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

                                 FORM 10-K

     (Mark One)
(X)  Annual Report Pursuant to Section 13 or 15(d) of The Securities
     Exchange Act of 1934 For the Fiscal Year Ended December 31, 1998

                                  OR

( )  Transition Report Pursuant to Section 13 or 15(d) of The
     Securities Exchange Act of 1934

                       Commission File Number 0-275

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

     Pennsylvania                       23-1263194
  (State of Incorporation)      (IRS Employer Identification No.)

  150 Locust Street, P. O. Box 36, Macungie, Pennsylvania      18062-0036
  (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code           610-966-2200

       Securities registered pursuant to section 12 (b) of the Act:
                                     
                                   None
                                     
       Securities registered pursuant to section 12 (g) of the Act:

               Class B Common Shares, par value $1 per share
                             (Title of Class)

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

                             Yes   X        No

Indicate by check mark if disclosure of delinquent filers pursuant to  Item
405  of  Regulation S-K is not contained herein, and will not 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-K  or  any
amendment of this Form 10-K.  (  X  )

The  Class  A voting stock of the registrant is not registered pursuant  to
the  Securities  Exchange  Act  of  1934,  is  not  publicly  traded,  and,
therefore, no market value information exists for such stock held  by  non-
affiliates.

The number of shares outstanding of each of the Registrant's classes of
common stock, as of the close of business on March 15, 1999:

Class A - Voting     84,002           Class B - Non-voting     1,086,709
<PAGE>
                            ALLEN ORGAN COMPANY
                                     
                                   INDEX
                                     
                                                                        
                                  PART I

1.    Business
        - General developments of business                        
        - Industry Segments                                        
        - Description of business                                  
        - Financial information about foreign operations and export sales
2.    Properties                                                    
3.    Legal Proceedings                                             
4.    Submission of Matters to a Vote of Security Holders           

                                     
                                  PART II

5.    Market for the Registrants Common Stock and
      Related Security Holder Matters                            
6.    Selected Financial Data                                       
7.    Management's Discussion and Analysis of Financial Condition and
       Results of Operations                                      
8.    Financial Statements
9.    Changes in and Disagreements with Accountants on Accounting
       and Financial Disclosure

                                 PART III

10.   Directors and Executive Officers of the Registrant         
11.   Executive Compensation
12.   Security Ownership of Certain Beneficial Owners and Management 
13.   Certain Relationships and Related Transactions

                                  PART IV

14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K 

Signatures                                                       

Exhibit
<PAGE>
                                  PART I
Item 1.   Business

          General developments of business.

                Incorporated  in Pennsylvania in 1945, Allen Organ  Company
          and  Subsidiaries ("Company") operate in four industry  segments:
          musical  instruments, data communications, electronic assemblies,
          and audio equipment.
                During  October 1998, the Company announced  its  plans  to
          permanently  close its manufacturing plant in  Rocky  Mount,  NC.
          Rocky Mount Instruments, Inc. (RMI) manufactured small organs and
          sub-assemblies for the Company's Musical Instruments segment.
               In December 1998, the Company established Allen Diversified,
          Inc.  as a wholly owned subsidiary of Allen Organ Company to hold
          and manage the Company's investment in its subsidiary Companies.
                The  Company is developing a line of Public Address  System
          products,  which  it demonstrated at an industry  trade  show  in
          January  1999.   The  Mixer  portion of these  products  utilizes
          Digital Signal Processor (DSP) technology also used in the  Allen
          digital   organs.   The  speaker  technology  was  developed   in
          conjunction  with  the Company's subsidiary,  Legacy  Audio.  The
          product  line will initially be targeted at small to  mid-  sized
          churches, auditoriums and the like. The Company expects to  begin
          shipping these products in the second half of 1999.

          Industry segments.

                The  Company  operates in four industry  segments:  musical
          instruments,  data  communications,  electronic  assemblies,  and
          audio  equipment.   For  financial  information  concerning   the
          segments, see Note 15 to the financial statements.

          Description of business.

              Musical Instruments.

                Allen Organ Company is a leading manufacturer of electronic
          keyboard musical instruments, primarily digital electronic church
          organs and accessories.  This segment accounted for 57%, 58%  and
          69% of revenue in 1998, 1997 and 1996 respectively.
               The principal market for the musical instruments segment are
          institutions, primarily churches.  Sales to the home market  make
          up  a  smaller  portion  of the segment's  sales.  The  segment's
          musical  instruments  are  distributed  mostly  through  dealers,
          primarily  independent retail music stores throughout the  United
          States,  with  a  lesser percentage distributed  through  dealers
          internationally.  The segment's business is not seasonal.
                The  principal raw materials used in the segment's products
          are  electronic  components and wood, all of  which  are  readily
          available from various sources without undue difficulty.
                The  segment does not engage in any significant amounts  of
          consignments,  extended payment terms, or lease guarantees.   The
          Company   is  contingently  liable  in  connection  with  certain
          customers' financing arrangements.  See Note 10 to the  financial
          statements.   The dollar amounts and number of times the  Company
          has had to honor these repurchase agreements are negligible.
                The  musical  instruments segment is not dependent  on  any
          single or small group of customers, the loss of which would  have
          a  material adverse effect on the business.  The dollar amount of
          the segment's unshipped order backlog at the end of February 1999
          and   1998  was  $6.3  million  and  $4.4  million  respectively.
          Approximately $5.7  million of these orders will be filled in the
          current  year  with the remaining $600,000 to be  filled  in  the
          following year.
                The  electronic organ industry is competitive involving  at
          least  five  (5)  domestic and foreign companies.   In  addition,
          there  are  many small pipe organ companies in the  institutional
          organ  market.  The organ market consists of two basic divisions,
          institutional  (primarily churches) and  home  or  entertainment.
          The Company believes it has a major position in the institutional
          market because of product performance and competitive prices, and
          a smaller percentage of the home or entertainment market.

              Data Communications.

                The  data  communications segment  operates  through  three
          majority owned subsidiaries, VIR, Inc., Linear Switch Corporation
          and  Eastern Research, Inc.  This segment accounted for 27%,  22%
          and 21% of revenues in 1998, 1997 and 1996 respectively.
               Data communications products are sold primarily to wholesale
          and  retail distributors worldwide and under OEM agreements  with
          several of its customers.  The segment maintains an inventory  of
          in-process  and finished goods to allow for rapid fulfillment  of
          customer orders which is expected in the industry.
                The  principal raw material used in the data communications
          products  are electronic components, which are readily  available
          from various sources without undue difficulty.
                The data communications segment derived 13% and 12% of  its
          1998 and 1997 revenue from one customer.
                VIR, Inc. (VIR) and Linear Switch Corporation (LSC)  During
          1997, these two companies combined their marketing and research &
          development functions under the name of "VIR Linear Switch".  The
          companies  design,  manufacture, and  market  a  number  of  data
          communication  products  including patch and  testing  equipment,
          often referred to as tech control products, test access equipment
          and  a  matrix  switch  which  can transport  high-speed  digital
          signals  and  allow "any-to-any" connectivity between  and  among
          connections.  The products are of varying complexity and are used
          to  connect, switch, test and trouble shoot data lines  in  large
          computer installations.
                 The  companies  compete  in  a  relatively  mature  field,
          producing  high  quality  products at  competitive  prices.   The
          companies have approximately four major competitors, all of which
          are larger than VIR/LSC.
                 With   the  need  for  higher  speed  and  more   reliable
          communications circuits increasing, VIR/LSC introduced in 1998, a
          new  family  of  products to provide the ability  to  access  and
          configure   these   higher  speed  circuits  for   various   test
          procedures.    Management   is   pursuing   strategic    customer
          relationships  in  an  effort  to  expand  distribution  of   its
          products.
                The dollar amount of unshipped order backlog at the end  of
          February  1999  and  1998 was $56,000 and $555,000  respectively.
          All orders are expected to be filled in the current year.
               Eastern Research, Inc. (ERI)  Designs and markets data inter-
          networking  products.   These  products  include  direct   access
          equipment  that allow users to utilize a broad range of  services
          offered by the telephone companies.
                ERI  competes in a growing market that is in excess of  $10
          billion.   However,  the company's current and projected  product
          lines and sales programs are targeted at only a fraction of  that
          market.   There  are  many competitors in  this  market  that  is
          dominated by several large data communications companies, such as
          Cisco  Systems,  Inc., Paradyne, Premisys and ADC  Kentrox.   The
          company's  strategy  has  been  to  target  existing,  yet  still
          growing,  market niches with products that provide  new  features
          and packaging with attractive pricing.
                ERI initially built its business in the CSU/DSU market  and
          has  also  developed router technology products.  These  products
          are relatively inexpensive and easy to manufacture. Thus, this is
          a  competitive  field  where margins can erode  as  new  products
          emerge.   During  1998,  the  company introduced  a  Frame  Aware
          CSU/DSU  that  it developed in conjunction with an OEM  agreement
          with one of its customers.
                ERI  is  focusing  on  its DNX (Digital  Exchange  Network)
          product  line,  a  narrowband DACS (Digital Access  Cross-connect
          Switch)  capable of access speeds from subrate to DS3.   The  DNX
          revenues  have  increased  as  a  percentage  of  sales  and   is
          considered  ERI's  flagship  product.   In  order  to   properly
          capitalize on this market's opportunities, ERI is implementing  a
          more aggressive marketing strategy and is also increasing product
          development   work.   This  will  continue  to  require   further
          investment through the coming year.
                ERI  has  been able to increase sales by working with,  and
          developing   strategic   customer   relationships    to    expand
          distribution of its products.  One such relationship,  which  ERI
          entered  into, is an OEM agreement to supply Lucent  Technologies
          with its DACS product line.
                The dollar amount of unshipped order backlog at the end  of
          February,  1999  and  1998  was $3.0  million  and  $1.2  million
          respectively.   All  orders are expected  to  be  filled  in  the
          current year.

              Electronic Assemblies.

                Allen Integrated Assemblies (AIA), a division of the  Allen
          Organ  Company,  provides subcontract manufacture  of  electronic
          assemblies  for  outside  customers.  The  electronic  assemblies
          segment is an outgrowth of the technical skills and manufacturing
          capabilities developed by the Company in its musical  instruments
          business. This segment accounted for 10%, 15% and 10% of  revenue
          in  1998,  1997, and 1996 respectively.  AIA derived 68%  of  its
          revenues  from  three customers in 1998 and 55% and  85%  of  its
          revenues from one customer in 1997 and 1996 respectively.
                The  electronic assemblies segment is very competitive with
          numerous   manufacturers  capable  of  producing  such  products.
          Customers are generally obtained from a geographic area close  to
          the manufacturer.  In order to improve its contract manufacturing
          capabilities, the segment is upgrading its manufacturing  systems
          and increasing its sales and marketing efforts.
                The  dollar amount of the segment's unshipped order backlog
          at  the  end of February 1999 and 1998 was $2.6 million and  $3.0
          million  respectively.  All orders are expected to be  filled  in
          the current year.

              Audio Equipment.

                The Audio Equipment segment began on April 1, 1997 with the
          acquisition of Legacy Audio, Inc. (LAI) discussed in  Note  2  of
          the  Financial Statements.  LAI designs, manufactures and markets
          high-quality  audio speaker cabinets for hi-fi  stereo  and  home
          theater applications.  It also markets electronic audio equipment
          amplifiers that are manufactured to its specifications  by  third
          party  suppliers.  This segment accounted for 6%  of  revenue  in
          1998  and  5% of revenues for the 9 month period from acquisition
          to December 31, 1997.
                The  principal  market for the audio equipment  segment  is
          individual  consumers for home use.  The segment's  products  are
          distributed directly to the customer and through Dealer  Audition
          Sites.  This segment's business is not seasonal.
                LAI's  manufacturing facility is currently  operating  near
          full capacity.  Many of their manufacturing needs are similar  to
          those required in the Company's musical instruments segment.  The
          Company  is  now building some of LAI's speaker cabinets  at  its
          Macungie, PA facility.
                The  principal raw materials used in the segment's products
          are  audio speakers, electronic components and wood, all of which
          are   readily  available  from  various  sources  without   undue
          difficulty.
                The  company  competes with several  other  high-end  audio
          speaker cabinet manufacturers including Martin-Logan, Thiel, B&W,
          Celestion, and others.
                LAI  is  not  dependent on any single, or small  group,  of
          customers.   The  dollar amount of the segment's unshipped  order
          backlog  at  the end of February 1999 and 1998 was  $246,000  and
          $579,000  respectively.  All orders are expected to be filled  in
          the current year.

          General.

                The  Company's working capital is sufficient  to  meet  the
          normal expansion of inventory and receivables.
                The  Company  spent $3,478,775, $2,654,662, and  $2,786,390
          annually  in  1998, 1997, and 1996 respectively on  research  and
          development.   The increase in 1998 is a result of the  Company's
          ongoing  commitment  to  new  product  development  and  support,
          primarily at Eastern Research.  The decrease in the 1997  expense
          relates   primarily  to  the  combining  of  the   research   and
          development efforts of VIR and LSC.
                The  Company and its subsidiaries employ approximately  544
          persons.
                The  Company is not aware of any problem in complying  with
          applicable federal, state, or local provisions with regard to the
          environment.  The manufacturing requirements do not  require  any
          special expenditures to meet environmental compliance.


          Financial information about foreign operations and export sales.
          
                The  Company does not own manufacturing or sales facilities
          in   any  foreign  countries.   See  Note  14  to  the  financial
          statements, for additional information on export sales.
                Export  sales are all made in US dollars and for  the  most
          part are made under Letter of Credit or on a prepaid basis.
                The  Company  has  established a Foreign Sales  Corporation
          within  the  meaning of the Internal Revenue Code of 1986.   This
          wholly-owned  subsidiary is Allen Organ  International,  Inc.,  a
          Virgin Islands corporation.

Item 2.   Properties

                The  following sets forth the location, approximate  square
          footage  and use of the Company's operating locations  segregated
          by  segment.   The  Company  believes  that  its  facilities  are
          generally suitable and adequate for its needs.

                                  Approximate
              Location           Square Footage               Use

         Musical Instruments and Electronic Assemblies:
          Macungie, Pennsylvania       242,000    Administrative, research and
                                                  manufacturing facility. 
                                                  Owned by Allen Organ Company.
                                                  Operating at approximately
                                                  90% capacity.

          Macungie, Pennsylvania        27,000    International sales,
                                                  exhibition  center,  museum 
                                                  and teaching  facility. 
                                                  Owned by Allen Organ Company. 
                                                  

          Rocky Mount, North Carolina   70,000    Manufacturing and  sales
                                                  facility. Owned by Rocky
                                                  Mount Instruments. Operating
                                                  at approximately 30% 
                                                  capacity. Operation will be 
                                                  closed during  1999 and the
                                                  property will be marketed for
                                                  sale.

         Data Communications:
          Southampton, Pennsylvania     22,000    Administrative, research
                                                  and  manufacturing  facility.
                                                  Leased until July, 2000.
                                                  Operating at approximately 
                                                  80% capacity.
                                             
         Moorestown, New Jersey         16,800    Administrative, sales and
                                                  research facility.  Leased
                                                  until February, 2001.

         Audio Equipment:
          Springfield,  Illinois        15,000    Administrative, research
                                                  and manufacturing facility.
                                                  Owned by Legacy Audio, Inc.
                                                  Operating at approximately
                                                  95% capacity.
                                             

Item 3.   Legal Proceedings

                There is no litigation requiring disclosure pursuant to Item
          103 of regulation S-K.

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

                No  matters  were  submitted to a vote of security  holders
          during the fourth quarter of fiscal year 1998.

                                  PART II

Item 5.   Market  for the Registrant's Common Stock and Related  Security
          Holder Matters

                The  Company's  Class A voting shares  are  not  registered
          pursuant  to  the  Securities Exchange Act of 1934  and  are  not
          publicly  traded.  The Company's Class B non-voting stock  trades
          on The NASDAQ Stock Market under the symbol AORGB.

                The high and low bid quotations for each quarter during the
          last two years as reported by NASDAQ Market Information System is
          as follows:

                  1998             High           Low

                  First Quarter    43             38
                  Second Quarter   42 1/2         37
                  Third Quarter    40 1/2         35
                  Fourth Quarter   39             33
                                                  
                  1997             High           Low

                  First Quarter    41             38 1/2
                  Second Quarter   41 1/4         39
                  Third Quarter    40 1/2         38 7/8
                  Fourth Quarter   44 3/4         39 3/4

                The  Company  has 8 Class A Shareholders and  340  Class  B
          Shareholders of record as of March 15, 1999.

                During  the past two fiscal years, the Company has declared
          dividends on both its class A and B shares as follows:

                Record of Quarterly Dividends Paid in 1998

                  Record Date        Payable     Amount

                  Cash   2/20/98      3/6/98      $.14
                  Cash   5/22/98      6/5/98      $.14
                  Cash   8/21/98      9/4/98      $.14
                  Cash  11/20/98     12/4/98      $.14
                                                  
                Record of Quarterly Dividends Paid in 1997

                  Record Date        Payable     Amount

                  Cash   2/21/97      3/7/97      $.14
                  Cash   5/23/97      6/6/97      $.14
                  Cash   8/22/97      9/5/97      $.14
                  Cash  11/21/97     12/5/97      $.14

Item 6.   Selected Financial Data

                                Years Ended December 31,
                   1998         1997         1996         1995         1994
                                                                  
Net Sales       $44,966,075  $40,348,084  $36,715,128  $30,024,761  $28,842,789
                                                      
Net (Loss)                   
Income          $  (616,711) $ 3,512,142  $ 3,865,876  $ 4,015,105  $ 4,449,703

Earnings (Loss)                    
per share       $     (0.52) $      2.79  $      2.88  $      2.94  $      3.25

Cash dividends                                                        
per share       $       .56  $       .56  $       .55  $       .55  $       .55

At Year End

 Total Assets   $61,989,953  $62,562,004  $63,966,646  $65,299,426  $58,464,695
                                                     
 Long-Term Debt,                                                  
  net of current 
  portion       $         0  $         0  $         0  $ 1,388,000  $         0

 The   1998  and  1997  results  of  operations  include  the  audio equipment
 segment acquired April April 1,  1997.  The 1998, 1997, 1996 and 1995 results
 of operations include the data communications segment acquired August 1, 1995.
    
Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

     Liquidity and Capital Resources:
        The  Company continues to maintain a strong financial position  and
     high  level of liquidity which enables it to generate funds internally
     to   meet   operating  needs,  capital  expenditures  and   short-term
     obligations.  Key indicators of the Company's liquidity are  presented
     below:
                                                    December 31,
                                              1998              1997
          Working Capital                  $39,994,941      $42,445,212
          Current Ratio                        10 to 1          15 to 1
          Debt to Equity Ratio                .08 to 1         .06 to 1

        The  Company's  ratio  of  debt to equity  has  remained  very  low
     because of management's continuing policy of financing expansion  with
     internally  generated funds.  This policy has enabled the  Company  to
     maintain  its  competitive  advantage  without  incurring  the   costs
     associated with borrowed funds.
        Cash  flows provided by operating activities increased during  1998
     as  compared to 1997 primarily due to reductions in inventory  in  the
     Musical   Instruments  and  Electronic  Assemblies  segments.    These
     decreases are the result of improvements in manufacturing methods  and
     inventory  management  discussed further below.   Inventory  decreased
     approximately $3.2 million and $600,000 in the Musical Instruments and
     Electronic  Assemblies segments, respectively, and increased  slightly
     in  the Data Communications and Audio Equipment segments.  The Company
     does not expect that inventory levels will change significantly during
     1999.   Cash  flows provided by operating activities  declined  during
     1997  compared  to  1996  primarily due to increased  working  capital
     requirements,  particularly accounts receivable and inventory.   These
     increases  were due primarily to new product introductions and  higher
     order   volumes   in   most  segments.   The  Company   expects   that
     approximately $2,000,000 will be required in 1999 to fund increases in
     working  capital,  primarily related to the growth of  its  subsidiary
     Eastern Research.
        Cash  flows used in investing activities during 1998 were  used  to
     purchase approximately $925,000 in machinery and equipment to be  used
     in   the   Musical  Instruments  and  Electronic  Assemblies  segments
     including approximately $200,000 for hardware and software related  to
     new   information  systems.   The  Data  Communications  segment  used
     approximately $552,000 primarily related to computer, office and  test
     equipment  purchased  to support the growth of Eastern  Research.   To
     continue Eastern Research's growth through 1999, the Company estimates
     that capital expenditures will approximate $1,500,000.
        During  1997  and  1996, cash flows from investing activities  were
     used  primarily to fund the purchase of treasury shares.   Cash  flows
     from  investing  activities were also used to fund the acquisition  of
     Legacy Audio, Inc. in April, 1997.  During 1997, the company increased
     its  expenditures  for property and equipment including  approximately
     $700,000  additional automated equipment and building improvements  to
     enhance its electronics manufacturing capabilities used in the musical
     instruments and electronic assemblies segments.
        During December 1998, the Company engaged an outside contractor  to
     upgrade the air handling systems in the wood and metal finishing  area
     of  its  Macungie, PA plant.  This addition is being made  to  improve
     product  quality  for  the Company's musical  instruments  and  Legacy
     speaker  cabinet production.  The total cost of this project  will  be
     approximately  $950,000  of  which  $177,000  has  been  paid  through
     December 31, 1998.
        During  1997 the Company began implementing new information systems
     which  will  be in place by mid 1999.  Through December 31,  1998  the
     Company   has  invested  nearly  $850,000  in  software  and  computer
     equipment  as  part of this project. The Company has  undertaken  this
     implementation as part of a business improvement program initiated  to
     up-grade production and product planning processes.  It is anticipated
     that  these improvements will provide long-term benefits in all  areas
     of the Company.
        See  Note 1 to the consolidated financial statements regarding  new
     accounting standards.

     Results of Operations:

     Sales and Operating Income
        Consolidated  net sales increased $4,617,991 (11%) during  1998  as
     compared  to  1997  primarily due to increased sales  in  the  Musical
     Instruments  segment  related to higher order volume  and  changes  in
     product  mix  and from the Data Communications segment resulting  from
     additional   sales   and  marketing  efforts   initiated   since   the
     acquisition.  In 1997, sales increased $3,632,956 (10%) as compared to
     1996 primarily due to sales from the audio equipment segment which was
     acquired in April, 1997 and increased sales in the data communications
     segment.
                                           December 31,                  
                                 1998            1997            1996       
                                                                
        Net Sales                                                         
        Musical Instruments
         Domestic            $21,748,131     $18,918,509     $19,824,334   
         Export                3,676,981       4,432,974       5,594,286   
          Total               25,425,112      23,351,483      25,418,620   
        Data Communications
         Domestic             11,036,926       6,933,787       6,229,961   
         Export                1,261,029       2,103,734       1,417,636   
          Total               12,297,955       9,037,521       7,647,597   
        Electronic Assemblies
         Domestic              4,727,975       5,935,381       3,648,911   
        Audio Equipment                                                  
         Domestic              2,422,507       1,812,138               0   
         Export                   92,526         211,561               0   
          Total                2,515,033       2,023,699               0   
                                                                         
        Total                $44,966,075     $40,348,084     $36,715,128   
                                                                         
        Income (Loss) from Operations                                    
        Musical Instruments  $   795,773     $ 2,718,085     $ 3,634,901   
        Data Communications   (3,397,020)     (1,069,165)       (349,785)   
        Electronic Assemblies    326,609         631,521         520,602   
        Audio Equipment           (9,846)        337,495               0   
         Total               $(2,284,484)    $ 2,617,936     $ 3,805,718   

       Musical Instruments Segment

           The   1998   increase  in  domestic  sales  reflects  continuing
       customer acceptance of the Company's Renaissance product line.   The
       1998  order rate exceeded 1997 resulting in an increase in the order
       backlog  at  year end of approximately $1,400,000 when  compared  to
       1997.
           The  1997 decrease in domestic sales reflects lower order  rates
       during  the  early  part  of the year.  New  orders  in  the  fourth
       quarter  of  1997  were approximately $500,000  ahead  of  the  same
       period  in 1996.  However, the product mix of these orders  required
       production  lead  times  beyond year end  and  increased  the  order
       backlog  at  year  end by approximately $900,000  when  compared  to
       1996.
           Export  sales decreased in 1998 and 1997, primarily from changes
       in  economic  conditions in certain world markets, particularly  Far
       East  countries.  Continuing economic troubles in foreign  countries
       and  foreign  exchange  rate fluctuations may affect  future  export
       sales.
           Gross  profit margins on sales were 24.6%, 28.1% and  31.8%  for
       the  three years ended December 31, 1998.  The decrease in the  1998
       gross  profit  margin is primarily due to additional costs  incurred
       as  part  of  a business improvement program initiated  to  up-grade
       production and product planning processes.  As part of this  program
       the  Company  is implementing new information systems, the  majority
       of  which  will be in place by mid 1999.  The Company  at  the  same
       time   has   been  improving  manufacturing  methods  and  inventory
       management,  which  has  resulted in a  reduction  in  inventory  of
       approximately $3,200,000 in this segment during 1998.   During  this
       process,  and  in  reducing its work-in-process and  finished  goods
       inventories,  the  segment  incurred  approximately  $1,100,000   in
       additional  overheads and expenses related to  unapplied  labor  and
       related overhead as it trained its work force.
           By  the  end  of  1997, manufacturing improvements  enabled  the
       Company  to  stop  organ production at its North  Carolina  facility
       leaving  only subassembly production there, consolidating all  organ
       production at the main manufacturing facility in Macungie, PA.   The
       North  Carolina  plant's remaining production of subassemblies  will
       be  phased out in 1999.  Increased capabilities at the Macungie,  PA
       facility  will  allow  the Company to meet  demand  for  organs  and
       electronic  assemblies.   It  is  anticipated  that  these  business
       improvements  programs  will  provide  long-term  benefits  to   the
       Company.   The decrease in the 1997 gross profit margin is a  result
       of  start-up expenses of new organ models introduced in  May,  1997,
       increases  in  overhead costs and lower sales over which  to  absorb
       fixed costs.
           Selling,    administrative,   and   other   expenses   increased
       approximately  $230,000  in  1998 due  to  increased  selling  costs
       associated with higher sales volume and implementation and  training
       costs   related   to   the   new  information   systems.    Selling,
       administrative  and other expenses increased approximately  $200,000
       in 1997 as a result of marketing and advertising of new products.
           Research   and   development  expenses  increased  approximately
       $147,000   and  $40,000  in  1998  and  1997  respectively.    These
       increases  are primarily due to increases in personnel  to  continue
       new product development.

       Data Communications Segment

           Domestic  sales in each of the last two years have increased  as
       a  result of additional sales and marketing efforts initiated  since
       the  acquisition.  International sales for 1998 decreased  primarily
       from  changes  in  economic  conditions in  certain  world  markets,
       particularly Far East countries.
           The  Company has significantly increased its investment  in  the
       sales and marketing effort at Eastern Research and will continue  to
       do  so  in  1999.  These additional efforts are focused on expanding
       channels   of   distribution   and   targeting   markets   for   the
       Company's products.    The   segment   is    developing    strategic
       relationships   with   customers  to  expand   their   channels   of
       distribution.   One  such relationship, which Eastern  Research  has
       entered into in February 1999, is an OEM agreement to supply  Lucent
       Technologies with its DACS product line.  These relationships  could
       provide  additional  sales  volume  in  1999.   This  segment   will
       continue to invest in sales and marketing programs.
           Gross  profit margins were 41% in 1998 compared to 46% in  1997,
       a  result  of competitive pressures on selling prices and variations
       in  product mix.  While Eastern Research's gross profit margins have
       increased  during  1998, this increase was  offset  by  lower  gross
       profits  at VIR Linear Switch due to lower sales volume.  While  the
       companies  strive to maintain profit margins by developing  products
       that  offer  more features, the industry is competitive which  often
       results in pricing changes to obtain and maintain market share.
           Selling   expenses  increased  approximately   $2,000,000    and
       $500,000  in  1998 and 1997 respectively, reflecting the  additional
       sales  and  marketing efforts.  Selling expenses  will  continue  to
       increase  in  the  future  as  sales  and  marketing  programs   and
       personnel  are added to further promote the segment's  products  and
       obtain additional market share.
           Administrative  expenses increased approximately  $518,000   and
       $550,000  in  1998 and 1997 respectively, resulting from  additional
       management  and support personnel added to promote and  oversee  the
       segment.
           Research  and  development expenses were $2,464,808,  $1,799,665
       and  $1,972,167  for  the years ended December 31,  1998,  1997  and
       1996,  respectively.   The  1997  decrease  is  attributed  to   the
       combining of the research and development efforts of VIR,  Inc.  and
       Linear  Switch Corporation. The segment is committed to new  product
       development  and support and expects these expenditures to  continue
       to increase during 1999.

       Electronic Assemblies Segment

           Sales  decreased  $1,207,000 during  1998  from  lower  incoming
       orders.   Sales  increased during 1997 and 1996  from  higher  order
       volume from existing customers and orders received from several  new
       customers.
           Gross  profit margins were 13.6%, 14.5% and 20.0% for the  three
       years  ended  December  31,  1998.   The  decrease  is  related   to
       competitive  pressures  common in the  industry  and  the  segment's
       efforts   to   restructure  operations  along   with   the   Musical
       Instruments segment.
           Selling,  general  and  administrative expenses  have  increased
       approximately  $86,000 in 1998 as compared  to  1997.   The  segment
       continues  its  marketing efforts and has  begun  to  diversify  its
       customer  base.   The  Company continues to improve  its  production
       capabilities  to  offer state of the art manufacturing  services  to
       its customers.

       Audio Equipment Segment

           Sales   for   the   year  ended  December  31,  1998   increased
       approximately 7% when compared to 1997 on a pro forma  basis.   This
       increase  is  a  result of greater awareness of the Company  through
       both  increased marketing and sales efforts, establishment of Dealer
       Audition  Sites in several markets and positive product  reviews  in
       several  industry  publications during the year.  The  Company  will
       continue  to  promote  awareness of its products  through  increased
       marketing efforts.
           Gross  profit  margins were 39.6% and 49.7% for the  year  ended
       December   31,   1998  and  the  nine  month  period   ended   1997,
       respectively.    This  decrease  is  attributable  to   changes   in
       distribution  in  certain  areas from  direct  marketing  to  Dealer
       Audition Sites.
           Selling,    general   and   administrative    costs    increased
       approximately  $360,000 during 1998 as compared  to  1997  resulting
       from   increased   sales  and  marketing  efforts   and   additional
       administrative personnel added to support the company's growth.

       Other Income (Expense)

           The  decrease in investment income during 1998 is due  to  lower
       invested  balances,  as well as gains on investments  recognized  in
       1997 not recurring in 1998.  The variations in investment income  in
       1997 and 1996 are primarily attributable to the yields available  on
       short-term   investments,  realized  gains,  and  the   amounts   of
       principal  invested.   The  1998, 1997,  and  1996  amounts  include
       $242,227,   $765,109   and  $287,982  of  realized   capital   gains
       respectively.
           Interest  expense  represents  interest  on  the  notes  payable
       issued  in connection with the acquisition of VIR, Inc. and  Eastern
       Research, Inc.

       Income Taxes

           The  increase in the effective tax rate related to the 1998  tax
       benefit  is  due to higher effective state tax rates  applicable  to
       the  Data Communications segments which incurred losses during 1998.
       The  decrease  in  the  1997  tax provision  is  attributable  to  a
       decrease  in  the estimated effective tax rate for the  current  and
       prior   tax   year  resulting  from  a  change  in   state   revenue
       allocations.

       Factors that May Affect Operating Results

           The  statements contained in this report on Form 10-K  that  are
       not  purely  historical  are forward looking statements  within  the
       meaning  of  Section 27A of the Securities Act of 1933  and  Section
       21E  of  the  Securities Exchange Act of 1934, including  statements
       regarding   the   Company's  expectations,  hopes,   intentions   or
       strategies   regarding  the  future.   Forward  looking   statements
       include:    statements   regarding  future   products   or   product
       development;  statements regarding future research  and  development
       spending   and  the  Company's  marketing  and  product  development
       strategy,  statements  regarding future  production  capacity.   All
       forward  looking statements included in this document are  based  on
       information  available to the Company on the date  hereof,  and  the
       Company  assumes  no obligation to update any such  forward  looking
       statements.   Readers are cautioned not to place undue  reliance  on
       these   forward  looking  statements,  which  reflect   management's
       opinions  only  as  of  the date hereof.  Readers  should  carefully
       review  the  risk factors described in other documents  the  Company
       files   from   time  to  time  with  the  Securities  and   Exchange
       Commission,  including the Quarterly Reports  on  Form  10-Q  to  be
       filed  by the Company in fiscal year 1999.  It is important to  note
       that  the  Company's  actual results could  differ  materially  from
       those in such forward looking statements.  Some of the factors  that
       could  cause  actual  results to differ  materially  are  set  forth
       below.
           The   Company  has  experienced  and  expects  to  continue   to
       experience fluctuations in its results of operations.  Factors  that
       affect  the  Company's results of operations include the volume  and
       timing  of  orders  received, changes in the mix of  products  sold,
       market  acceptance  of  the Company's and its  customer's  products,
       competitive  pricing  pressures,  global  currency  valuations,  the
       Company's  ability to meet increasing demand, the Company's  ability
       to  introduce  new  products on a timely basis, the  timing  of  new
       product  announcements  and introductions  by  the  Company  or  its
       competitors, changing customer requirements, delays in  new  product
       qualifications,  the timing and extent of research  and  development
       expenses  and fluctuations in manufacturing yields.  As a result  of
       the  foregoing or other factors, there can be no assurance that  the
       Company   will  not  experience  material  fluctuations  in   future
       operating  results  on  a  quarterly or annual  basis,  which  would
       materially  and  adversely affect the Company's business,  financial
       condition and results of operations.
           See   Note   1  to  the  financial  statements  for  information
       concerning  the  effects of changes in and new accounting  standards
       and Year 2000 issues.
           

Item 8.   Financial Statements
            See Item 14 for index.


Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure
            There were no reportable events as described in Item 304(b).
<PAGE>                                     
     KPMG

     4905 Tilghman Street
     Allentown, PA 18104
                                     
                                     
                                     
Independent Auditors' Report


The Board of Directors and Stockholders
Allen Organ Company:


We have audited the accompanying consolidated balance sheets of Allen Organ
Company  and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, 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, the consolidated financial statements referred  to  above
present  fairly,  in  all  material respects,  the  consolidated  financial
position  of Allen Organ Company and Subsidiaries as of December  31,  1998
and  1997, and the consolidated results of their operations and their  cash
flows  for  the  years  then ended in conformity  with  generally  accepted
accounting principles.


/s/ KPMG LLP




Allentown, PA
January 29, 1999
<PAGE>
               CONCANNON, GALLAGHER, MILLER & COMPANY, P.C.
           CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
Michael J. Gallagher, CPA 
Michael R. Miller, CPA
William C. Mason, CPA
E. Barry Hetzel, CPA
Edward J. Quigley, Jr., CPA
John G. Estock, CPA
Howard D. Gneiding, CPA
Robert A. Oster, CPA
Robert E. Vitale, CPA
John F. Sharkey, Jr., CPA
Victor J. Meyer, CPA
David C. Gehringer, CPA
Gerard D. Stanus, CPA
Robert M. Caster, CPA
Anthony M. Bragano, CPA
Kenneth P. Harmony, Jr., CPA
                       INDEPENDENT AUDITORS' REPORT

The Board of Directors
 and Shareholders
Allen Organ Company

      We  have audited the accompanying consolidated balance sheet of Allen
Organ  Company  and Subsidiaries as of December 31, 1996  and  the  related
consolidated statements of income, stockholders' equity and cash flows  for
the  year  then  ended.  These consolidated financial  statements  are  the
responsibility  of  the  Company's management.  Our  responsibility  is  to
express an opinion on these consolidated financial statements based on  our
audit.
      We conducted our audit 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  audit
provides a reasonable basis for our opinion.
      In  our  opinion, the consolidated financial statements  referred  to
above  present fairly, in all material respects, the consolidated financial
position  of Allen Organ Company and Subsidiaries at December 31, 1996  and
the  consolidated results of their operations and their cash flows for  the
year   then   ended  in  conformity  with  generally  accepted   accounting
principles.


/s/ CONCANNON, GALLAGHER, MILLER  AND COMPANY, P.C.

Allentown, PA
January 30, 1997

Member of AICPA Division for CPA Firms  SEC and Private Companies Practice
                                 Sections
<PAGE>                                     
                      ALLEN ORGAN COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                        
                                                        December 31,
                     ASSETS                           1998        1997
CURRENT ASSETS                                                
  Cash                                            $ 1,727,554  $ 1,020,348
  Investments including accrued interest           19,988,346   20,040,334
  Accounts receivable                               7,068,588    5,732,432
  Inventories                                      14,481,177   17,923,387
  Prepaid income taxes                                422,656      232,895
  Prepaid expenses                                    511,954      483,300
  Deferred income tax benefits                        306,812          --
     Total Current Assets                          44,507,087   45,432,696
                                                                        
PROPERTY, PLANT AND EQUIPMENT, NET                  9,911,637    9,515,012 
                                                                       
OTHER ASSETS                                                  
  Prepaid pension costs                               642,609      795,107
  Inventory held for future service                 1,242,754    1,260,346
  Note receivable                                     659,886      203,557
  Cash value of life insurance                      1,400,334    1,122,495
  Goodwill, net                                     3,619,147    3,755,483
  Intangible and other assets, net                      6,499      477,308
     Total Other Assets                             7,571,229    7,614,296
     Total Assets                                 $61,989,953  $62,562,004

  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES                                           
  Accounts payable                                $ 1,562,432  $   913,110
  Deferred income taxes                                 --          74,091
  Other accrued expenses                            1,422,285      692,282
  Customer deposits                                 1,527,429    1,308,001
     Total Current Liabilities                      4,512,146    2,987,484
NONCURRENT LIABILITIES                                        
  Deferred liabilities                                280,504      721,264
     Total Liabilities                              4,792,650    3,708,748
                                                             
MINORITY INTERESTS                                    288,607      321,424
                                                              
COMMITMENTS AND CONTINGENCIES                                 
STOCKHOLDERS' EQUITY                                          
  Common stock, par value $1 per share                        
  Authorized                                                  
     Class A Shares -   400,000 in 1998 and 1997                
     Class B Shares - 3,600,000 in 1998 and 1997              
  Issued                                                      
  Common stock    1998              1997                                
     Class A   127,232 shares;   127,232 shares       127,232      127,232
     Class B 1,410,761 shares; 1,410,761 shares     1,410,761    1,410,761
      Total Common Stock                            1,537,993    1,537,993
  Capital in excess of par value                   12,758,610   12,758,610
  Retained earnings                                54,448,760   55,725,180
  Accumulated other comprehensive income:                     
     Unrealized gain on investments, net              134,336      128,474
       Sub-total                                   68,879,699   70,150,257
  Less cost of common shares in treasury                      
     1998 - 43,120 Class A shares and
            324,052 Class B shares                (11,971,003)       --
     1997 - 43,120 Class A shares and
            314,155 Class B shares                       --    (11,618,425)
  Total Stockholders' Equity                       56,908,696   58,531,832
  Total Liabilities and Stockholders' Equity      $61,989,953  $62,562,004
                                                              
          See accompanying notes to Consolidated Financial Statements.
<PAGE>                                        
              ALLEN ORGAN COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF INCOME
                                
                                           Years Ended December 31,
                                         1998          1997         1996
                                                            
NET SALES                             $44,966,075  $40,348,084  $36,715,128

COSTS AND EXPENSES                                          
  Cost of sales                        31,870,469   26,785,916   23,789,872
  Selling, administrative and
   other expenses                      11,486,315    8,289,570    6,333,148
  Research and development              3,478,775    2,654,662    2,786,390
  Costs to close Rocky Mount plant        415,000          --           --
    Total Costs and Expenses           47,250,559   37,730,148   32,909,410
                                                            
(LOSS) INCOME FROM OPERATIONS          (2,284,484)   2,617,936    3,805,718
                                    
OTHER INCOME (EXPENSE)                                      
  Investment income                     1,223,699    2,114,722    2,025,024
  Other income, net                        12,925       14,443       24,621
  Interest expense                            --           --       (10,309)
  Minority interests in             
   consolidated subsidiaries               61,958        6,041       55,822
    Total Other Income (Expense)        1,298,582    2,135,206    2,095,158
                                                            
(LOSS) INCOME BEFORE TAXES               (985,902)   4,753,142    5,900,876
                                  
PROVISION FOR TAXES                                         
  Current                                 (11,000)   1,296,000    2,087,000
  Deferred                               (646,000)     (55,000)     (52,000)
    Total Provision For Taxes            (657,000)   1,241,000    2,035,000
                                                            
NET (LOSS) INCOME BEFORE  
CUMULATIVE EFFECT OF CHANGE                          
IN ACCOUNTING PRINCIPLE               $  (328,902) $ 3,512,142  $ 3,865,876
                                                            
CUMULATIVE EFFECT OF CHANGE IN      
ACCOUNTING PRINCIPLE (net of                
 income tax benefit of $183,000)         (287,809)         --           --
                                                            
NET (LOSS) INCOME                     $  (616,711) $ 3,512,142  $ 3,865,876
                                                            
OTHER COMPREHENSIVE INCOME, NET OF TAX                         
  Unrealized gains on investments:                          
   Unrealized gains arising   
    during period                     $   162,874  $   525,168  $   166,334
   Less:  reclassified adjustment           
    for gains included in income         (157,012)    (486,074)    (171,090)
Other comprehensive income                  5,862       39,094       (4,756)
COMPREHENSIVE (LOSS) INCOME           $  (610,849) $ 3,551,236  $ 3,861,120
                                                            
BASIC AND DILUTED EARNINGS                              
 PER SHARE:
Net (loss) income before cumulative     
  effect of change in accounting
  principle                           $     (0.28) $      2.79  $      2.88
Cumulative effect of change in        
  accounting principle                      (0.24)          --           --
                                                            
NET (LOSS) INCOME                     $     (0.52) $      2.79  $      2.88
                                
          See accompanying notes to Consolidated Financial Statements.
<PAGE>          
                                
                   ALLEN ORGAN COMPANY AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                     
                                      Common Stock                   Capital
                                                                       in
                              Class A              Class B          Excess of
                           Shares    Amount    Shares    Amount     Par Value
                                                                       
Balance-December 31, 1995  128,104   $128,104  1,409,889 $1,409,889 $12,758,610
                                                                      
Balance-December 31, 1996  128,104   $128,104  1,409,889 $1,409,889 $12,758,610
                                                                      
Exchange Class A Shares                                               
 for Class B Shares           (872)      (872)       872        872    
                                                                      
Balance-December 31, 1997  127,232   $127,232  1,410,761 $1,410,761 $12,758,610
                                                                      
Balance-December 31, 1998  127,232   $127,232  1,410,761 $1,410,761 $12,758,610

                                         Accumulated
                                           Other
                             Retained   Comprehensive        Treasury Stock
                             Earnings      Income         Shares      Amount
                                                             
Balance-December 31, 1995  $49,786,163   $ 94,136        174,955    $4,522,049
Net Income                   3,865,876                             
Reacquired Class B Shares                                 38,801     1,469,659
Change in unrealized gain on                                         
 securities available
  for sale                                 (4,756)                   
Cash dividend paid                                   
 ($.55 per share)             (736,983)
                                                              
Balance-December 31, 1996  $52,915,056   $ 89,380        213,756    $5,991,708
                                                              
Net Income                   3,512,142                             
Reacquired Class B Shares                                143,519     5,626,717
Change in unrealized gain on                                          
 securities available
  for sale                                 39,094                   
Cash dividend paid
 ($.56 per share)             (702,018)                             
                                                              
Balance-December 31, 1997  $55,725,180   $128,474        357,275    $11,618,425
                                                              
Net Loss                      (616,711)                             
Reacquired Class B Shares                                  9,897        352,578
Change in unrealized gain on                                          
 securities available
  for sale                                  5,862                   
Cash dividend paid                                   
 ($.56 per share)             (659,709)
                                                              
Balance-December 31, 1998  $54,448,760   $134,336        367,172    $11,971,003
                                     
       See accompanying notes to Consolidated Financial Statements.
<PAGE>
                   ALLEN ORGAN COMPANY AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 Years Ended December 31,
                                             1998         1997           1996
CASH FLOWS FROM OPERATING ACTIVITIES                             
 Net (loss) income                     $ (616,711)  $  3,512,142  $  3,865,876
 Adjustments to reconcile net (loss)                             
  income to net cash provided by
  operating activities                          
  Depreciation and amortization         1,478,379      1,114,639       815,277
  Minority interest in consolidated      
   subsidiaries                           (61,958)        (6,041)      (55,822)
  Amortization of bond premiums               --             --          4,349
  Cumulative effect of change in          
   accounting principle (excluding
    income tax effects)                   470,809            --            --
  Loss (Gain) on sale of property,        
   plant and equipment                      8,153         (3,984)        5,692
  Gain on sale of investments            (242,227)      (765,110)     (287,982)
  Change in assets and liabilities (net                          
    of acquisition effects)                                              
   Accounts receivable                 (1,336,156)      (914,493)     (386,440)
   Inventories                          3,459,802     (3,188,750)   (1,292,561)
   Prepaid income taxes                  (189,761)       164,509       459,226
   Prepaid expenses                       (28,654)      (328,631)      (39,349)
   Deferred income tax benefits          (306,812)           --            --
   Prepaid pension costs                  152,498         94,099       132,311
   Accounts payable                       649,322        498,632      (139,103)
   Other accrued expenses                 730,003        192,927    (1,518,438)
   Customer deposits                      219,428        546,262       298,720
   Deferred liabilities                  (514,851)       (32,217)      (59,500)
     Net Cash Provided by Operating         
      Activities                        3,871,264        883,984     1,802,256
CASH FLOWS FROM INVESTING ACTIVITIES                             
 Cash proceeds from sale of investments         
  classified as available for sale      2,526,721     30,263,188    38,938,452
 Cash paid for purchase of investments           
  classified as available for sale     (2,226,644)   (20,497,033)  (36,914,531)
 Increase in cash value of life                  
  insurance                              (277,839)      (264,278)     (228,736)
 Increase in note receivable             (456,329)       (40,409)      (40,562)
 Payment for acquisition, net of cash      
  acquired                                    --      (1,512,000)          --
 Additions to intangible and other       
  assets                                 (238,534)      (211,690)          --
 Purchase of minority stockholders'        
  interest in subsidiary                      --             --        (20,000)
 Cash proceeds from sale of property,     
  plant and equipment                      28,170          7,841        10,000
 Cash paid for purchase of property,            
  plant and equipment                  (1,477,340)    (2,046,097)     (761,483)
     Net Cash (Used In) Provided by                
      Investing Activities             (2,121,795)     5,699,522       983,140
CASH FLOWS FROM FINANCING ACTIVITIES                             
 Dividends paid in cash                  (659,709)      (702,018)     (736,983)
 Reacquired Class B common shares        (352,578)    (5,626,717)   (1,469,659)
 Subsidiary company stock reacquired     
  from minority stockholders              (29,976)       (15,625)       (3,572)
 Subsidiary company stock issued to        
  minority stockholders                       --             --          9,920
     Net Cash Used in 
      Financing Activities             (1,042,263)    (6,344,360)   (2,200,294)
NET INCREASE IN CASH                      707,206        239,146       585,102

CASH, JANUARY 1                         1,020,348        781,202       196,100
                                         
CASH, DECEMBER 31                      $1,727,554   $  1,020,348  $    781,202
                                    
           SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

  Cash paid for income taxes           $  167,050   $  1,758,833  $  1,793,338
  Cash paid for interest               $     --     $        --   $     53,322
                                    
   SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
 Purchase price adjustment                           
  of August 1,1995 acquisition         $     --     $        --   $    630,885
 Decrease of accrued liability to        
  purchase inventory                         --              --      1,735,000
 Decrease in long term debt                  --              --         86,641
 Decrease in minority interest               --              --       (630,885)
 Decrease in inventory                       --              --       (864,291)
 Decrease in intangible assets              
 (Goodwill)                                  --              --       (957,350)
 Increase in current accrued                  
  liabilities                          $     --     $        --    $       -- 
                                         
                                     
       See accompanying notes to Consolidated Financial Statements.
<PAGE>                                     
                      ALLEN ORGAN COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 Significant Accounting Policies
     Background:
        Allen Organ Company and Subsidiaries operate in four industry segments:
     musical instruments, data communications, electronic assemblies, and audio
     equipment.   See  note  15  for additional information  on  the  operating
     activities of each segment.

     Principles of Consolidation:
        The consolidated financial statements include the accounts of the Allen
     Organ  Company  and the following subsidiaries.  All material intercompany
     transactions have been eliminated.
            Subsidiary Name               Ownership %
         Allen Diversified, Inc.           100.00%
         Rocky Mount Instruments, Inc.     100.00%
         Allen Organ International, Inc.   100.00%
         VIR, Inc.                          98.59%
         Eastern Research, Inc.             92.52%
         Linear Switch Corporation          92.20%
         Legacy Audio, Inc.                 75.00%
        In  December  1998  the Company established Allen Diversified, Inc. to
     hold and manage the Company's investments in its subsidiaries.

     Reclassifications:
        Certain  amounts  in  the 1997 and 1996 financial statements have been
     reclassified to conform to the 1998 presentation.

     Off-Balance Sheet Risk:
        Financial  instruments that potentially subject the  Company to credit
     risk consist principally of short-term investments and trade receivables.
     The  Company  places substantially all of its investments in mutual funds
     holding  federal, state and local government obligations and, by  policy,
     limits the  amount of credit exposure in any one investment.  The  Company
     sells most of its products through established dealer networks. The credit
     risk associated with related receivables is limited due to the large 
     number of dealers and their geographic dispersion.

     Use of Estimates:
        The  preparation of financial statements in conformity  with  generally
     accepted accounting principles 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  reported  period.   Actual results  could  differ from  those
     estimates.

     Investments:
        The  Company accounts for its short-term investments in accordance with
     Statement of Financial Accounting Standards No. 115, Accounting for 
     Certain Investments in Debt and Equity Securities.  Management  determines
     the appropriate classification of its investments in debt and equity 
     securities at the time of purchase and reevaluates such determination at 
     each balance sheet date.

     Inventories:
        Inventories are valued  at  the lower of  cost  or  market.   Cost  is
     determined using the first-in, first- out (FIFO) method for  substantially
     all inventories.

     Property, Plant and Equipment:
        Property,  plant and equipment are stated at  cost.   Depreciation  is
     computed  over  estimated useful asset lives using both straight-line and
     accelerated methods for financial reporting and accelerated methods for 
     tax reporting.

     Goodwill and Intangibles:
        Goodwill  represents the excess of cost over the net assets of acquired
     subsidiaries.  Goodwill is amortized on a straight-line basis over various
     periods from 3 - 20 years and is presented net of accumulated amortization
     of $782,850 and $348,862 at December 31, 1998 and 1997 respectively.   The
     carrying value  of goodwill for each business is continually  reviewed  to
     assess  its  recoverability  from  future  operations  of  the   acquired
     subsidiaries, based  on future cash flows (undiscounted)  expected  to  be
     generated  by such operations.  Any impairment in value indicated  by  the
     assessment would be charged against current operations.
        During  1997 the  Company  re-evaluated the  useful  life  of  goodwill
     acquired through business acquisitions and began amortizing  the  goodwill
     associated  with  acquisitions  over  useful  lives  of  3  - 20   years.
     Previously, goodwill was being amortized over 40 years.  This change in 
     the estimated life of the goodwill had the effect of decreasing net income
     for 1997 by approximately $60,000 ($0.05 per share).
        Intangible  assets  consisted of organization costs  (presented  net of
     accumulated amortization of $134,225 at December 31, 1997) which are 
     stated at cost and amortized using the straight-line method over ten  
     years.  Inaccordance with  the  AICPA  Accounting  Standards  Executive  
     Committee Statement of Position, 98-5, Reporting on the Costs of Start-up 
     Activities, the net book value of these organizational costs was expensed
     in 1998, as acumulative effect of a change in accounting principle.

     Income Taxes:
        Income  taxes are provided for the tax effects of transactions reported
     in  the  financial  statements  and consist of taxes  currently due  plus
     deferred taxes.  Deferred taxes are recognized for differences between the
     basis  of  assets and liabilities for financial statement  and  income tax
     purposes.

     Research and Development:
        Research  and  development  expenditures  are  charged  to  expense  as
     incurred.

     Stock-Based Compensation:
        The Company accounts for its stock-based compensation plans  using  the
     accounting prescribed  by  Accounting Principles  Board  Opinion  No.  25,
     Accounting for  Stock  Issued to Employees.   Since  the  Company  is  not
     required to  adopt the fair value based recognition provisions  prescribed
     under Statement of Financial Accounting Standards No. 123, Accounting  for
     Stock-Based Compensation, it has elected only to comply with the 
     disclosure requirements set forth in the Statement.  (See Note 17.)

     Year 2000:
        The Year  2000  issue  relates  to the  ability  of  computer  systems,
     microprocessors  and other electronic devices to deal  appropriately  with
     dates on or after January 1, 2000.  The effect of the Year 2000 issue  may
     include computer failures and business interruption.
        The  Company  has  taken  action to  make  its  systems,  products  and
     infrastructure Year 2000 compliant. The Company began work  several  years
     ago  to  prepare  its products  and its financial  information  and  other
     computer-based  systems  for  the  Year 2000,  including replacing  and/or
     updating  existing systems.  Internally the Company is in the  process  of
     implementing  new,  Year  2000  compliant,  information systems  that  are
     expected to be in place by mid 1999.  Externally, the Company has surveyed
     its suppliers,  financial institutions, and other organizations  that  may
     impact the  Company's  operation  to  assess  their  level  of  Year  2000
     compliance.  The Company will continue to monitor its Year 2000 compliance
     program, address any material issues and develop contingency plans,  as it
     deems  appropriate.  While the Company has and will take steps  to address
     material  Year 2000 issues, the failure to identify or correct  a material
     internal or external Year 2000 problem could result in an interruption  in
     the Company's business operations.
        While these  Year  2000  efforts  will involve  additional  costs,  the
     Company  believes, based on available information, that it will be able to
     manage  its total Year 2000 transition without any material adverse effect
     on its business operations, products or financial condition.

     Change in Accounting Policies:
        Effective  January  1, 1998, the Company adopted the  AICPA  Accounting
     Standards Executive Committee Statement of Position, 98-5, Reporting on 
     the Costs of Start-up Activities, (SOP 98-5). In accordance with SOP 98-5,
     costs associated with start-up activities, including organizational costs,
     should be  expensed as incurred.  The effect of the change resulted  in  a
     decrease  to net  income of $287,809 (net of taxes  of  $183,000).   These
     amounts were a result of unamortized organizational costs associated  with
     the acquisitions of the Data Communications and Audio Equipment segments.
        During  1998,  the  Company  also adopted the following  new Statements
     issued  by the Financial Accounting Standards Board.  These Statements did
     not have a material effect on the Company's financial Statements.
           SFAS 130, Reporting Comprehensive Income - establishes standards for
           reporting  and display of comprehensive income and its components in
           a full set of general purpose financial statements.
           SFAS  131,  Disclosures about Segments of an Enterprise and  Related
           Information   -   establishes  standards   for   reporting  selected
           information  about  operating segments in interim financial reports.
           It also establishes standards for related disclosures about products
           and services.
           SFAS  132,  Employers' Disclosures about  Pensions  and  Other  Post
           Retirement  Benefits - revises disclosures about pensions  and other
           post retirement benefit plans.

NOTE 2 Business Acquisitions
     Legacy Audio:
        On  April  1, 1997 the Company purchased a 75% interest in Legacy Audio
     in  exchange  for $1,512,000 in cash.  In connection with the acquisition,
     the  company  established a new subsidiary, Legacy Audio,  Inc. (LAI), to
     acquire  the  assets  of  the  seller.  A  founding  owner  of the seller
     contributed  the  remaining 25% of the assets of  the seller  to  the  new
     company in exchange for a 25% interest in LAI.  Additionally, this 
     founding owner has been named the President and Chief Designer of LAI.
        The  acquisition has been accounted for as a purchase.  The results  of
     operations  of  LAI  have  been  included  in  the  Company's consolidated
     financial statements from the date of acquisition.  Assets and liabilities
     have  been recorded at their estimated fair market values with the  excess
     being recorded as goodwill which will be amortized over periods from  10 -
     20 years.
        The  following pro forma financial information has been prepared giving
     effect to the acquisition of Legacy Audio, Inc. as if the transaction  had
     taken  place at  the  beginning of the respective  year.   The  pro  forma
     financial  information  is not necessarily indicative  of the  results  of
     operations  which  would have  been attained  had  the  acquisitions  been
     consummated on any of the foregoing dates or which may be attained  in the
     future.
                                          Years Ended December 31,
                                             1997        1996
       Pro forma Net Sales               $40,809,887  $38,681,238
       Pro forma Net Income                3,490,772    3,889,960
       Pro forma Net Income Per Share          $2.77        $2.90

NOTE 3 Plant Closing
        In  October 1998 the Company announced plans to permanently  close  its
     manufacturing plant  in  Rocky Mount, NC.  Rocky Mount  Instruments,  Inc.
     (RMI)  manufactured  small organs  and sub-assemblies  for  the  Company's
     Musical Instruments segment.  The Company expects to terminate a total  of
     60  people  by  June  30, 1999.  28 employees had been  terminated  as  of
     December 31, 1998.  The Company estimates the termination costs (including
     employee  severance and  benefits)  related  to  this  closure  to   total
     approximately $415,000, which is included in the operating results for the
     year  ended December 31, 1998.  $110,569 of termination costs were paid as
     of December 31, 1998, the balance of $304,431 is included in other accrued
     expenses at December 31, 1998.  The Company does not expect to incur 
     losses on the disposition of the plant assets.

NOTE 4 Investments
        The  cost and fair value of investments in debt and equity securities
      are as follows:
       
                                                  
                                               Gross       Gross       
                                  Amortized  Unrealized  Unrealized      Fair
                                    Cost       Gains       Losses        Value
                                      
      December 31, 1998                                     
      Available for sale                                   
       Equity securities        $   181,473  $     42   $  139,696  $    41,819
       Mutual Funds                                          
        Short Term Gov't Funds   10,331,781   135,266          --    10,467,047
        Municipal Bond Funds      6,066,165   112,575          --     6,178,740
        Equity Funds              2,779,074   118,495       14,829    2,882,740
       U.S. Treasury Bills          418,000       --           --       418,000
      Totals                    $19,776,493  $366,378   $  154,525  $19,988,346
                                                            
      December 31, 1997                                     
      Available for sale                                    
       Equity securities        $   215,354  $     82   $   69,663  $   145,773
       Mutual Funds                                          
        Short Term Gov't Funds   10,268,613      --            --    10,268,613
        Municipal  Bond Funds     5,725,690   111,096          --     5,836,786
        Equity Funds              2,071,521   169,121        7,480    2,233,162
       U.S. Treasury Bills        1,556,000      --            --     1,556,000
      Totals                    $19,837,178  $280,299   $   77,143  $20,040,334
        
        Marketable  debt securities  have an average  contractual  maturity  of
     approximately 1 year or less.
        Realized gains and losses are determined based on the original cost  of
     these  investments using a first-in, first-out method.  During  1998, 1997
     and 1996, sales proceeds and gross realized gains and losses on securities
     classified as available for sales were:
        
                                  1998           1997           1996
                                                            
     Sales proceeds           $2,526,721     $30,263,188    $38,938,452
                                                            
     Gross realized losses    $      --      $    44,448    $     9,100
                                                            
     Gross realized gains     $  242,227     $   809,558    $   297,082
        
        The  change  in  net unrealized holding gains  (losses)  on  securities
     available  for sale in the amount of $8,697, $53,746, and $(9,046)  net of
     deferred  tax expense (benefits) of $2,835, $14,650, and $(4,290) has been
     included  in  other comprehensive income in stockholders' equity  for  the
     years ended December 31, 1998, 1997, and 1996, respectively.

NOTE 5 Inventories
                                                 December 31,
                                              1998        1997
           Finished goods                 $ 2,631,290    $ 2,046,835
           Work in process                  4,932,978      7,343,590
           Raw materials                    6,916,909      8,532,962
            Totals                        $14,481,177    $17,923,387

           The Company maintains an inventory of various parts to  be  used  to
       service musical  instruments  as future needs  arise.   This  inventory,
       $1,242,754 and  $1,260,346 at December 31, 1998 and 1997,  respectively,
       is reported as a noncurrent asset.

NOTE 6 Property, Plant and Equipment
                                                                     Estimated
                                                 December 31,          Useful
                                              1998         1997        Lives
        Land and improvements             $ 2,445,579  $2,445,579    10 yrs
        Buildings and improvements          8,250,158   8,100,068    10-40 yrs
        Machinery and equipment             8,385,676   7,751,766     5-10 yrs
        Office furniture and equipment      2,109,192   1,545,262     3-8 yrs
        Vehicles                              224,632     241,869     4 yrs
         Sub-total                         21,415,237  20,084,544
        Less accumulated depreciation      11,503,600  10,569,532
         Property, plant and equipment net
          of accumulated deprecitation    $ 9,911,637  $9,515,012

           Depreciation  expense charged to operations was $1,044,393, $836,769
       and $676,775 in 1998, and 1997 and 1996 respectively.

NOTE 7 Note Receivable
           The   Company  has  entered  into  two  Split-Dollar  Life Insurance
       agreements  with  its  President who is the  insured  and  owner of  the
       policies.   The policy owner shall pay the portion of the premiums equal
       to  the  value  of  the economic benefit determined  in accordance  with
       applicable  IRS  Revenue Rulings.  The Company shall pay the balance  of
       the net premiums which shall approximate $450,000 annually.
           The agreements provide that the Company shall be entitled to recover
       the amount  of  premiums  paid  out of the  built  up  cash  value  upon
       termination  of the agreement or out of the proceeds upon  the  death of
       the  insured.   As  security for repayment the Company  is  a collateral
       assignee  of the policy to the extent of any such unreimbursed premiums.
       The Company is also secured by the personal obligation of its President.
       The note  receivable exceeds the cash surrender value of these  policies
       by approximately $340,000 at December 31, 1998.

NOTE 8 Income Taxes
           The provision for income taxes consists of the following:
                     1998                    1997                1996
            Currently               Currently              Currently
             Payable    Deferred     Payable    Deferred   Payable    Deferred
      
Federal    $(151,000)  $(420,000)  $1,270,000  $  73,000  $1,620,000   $59,000
State        125,000    (394,000)      26,000   (128,000)    467,000  (111,000)
 Total     $ (26,000)  $(814,000)  $1,296,000  $ (55,000) $2,087,000  $(52,000)
                   
       
          The  total  1998 tax benefit of $840,000 is included in  current  and
      deferred  taxes on income and in the tax effect of the cumulative  effect
      of  change  in  accounting  principle on the consolidated  statements  of
      income.

          A   reconciliation  of  the  provision  for  income  taxes  with  the
       statutory rate follows:
                                1998             1997                1996
Statutory provision for
 federal income tax     $(516,000) 34.0%  $1,614,000  34.0%   $1,987,000  34.0%
State taxes, net of
 federal tax benefits    (177,000) 11.7       81,000   1.6       235,000   4.0
Tax credits                    --   --       (60,000) (1.3)      (60,000) (1.0)
Tax-exempt income         (97,000)  6.4     (110,000) (2.3)      (65,000) (1.1)
Exempt income of foreign
 sales corporation        (61,000)  4.0     (101,000) (2.1)     (104,000) (1.8)
Other items, net           11,000  (0.7)     (38,000) (0.8)      (42,000) (0.7)
Effect of change in
 prior year's state tax
 revenue allocations           --   --      (229,000) (4.8)          --     --
Effect of change in
 state valuation allowance
 of deferred tax asset         --   --        84,000   1.8           --     --
  Total                 $(840,000) 55.4%  $1,241,000  26.1%   $2,035,000  34.8%
   
          The  following temporary differences give rise to the  net  deferred
    tax liability at December 31, 1998 and 1997.
                                                       1998            1997
    Deferred Tax Liabilities
     Excess of tax depreciation/amortization
      over book depreciation/amortization         $  (359,778)    $  (533,989)
     Excess of pension expense for tax 
      purposes over book                             (224,910)       (288,801)
     Unrealized gain not recognized   
      for tax purposes                                (74,522)        (74,091)
       Total Deferred Tax Liabilities                (659,210)       (896,881)
    Deferred Tax Assets
     Deferred compensation not recognized 
      for tax purposes                                 16,856          20,211
     State net operating loss carry forwards          383,516         185,716
     Accrued expenses to close Rocky Mount plant      112,652            --
     Reserve for Bad Debts                             70,702          11,383
     Inventory Reserve                                243,709          23,633
      Sub-total                                       827,435         240,943
    Valuation Allowance                               (94,000)        (84,000)
       Total Deferred Tax Assets                      733,435         156,943
        Net Deferred Tax Asset (Liability)        $    74,225     $  (739,938)
           
          Deferred  taxes are included in the company's financial statements as
     follows:
                                                       1998            1997
    Current deferred tax asset (liability)        $   306,812     $   (74,091)
    Non-current deferred tax liability               (232,587)       (665,847)
     Net deferred tax asset (liability)           $    74,225     $  (739,938)
                                        
          The  Company  has  available  at December  31,  1998,  approximately
    $6,400,000 of unused state net operating loss carry forwards that  may  be
    applied  against  future taxable income and that expire in  various  years
    from 2002 to 2008.
          At  December  31,  1998  and 1997 the Company recorded  a  valuation
    allowance  of  $94,000 and $84,000, respectively against the deferred  tax
    assets relating to uncertainty of realizing state net operating loss carry
    forwards.

NOTE 9 Other Accrued Expenses
                                                        December 31,
                                                    1998          1997
             Accrued salaries and commissions   $  552,099    $  385,176
             Accrued plant closing costs           304,431           --
             Other                                 565,756       307,106
              Total                             $1,422,286    $  692,282

NOTE 10    Commitments and Contingencies
          As  of  December 31, 1998, the Company is contingently liable for  a
    maximum  amount  of  approximately  $1,821,332  in  connection  with   the
    financing arrangements of certain customers.
          Under  the terms of an agreement with the wife of the late  Chairman
    and  principal shareholder, the Company may be required to purchase within
    eight  months  of her death, at the option of her personal representative,
    an  amount of Class B Common Shares then owned by her or includable in her
    estate for Federal Estate Tax purposes sufficient to pay estate taxes  and
    costs,  subject to the limitations of Section 303 of the Internal  Revenue
    Code.   At  December  31,  1998,  the  shareholder  owned  or  would  have
    includable  in  her  estate 261,072 shares of Class B Common  Stock.   The
    Company has purchased life insurance on the life of the shareholder with a
    face value of $6,000,000.  Management believes that the insurance proceeds
    would  be sufficient to substantially fund this possible future commitment
    and  that  any  excess would not have a material effect on  the  financial
    condition of the Company.
          During  December 1998, the Company engaged an outside contractor  to
    upgrade  the air handling systems in the wood and metal finishing area  of
    its  Macungie,  PA plant.  This addition is being made to improve  product
    quality  for the Company's musical instruments and Legacy speaker  cabinet
    production.  The total cost of this project will be approximately $950,000
    of which $177,000 has been paid through December 31, 1998.
          In  connection with the purchase of VIR, Eastern Research and Linear
    Switch,  the  Company agreed to pay a contingent purchase price  equal  to
    4.5%  of  the  sales of these Companies in excess of $7,000,000  per  year
    through  December 2000.  The total contingent payment for 1998,  1997  and
    1996  amounted  to  $238,535,  $92,432  and  $29,142,  respectively.   The
    agreement  provides  that the total of the contingent payments  shall  not
    exceed $2,000,000.
          The  Company's  data communications segment leases its  offices  and
    production facility under non-cancelable operating leases which expire  at
    various  dates  through  February, 2001.   These  leases  include  renewal
    options  for  periods ranging from two to fifteen years with increases  of
    lease payments based on changes in the Consumer Price Index.  Rent expense
    was $230,447, $179,765 and $169,493 for 1998, 1997 and 1996, respectively.
    Minimum annual rent payments for the operating leases are as follows:
           
            1999                     $ 236,320
            2000                       199,220
            2001                        24,220
             Total                   $ 459,760

NOTE 11   Retirement Plans
          The  Company  sponsors two noncontributory defined  benefit  pension
    plans  which  cover  substantially all of its  employees.   Salaried  plan
    benefits  are  generally  based on the employee's  years  of  service  and
    compensation  levels.  Hourly plan benefits are based on  various  monthly
    amounts  for each year of credited service.  The Company's funding  policy
    is  to  contribute  amounts to the plans sufficient to  meet  the  minimum
    funding  requirements set forth in the Employee Retirement Income Security
    Act of 1974, plus such additional amounts as the Company may determine  to
    be  appropriate from time to time.  Plan assets are comprised  principally
    of cash equivalents, U.S. Government obligations, fixed income securities,
    and equity securities.
          Following are reconciliations of the pension benefit obligation  and
    the value of plan assets:
           
                                          1998            1997          1996
   Pension benefit obligation
      Balance, beginning of year      $13,222,392    $13,252,456   $12,450,935
      Service cost                        310,909        299,166       282,303
      Interest cost                       983,147        953,842       952,301
      Benefits paid to participants      (792,052)      (757,090)     (815,577)
      Gain (loss) on updated       
       data/assumptions                 1,198,922       (525,982)      382,494
        Balance, end of year          $14,923,318    $13,222,392   $13,252,456
                                        
   Plan assets
      Fair value, beginning of year   $14,764,799    $13,641,779   $12,788,615
      Actual investment returns         1,639,203      1,750,515     1,544,571
      Company contributions                  --          129,595       124,170
      Benefits paid to participants      (792,052)      (757,090)     (815,577)
        Fair value, end of year       $15,611,950    $14,764,799   $13,641,779

           The Funded status of the plans were as follows:
                                                      December 31,
                                          1998            1997          1996
   Excess of the value of plan assets 
    over the benefit obligation       $   688,632    $ 1,542,407   $  389,323
   Unrecognized prior service cost        147,313        221,303      295,293
   Unrecognized net transition 
    liability (asset)                    (216,028)      (288,036)    (360,044)
   Unrecognized net actuarial loss         22,692       (680,567)     564,634
    Prepaid benefit cost              $   642,609    $   795,107   $  889,206

           The following weighted-average rates were used:

   Discount rate on the benefit obligation  6.75%           7.5%        7.5%
   Rate of return on plan assets             8.0%           8.0%        8.0%
   Rate of long-term compensation increase   6.0%           6.5%        7.0%


           Pension expense is comprised as follows:
                                          1998            1997          1996

   Service cost                       $   310,909     $  299,166   $  282,303
   Interest cost                          983,147        953,842      952,301
   Expected return on plan assets      (1,143,540)    (1,031,296)    (989,618)
   Amortization of net loss from
    prior periods                             --             --         9,513
   Amortization of unrecognized prior                      
    service cost                           73,990         73,990       73,990
   Amortization of transition asset       (72,008)       (72,008)     (72,008)
    Net Pension Cost                  $   152,498      $ 223,694   $  256,481

          The  foregoing  net amounts regarding the pension benefit  obligation
      and  the  value  of  plan  assets are based  on  a  combination  of  both
      overfunded  and  underfunded plans.  The aggregate  amounts  relating  to
      underfunded plans are as follows:

                                                    December 31,
                                          1998            1997          1996
   Projected benefit obligation       $ 7,798,136      $   --      $7,068,885
   Accumulated benefit obligation       6,708,396          --       5,645,393
   Fair value of plan assets            7,707,085          --       6,663,437

                                        
          The  Company  provides  a  401(k) deferred  compensation  and  profit
      sharing  plan  for the benefit of eligible employees.   The  plan  allows
      eligible  employees  to  defer a portion of  their  annual  compensation,
      pursuant to Section 401(k) of the Internal Revenue Code.  Company profit-
      sharing contributions to the plan are discretionary as determined by  the
      Company's  board of directors.  The Company contributions were  $112,981,
      $147,160 and $139,732 to the plans in 1998, 1997 and 1996 respectively.

NOTE 12   Deferred Liabilities
                                                 December 31,
                                              1998        1997
           Deferred compensation expense   $  47,917    $  55,417
           Deferred income taxes             232,587      665,847
            Total                          $ 280,504    $ 721,264

NOTE 13   Earnings Per Share
          Earnings  per  share were computed using 1,178,064  shares  in  1998,
      1,258,966  shares  in 1997, and 1,340,047 shares in  1996,  the  weighted
      average number of shares outstanding during each year.  The Company  does
      not have any dilutive equity instruments.
                                        
NOTE 14   Export Sales
          In  1998, 1997 and 1996, net sales by the musical instruments segment
      include  export sales, principally to Canada, Europe and the Far East  of
      $3,676,981, $4,432,974, and $5,594,286, respectively.  Net sales  by  the
      data  communications segment include export sales principally  to  Europe
      and  the  Far  East  of  $1,261,029 for 1998, $2,103,734  for  1997,  and
      $1,417,636  for  1996.   Net  sales by audio  equipment  segment  include
      export  sales principally to Europe and the Far East of $92,526 for  1998
      and $211,561 for the nine months ended December 31, 1997.

NOTE 15   Industry Segment Information
          The  Company's operations are classified into four industry segments:
      musical  instruments,  data  communications, electronic  assemblies,  and
      audio  equipment.   The  musical  instruments  segment  is  comprised  of
      operations  principally  involved in the design,  manufacture,  sale  and
      distribution  of  electronic  keyboard  musical  instruments,   primarily
      digital  computer  organs and related accessories.   Musical  instruments
      are sold primarily to retail distributors worldwide.
          The   data   communications  segment  is  involved  in  the   design,
      manufacture,  sale  and  distribution of data  communications  equipment.
      Data  communications products are sold primarily to wholesale and  retail
      distributors  worldwide  and under OEM agreements  with  several  of  its
      customers.
          The  electronic  assemblies segment is involved in  the  manufacture,
      sale  and  distribution  of electronic assemblies for  outside  customers
      used  primarily as control devices and other circuitry in their products.
      Subcontract  assembly  services  are  provided  primarily  to  industrial
      concerns in Pennsylvania and New Jersey.
          The  audio  equipment  segment began in  1997  with  the  acquisition
      discussed   in  Note  2.   The  segment  is  involved  in   the   design,
      manufacture,  sale and distribution of high quality speaker cabinets  and
      related  equipment  for hi-fi stereo and home theater applications.   The
      segment's  products  are sold worldwide directly to individual  customers
      for  home  use  with  a  lesser  percentage  distributed  through  dealer
      audition sites.

          Following  is a summary of segmented information for 1998,  1997  and
      1996.
                                                    December 31,
                                           1998         1997          1996
   Net Sales to Unaffiliated Customers
    Musical instruments               $25,425,112    $23,351,483   $25,418,620
    Data communications                12,297,955      9,037,521     7,647,597
    Electronic assemblies               4,727,975      5,935,381     3,648,911
    Audio equipment                     2,515,033      2,023,699             0
     Total                            $44,966,075    $40,348,084   $36,715,128

   Intersegment Sales
    Musical Instruments               $   136,123    $     5,252   $         0
    Data Communications                       594         84,939       125,288
    Electronic Assemblies                 495,266        938,479       296,132
    Audio Equipment                       148,573         52,244             0
     Total                            $   780,556    $ 1,080,914   $   421,420

   Income (Loss) from Operations
    Musical instruments               $   795,773    $ 2,718,085   $ 3,634,901
    Data communications                (3,397,020)    (1,069,165)     (349,785)
    Electronic assemblies                 326,609        631,521       520,602
    Audio equipment                        (9,846)       337,495             0
     Total                            $(2,284,484)   $ 2,617,936   $ 3,805,718
      
   Identifiable Assets
    Musical instruments               $19,777,418    $22,669,782   $20,790,307
    Data communications                11,532,523     10,294,411     8,937,839
    Electronic assemblies               3,501,492      4,422,908     2,600,627
    Audio equipment                     2,259,185      2,153,922             0
     Sub-total                         37,070,618     39,541,023    32,328,773
    General corporate assets           24,919,335     23,020,981    31,637,873
     Total                            $61,989,953    $62,562,004   $63,966,646

   Capital Expenditures
    Musical instruments               $   926,718    $ 1,574,743   $   530,624
    Data communications                   542,030        386,308       230,859
    Audio equipment                         8,592         85,046             0
      Total                           $ 1,477,340    $ 2,046,097   $   761,483

   Depreciation and Amortization
    Musical instruments               $   786,582    $   657,686   $   580,090
    Data communications                   618,380        392,108       235,187
    Audio equipment                        73,417         64,845             0
     Total                            $ 1,478,379    $ 1,114,639   $   815,277

          Intersegment  sales are generally priced at cost  plus  a  percentage
      mark-up,  and  are  generally thought to be marginally less  than  prices
      which  would  be charged for the same product to unaffiliated  customers.
      Intersegment  sales  are  excluded  from  net  sales  reported   in   the
      accompanying  consolidated  income statements.   Identifiable  assets  by
      segment  are  those  assets  that are used in  the  Company's  operations
      within  that  segment.  General corporate assets consist  principally  of
      cash and short-term investments.
          The  electronic assemblies segment derived 68% of its  revenues  from
      three  customers  in  1998,  and 55% and 85% of  its  revenues  from  one
      customer in 1997 and 1996 respectively.  The data communications  segment
      derived  13%, 12% and 14% of its revenue from one customer in 1998,  1997
      and  1996,  respectively.   The Company's musical  instrument  and  audio
      equipment segments are not dependent on any single customer.

NOTE 16   Investment Income

                                                    December 31,
                                           1998         1997        1996

       Interest Income                  $  887,338  $1,198,362   $1,382,301
       Dividend Income                      94,134     151,250      354,741
       Gain on Sale of Investments         242,227     765,110      287,982
        Total                           $1,223,699  $2,114,722   $2,025,024

NOTE 17   Stock Option Plans
          During  1997,  VIR,  Inc.  (VIR)  and Eastern  Research,  Inc.  (ERI)
      established  employee stock-based compensation plans to  assist  them  in
      attracting  and  retaining  personnel.   The  maximum  number  of   these
      subsidiaries'  shares that may be issued under the plans  approximates  a
      15% interest in each of the respective companies.  Options are issued  at
      estimated  fair  market value.  The maximum term  of  the  options  is  6
      years, and they generally vest equally over 4 years.
          As  of  December  31,  1997, total options issued  for  VIR  and  ERI
      represent   10%   and   11%,  respectively,  of  the   shares   currently
      outstanding.   Vested  options consist of 2%  and  3%  of  the  currently
      outstanding shares of VIR and ERI, respectively.
          No  compensation expense was recognized for these plans in  1998  and
      1997.   Had  compensation cost been determined pursuant to FASB Statement
      No. 123, net income (loss) and earnings per share would have been:

                                     1998        1997
           Net (loss) income     $(686,811)   $3,431,897
           Earnings per share       $(0.58)        $2.73
<PAGE>

                                 PART III

Item 10.    Directors and Executive Officers of the Registrant.

                 (a)            Identification of Directors
                                                               Time Period
                              Date Term                         Position
Name                           Expires       Age  Position         Held

Steven Markowitz             Next Annual     45   Director     Since 1980
                           Meeting in 1999
Eugene Moroz                 Next Annual     75   Director     Since 1968
                           Meeting in 1999
Leonard W. Helfrich (1)      Next Annual     69   Director     1964-1968 and
                           Meeting in 1999                     1972 to present
Orville G. Hawk (1)          Next Annual     81   Director     Since 1989
                           Meeting in 1999
Albert F. Schuster (1)       Next Annual     79   Director     Since 1989
                           Meeting in 1999
Martha Markowitz             Next Annual     77   Director     Since 1991
                           Meeting in 1999
Jeffrey L. Schucker (1)      Next Annual     44   Director     Since July 1996
                           Meeting in 1999
Ernest Choquette             Next Annual     45   Director     Since April 1998
                           Meeting in 1999

   (1)  Audit Committee member.

           (b)  Identification of Executive Officers.
                                                                  Time Period
                            Date Term                              Position
Name                        Expires       Age  Position            Held
Steven Markowitz          Next Annual     45   President           1990 to
                        Meeting in 1999                            present
Leonard W. Helfrich       Next Annual     69   Vice President,     1958 - 1968
                        Meeting in 1999        Secretary           and 1971 to
                                                                    present
Barry J. Holben           Next Annual     46   Vice President      October 1995
                        Meeting in 1999                            to present
Dwight A. Beacham         Next Annual     52   Vice President      October 1995
                        Meeting in 1999                            to present
Nathan S. Eckhart         Next Annual     35   Treasurer,          May 1996
                        Meeting in 1999        Assistant Secretary to present

   
           (c)  Identification of Certain Significant Employees.

                       Not required to be answered.

           (d)  Family Relationships.

                        Except  for Martha Markowitz and Steven  Markowitz,
                  who  are  mother and son, there is no family relationship
                  between any officers or directors of the Company.

           (e)  Business Experience.

                 (1)   Steven Markowitz, , Leonard W.  Helfrich
                 and  Dwight  Beacham,  have been  employees  of  the
                 Company  in  executive capacities for at  least  the
                 last five years.
                       Mr.  Holben  has  been  employed  by  the
                 Company  since 1989, spending two years  in  product
                 development  and  then  serving  in  various   sales
                 capacities.
                       Mr.  Eckhart  has been  employed  by  the
                 Company   since   1993,   previously   serving    as
                 Controller.  Prior to that time he was a manager for
                 a public accounting firm.
                       Mr. Moroz was employed by the Company for
                 over 50 years, having last held the position of Vice
                 President.  He retired from active employment in May
                 1998  and  continues  to  serve  on  the  Board   of
                 Directors.
                       Mr.  Hawk who has been retired more  than
                 five  (5)  years was formerly Chairman of the  Board
                 and President of First National Bank of Allentown.
                       Mr. Schuster is a church director of music
                 and prior to his retirement more than five (5) years
                 ago was a supervisor at Bethlehem Steel Corporation.
                       Mr.  Schucker is currently  President  of
                 Middle  Market Capital Advisors, L.L.C. and formerly
                 a Vice President of Meridian Capital Markets.
                       Mr. Choquette has been a member of the law
                 firm  of  Stevens & Lee, Reading PA, for  almost  20
                 years  and currently serves as Co-Chairman of  their
                 Corporate Group.
                       Mrs.  Markowitz  is the widow  of  Jerome
                 Markowitz, the Company's founder, and represents the
                 family interests.
   
           (f)    Involvement  in  Certain  Legal   Proceedings   by
                  Directors or Officers.

                       None.

           (g)  Compliance with Section 16(a) of the Exchange Act.

                       No transaction required to be reported.

Item 11.    Executive Compensation.
                 Deleted paragraphs and/or columns are not required to be
                 answered.

             (b)  SUMMARY COMPENSATION TABLE:
                                       Annual Compensation        All Other
                                       Salary      Bonus        Compensation  *
Name and Principal Position       Year    $          $                $

Steven A. Markowitz, President   1998   105,115    17,000           35,558
  (Chief Executive Officer)      1997   100,090    18,598           30,650
                                 1996    96,547    22,865           30,766

Leonard W. Helfrich,             1998    95,065    16,000
  Vice President - Finance       1997    93,624    17,402
  (Secretary)                    1996    88,113    21,385

*Value  of  Split  Dollar Life Insurance.  See Note 7 to  the  accompanying
consolidated  financial  statements  for  additional  information  on  this
arrangement.

             (f)  Defined Benefit or Actuarial Plan Disclosure.

                   Estimated  Annual Benefit obtained from  1998  Actuarial
                   Valuation Report:

                   Steven A. Markowitz     $57,354   Age 45. (1)
                   Leonard W. Helfrich     $39,817   Age 69. (2)
                  

            (1)  Amount shown is calculated from prior compensation to date and
                 estimated compensation to normal retirement age (65).
            (2)  Amount shown is calculated from prior compensation to current
                 age.

             (g)  Compensation of Directors:

                      Non-employee Directors receive  $350  for  each Board
                  and committee meeting attended plus reasonable expenses
                  in   connection  with  attendance.    Employee Directors
                  receive no additional compensation  for  their services
                  as a Director.

             (h)   Employment Contracts and Termination  of Employment and
                   Change in Control Arrangements:

                      There are no employment contracts between the Company
                  and any of the Company's Executive Officers. The Company 
                  has discontinued the Executive Incentive Plan adopted
                  October  24,  1996.  The  Company  is  presently evaluating
                  its executive compensation   plans   with assistance  from
                  outside consultants and  will  implement  appropriate plans
                  during 1999.

             (j)     Additional Information with  Respect  to Compensation
                     Committee Interlocks and Insider Participation in
                     Compensation Decisions:

                  (1)  Leonard   W. Helfrich, Vice President, Secretary,
                       and Director of the  Company, is the sole member 
                       of the Compensation Committee  of the Board of
                       Directors whose function is to set the compensation
                       of the President. Thecompensation of all other employees
                       is set by or at the direction of the President.
                       

Item 12.     Security Ownership of Certain Beneficial Owners and Management

             (a)   Voting securities of the registrant owned of  record  or
             beneficially by each person who owns of record, or is known by
             the registrant to own beneficially, more than 5 percent of any
             class  of  such securities.  Class A Common Shares  constitute
             the  only  securities with voting rights.  Information  as  of
             February 28, 1998.
                                          Amount and
                                          Nature of
            Names and           Title of  Beneficial   % of
            Addresses             Class   Ownership    Class
            Jerome Markowitz        A     81,531       97.06%
            Trust (2)                     (1)
            821 N. 30th St.
            Allentown, PA

            (1)  Sole voting and investment power

            (2)  The  shares are held by Trustees under an Inter  Vivos
               Trust  established by Mr. Markowitz, who died  in  February,
               1991,  for the benefit of his family, principally his widow,
               Martha   Markowitz.   The  Trustees  are  Steven  Markowitz,
               President  and  a  Director  of  the  Company,  and   Martha
               Markowitz, a Director of the Company.

             (b)   Each class of equity securities of the registrant  or  any
             of   its   parents   or  subsidiaries,  other  than   directors'
             qualifying shares, beneficially owned directly or indirectly  by
             all  directors  naming them and directors and  officers  of  the
             registrant, as a group, without naming them.  Information as  of
             December 31, 1998.

                                                         Percent    Percent
                                        Nature of          of         of
                 Class     Class        Beneficial       Class      Class
Directors          A         B          Ownership          A          B

Steven Markowitz    58                  (1) (3)          .07 %
                           13,562       (1) (3)                     1.25%
                81,531*                 (2) (4)        97.06 %
                          242,016*      (2) (4)                    22.27%

Eugene Moroz                6,290       (1) (3) as
                                        to 6,290
                            6,000       (2) (4) as
                                        to 6,000                    1.13%

Leonard W. Helfrich           278       (2) (4)                      .03%

Orville G. Hawk                50       (2) (4)                     .005%

Martha Markowitz           19,056       (1) (3)                     1.75%
                81,531*                 (2) (4)        97.06 %
                          242,016*      (2) (4)                    22.27%


                                                         Percent    Percent
All Directors                                              of         of
and Officers     Class     Class                         Class      Class
as a Group         A         B                             A          B

     7          81,589**  287,252**                     97.13%**   26.43%


              (1)   Sole voting power
              (2)   Shared voting power
              (3)   Sole investment power
              (4)   Shared investment power

               *     Shares owned by the Jerome Markowitz Trust  for
                  which   Martha  Markowitz  and  Steven  Markowitz,   Co-
                  Trustees, have shared voting and investment power and of
                  which  Martha  Markowitz is the primary beneficiary  and
                  Steven Markowitz, one of the residuary beneficiaries.

               **   The shares held by the Jerome Markowitz Trust are
                  not duplicated in the totals for the Class A and Class B
                  Shares.

             (c)      Changes in Control.  Not required to be answered.

Item 13.    Certain Relationships and Related Transactions

            See  Note  10 to Financial Statements, concerning an  agreement
            between  the  Company and Martha Markowitz, a Director  of  the
            Company.

                                  PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

            (a)  (1)  Financial Statements

                 The  following consolidated financial statements  of
                 Allen  Organ Company and its subsidiaries are included  in
                 Part II, Item 8:

                 Independent Auditors' Reports.

                 Consolidated Balance Sheets as of December 31,  1998
                 and 1997.

                 Consolidated Statements of Income for the years ended
                 December 31, 1998, 1997, and 1996.

                 Consolidated  Statement of Changes in  Stockholders'
                 Equity  for the years ended December 31, 1998,  1997,  and
                 1996.

                 Consolidated Statements of cash flows for the  years
                 ended December 31, 1998, 1997, and 1996.

                 Notes to Consolidated Financial Statements.

                 The   individual   financial  statements   of   the
                 Registrant's subsidiaries have been omitted, as  they  are
                 all  included  in  the  consolidated financial  statements
                 referred to above.

            (a)  (2) Financial Statement Schedules

                 Financial schedules are omitted as not applicable.

            (a)  (3) Exhibits
                      Exhibit No.    Description
                      2(4)      Plan of acquisition
                      3.1(1)    Articles of Incorporation as amended
                      3.2(2)    Bylaws, as amended
                      10.2(3)   Agreement of Amendment between the Company
                                and Martha Markowitz
                      21        Subsidiaries of the registrant

                     1.       Incorporated  by  reference  to  the  exhibit
                              filed with the Registrants Annual Report on 
                              Form  10-K for the year ended December 31, 1984.
                     2.       Incorporated  by  reference  to  the  exhibit
                              filed  with the Registrants Quarterly Report  
                              on Form 10-Q for the period ended
                              September 30, 1996.
                     3.       Incorporated  by  reference  to  the  exhibit
                              filed with the Registrants Annual Report on 
                              Form  10-K for the year ended December 31, 1992.
                     4.       Incorporated  by  reference  to  the  exhibit
                              filed with the Registrants Current Report on 
                              Form  8-K dated August 1, 1995.
    

            (b)   Reports  on  Form  8-K.  None  filed  during  fourth
                  quarter of 1998.



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.


                                ALLEN ORGAN COMPANY



Date:   March 17, 1999                                 /s/ STEVEN A. MARKOWITZ
                                                       Steven A. Markowitz
                                                       Chief Executive Officer,
                                                       President and Director


Date:   March 17, 1999                                 /s/ LEONARD W. HELFRICH
                                                       Leonard W. Helfrich
                                                       Vice President-Finance,
                                                       and Director, Chief
                                                       Financial and Principal
                                                       Accounting Officer


Date:   March 17, 1999                                 /s/ MARTHA MARKOWITZ
                                                       Martha Markowitz
                                                       Director              

Date:   March 17, 1999                                 /s/ JEFFREY L. SCHUCKER
                                                       Jeffrey L. Schucker
                                                       Director