revenues.


THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND THE VALUE OF YOUR
INVESTMENT MAY DECLINE.

     The volatility of the market price of our common stock may cause wide
fluctuations in the price of our common stock on the OTC Bulletin Board. The
market price of our common stock is likely to be affected by:

     *  changes in general conditions in the economy or the financial markets;

     *  variations in our quarterly operating results;

     *  changes in financial estimates by securities analysts;

     *  other developments affecting us, our industry, customers or competitors;

     *  the operating and stock price performance of companies that investors
        deem comparable to us; and

     *  the number of shares available for resale in the public markets under
        applicable securities laws.


THE LIQUIDITY OF OUR COMMON STOCK COULD BE RESTRICTED BECAUSE OUR COMMON STOCK
FALLS WITHIN THE DEFINITION OF A PENNY STOCK.

     Under the rules and regulations of the Securities and Exchange Commission
(SEC), as long as the trading price of our common stock on the OTC Bulletin
Board is less than $5 per share, our common stock will come within the
definition of a "penny stock."  On March 30, 2004, the closing  sale price of
our common stock on the OTC Bulletin Board was $0.75 per share. Generally
speaking, the definition of a "penny stock" does not include stock that is
traded on Nasdaq or on a national securities exchange.  Since our common stock
is traded on the OTC Bulletin Board, rather than on Nasdaq or a national
securities exchange, our common stock falls within the definition of a  "penny
stock" while it is trading below $5 per share.  As a result, the trading of our
common stock is subject to certain "penny stock" rules and regulations.


                                         26
<PAGE>
     The SEC rules and regulations require that broker-dealers, prior to
effecting any transaction in a penny stock, satisfy certain disclosure and
procedural requirements with respect to the prospective customer.  These
requirements include delivery to the customer of an SEC-prepared risk disclosure
schedule explaining the nature and risks of the penny stock market, disclosure
to the customer of the commissions payable to both the broker-dealer and any
other salesperson in connection with the transaction, and disclosure to the
customer of the current quotations for the stock to be purchased.  In addition,
if the broker-dealer is the sole market maker, it must disclose this fact and
the broker-dealer's presumed control over the market.  Finally, prior to
effecting any penny stock transaction, broker-dealers must make individualized
written suitability determinations and obtain a written agreement from customers
verifying the terms of the transaction.  Subsequent to any sale of penny stock,
broker-dealers must send monthly statements disclosing recent price information
for the penny stock held in the customer's account and certain other information
relating to the limited market in penny stocks. These rules, regulations and
procedural requirements may restrict the ability of broker-dealers to sell our
common stock or discourage them from doing so.  As a result, purchasers may find
it more difficult to dispose of, or to obtain accurate quotations for, our
common stock.


BECAUSE OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY, INFRINGEMENT ON OUR PROPRIETARY RIGHTS COULD LEAD TO COSTLY LITIGATION
AND DECREASED REVENUES.

     Our copyrights, patents, trademarks, trade secrets and similar intellectual
property are critical to our success.  To establish and protect our proprietary
rights, we rely on a combination of copyright, trademark, patent and trade
secret laws, confidentiality and non-disclosure agreements and contractual
provisions with employees and third parties, and license agreements with
consultants, vendors and customers.  Despite such protections, there can be no
assurance that these steps will be adequate, that we will be able to secure
trademark registrations for all of our marks in the United States or other
countries or that third parties will not infringe upon or misappropriate our
copyrights, patents, trademarks and similar proprietary rights.  In addition,
effective copyright, patent and trademark protection may be unenforceable or
limited in certain countries. In the future, litigation may be necessary to
enforce and protect our trade secrets, copyrights, patents and other
intellectual property rights.  We may also be subject to litigation to defend
against claims of infringement of the rights of others or to determine the scope
and validity of the intellectual property rights of others.  Any such litigation
could cause us to incur substantial expenses and would adversely affect our
financial condition.

                                       27
<PAGE>
ITEM 3.  CONTROLS AND PROCEDURES.

     Under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of
the period covered by this report.  Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective.  There were no changes in our
internal control over financial reporting during the quarter ended March 31,
2004 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

     We have evaluated, under the supervision and with the participation of our
principal executive officer and principal financial officer, the effectiveness
of the design and operation of our disclosure controls and procedures as of the
end of the period covered by this report. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are. It should be noted that the design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.

     There were no significant changes in our internal controls over financial
reporting during the quarter ended March 31, 2004 that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.

                                       28
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEDINGS

Dialog4

     On April 29, 2003, the Company was notified that Dialog4 filed a demand for
arbitration in Germany. On June 30, 2003, we gave notice of various claims
pertaining the representations and warranties made by Dialog4 in the Asset Sale
and Purchase Agreement. The Company then filed a formal statement of defense
along with counterclaims against Dialog4 on August 25, 2003, within the time
limits as by the Arbiter. Dailog4 filed its response on October 16, 2003. The
Company submitted a response on December 1, 2003.  Dialog4 submitted a further
response on January 12, 2004, and amended its original demand for arbitration
with additional claims. On February 17, 2004, the Company filed a response. On
April 28, 2004, an evidentiary hearing was held in Stuttgart, Germany and both
sides presented evidence and testified before the Arbiter. Each side will next
submit a posterior brief due June 10, 2004, after which the Arbiter may rule
within 60 to 90 days.


Formosa International Systems Co., Inc.,

     The Company leased space at 1330 West Auto Drive, Tempe, Arizona (the
"Building") beginning January 2, 2003.  The owner of the Building, Formosa
International Systems Co., Inc., was also a tenant in the Building.  An informal
lease was executed which provided that the owner would vacate the Building upon
request and that the Company would pay rent partly in cash and partly in stock
of the Company (subject to compliance with Securities Laws). The Company made
all payments of the cash portion of the rent, but refused to pay the stock
portion until the owner vacated the Building so the Company could use all of the
space it was renting.  The owner refused to vacate.  In addition, the owner
requested the Company to execute a subordination agreement with its lender on
terms the Company found unacceptable and the Company refused to execute it
without modifications. The owner then locked out the Company for nonpayment of
the stock portion of the rent on November 10, 2003. The Company immediately
sought and obtained a Temporary Restraining Order ("TRO") from the Superior
Court of Maricopa County, Arizona requiring the owner to allow the Company
continued use of the Building, and the Company moved back into the Building that
day.

     The Company declared the lockout to be a default under the lease and
vacated the Building in late November, 2003, entering into the present lease for
a building located at 1302 West Drivers Way, Tempe, Arizona.  The Company
thereafter amended its complaint in the Superior Court alleging breach of lease
and constructive eviction, seeking from the owner of the Building its actual
damages, which it alleges to be at least $100,000.  The owner of the Building
has counterclaimed for breach of lease, claiming damages of $177,500, and for
the allegedly wrongful conduct of the Company in refusing to execute the
subordination agreement requested by the owner, claiming unspecified damages.
The Company has denied the allegations of the counterclaim and the matter is
pending.


                                       29
<PAGE>
ITEM 2.  CHANGES IN SECURITIES

Recent Sales of Unregistered Securities

     Set forth below is information concerning sales of our common stock (or
transactions deemed to be sales) during the quarter ended March 31, 2004 that
were not registered under the Securities Act of 1933, as amended (the "Act").
All such securities are restricted securities and the certificates bear
restrictive legends.

     On January 18, 2002, our wholly owned subsidiary, CRL Systems, Inc. doing
business as Orban, Inc., acquired the assets of Dialog4 System Engineering GmbH,
a worldwide leader in ISO/MPEG, audio, ISDN, satellite transmission, networking
and storage.  Orban/CRL purchased the assets of Dialog4 pursuant to an Asset
Sale and Purchase Agreement for $2 million, comprised of 1,250,000 shares of our
common stock, valued at $1.00 per share, and $750,000 cash.  In connection with
this transaction, we relied on the exemption from registration under Section
4(2) of the Act.

     Mr. Phil Zeni, the Company's executive vice president and chief operating
officer and Director, was issued an aggregate of 18,959 shares during the
quarter ended March 31 2004. Under his employment contract with the Company, Mr.
Zeni's monthly base compensation is paid to him in shares of stock. The value of
the stock for purposes of these payments is the monthly average closing price
for the month in which the salary is earned.


                                       30
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

Exhibit  Description
Number

2.1(1)   Asset Sale and Purchase Agreement, dated as of November 16, 2001, among
         Dialog4 System Engineering GmbH, Berthold Burkhardtsmaier, Cornelia
         Burkhardtsmaier, Friedrich Maier, Circuit Research Labs, Inc. and CRL
         Systems, Inc.
10.1(1)  Amendment to Existing Agreements and Closing Declaration, dated as of
         January 18, 2002, among Dialog4 System Engineering GmbH, Berthold
         Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
         Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.2(2)  Second Amendment to Existing Agreements and Closing Declaration, dated
         as of March 26, 2002, among Dialog4 System Engineering GmbH, Berthold
         Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
         Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.3(3)  Second Amendment to Credit Agreement, dated as of May 1, 2002, by and
         among Circuit Research Labs, Inc., as Parent, CRL Systems, Inc. as
         Borrower, and Harman Acquisition Corporation (formerly known as Orban,
         Inc.), as Lender
10.4(3)  Second Amended and Restated Tranche A Note, dated as of May 1, 2002,
         from CRL Systems, Inc. to Harman Acquisition Corporation (formerly
         known as Orban, Inc.) in the amount of $5,000,000
10.5(3)  Second Amended and Restated Tranche B Note, dated as of May 1, 2002,
         from CRL Systems, Inc. to Harman Acquisition Corporation (formerly
         known as Orban, Inc.) in the amount of $3,500,000
10.6(4)  Form of Circuit Research Labs, Inc. Stock Option Agreement
31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1(5)  Letter Agreement between Circuit Research Labs, Inc. and Harman
         Acquisition Corp. dated as of March 27, 2003
99.2     Letter Agreement among Circuit Research Labs, Inc., CRL Systems, Inc.
         and Harman Acquisition Corp. dated as of May 16, 2003


(1)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     February 4, 2002.
(2)  Incorporated by reference to the Registrant's Report on Form 10-KSB for the
     fiscal year ended December 31, 2001.

                                       31
<PAGE>
(3)  Incorporated by reference to the Registrant's Report on Form 8-K dated May
     13, 2002.
(4)  Previously filed with the Registrant's Form 10-QSB for the first quarter
     ended March 31, 2002.
(5)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     April 1, 2003.


(b)      During the three months ended March 31, 2004, the Registrant filed the
         following reports on Form 8-K:

         None

                                       32
<PAGE>
                                   SIGNATURES

     In accordance with 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.



                                             CIRCUIT RESEARCH LABS, INC.


Dated: May 24, 2004                          By: /s/ Robert W. McMartin
                                                 -----------------------
                                                 Robert W. McMartin
                                                 Vice President, Treasurer and
                                                 Chief Financial Officer


                                       33
<PAGE>
                                  EXHIBIT INDEX

Exhibit  Description
Number

2.1(1)   Asset Sale and Purchase Agreement, dated as of November 16, 2001, among
         Dialog4 System Engineering GmbH, Berthold Burkhardtsmaier, Cornelia
         Burkhardtsmaier, Friedrich Maier, Circuit Research Labs, Inc. and CRL
         Systems, Inc.
10.1(1)  Amendment to Existing Agreements and Closing Declaration, dated as of
         January 18, 2002, among Dialog4 System Engineering GmbH, Berthold
         Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
         Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.2(2)  Second Amendment to Existing Agreements and Closing Declaration, dated
         as of March 26, 2002, among Dialog4 System Engineering GmbH, Berthold
         Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
         Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.3(3)  Second Amendment to Credit Agreement, dated as of May 1, 2002, by and
         among Circuit Research Labs, Inc., as Parent, CRL Systems, Inc. as
         Borrower, and Harman Acquisition Corporation (formerly known as Orban,
         Inc.), as Lender
10.4(3)  Second Amended and Restated Tranche A Note, dated as of May 1, 2002,
         from CRL Systems, Inc. to Harman Acquisition Corporation (formerly
         known as Orban, Inc.) in the amount of $5,000,000
10.5(3)  Second Amended and Restated Tranche B Note, dated as of May 1, 2002,
         from CRL Systems, Inc. to Harman Acquisition Corporation (formerly
         known as Orban, Inc.) in the amount of $3,500,000
10.6(4)  Form of Circuit Research Labs, Inc. Stock Option Agreement
31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1(5)  Letter Agreement between Circuit Research Labs, Inc. and Harman
         Acquisition Corp. dated as of March 27, 2003
99.2     Letter Agreement among Circuit Research Labs, Inc., CRL Systems, Inc.
         and Harman Acquisition Corp. dated as of May 16, 2003


(1)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     February 4, 2002.
(2)  Incorporated by reference to the Registrant's Report on Form 10-KSB for the
     fiscal year ended December 31, 2001.
(3)  Incorporated by reference to the Registrant's Report on Form 8-K dated May
     13, 2002.
(4)  Previously filed with the Registrant's Form 10-QSB for the first quarter
     ended March 31, 2002. (5) Incorporated by reference to the Registrant's
     Report on Form 8-K dated April 1, 2003.


                                       34