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, 2004

                       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.  ( )
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 29, 2005:
         Class A - Voting  83,864       Class B - Non-voting  1,072,302
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act).
                                Yes         No   X
The aggregate market value of the Class B Common Shares held by non-affiliates
of the Registrant as of June 30, 2004: $42,038,347
                                      1
<PAGE>
                               ALLEN ORGAN COMPANY

                                      INDEX


Item                                                           Page No.


                                     PART I

1. Business
      - General developments of business                         3
      - Industry segments                                        4
      - Description of business                                  4 - 7
      - Financial information about geographic areas             7
      - Available information                                    7
2. Properties                                                    7
3. Legal Proceedings                                             8
4. Submission of Matters to a Vote of Security Holders           8

                                     PART II

5. Market for the Registrant's Common Equity,
      Related Stockholder Matters and Issuer
      Purchases of Equity Securities                             8
6. Selected Consolidated Financial Data                          9
7. Management's Discussion and Analysis of Financial Condition and
      Results of Operations                                      9 - 17
7A.   Quantitative and Qualitative Disclosures About Market Risk 17
8. Financial Statements and Supplemental Data                    18 - 39
9. Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure                                   17
9A Controls and Procedures                                       17
9B Other Information                                             17

                                    PART III

10.   Directors and Executive Officers of the Registrant         40 - 42
11.   Executive Compensation                                     42 - 43
12.   Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters                            43 - 45
13.   Certain Relationships and Related Transactions             45
14.   Principal Accountant Fees and Services                     45

                                     PART IV

15.   Exhibits and Financial Statement Schedules                 46

Signatures                                                       47

Financial Statement Schedules                                    48

Exhibits                                                         49 - 53
                                      2
<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.
               The Musical Instruments segment consists of the manufacture and
         sale  of electronic keyboard musical instruments,  primarily  digital
         church  organs and accessories.  During 2004 the Musical  Instruments
         segment  showed improvement in both net sales and operating  results.
         Management attributes this improvement to an improving economy and the
         introduction of organs containing Quantum(TM) technology in the second
         quarter  of  this  year,  with shipments beginning  during  the  third
         quarter.   Quantum organs offer significant new features  and  product
         benefits. Two major benefits of this technology are Quad Suite(TM) and
         Acoustic  PortraitT.  Quad Suite allows Quantum organs to supply  four
         complete  tonal specifications in one organ console thereby increasing
         the  instrument's  versatility.  Acoustic  Portrait  adds  low-latency
         convolution  reverberation, currently an  exclusive  feature  for  the
         church  organ market.  Convolution technology enables the  Company  to
         accurately reproduce the response of desired rooms and include them in
         Quantum organs.
               The Musical Instruments segment is seeing increasing changes  in
         the  type  of  music  used in churches throughout North  America,  the
         primary  market for this segment's organs.  Some churches have changed
         their  music  programs from traditional styles that primarily  include
         the  use of an organ, to more "contemporary" services where the  organ
         plays a lesser or no role.  These changes may negatively impact future
         sales  volume  of  this  segment.   The  Company  recently  introduced
         products to address the changing needs of church music.  This includes
         the  Allen EnsembleT that combines traditional organ sounds  and  more
         contemporary  General  MIDI  (Musical  Instrument  Digital  Interface)
         sounds.    The   Company   also  introduced   EACT   (Expanded   Audio
         Capabilities)  which  allows churches that have both  traditional  and
         contemporary   programs   to  utilize  their   Allen   organ's   audio
         capabilities  for  playing  back recorded music  or  amplifying  other
         musical  instruments.  The introduction of the Allen Ensemble and  EAC
         are  intended to help maintain the organ as the cornerstone of  church
         music  programs.   Management is hopeful that recent improvement's  in
         the  economy  and  spending patterns of religious  institutions,  this
         segment's  primary  customers, along with the  favorable  reaction  to
         Quantum organs will continue in 2005.
                The  Data  Communications  segment  designs  and  markets  data
         networking  products.   This  segment's 2004  annual  sales  increased
         approximately $18,958,000 (53%) when compared to 2003.  Gross  margins
         and  operating  income  in  2004  also  increased  significantly  when
         compared to 2003.  This improvement in net sales and operating results
         is  attributable to an improvement in the overall data  communications
         market  and  the timing of completing sales with the Company's  larger
         customers.   Sales in this segment have become increasingly  dependent
         on  larger  sales opportunities that could result in  the  amount  and
         timing of future net sales being more volatile.
                The   Electronics   Assemblies  segment  provides   subcontract
         manufacture of electronic assemblies for outside customers.  Recently,
         the  order rate for this segment has improved and management  believes
         that  its  efforts to diversify its customer base and recent signs  of
         improvement in the economy may continue to improve this segments order
         rate in 2005.
               The  Audio  Equipment segment designs, manufactures and  markets
         high-quality audio speaker cabinets for hi-fi stereo and home  theater
         applications.   This segment's 2004 net sales decreased when  compared
         to  2003.   This segment continues its efforts to develop an  expanded
         dealer  network, however, adding quality dealers for its products  has
         been slower than expected.
                                      3

        Industry segments.

        Description of business.
          Musical Instruments.
               Allen  Organ  Company  is a leading manufacturer  of  electronic
         keyboard  musical  instruments, primarily digital  church  organs  and
         accessories.  This segment accounted for 26%, 34% and 37% of net sales
         in 2004, 2003 and 2002, respectively.
               The  principal  market  for the Musical Instruments  segment  is
         institutions, primarily churches.  Sales to homes make  up  a  smaller
         portion  of this segment's sales.  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, which are  readily  available  from
         various sources without undue difficulty.  Traditionally, organs  have
         longer  service  requirements than other digital  products.   As  life
         cycles  for electronic components have shortened in recent  years  the
         Company  has had to redesign some circuit boards to satisfy the  needs
         of  current and past customers.  At the present time, management  does
         not   expect  this  issue  to  significantly  affect  future   product
         shipments.
               This  segment  does  not  engage in any significant  amounts  of
         extended   payment  terms,  or  lease  guarantees.   The  Company   is
         contingently  liable  in connection with certain customers'  financing
         arrangements  (see Note 11 to the Consolidated Financial  Statements).
         The  dollar amounts and number of times the Company has had  to  honor
         these repurchase agreements have been 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 2005 and 2004 was  $4.9
         million and $3.6 million, respectively.  All orders are expected to be
         filled in the current year.
               The  organ  industry  is  competitive involving  at  least  five
         domestic  and  foreign manufacturers of digital organs.  In  addition,
         there are many small pipe organ companies that serve the institutional
         organ  market.   The  organ market consists of  two  basic  divisions,
         institutional  (primarily  churches) and home  or  entertainment  type
         instruments.  Management believes it is the largest supplier of organs
         for  the  institutional  market in the United  States  (largest  world
         market) because of product performance and competitive prices, and has
         a  smaller percentage of the home or entertainment organ market.  This
         segment  also  markets its organ consoles and control  electronics  to
         customers that want to retain their wind-blown pipes and augment  them
         with digital voices.  The Company maintains a research and development
         program  to take advantage of the latest in technological developments
         relating to digital sound generation.

          Data Communications.
               The  Data  Communications segment consists of Eastern  Research,
         Inc. (ERI).  This segments operations are headquartered in Moorestown,
         New Jersey.  ERI designs and markets data networking products enabling
         network  service  providers to deliver services to their  external  or
         internal  customers.  This segment accounted for 68%, 59% and  54%  of
         the Company's net sales in 2004, 2003 and 2002, respectively.
               Data Communications products are predominantly sold directly  to
         end-users,  to wholesale and retail distributors worldwide  and  to  a
         smaller  extent  under  OEM  agreements.   The  segment  maintains  an
         inventory  of  in-process  and  finished  goods  to  allow  for  rapid
         fulfillment of orders.
                                      4

               The  principal  raw  materials used in the  Data  Communications
         products  are electronic components, which are readily available  from
         various  sources  without  undue  difficulty.   As  life  cycles   for
         electronic components have shortened in recent years, the Company  has
         had  to  redesign some circuit boards to satisfy the needs of  current
         and  past customers.  At the present time, management does not  expect
         this to significantly affect future product shipments.
              The Data Communications segment derived 41% of its 2004 net sales
         from  two  customers, 16% of its net sales from one customer in  2003,
         and 40% of its net sales from two customers in 2002.  While there have
         been significant customers contributing to the revenue growth, some of
         these customers have changed from year to year.
               This  segment derived approximately 27%, 19% and 28% of its  net
         sales from international markets in 2004, 2003 and 2002, respectively,
         primarily  from Asia Pacific and Europe.  ERI will continue to  pursue
         growth  opportunities  in  markets outside  the  United  States.   The
         realization  of  future  business from these  opportunities  could  be
         affected  by  currency fluctuations, social and  political  risks  and
         changes in foreign economies.
               ERI  has  a  diversified  portfolio of customers  serving  three
         primary  segments:  mobile  network service providers,  fixed  network
         service  providers  and private networks; both  in  the  domestic  and
         international  markets.   While each segment continues  to  grow,  the
         mobile  segment has accelerated the most and contributed 41%  of  2004
         revenues.   Applications in the mobile segment involve optimizing  and
         managing the access portion of these networks, which are projected  to
         continue  to  grow  and change.  There are many  competitors  in  this
         market  that is dominated by large data communications companies  such
         as  Adtran, Tellabs and Alcatel.  The Company's strategy has  been  to
         target market niches with products that provide desirable features and
         packaging with attractive pricing.
               ERI  initially built its business in the CSU/DSU market and also
         developed  router  technology products.  In 1997, ERI  introduced  its
         multi-service access concentrator (DNX) family of products.   ERI  has
         expanded this product family and broadened its feature set making  the
         DNX  its  flagship product.  The DNX revenues represent  approximately
         90% of ERI's net sales for 2004.  During 2002, ERI introduced the DNX-
         1u,  which  is targeted at wireless service providers.  The DNX-1u  is
         the  smallest product in the DNX family and includes up to 8 T1 or  E1
         circuits.  This and prior product introductions have strengthened  the
         DNX  product line.  The largest product in the DNX line is the  DNX-88
         that  can handle as many as 600 T1 circuits and also includes  T3  and
         OC3  (optical)  capabilities.  While revenues  are  primarily  product
         sales,  service  revenues are a smaller, yet growing  portion  of  the
         business.
               To  properly capitalize on this market's opportunities, ERI  has
         implemented marketing strategies and product development work and will
         continue to do so in a way that takes into account ERI's needs and the
         economic environment.
               On  July  24, 2003, ERI purchased the assets of Avail  Networks,
         Inc.  (Avail) in exchange for $200,000 in cash and contingent payments
         based  on future revenue related to the sale of Avail products  during
         the  30  months  after the acquisition.  The resources and  technology
         related  to  this acquisition have been redeployed and  are  currently
         being  used  in  the  development  of the  Company's  next  generation
         products.
               The  dollar  amount of unshipped order backlog  at  the  end  of
         February   2005   and  2004  was  $5.2  million  and   $7.0   million,
         respectively.   All orders are expected to be filled  in  the  current
         year.
               This  segment  has directed its sales and marketing  efforts  to
         focus  on markets for which its product line is well suited, including
         the   wireless,   enterprise,  government  and  certain  international
         markets.   Future  sales  in  this segment  have  become  increasingly
         dependent  on  larger  sales opportunities that could  result  in  the
         amount and timing of future revenue being more volatile.
                                      5

          Electronic Assemblies.
               Allen Integrated Assemblies (AIA) is the Company's division that
         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  for  its  Musical  Instruments business.   AIA  services  are
         supplied  out of the Macungie, PA plant, the same plant in  which  the
         Company manufactures Musical Instruments and Audio Equipment products.
         This  segment accounted for 4%, 5% and 7% of 2004, 2003 and  2002  net
         sales, respectively.  AIA derived 68% of its 2004 net sales from  five
         customers, 61% of its 2003 net sales from two customers and 73% of its
         net  sales  from three customers in 2002.  AIA continues  to  work  on
         diversifying its customer base.
               The  Electronic  Assemblies segment  is  very  competitive  with
         numerous  companies  offering  similar services.   AIA  customers  are
         generally  in  a  geographic area relatively close  to  the  Company's
         Macungie manufacturing facility.
              The dollar amount of the segment's unshipped order backlog at the
         end   of   February  2005  and  2004  was  $1,551,000  and   $909,000,
         respectively.   All orders are expected to be filled  in  the  current
         year.

          Audio Equipment.
              The Audio Equipment segment operates mainly through Legacy Audio,
         Inc.  (LAI).  LAI designs, manufactures and markets high-quality audio
         speaker cabinets for hi-fi stereo and home theater applications.  This
         segment  accounted  for  2%  of net sales  in  2004,  2003  and  2002,
         respectively.
               The  principal raw materials used in the segment's products  are
         audio  speakers,  electronic components and wood,  which  are  readily
         available from various sources without undue difficulty.
               LAI  derived  12%  of its 2004 net sales from one  customer,  no
         single  customer accounted for greater than 10% of this  segments  net
         sales in 2003 or 2002.
               The  principal  market for LAI's products is the  consumer  home
         market.    The  segment's  products  are  mainly  distributed  through
         independent retail dealers and directly to end-users.  This  segment's
         business is not seasonal.
               LAI  historically  sold its products through  direct  marketing.
         Management  determined  that this method of distribution  limited  its
         ability  to  penetrate the broader market.  The Company has  and  will
         continue to add independent retail dealers in a conservative manner to
         build a quality dealer network in an effort to distribute its products
         more  broadly.   LAI  has  had  difficulty  adding  dealers  that  are
         appropriate for its products.
               The  high-end audio market is evolving from the traditional two-
         channel to the multi-channel market, which is utilized in home theater
         applications.  LAI has developed and markets products specifically for
         these home theater applications.
               LAI  competes with several other high-end audio speaker  cabinet
         manufacturers  including  Martin-Logan,  Thiel,  B&W,  Celestion,  and
         others.
              The dollar amount of the segment's unshipped order backlog at the
         end of February 2005 and 2004 was $223,000 and $179,000, 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 $13,948,340, $8,785,522 and $7,782,571 in 2004,
         2003  and  2002, respectively, on research and development.  The  2004
         and 2003 increases were mainly within the Data Communications segment.
         The Company maintains an ongoing commitment to new product development
         and  expects  future expenditures for these activities to  exceed  the
         2004 level.
                                      6
          General. (Continued)
               The  Company  monitors its compliance with  applicable  federal,
         state,  or  local  provisions  with  regard  to  the  environment  and
         implements  procedures or modifies its equipment  as  necessary.   The
         Company  does  not  expect any significant capital  additions  in  the
         coming year to maintain its compliance.
              The Company and its subsidiaries employ approximately 505 people.
         None   of  our  employees  are  covered  by  a  collective  bargaining
         agreement.   Management  believes that relations  with  employees  are
         good.

         Financial information about geographic areas.
              The Company does not own manufacturing or sales facilities in any
         foreign   countries.   See  Note  13  to  the  Consolidated  Financial
         Statements for additional information on export sales.
              Export  sales are all made in US dollars and, based on  customer
         credit information, are made either on open credit terms, under letter
         of credit or on a prepaid basis.

         Available information.
               The Company files annual reports on Form 10-K, quarterly reports
         of  Form  10-Q,  current reports on Form 8-K and amendments  to  those
         reports  pursuant  to  Section 13(a) or 15(d) of  The  Securities  and
         Exchange  Act  of 1934 with the Commission.  The public may  read  and
         copy  any  materials filed with the Securities and Exchange Commission
         at their Public Reference Room at 450 Fifth Street, NW, Washington, DC
         20549.   The  public may also obtain this information by  calling  the
         Commission  at  1-800-SEC-0330.   The  Securities  and  Exchange  also
         maintains an Internet site that contains reports and other information
         statements  and  other  information  regarding  electronic  filers  at
         www.sec.gov.

Item 2.   Properties
              The following sets forth the location, approximate square footage
         and  use  of the Company's operating locations by segment.  Management
         believes  that its Macungie, PA facilities are generally suitable  and
         adequate   for  the  needs  of  the  Musical  Instruments,  Electronic
         Assemblies  and  Audio  Equipment segments.  The  Data  Communications
         segment  will need to expand the size of its present facility  in  New
         Jersey or relocate to another leased facility during 2005.

                                  Approximate
             Location           Square Footage           Use
 Musical Instruments, Audio Equipment and Electronic Assemblies:

       Macungie, Pennsylvania    242,000        Administrative, research  and
                                                manufacturing facility. Owned
                                                by  Allen  Organ Company.
                                                Operating at approximately
                                                85% capacity.

       Macungie, Pennsylvania     27,000        International sales, exhibition
                                                center, museum and teaching
                                                facility.  Houses the sales
                                                offices for Musical Instruments
                                                and Legacy Audio. Owned by
                                                Allen Organ Company.
 Data Communications:
       Moorestown, New Jersey     46,000        Administrative, sales and
                                                research facility. Leased until
                                                September 2005.

       Ann Arbor,  Michigan        5,000        Research facility. Leased
                                                until July 2005.

               In  October 2002, the Company's subsidiary, Legacy Audio,  Inc.,
         sold  its  manufacturing  and sales facility located  in  Springfield,
         Illinois.   See  Note 21 to the Consolidated Financial Statements  for
         additional information.
                                      7

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 2004.

                                     PART II

Item 5.  Market  for  the  Registrant's Common Stock and Related  Stockholder
          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  are  as
         follows:

                  2004              High            Low
                  First Quarter  $  48.00       $  43.15
                  Second Quarter    54.66          47.50
                  Third Quarter     64.00          47.74
                  Fourth Quarter    70.36          53.05

                  2003              High            Low
                  First Quarter  $  40.64       $  37.00
                  Second Quarter    42.58          35.46
                  Third Quarter     44.11          37.97
                  Fourth Quarter    50.03          43.00

               The  Company  has  6  Class  A  Stockholders  and  232  Class  B
         Stockholders of record as of March 29, 2005.
               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 2004
                     Record Date     Payable     Amount
                  Cash  2/20/2004    3/5/2004    $0.14
                  Cash  5/14/2004    5/28/2004   $0.14
                  Cash  8/13/2004    8/27/2004   $0.14
                  Cash  11/19/2004   12/3/2004   $0.14

                  Record of Quarterly Dividends Paid in 2003
                     Record Date     Payable     Amount
                  Cash  2/14/2003    2/28/2003   $0.14
                  Cash  5/16/2003    5/30/2003   $0.14
                  Cash  8/15/2003    8/29/2003   $0.14
                  Cash  11/14/2003   11/28/2003  $0.14
                                      8
Item 6.  Selected Financial Data
       The  selected  consolidated  financial data  presented  below  has  been
    derived  from the Company's consolidated financial statements for  each  of
    the  periods indicated.  The data set forth below is qualified by reference
    to  and  should  be read in conjunction with "Management's  Discussion  and
    Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
    Company's Consolidated Financial Statements included as Items 7  and  8  in
    this Annual Report on Form 10-K.

                                  Years Ended December 31,
                     2004         2003        2002        2001         2000

Net Sales        $80,170,788  $60,788,058 $67,739,548 $60,490,513  $72,516,208
Operating Income
 (Loss)          $ 5,729,224  $   889,497 $ 3,080,022 $(7,113,614) $ 3,784,196
Net Income
(Loss)           $ 4,709,047  $ 1,396,896 $ 2,685,357 $(4,083,810) $ 3,954,896
Basic earnings
(loss) per share $      4.07  $      1.20 $      2.29 $     (3.49) $      3.38
Diluted earnings
(loss) per share $      4.06  $      1.20 $      2.29 $     (3.49) $      3.38
Cash dividends
per share        $      0.56  $      0.56 $      0.56 $      0.56  $      0.56
At Year End
 Cash            $ 8,949,691  $ 5,907,576 $ 4,515,189 $ 4,449,998  $ 2,712,368
 Investments     $18,338,350  $17,143,171 $17,176,750 $11,609,416  $24,694,377
 Working Capital $46,943,904  $43,917,002 $41,551,690 $38,656,758  $41,648,400
 Total Assets    $78,472,735  $71,950,276 $73,362,868 $66,472,252  $80,807,742
 Long-Term Debt,
 net of
 current portion $         0  $         0 $         0 $         0  $         0
Stockholders'
 Equity          $59,888,146  $56,364 833 $56,306,332 $56,315,015  $62,434,901

Item  7. Management's  Discussion and Analysis  of  Financial  Condition  and
          Results of Operations
     Business Overview:
       As  discussed  in  Note  21  of the financial statements,  Allen  Organ
    Company  and  Subsidiaries ("Company") operate in four  industry  segments:
    Musical  Instruments, Data Communications, Electronic Assemblies and  Audio
    Equipment.
       Sales  for  the year ended December 31, 2004 increased $19,382,730  when
    compared  to  2003, primarily due to increased sales in the Company's  Data
    Communications  segment.  Net income increased $3,312,151 during  the  year
    ended  December  31, 2004, compared to 2003, primarily due  to  the  higher
    sales in the Data Communications segment and improved operating results  in
    the Musical Instruments segment.
       Net  sales  consist  of  revenues obtained for the  sale  of  electronic
    keyboard  musical  instruments  in the Musical  Instruments  segment;  data
    networking  products  and  support  services  in  the  Data  Communications
    Segment; electronic assembly services in the Electronic Assemblies segment;
    and  audio speaker cabinets in the Audio Equipment segment.  Sales  credits
    and adjustments are also included in net sales.
       Cost  of  sales  consist primarily of material costs of  products  sold,
    salary  and  benefit costs related to production and manufacturing  support
    personnel,   incoming  shipping  and  facility  related  costs,   such   as
    depreciation and maintenance.
       Consolidated  selling, general and administrative expenses and  research
    and  development expenses increased approximately $8,197,000 and $1,554,000
    during  the years ended December 31, 2004 and 2003, respectively, primarily
    related to the growth in the Data Communications segment.  Selling expenses
    consist  primarily  of employee salary and benefit costs,  advertising  and
    marketing  expenses.  General and administrative expenses consist primarily
    of  employee salary and benefit costs, professional services fees and other
    general  corporate  expenses.   Research and development  expenses  consist
    primarily of employee salary and benefit costs for engineering staff, third
    party  contracted development services, product prototyping and  compliance
    costs.
                                      9
Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)
     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,
                                                 2004             2003
          Working Capital                     $46,943,904      $43,917,002
          Current Ratio                         5.3 to 1         6.5 to 1
          Total Liabilities to Equity Ratio    0.31 to 1        0.28 to 1

       Cash   flows   from  operating  activities  increased  by  approximately
    $3,718,000  during 2004 when compared to 2003, primarily  due  to  improved
    operating  results  in the Musical Instruments, Electronic  Assemblies  and
    Data   Communications  segments.   Net  income  improved  by  approximately
    $3,312,000  during  the year ended December 31, 2004 as compared  to  2003,
    after  reflecting a non-cash charge of approximately $363,000 in 2004  from
    the  write-off of goodwill and intangibles in the Audio Equipment  segment.
    Cash  of $454,000 was used to increase working capital components in  2004,
    versus changes in working capital providing cash of $806,000 and $3,315,000
    in 2003 and 2002, respectively.  The increase in working capital components
    in   2004   is  primarily  attributable  to  higher  levels  of   inventory
    ($1,693,000) to support the increased sales activity, payment of  estimated
    income  taxes  ($1,466,000, net of current year accruals)  and  payment  of
    pension  contributions ($544,000, net of current year accruals), offset  by
    increases in payables and other accruals (total of $3,079,000) and customer
    deposits ($634,000).
       Cash  flows  provided by operating activities decreased during  2003  as
    compared to 2002, primarily due to operating losses incurred in the Musical
    Instruments segment.  Working capital decreased in 2003 due to decreases in
    receivables  and inventory (total of $2,830,000) primarily from  collection
    of  a  receivable from a large sales transaction in late 2002 and  improved
    inventory  management,  offset  by  a decrease  in  payables  and  accruals
    ($3,238,000) primarily from payment of inventory purchases to  fulfill  the
    large  sales transaction in late 2002.  Working capital decreased  in  2002
    due  to  a  decrease  in  inventory ($1,073,000)  primarily  from  improved
    inventory management, payment of estimated income taxes ($945,000,  net  of
    income  tax accruals) and an increase in payables and accruals ($3,604,000)
    primarily from inventory purchases to fulfill a large sales transaction  in
    late  2002,  offset  by  an  increase in accounts  receivable  ($2,237,000)
    primarily related to a large sales transaction in late 2002.
       Cash   flows   used  in  investing  activities  during   2004   includes
    approximately  $2,743,000  of property additions,  of  which  approximately
    $2,320,000 is primarily computer and test equipment purchased for the  Data
    Communications  segment  and net purchase of investments  of  approximately
    $1,268,000.
       Cash  flows  used  in  investing activities during  2003  were  used  to
    purchase  approximately $160,000 and $900,000 of property and equipment  in
    the Musical Instruments and Data Communications segments, respectively.  In
    addition, the Data Communications segment used $200,000 as payment for  the
    acquisition of Avail Networks.
      Cash  flows  used  in  investing activities during  2002  were  used  to
    purchase  approximately $1,039,000, $188,000 and $672,000 of  property  and
    equipment  in  the  Musical  Instruments, Electronic  Assemblies  and  Data
    Communications  segments, respectively and net purchase of  investments  of
    approximately $5,376,000.
       Cash  flows from financing activities during 2004 and 2002 were made  up
    primarily  of dividend payments to Company shareholders.  Cash  flows  from
    financing  activities  during  2003 in addition  to  dividend  payments  to
    Company   shareholders,  included  approximately  $505,000  paid  for   the
    repurchase of Class B common shares and $449,000 paid for the repurchase of
    subsidiary company stock.
                                      10
Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)
     Results of Operations:
        Sales and Operating Income
                                             December 31,
                                 2004            2003            2002
        Net Sales
        Musical Instruments
         Domestic            $16,961,307     $17,033,746     $21,694,445
         Export                3,925,493       3,348,158       3,248,480
          Total               20,886,800      20,381,904      24,942,925

        Data Communications
         Domestic             40,275,770      29,252,691      26,107,275
         Export               14,704,274       6,769,565      10,428,899
          Total               54,980,044      36,022,256      36,536,174

        Electronic Assemblies
         Domestic              2,822,019       2,819,640       4,750,143

        Audio Equipment
         Domestic              1,227,055       1,390,526       1,441,084
         Export                  254,870         119,780          69,222
          Total                1,481,925       1,564,258       1,510,306

        Total                $80,170,788     $60,788,058     $67,739,548

        Income (Loss) from Operations
        Musical Instruments  $   613,203     $  (764,639)    $ 2,024,144
        Data Communications    6,436,161       2,446,213       2,091,520
        Electronic Assemblies   (124,425)       (457,366)       (401,165)
        Audio Equipment       (1,195,715)       (334,711)       (634,477)
         Total               $ 5,729,224     $   889,497     $ 3,080,022

       Consolidated  sales for 2004 increased $19,382,730 (32%)  when  compared
    to  2003, primarily due to higher sales in the Data Communications  segment
    of  approximately  $18,958,000.   Consolidated  sales  for  2003  decreased
    $6,951,490  (10%)  when compared to 2002, primarily  due  to  a  $4,561,000
    decrease  in  Musical  Instruments  sales  and  a  $1,930,000  decrease  in
    Electronic Assemblies segment sales.
       Consolidated gross margins increased to 48% in 2004 compared to  41%  in
    2003.  This was due to the Data Communications segment representing 69%  of
    consolidated  net sales in 2004 versus 59% in 2003, which segment  provides
    the  highest gross profit percent (58% in 2004).  In addition, the  Musical
    Instruments  segment gross margins  increased by six percentage  points  to
    27.5%  in 2004 versus 21.1% in 2003 attributable to cost reduction  efforts
    that  were initiated in 2003 to reduce material and other operating  costs.
    Consolidated gross margins in 2003 increased to 41% compared to 38% in 2002
    due  to  a  6%  increase  in the gross margins in the  Data  Communications
    segment attributable to higher sales volume, reductions in product cost and
    changes in product mix, offset by a 6% decrease in the gross margin in  the
    Musical  Instrument segment due to lower sales volume over which to  absorb
    fixed costs.
       Consolidated  selling,  administrative  and  other  expenses   increased
    $3,034,102 during the year ended December 31, 2004 when compared  to  2003,
    primarily  related  to  a  $2,565,000 increase in the  Data  Communications
    segment for increased salaries and commissions related to the higher  sales
    volume  and  additional sales and marketing efforts  implemented  in  2004.
    Consolidated selling, administrative and other expenses increased  $503,940
    during  the year ended December 31, 2003, when compared to 2002,  primarily
    related  to  an  $872,000 increase in the Data Communications  segment  for
    increased  salaries  and  benefits  related  to  its  increased  sales  and
    marketing efforts.
                                      11
Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)

       Consolidated  research  and  development expenses  increased  $5,162,818
    during  the  year ended December 31, 2004 when compared to  2003  primarily
    related to a $5,292,000 increase in the Data Communications segment.   This
    increase   was   primarily  from  salaries  and  benefits  for   additional
    engineering   staff,  prototype  costs  and  contracted   design   services
    associated  with the development of the Data Communications  segments  next
    generation  products.   Consolidated  research  and  development   expenses
    increased $1,002,951 during the year ended December 31, 2003, when compared
    to   2002,   primarily  related  to  an  $820,000  increase  in  the   Data
    Communications  segment.  This increase was made up primarily  of  salaries
    and benefits for additional engineering staff.
       Consolidated  costs and expenses for the year ended  December  31,  2004
    also  includes  a  charge  for impairment of goodwill  and  intangibles  of
    $362,611 related to the write down of the carrying value of Legacy  Audio's
    goodwill and intangibles.
       Investment income decreased $39,649 and $283,936 during the years  ended
    December  31,  2004 and 2003, respectively, due to lower  rates  of  return
    available  on  invested  funds.   The  minority  interest  in  consolidated
    subsidiaries represents the ERI employee shareholders interest in  the  net
    income  of Eastern Research after recovering accumulated losses from  prior
    years  that  were  absorbed by the parent company.  There was  no  minority
    interest in consolidated subsidiaries in 2003 and 2002, as all consolidated
    subsidiaries  had accumulated losses that had been absorbed by  the  parent
    and,  in  the case of Eastern Research, were being recovered by  subsequent
    net income of the subsidiary.
       The  effective tax rate (benefit) was 22.5%, (5.7%) and 29.3%  in  2004,
    2003  and  2002,  respectively.  See Note 16 of the Consolidated  Financial
    Statements  for  a  reconciliation  of the  income  tax  provision  to  the
    statutory  rates.  The effective tax rate in 2004, 2003 and 2002  is  lower
    than  statutory tax rates primarily due to foreign income with the  benefit
    of  lower  tax  rates,  research and development  credits  and  non-taxable
    investment  income derived from investment in municipal  bond  funds.   The
    2004  rate  increased compared to 2003 primarily due to  higher  levels  of
    taxable  income  in  2004 offset by higher levels of tax  credits  and  tax
    exempt  income.  The 2003 rate decreased when compared to 2002 due  to  the
    low  level of taxable income which, after deducting tax credits and  exempt
    income, resulted in a small tax benefit.
       Consolidated  net  income increased $3,312,151  during  the  year  ended
    December 31, 2004, compared to 2003, primarily due to the higher sales  and
    operating  income in the Data Communications segment and improved operating
    results  in  the  Musical  Instruments segment.   Consolidated  net  income
    decreased  $1,288,461 during the year ended December 31, 2003, compared  to
    2002,  primarily due to operating losses of $765,000 and $457,000  incurred
    in   the   Musical   Instruments   and  Electronic   Assemblies   segments,
    respectively.
       The  Company is in the process of implementing regulations contained  in
    the  Sarbanes-Oxley Act of 2002 applicable to companies  with  a  class  of
    securities  registered  under  the Securities  Exchange  Act  of  1934,  in
    particular  Section  404  relating to Management's Assessment  of  Internal
    Controls.   Compliance with these regulations is estimated to cost  in  the
    range of $400,000 to $600,000 for initial implementation.  These costs will
    be  incurred  over  2005  and 2006.  In addition,  there  will  be  ongoing
    compliance  costs  thereafter  which management  expects  will  range  from
    $250,000 to $400,000 annually.

  Musical Instruments Segment
       Domestic  sales  for 2004 were approximately equal to  2003.   The  2004
    order rate and backlog on December 31, 2004 continue to be higher than  the
    same  periods  in  2003  reflecting  favorable  customer  reaction  to  the
    Company's Quantum organs that include significant new features and  product
    benefits,  as  well  as an improved economic environment.   Quantum  organs
    offer Quad SuiteT and Acoustic PortraitT.  Quad Suite allows Quantum organs
    to   supply  four  complete  tonal  specifications  in  one  organ  console
    increasing  the  instrument's  versatility.  Acoustic  Portrait  adds  low-
    latency  convolution reverberation, currently an exclusive feature for  the
    church  organ  market.   Convolution  technology  enables  the  Company  to
    accurately  reproduce the response of desired rooms  and  include  them  in
    Quantum organs.  The domestic sales for 2003 decreased $4,661,000 from 2002
    due  to  lower  order volume, which management believed was caused  by  the
    economic  downturn,  declines  in  financial  markets  and  general  global
    uncertainty caused by the war in Iraq.
                                      12
Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations (Continued)
      Musical Instruments Segment (Continued)
       This  segment  is seeing changes in the type of music used  in  churches
    throughout  North  America, the primary market for this  segment's  organs,
    which  may  negatively impact future sales volume for this  segment.   Some
    churches  have  changed their music programs from traditional  styles  that
    primarily  use  an organ, to more "contemporary" services where  the  organ
    plays  a lesser or no role.  To address the changing needs of church music,
    the Company recently introduced products including the Allen EnsembleT that
    combines  traditional  organ  sounds and  more  contemporary  General  MIDI
    (Musical Instrument Digital Interface) sounds.  The Company also introduced
    EACT  (Expanded  Audio Capabilities) that allows churches  that  have  both
    traditional and contemporary programs to utilize their Allen organ's  audio
    capabilities  for playing back recorded music or amplifying  other  musical
    instruments.   The introduction of the Allen Ensemble and EAC are  intended
    to help maintain the organ as the cornerstone of church music programs.
       Export  sales  increased approximately $577,000 during  the  year  ended
    December  31,  2004  when  compared to 2003, which management  believes  is
    attributable  to the decreased value of the US dollar compared  to  certain
    foreign  currencies making the Company's products more affordable in  those
    countries.   Export sales were approximately equal in 2003 when compared to
    2002.   Certain  foreign  markets continue to be  affected  by  unfavorable
    economic conditions.
        Gross  profit margins on sales were 27.5%, 21.1% and 29.5% for the years
    ended December 31, 2004, 2003 and 2002, respectively.  The 2004 increase is
    attributable  to  the  higher sales volume, favorable product  mix  changes
    caused  by  the  introduction of Quantum organs  and  the  effect  of  cost
    reduction  efforts initiated to reduce material and other operating  costs.
    The  2003  decrease  in gross profit margins was a result  of  lower  sales
    volume  over  which  to  absorb  fixed costs  and  higher  operating  costs
    including  employee pension expense, which increased by $597,000 (103%)  in
    2003 versus 2002.
       Selling  and  advertising expenses during 2004 were approximately  equal
    to  2003  and decreased approximately $71,000 during 2003 when compared  to
    2002,  due  to  lower  sales volume.  General and  administrative  expenses
    increased  approximately  $108,000  during  2004  when  compared  to  2003,
    primarily  due to higher fees incurred for professional services  including
    legal  and  audit services.  General and administrative expenses  decreased
    approximately $60,000 in 2003 when compared to 2002.
       Research  and  development  expenses  decreased  approximately  $152,000
    during  2004  compared  to 2003 primarily due to lower  retirement  benefit
    costs  and  increased approximately $82,000 during 2003  when  compared  to
    2002.
       Several  of  the  Company's  operating  expenses  continue  to  rise  at
    significant  rates  including business insurances,  medical  insurance  and
    other  employee benefit expenses.  As discussed in Note 14 to the financial
    statements,  effective December 31, 2003, the Company froze future  benefit
    accruals  in  both of its defined benefit pension plans and  replaced  this
    benefit  with  a  discretionary contribution to  the  Allen  Organ  Company
    Savings and Profit Sharing Plan.
       During 2005, management has implemented a profit sharing bonus plan  for
    employees  at  its  Macungie,  PA  facility  which  contains  its   Musical
    Instrument,  Electronic  Assemblies  and  Audio  Equipment  segments.   The
    Company  will  contribute 10% of this plants operating income  to  eligible
    employees.  The plan has been implemented to incent employees to work along
    with  management  in  lowing  costs, improving processes  and  quality  and
    improving the plants operating results.

  Data Communications Segment
       Domestic  sales increased $11,023,079 and $3,145,416 in 2004  and  2003,
    respectively.   International  sales  increased  $7,934,709  in  2004  when
    compared  to 2003, and decreased $3,659,334 in 2003 when compared to  2002.
    The 2004 increases are due to higher order volume which management believes
    is attributable to an improvement in the overall data communications market
    and  the  timing  of completing sales with the Company's larger  customers.
    Future  sales visibility for this segment has improved, but remains limited
    throughout  the markets served by this segment.  The total 2003 sales  were
    approximately equal to 2002.
       Gross  profit  margins  were 58%, 56% and 50% in 2004,  2003  and  2002,
    respectively.  The 2004 increase is due to higher sales volume,  reductions
    in  product costs and changes in product mix.  In addition, the 2003  gross
    margin  was  reduced  by approximately 3% due to an  accrual  for  warranty
    costs.  The 2003 increase is due to favorable product mix changes offset by
    an  $850,000  accrual  for warranty costs and also includes  $1,400,000  of
    revenue  recognized on product software development for a  customer  during
    the  second  quarter of 2003.  Excluding this product software  development
    sale  the 2003 gross margin was 54%.  While the Company strives to maintain
    profit  margins by developing products that offer desirable  features,  the
    industry is very competitive which can negatively affect margins.
                                      13

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations (Continued)
    Data Communications Segment (Continued)
       Selling  expenses increased approximately $2,138,000 (28%) in 2004  when
    compared to 2003, primarily due to increases in ERI's domestic sales  force
    ($983,000),   marketing  ($344,000)  and  higher  costs   associated   with
    international   sales  efforts  ($621,000).   Selling  expenses   increased
    approximately $823,000 in 2003 when compared to 2002, due to  increases  in
    ERI's sales efforts both domestic and international.
       Administrative expenses increased approximately $426,000 (15%)  in  2004
    compared  to 2003, and increased approximately $50,000 in 2003 compared  to
    2002.   These  increases  are  primarily due to additional  management  and
    administrative personnel to support the segment's growth.
       Research  and  development  expenses were  $12,465,063,  $7,173,393  and
    $6,352,909  for  the  years  ended  December  31,  2004,  2003  and   2002,
    respectively.   The 2004 increase is due primarily to additional  personnel
    and  related  costs associated with the development of the  Company's  next
    generation  products.   The  products under  development  are  expected  to
    continue to serve emerging segments of the mobile and fixed network service
    providers,  as well as private networks, and may also present  the  Company
    with  a  much  broader market opportunity.  The 2003 increase  was  due  to
    increased   expenditures  incurred  in  connection  with  the   July   2003
    acquisition  of  Avail  Networks  and the  commencement  of  work  on  next
    generation  products.  The segment is committed to new product  development
    and expects these expenditures to increase during 2005.
       The  combination  of higher sales and higher gross margins  resulted  in
    operating income of $6,436,161, $2,446,213 and $2,091,520 during 2004, 2003
    and  2002,  respectively, for this segment.  Future sales in  this  segment
    have become increasingly dependent on larger sales opportunities that could
    result  in the amount and timing of future revenue and operating income  to
    be more volatile.  In addition, this segment will increase future operating
    costs,  primarily  research  and development  to  develop  next  generation
    products, which is expected to negatively impact future operating results.

 Electronic Assemblies Segment
       Sales  for  2004 were approximately equal to 2003, which  had  decreased
    $1,930,503 compared to 2002.  The segment's order rate decreased in 2003 as
    a  result  of  the  economic slowdown that affected the Company's  contract
    manufacturing customers.  Management believes that its efforts to diversify
    its  customer  base  and recent signs of improvement  in  the  economy  may
    improve this segment's order rate in 2005.
       The  gross  profit  margin  for  2004 was  5%  compared  to  a  loss  of
    approximately  $(114,000)  (4%)  and  $(61,000)  (1%)  in  2003  and  2002,
    respectively.  The 2004 increase is due to the Company's efforts  initiated
    in 2003 to reduce its operating costs.  Selling, general and administrative
    expenses  in 2004 were approximately equal to 2003 and 2002.  This  segment
    continues  its  efforts to diversify its customer base and to  improve  its
    production capabilities to offer state of the art manufacturing services to
    its customers.

 Audio Equipment Segment
       Sales  decreased  $82,333 in 2004 and increased  $53,952  in  2003  when
    compared  to  the  previous year.  Legacy Audio has historically  sold  its
    products through a direct marketing program.  Management believes that this
    method  of  distribution has limited its ability to penetrate  the  broader
    market.   In  2002, Legacy began distributing its products through  a  more
    traditional  dealer  network.   The Company has  added  independent  retail
    dealers  and  will continue to do so in a conservative manner  to  build  a
    quality  dealer network.  During this period, Legacy has shifted  marketing
    resources to the new method of distribution.
       Gross  profit  margins  were  20%, 35%, and  22%  for  the  years  ended
    December  31,  2004,  2003 and 2002, respectively.  The  2004  decrease  is
    primarily  due  to  changes  in products mix  and  $150,000  in  additional
    inventory reserves recorded.
       Selling,   general  and  administrative  costs  increased  approximately
    $217,000  during 2004 when compared to 2003, primarily related to increased
    marketing  and  advertising  costs  associated  with  the  introduction  of
    Legacy's new products.  Selling, general and administrative costs decreased
    approximately $29,000 in 2003 compared to the previous year, as a result of
    steps  taken  to  reduce operating costs.  The Company has taken  steps  to
    lower these costs in 2005.
       As  discussed  in Note 7 of the Consolidated Financial Statements,  2004
    operating expenses includes a charge of $362,611 related to the write  down
    of  the  carrying value of Legacy's goodwill and intangibles.   This  write
    down  is attributable to Legacy's past and continuing operating losses  and
    its inability to significantly expand distribution of its products, all  of
    which  reduced  expectations of future cash flows from Legacy's  operations
    and correspondingly it estimated fair market value.
                                      14

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations (Continued)

 Significant Accounting Policies
       The  significant  accounting policies of the Company  are  described  in
    Note  1  of  the  Consolidated Financial Statements.   The  preparation  of
    financial  statements  in conformity with accounting  principles  generally
    accepted  in  the  United  State of America  requires  management  to  make
    estimates  and assumptions that affect the reported amounts of  assets  and
    liabilities  and  disclosures of contingent assets and liabilities  at  the
    date  of  the financial statements and the reported amounts of revenue  and
    expense during the reporting period.
       Certain  accounting estimates and assumptions are particularly sensitive
    because of their significance to the consolidated financial statements  and
    the possibility that future events affecting them may differ markedly.
       Management considers the following accounting estimates to be  the  most
    critical  in  preparing  the  consolidated  financial  statements.    These
    critical accounting estimates have been discussed with the Company's  audit
    committee.
         Allowance  for Doubtful Accounts:  Management performs ongoing  credit
         evaluations of customers and adjusts credit limits based upon  payment
         history and the customer's current credit worthiness, as determined by
         a review of their current credit information.  Management continuously
         monitors  collections  and  payments from customers  and  maintains  a
         provision for estimated credit losses based upon historical experience
         and any specific customer collection issues that have been identified.
         If  the  financial condition of a specific customer or  the  Company's
         general  customer base were to deteriorate, resulting in an impairment
         of  their  ability  to  make payments, additional  allowances  may  be
         required.

         Carrying  Value  of Obsolete and Slow Moving Inventory:   The  Company
         values inventory at the lower of cost or market.  Management regularly
         reviews  inventory  quantities on-hand and  records  a  provision  for
         excess  and obsolete inventory based primarily on estimated  forecasts
         of  product demand and historical usage, after considering the  impact
         of  new products.  If actual market conditions and product demand  are
         less favorable than projected, additional inventory write-downs may be
         required.

         Carrying  Value of Goodwill and Intangible Assets:  In  assessing  the
         recoverability  of  goodwill  and  intangible  assets,  management  is
         required to make assumptions regarding estimated future cash flows and
         other  factors  to determine whether the fair value  of  the  business
         supports  the  carrying value of goodwill, intangible assets  and  net
         operating  assets.  This analysis includes assumptions  and  estimates
         about future sales, costs, working capital, capital expenditures,  and
         cost  of  capital.  If these assumptions and estimates change  in  the
         future,  the  Company may be required to record an  impairment  charge
         related to goodwill and intangible assets.

         Realization of Deferred Income Tax Benefits:  As discussed in Note  16
         of  the  Consolidated Financial Statements, the Company  has  recorded
         valuation  allowances related to the uncertainty of realizing  certain
         federal  and  state net operating loss carryforwards and state  credit
         carryforwards.  If the estimates and related assumptions  relating  to
         the likely utilization of the deferred tax asset change in the future,
         the valuation allowance may change accordingly.

         Warranty  Reserve:  The Company provides warranties  on  some  of  its
         products for varying lengths of time. A warranty liability is recorded
         at the time of product sale based on estimates that are developed from
         historical  information and certain assumptions about  future  events.
         Future  warranty  obligations are affected by product  failure  rates,
         usage and service costs incurred in addressing warranty claims.  These
         factors are impacted by the level of new product introductions and the
         mix  of  equipment  sold.  If actual warranty costs  differ  from  the
         estimates, adjustments to the warranty liability would be required.
                                      15

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations (Continued)
     Contractual Obligations and Commercial Commitments
       Following  is a summary of contractual obligations and other  commercial
    commitments of the Company:
                                                  Payments Due by Period
                                             Less
           Contractual                       than       1-3      4-5    After
           Obligations           Total      1 year      years    years  5 years
        Operating Leases(a)    $341,983    $339,508    $2,475     $0       $0
        Purchase
         Obligations (b)     $9,575,186  $9,189,880  $385,306     $0       $0


                                   Amount of Commitment Expiration Per Period


                                             Less
        Other Commercial    Total Amounts    than       1-3      4-5    After
           Commitments        Committed     1 year      years    years  5 years
        Contingent Repurchase
        Commitments Related to
        Customer Financing
        Arrangements (a)       $972,676    $972,676       $0      $0       $0



(a)  Refer to Note 11 of the Consolidated Financial Statements for  more
information regarding Operating Leases and Contingent Repurchase Commitments.

(b)  Purchase Obligations are defined as agreements to purchase goods or
services that are enforceable and legally binding and specify all significant
terms.  The amounts listed above for purchase obligations include contractual
commitments for items such as raw materials, supplies, services and capital
expenditures.  Cancelable purchase obligations that the Company intends to
fulfill are also included in the purchase obligations amount listed above.

 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  and
    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
    2005.   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 global economics and financial markets, 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
    availability  of  electronic  components that the  Company  purchases  from
    suppliers,  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.
                                      16

Item  7. Management's Discussion and Analysis of Financial Condition and
         Results of Operations (Continued)

 New Accounting Standards
       During  2004  the  Financial  Accounting  Standards  Board  issued   the
    following  new  statements  that  are applicable  to  the  Company.   These
    statements  did not have a material effect on the Company's 2004  financial
    statements.
       SFAS  123, (revised), "Share Based Payment" - establishes standards  for
    the  accounting  for transactions in which an entity exchanges  its  equity
    instruments  for goods or services. The Statement requires a public  entity
    to  measure the cost of employee services received in exchange for an award
    of equity instruments based on the grant-date fair value of the award. That
    cost  will  be  recognized  over the period during  which  an  employee  is
    required to provide service in exchange for the award-the requisite service
    period (usually the vesting period).  This statement is effective as of the
    beginning of the first interim reporting period that begins after June  15,
    2005, which for the Company will be the third quarter of 2005.  The Company
    does not expect that this revised statement will have a material effect  on
    the Company's consolidated financial statements.
       SFAS  151,  "Inventory Costs-an amendment of ARB No. 43,  Chapter  4"  -
    clarifies  the  accounting for abnormal amounts of idle  facility  expense,
    freight,  handling costs and wasted material.  In addition, this  Statement
    requires  that  allocation of fixed production overheads to  the  costs  of
    conversion  be  based on the normal capacity of the production  facilities.
    This Statement is effective for the Company for inventory costs incurred on
    or after January 1, 2006
       SFAS  153,  "Exchange of Nonmonetary Assets-an amendment of APB  Opinion
    No.  29" - This Statement amends the accounting for the exchange of similar
    productive assets and replaces it with a general exception for exchanges of
    nonmonetary  assets that do not have commercial substance.  This  Statement
    is  effective for nonmonetary asset exchanges occurring on or after
    January 1, 2006.
       In   December  2003,  FASB  Statement  No.  132  (revised),   "Employers
    Disclosures about Pensions and Other Postretirement Benefits", was  issued.
    This  Statement prescribes employers' disclosures about pension  plans  and
    other  postretirement benefit plans; it does not change the measurement  or
    recognition of those plans.  The new annual disclosure requirements  became
    effective  for  the Company as of the year ended December 31,  2004.   This
    additional disclosure is included in Note 14 to the consolidated  financial
    statements.

Item 7A  Quantitative and Qualitative Disclosures About Market Risk.
       Financial  instruments that potentially subject the  Company  to  market
    and/or 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's  Musical Instruments segment sells most of its  products  through
    established dealer networks.  The Data Communications segment sells most of
    their  products directly to end-users, to wholesale and retail distributors
    worldwide  and  to a smaller extent under OEM agreements  with  other  data
    communications  companies.   The market and  credit  risk  associated  with
    related  receivables  is limited due to the large  number  of  dealers  and
    distributors  and their geographic dispersion.  The Company  has  no  other
    material exposure to market risk.

Item 8.  Financial Statements and Supplemental Data
       The  information required by this Item is set forth on pages 18  through
    39 hereto and is incorporated by reference herein.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure
       There  were  no  reportable  events  as  described  in  Item  304(b)  of
    Regulation S-K.

Item 9A. Controls and Procedures
       The  Company's Chief Executive Officer and Chief Financial Officer  have
    evaluated  the  effectiveness of the design and operation of the  Company's
    disclosure controls and procedures, which are designed to insure  that  the
    Company  records,  processes,  summarizes  and  reports  in  a  timely  and
    effective  manner the information required to be disclosed in  the  reports
    filed  with or submitted to the Securities and Exchange Commission.   Based
    upon this evaluation, they concluded that the Company's disclosure controls
    are  effective  as of December 31, 2004.  There has been no change  in  the
    Company's  internal control over financial reporting that  occurred  during
    the  quarter  ended December 31, 2004 that has materially affected,  or  is
    reasonably likely to materially affect, the Company's internal control over
    financial reporting.

Item 9B. Other Information
       None

                                      17
<PAGE>
KPMG
4905 Tilghman Street
Allentown, PA 18104

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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, 2004 and  2003,  and  the related
consolidated statements of income, stockholders' equity and cash flows and  the
related  financial  statement schedule for each of the years in  the three-year
period  ended  December 31, 2004.  These consolidated financial statements  and
financial statement schedule are the responsibility of the management  of Allen
Organ   Company.   Our  responsibility  is  to  express  an  opinion  on  these
consolidated financial statements and financial statement schedule based on our
audits.

     We  conducted  our audits in accordance with the standards of  the  Public
Company Accounting  Oversight Board (United States).  Those  standards  require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated  financial statements are free of material  misstatement.   An
audit includes examining, on a test basis, evidence supporting the amounts  and
disclosures in the consolidated 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 financial position of Allen Organ
Company  and Subsidiaries as of December 31, 2004 and 2003, and the  results of
their  operations and their cash flows for each of the years in  the three-year
period  ended December 31, 2004, in conformity  with U.S. generally  accepted
accounting principles. Also, in our opinion, the related  financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents  fairly, in  all material respects,
the information set forth therein.





/s/KPMG LLP
Allentown, Pennsylvania
February 24, 2005

                                      18
<PAGE>
                      ALLEN ORGAN COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                           December 31,
                     ASSETS                           2004             2003
CURRENT ASSETS
 Cash                                             $ 8,949,691      $ 5,907,576
 Investments including accrued interest            18,338,350       17,143,171
 Accounts receivable, net of allowance for
  doubtful accounts of $ 445,804  in 2004
  and $605,496 in 2003                             10,993,833       11,652,365
 Inventories                                       15,619,326       13,926,173
 Prepaid income taxes                               1,466,029             --
 Prepaid expenses                                     532,175          491,444
 Deferred income taxes                              2,045,087        2,741,167
     Total Current Assets                          57,944,491       51,861,896

PROPERTY, PLANT AND EQUIPMENT, NET                 10,878,469       10,167,004

OTHER ASSETS
 Note receivable from related party                 2,397,291        2,397,291
 Cash value of life insurance                       2,822,638        2,474,002
 Deferred income taxes                              3,700,899        3,493,238
 Intangible assets, net                               682,258        1,347,822
 Goodwill, net                                         24,701          194,523
 Other assets                                          21,988           14,500
     Total Other Assets                             9,649,775        9,921,376
     Total Assets                                 $78,472,735      $71,950,276

          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                                 $ 3,285,659      $ 1,278,535
 Accrued income taxes                                  --              657,941
 Accrued expenses                                   4,882,754        3,811,025
 Customer deposits                                  2,832,174        2,197,393
     Total Current Liabilities                     11,000,587        7,944,894
NONCURRENT LIABILITIES
 Deferred and other noncurrent liabilities          1,529,890        1,946,696
 Accrued pension costs                              6,012,185        5,693,853
     Total Noncurrent Liabilities                   7,542,075        7,640,549
     Total Liabilities                             18,542,662       15,585,443

MINORITY INTEREST                                      41,927             --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
 Class A Voting Common stock, $1 par value,
  400,000 shares authorized, 127,232 shares issued    127,232          127,232
 Class B Non-Voting Common stock, $1 par value,
  3,600,000 shares authorized,
   1,410,761 shares issued                          1,410,761        1,410,761
 Additional paid-in capital                        13,197,610       13,150,610
 Retained earnings                                 62,076,690       58,015,139
 Accumulated other comprehensive loss              (4,417,842)      (3,832,694)
 Treasury stock, at cost, 43,368 Class A shares
  in 2004 and 2003, 338,382  Class B shares in 2004
  and 338,380 in 2003                             (12,506,305)     (12,506,215)
     Total Stockholders' Equity                    59,888,146       56,364,833
     Total Liabilities and Stockholders' Equity   $78,472,735      $71,950,276

          See accompanying notes to Consolidated Financial Statements.
                                      19
<PAGE>
              ALLEN ORGAN COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF INCOME

                                           Years Ended December 31,
                                        2004           2003           2002

NET SALES                           $80,170,788    $60,788,058    $67,739,548

COSTS AND EXPENSES
  Cost of sales                      41,653,317     35,693,613     41,963,839
  Selling, administrative and other
   expenses                          18,424,333     15,390,231     14,886,291
  Research and development           13,948,340      8,785,522      7,782,571
  Other expense                          52,963         29,195         26,825
  Impairment of goodwill and
   intangibles                          362,611           --             --
 Total                               74,441,564     59,898,561     64,659,526

INCOME FROM OPERATIONS                5,729,224        889,497      3,080,022

INVESTMENT INCOME                       392,750        432,399        716,335

MINORITY INTERESTS IN CONSOLIDATED
  SUBSIDIARY                            (41,927)          --             --

INCOME  BEFORE INCOME TAXES           6,080,047      1,321,896      3,796,357

INCOME TAXES
  Current                               533,000        571,000      1,669,000
  Deferred                              838,000       (646,000)      (558,000)
   Total                              1,371,000        (75,000)     1,111,000

NET INCOME                          $ 4,709,047    $ 1,396,896    $ 2,685,357

OTHER COMPREHENSIVE LOSS,
  NET OF TAX
  Unrealized (loss) gain on investments:
   Unrealized (loss) gain arising
    during period                   $   (47,865)   $   (26,898)   $   132,305
   Less: reclassified adjustment
   for gain (loss) included in
   income                                    12          2,495        (97,186)
 Sub-total                              (47,853)       (24,403)        35,119
 Minimum pension liability adjustment  (537,295)      (347,828)    (2,121,282)
Other comprehensive loss               (585,148)      (372,231)    (2,086,163)
COMPREHENSIVE INCOME                $ 4,123,899    $ 1,024,665    $   599,194

EARNINGS PER SHARE OF COMMON STOCK
  BASIC                             $      4.07    $      1.20    $      2.29
  DILUTED                           $      4.06    $      1.20    $      2.29

  See accompanying notes to Consolidated Financial Statements.
                                      20
<PAGE>
                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                      Common Stock                   Additional
                               Class A              Class B          Paid-in
                           Shares    Amount     Shares    Amount     Capital

Balance-December 31,2001  127,232  $127,232  1,410,761  $1,410,761  $12,903,610
Tax benefit from
 exercise of subsidiary
 stock options                                                           58,000
Balance-December 31,2002  127,232   127,232  1,410,761   1,410,761   12,961,610
Tax benefit from
 exercise ofsubsidiary
 stock options                                                          189,000
Balance-December 31,2003  127,232   127,232  1,410,761   1,410,761   13,150,610
Tax benefit from
 exercise of subsidiary
 stock options                                                           47,000
Balance-December 31,2004  127,232  $127,232  1,410,761  $1,410,761  $13,197,610



                                        Accumulated
                                          Other
                           Retained    Comprehensive      Treasury Stock
                           Earnings    Income (Loss)     Shares      Amount

Balance-December 31,2001  $55,237,713  $(1,374,300)    367,672    $(11,990,001)

Net income                  2,685,357
Reacquired Class B Shares                                  261         (10,570)
Change in unrealized gain
 (loss) on securities
 available for sale                         35,119
Minimum pension
 liability adjustment                   (2,121,282)
Cash dividend paid
 ($0.56 per share)           (655,307)
Balance-December 31,2002   57,267,763   (3,460,463)    367,933     (12,000,571)

Net income                  1,396,896
Reacquired Class B Shares                               13,815        (505,644)
Change in unrealized gain
 (loss) on securities
 available for sale                        (24,403)
Minimum pension
 liability adjustment                     (347,828)
Cash dividend paid
 ($0.56 per share)           (649,520)
Balance-December 31,2003   58,015,139   (3,832,694)    381,748     (12,506,215)

Net income                  4,709,047
Reacquired Class B Shares                                    2             (90)
Change in unrealized
 loss on securities
  available for sale                       (47,853)
Minimum pension
 liability adjustment                     (537,295)
Cash dividend paid
 ($0.56 per share)           (647,496)
Balance-December 31,2004  $62,076,690  $(4,417,842)    381,750     $12,506,305

         See accompanying notes to Consolidated Financial Statements.
                                      21

<PAGE>
                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  Years Ended December 31,
                                            2004         2003          2002
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                              $4,709,047   $1,396,896    $2,685,357
 Adjustments to reconcile net income to
  net cash provided by
  operating activities
  Depreciation and amortization           2,480,881    2,518,612     2,801,512
  Minority interest in consolidated
   subsidiary                                41,927        --            --
  Loss from impairment of goodwill and
   intangibles                              362,611        --            --
  (Gain) loss on sale of property,
   plant and equipment                         (378)      16,554        55,184
  Loss (gain) on sale of investments           --          4,000      (156,248)
  Tax benefit from exercise of stock
   options                                   47,000      189,000        58,000
  Deferred income taxes                     838,000     (624,135)     (518,984)
  Change in assets and liabilities
   Accounts receivable                      658,532      532,199    (2,236,722)
   Inventories                           (1,693,153)   2,297,509     1,073,475
   Prepaid income taxes                  (1,466,029)     161,071       945,143
   Prepaid expenses                         (40,731)    (172,501)       67,478
   Other assets                              (7,488)       1,592         --
   Accounts payable                       2,007,124   (4,410,432)    2,938,716
   Accrued income taxes                    (657,941)     657,941         --
   Accrued expenses                       1,071,729    1,172,769       665,104
   Customer deposits                        634,781     (496,587)     (284,043)
   Accrued pension costs                   (544,045)     144,349      (175,071)
   Deferred and other noncurrent
    liabilities                            (416,806)     917,911       321,016
     Net Cash Provided by
      Operating Activities                8,025,061    4,306,748     8,239,917

CASH FLOWS FROM INVESTING ACTIVITIES
 Cash proceeds from sale of investments
  classified as available for sale          791,464      526,866    30,633,381
 Cash paid for purchase of investments
  classified as available for sale       (2,058,995)    (521,690)  (36,009,348)
 Increase in cash value of life
  insurance                                (348,636)    (200,839)      (99,597)
 Increase in note receivable                   --            --       (400,184)
 Payment for acquisition of business           --       (200,000)        --
 Cash proceeds from sale of property,
  plant and equipment                         7,000        5,100       319,155
 Cash paid for purchase of property,
  plant and equipment                    (2,743,457)  (1,063,231)   (1,898,586)
   Net Cash Used In Investing
    Activities                           (4,352,624)  (1,453,794)   (7,455,179)

CASH FLOWS FROM FINANCING ACTIVITIES
 Dividends paid in cash                    (647,496)    (649,520)     (655,307)
 Reacquired Class B common shares               (90)    (505,644)      (10,570)
 Subsidiary company stock reacquired
  from minority stockholders                (24,939)    (448,659)      (89,386)
 Proceeds from sale of subsidiary stock      42,203      143,256        35,716
  Net Cash Used in Financing Activities    (630,322)  (1,460,567)     (719,547)

NET INCREASE IN CASH                      3,042,115    1,392,387        65,191

CASH, JANUARY 1                           5,907,576    4,515,189     4,449,998

CASH, DECEMBER 31                        $8,949,691   $5,907,576    $4,515,189


            SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid (refunded) for income taxes    $2,619,970   $ (439,012)   $  750,008
Cash paid for interest                   $   --       $   --        $    --
The above changes in assets and
 liabilities excludes the following
 adjustments related to the minimum
 pension liability.
Accumulated other comprehensive income   $  537,295   $  347,828    $2,121,282
Deferred income tax benefits                325,082      195,128     1,312,295
Accrued pension costs                      (862,377)    (542,956)   (3,433,577)

         See accompanying notes to Consolidated Financial Statements.
                                      22
<PAGE>
                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 Background and Significant Accounting Policies

     Background:
        Allen  Organ  Company  and  Subsidiaries  (Company)  operate  in   four
     industry  segments:  Musical Instruments, Data Communications,  Electronic
     Assemblies,  and Audio Equipment.  See Note 21 for additional  information
     on the operating activities of each segment.

     Principles of Consolidation:
        The  consolidated  financial statements include  the  accounts  of  the
     Company  and  its wholly-owned subsidiaries (Allen Diversified,  Inc.  and
     Legacy Audio, Inc.) and majority-owned (91%) subsidiary (Eastern Research,
     Inc.).    In  addition,  the  Company  has  other  inactive,  wholly-owned
     subsidiaries.   All  material intercompany accounts and transactions  have
     been eliminated.

     Use of Estimates:
        The  preparation of financial statements in conformity  with  generally
     accepted accounting principles in the United States 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.

     Cash Equivalents:
        Cash equivalents of $5,861,878 and $1,556,578 at December 31, 2004  and
     2003,  respectively, consist of money market funds.  For purposes  of  the
     consolidated  statements of cash flows, the Company considers  all  highly
     liquid  debt instruments with original maturities of three months of  less
     to be cash equivalents.

     Investments:
        Investment  securities at December 31, 2004 and 2003  consist  of  U.S.
     Treasury   and  equity  securities.   The  Company  classifies  its   debt
     securities  in one of three categories: trading, available  for  sale,  or
     held  to maturity and its equity securities into trading or available  for
     sale.   Trading securities are bought and held principally for the purpose
     of  selling  them in the near term.  Held to maturity debt securities  are
     those  securities in which the Company has the ability and intent to  hold
     the security until maturity.  All other securities not included in trading
     or held to maturity are classified as available for sale.  The Company has
     no trading or held to maturity securities.
        Available-for-sale securities are recorded at fair  value.   Unrealized
     holding gains and losses, net of the related tax effect, on available-for-
     sale  securities are excluded from earnings and are reported as a separate
     component  of  other comprehensive income until realized.  Realized  gains
     and  losses  from the sale of available-for-sale securities are determined
     on a specific-identification basis.
        A  decline in the market value of any available-for-sale security below
     cost  that is deemed to be other-than-temporary results in a reduction  in
     carrying amount to fair value.  The impairment is charged to earnings  and
     a new cost basis for the security is established.  To determine whether an
     impairment is other-than-temporary, the Company considers whether  it  has
     the  ability  and  intent  to hold the investment  until  a  market  price
     recovery  and  considers  whether evidence  indicating  the  cost  of  the
     investment  is  recoverable outweighs evidence to the contrary.   Evidence
     considered in this assessment includes the reasons for the impairment, the
     severity  and  duration of the impairment, changes in value subsequent  to
     year-end, and forecasted performance of the investee.
        Premiums and discounts are amortized or accreted over the life  of  the
     related  available-for-sale security as an adjustment to yield  using  the
     effective-interest  method.  Dividend and interest income  are  recognized
     when earned.

     Accounts Receivable Allowance:
         The   Company   records   an  allowance  for  uncollectible   accounts
     receivable based on historical loss experience, customer payment  patterns
     and  current  economic trends.  Management reviews  the  adequacy  of  the
     allowance for uncollectible accounts receivable on a quarterly basis  and,
     if necessary, increases or decreases the allowance.
                                      23

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 Background and Significant Accounting Policies (Continued)
     Inventories:
        Inventories  are  valued  at the lower of  cost  or  market.   Cost  is
     determined  using  the  first-in,  first-  out  (FIFO)  method   for   all
     inventories.

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

     Goodwill and Intangible Assets:
        Goodwill  represents the excess of costs over fair value of  assets  of
     businesses  acquired. The Company accounts for its goodwill and intangible
     assets  in  accordance  with Statement of Financial  Accounting  Standards
     (SFAS)  No.  142,  "Goodwill and Other Intangible  Assets".  Goodwill  and
     intangible  assets  acquired  in  a  purchase  business  combination   and
     determined  to  have  an  indefinite useful life are  not  amortized,  but
     instead  tested  for impairment at least annually in accordance  with  the
     provisions  of  SFAS No. 142.  SFAS No. 142 also requires that  intangible
     assets  with  useful  lives be amortized over their  respective  estimated
     useful  lives  to  their  estimated  residual  values,  and  reviewed  for
     impairment in accordance with SFAS No. 144, "Accounting for Impairment  or
     Disposal of Long-Lived Assets".
        Intangible  assets  represent  identifiable  assets  such  as  customer
     lists, developed technology and trademarks acquired in connection with the
     purchase  of the Company's subsidiaries.  Intangible assets are  amortized
     on  a  straight-line basis over various periods, generally  from  5  -  15
     years,   and  are  presented  net  of  accumulated  amortization  on   the
     consolidated balance sheets.
        The  carrying value of goodwill and intangible assets for each business
     is   continually  reviewed  to  assess  its  recoverability  from   future
     operations,  based  on  future cash flows (undiscounted)  expected  to  be
     generated  by such operations.  Any impairment in value indicated  by  the
     assessment  would be computed based on discounted cash flows  and  charged
     against current operations.

     Revenue Recognition:
        The  Company  recognizes  revenue when products  are  shipped  and  the
     customer  takes  ownership and assumes risk of  loss,  collection  of  the
     relevant  receivable is probable, persuasive evidence  of  an  arrangement
     exists and the sales price is fixed or determinable.  Service revenues are
     recognized  when the services are performed. Service revenues are  derived
     from providing extended warranties to customers, equipment maintenance and
     repairs,  engineering  and  hardware  support,  and  subcontract  assembly
     services.  Deferred  revenues represent cash received  from  customers  in
     advance of revenues being recognized for the related payment.
        Sales  are  recorded net of anticipated product returns.  The estimated
     product  returns are based on a historical analysis and are recorded  when
     the associated product revenue is recognized.

     Research and Development and Advertising:
        Research  and development and advertising expenditures are  charged  to
     expense  as  incurred.  Research and development expenses  are  separately
     disclosed  in the consolidated statements of operations while  advertising
     costs  were  $459,812,  $278,327, and $333,695 in  2004,  2003  and  2002,
     respectively.

     Income Taxes:
        Income  taxes  are accounted for under the asset and liability  method.
     Deferred  tax  assets and liabilities are recognized for  the  future  tax
     consequences  attributable to differences between the financial  statement
     carrying  amounts of existing assets and liabilities and their  respective
     tax  bases and operating loss and tax credit carryforwards.  Deferred  tax
     assets  and  liabilities are measured using enacted tax rates expected  to
     apply  to taxable income in the years in which those temporary differences
     are  expected  to  be recovered or settled.  The effect  on  deferred  tax
     assets and liabilities of a change in tax rates is recognized in income in
     the period that includes the enactment date.
                                      24

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 Background and Significant Accounting Policies (Continued)
     Financial Instruments:
        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's
     Musical Instruments segment sells most of its products through established
     dealer  networks.   The  Data Communications segment  sells  most  of  its
     products  direct to customers, to distributors worldwide and to  a  lesser
     extent under OEM agreements with other data communications companies.  The
     credit  risk  associated with related receivables is limited  due  to  the
     large number of customers and their geographic dispersion.

     Reclassifications:
        Certain  amounts  in the 2003 and 2002 financial statements  have  been
     reclassified to conform to the 2004 presentation.

     New Accounting Standards:
        During  2004  the  Financial  Accounting  Standards  Board  issued  the
     following  new  statements  that are applicable  to  the  Company.   These
     statements did not have a material effect on the Company's 2004  financial
     statements.
        SFAS 123, (revised), "Share Based Payment" - establishes standards  for
     the  accounting for transactions in which an entity exchanges  its  equity
     instruments for goods or services. The Statement requires a public  entity
     to measure the cost of employee services received in exchange for an award
     of  equity  instruments based on the grant-date fair value of  the  award.
     That  cost will be recognized over the period during which an employee  is
     required  to  provide  service  in exchange for  the  award-the  requisite
     service  period (usually the vesting period).  This statement is effective
     as  of  the  beginning of the first interim reporting period  that  begins
     after  June  15, 2005, which for the Company will be the third quarter  of
     2005.  The Company does not expect that this revised statement will have a
     material effect on the Company's consolidated financial statements.
        SFAS  151,  "Inventory Costs-an amendment of ARB No. 43, Chapter  4"  -
     clarifies  the  accounting for abnormal amounts of idle facility  expense,
     freight,  handling costs and wasted material.  In addition, this Statement
     requires  that allocation of fixed production overheads to  the  costs  of
     conversion  be based on the normal capacity of the production  facilities.
     This  Statement is effective for the Company for inventory costs  incurred
     on or after January 1, 2006
        SFAS  153, "Exchange of Nonmonetary Assets-an amendment of APB  Opinion
     No. 29" - This Statement amends the accounting for the exchange of similar
     productive  assets and replaces it with a general exception for  exchanges
     of  nonmonetary  assets  that  do  not have  commercial  substance.   This
     Statement  is  effective for nonmonetary asset exchanges occurring  on  or
     after January 1, 2006.
        In   December  2003,  FASB  Statement  No.  132  (revised),  "Employers
     Disclosures about Pensions and Other Postretirement Benefits", was issued.
     This  Statement prescribes employers' disclosures about pension plans  and
     other postretirement benefit plans; it does not change the measurement  or
     recognition of those plans.  The new annual disclosure requirements became
     effective  for the Company as of the year ended December 31,  2004.   This
     additional disclosure is included in Note 14.
                                      25

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 Background and Significant Accounting Policies (Continued)
     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, as amended  by
     SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation",  only   the
     disclosure requirements set forth in the Statements are presented.
        Had  compensation  cost  been determined on the  basis  of  fair  value
     pursuant  to  SFAS  No. 123, as amended by SFAS No. 148,  net  income  and
     earnings per share would have been as follows:
                                            2004         2003          2002
      Net income
        As reported                      $4,709,047   $1,396,896    $2,685,357
        Stock-based employee compensation
        expense included in reported net
        income, net of tax                   71,693       90,402        35,661

        Total stock-based employee
        compensation expense determined under
        fair value based method for all awards,
        net of related tax effects             (653)    (121,859)     (105,035)
          Pro forma                      $4,780,087   $1,365,439    $2,615,983
      Earnings per share
        As reported
          Basic                               $4.07        $1.20         $2.29
          Diluted                             $4.06        $1.20         $2.29
        Pro forma
          Basic                               $4.13        $1.18         $2.23
          Diluted                             $4.12        $1.18         $2.23

        The  fair  value of each option granted is estimated on the grant  date
     using  the  Black-Scholes option pricing model.  The following assumptions
     were  made in estimating the fair value of options granted under the Allen
     Organ  Company  stock option plan in 2004 and 2002; there were  no  option
     grants under the Allen Organ Company stock option plan in 2003.
                                           2004      2002
           Dividend yield                  1.40%     1.40%
           Risk-free interest rate         2.25%     2.50%
           Expected life                 6 years   7 years
           Expected volatility               25%       10%

NOTE 2 Business Acquisition
        On  July  24,  2003, the Company's subsidiary, Eastern  Research,  Inc.
     (ERI),  purchased the assets of Avail Networks, Inc. (Avail)  in  exchange
     for $200,000 in cash and contingent payments of 5% of net revenues related
     to  the sale of Avail products in excess of $1,500,000 during the first 30
     months  after  the  acquisition.   ERI  has  not  paid  any  royalties  in
     connection with this acquisition and does not expect that revenue  related
     to  the  sales  of  Avail  products during the  30  months  following  the
     acquisition  will  exceed $1,500,000, the amount after which  any  royalty
     would be due.
        Avail's  sales  prior to the acquisition date were minimal.   As  such,
     pro-forma financial information is not required for this acquisition.
        The  purchase  price was allocated $114,300 to property  and  equipment
     and $85,700 to intangibles.
                                      26

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3  Investments

       The  cost  and  fair value of investments in debt and equity  securities
       are as follows:


                                           Gross         Gross         Fair
                          Amortized       Unrealized   Unrealized     Value
                            Cost            Gains        Losses

      December 31, 2004
      Available for sale
      Equity securities  $   29,310      $     --       $     50   $    29,260
      Mutual Funds
       Short Term Gov't
        Funds             3,318,087            --         72,088     3,245,999
       Municipal  Bond
        Funds            15,049,871            --         46,056    15,003,815
       Equity Funds          57,213          2,063           --         59,276
      Totals            $18,454,481      $   2,063      $118,194   $18,338,350

      December 31, 2003
      Available for sale
      Equity securities  $   29,310      $     --       $     50   $    29,260
      Mutual Funds
       Short Term Gov't
        Funds             2,281,775            --         36,422     2,245,353
       Municipal  Bond
        Funds            14,840,033            --          6,593    14,833,440
       Equity Funds          35,832            --            714        35,118
      Totals            $17,186,950      $     --       $ 43,779   $17,143,171

        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 2004,  2003
     and 2002, sales proceeds and gross realized gains and losses on securities
     classified as available for sale were:

                                  2004           2003           2002

     Sales proceeds           $ 791,464      $ 526,866      $30,633,381

     Gross realized losses    $      --      $   4,000      $   379,804

     Gross realized gains     $      --      $      --      $   536,052

        The  change  in  net  unrealized  holding  (loss)  gain  on  securities
     available  for sale of $(72,352) $(36,537), and $55,961, net  of  deferred
     tax  (benefit)  expense  of $(24,499), $(12,134), and  $20,842,  has  been
     included  in accumulated other comprehensive loss in stockholders'  equity
     for the years ended December 31, 2004, 2003, and 2002, respectively.
                                      27

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 Inventories
                                                 December 31,
                                              2004         2003
           Finished goods                  $5,685,024   $3,945,007
           Work in process                  5,535,795    5,525,106
           Raw materials                    4,398,507    4,456,060
            Total                         $15,619,326  $13,926,173

           Inventory is net of allowance for obsolete and slow moving items  of
       $3,134,223 and $3,851,749 at December 31, 2004 and 2003, respectively.
           Finished  goods  consist  primarily  of  completed  organs,  speaker
       cabinets and completed data communications products.

NOTE 5 Property, Plant and Equipment
                                                                    Estimated
                                                December 31,         Useful
                                             2004         2003       Lives
           Land and improvements         $ 2,369,298  $ 2,369,298    10 yrs
           Buildings and improvements      9,502,949    9,085,523    2 - 40 yrs
           Machinery and equipment        12,411,711   11,263,861    5 - 10 yrs
           Office furniture and equipment  6,480,353    5,385,231    3 - 8  yrs
           Vehicles                          212,453      179,369    4 yrs
            Sub-total                     30,976,764   28,283,282
           Less accumulated depreciation  20,098,295   18,116,278
            Total                        $10,878,469  $10,167,004

           Depreciation   expense   charged  to  operations   was   $2,025,370,
       $1,846,367 and $2,158,302 in 2004, 2003 and 2002, respectively.

NOTE 6 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 is required to pay  the  portion  of  the
       premiums  equal  to  the  value of the economic  benefit  determined  in
       accordance  with applicable IRS Revenue Rulings.  Due to rules  included
       in  the  Sarbanes-Oxley Act of 2002 prohibiting  the  payment  of  these
       types  of  premiums, the Company did not pay any insurance  premiums  in
       2004  or  2003 related to these split-dollar agreements.  In  the  past,
       the  Company  paid  the balance of the net premiums, which  approximates
       $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  note receivable is also secured by the personal obligation  of  its
       President.   The  note receivable exceeds the cash  surrender  value  of
       these  policies by approximately $457,000 and $431,000 at  December  31,
       2004  and 2003, respectively.  However, the Company's President  has  an
       adequate level of personal net assets to cover these amounts.
                                      28

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 Intangible Assets
           Intangible assets subject to amortization are as follows:

                      December 31, 2004       December 31, 2003

                                                                     Weighted
                    Gross                   Gross                     Average
                  Carrying  Accumulated    Carrying   Accumulated  Amortization
                   Amount   Amortization    Amount    Amortization     Period


Customer Lists  $  105,679   $  105,679   $  105,679  $   87,583      7 years
Developed
 Technology      4,643,246    3,960,988    4,660,509   3,515,220      5 years
Trademark          278,396      278,396      278,396      93,959     20 years
 Total          $5,027,321   $4,345,063   $5,044,584  $3,696,762

        Amortization expense was $455,511, $672,245 and $643,210 in 2004,  2003
     and  2002, respectively.  Estimated amortization expense for the next five
     years is as follows:

              2005                    $224,856
              2006                     167,605
              2007                     136,356
              2008                      87,875
              2009                      65,566

        As  discussed in Note 2, in July 2003, ERI acquired the assets of Avail
     Networks  for  $200,000,  which  included  $85,700  of  intangible  assets
     allocated  to developed technology and will be amortized over five  years.
     In  addition,  intangible assets of $(17,264), $305,403 and  $53,670  were
     recorded  in 2004, 2003 and 2002, respectively, in connection  with  stock
     transactions with minority stockholders of ERI.
        During  June 2004, the Company recorded a charge to operating  expenses
     of  $362,611  related to the impairment in the carrying value of  goodwill
     ($169,822) and intangibles ($192,789) which arose in connection  with  the
     acquisition  of  Legacy Audio, Inc.  This write down  is  attributable  to
     Legacy's  past  and  continuing operating  losses  and  its  inability  to
     significantly  expand distribution of its products, all of  which  reduced
     expectations   of   future  cash  flows  from  Legacy's   operations   and
     correspondingly its estimated fair market value.

NOTE 8 Accrued Expenses
                                                          December 31,
                                                       2004         2003
           Accrued salaries and commissions        $2,279,036   $1,876,287
           Accrued warranty costs                     555,000      970,000
           Deferred revenue                           535,113      405,959
           Accrued profit sharing contribution        826,640      248,349
           Other                                      686,965      310,430
             Total                                 $4,882,754   $3,811,025
                                     29

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 Deferred and Other Noncurrent Liabilities
                                                            December 31,
                                                          2004       2003
           Deferred compensation (see Note 14 and 18)   $  925,157  $1,190,549
           Deferred revenue                                254,940     516,147
           Accrued warranty costs                          349,793     240,000
             Total                                      $1,529,890  $1,946,696

NOTE 10    Warranty Costs
        The  Musical  Instruments segment provides a 10 year  warranty  on  its
     organs, the Data Communications segment provides a 2 year warranty on  all
     of  its  data  communication products, the Electronic  Assemblies  segment
     provides  a  1  year  warranty  on  assemblies  manufactured  for  outside
     customers  and the Audio Equipment segment provides a 5 year  warranty  of
     its  line  of home audio speakers.  The Company's policy is to accrue  the
     estimated cost of warranty coverage at the time the sale is recorded.  The
     activity in the warranty accrual is summarized as follows:
                                                           December 31,
                                                       2004            2003
           Accrual at beginning of year            $1,210,000      $  300,000
           Revision to prior year estimate           (298,105)           --
           Additions charged to warranty expense      315,000       1,080,357
           Claims paid and charged against
             the accrual                             (322,102)       (170,357)
           Accrual at end of year                  $  904,793      $1,210,000

NOTE 11    Commitments and Contingencies
        As  of  December  31, 2004, the Company is contingently  liable  for  a
     maximum  amount of approximately $973,000 in connection with the financing
     arrangements of certain customers.
        Under the terms of an agreement with the wife of the late Chairman  and
     principal  stockholder  of the Company, the Company  may  be  required  to
     purchase  within eight months of her death, at the option of her  personal
     representative, an amount of Class A and/or 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, 2004, the stockholder owned
     or  would have includable in her estate 81,531 Class A shares and  267,429
     Class  B shares.  The Company's obligation under this agreement is limited
     to  the insurance proceeds to be received by the Company on life insurance
     purchased on the life of the stockholder, which policy has a face value of
     $6,000,000.
        In  connection with the purchase of Avail Networks (see  Note  2),  ERI
     agreed  to  pay royalties of 5% of total net sales of qualifying  products
     through  January 2006 in excess of $1,500,000.  The royalties are  payable
     quarterly.  There were no royalty payments made during 2004 and 2003.
        ERI  leases  its  offices and production facility under  non-cancelable
     operating  leases which expire at various dates through March 2006.   Rent
     expense  for  all  Company  operating leases was $571,851,  $453,414,  and
     $413,733  in  2004,  2003  and 2002, respectively.   Minimum  annual  rent
     payments  for  the operating leases are $339,508 and $2,475  in  2005  and
     2006, respectively.
        At  December  31, 2004, the Company had open purchase obligations  with
     expected payment obligations of $9,575,186 in 2005 and $385, 306 in 2006.
                                      30

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12    Accumulated Other Comprehensive Loss
                                                         December 31,
                                                      2004          2003
           Unrealized loss on investments, net   $   (76,720)  $   (28,867)
           Minimum pension liability adjustment   (4,341,122)   (3,803,827)
             Total                               $(4,417,842)  $(3,832,694)

NOTE 13    Export Sales
        Export  sales  are  all made in US dollars and based on  the  customers
     credit  information are made either on open credit terms, under letter  of
     credit or on a prepaid basis
        In  2004,  2003 and 2002, net sales by the Musical Instruments  segment
     include  export sales, principally to Canada, Europe and the Far East,  of
     $3,925,493,  $3,348,158, and $3,248,480, respectively.  Net sales  by  the
     Data  Communications  segment include export sales  principally  to  South
     Africa,  Europe  and Asia Pacific of $14,704,274 for 2004, $6,769,565  for
     2003, and $10,428,899 for 2002.  Included in the export sales of the  Data
     Communications  segment  are sales to Australia of $6,622,621,  $2,321,937
     and  $6,979,993 in 2004, 2003 and 2002, respectively.  Net  sales  by  the
     Audio  Equipment  segment include export sales principally  to  Russia  of
     $254,870 for 2004, $119,780 for 2003, and $69,222 for 2002.

NOTE 14    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.
        Effective December 31, 2003, the Company froze future benefit  accruals
     under  both  the salaried and hourly defined benefit pension  plans.   The
     Company will continue to fund the plans and may terminate the plans in the
     future.   The  Company  has  replaced the  retirement  benefit  previously
     provided  to its employees under the defined benefit pension plan  with  a
     discretionary  contribution to the Allen Organ Company Saving  and  Profit
     Sharing  Plan.   The  discretionary  contribution  will  be  allocated  to
     employee accounts based on their salary.
        The  measurement  date  used to calculate the  benefit  obligations  is
     December 31.
                                      31

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14    Retirement Plans (Continued)
   Following  are  reconciliations of the pension benefit obligation  and  the
value of plan assets:
                                         2004            2003          2002
      Pension benefit obligation
      Balance, beginning of year     $17,945,952     $17,468,426   $16,112,915
      Service cost                         --            436,305       393,927
      Interest cost                    1,016,079       1,089,526     1,085,299
      Benefits paid to
      participants                    (1,142,374)     (1,112,879)   (1,117,494)
      Actuarial loss                     862,985           --            --
      Increase due to changes
       in data/assumptions                 --             64,574       993,779
         Balance, end of year        $18,682,642     $17,945,952   $17,468,426

      Plan assets
      Fair value, beginning of year  $12,252,099     $11,514,344   $13,398,564
      Actual investment returns          560,732         820,634    (1,663,508)
      Company contributions            1,000,000       1,030,000       852,041
      Benefits paid to participants   (1,142,374)     (1,112,879)   (1,072,753)
         Fair value, end of year     $12,670,457     $12,252,099   $11,514,344

      The funded status of the plans is as follows:
                                                     December 31,
                                         2004            2003          2002
      Excess of the benefit
       obligation over the value of
       plan assets                   $(6,012,185)    $(5,693,853)  $(5,954,082)
      Unrecognized net actuarial loss  6,967,646       6,105,269     6,509,847
      Adjustment to recognize
       minimum liability              (6,967,646)     (6,105,269)   (5,562,313)
      Accrued benefit cost           $(6,012,185)    $(5,693,853)  $(5,006,548)

        The   adjustment  to  recognize  the  minimum  pension   liability   of
     $6,967,646,  net of deferred tax benefit of $2,626,524, has been  included
     in  accumulated  other  comprehensive  loss  in  stockholders'  equity  at
     December 31, 2004.
        The  following  weighted-average rates were  used  in  determining  the
     above plan information:
                                                       2004      2003     2002
      Discount rate on the benefit obligation          5.50%     5.75%    6.25%
      Discount rate on net periodic benefit cost       5.75%     6.25%    6.75%
      Expected long-term rate of return on plan assets 7.00%     7.00%    7.00%
      Rate of long-term compensation increase          N/A       5.00%    5.00%

        The  expected  long-term rate of return is based on the portfolio  that
     management  expects  to maintain as a whole and not  on  the  sum  of  the
     returns  on  individual asset categories.  The return is based exclusively
     on  historical returns, without adjustments.  The expected rate  of  long-
     term  compensation is not applicable as accrued benefits in the plans have
     been frozen.

        Pension expense is comprised as follows:
                                           2004          2003          2002
      Service cost                     $   --        $  436,305    $  393,927
      Interest cost                     1,016,079     1,089,526     1,085,299
      Expected return on plan assets     (868,347)     (768,716)   (1,036,157)
      Amortization of net gain from
       prior service cost                  --              --         133,903
      Amortization of net loss            308,223       417,234          --
        Net pension cost               $  455,955    $1,174,349    $  576,972

                                      32

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14    Retirement Plans (Continued)
        The  allocation  of  the  fair value of plan assets  of  the  Company's
     pension plans at December 31, 2004, 2003 and 2002 were as follows:
                                                     December 31,
                                          2004          2003       2002
           Equity Security Funds            33%          20%        --
           Stable Asset Fund                34%          34%        --
           Cash and Equivalents Fund        33%          46%       100%
             Total                         100%         100%       100%

        The  Company's  investment  policies and  strategies  for  the  pension
     benefit  plans  do  not  use target allocations for the  individual  asset
     categories.   Management  expects to increase  its  allocation  to  Equity
     Security  Funds to approximately 40%, with the balance being  invested  in
     the  Stable  Asset  Fund.   Management will  continue  to  monitor  market
     conditions  and  make  changes  in asset  allocation  that  it  feels  are
     appropriate  to  balance  the risk and return on  plan  investments.   The
     Company's  investment goals are to maximize returns  subject  to  specific
     risk management policies.  Its risk management policies permit investments
     in  mutual  funds  and  prohibit direct investments  in  debt  and  equity
     securities  and  derivative financial instruments.  The Company  addresses
     diversification  by  the use of mutual fund investments  whose  underlying
     investments are in domestic and international fixed income securities  and
     domestic  and  international equity securities.  These  mutual  funds  are
     readily marketable and can be sold to fund benefit payment obligations  as
     they become payable.
        The  Company expects to contribute a total of $1,000,000 to its pension
     plans in 2005.
        Future benefit payments are estimated as follows:
                 2005          $1,165,633
                 2006           1,188,586
                 2007           1,274,828
                 2008           1,330,150
                 2009           1,318,210
                 2010-2014      6,277,407

        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.  Profit-sharing contributions
     to  the  plan  are discretionary as determined by the Company's  Board  of
     Directors.   Expenses related to this plan were $826,640, $248,349 and
     $58,325 in 2004, 2003 and 2002, respectively.
        The  Company provides supplemental executive retirement plans (deferred
     compensation)  for  several  of its officers  and  key  employees  of  the
     Company.   These  plans  provide for discretionary Company  contributions,
     which vest over a five year period, accrue interest at the prime rate, not
     to  exceed  9%, and are payable upon the executive's death or  retirement.
     Expense  related to these arrangements was $159,647, $138,760 and $143,512
     in  2004, 2003 and 2002, respectively.  The accrued benefits were $629,157
     and $667,549 at December 31, 2004 and 2003, respectively.

NOTE 15    Investment Income
                                                     December 31,
                                            2004        2003         2002

       Interest Income                   $ 377,753   $ 429,440    $ 550,697
       Dividend Income                      14,997       6,959        9,390
       Gain (Loss) on Sale of Investments     --        (4,000)     156,248
        Total                            $ 392,750   $ 432,399    $ 716,335
                                      33

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16    Income Taxes
           The provision for income taxes consists of the following:

                   2004                   2003                   2002
          Currently              Currently              Currently
           Payable    Deferred    Payable    Deferred    Payable      Deferred

Federal   $ 432,000  $ 783,000  $ 439,000  $ (448,000)  $1,252,000  $ (456,000)
State       101,000     55,000    132,000    (198,000)     417,000    (102,000)
 Total     $533,000  $ 838,000  $ 571,000  $ (646,000)  $1,669,000  $ (558,000)

           A  reconciliation  of  the  provision  for  income  taxes  with  the
       statutory rate follows:
                                 2004            2003               2002
Statutory provision for
 federal income tax     $2,081,000  34.0% $ 449,000   34.0%  $1,291,000  34.0%
State taxes, net of
 federal tax benefits      203,000   3.3    106,000    8.0      143,000   3.8
Tax credits for research
 and development          (510,000) (8.3)  (347,000) (26.3)    (311,000) (8.2)
Tax-exempt income          (71,000) (1.1)   (56,000)  (4.2)     (64,000) (1.7)
Extraterritorial
 income exclusion         (309,000) (5.1)  (104,000)  (7.9)    (136,000) (3.6)
Other items, net            77,000   1.3     27,000    2.0       18,000   0.5
Effect of change in
 valuation allowance
 of deferred tax assets:
  Federal                      --     --      --       --       105,000   2.8
  State                   (100,000) (1.6)  (150,000) (11.3)      65,000   1.7
 Total                  $1,371,000  22.5% $ (75,000)  (5.7)% $1,111,000  29.3%

           The  following temporary differences give rise to the net  deferred
     tax asset at December 31, 2004 and 2003.

                                                        2004            2003
    Deferred Tax Assets
      Excess of book depreciation/amortization
        over tax depreciation/amortization          $  352,792      $  375,529
      Excess of book over tax pension expense        1,881,358       1,766,324
      Loss on investments not recognized
       for tax purposes                                 39,414          14,913
      Deferred compensation not recognized
        for tax purposes                               316,157         447,759
      Net operating loss and credit carryforwards    1,729,610       1,872,221
      Other liabilities                                659,323         646,331
      Reserve for bad debts                            167,560         227,846
      Warranty reserve                                 340,852         454,989
      Inventory reserve                              1,178,920       1,448,493
       Sub-total                                     6,665,986       7,254,405
         Valuation Allowance                          (920,000)     (1,020,000)
           Total Deferred Tax Assets                $5,745,986      $6,234,405

        Deferred  taxes are included in the Company's financial  statements  as
     follows:
                                                        2004            2003
             Current deferred tax asset             $2,045,087      $2,741,167
             Non-current deferred tax asset          3,700,899       3,493,238
               Total deferred tax asset             $5,745,986      $6,234,405

                                      34

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16    Income Taxes (Continued)
        At   December   31,  2004,  the  Company  has  available  approximately
     $2,337,000 of unused federal and $13,886,000 of unused state net operating
     loss  carryforwards that may be applied against future taxable income  and
     that  expire in various years from 2007 to 2024.  In addition, the Company
     has  $872,000  in  state tax credit carryforwards that expire  in  various
     years  from  2008  to  2019.   The Company has a  valuation  allowance  of
     $920,000  for  the  deferred  tax assets related  to  the  uncertainty  of
     realizing   state   net   operating  loss  carryforwards,   state   credit
     carryforwards and federal net operating losses generated by  a  subsidiary
     prior  to  inclusion in the consolidated federal income tax  return.   The
     decrease in the 2004 valuation allowance is primarily related to state net
     operating losses that were reduced due to state apportionment.
        In  assessing  the  realizability of deferred  tax  assets,  management
     considers whether it is more likely than not that some portion or  all  of
     the deferred tax assets will not be realized.  The ultimate realization of
     deferred  tax  assets is dependent upon the generation of  future  taxable
     income  during  the  periods in which those temporary  differences  become
     deductible.   Management considers the scheduled reversal of deferred  tax
     liabilities, projected future taxable income, and tax planning  strategies
     in  making  this  assessment.  Based upon the level of historical  taxable
     income and projections for future taxable income over the periods in which
     the  deferred tax assets are deductible, management believes  it  is  more
     likely  than  not  that  the Company will realize the  benefits  of  these
     deductible  differences,  net  of  the  existing  valuation  allowance  at
     December  31,  2004.   The  amount of the deferred  tax  asset  considered
     realizable,  however, could be reduced in the near term  if  estimates  of
     future taxable income during the carryforward period are reduced.

NOTE 17    Earnings Per Share
        The  following shows the amounts used in computing earnings  per  share
     and the effect on weighted average number of shares for dilutive potential
     common stock.

                                              2004        2003       2002
    Weighted average number of
      common shares used in basic
      earnings per share                   1,156,243   1,160,008  1,170,191
    Effect of stock options                    2,576         473         --
    Weighted average number of
      common shares used in diluted
      earnings per share                   1,158,819   1,160,481  1,170,191

        Outstanding  stock options to purchase 12,000 shares  of  common  stock
     were  not  included in computing earnings per share for 2002  because  the
     effect was antidilutive.
                                      35

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 18    Stock Option Plans
        In   July   2002,  the  Company  established  an  employee  stock-based
     compensation  plan to assist in attracting and retaining  personnel.   The
     maximum  number of the Company's Class B shares that may be  issued  under
     the plan approximates a 9% interest in the Company.  Options are issued at
     the  fair  market  value on the date of grant.  The maximum  term  of  the
     options is ten years, and generally vest equally over four years.
        As  of  December 31, 2004, total options issued represent 1.40% of  the
     shares  currently  outstanding.  Vested options  represent  0.75%  of  the
     currently outstanding shares.
        Following is a summary of the activity under the plan:
                                          December 31,
                             2004               2003               2002
                              Weighted            Weighted            Weighted
                              Average             Average             Average
                    Number of Exercise  Number of Exercise  Number of Exercise
                     Shares    Price     Shares    Price     Shares   Price

Outstanding at
 beginning of year   12,000    $39.00    12,000    $39.00        --    $  --
Granted               4,500     43.15        --      --      12,000     39.00
Exercised               --      --           --      --         --       --
Forfeited               --      --           --      --         --       --
Outstanding at end
 of year             16,500    $40.13    12,000    $39.00    12,000    $39.00
Weighted average
 fair value of
 options granted
 during the year     $10.32               $ --               $ 5.03

        Following  is  a  summary  of  the status  of  options  outstanding  at
     December 31, 2004:
                      Options Outstanding                  Options Exercisable
                           Weighted Avg.
                           Remaining       Weighted Avg.           Weighted Avg
  Exercise    Number       Contractual     Exercise       Number     Exercise
  Price     Outstanding      Life            Price      Exercisable   Price

    $39.00       12,000     7.56 years     $39.00         7,200      $39.00
     43.15        4,500     9.08 years      43.15         1,500       43.15
    Total        16,500     7.98 years     $40.13         8,700      $39.72

        ERI  also provides an employee stock-based compensation plan to  assist
     in  attracting and retaining personnel.  The maximum number of  subsidiary
     shares  that  may be issued under the plan approximates a 15% interest  in
     the subsidiary.  Options are generally issued at the estimated fair market
     value.   The maximum term of the options is six years, and generally  vest
     equally over four years.
        As   of  December  31,  2004,  total  options  issued  and  outstanding
     represents  8%  of the ERI shares currently outstanding.   Vested  options
     consist of 5% of the currently outstanding shares of ERI.
        ERI  recognized compensation expense of $115,188 in 2004,  $144,875  in
     2003,  and  $59,375 in 2002 related to options granted  with  an  exercise
     price  less  than  the fair market value on the date of  grant.   Deferred
     compensation relating to these option grants is $296,000 and  $523,000  at
     December 31, 2004 and 2003, respectively.
        See  Note  1  for the pro forma effects on net income and earnings  per
     share  had  compensation cost been determined on the basis of  fair  value
     pursuant to SFAS No. 123, as amended by SFAS No. 148.

                                      36

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19    Related Party Transactions
        The  Company  maintains  two classes of stock, Class  A  voting  common
     stock  and  Class B non-voting common stock.  The majority  (97%)  of  the
     Class  A  voting  common stock is held by a Trust for the benefit  of  the
     family  of  company founder Jerome Markowitz.  Accordingly, the  Markowitz
     family  has  the ability to elect all board of directors and  control  the
     vote   on  substantially  all  matters  without  the  approval  of   other
     stockholders.
        A  member  of the Company's Board of Directors is a principal in  firms
     providing  legal and financial advisory services.  Legal  fees  paid  were
     $265,447,  $153,149  and  $45,851 in 2004, 2003  and  2002,  respectively.
     Financial  advisory fees paid were $6,000 in both 2003  and  2002.   There
     were no related party financial advisory fees paid in 2004.

NOTE 20    Major Customers
        The  Company  derived  20%  of  its consolidated  net  sales  from  one
     customer in 2004.  Receivables from this customer represented 41% of total
     consolidated accounts receivable at December 31, 2004.  No single customer
     represented 10% or more of consolidated net sales in 2003 or 2002.

NOTE 21    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  organs  and
     related  accessories.  Musical instruments are sold  primarily  to  retail
     dealers worldwide.
        The  Data  Communications segment is involved in the design,  sale  and
     distribution   of  data  communications  equipment.   Data  communications
     products are sold direct to customers, to distributors worldwide and to  a
     smaller extent under OEM agreements with some 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 (Legacy Audio, Inc.) segment is involved  in  the
     design,  manufacture,  sale  and  distribution  of  high  quality  speaker
     cabinets  for  hi-fi  stereo  and  home  theater  applications.   Legacy's
     products  are sold worldwide primarily through independent retail  dealers
     and, to a lesser extent, directly to individual customers.
        Intersegment sales are generally priced at cost plus a percentage mark-
     up,  and  are generally 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
     statements  of  income.  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 2004  net  sales
     from five customers, 61% of its 2003 net sales from two customers and  73%
     of  its  2002  net  sales from three customers.  The  Data  Communications
     segment derived 41% of its 2004 net sales from two customers, 16%  of  its
     net  sales  from  one customer in 2003 and 40% of its net sales  from  two
     customers  in 2002.  The Audio Equipment segment derived 12% of  its  2004
     net sales from one customer. The Company's Musical Instruments segment  is
     not dependent on any single customer.
        In  October  2002,  Legacy  Audio, Inc. sold  its  manufacturing  plant
     located  in  Springfield, Illinois for $285,000 (net of selling  expenses)
     and  recognized a gain on the sale of approximately $7,000.  Legacy ceased
     operations at this facility effective August 31, 2002 and consolidated all
     of  its  production into the Company's manufacturing facility in Macungie,
     PA.
                                      37

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 21     Industry Segment Information (Continued)
        Following  is  a  summary of segmented information for 2004,  2003  and
     2002.

                                                     December 31,
                                          2004           2003          2002
            Net Sales to
            Unaffiliated Customers
              Musical Instruments     $20,886,800    $20,381,904   $24,942,925
              Data Communications      54,980,044     36,022,256    36,536,174
              Electronic Assemblies     2,822,019      2,819,640     4,750,143
              Audio Equipment           1,481,925      1,564,258     1,510,306
                Total                 $80,170,788    $60,788,058   $67,739,548

            Intersegment Sales
              Musical Instruments     $   905,340    $   823,199   $   435,915
              Data Communications            --           84,418          --
              Electronic Assemblies       951,919        344,553       131,540
              Audio Equipment              31,411         88,205        88,909
                Total                 $ 1,888,670    $ 1,340,375   $   656,364

            Income (Loss) from Operations
              Musical Instruments     $   613,203    $  (764,639)  $ 2,024,144
              Data Communications       6,436,161      2,446,213     2,091,520
              Electronic Assemblies      (124,425)      (457,366)     (401,165)
              Audio Equipment          (1,195,715)      (334,711)     (634,477)
                Total                 $ 5,729,224    $   889,497   $ 3,080,022

            Identifiable Assets
              Musical Instruments     $16,474,486    $16,762,054   $17,301,133
              Data Communications      30,152,927     26,164,502    25,868,894
              Electronic Assemblies     1,850,634      2,065,776     2,373,162
              Audio Equipment           1,015,729      1,541,238     1,623,546
                Sub-total              49,493,776     46,533,570    47,166,735
              General corporate assets 28,978,959     25,416,706    26,196,133
                Total                 $78,472,735    $71,950,276   $73,362,868

            Capital Expenditures
              Musical Instruments     $   423,417    $   155,195   $ 1,037,338
              Data Communications       2,320,040        904,861       670,320
              Electronic Assemblies          --              --        188,487
              Audio Equipment                --            3,175         2,441
                Total                 $ 2,743,457    $ 1,063,231   $ 1,898,586

            Depreciation and Amortization
              Musical Instruments     $   712,558    $   765,196   $   759,689
              Data Communications       1,640,861      1,596,862     1,864,921
              Electronic Assemblies       104,184        120,679       126,321
              Audio Equipment              23,278         35,875        50,581
                Total                 $ 2,480,881    $ 2,518,612   $ 2,801,512

            Income Tax Expense (Benefit)
              Musical Instruments     $   521,000    $   (20,000)  $ 1,240,000
              Data Communications       1,303,000        312,000       138,000
              Electronic Assemblies       (25,000)      (204,000)     (152,000)
              Audio Equipment            (428,000)      (163,000)     (115,000)
                Total                 $ 1,371,000    $   (75,000)  $ 1,111,000

                                      38

                     ALLEN ORGAN COMPANY AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 22     Quarterly Financial Data (Unaudited)


                  First       Second        Third       Fourth
                 Quarter      Quarter      Quarter      Quarter      Total
  2004
Net Sales      $16,718,716  $19,747,048  $21,353,653  $22,351,371  $80,170,788
Gross Profit     7,879,016    9,857,983   10,553,944   10,226,528   38,517,471
Net Income         682,674    1,199,172    1,607,432    1,219,769    4,709,047
Earnings per Share
 Basic                0.59         1.04         1.39         1.05         4.07
 Diluted              0.59         1.04         1.39         1.05         4.06

  2003
Net Sales      $13,874,464  $12,725,880  $14,932,091  $19,255,623  $60,788,058
Gross Profit     5,274,954    5,222,827    6,588,075    8,008,589   25,094,445
Net Income (Loss)  (19,808)    (149,898)     200,923    1,365,679    1,396,896
Earnings (Loss) per
 Share
 Basic               (0.02)       (0.13)        0.17         1.18         1.20
 Diluted             (0.02)       (0.13)        0.17         1.18         1.20

  2002
Net Sales      $15,977,488  $17,403,733  $15,705,708  $18,652,619  $67,739,548
Gross Profit     6,628,428    7,158,583    5,755,644    6,233,054   25,775,709
Net Income         931,539    1,009,634      528,362      215,822    2,685,357
Earnings per Share
 Basic                0.80         0.86         0.45         0.18         2.29
 Diluted              0.80         0.86         0.45         0.18         2.29

                                      39
<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     51   Director     Since 1980
                           Meeting in 2005

Eugene Moroz (1)             Next Annual     81   Director     Since 1968
                           Meeting in 2005

Leonard W. Helfrich          Next Annual     75   Director     1964-1968 and
                           Meeting in 2005                     1972 to present

Orville G. Hawk (1)          Next Annual     87   Director     Since 1989
                           Meeting in 2005

Albert F. Schuster           Next Annual     85   Director     Since 1989
                           Meeting in 2005

Martha Markowitz             Next Annual     83   Director     Since 1991
                           Meeting in 2005

Jeffrey L. Schucker (1)      Next Annual     50   Director     Since 1996
                           Meeting in 2005

Ernest Choquette             Next Annual     51   Director     Since 1998
                           Meeting in 2005

Michael F. Doyle             Next Annual     50   Director     Since 2001
                           Meeting in 2005

   (1)  Audit Committee member.

           (b)  Identification of Executive Officers.
                    Date Term                                   Time Period
Name                 Expires       Age   Position               Position Held

Steven Markowitz   Next Annual     51    President             1990 to present
                  Meeting in 2005

Barry J. Holben    Next Annual     52    Vice President-Sales  October 1995 to
                  Meeting in 2005                               present

Dwight A. Beacham  Next Annual     58    Vice President-       October 1995 to
                  Meeting in 2005        Product Development    present

Nathan S. Eckhart  Next Annual     41    Vice President-       May 1996 to
                  Meeting in 2005        Finance, Treasurer,    present
                                         Secretary


                  (c)  Identification of Certain Significant Employees.
                       Not applicable.
                  (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.
                                      40


                  (e)  Business Experience.

                             (1)   Steven  Markowitz, Barry Holben,  Dwight
                       Beacham  and Nathan Eckhart, have been employees  of
                       the Company in executive capacities for at least the
                       last five years.
                                  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.  Helfrich was employed by the Company
                       for  nearly  40 years as Vice President-Finance  and
                       Secretary   before  retiring  in  March   2000   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.
                                  Mrs.  Markowitz  is the widow  of  Jerome
                       Markowitz, the Company's founder, and she represents
                       the family's interest in the Company.
                                  Mr.  Schucker  is  a  Vice  President  at
                       National  Penn Bank.  Prior to joining the bank,  he
                       worked  as  an  investment banker at  various  firms
                       including  Managing Director with Griffin  Financial
                       Group,  President of Middle Market Capital Advisors,
                       L.L.C. (MMCA) and Vice President of Meridian Capital
                       Markets.
                                 Mr. Choquette has been a member of the law
                       firm of Stevens & Lee, Reading PA, for over 20 years
                       and   currently  serves  as  Co-Chairman  of   their
                       Corporate  Group.  Stevens & Lee serves  as  general
                       counsel to the Company.
                                  Mr.  Doyle is President of the  Company's
                       subsidiary, Eastern Research, Inc.  Prior to joining
                       ERI   in  May  of  1997,  Mr.  Doyle  had  20  years
                       experience  in  the  data  communications   industry
                       including positions at Infotron Systems, Inc., Dowty
                       Communications,  Inc., Teleos  Communications,  Inc.
                       and Madge Networks, Inc.

                  (f)    Involvement  in  Certain  Legal   Proceedings   by
                  Directors or Officers.

                       None.

                  (g)    Section   16(a)  Beneficial  Ownership   Reporting
                  Compliance.

                       Section 16(a) of the Securities Exchange Act of 1934
                  requires  that Company Directors, Executive Officers  and
                  greater-than-ten-percent  Share  Owners  file  with   the
                  Securities  and  Exchange Commission and the  Company  an
                  initial  statement  of beneficial ownership  and  certain
                  statements of changes in beneficial ownership  of  Common
                  Stock of the Company.  Based solely on its review of such
                  forms  received  by  the Company,  Martha  Markowitz  and
                  Steven Markowitz both individually and as trustees of the
                  Jerome  Markowitz  Trust inadvertently failed  to  timely
                  report the following share transactions in December  2004
                  due  to  a failure of the transfer agent to timely notify
                  the  filer of the date the shares were transferred.   The
                  Company   is   unaware   of  any   other   instances   of
                  noncompliance  with such filings during  the  year  ended
                  December 31, 2004.

                         Name             Transaction     Number and Class of
                                             Type              Shares
                   Martha Markowitz        Purchase      1,047 Class B shares
                   Steven A. Markowitz     Sale            869 Class B Shares
                   Jerome Markowitz
                   Trust, Martha &
                   Steven Markowitz
                   Trustees                Purchase      3,000 Class B Shares

                                      41

                  (h)  Audit Committee Financial Expert

                       The Company's Board of Directors has determined that
                  Jeffrey L. Schucker is a financial expert serving on  the
                  Company's  audit  committee and that  he  is  independent
                  within  the meanings of the NASDAQ listing standards  and
                  the Exchange Act.

                  (i)  Code of Ethics.

                        The  Company has adopted a Code of Business Conduct
                  and  Ethics  that applies to all employees including  its
                  principal  executive and financial officers.  A  copy  of
                  the  Code  of Business Conduct and Ethics is incorporated
                  by reference to Exhibit 14 of the 2003 Form 10-K.

Item 11.    Executive Compensation.
                 Deleted paragraphs and/or columns are not applicable.

             (b)  SUMMARY COMPENSATION TABLE:
                                                       Long Term
                                                       Compensation
                                  Annual Compensation  Securities  All Other
Name and                          Salary   Bonus       Underlying  Compensation
Principal Position         Year    $        $          Options(#)     $


Steven A. Markowitz,
President                  2004  155,027     -              -       39,995 (1)
(Chief Executive Officer)  2003  151,675     -              -       38,886
                           2002  147,855     -              -       20,969

Dwight A. Beacham,         2004  107,438     -              -       27,994 (2)
 Vice President -          2003  104,850     -              -       17,052
 Product Development       2002  101,918     -           4,000      12,049

Barry J. Holben,           2004  107,642     -              -       27,994 (2)
 Vice President-Sales      2003  106,628     -              -       17,052
                           2002  104,008     -           4,000      12,049

Nathan S. Eckhart,         2004  112,313     -              -       22,142 (2)
 Vice President-Finance,   2003  107,630     -              -       13,533
 (Treasurer and Secretary) 2002  102,823     -           4,000       9,527

(1)-Value  of  split  dollar life insurance policy.   See  Note  6  to  the
accompanying  Consolidated Financial Statements for additional  information
on this arrangement.
(2)-Value   of  vested  deferred  compensation  earned  under  supplemental
executive  retirement plans.  See Note 14 to the accompanying  Consolidated
Financial Statements for additional information on these arrangements.

             (c)  OPTION GRANTS IN LAST FISCAL YEAR:
                     There  were  no stock options granted to or  exercised
                     by  the  above named executive officers of the Company
                     during  2004  under  the  Allen  Organ  Company  stock
                     option plan.
                                      42

             (d)  AGGREGATE OPTIONS EXERCISED IN LAST  YEAR
                   AND DECEMBER 31, 2004 OPTION VALUE:

                                Number of Securities           Value of
                                    Underlying             Unexercised In-The
                                Unexercised Options        Money Options at
                Shares         at December 31, 2004(#)     December 31, 2004($)

 Name     Acquired
             on     Value
          exercise Realized                              (1)           (1)
            (#)      ($)    Exercisable Unexercisable Exercisable Unexercisable
Dwight A.
Beacham      0        0       2,400        1,600        $72,000      $48,000

Barry J.
Holben       0        0       2,400        1,600        $72,000      $48,000

Nathan S.
Eckhart      0        0       2,400        1,600        $72,000      $48,000

      (1) Based on market value of $69.00 per share for Allen Organ Company
          Class B common stock at December 31, 2004.

             (f)  Defined Benefit or Actuarial Plan Disclosure.

                                  As  discussed in Note 14 to the Company's
                  consolidated  financial statements included  in  Item  8,
                  future  benefit  accruals  under  the  Company's  defined
                  benefit pension plan were frozen as of December 31, 2003.
                  Based  on  the  2004 actuarial report for  the  Plan  the
                  estimated  annual retirement benefit under  the  Plan  to
                  each  of  the  named executive officers are  as  follows:
                  Steven A. Markowitz (age 51) - $33,890; Dwight A. Beacham
                  (age  58)  - $21,378; Barry J. Holben (age 52) - $15,742;
                  Nathan S. Eckhart (age 41) - $13,870.

             (g)  Compensation of Directors:

                                  Non-employee directors receive  $450  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 established an Executive Bonus Program in
                  the  form of executive supplemental retirement plans  for
                  the  benefit of Mr. Beacham, Mr. Holben and Mr.  Eckhart.
                  These    plans   provide   for   discretionary    Company
                  contributions which vest over a five year period,  accrue
                  interest  at  the prime rate, not to exceed 9%,  and  are
                  payable upon the executives death or retirement.

Item 12.     Security Ownership of Certain Beneficial Owners and Management
             and Related Stockholder Matters

             (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 five percent  of
             any   class  of  such  securities.   Class  A  Common   Shares
             constitute   the   only   securities   with   voting   rights.
             Information as of February 29, 2005.

                                          Amount and
                                          Nature of
            Names and           Title of  Beneficial   % of
            Addresses             Class   Ownership    Class
            Jerome Markowitz        A     81,531       97.22%
            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.
                                      43

           (b)    Each   class  of  equity  securities  of  the  registrant
           beneficially  owned  directly  or indirectly  by  all  directors
           naming them and directors and officers of the registrant,  as  a
           group,  without  naming  them.   Directors  not  named  in   the
           following  table  do not beneficially own any equity  securities
           of the registrant.  Information as of December 31, 2004.

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

Steven Markowitz     58                 (1) (3)      .07 %
                           12,693       (1) (3)               1.18%
                 81,531*                (2) (4)    97.22 %
                          245,016*      (2) (4)              22.85%

Eugene Moroz                6,290       (1) (3) as
                                        to 6,290
                            6,000       (2) (4) as
                                        to 6,000              1.15%

Leonard W. Helfrich           258       (2) (4)                .02%

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

Martha Markowitz           22,413       (1) (3)               2.09%
                 81,531*                (2) (4)    97.22 %
                          245,016*      (2) (4)              22.85%


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

     12          81,589** 292,720**                97.29%**  27.30%


              (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 is 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 applicable.

                                      44

     (d)      Securities  authorized for issuance under equity  compensation
              plans:

     Plan category  Number of          Weighted-average   Number of
                    securities to be   exercise price of  securities
                    issued upon        outstanding        remaining
                    exercise of        options, warrants  available for
                    outstanding        and rights         future issuance
                    options, warrants                     under equity
                    and rights                            compensation plans
                                                          (excluding
                                                          securities
                                                          reflected in
                                                          column (a))
                    (a)                     (b)             (c)
     Equity
     compensation
     plans
     approved by
     security
     holders        16,500                 $40.13           83,500

     Equity
     compensation
     plans not
     approved by
     security
     holders         --                       --                --

     Total          16,500                 $40.13           83,500

Item 13.    Certain Relationships and Related Transactions

            See Note 11 to the Consolidated Financial Statements concerning
            an  agreement  between  the Company  and  Martha  Markowitz,  a
            Director of the Company.
            Ernest Choquette, a member of the Company's Board of Directors,
            is  a principal in firms providing legal and financial advisory
            services.  Legal fees paid were $265,447, $153,149 and  $45,851
            in  2004, 2003 and 2002, respectively.  Financial advisory fees
            paid were $6,000 in both 2003 and 2002, none were paid in 2004.

Item 14.    Principal Accountant Fees and Services
                                                      2004       2003
            (1) Audit Fees                         $185,000   $116,000
            (2) Audit-Related Fees                   14,100     13,500
            (3) Tax Fees                             92,200    116,200
            (4) All Other Fees                         --       --
                 Total Fees                        $291,300   $245,700

              (1)  Audit  Fees  represent the fees to complete  the  annual
              audit and quarterly reviews.
              (2)  Audit-Related  Fees include assurance services  provided
              for   the  Company's  retirement  plans  in  2003  and  other
              miscellaneous services in 2004.
              (3)   Tax   Fees   include  fees  for  compliance   services,
              assistance  with compliance documentation and  various  other
              tax issues that arise from time to time.
              (4) No other fees paid in 2004 and 2003.
              The  audit  committee of the Board of Directors  pre-approves
              all  audit and permissible non-audit services provided by the
              Company's  independent  registered  public  accounting  firm.
              All  of  the  services provided by the Company's  independent
              registered public accounting firm set forth above  were  pre-
              approved by the audit committee.

                                      45

                                  PART IV
Item 15.    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:
                 Report  of  Independent Registered Public Accounting Firm.
                 Consolidated Balance Sheets as of December 31, 2004 and 2003.
                 Consolidated Statements of Income for the years ended
                   December 31, 2004, 2003, and 2002.
                 Consolidated Statements of Stockholders' Equity  for
                   the years ended December 31, 2004, 2003, and 2002.
                 Consolidated Statements of Cash Flows for the  years
                   ended December 31, 2004, 2003, and 2002.
                 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
                 Schedule II.  Valuation and Qualifying Accounts  for
                 the three years ended December 31, 2004.
                                            Schedules   other  than   those
                           listed  above  are  omitted  because  they   are
                           either  not required, are not applicable or  the
                           required   information  is  presented   in   the
                           Consolidated Financial Statements.
            (a)  (3) Exhibits
                  Exhibit No.    Description
                      3.1(1)    Articles of Incorporation, as amended
                      3.2(2)    Bylaws, as amended
                      10.1(7)   Allen Organ Company Stock Option Plan
                      10.2(3)   Agreement of Amendment between the Company
                                and Martha Markowitz
                      10.3(5)   Executive Bonus Program and Endorsement Split
                                Dollar Life Insurance Agreements between the
                                Company and Dwight A. Beacham, Nathan S.
                                Eckhart and Barry  J. Holben
                      14(8)     Code of Business Conduct  and Ethics
                      21        Subsidiaries of the registrant
                      23.1      Consent of KPMG LLP
                      31.1      Rule 13a-14(a)/15d-14(a)
                                 Certification - Chief Executive Officer
                      31.2      Rule 13a-14(a)/15d-14(a)
                                 Certification - Chief Financial Officer
                      32        Section 1350 Certifications
                      99.1(6)   Audit Committee Charter

            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 Annual Report on Form  10-K
               for the period ended December 31, 1991.
            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 Quarterly Report on Form 10-Q for the period
                ended September 30, 1999.
            5. Incorporated by reference to the exhibit filed with the
                Registrants Annual Report on Form 10-K for the year
                ended December 31, 2000.
            6. Incorporated by reference to the exhibit filed with the
                Registrants Quarterly Report on Form 10-Q for the
                period ended September 30, 2002.
            7. Incorporated by reference to the exhibit filed with the
                 Registrants Annual Report on Form 10-K for the year
                 ended December 31, 2003.

                                      46
<PAGE>

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 31, 2005                /s/STEVEN A. MARKOWITZ
                                     Steven A. Markowitz
                                     Chief Executive Officer,
                                     President and Director


Date:  March 31, 2005                /s/NATHAN S. ECKHART
                                     Nathan S. Eckhart
                                     Vice President-Finance,
                                     Chief Financial and
                                     Principal Accounting Officer

Date:  March 31, 2005                /s/LEONARD W. HELFRICH
                                     Leonard W. Helfrich
                                     Director

Date:  March 31, 2005               /s/MARTHA MARKOWITZ
                                    Martha Markowitz
                                    Director

Date:  March 31, 2005               /s/ERNEST CHOQUETTE
                                    Ernest Choquette
                                    Director

Date:  March 31, 2005               /s/MICHAEL F. DOYLE
                                    Michael F. Doyle
                                    Director

                                      47
<PAGE>
Allen Organ Company and Subsidiaries

     Schedule II - Valuation and Qualifying Accounts

     For the Years Ended December 31, 2004, 2003 and 2002


                        Balance     Additions  Charged   Reductions,   Balance
                          at        Charged      to      Write Offs      at
 Description           Beginning       to       Other       And          End
                        Of Year      Expense   Accounts  Recoveries    Of Year

Year Ended
 December 31, 2004
  Allowance for
   Doubtful Accounts  $  605,496  $ (119,078)  $  -    $  (40,614)  $  445,804
  Allowance for
   Obsolete and slow
   moving inventory    3,851,749     744,323      -    (1,461,849)   3,134,223
  Valuation Allowance
   Deferred Tax Asset  1,020,000        -         -      (100,000)     920,000

Year Ended
 December 31, 2003
  Allowance for
   Doubtful Accounts  $  502,209  $  174,614   $  -    $  (71,328)  $  605,496
  Allowance for
   Obsolete and slow
   moving inventory    3,497,436     890,391      -      (536,078)   3,851,749
  Valuation Allowance
   Deferred Tax Asset  1,170,000        -         -      (150,000)   1,020,000

Year Ended
 December 31, 2002
  Allowance for
   Doubtful Accounts  $  350,492  $  234,117   $  -    $  (82,400)  $  502,209
  Allowance for
   Obsolete and slow
   moving inventory    3,178,050     974,251      -      (654,865)   3,497,436
  Valuation Allowance
   Deferred Tax Asset  1,000,000     170,000      -          -       1,170,000


                                      48
<PAGE>