U. S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                FORM 10-KSB

                Annual Report Under Section 13 or 15(d) of
                    The Securities Exchange Act of 1934


     December 31, 1997                            0-11353
     For the year ended)                   (Commission File No.)
                       CIRCUIT  RESEARCH  LABS,  INC.
          Arizona                            86-0344671
State or other jurisdiction of    (IRS Employer Identification No.)
incorporation or organization
                  Address of principal executive offices:

                2522 West Geneva Drive Tempe, Arizona 85282
                      Registrant's Telephone No.
                         (602) 438-0888
     Securities registered pursuant to Section 12(b) of the Act:
                               None

     Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.10 Par Value

This registrant has filed all reports required to be filed by Section 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.

Disclosure of delinquent filers in response to Item 405 of Regulation SB is

not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge in definitive proxy or information statements,
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB.

The registrant's revenues for fiscal 1997 were $ 1,964,705.


The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on February 27, 1998, based on the closing
sales price for such stock in the
Over-the-Counter market as reported by NASDAQ on such date was $683,839.

At February 27, 1998, 597,682 shares of the registrant's common stock were
issued and outstanding.


The registrant's December 31, 1997 Annual Report to Stockholders is
incorporated by reference in Parts I, II and III.

                  Exhibit Index located on page Seventeen.



          Page 1




                        CIRCUIT RESEARCH LABS, INC.

                   INDEX TO ANNUAL REPORT ON FORM 10-KSB
PART I                                                      Page

Item 1         Description of Business                      3
Item 2         Description of Property                      9

Item 3         Legal Proceedings                           10
Item 4         Submission of Matters to a Vote of

               Security Holders                            10
PART II

Item 5         Market for Common Equity and Related
               Stockholder Matters                         11

Item 6         Management's Discussion and Analysis or
               Plan of Operations                          11

Item 7         Financial Statements                        11
Item 8         Changes in and Disagreements with
               Accountants on Accounting and Financial
               Disclosure                                  11
PART III
Item 9         Directors, Executive Officers, Promoters
               and Control Persons: Compliance with
               Section 16(a) of the Exchange Act           12

Item 10        Executive Compensation                      14
Item 11        Security Ownership of Certain Beneficial

               Owners and Management                       16
Item 12        Certain Relationships and Related

               Transactions                                17
Item 13        Exhibits and Reports on Form 8-K            17



          Page 2


                                  PART  I

ITEM 1 - DESCRIPTION OF BUSINESS

General

This information is incorporated by reference to "Corporate Profile" and

"Selected Financial Information" on page 1 of Circuit Research Labs, Inc's.
("CRL" or the "Company") 1997 Annual Report to Stockholders (the "1997
Report"); "Corporate Overview" on page 3 of the 1997 Report; and Notes 1, 2
and 7 to the Company's Consolidated Financial Statements on pages 17-24 of
the 1997 Report.  In addition, reference is made to "Patents and Trademarks"
on page 7, "Competition" on page 7, and "Dependence on Major Customers" on
page 8 of this Form 10-KSB.


Audio Processing

Audio processing equipment produced by the Company is used by radio and
television stations, entertainers and recording studios.  The Company's
equipment "repackages" audio signals produced by microphones, recordings and
other audio sources.  The equipment alters such signals to control audio
loudness (amplitude) and tonal balance (equalization) prior to transmission.

Audio processing shapes the audio sound wave when it is in electrical
impulse form before it is transmitted by a carrier wave.

Radio stations utilize audio processing equipment to control the electrical
amplitude limit of audio signals (modulation limit) as required by
government regulations and to control the quality of radio station signals
received by listeners.  All radio stations utilize some type of audio
processing to comply with governmental and environmental regulations and to
improve the apparent quality of their signals.  Approximately 10,800 AM and
FM stations in the United States use audio processing, as well as more than
19,000 radio stations in other countries.  Of the approximately 1,600
television stations in the United States, about two-thirds of them now
broadcast in stereo, which requires audio processing.  Based on replacement
equipment orders, the Company estimates that the average useful life of
audio processing equipment is less than five years.  Other recently
developed products are appropriate for the audio processing needs of the
recording and performing industry.

The Principal Products

Audio Processing Products


CRL's audio processing equipment for radio broadcast can be separated into
four different series or product families, Digital Series, Modular Series,
Amigo Series and the Signature Series.

Digital Series


          Page 3




The newest addition to CRL's radio processors is the Digital Series. CRL
digital products are on the leading edge of technology with 100% digital
architecture. The principal products are:

     DP-100 Digital Processor  The CRL DP-100 digital processor is the
     newest addition to our FM processing line. It is currently the
     only digital audio processor to use 32 bit floating-point
     technology. Its advance design allows the unit to serve a long
     life in it customer's hands. The modular construction makes it
     possible for CRL to offer specific PCB upgrades without changing
     the main chassis. This design approach allows CRL to sell
     additional upgrade products to current users of the DP-100. The
     DP-100 FM digital processor gives a strong, high quality sound
     that attracts and holds the listening audience. The radio audience
     will enjoy a clear, bright and appealing sound that is easy to
     listen to for long periods of time. The DP-100 uses the latest
     digital technology to its fullest potential to produce the most
     advanced digital processor on the market. The DP-100 includes a
     true digital stereo multiplex generator, gated AGC (Audio Gain
     Controller), 5 band compressor, multi-band limiter and graphic
     equalizer. Also included is CRL's exclusive stereo sound
     enhancement.


     SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast Data Systems)
     allows a FM radio station to transmit additional streams of
     digital information giving the station new promotional methods,
     new public service opportunities and exciting new revenue
     possibilities. CRL's SC-100 is a RDS/RBDS generator using the
     latest in DSP (Digital Signal Processing) digital technology. The
     visual text message that the SC-100 sends to the new "smart
     radios" can be used for call letter and slogan recognition,
     traffic and weather reports, emergency alert messages and display
     advertising. The SC-100 can also be used for paging, billboard
     sign control, global positioning, plus other exciting
     applications. In addition, CRL has become a value added reseller
     of equipment  to build RDS/RBDS paging systems. CRL configures the
     system to the customer's requirements and, for an additional fee,
     oversees the installation of the system.

Modular Series

In its Modular Series, CRL designed the entire AM or FM processing chain as
building blocks. As a result, the station can start simply, with just a
limiter and stereo generator, for instance, and then add a compressor later
as its processing needs change and its budget allows. The modular approach
allows the radio station to buy just what it needs. The principal Modular
systems are:




          Page 4




     FM1g  A basic FM audio processing system consisting of CRL's
     automatic gain controller (AGC) /limiter and digitally synthesized
     stereo generator.
     FM2g  A complete system with an AGC, a limiting system and
     digitally synthesized stereo generator.
     FM2g+ A comprehensive FM system with an AGC, a limiter, a
     digitally synthesized stereo generator and four band compressor.
     AM2m An AGC and a peak limiter are the two components of this
     basic mono AM system.
     AM4m CRL's most popular AM system is a three unit system
     consisting of an AGC, a modulation limiter and four band
     compressor.
     AM2s CRL's basic stereo AM system includes a stereo AGC and a
     limiter.
     AM4s Three components form CRL's enhanced stereo AM system. The
     system includes a stereo AGC, four band compressor/equalizer and
     matrix limiter.

Amigo Series

The next family of radio processing is the Amigo Series. The Amigo family of
processors is an integrated "one box" processing system designed for the
small to mid-size station in both international and domestic markets. The
Amigo family of processors is one of the best performing processors in its
class. The principal Amigo systems are:

     Amigo The Amigo is a combination of a dual band AGC, a variable
     pre-emphasis multi-band limiter and digitally synthesized stereo
     generator. The single unit contains a complete FM audio processing
     system. The Amigo is flexible and powerful, yet designed for easy
     set up and use. The Amigo FM is one of CRL's most popular selling
     systems.

     Amigo AM The Amigo AM is a complete stereo audio processing
     system. It includes CRL's patented AM stereo processing circuitry
     as found in the modular AM systems. The system includes a dual
     band AGC, triband limiter, and NRSC (National Radio Systems
     Committee) output filtering. The Amigo AM can be used on mono for
     customers waiting to convert to stereo.

     BAP-2000 A complete stand alone audio processor for any mono FM.
     The system consists of an advanced dual band audio AGC and
     limiter. Internal options selected by the radio station allow the
     BAP-2000 to be tailored to handle most any mono audio control job.


Signature Series

The Signature Series is a high performance audio processing system. The
principal products are:


          Page 5




     Audio Signature The Audio Signature gives the  power of digital
     control with multi-band compression and limiting for high
     performance power. The FM Audio Signature includes a stereo AGC
     and four band compressor with a sophisticated set of processing
     controls to produce the radio station's own unique and distinctive
     sound.

     Modulation Signature The Modulation Signature features a digitally
     modulated stereo generator and a fully adjustable limiting system.

     Real Time Event Sequencer The Real Time Event Sequencer is a
     programmable event timer that can control any combination of eight
     outputs and store up to 255 events. Events can be programmed to
     the second for each day of the week, for each different month of
     the year.


Television Products

CRL has a complete line of quality audio processing, plus Stereo, SAP
(secondary audio program, primarily designed for public second language
usage) and PRO channel (non-public use with integrated input limiter, data
and telemetry inputs) generators. The audio processing was designed with
surround sound compatibility in mind. Many first generation stereo users are
converting over to the TVS-3000 series of products because of it surround
sound capabilities.

     TVS-3001 The TVS-3001 is a state-of-the-art stereo television
     processing system that offers maximum control of the audio program
     material. It includes a precision tri-band AGC with horizontal
     sync rejection filter, exclusive CRL/CBS loudness control
     circuitry, reversed phase audio corrector and audio asymmetry
     removal circuits.

     TVS-3003 The TVS-3003 is a digitally synthesized MTS generator
     with dbx encoding, advanced transfer function pre-emphasis limiter
     and a proprietary stereo sound field enhancer.

     TVS-3004  The TVS-3004 Professional Channel (PRO) generator is a
     digitally synthesized subcarrier generator for non-public use with
     integrated input limiter, data and telemetry inputs.

     TVS-3005 The TVS-3005 is a digitally synthesized subcarrier
     generator for a secondary audio program (SAP) channel, primarily
     designed for public second language usage.

     BAP-2000 The BAP-2000 is a complete audio processor with
     horizontal sync rejection filter for mono television applications.


Noise Reduction Systems

          Page 6


      DX1 & DX2 For the professional audio and music industry, CRL
      manufactures noise reduction systems incorporating an integrated
      circuit patented under the dynafexR name. The dynafexR noise reduction
      system effectively reduces tap hiss and other background noises from
      virtually any audio source. The dynafex system is available in mono
      (DX1) and stereo (DX2). The dynafex chip is also utilized in all CRL
      products where possible.

 Test and Measurement

      DAA-50  With the conversion of audio technology to digital, CRL
      recognized the need for an inexpensive test and analysis tool and
      developed the DAA-50. The DAA-50 receives and decodes audio data. A
      variety of information about the signal can be determined through
      easily defined LED status indicator lights. Compact and light weight,
      the DAA-50 can be used when and wherever it's needed.

 Technology Research and Development

      Tektronix AM70  CRL licensed certain digital audio testing technology
      to Tektronix. Tektronix's Pathfinder AM70 Audio Analyzer/Generator is
      the product of this combined effort. The AM70 is a handheld
      programmable audio product that operates in three modes: generator
      (serves as source of analog and digital signals), monitor (provides
      visual and audible output), and modify (allows real-time editing).




New Products

The Company continued to add new features and improvements to the DP100
Digital Processor and the SC-100 RDS/RBDS generator for paging. In addition,
CRL is continuing to research and develop new products for release in the
coming years.


Research and Development

This information is incorporated by reference to "Corporate Strategy" on
page 3 of the 1997 Report and to that part of "Management's Discussion and
Analysis" on page 9 of the 1997 Report.

Patents and Trademarks


The Company holds eight United States patents including three acquired by
purchase in July 1985 and a British patent.  These patents cover circuitry
components that appear basic to the design of the Company's current audio
processing equipment, AM Stereo and its dynafexR chip.  During 1993, the
Company entered into a licensing agreement with Tektronix. This information
is incorporated by reference on page 7 of the 1997 Report.

          Page 7





"CRL Systems", "CRL Audio" and "dynafexR" are registered trade names
utilized by the Company.

Backlog and Backlog Comparisons

The backlog at December 31, 1997 was approximately $138,570 compared to
$228,350 at December 31, 1996.  The current backlog is expected to be filled
within the current fiscal year.  Additional information is incorporated by
reference to "Selected Financial Information" on page 1 of the 1997 Report.

Effect of Existing or Probable Government Regulations

The Company's current and forthcoming products are not regulated by any
government.  The Company's domestic customers are highly regulated by the
Federal Communications Commission ("FCC") and the Company's products perform
certain audio processing to control a radio station's signals within FCC
limits.  The Company's stereo generators assist its domestic customers in
maintaining certain specifications set by the FCC. The Company's AM limiters
and FM TV stereo generators assist its domestic customers in maintaining
certain specifications set by the FCC.





Competition

Audio processing equipment for broadcast application is produced by several
small companies with less than 100 employees.  Based on limited information
available from Dun & Bradstreet, the largest of the companies providing
audio processing equipment is Orban Associates, now a wholly-owned
subsidiary of a US corporation.  The Company competes with Orban on the
basis of uniqueness of design, quality and price.  Custom audio processing
equipment is provided by several very small competitors.

Marketing and Distribution


This information is incorporated by reference to "Management's Discussion
and Analysis" relative to results of operations on page 9 of the 1997 Report
and to Note 10 to the Company's Consolidated Financial Statements on page 23
of the 1997 Report.  In addition, reference is made to "Foreign Operations
and Export Sales" on page 9 of this Form 10-KSB.

Warranties and Service


The Company provides a one-year limited warranty against defects in product,
materials and workmanship on it radio line equipment. The standard warranty
for the DP-100, SC-100 and TV series products is three years.  Company
employees perform all warranty and repair service at the Company's


          Page 8




facilities.  Warranty claims have been minimal throughout the history of the
Company.


Delivery and Installation

The Company delivers FOB its audio processing equipment for installation by
the user.  For a fee, the Company will provide installation service or
assistance.

Seasonality

Historically, sales of the Company's equipment have been seasonal in that
demand tends to increase before and after market rating periods for radio
stations.  The market rating periods for various areas are now staggered,
making such seasonality less important.  However, sales do increase after
major trade shows, such as the National Association of Broadcasters.

Sales Terms

Company products are currently sold and shipped domestically with payment
due 30 days from the invoice date.  Products returned in 1997 were
approximately 3.0% of sales.  International shipments are made against
letters of credit or are prepaid by wire transfers.

Dependence on Major Customers

The current industry market is primarily comprised of individual and small
group ownerships of the broadcast properties.  The Company, however, markets
its products through wholesale distributors and agents.   Additional
information is incorporated by reference to Note 10 of the Company's
Consolidated Financial Statements on page 23 of the 1997 Report.

Production and Assembly

The Company produces products at facilities in Tempe, Arizona.  The Company
assembles certain components, particularly those utilizing proprietary
information, and subcontracts certain other subassemblies.  Other components
are purchased from manufacturers and included in the Company's final
assembly.

In a move to diversify, CRL purchased late in 1995, the assets, name and
backlog of a small subcontractor, Desert Assemblies.  Desert Assemblies has
been CRL's contract printed circuit board assembler for several years with
proven high quality and ontime delivery.  With the downsizing of many
electronic manufacturers in the Phoenix area, the potential market for
subcontract work expanded beyond the capacity of Desert Assemblies.  CRL had
excess manufacturing capacity, including inventory handling.  This purchase
allows a consolidation of the subcontract operation into the CRL facility


          Page 9




making for a more efficient operation for both CRL and Desert Assemblies.
Desert Assemblies operates as a division of CRL.

Sources and Availability of Raw Materials

The Company has experienced no problems in obtaining needed components and
materials.  However, because it purchases components and raw material from
outside suppliers, the Company is dependent on those manufacturers and
suppliers.  The Company has made informal arrangements with suppliers for
materials and components, and has second and third sources of supply for
most items.  The Company has attempted to exclude materials, parts, and
supplies from its product designs for which availability is not reasonably
assured.

Compliance with Environmental Laws


The Company believes that it is in compliance with all environmental laws
and regulations applicable to its operations.

Employees

The Company employs 24 persons, all of whom are full-time, including
clerical, sales, technical and manufacturing personnel, all in Tempe,
Arizona.  The Company has not had, and does not expect to have difficulty in
recruiting and training its labor force.

Governmental Approval of Principal Products

No governmental approval is required for the production and sale of any of
the Company's products.  Certain international shipments require export
licenses.

Foreign Operations and Export Sales

The Company has no foreign operations.  For the year ended December  31,
1997, the Company's export sales totaled approximately $1,140,000 which was
58% of total sales.  All foreign  sales were made through CRL International,
Inc., the Company's wholly-owned Foreign Sales Corporation, which was
incorporated in Guam in January 1991.  The Company's 1997 export sales by
region are as follows:
     Region              Export Sales               Percentage

     Europe               $  186,100                    16%
     Pacific Rim             507,500                    44
     Latin and South America  77,200                     7

     Canada and Mexico       214,000                    19
     Other                   155,200                    14
     Total                $1,140,000                   100%

ITEM 2 - DESCRIPTION OF PROPERTY


          Page 10




In June 1983, the Company contracted for the purchase of land and
construction of a building at 2522 West Geneva Drive, Tempe, Arizona.  In
February 1984, the Company moved its operations into this 5,300 square foot
building on a 37,500 square foot parcel of land that currently houses the
Company's executive, administrative, sales and research facilities.  This
property is subject to a mortgage collateralizing the property and is
referred to in Note 6 to the Company's Consolidated Financial Statements on
page 21 of the 1997 Report.

In August 1990, the Company entered into a contract for the construction of
an addition to the existing building at 2522 West Geneva Drive.  The project
was completed in January 1991 and was financed through cash reserves.  The
5,000 square foot addition is being utilized by corporate manufacturing. The
Company believes its plant, equipment and offices are in good condition and
are adequate for the Company's foreseeable future.

It is the Company's policy to not invest in real estate other than that real
estate necessary for the operations of the business.


ITEM 3 - LEGAL PROCEEDINGS


The Company is not involved in any material legal proceedings.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.




          Page 11



                                  PART  II


ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


This information is incorporated by reference to "Stock Market Information"
on page 25 of the 1997 Report.

Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.



ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

This information is incorporated by reference to "Management's Discussion
and Analysis" on pages 8 through 12 of the 1997 Report.


ITEM 7 - FINANCIAL STATEMENTS


This information is incorporated by reference to the Consolidated Financial
Statements on pages 13 through 24 of the 1997 Report.

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE


None.




          Page 12




                                  PART  III

 ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
 COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Name                Age                 Position


Gary D. Clarkson(1)      45                  Chief Executive Officer,
                                             President and a
                                             Director
Erle M. Constable        79                  Assistant Treasurer
                                             and Director
Carl E. Matthusen        54                  Director
Gary  M. Hamker          61                  Director
Royce T. Jones           48                  Director

Dennis L. Drew           52                  Secretary/Treasurer
                                             and Vice President of
                                             Operations

                                 DIRECTORS

Gary D. Clarkson In January 1998, following the death of Mr. Ronald R.
Jones, Mr. Clarkson was elected to the positions of Chief Executive Officer,
President and Chairman. Mr. Clarkson had been Secretary and a director of
the Company since its incorporation and was elected Treasurer in July 1992.
Mr. Clarkson founded Circuit Research Labs with Mr. Jones in 1974, and has
devoted  substantially all of his business efforts to the Company's business
since that time.  He has been a design engineer for Circuit Research Labs
from 1974 to present.  He holds an associate degree in electronics
engineering technology from DeVry Institute of Technology, Phoenix, Arizona.
Mr. Clarkson served as assistant and chief engineer at many radio stations
from 1971 until 1978. Mr. Clarkson is Treasurer and a director of CRL
International, Inc., the Company's wholly owned foreign sales corporation.

Erle M. Constable has served as a director of the Company since 1983 and
Treasurer from January 1987 to November 1988 when he reduced his activity to
Assistant Treasurer.  In 1983, Mr. Constable retired from Dynalectron
Corporation (now DYNCORP), then a publicly-held diversified technical
services company where he served as Vice President of Finance and Corporate
Development.  He was employed by Dynalectron in 1973, and was in charge of
an acquisition program which merged 15 companies into Dynalectron.  Prior to
joining Dynalectron, Mr. Constable worked for Fairchild Industries, Lockheed
Aircraft Corporation, Glenn L. Martin Company and Trans World Airlines.  He
holds undergraduate and masters degrees in business administration received
in 1939 and 1940 from the University of Nebraska.  Periodically, Mr.
Constable acts as a consultant to the Company and receives an hourly
consulting fee for his services. Mr. Constable is a director of CRL
International, Inc., the Company's wholly owned foreign sales corporation.




          Page 13




Carl E. Matthusen has served as a director of the Company since February
1988.  Mr. Matthusen began his career in the broadcast industry in 1963
serving in various capacities at seven radio
broadcast stations in Arizona, Wisconsin, Minnesota and Virginia.  Since
1978, he has been General Manager of KJZZ/Sun Sounds operated by the Mesa
Community College in Mesa, Arizona.  In addition, he is a guest lecturer at
Mesa Community College, Phoenix College and Arizona State University as well
as a consultant to Arizona Western Community College and the Arizona
Commission on Post-secondary Education.  Mr. Matthusen also served as
Chairman of the Board of Directors of the National Public Radio Network from
1992 to 1996, where he has been a director from 1990 to 1997.

Gary M. Hamker has been a member of the Board of Directors and a Special
Projects Consultant since July 1993.  Mr. Hamker is retired from NCR/AT&T
after 30 years in Marketing and Corporate Product Management.  While with
NCR/AT&T he had many diversified assignments, including developing new
domestic and international computer product strategies and product/marketing
plans for the worldwide market.  He was instrumental in development and
sales strategies of mini-computers and personal computer/network systems
during their infancy.  Approval of research and development, new product
specifications, monitoring R&D budgets, developing and approving new product
plans and planning profitable products phase-out, were a few of his
responsibilities.  His expertise includes working on system problems, on
proposals to increase market penetration with large multi-national accounts
and on developing internal communications to improve departmental
cooperation and effectiveness.  Periodically, Mr. Hamker acts as a
consultant to the Company and receives an hourly consulting fee for his
services.

Royce T. Jones was appointed to the Board of Directors on January 3, 1998
following the death of her husband, Ronald R. Jones. She is employed at the
Wild Toucan restaurant in Sedona, Arizona. Previously she had been a flight
attendant with Hughes Airwest and Northwest Airlines.

                          OTHER EXECUTIVE OFFICERS


Dennis L. Drew  was appointed Secretary/Treasurer in January 1998. Mr. Drew
joined the Company in 1993 as controller.  In 1994, he was appointed to the
positions of Vice President of Operations, and Assistant
Secretary/Treasurer.  Before joining the Company, Mr. Drew spent three years
as a Project Manager for Computer Cable Specialists. Prior to Computer Cable
Specialists, Mr. Drew held several senior financial management positions
with companies in the computer leasing industry.  These positions covered a
wide range of responsibilities including implementing computerized internal
controls to negotiating contracts and loan agreements.  Mr. Drew has an MBA
from Arizona State University.

(1) Ronald R. Jones had been Chief Executive Office, President, and a
Director of Circuit Research Labs, Inc. since incorporation in 1978. Mr.
Jones died on January 1, 1998.

          Page 14




ITEM 10 - EXECUTIVE COMPENSATION

The Company did not pay any individual cash compensation in excess of
$100,000 for services provided during the fiscal year.  The following table
sets forth compensation paid or accrued to the chief executive officer
during each of the three years ended December 31, 1997.


                         Summary Compensation Table
Name and                                               Other
Principal Position    Year    Salary    Bonus          Compensation

Ronald R. Jones(1)
President and
Chairman of the Board 1997    $ 72,696  -0-            $     0
                      1996      72,696  -0-               2,022(2)
                      1995      72,696  -0-               2,152(2)

(1)  Mr. Jones died on January 1, 1998.
(2)  Fee paid by Company for the personal guarantee of the SBA loan.

The Company has no employment contracts currently in force.  The Company has
agreements with all employees calling for nondisclosure of trade secrets.


The Company has group life, disability, and medical insurance plans, a
401(k) pension plan, and an Employee Stock Purchase Plan.  The 1994 Stock
Option Plan was approved by  the Company's shareholders  at the Company's
annual meeting on May 6, 1994.

Compensation of Directors


During the year ended December 31, 1997, directors received no compensation
for attending meetings.

Employee Pension Plan

The Company sponsors the CRL, INC. 401(k) PROFIT SHARING PLAN (the "Plan")
for the benefit of all employees meeting certain eligibility requirements.
Under the Plan, participants are permitted to make pre-tax contributions to
their plan accounts.  The Company will match 50% of a participant's
contributions up to a maximum Company matching contribution of 3% of a
participant's annual compensation.  Total annual contributions to a
participant's account may not exceed 25% of annual compensation.  In
addition, the Company, at its sole discretion, may make an annual profit
sharing contribution to the Plan out of its current or accumulated profits.

The annual contribution, if any, is allocated to participants based upon
each participant's annual compensation.  The Company has not made an annual
contribution and currently has no plans to do so.  The Company did not make
a contribution to the account of the individual listed in the preceding cash
compensation table for the year ended December 31, 1997.


          Page 15




Stock Purchase Plan

The Company has an employee stock purchase plan which is offered to
substantially all employees, including officers.  Employees may purchase the
Company's common stock through payroll deductions not exceeding $50 per week
and shares are purchased at the market price, by a nonaffiliated dealer on
the open market. During 1997, two employees participated in this plan.


Stock Options

The following is a brief summary of the Company's 1994 Stock Option Plan.
The closing bid price of the Company's common stock on the NASDAQ National
Market System on February 27, 1998 was $2.375 per share.

In May 1994, the Company's stockholders approved the Company's 1994  Stock
Option Plan, which set aside an aggregate of 60,000 shares of common stock
for which options may be granted to employees, officers, directors, and
consultants.  Options granted and not exercised under the Company's previous
plan were canceled and new options were granted.  The Company's Board of
Directors appoints the Stock Option Committee which is authorized to grant
incentive stock options and non qualified stock options under the Plan,
select optionees, determine the number of shares to be granted to each
nominee, select the term of the option (up to ten years),  and determine the
price to be paid on the exercise of the option, provided that such price
must not be less than 100% of the market value of the shares subject to the
option at the time it is granted.  Each option is exercisable from time to
time subject to such restrictions on exercisability as the Stock Option
Committee may impose at the grant date.  This plan expires in April 2004.


As of February 27,1998, options to purchase a total of 15,312 shares were
outstanding to 6 employees and directors.

The following table sets forth information as to all options to purchase
Common Stock under the Plan which were granted to certain officers and
directors and to all officers and directors as a group and which were
outstanding as of February 28, 1998.

                                                        	   Average
Mame                Capacities          Shares               Price

Erle M. Constable   Director and
                    Assistant Treasurer 1,562(1)             $1.25
Carl E. Matthusen   Director            1,250(2)             $1.25
Dennis L. Drew      Secretary/Treasurer,
                    Vice President
                    Operations          5,000(3)             $2.00


          Page 16




All officers and directors
as a group (3 individuals)              7,812(4)              $1.73

(1) 1,562 shares granted  May 6, 1994.  All shares became  exercisable on
May 6, 1995 and expire  May 6, 1999.
(2) 1,250 shares granted  May 6, 1994.  All shares  became exercisable on
May 6, 1995 and expire  May 6, 1999.
(3) 5,000 shares granted  June 12, 1997.  All shares  became exercisable on
June 12, 1997 and expire  May 6, 1999.
(4) An additional 7,500 shares may be acquired by employees exercising
options which expire May 6, 1999.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

A. Security Ownership of Certain Beneficial Owners

As of February 27, 1998, the following persons were known by the Company to
be the beneficial owners of more than 5% of the Company's Common Stock:

                                        Amount and
               Name and Address of      Nature of        Percent of
Title of Class Beneficial Owner         Beneficial Owner   Class(1)


$.10 par value
common         Estate of Ronald
               R. Jones(2)               187,500           31.4%
                  of
               Charles R. Berry
               Titus, Brueckner & Berry, P.C.
               Scottsdale Center, Suite B-252
               7373 N. Scottsdale Road
               Scottsdale, Arizona 85253-3527

$.10 par value
common         Gary D. Clarkson           121,312          20.3%
                  of
               Circuit Research Labs, Inc.
               2522 West Geneva Drive
               Tempe, Arizona 85282

(1)  On the basis of 597,682 shares outstanding on February 28, 1998.
(2)  It is anticipated that, pursuant to an agreement between the Company
and Ronald R. Jones, the Company will repurchase all of Ronald R. Jones'
187,500 shares from the estate of Ronald R. Jones for the price of
approximately $181,640.  The repurchase will take place on or before
May 5, 1998. The Company had a key man life insurance policy on the life of
Ronald R. Jones which is more than sufficient to cover the purchase of the
stock.

B. Security  Ownership of Management

          Page 17




The stock ownership by directors and officers of the Company as of February
27, 1998 is set forth below.  Each person named exercises sole voting power
over all shares beneficially owned.

                                        Amount and
                    Name and            Nature of      Percent
                    Address of          Beneficial     of Class

Title of Class      Beneficial Owner    Owner           (4)

$.10 par value
common              Estate of Ronald
                    R. Jones            187,500(1)     31.2%
                      of
                    % Charles R. Berry
                    Titus, Brueckner & Berry, P.C.
                    Scottsdale Center, Suite B-252
                    7373 N. Scottsdale Road
                    Scottsdale, Arizona 85253-3527

$.10 par value
common              Gary D. Clarkson    121,312        20.2%
$.10 par value

common              Erle M. Constable     2,500(2)       .4%
$.10 par value
common              Carl E. Matthusen     1,250(3)       .2%
$.10 par value
common              Dennis L. Drew        5,000(4)       .8%
                           All of
                    Circuit Research Labs, Inc.
                    2522 West Geneva Drive
                    Tempe, Arizona 85282
Officer and directors
 as a group (5 persons)                  317,562(5)      53%(6)

(1)  It is anticipated that, pursuant to an agreement between the Company
and Ronald R. Jones, the Company will repurchase all of Ronald R. Jones'
187,500 shares from the estate of Ronald R.  Jones for the price of
approximately $181,640.  The repurchase will take place on or before May 5,
1998. The Company had a key man life insurance policy on the life of Ronald
R. Jones which is more than sufficient to cover the purchase of the stock.
Royce T. Jones, a Director and widow of Ronald R. Jones, is the beneficiary
of the estate of Ronald R. Jones.
(2)  938 shares owned; 1,562 shares under exercisable options.  Held as
community property with Eugenia Constable.
(3)  No shares owned; 1,250 shares under exercisable options.
(4)  No shares owned; 5,000 shares under exercisable options.
(5)  Includes 7,812 shares which may be acquired by exercising stock
options.
(6)  Percentage is calculated on the basis that all director and officer
shares under stock options presently exercisable are deemed outstanding, a

          Page 18




total of 605,494 shares.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

This information is incorporated by reference to Notes 6 and 7 of the
Consolidated Financial Statements on pages 21-22 of the 1997 Report.


ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

The following consolidated financial statements of Circuit Research Labs,
Inc. and subsidiaries are included in the annual report of the registrant to
its stockholders for the year ended December 31, 1997 and are incorporated
by reference in Item 7:

            Consolidated balance sheets - December 31, 1997 and
            1996.
            Consolidated statements of operations - Years ended
            December 31, 1997 and 1996.
            Consolidated statements of stockholders' equity -
            Years ended December 31, 1997 and 1996.
            Consolidated statements of cash flows - Years ended
            December 31, 1997 and 1996.
            Notes to consolidated financial statements - Years
            ended December 31, 1997 and 1996.

           Exhibit Index
 (a) Exhibit No.

     11   Schedule of computation of per share earnings - see page
          20.

     23   Consent of Deloitte & Touche LLP - see page 19.

In addition to the exhibits previously described, the Company
hereby incorporates the following exhibits by reference pursuant to Rule
12B-32, each of which was filed as an exhibit to the Company's Registration
Statement on Form S-18 which was effective October     14, 1983, and
subsequent filings in a timely manner.

      3   Articles of Incorporation as Amended and Bylaws
          previously filed and incorporated herein by reference

     10   Stock Option Plan previously filed and incorporated
          herein by reference 1994 Stock Option Plan previously
          filed and incorporated herein by reference


     13   1997 Annual Report to Security Holders incorporated by
          reference Previous Annual Reports to Security Holders and
          Forms 10-Q were previously filed in a timely manner and
          are incorporated herein by reference.


          Page 19




     21   Subsidiaries of the Registrant - CRL International, Inc.
          the Company's wholly-owned Foreign Sales Corporation was
          incorporated in Guam in January 1991.



 (b) Reports on Form 8-K


     No reports on Form 8-K were filed during the last quarter of
     1997.



          Page 20



INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No.
33-82176 of Circuit Research Labs, Inc. on Form S-8 of our report dated
March 20, 1998 incorporated by reference in this Annual Report on Form
10-KSB of Circuit Research Labs, Inc. for the year ended December 31, 1997.





DELOITTE & TOUCHE LLP

Phoenix, Arizona
March 30, 1998




          Page 21



Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

                                   Registrant
Date:          March 29, 1998      By   /s/ Gary D. Clarkson
                                   Gary D. Clarkson, Chief
                                   Executive Officer and Chairman
                                   of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Date:          March 29, 1998           By   /s/ Gary D. Clarkson
                                             Gary D. Clarkson,
                                             Chief Executive
                                             Officer and Director
                                             (Principal Executive

                                             Officer)

Date:          March 29, 1998           By   /s/ Erle M. Constable
                                             Erle M. Constable,
                                             Director

Date:          March 29, 1998           By   /s/ Carl E. Matthusen

                                             Carl E. Matthusen,
                                             Director

Date:          March 29, 1998           By   /s/ Gary M. Hamker
                                             Gary M. Hamker,
                                             Director


Date:          March 29, 1998           By   /s/ Royce Jones
                                             Royce T. Jones,
                                             Director

Date:          March 29, 1998           By   /s/ Dennis L. Drew
                                             Dennis L. Drew,
                                             Secretary/Treasurer
                                             Vice President

                                             Operations Controller,


                        CIRCUIT RESEARCH LABS, INC.

CORPORATE PROFILE

          Page 22





Circuit Research Labs, Inc. (the "Company") is an electronics company
developing, manufacturing and marketing high quality audio processing and
transmission encoding equipment for the radio, television and professional
audio markets world wide.

The Company's main product lines control the audio quality and range of

radio and television audio reception including generators allowing radio and
television stations to broadcast in stereo.  Professional sound
reinforcement and digital audio test equipment is also produced having a
wide range of applications.

SELECTED FINANCIAL INFORMATION
                                 YEARS ENDED DECEMBER 31

                    1997      1996          1995      1994        1993
    Operating Highlights

 Net sales     $1,953,521  $2,524,870  $1,884,402 $2,074,716  $2,089,390
 Other income      11,184      16,860      26,524     29,596      29,119
 Total revenues 1,964,705   2,541,730   1,910,926  2,104,312   2,118,509

 Net(loss)income(262,296)     123,160   (306,720)    (92,427)   (126,062)
 Net(loss)income
 per common share
 basic and diluted  (.44)         .21       (.51)       (.15)      (.21)
 Weighted average
 number ofcommon shares
 outstanding      597,682     597,682     597,682     597,682    597,682


 Balance Sheet Highlights
 Current assets$1,263,249  $1,431,175  $1,389,754  $1,466,831 $1,533,432
 Current
 liabilities      195,746     239,811     321,974     133,355    154,272
 Total assets   1,846,598   2,169,590   2,149,670   2,236,761  2,357,265
 Long-term
 obligations      105,656     122,287     138,458     112,354    119,514

 Total liabilities301,402     362,098     460,432     245,709    273,786
 Stockholders'
 equity         1,545,196   1,807,492   1,689,238   1,991,052  2,083,479
 No cash dividends have been declared.

 Key Statistics
 Current ratio       6.45        5.97        4.32       11.00       9.94

 Book value per
 share              $2.59       $3.02       $2.83       $3.33      $3.49
 Working
 capital       $1,067,503  $1,191,364  $1,067,780  $1,333,476 $1,379,160
 Order backlog   $138,570    $228,350    $566,720    $103,000   $227,000
 Employees             24          35          25          20         26



          Page 23





To CRL Shareholders:

     1997 was a disappointing year-not only did we have a reduced sales
volume of approximately $1.9 million ( a 23% decline from 1996) and a net
loss of $262,300, but at the very end of the year we lost our co-founder,
President and Chairman of the Board, Ronald R. Jones.


     Ron and I go way back to 1970 when we were students, learning about the
mysteries of radio and television broadcasting.  After completing our
technical courses, and in some instances before we completed them, we served
as engineers and technical consultants to local Phoenix, Arizona
broadcasters. In 1978, Circuit Research Labs, Inc. was formed, becoming a
public company  in 1983 when you brought in much needed capital and support,
which was greatly appreciated.


Your Company is dedicated to serving the audio processing requirements in
the broadcast industry with high quality products, the best in customer
service and integrity in it dealings.  The loyal CRL workforce and I will do
all we possibly can to maintain and improve our reputation and to return the
operation to a profitable level.


During the last few years the majority of our sales have been in the
international marketplace, a major portion of which included the Pacific
Rim, which has recently been hard hit economically.  Since marketing our
limited product line worldwide is quite expensive, as we found out in 1997,
we hope to develop a relationship with producers of other broadcast products
for joint marketing efforts, reducing costs for all participants.  With
improved products and marketing, we believe that the US and Canada markets
will provide increased sales volume in the near future.

Although we suffered a significant operating loss in 1997, the proceeds
of key man life insurance have provided us with sufficient funds to purchase
the shares in the Company from the estate of Ronald R. Jones, pay off the
mortgage on the building leaving us debt free, and supply working capital to
support our 1998 efforts.


Thank you all for your support


                                                  Very truly yours,


                                                  Gary Clarkson

                                                  President


          Page 24




CIRCUIT RESEARCH LABS, INC.


Corporate Overview

Founded in 1974 as broadcast industry consultants, Circuit Research Labs
built upon its understanding of the broadcast industry's needs by expanding
into product development and manufacturing. In 1978, Circuit Research Labs,
Inc., herein after referred to as the Company or CRL, was incorporated , and
in late 1983 became registered as a public company on the NASDAQ stock
exchange.

Since the first product, which was designed to improve the "coverage and
quality" of low powered AM radio stations, CRL has been committed to
improving broadcast quality. CRL's product lines have grown to include
digital and analog audio processing and encoding devices for monaural or
stereo AM or FM radio, international short-wave and mono or stereo
television, RDS/RBDS generators and receivers and digital audio analyzers.
These products are labeled "CRL Systems".


Corporate Strategy


CRL is dedicated to serving the audio processing needs of the broadcast and
professional audio markets with the highest quality products utilizing
state-of-the-art technology. To achieve this goal requires a high level of
research and development and CRL commits a large portion of its revenues to
developing new products and constantly improving existing product
performances. CRL also monitors new technology frontiers in our existing
markets and others for possible product improvements. CRL has confidence in
its engineers' expertise to develop new products on the leading edge of
technology for the broadcast industry.

In order to prevent dependency on one market, when appropriate, consultants,
licensing of technology and acquisition of product lines are also used to
diversify operations.  CRL also encourages product engineering and
development for other complementary broadcast manufacturers.  Examples
include the development of digital audio analyzers and the acquisition of
Desert Assemblies.

CRL's production capabilities are constantly being improved and new
marketing concepts are being developed to provide increased market share.
Trusting in our dealers internationally and domestically for final product
distribution, the CRL marketing and sales staff works directly in sales
efforts with potential customers along with and for its dealers. Supported
by an efficient customer service department, CRL maintains a reputation for
excellent business ethics and selling standards.


The Broadcast Industry and CRL

          Page 25



CRL was a major participant in the National Radio Systems Committee (NRSC)
which developed standards for AM stations adopted by the FCC. During 1987,
CRL developed and produced equipment enabling AM stations to meet certain
NRSC standards and continues to be a market leader in AM processing.

CRL is a member of the National Association of Broadcasters (NAB).  The NAB
is the world's largest, most extensive broadcaster's association, offering a
wide variety of services to radio and television stations, as well as
organizations that provide products and/or services to the broadcast
industry.  CRL's staff contribute articles and technical papers to various
NAB publications and participate in technical conferences.

CRL is a member of the (Radio Data Systems) RDS Forum. The Forum promotes
the exchange of experience between broadcasters and manufacturers on RDS
system implementation and provides guidance to manufacturers on
broadcasters' operational needs.  RDS is a system which enables a FM radio
station to transmit digital data without interfering with the current audio
signal.

In 1985, CRL purchased all rights to the patented dynafexR chip. The
dynafexR noise reduction system effectively reduces tape hiss and other
background noises from virtually any audio source. Two products are being
produced under the dynafexR label and most CRL processors utilize the
dynafexR chip.

In the last quarter of 1995, CRL acquired Desert Assemblies, a contract
electronic assemblies company. The acquisition of Desert Assemblies expanded
and enhanced CRL's production capabilities. CRL now possesses the ability to
design, build and test products for other companies (turnkey production).

CRL holds several patents on component designs for CRL products within the
broadcast industry.


The Principal Products


AUDIO PROCESSING PRODUCTS

CRL's audio processing equipment for radio broadcast can be separated into
four different series or product families, Digital Series, Modular Series,
Amigo Series and the Signature Series.



Digital Series


          Page 26


The newest addition to CRL's radio processors is the Digital Series. CRL
digital products are on the leading edge of technology with 100% digital
architecture. The principal products are:

     DP-100 Digital Processor  The CRL DP-100 digital processor is
     CRL's FM digital processing line. It is currently the only major
     digital audio processor to use 32 bit floating-point technology.

     Its advance design allows the unit to serve a long life in its
     customer's hands. The modular construction makes it possible for
     CRL to offer specific PCB upgrades without changing the main
     chassis. This design approach allows CRL to sell additional
     upgrade products to current users of the DP-100. The DP-100 FM
     digital processor gives a strong, high quality sound that attracts
     and holds the listening audience. The radio audience will enjoy a
     clear, bright and appealing sound that is easy to listen to for
     long periods of time. The DP-100 uses the latest digital
     technology to its fullest potential to produce the most advanced
     digital processor on the market. The DP-100 includes a true
     digital stereo multiplex generator, gated AGC (Audio Gain
     Controller), 5 band compressor, multi-band limiter and graphic
     equalizer. Also included is CRL's exclusive stereo sound
     enhancement.

     SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast Data Systems)
     allows a FM radio station to transmit additional streams of
     digital information giving the station new promotional methods,
     new public service opportunities and exciting new revenue
     possibilities. CRL's SC-100 is a RDS/RBDS generator using the
     latest in DSP (Digital Signal Processing) digital technology. The
     visual text message that the SC-100 sends to the new "smart
     radios" can be used for call letter and slogan recognition,
     traffic and weather reports, emergency alert messages and display
     advertising. The SC-100 can also be used for paging, billboard
     sign control, global positioning,  plus other exciting
     applications. In addition, CRL has become a value added reseller
     of equipment  to build RDS/RBDS paging systems. CRL configures the
     system to the customer's requirements and, for an additional fee,
     oversees the installation of the system.

Modular Series

In its Modular Series, CRL designed the entire AM or FM processing chain as
building blocks. As a result, the station can start simply, with just a
limiter and stereo generator, for instance, and then add a compressor later
as its processing needs change and its budget allows. The modular approach
allows the radio station to buy just what it needs. The principal Modular
systems are:




          Page 27




     FM1g  A basic FM audio processing system consisting of CRL's
     automatic gain controller (AGC) /limiter and digitally synthesized
     stereo generator.
     FM2g  A complete system with an AGC, a limiting system and
     digitally synthesized stereo generator.
     FM2g+ A comprehensive FM system with an AGC, a limiter, a
     digitally synthesized stereo generator and four band compressor.
     AM2m An AGC and a peak limiter are the two components of this
     basic mono AM system.
     AM4m CRL's most popular AM system is a three unit system
     consisting of an AGC, a modulation limiter and four band
     compressor.
     AM2s CRL's basic stereo AM system includes a stereo AGC and a
     limiter.
     AM4s Three components form CRL's enhanced stereo AM system. The
     system includes a stereo AGC, four band compressor/equalizer and
     matrix limiter.

Amigo Series

The next family of radio processing is the Amigo Series. The Amigo family of
processors is an integrated "one box" processing system designed for the
small to mid-size station in both international and domestic markets. The
Amigo family of processors is the best performing processor in its class.
The principal Amigo systems are:

     Amigo The Amigo is a combination of a dual band AGC, a variable
     pre-emphasis multi-band limiter and digitally synthesized stereo
     generator. The single unit contains a complete FM audio processing
     system. The Company believes the Amigo is flexible and powerful,
     yet designed for easy set up and use. The Amigo FM is one of CRL's
     most popular selling systems.

     Amigo AM The Amigo AM is a complete stereo audio processing
     system. It includes CRL's patented AM stereo processing circuitry
     as found in the modular AM systems. The system includes a dual
     band AGC, triband limiter, and NRSC (National Radio Systems
     Committee) output filtering. The Amigo AM can be used on mono for
     customers waiting to convert to stereo.

     BAP-2000 A complete stand alone audio processor for any mono FM.
     The system consists of an advanced dual band audio AGC and
     limiter. Internal options selected by the radio station allow the
     BAP-2000 to be tailored to handle most any mono audio control job.


Signature Series

The Signature Series is a high performance audio processing system. The
principal products are:


          Page 28




     Audio Signature The Audio Signature gives the  power of digital
     control with multi-band compression and limiting for high
     performance power. The FM Audio Signature includes a stereo AGC
     and four band compressor with a sophisticated set of processing
     controls to produce the radio station's own unique and distinctive
     sound.

     Modulation Signature The Modulation Signature features a digitally
     modulated stereo generator and a fully adjustable limiting system.

     Real Time Event Sequencer The Real Time Event Sequencer is a
     programmable event timer that can control any combination of eight
     outputs and store up to 255 events. Events can be programmed to
     the second for each day of the week, for each different month of
     the year.


Television Products
CRL has a complete line of quality audio processing, plus Stereo, SAP
(secondary audio program, primarily designed for public second language
usage) and PRO channel (non-public use with integrated input limiter, data
and telemetry inputs) generators. The audio processing was designed with
surround sound compatibility in mind. Many first generation stereo users are
converting over to the TVS-3000 series of products because of it surround
sound capabilities.

     TVS-3001 The TVS-3001 is a state-of-the-art stereo television
     processing system that offers maximum control of the audio program
     material. It includes a precision tri-band AGC with horizontal
     sync rejection filter, exclusive CRL/CBS loudness control
     circuitry, reversed phase audio corrector and audio asymmetry
     removal circuits.

     TVS-3003 The TVS-3003 is a digitally synthesized MTS generator
     with dbx encoding, advanced transfer function pre-emphasis limiter
     and a proprietary stereo sound field enhancer.

     TVS-3004  The TVS-3004 Professional Channel (PRO) generator is a
     digitally synthesized subcarrier generator for non-public use with
     integrated input limiter, data and telemetry inputs.

     TVS-3005 The TVS-3005 is a digitally synthesized subcarrier
     generator for a secondary audio program (SAP) channel, primarily
     designed for public second language usage.


     BAP-2000 The BAP-2000 is a complete audio processor with
     horizontal sync rejection filter for mono television applications.

Noise Reduction Systems


          Page 29




     DX1 & DX2  For the professional audio and music industry, CRL
     manufactures noise reduction systems incorporating an integrated
     circuit patented under the dynafexR name. The dynafexR noise reduction
     system effectively reduces tap hiss and other background noises from
     virtually any audio source. The dynafex system is available in mono
     (DX1) and stereo (DX2). The dynafex chip is also utilized in all CRL
     products where possible.

Test and Measurement
     DAA-50  With the conversion of audio technology to digital, CRL
     recognized the need for an inexpensive test and analysis tool and
     developed the DAA-50. The DAA-50 receives and decodes audio data. A
     variety of information about the signal can be determined through
     easily defined LED status indicator lights. Compact and light weight,
     the DAA-50 can be used when and wherever it's needed.


Technology Research And Development

     Tektronix AM70  CRL licensed certain digital audio testing technology
     to Tektronix. Tektronix's Pathfinder AM70 Audio Analyzer/Generator is
     the product of this combined effort. The AM70 is a handheld
     programmable audio product that operates in three modes: generator
     (serves as source of analog and digital signals), monitor (provides
     visual and audible output), and modify (allows real-time editing).

New Products


The Company continued to add new features and improvements to the DP100
Digital Processor and the SC-100 RDS/RBDS generator for paging. In addition,
CRL is continuing to research and develop new products for release in the
coming years.



          Page 30




CIRCUIT RESEARCH LABS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
YEARS ENDED DECEMBER 31, 1997 AND 1996

RESULTS OF OPERATIONS


The following tables set forth financial information for each of the four
quarters of the year ended December 31, 1997 and for the years ended
December 31, 1997 and 1996.

                         1997 Quarters Ended

                            Mar 31    Jun 30      Sep 30   Dec 31


Net sales                  $510,851  $506,287  $557,549   $378,834
Other income                  1,587     2,189     1,147      6,261

Total revenues             $512,438  $508,476  $558,696   $385,095

Gross profit on net sales  $304,014  $228,936  $290,509   $139,436
Gross profit percent            60%       45%       52%        37%


Net income (loss)           $   812 $(51,218) $(16,783) $(195,107)
Net  income (loss) percent
of net sales                     0%     (10%)      (3%)      (51%)

Income (loss) per share        $.00    $(.09)    $(.03)     $(.32)


                                          Years Ended December 31
                                               1997       1996

Net sales                                    $1,953,521 $2,524,870
Other income                                     11,184     16,860
Total revenues                               $1,964,705 $2,541,730


Gross profit on net sales                    $  962,895 $1,397,664
Gross profit percent                                49%        55%

Net (loss) income                            $(262,296)   $123,160
Net (loss) income  percent                        (13%)         5%
(Loss) income  per share                         $(.44)      $. 21

The primary factors affecting the results of the Company's 1997 operations
compared to 1996 are a decrease in sales and a decrease in the gross profit
margin  without any corresponding decrease in selling, general and
administrative expenses.




          Page 31




Net sales in 1997 decreased 23% to $1,954,000 compared  to $2,525,000 for
1996. The decrease is the result of slow demand for CRL's audio processing
equipment, in both the domestic and international markets.

Cost of goods sold in 1997 was 51% of net sales compared to 45% in 1996. The
increase is the result of the expected lower profit margins in the sales of
package paging systems and CRL's circuit board assembly division. The
current profit margins are expected to continue in the future. The Company
also increased its reserve for obsolete inventory which also contributed to
the increase in cost of goods sold. The cost of goods sold on CRL's main
product lines for the year ended December 31, 1997 was 41% which was
comparable to 38% for the same period of 1996.

Selling, general and administrative expense in 1997 of  $996,000 was
comparable to the selling, general and administrative expense in 1996 of
$996,000.

Research and development expense for the year ended December 31, 1997 was
$219,000, a decrease of $53,000 compared to $272,000 for the same period of
1996. The decrease was the result of lower developmental cost on new product
lines and lower labor cost resulting from not having contract engineers on
staff.

Interest and other income of $11,000 for the year ended December 31, 1997
was $6,000 lower than  1996 interest of $17,000. The decrease was due to
lower income from investments as a result of the decrease in funds invested.

FINANCIAL CONDITION

At December 31, 1997, the Company had net working capital of $1,068,000 and
a current ratio of 6.45 to 1. In 1997, net cash used in operating activities
increased to $42,000 from $18,000 in 1996, primarily as the result of the
Company's net loss versus net income offset in part by increased non- cash
charges for depreciation, amortization and inventory reserves and changes in
other working capital accounts.

     On February 6, 1998, the Company received $1,033,000 as proceeds of an
insurance policy payable upon the death of Ronald R. Jones. Pursuant to an
agreement between the Company and Ronald R. Jones, the Company will
repurchase all of Ronald R. Jones' 187,500 shares from the estate of Ronald
R.   Jones for the price of approximately $181,640.  The repurchase will
take place on or before May 5, 1998. The Company also anticipates paying off
the balance of the mortgage note collateralized by the Company's operating
facility. The balance of the funds will be available for operations.

The Company's credit line expired on  July 1, 1996, and since it had not
been used, the Company did not pursue its renewal. The Company believes
future liquidity needs will be met by a combination of cash generated from
future operations, the reduction of investments and existing cash balances.

          Page 32


CRL believes that its financial resources are adequate to fund its
operations in 1998.

Receivables at December 31, 1997 of $112,000 were $78,000 lower than the
December 31, 1996 balance of $190,000. The decrease was due to the decrease
in sales in the fourth quarter of 1997 compared to  the fourth quarter of
1996 of $307,716. The Company's credit policy remains the same as in
previous years, with letters-of-credit for international shipments and
short-term extension of payment terms to domestic dealers.

Inventories of $883,000 at December 31, 1997 decreased $73,000 compared to
$956,000 at December 31, 1996. The decrease was due to lower levels of raw
materials and an increase in the allowance for inventory obsolescence,
offset by an increase in finished goods.

There were no major capital expenditures in 1997, and none are anticipated
for 1998.

The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year is commonly referred to as the Year 2000 compliance issue. The
Company expects to be Year 2000 compliant by year end 1998 by continuing to

upgrade its current accounting and financial software. The Company's
accounting software for its financial systems is under a maintenance
contract which covers Year 2000 compliance, so no additional costs are
expected to be incurred.

The documents includes "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1996. Management's
anticipation of future events is based upon assumptions regarding levels of
competition, research and development results, raw material markets, the
markets in which the Company operates, and stability of the regulatory
environment. Any of these assumptions could prove inaccurate, and therefore
there can be no assurance that the forward-looking information will prove to
be accurate.


          Page 33



CIRCUIT RESEARCH LABS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
YEARS ENDED DECEMBER 31, 1996 AND 1995

RESULTS OF OPERATIONS


The following tables set forth financial information for each of the four
quarters of the year ended December 31, 1996 and for the years ended
December 31, 1996 and 1995.

                                1996 Quarters Ended




                             Mar 31    Jun 30    Sep 30     Dec 31

Net sales                  $607,264  $599,761  $631,295   $686,550
Other income                  5,005     3,461     4,215      4,179

Total revenues             $612,269  $603,222  $635,510   $690,729


Gross profit on net sales  $390,921  $354,460  $360,987   $291,296
Gross profit percent            64%       59%       57%        42%

Net income                  $21,232  $ 30,970   $64,984     $5,974
Net  income percent              3%        5%       10%       .01%


Income per share               $.04      $.05      $.10       $.01

                                           Years Ended December 31
                                               1996       1995

Net sales                                    $2,524,870 $1,884,402
Other income                                      16,860     26,524

Total revenues                               $2,541,730 $1,910,926

Gross profit on net sales                    $1,397,664 $1,188,266
Gross profit percent                                55%        63%

Net income (loss)                              $123,160 $(306,720)
Net income (loss) percent of net sales
5%                    (16)%

Income (loss) per share                            $.21    $ (.51)

The primary factors affecting the results of the Company's 1996 operations
compared to 1995 were an increase in sales, as well as reductions in
selling, general and administrative expenses and research and development
costs.

          Page 34



Net sales in 1996 increased 34% to $2,525,000 compared  to $1,884,000 for
1995. The increase was the result of increased sales of CRL's audio
processing equipment, the sales of package paging systems that compliment
the sales of CRL's SC100, and revenues from CRL's circuit board assembly
division.

Cost of goods sold in 1996 was 45% of net sales compared to 37% in 1995. The
increase was the result of the expected lower profit margins in the sales of
package paging systems and CRL's circuit board assembly division. The cost
of goods sold on CRL's main product lines for the year ended December 31,
1996 was 38% which was consistent with 37% for the same period of 1995.

Selling, general and administrative expense in 1996 of  $996,000 was
comparable to the selling, general and administrative expense in 1995 of
$1,056,000. The $60,000 decrease was due primarily to a decrease in domestic
and international marketing costs including travel and trade show costs.

Research and development expense for the period ended December 31, 1996 was
$272,000 a decrease of $158,000 compared to the same period of 1995 of
$430,000. The decrease was the result of lower developmental cost on the new
product lines and lower labor cost resulting from not having contract
engineers on staff.

Interest and other income of $17,000 for the period ended December 31, 1996
was $10,000 lower than for the same period  of 1995 of $27,000. The decrease
was due to lower income from investments as a result of the decrease in
funds invested.

FINANCIAL CONDITION

At December 31, 1996, the Company had net working capital of $1,191,000 and
a current ratio of 5.97 to 1. In 1996, net cash used in operating activities
decreased to $18,000 from $81,000 in 1995, primarily as the result of the
Company's net income versus net loss offset in part by net reductions in
accounts payable and accrued expenses.

Receivables at December 31, 1996 of $190,000 increased from the December 31,
1995 balance of $162,000, based on fourth quarter sales of $687,000 in 1996
compared to $436,000 in 1995.

Inventories of $956,000 at December 31, 1996 increased $119,000 compared to
$837,000 of inventories at December 31, 1995. The increase was the result of
raw material purchases for the production of the Company's product, the

DP-100.

There were no major capital expenditures in 1996.




          Page 35



 INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Circuit Research Labs, Inc.
Tempe, Arizona

We have audited the accompanying consolidated balance sheets of Circuit
Research Labs, Inc. and  subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.


In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Circuit Research Labs, Inc.
and subsidiaries at December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.


As discussed in Note 12, the Company's Secretary/Treasurer was appointed
President and Chief Executive Officer on January 2, 1998, following the
death on the previous day of the Company's then President and Chief
Executive Officer.


DELOITTE & TOUCHE LLP
Phoenix, Arizona

March 20, 1998




          Page 36




CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996


ASSETS                                          1997     1996


CURRENT ASSETS:
    Cash                                   $  119,851  $  48,048
    Securities available-for-sale (Note 3)     89,607    167,961
    Accounts receivable, less allowance for
    doubtful accounts of $6,520               112,320    189,616
     Inventories (Note 4)                     883,125    955,922
     Prepaid expenses and other                58,346     69,628

         Total current assets               1,263,249  1,431,175

PROPERTY, PLANT AND EQUIPMENT - Net
Notes 5 and 6)                                531,555    578,564
OTHER ASSETS - Net                             51,794    159,851
TOTAL                                      $1,846,598 $2,169,590


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                        $  53,382   $ 64,650
    Accrued salaries and benefits              63,086     65,699
    Accrued professional fees                  29,302     21,976
    Customer deposits                          26,180     40,432

    Other accrued expenses and liabilities      7,315     31,826
    Current portion of long-term debt (Note 6) 16,481     15,228
Total current liabilities                     195,746    239,811

LONG-TERM DEBT - Net of current portion
(Note 6)                                      105,656    122,287
         Total liabilities                    301,402    362,098


STOCKHOLDERS' EQUITY (Note 7):
    Preferred stock, $100 par value -
    authorized, 500,000 shares, none issued
    Common stock, $.10 par value - authorized
    20,000,000 shares,597,682  shares issued
    and outstanding                            59,768     59,768
    Additional paid-in capital              1,247,240  1,247,240

    Retained earnings                         238,188    500,484
         Total stockholders' equity         1,545,196  1,807,492
TOTAL                                      $1,846,598 $2,169,590

See notes to consolidated financial statements.


          Page 37



CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1997 AND 1996



                                                1997      1996

NET SALES (Note 10)                        $1,953,521 $2,524,870

COST OF GOODS SOLD                            990,626  1,127,206

              Gross profit                    962,895  1,397,664

OPERATING EXPENSES (Note 11):
    Selling, general and administrative       995,550    995,882
    Research and development                  219,090    272,354

              Total operating expenses      1,214,640  1,268,236

 (LOSS) INCOME FROM OPERATIONS               (251,745)   129,428

OTHER INCOME (EXPENSE):
   Interest and other income                   11,184     16,860

   Interest expense                          (18,685)    (23,078)

              Total other expense             (7,501)     (6,218)

(LOSS) INCOME BEFORE INCOME TAX
PROVISION                                   (259,246)    123,210

INCOME TAX PROVISION  (Note 9):                3,050          50

NET (LOSS) INCOME                        $  (262,296) $  123,160

(LOSS) INCOME PER COMMON SHARE -
BASIC (Note 8)                                 $(.44)     $ .21

(LOSS) INCOME PER COMMON SHARE -

DILUTED (Note 8)                               $(.44)     $ .21


See notes to consolidated financial statements.



          Page 38




CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996


                                             Unrealized
                                            Appreciation
                          Additional               On
                  Common   Paid-in   Retained  Securities
                   Stock   Capital  Earnings  Available-
                                               for-Sale   Total

BALANCE,

JANUARY 1, 1996   $59,768 $1,247,240 $ 377,324  $4,906  $1,689,238

Unrealized
depreciation on
securities available-
for-sale                                        (4,906)    (4,906)

Net income                             123,160             123,160

BALANCE,
DECEMBER 31, 1996  59,768  1,247,240   500,484           1,807,492

Net loss                              (262,296)           (262,296)

BALANCE,
DECEMBER 31, 1997 $59,768 $1,247,240 $  238,188    $0   $1,545,196

 See notes to consolidated financial statements.



          Page 39




CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
               1997      1996
OPERATING ACTIVITIES:
Net (loss)  income                        $(262,296)  $  123,160

 Adjustments to reconcile net
 (loss) income  to net cash used in
   operating activities:
   Depreciation and amortization             103,866       80,958
   Loss on disposal of assets                 10,382
   Increase in inventory reserves             44,000       25,000
   Changes in assets and liabilities:
         Accounts receivable                  77,296     (27,374)
         Inventories                          28,797    (144,294)
         Prepaid expenses and other           11,282      (2,385)
         Other assets                        (10,244)      4,832
         Accounts payable and accrued
         expenses                            (45,318)    (78,255)
           Net cash used in operating
           activities                        (42,235)    (18,358)

INVESTING ACTIVITIES:
    Capital expenditures                     (36,101)    (65,370)
    Proceeds on sale of fixed assets                       3,000
    Purchase of securities                  (208,437)   (264,931)
    Proceeds from sale or maturity
    of securities                            289,764      389,731

    Payments received on stockholder notes                  1,081
           Net cash provided by investing
           activities                         48,226       60,511

FINANCING ACTIVITIES:
     Principal payments on long-term debt    (15,378)    (20,079)
     Redemption of life insurance cash
     surrender value                          81,190
           Net cash provided by (used in)
           financing activities               65,812     (20,079)

           NET INCREASE  IN CASH              71,803      22 074

CASH, BEGINNING OF YEAR                       48,048       25,974
CASH, END OF YEAR                          $ 119,851    $  48,048

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for interest                $  18,685   $   23,078
     Cash paid for income taxes               $3,050         $ 50

    See notes to consolidated financial statements.

          Page 40


CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996


1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Principles of Consolidation - The consolidated financial statements
   include the accounts of Circuit Research Labs, Inc. and its wholly-owned
   subsidiaries:  CRL Systems, Inc., National Communications Research
   Center, Inc. ("NCRC") and CRL International, Inc. (collectively, the
   "Company").   Significant intercompany accounts and transactions have
   been eliminated in consolidation.

   Securities available-for-sale are securities being held for indefinite
   periods of time, including securities that management intends to use for
   liquidity needs or that may be sold in response to changes in interest
   rates, prepayments or other factors and are carried at estimated fair
   value, with the net, after-tax unrealized gain or loss recorded as a
   separate component of stockholders' equity with no effect on current
   results of operations. Realized gains and losses are included in other
   income and are computed using specific identification.

   Inventories are stated at the lower of cost (first-in, first-out method)
   or market.

   Property, plant and equipment are stated at cost.  Depreciation is
   computed using the straight-line method over the estimated useful lives
   of the related assets ranging from 2 to 5 years for furniture, fixtures,
   machinery and equipment, and 31.5 years for building and improvements.

   Other assets consist principally of  cash surrender values on officers'
   life insurance and patents which are stated at cost less amortization
   computed on the straight-line method over the underlying asset's
   estimated useful life. Accumulated amortization of patents was $38,079
   and $36,979 at December 31, 1997 and 1996, respectively.

   Long-Lived Assets - In accordance with Statement of  Financial
   Accounting Standards ("SFAS") No. 121, the Company reviews the carrying
   value of its long-lived assets and identifiable intangibles for possible
   impairment whenever events or changes in circumstances indicate that the
   carrying amount of assets to be held and used may not be recoverable.
   For assets to be disposed of, the Company reports long-lived assets and
   certain identifiable intangibles at the lower of carrying amount or fair
   value less cost to sell. During 1997, the Company wrote off the
   remaining $26,000 of non-compete agreement related to its 1995
   acquisition of Desert Assemblies as the results of this division were


          Page 41


   not as profitable as originally anticipated. Such amount has been
   included in cost of goods sold.

   Revenue is recognized on sales of products at the time of shipment.

   Research and development costs are charged to expense as incurred.

   Income Taxes - Income tax expense is calculated under the liability
   method as required under SFAS No. 109.  Under the liability method,
   deferred tax assets and liabilities are determined based upon the
   differences between financial statement carrying amounts and the tax
   bases of existing assets and liabilities and are measured at the tax
   rates that will be in effect when these differences reverse.

   Financial Instruments - SFAS No. 107 "Disclosures About Fair Value of

   Financial Instruments" was adopted for the year ended December 31, 1996.
   SFAS No. 107 requires disclosures of the estimated fair value of certain
   financial instruments. The Company has estimated the fair value of its
   financial instruments using available market data. However, considerable
   judgment is required in interpreting market data to develop estimates of
   fair value. The use of different market assumptions or methodologies may
   have a material effect on the estimates of fair value.  The carrying
   values of cash, securities available-for-sale, receivables, accounts
   payable and long-term debt approximate fair values due to the short-term
   maturities or market rates of interest of these instruments.

   Income (Loss) Per Share - In March 1997, the Financial Accounting
   Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share",
   which is effective for financial statements for both interim and annual
   periods ending after December 15, 1997. The Company has implemented this
   Statement and, as required, has restated income (loss) per share ("EPS")
   for all periods presented. This new standard requires dual presentation
   of "basic" and "diluted" EPS on the face of the statement of operations
   and requires a reconciliation of the numerator and denominator of basic
   and diluted EPS calculations. (See Note 8). Basic income per common
   share is computed on the weighted average number of shares of common
   stock outstanding during each period. Diluted income per common share is
   computed on the weighted average number of shares of common stock
   outstanding plus additional shares representing the exercise of
   outstanding common stock options using the treasury stock method.

    Preferred stock may be issued in amounts with such designations,
    preferences, voting rights, privileges and such other restrictions and
    qualifications as the Board of Directors may establish.  No preferred
    stock has been issued.

   New accounting pronouncements - In June 1997, the FASB issued SFAS No.
   130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures
   About Segments of an Enterprise and Related Information", which are
   effective for financial statements for periods beginning after December

          Page 42


   15, 1997. SFAS No. 130 requires that an enterprise (a) classify items of
   other comprehensive income by their nature in a financial statement and
   (b) display the accumulated balance of other comprehensive income
   separately from retained earnings and additional capital in the equity
   section of a statement of financial position. SFAS No. 131 establishes
   standards for the way that public enterprises report information about
   operating segments in annual financial statements and requires that
   those enterprises report selected information about operating segments
   in interim financial reports issued to shareholders. It also establishes
   standards for disclosures about products and services, geographic areas
   and major customers. The Company has not completed evaluating the
   effects these statements will have on its financial reporting and
   disclosures. The statements will have no effect on the Company's
   financial position or results of operations.

   Use of estimates - The preparation of financial statements in conformity
   with generally accepted accounting principles necessarily requires
   management to make estimates and assumptions that affect the reported
   amounts of assets and liabilities and disclosure of contingent assets
   and liabilities at the date of the financial statements and the reported
   amounts of revenues and expenses during the reporting period.  Actual
   results could differ from these estimates.

   Reclassifications - Certain reclassifications were made to the
   1996 financial statements to conform with the 1997
   presentation.

2. DESCRIPTION OF BUSINESS

    The Company develops, manufactures and markets audio processing and
    transmission encoding equipment for the broadcast and professional
    entertainment industries. In addition,the Company has become a value
    added reseller of equipment  to build RDS/RBDS paging systems. CRL
    configures the system to the customer's requirements and for an
    additional fee, can oversee the installation of the system. The Company
    also acts as a subcontractor for circuit board assemblies, since
    December 4, 1995 when it purchased certain assets of Desert Assemblies,
    a former contractor and sub-assembler for the Company.

3. SECURITIES  AVAILABLE-FOR-SALE

   SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
   Securities" requires the classification of securities at acquisition
   into one of three categories: held-to-maturity, available-for-sale or
   trading -- with different reporting requirements for each
   classification.  All of the Company's marketable securities are
   classified as available-for-sale. The fair value of the Company's
   securities are estimated based on quoted market prices for those or
   similar instruments.

          Page 43

   A summary of the Company's  securities is as follows at December 31:
                                                1997      1996
   Amortized cost and estimated fair value:
       United States Treasury bonds            $ 89,607 $117,961
        Preferred stocks                                  50,000
                            Total              $ 89,607 $167,961

   At December 31, 1997, the United States Treasury bonds mature
   in 1998.

4. INVENTORIES

   Inventories consist of the following at December 31:
                                                1997      1996

   Raw materials and supplies                 $176,439  $335,072
   Work in process                             289,690   314,291
   Finished goods                              416,996   306,559
   Total                                      $883,125  $955,922

5. PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment consist of the following at

   December 31:
                                                1997     1996

   Land                                       $130,869  $130,869
   Building and improvements                   497,004   497,004
   Furniture and fixtures                      300,628   397,546
   Machinery and equipment                     599,864   616,081


   Total                                     1,528,365 1,641,500
   Less accumulated depreciation               996,810 1,062,936

   Property, plant and equipment - net       $ 531,555 $ 578,564

6. LONG-TERM DEBT

    Long-term debt consists of the following at December 31:

                                                  1997     1996
    12.7% mortgage note collateralized by

    the Company's operating facility requiring
    monthly principal and interest payments of
    $1,913 through April 2004                  $ 95,166 $104,385

    Noninterest-bearing note issued in
    connection with acquisition of Desert

          Page 44


    Assemblies,requiring annual payments of
    $11,000 through January 2000                 30,000   39,000

    Less unamortized discount based on imputed
    interest rate of 10%                         (3,029) (5,870)
    T otal                                      122,137 137,515
    Less current portion                        (16,481)(15,228)

    Long-term debt, net of current portion     $105,656 $122,287

    Principal payments on long-term debt are scheduled as follows:  1998,
    $16,481; 1999, $21,838; 2000, $24,521, 2001, $15,465, 2002 $17,105 and
    $26,727 thereafter.

    The Board of Directors of the Company has elected to provide
    compensation to two principal stockholders for their continuing
    guarantee of the long-term note payable for the Company's oper
    ating facility.  Such compensation is calculated at 3% of the
    outstanding balance of the long-term note payable at each fiscal
    year-end .

7. STOCK OPTIONS


    In May 1994, the Company's stockholders approved the Company's 1994
    Stock Option Plan, which set aside an aggregate of 60,000 shares of
    common stock for which options may be granted to employees, officers,
    directors, and consultants.  Options granted and not exercised under the
    Company's previous plan were canceled and new options were granted. In
    accordance with the plan, 15,312 options have been granted. Information
    with respect to the stock option transactions is as follows:

                                                         Weighted
                                                     Average Exercise
                                           Shares          Price
   Outstanding at January 1, 1996          14,062          $1.25
   Canceled                                (3,750)         $1.25
   Outstanding at December 31, 1996        10,312          $1.25
   Granted                                  5,000          $2.00

   Outstanding at December 31, 1997        15,312          $1.49

   Options are typically exercisable upon the grant date for up to
   3 years at a price equal to 100% of the fair market value at
   the date of grant. All options are currently exercisable, and
   the expiration date is May 6, 1999.  The aggregate exercise
   price of options outstanding at December 31, 1997 was $22,890.

   The estimated fair value of options granted during 1997 was
   $.51 per share. The Company applies Accounting Principles Board
   Opinion No. 25 and related interpretations in accounting    for
   its stock option plan. Accordingly, no compensation cost has
   been recognized for its stock option plan. Had compensation
   cost for the Company's stock option plan been determined

          Page 45


   based on the fair value at the grant dates for awards
   consistent with the method of SFAS No.123, the Company's net
   loss per share for the year ended December 31, 1997  would have
   been increased to the pro forma amounts indicated below:

   Net loss - as reported                     $(262,296)
   Net loss - pro forma                        (264,846)

   Loss per share - as reported                   (0.44)
   Loss per share - pro forma                     (0.44)

   The fair market value of each option grant is estimated on the
   date of grant using the Black-Scholes options pricing model
   with the following weighted-average assumptions used for
   grants: no dividend yield, expected volatility of 35%,
   risk-free interest rate of 7%, and expected lives of  two
   years.

8. INCOME (LOSS) PER SHARE

   As discussed in Note 1, the following is a reconciliation of
   the numerator and denominator of the basic and diluted income
   per share computations for the year ended December 31, 1996 as
   required by SFAS No. 128. Loss per share amounts for the year
   ended December 31, 1997 are calculated using only the weighted
   average outstanding shares of 597,682. Options to purchase
   10,312 and 5,000 shares of common stock at $1.25 and $2.00 per
   share, respectively, were outstanding during the year ended
   December 31, 1997 but were not included in the computation of
   diluted EPS because their effect would be anti-dilutive.

                            For the Year Ended December 31, 1996
                              Income    Shares      Per Share
                            (Numerator)(Denominator)  Amount
   Basic
   Income available to
   common stockholders        $ 123,160     597,682   $  0.21
   Effect of dilutive stock
   options                                    2,222

   Diluted
   Income available to common
   stockholders and assumed
   conversions                $ 123,160     599,904   $  0.21



          Page 46


9. INCOME TAXES

   The principal reasons for the difference between the income tax
   provision and the amounts computed by applying the statutory income tax
   rates to (loss) income before income tax provision for the years
   ended December 31, are as follows:
                                                 1997     1996

   Federal tax at statutory rates              $(88,000)$ 31,000
   State tax at statutory rates                 (15,600)  11,000
   Preferred foreign income                      22,700
   Officers' life insurance                       5,900    4,300
   Use of net operating loss                             (47,450)
   Increase in valuation allowance               83,700
   Other                                        ( 5,650)  1,200
   Total                                        $ 3,050     $ 50

     At December 31, deferred taxes represent the tax effect of temporary
   differences related to:
                                                 1997    1996
   Current deferred taxes:
      Inventory capitalization                 $ 20,600  $ 22,300
      Prepaid expenses                          (22,900)  (24,900)
      Inventory obsolescence reserve             57,800    40,100
      Allowance for doubtful accounts             2,600     2,600
      Other                                                   500
      Deferred tax valuation allowance          (58,100)  (40,600)
   Total                                       $      0 $       0

   Non-current deferred taxes:

      Depreciation and amortization            $(33,200) $(28,000)
      Operating loss carryforward              144,600    70,500
      Federal general business credit
      carryforward                              85,000    85,000
      Other                                                2,700
      Deferred tax valuation allowance         (196,400) (130,200)
    Total                                         $   0 $      0

   At December 31, 1997, a valuation allowance totaling $ 254,500
   was recorded which relates to, among other items, federal  and
   state net operating losses and federal general business credit
   carryforwards for which the utilization is not reasonably
   assured. Net operating loss carryforwards of approximately
   $362,000 which expire through 2012 are available for federal
   income tax purposes.

10.SALES TO MAJOR CUSTOMERS AND EXPORT SALES

   Sales during each of the two years ended December 31, 1997 were
   conducted primarily through wholesale distributors and dealers. Two

          Page 47


   wholesale distributors accounted for 13% and 14% of net sales for the
   year ended December 31, 1997 and 7% and 9%, respectively, for the year
   ended  December 31, 1996.

   International sales in 1997 and 1996 totaled approximately $1,140,000
   and $1,549,400, respectively.  Foreign sales are made through the
   Company's wholly-owned foreign sales corporation.  The Company requires
   that all sales be paid in U.S. currency.  Accordingly, there are no
   foreign currency gains or losses for the years ended December 31, 1997
   or 1996.  The Company's export sales by region are as follows:

                                      Export Sales

   Region                       1997      %       1996       %

   Europe                   $  186,100   16%  $  378,800    24%
   Pacific Rim                 507,500   44      716,100    46
   Latin and South America      77,200    7      139,000     9
   Canada and Mexico           214,000   19      151,300    10
   Other                       155,200   14      164,200    11
   Total                    $1,140,000  100%  $1,549,400   100%


11.EMPLOYEE BENEFIT PLAN

   As of January 1, 1991, the Company adopted a 401(k) profit sharing plan
   (the "Plan") for the benefit of all employees who meet certain
   eligibility requirements.  The Company will match    50% of employee
   contributions up to a maximum contribution by the Company of 3% of a
   participant's annual compensation.  Total annual contributions to a
   participant's account may  not exceed 25% of compensation.  Company
   contributions made to the Plan were $22,132 and $13,189 in 1997 and
   1996, respectively.

12.   SUBSEQUENT EVENTS

   Ronald R. Jones, who was the President and a Director and Chief
   Executive Officer of the Company, died on January 1, 1998. At a special
   meeting of the Board of Directors of the Company on January 2, 1998,
   Gary D. Clarkson was appointed President and Chief Executive Officer.
   Mr. Clarkson had been the Secretary/Treasurer and a Director of the
   Company, and was co-founder of the Company with Ronald Jones in 1974.

   On February 6, 1998, the Company received $1,033,000 as proceeds of an
   insurance policy payable upon the death of Ronald Jones. Pursuant to an
   agreement between the Company and Ronald Jones, the Company will
   repurchase all of Ronald Jones' 187,500 shares from the estate of Ronald
   Jones for the price of approximately $181,640. The repurchase will take
   place on or before May 5, 1998.



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   Circuit  Research Labs, Inc. is currently listed on the NASDAQ Small Cap
   market. NASDAQ is raising its requirements for continued listing. It
   will require among other criteria, a public float of 500,000 shares, and
   the Company's public float is approximately 295,000 shares. "Public
   float" is defined as shares that are not held directly or indirectly by
   any officer or director of the issuer and by any other person who is the
   beneficial owner of more than 10% of the total shares outstanding.

   NASDAQ will require a minimum market value of the public float to be
   $1,000,000. The bid price on March 20, 1998 for the Company's common
   stock was $2.00. The highest bid price in 1997 was $2.19. The present
   market value of the Company's public float is approximately $590,000. In
   addition, the Company may not meet other new monetary tests.

   Based on present information, the Company will not be able to meet
   these new NASDAQ requirements. The Company's shares will be offered the
   services of another quotation service - the OTC Bulletin Board. It is
   anticipated that the shares will be listed on the OTC Bulletin Board after
   April 1, 1998.


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STOCK MARKET INFORMATION

CIRCUIT RESEARCH LABS, INC.

The Company's common stock is publicly traded in the over-the-counter market
(NASDAQ symbol: CRLI) and commenced trading on November 4, 1983.  As of
February 28, 1997, there were 597,682 shares of common stock issued and
outstanding, with an estimated 324 stockholders of record.  The following
table sets forth the high and low closing bid prices as reported by the
National Association of Securities Dealers Automated Quotations (NASDAQ).

                              1997 - Quarters Ended
                      March 31 June 30  September 30 December 31
Bid Quotation Range


High                    $2.19    $1.94         $1.63      $1.44
Low                     $1.75    $1.50         $1.00      $ .94

                              1996 - Quarters Ended
                      March 31  June 30  September 30 December 31
Bid Quotation Range


High                    $1.63    $1.75         $1.63      $1.94
Low                     $1.25    $1.50         $1.50      $1.63

Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.

Circuit  Research Labs, Inc. is currently listed on the NASDAQ Small Cap
market. NASDAQ is raising its requirements for continued listing. It will
require among other criteria, a public float of 500,000 shares, and the
Company's public float is approximately 295,000 shares. "Public float" is
defined as shares that are not held directly or indirectly by any officer or
director of the issuer and by any other person who is the beneficial owner
of more than 10% of the total shares outstanding.

NASDAQ will require a minimum market value of the public float to be
$1,000,000. The bid price on March 20, 1998 for the Company's common stock was
$2.00. The highest bid price in 1997 was $2.19. The present market value of
the Company's public float is approximately $590,000. In addition, the
Company may not meet other new tests.

Based on present information, the Company will not be able to meet these
new NASDAQ requirements. The Company's shares will be offered the services of
another quotation service - the OTC Bulletin Board. It is anticipated
that the shares will be listed on the OTC Bulletin Board after April 1,
1998.

          Page 50


DIVIDENDS

The Company has not paid any dividends on its common stock for the two most
recent fiscal years and intends to retain its earnings for use in the
development of its business.  Therefore, the Company does not expect to pay
cash dividends at any time in the foreseeable future.  No contractual
restrictions or limitations exist on the Company's present or future ability
to pay dividends.


          Page 51



CIRCUIT RESEARCH LABS, INC.

                            CORPORATE DIRECTORY

OFFICERS AND DIRECTORS:


Gary D. Clarkson
Chairman of the Board of Directors,
President, Chief Executive Officer and
Chief Operating Officer

Erle M. Constable
Assistant Treasurer and Director

Carl E. Matthusen
Director
General Manager KJZZ/Sun Sounds

Gary M. Hamker
Director

Royce Jones
Director

Dennis L. Drew
Secretary/Treasurer and  Vice
President Operations


                           CORPORATE INFORMATION
                          Corporate Headquarters:

                        Circuit Research Labs, Inc.
                          2522 West Geneva Drive
                           Tempe, Arizona  85282

Transfer Agent and Registrar:           Independent Auditors:
    Harris Trust and Savings Bank         Deloitte & Touche LLP
    311 W. Monroe , 11th Floor          2901 North Central Avenue

    Chicago, Illinois 60690             Suite 1200
                                        Phoenix, Arizona 85012

Financial Public Relations Counsel:   Corporate Counsel:
    The Equity Group Inc.               James S. Freedman, Esquire
    919 Third Avenue                    4455 East Camelback Rd., Suite E160
    New York City, New York 10022       Phoenix, Arizona  85018

 Additional Information:
 A copy of Circuit Research Labs, Inc.'s current Form 10-KSB has been filed
  with the Securities and Exchange Commission and is available on request
   without charge by writing to the Company's corporate headquarters and
                  marked:  Attention:  Investor Relations.


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