Astrocom Corporation
Statements of Cashflows (Unaudited)

Astrocom Corporation

Notes to Financial Statements

September 30, 2000

1. Basis of Presentation

The financial statements in this Form 10-QSB have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of financial position, results of operations and cash flows. These financial statements should be read in conjunction with the financial statements and notes included in the Company's annual report on Form 10-KSB for the year ended December 31, 1999.

2. Inventories

Inventories are stated at the lower of cost or market, determined on an average cost basis, and consisted of the following:

The Company follows Financial Accounting Standards Board Statement No. 128, "Earnings Per Share." Basic earnings per share exclude the dilutive effect of options, warrants and convertible securities, while diluted earnings per share include such effects. For all periods presented, the Company's basic and diluted loss per share are the same because the effects of all options, warrants and convertible securities were antidilutive.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Report contains certain forward-looking statements that project or estimate future events. When used in this Form 10-QSB, the words "believes," "expects," "anticipates," "intends," and similar expressions are intended to identify forward-looking statements. These statements are subject to various risks and uncertainties which could cause actual results to differ materially from historical results or those currently projected. Readers are cautioned not to place undue reliance on these forward-looking statements.

Results of Operations

The following table sets forth selected information derived from the Company's interim statement of operations expressed as percentages of net sales:

Gross Profit. Gross profit margin for the three and nine month periods ended September 30, 2000 were 18.3% and 14.1%, respectively, as compared to 36.3% and 33.8% for the comparable periods of 1999. The decrease in the third quarter is the result of an increase in inventory reserves and to write off of material.  The overall decrease in the nine month period is primarily attributable to the reduced sales volume and the resulting increase in labor and overhead as a percentage of sales dollars. While the Company has reduced labor expenses in production, gross margins will continue to be affected by sales volume, product mix and the sales channel used.

Operating Expenses. Selling and administrative expenses were $196,969 for the three month period ended September 30, 2000, a decrease of 7.7% from the comparable period of 1999. For the nine month period ended September 30, 2000, selling and administrative expenses were $799,309, an increase of 15.5% from the comparable period of 1999. Sales and marketing expenses increased by 103%, 154% and 121% for the first three quarters of 2000, respectively, over the same quarters in 1999; this increase is due to the hiring of additional sales staff, increased sales activity and the expenses associated with training the Company's network of Manufacturers' Representatives. Administrative expenses for 2000 decreased slightly over the first two quarters and by 72% in the third quarter when compared to the same periods in 1999; the significant third quarter decrease is primarily due to a voluntary salary reduction by Mr. Thomas for 2000.

Research and development expenses were $154,174 for the three month period ended September 30, 2000, an increase of 26.3% from the comparable period in 1999. For the nine month period ended September 30, 2000, research and development expenses were $447,660, an increase of 74.6% from the comparable period of 1999. The Company expects research and development expenses to continue to increase in future quarters as it further expands new product development.

Other Income (Expense). Other income, net, for the three month period ended September 30, 2000 increased to $11,265 from $2,542 in the comparable period of 1999. For the nine month period ended September 30, 2000, other income, net, increased to $36,626 from $(29,967) in the comparable period of 1999. The 1999 loss was primarily driven by the disposal of $1,424,111 of obsolete equipment; because most of this equipment was fully depreciated, the result was a write off amounting to $36,977.

Net Loss. The Company reported a net loss of $(296,772) and $(1,124,420), respectively, for the three and nine month periods ended September 30, 2000, compared to a net loss of $(246,317) and $(694,145) for the comparable periods of 1999. The increased loss is primarily due to lower sales revenue and increased expenditures for new product development and sales and marketing.

Liquidity and Capital Resources

Net working capital decreased to $1,150,358 for the third quarter from $1,408,925 on June 30, 2000. Cash decreased to $748,032 from $1,012,465 on June 30, 2000. The Company has initiated efforts to raise additional working capital primarily to fund its increased development and sales and marketing efforts.

Management remains focused on running profitable operations that generate adequate cash flow to meet current obligations on a timely basis.

PART II. OTHER INFORMATION

Item 5. Other Information

Effective 19 September 2000, Hanrow Capital Fund Five converted all outstanding shares of Convertible Preferred Stock (200,000) to common shares at $.46 per share or 434,782 shares.

Item 6. Exhibits and Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirement 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.

Dated: 10 November 2000

ASTROCOM CORPORATION

By:____/S/___________________

Ronald B. Thomas

President and Chief Executive Officer

By:___/S/____________________

John M. Bucher

Director of Operations and Corporate Controller