**United States Securities and ExchangeCommissionWashington, D.C. 20549**
**FORM 10-KSB**

[ **X** ] Annual Report Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934

         For the fiscal year ended **December31, 2002**

 

Commission File Number**0-8482**

**ASTROCOM CORPORATION**(Exact name of small business issuer as specified in its charter)

                                    **Minnesota **                                               **41-0946755**              (State or other jurisdiction ofincorporation         (I.R.S. Employer Identification No.)                                    or organization)

**3500 Holly Lane North, Suite 60, Plymouth, Minnesota 55447**(Address and zip code of principal executive office)

**(612) 378-7800**(Issuer's telephone number, including area code)

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

**Common Stock, par value $.10 per share**(Title of Class)

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter 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 ___

Check if there is no disclosure of delinquent filers in response to Item 405of Regulation S-B contained in this form, and no disclosure will be contained,to the best of the registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year were $328,174.

As of March 14, 2003, the aggregate market value of the voting stock held bynon-affiliates was $1,800,105, computed by reference to the average of the bidand asked prices on such date, as reported by the OTC Bulletin Board.

As of March 31, 2003, there were outstanding 26,448,943 shares of theregistrant's common stock, par value $.10 per share.

DOCUMENTS INCORPORATED BY REFERENCE

None

**TABLEOF CONTENTSForm10-KSB**
Part IPageItem 1Description of Business3Item 2Description of Property7Item 3Legal Proceedings7Item 4Submission of Matters to a Vote of Security        Holders8Part IIItem 5Market for Common Equity and Related        Stockholder Matters8Item 6Management's Discussion and Analysis or Plan        of Operation9Item 7Financial Statements14Item 8Changes in and Disagreements with Accountants        on Accounting and Financial Disclosure32Part IIIItem 9Directors, Executive Officers, Promoters and        Control Persons; Compliance with Section 16(a) of The Exchange Act32Item 10Executive Compensation35Item 11Security ownership of Certain Beneficial        Owners and Management38Item 12Certain Relationships and Related        Transactions39Part IVItem 13Exhibits and Reports on Form 8-K40Item 14Controls and Procedures42Signatures43Certifications44
**PART 1**

     This Annual Report contains certain forward-looking statements that projector estimate future events. For this purpose, any statements contained in thisForm 10-KSB that are not statements of historical fact may be deemed to beforward-looking statements. Without limiting the foregoing, the words"believes," "expects," "anticipates,""intends," and similar expressions are intended to identifyforward-looking statements. These statements involve various risks anduncertainties that may cause actual results to differ materially from historicalresults or those currently projected. Readers are cautioned not to place unduereliance on these forward-looking statements. The Company assumes no obligationto update any of the forward-looking statements after the date of this Form10-KSB.

**ITEM 1. DESCRIPTION OF BUSINESS.**

**(a) Business Development**

     Astrocom Corporation ("Astrocom" or the "Company") wasincorporated in the State of Minnesota on September 28, 1968. Astrocom has beenengaged in the design, development, manufacture, assembly and sale of electronicproducts used for data communications since it commenced operations in 1968.

**(b) Business of the Company**

**Products**

     The Company develops, manufactures, markets and services electronic deviceswhich address key areas of wide area data, voice and video communicationnetworks. The Company's primary focus is on the sales and marketing of WANBandwidth Aggregation and WAN Fail-over devices branded under the PowerLinkTMname. The PowerLinkTM family of products consists of four models which arebased on a solid-state network appliance platform that combines multipleindependent WAN lines to form a single logical channel for high-speedtransmissions up to 8Mbps completely transparent to the user's network. Inaddition to aggregating multiple link bandwidth, PowerLinkTM actively monitorsthe performance of each connection to provide fail-over redundancy to achieveHigh Availability Internet access. Should one of the links fail for any reason,traffic is automatically forwarded to the active link(s).  When the failed linkis restored, the connection is immediately recognized and placed back in theaggregation.  PowerLinkTM  is an emerging technology solution positioned to meetthe needs of businesses that are becoming more dependent on the reliability oftheir Internet access.

     In addition to PowerLinkTM, the Company continues to manufacture and marketits legacy lines of T1 and Fractional T1 CSU/DSU products. These productscontain all the features and functionality of industry standard counterpartscombined with application specific added value features that address therequirements of the Internet, Video Conferencing and Corporate Internetworkingmarkets. Advanced features of the Company's products help organizations makebetter use of their bandwidth and reduce capital costs.

     The Company's products are backed by 2-year, 5-year and lifetime warrantieswhich include its signature Customer Service program which provides 24 hours aday, 7 days a week toll-free technical support and overnight replacement offailed units.

**Sales and Distribution**

     The Company's customers include a North American network of AuthorizedValue Added Resellers, telephone companies, Internet Service Providers (ISPs),corporate and institutional end-users, integrators and distributors.

     In addition to the channel sales programs, the Company's sales forcepursues direct business with strategic partners, large end-users with multipleremote locations, OEM/Private Label resellers and Carrier Class serviceproviders. The Company provides marketing support through participation inselected industry trade shows, through a comprehensive corporate web site,through direct mail campaigns, and through cooperative marketing activities withkey partners.

**Manufacturing**

     The Company subcontracts approximately 80% of its manufacturing operations tooutside organizations specializing in manufacturing; final assembly and testingoperations are performed at the Company's facility to maintain direct controlover product quality. The Company believes that there are several outsideorganizations that could provide the specialized manufacturing services requiredby the Company.

**Competition**

     The PowerLinkTM solution is targeted at the Small, MediumEnterprise (SME) business market for which the Company has three primary competitors. Two brandrecognition competitors price their offerings substantially higher than Astrocom;with price being a key factor, we compete very well against these companies. Thethird company competes on price by offering very limited features; they aresuccessful with those customers with the most basic applications. All of thesefirms are larger and financially stronger than the Company. The Company'sability to compete effectively in the future will depend on the ability toprovide an extremely reliable product and continuous development and refinementof key features.

     The business for the Company's legacy lines of T1 and FractionalT1 CSU/DSU products is highly competitive. Price and service are the most significantfeatures of the market in which the Company offers its products.  The Companycompetes on a nationwide basis with many other firms. Almost all of these firmsare larger and financially stronger than the Company. Management believes thatthe Company accounts for only a very small portion of the respective nationaland local markets.

**Sources and Availability of Raw Materials**

     The Company uses consigned manufacturing subcontractors. Under the consignedapproach, Astrocom buys and supplies the material to the subcontractor.Components and raw materials are purchased from an assortment of suppliers,manufacturers and distributors throughout the United States. The Companybelieves that there are several sources of supply for the required componentsand raw materials.

**Significant Customers**

     One of the Company's customers accounted for approximately 20% and 33% ofthe Company's net sales in 2002 and 2001, respectively. No other customeraccounted for more than 10% of the Company's net sales during this period.
**Patents**

     The Company has no patents, exclusive licenses, franchises or concessionswhich are of material importance to its business.

**Government Regulation**

     Some of the Company's electronic products are used in conjunction with thetelephone network. Existing Federal Communications Commission (FCC) regulationsand local tariffs allow such products to be interconnected with the telephonenetwork. Certain products marketed by the Company have been registered with theFCC and management believes they meet all applicable FCC standards. Restrictivechanges in interstate regulation (FCC jurisdiction) or intrastate tariffs (stateregulatory agency jurisdiction) could limit the uses and hence the marketabilityof some of the Company's products.

**Research and Development**

     The Company spent $325,659 in 2002 and $624,944 in 2001 for research anddevelopment. The Company deducts internal research and development costs asexpense as they occur. The Company recognizes that the sale of electronicproducts will require continuous development of new products and refinement ofestablished products.

**Environmental Issues**

     Management believes that compliance with federal, state and local provisionswhich have been enacted or adopted regulating the discharge of materials in theenvironment or otherwise relating to the protection of the environment shouldhave no material effect upon the capital expenditures, earnings and competitiveposition of the Company's operations.

**Employees**

     As of March 14, 2003, the Company had a total of eight employees; employeecount has remained relatively flat since February 11, 2002 when the Company laidoff six employees, all of whom were full-time personnel, to reduce cost. Noemployees are currently represented by labor organizations and there are nocollective bargaining agreements. The Company provides paid holidays andvacations. In addition, the Company provides and partially funds group medicaland dental insurance.

**Sale of Subsidiary and Lease Settlement Costs**

     On May 29, 1990, a wholly-owned subsidiary of the Company sold its businessand substantially all its assets to Visi-Tour Vision, Inc. (subsequently renamedCircuit Board One, Inc.). As a result of that transaction, all of thesubsidiary's right, title and interest in a real estate lease and variousequipment leases were assigned to Circuit Board One, Inc., but the Companyremained contingently liable to the respective lessors in the event of defaultby Circuit Board One, Inc. Circuit Board One, Inc. ceased operations on October8, 1992.

     The real estate lease assigned to Circuit Board One, Inc. covered a 29,867square foot office, manufacturing and warehouse facility at 4300 Peavey Road,Chaska, Minnesota. The Company's guaranty of the lease remained in effect afterthe assignment to Circuit Board One, Inc. After Circuit Board One, Inc. ceasedoperations, the landlord asserted a claim against the Company. This matter wassettled during 1993, and the landlord and the Company agreed upon a settlementpayment schedule. During 2002, the schedule was revised; final payment is to bemade in May 2003. See Notes to Financial Statements.

**Private Placements**

     On December 27, 2002, the Company issued $500,000 in secured, two-yearconvertible notes. The notes bear an interest rate of 12% per annum, areconvertible into shares of the Company's common stock at $.05 per share, and aresecured by all of the Company's assets, except accounts receivable.Subsequently, on March 7, 2003, the Company issued $50,000 in secured, two-yearconvertible notes which carry the same terms as above but are subordinated tothe December 27 notes, and are secured by a second security interest in all ofthe Company's assets except accounts receivable.

     On April 2 and on July 19, 2002, the Company issued $300,000 and $75,000,respectively, of one-year 12% Subordinated Promissory Notes and 5-yearNon-callable Warrants to purchase 2-1/2 shares of common stock of the Company,at a price of $.40 per share, for each $1 invested in the private placementoffering. The Notes provide that principal and accrued interest are convertibleto common stock at a conversion price of $.10 per share during the term of thenote.

     During November and December 2001, the Company raised $175,000 through theissuance of six-month 12% Subordinated Promissory Notes to Ronald Thomas, theCompany's President and CEO, Douglas Pihl, a director of the Company, andanother accredited investor. The Company was in default on those notes andnegotiated two-year extensions. In return for the extensions, the notes werereissued effective March 1, 2003 at an amount equal to the principal plusaccrued interest, bear an annual interest rate of 12% payable at maturity andare convertible to common stock at a conversion price of $.05 per share.

     From March through June 2001, the Company accepted subscription agreementscovering an aggregate $790,000 loaned to the Company by 18 accredited investors,and authorized the issuance of one-year 12% Subordinated Promissory Notes and5-year Non-callable Warrants to purchase 2-1/2 shares of common stock of theCompany, at a price of $.40 per share for each $1 invested in the notes. TheNotes provide that principal and accrued interest are convertible to commonstock at a conversion price per share equal to the lower of $.20 per share or80% of the lowest price per share for which the Company may sell shares of itscommon stock (in a minimum offering amount of 100,000 shares) during the term ofthe note. The Company was in default on those notes and negotiated one-yearextensions. In return for the extensions, the notes were reissued effective June15, 2002 at an amount equal to the principal plus accrued interest, bear aninterest rate of 12% payable at maturity and are convertible to common stock ata conversion price of $.10 per share; the holders are also be granted 2-1/2additional warrants per dollar invested to purchase shares of common stock at$.20 per share. All but two of the extensions, representing $50,000, have beenfinalized; management believes that these extensions will eventually beconcluded.

     The beneficial conversion feature and the warrants, including those to beissued as a result of extensions to the above notes currently in default, werevalued and recorded as a discount to the notes payable which is being accretedas interest expense over the term of the notes.

     The costs for issuing debt in 2002 are comprised of attorney fees of $18,787and agent fees of $107,418. In addition, warrants to purchase 1,375,000 commonshares at $.10 per share were issued to agents and valued at $41,250.

**ITEM 2. DESCRIPTION OF PROPERTY**

     On June 1, 1992, the Company sold and assigned toThe Crepeau Company ("Crepeau")all rights, duties and liabilities the Company had under a lease, as Tenant,from the St. Paul PortAuthority, as Landlord, which covered office andmanufacturing space and land at 120 West Plato Boulevard, St. Paul, Minnesota(the "Lease"). The Lease was dated September 1, 1997 and ran throughAugust 31, 2007. On August 11, 2000, Crepeau filed Chapter 11 bankruptcy.Subsequent to Crepeau's bankruptcy filing, a Mutual Release was entered into byand between the St. Paul Port Authority and Crepeau, dated May 31, 2001, whereinthe Port Authority released Crepeau from any obligations to pay and perform theobligations of Tenant under the Lease (the "Release"). While theCompany was not a party to the Release, the language in the Release did notspecifically exclude the Company from the benefit of the Release provisions infavor of the Tenant.  Although upon assignment of the Lease from theCompany to Crepeau, the Company remains potentially liable to the Port Authority for leasedefaults, the Company believes that, as a result of the Release, the Company hasa defense to any claim by the Port Authority against it alleging breach of theLease.

     The Company leases from the St. Paul Port Authority 81,568 square feet ofundeveloped land. The lease runs through August 31, 2007 and provides for rentalpayments of $626 per month. On August 16, 1993, the Company subleased saidundeveloped land to Rutzick-Sheehy Office Center, a Minnesota generalpartnership. The sublease runs through August 31, 2007, and provides forpayments of $626 per month during the entire term of the sublease. Subtenantalso agreed to pay all taxes, special assessments and other charges and expensesrequired to be paid by the Company pursuant to its lease with the PortAuthority.

     On March 30, 1999, the Company entered into a five-year lease agreement withPlymouth Ponds Development II, LLC, for 9,672 square feet of office andmanufacturing space at 3500 Holly Lane North, Suite 60, Plymouth, Minnesota. Thelease runs through March 31, 2004, and provides for rental payments of $7,415per month.

**ITEM 3. LEGAL PROCEEDINGS**

     On July 27, 1983, the Board of the Minnesota Pollution Control Agency foundthe Company and 13 other corporations to be responsible persons under theMinnesota Superfund Act and thereby secondarily liable for the cleanup ofhazardous wastes given to Ecolotech and Brian Carriere. Ecolotech collected suchwaste materials from the Company during the period 1973 to 1978. On January 25,1984, the Company and the 13 other corporations entered into an agreement toshare the costs of cleanup and litigation in proportion to the respectivevolumes of waste materials given by each to Ecolotech.  As of March 14, 2003, theCompany had paid approximately $171,000 pursuant to the agreement, none of whichwas paid during 2002. The cleanup was completed on February 1, 1986. DuringFebruary 1987, a judgment was obtained in favor of the Company and the 13 othercorporations against Carriere Properties and others. No estimate can be given asto the collectibility of said judgment.  The Company believes that any costs orliabilities that it may incur in connection with any latent problems will nothave a material effect on the financial condition of the Company.

     In June 1988, the Company was informed by Mibco, theowner and lessor of the Minnetonka facility where the Company's wholly-owned subsidiary was locateduntil March 6, 1989, that there were soil and groundwater contamination problemsat the facility. There currently appear to be seven companies (including Mibco) which are potentially responsible parties. The Company's alleged involvementoccurred during the period March 1972 through September 1973. The matter hasbeen reported to the Minnesota Pollution Control Agency (MPCA) which has made apreliminary assessment, conducted a follow-up site investigation and includedthe site on Minnesota's permanent list of priorities. The Company will continueto monitor the site testing required by the MPCA.  The Company believes that anycosts or liabilities that it may incur in connection with the proceedings beforethe MPCA or any lawsuit commenced by MPCA or the present owner will not have amaterial effect on the financial condition of the Company.

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None.

**PART II**

**ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

**(a) Market Information**

     The Company's Common Stock is traded on the Over-the-Counter Bulletin Boardsystem under the symbol ATCC. These quotations reflect inter-dealer priceswithout retail mark-up, markdown or commission and may not represent actualtransactions. The following table sets forth the high and low selling prices forthe Company's Common Stock for 2002 and 2001:

2001
2000
High
Low
High
Low
   First Quarter      $ .28      $ .03      $ .64      $ .16
   Second Quarter      .09      .05      .29      .16
   Third Quarter      .09      .03      .25      .10
   Fourth Quarter      .02      .08      .20      .08
 

**(b) Holders**

     On March 14, 2003 the Company had approximately 600 shareholders of record.**(c) Dividends**

     The Company intends to retain any earnings to finance the development of itsbusiness and, accordingly, does not anticipate payment of a cash dividend in theforeseeable future.

**(d) Recent Sales of Unregistered Securities**

     See Item 1: Description of Business -- "Private Placements." 

**(e)  Equity Compensation**

     The following table sets forth certain information regarding equitycompensation plan information as of December 31, 2002.

Plan  Category

Number        of Securities to be issued upon exercise of outstanding option and        warrants        (a)

Weighted-average        exercise price of outstanding options and warrants        (b)

Number        of securities remaining available for future issuance under equity        compensation plans (excluding securities reflected in column (a)        (c)
Equity compensation plans approved by        security holders2,596,667$.181,403,333Equity compensation plans not approved by        security holders11,722,969(1)$.31n/aTotal14,319,636$.291,403,333
(1) Comprised of warrants addressed in sections on Private Placements,    Thomas Warrants, Liquidity and Capital Resources, and Security Ownership of    Certain Beneficial Owners and Management, as well as in the Notes to    Financial Statements. Also includes 950,000 warrants issued to key    employees.

**ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**Overview**

     Astrocom Corporation, a public company (O.T.C,ATCC), was incorporated in1968 to design, manufacture and distribute telecommunications products to servethe short-haul communication market by providing line drivers and otherequipment for local area networks (LANs). Since 1989, the Company has developedseveral high-speed digital access communications products linking facilitiesthrough wide area networks (WANs). Astrocom's most recent development andprimary market focus is the PowerLinkTMAggregator which bundles multiple WAN lines (T1, xDSL, Cable, ISDN, Wireless,Satellite, etc.) into a single virtual wide-pipe of up to 8 Mbps of aggregatedbandwidth, and provides fail-over redundancy and intelligent load-balancing. TheCompany's legacy lines of CSU/DSUs (Channel Service Unit/Digital Service Unit)products interface to high bandwidth telephone company services for suchapplications as high-speed Internet access, video conferencing, and corporateinternetworking.  Astrocom products are used by Internet service providers,telephone service providers, government and educational entities, privateenterprises and others. Astrocom sells its products through a direct sales forceand a network of distributors and value-added resellers (VARs).

**Results of Operation**
     The following table presents selected financial information derived from theCompany's statements of operations expressed as a percentage of net sales forthe years indicated.

Percentage of Net Sales for Years Ended December 31,20022001Net Sales100.0%100.0%Cost of Products Sold113.594.7Gross Profit (Loss)(13.5)5.3Selling and Administrative224.9173.6Research and Development99.2103.1Operating Loss(337.6)(271.5)Other Income (Expense)(101.9)(42.4)Net Loss(439.5)%(313.9)%***Years ended December 31, 2002 Compared to 2001****     Net Sales. Net sales for the year ended December31, 2002 decreased by 46% to $328,174 compared to $605,884 for the same periodended December 31, 2001. The continued decrease in revenue was due to theongoing transition of the Company from the traditional CSU/DSU products to theWide Area Network (WAN) line aggregation market and the lack of meaningful salesof the new products. Relative to sales mix, the percentages of PowerLinkTM sales to Net Sales for the year ended December 31, 2002 when compared to theyear ended December 31, 2001 were 50% and 9%, reflecting increases of 335% and231%, respectively. Since inception, the PowerLinkTM has beenenhanced with features such as Domain Name System (DNS) server; additionalfeatures - including, traffic shaping and quality of service enhancements -are planned. The Company believes that these features will expand the range ofbusiness applications for the PowerLinkTM.
     The Company's distribution channel has also been improved. On March 18,2003, Astrocom announced an agreement with Ingram Micro Inc. to distributePowerLinkTM products throughout Canada. Ingram Micro (NYSE: IM), the largestglobal wholesale provider of technology products and supply chain managementservices with the largest distribution network in Canada, will now be providingthe Canadian reseller channel with the PowerLinkTM family of WAN Aggregationand Fail-over products.
*     Gross Profit (Loss). Gross profit (loss) for the year ended December 31,2002 was ($44,340) compared to $31,988 in 2001 ((14%) and 5% of net sales,respectively). The low gross profit percentage is primarily attributable to thelow sales volume and fixed overhead costs; the increase in labor and overheaddollars as a percentage of sales results in a smaller gross margin percentage.Gross profit margin for 2002 has also been impacted by the Company's decisionto fully reserve all inventories unique to the IMUX product line and to increasethe reserve for obsolescence for inventories related to legacy products. (Forthe period ended December 31, 2001 it was reported that the Company believedthat half of the IMUX related inventory has potential applications within thenext year. Due to subsequent cost reduction efforts, the Company has curtailedits resources to the point where it is unlikely that any significant portion ofthe IMUX inventory will be used.)

     Exclusive of the effect of the additional inventory reservefor IMUX andlegacy inventory obsolescence, gross profit margin for the period ended December31, 2002 would be approximately 45%. The increase is primarily attributable tostaff reductions and relatively higher margin PowerLinkTM sales.While the Company has reduced labor expenses in production, gross margins willcontinue to be affected by sales volume, product mix and the sales channel used.
*     Selling and Administrative.  Selling and administrative expenses decreasedby 30% in 2002 compared to 2001. The decrease is primarily attributable toreductions in personnel and related expenses. The Company also decreasedspending on travel, trade shows and professional services.
*     Research and Development.  Research and development expenses decreased by48% to $325,659 in 2002 compared to $624,944 in 2001. The decrease was due to areduction in engineering staff and associated costs. The Company expects tocontinue to focus its research and development efforts on enhancements to thePowerLinkTM.
*     Other Income (Expense).  Other expense, net, was ($334,222) for the periodending December 31, 2002 compared to a net other expense of ($257,190) for thesame period in 2001. The increase in expenses is primarily due to costsassociated with the current loans. Because the debt is convertible to commonstock at a discount from the market price and included detachable warrants, thedebt was discounted from its face value for both the value of the warrants andconversion feature and was accreted over the term of the loan as a non-cashinterest expense.
*     Net Loss.  Net loss decreased to $1,442,299 in 2002 from $1,902,228 in2001. The decrease in loss is attributable to cost reduction efforts by theCompany and the higher margin PowerLinkTM sales; the overall loss is due to the lower sales revenue (and resultant lowergross margins), an increase in material reserves, and expenditures associatedwith the bridge financing.

**Liquidity and Capital Resources**

     Net working capital decreased to a deficit of $1,374,018 on December 31, 2002from a deficit of $968,725 on December 31, 2001. Cash increased to $382,710 onDecember 31, 2002 from $116,135 on December 31, 2001.

     During 2002, the Company borrowed $ 905,626 through the issuance ofsubordinated promissory notes and convertible promissory notes. In addition, theCompany negotiated extensions with the holders of $790,000 in notes which werein default; as the Company was not financially able to pay the notes, theholders agreed to new notes totaling $902,755. To date in 2003, the Company hasraised an additional $50,000 and negotiated extensions with the holders of$175,000 in notes which were in default and reissued new notes totaling$230,443. Moreover, it is anticipated that the Company will need to negotiatewith the holders of the notes due between April and August 2003 as the Companydoes not have the funds available to pay the notes.

     To improve cash availability for the Company, the President and the formerVice President of Sales and Marketing of the Company have accepted agreements todefer $150,000 in salary until December 2004 at 12% interest and havecontributed $239,822 of accrued salaries to shareholders' deficit.

     The Company currently believes that it has sufficient funds, in addition tominimal sales and some form of accounts receivable financing, to financeoperations for approximately four months. While management is optimisticthat its current activities, such as the recent agreement with Ingram Micro,will lead to increased sales, additional financing is required to remain inoperation beyond that period; there is no assurance, however, that the Companywill be successful in its efforts to secure the needed funds; in which case, itmay need to cease operation at the end of that period. Moreover, there is riskthat the holders of the notes coming due in April 2003 will not renegotiateterms.

**Critical Accounting Policies**

     A critical accounting policy is a policy that is both important to theportrayal of our financial condition and results and requires subjective orcomplex judgments, often as a result of the need to make estimates about theeffect of the matters that are inherently uncertain. While our significantaccounting policies are discussed in the Notes to our financial statementsincluded in this Form 10-KSB, we believe the following accounting policies to becritical:
*     Inventory Valuation/Obsolescence:  For emerging products,such as PowerLinkTM, theCompany has recorded a reserve of 15% of the value of inventory associated withthat product line. Each remaining line item of inventory is analyzed for valueof inventory actually moved on an annual basis. Any item that has not moved fortwo years and any item that is known to be obsolete is fully reserved. In 2002,the Company determined that the IMUX platform will not provide a viable futureplatform for PowerLinkTMgrowth; as a result, all inventory unique to IMUX has been fully reserved. Alsoin 2002, the Company revised its reserve policy for legacy products fromreserving two-thirds of the cost over one-year's usage to reserving the fullcost of inventory over one-year's usage.
*     Revenue Recognition: Generally, revenue is recognized uponshipment of product, FOB shipping point. For products sold to distributors andsubject to the specifics of the agreement, revenue is usually not recognizeduntil sale of unit to an end-user during the first 120 days following the saleto the distributor; after that period, all remaining revenue less anyadjustments is recognized. For evaluation units subsequently purchased, revenueis not recognized until payment is received. At December 31, 2002, there were nooutstanding units to a distributor.

**Recently Issued Accounting Pronouncements**

     In April 2002, the FASB issued SFAS No. 145, "Rescissionof FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections," effective for fiscal years beginning after May 15,2002.  SFAS No. 145 streamlines the reporting of debt extinguishments and requires that onlygains and losses from extinguishments meeting the criteria in AccountingPrinciples Board Opinion No. 30 will be classified as extraordinary. Thus, gainsand losses arising from extinguishments that are part of a company's recurringoperations are not reported as an extraordinary item. The Company believes theadoption of SFAS No. 145 will not have a material effect on its financialposition or its results of operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for CostsAssociated with Exit or Disposal Activities." SFAS No. 146 requires therecognition of a liability for a cost associated with an exit or disposalactivity when the liability is incurred versus the date the Company commits toan exit plan. In addition SFAS No. 146 states the liability should be initiallymeasured at fair value. The requirements of SFAS No. 146 are effective for exitor disposal activities that are initiated after December 31, 2002. The Companybelieves the adoption of SFAS No. 146 will not have a material effect on theCompany's financial position or results of operations.

     In October 2002, the FASB issued SFAS No. 147, "Acquisitions of CertainFinancial Institutions." SFAS No. 147 is effective October 1, 2002. Theadoption of SFAS No. 147 did not have a material effect on the Company'sfinancial position or results of operations.

     In December of 2002, the FASB issued SFAS No. 148, "Accounting forStock-Based Compensation Transition and Disclosure." SFAS No. 148 is anamendment to SFAS No. 123 providing alternative methods of transition for avoluntary change to the fair value based method of accounting for stock basedemployee compensation and also provides additional disclosure about the methodof accounting for stock-based employee compensation. Amendments are effectivefor financial statements for fiscal years ending after December 15, 2002 and forinterim periods beginning after December 15, 2002. The Company adopted theannual disclosure provisions of SFAS No. 148. The Company has currently chosento not adopt the voluntary change to the fair value based method of accountingfor stock-based employee compensation, pursuant to SFAS No. 148, which, ifadopted, could have a material effect on the Company's financial position andresults of operations.

**Disclosures about Contractual Obligations and Commercial Commitments**

     The following summarizes our contractual obligations at December 31, 2002,and the effect these contractual obligations are expected to have on ourliquidity and cash flows in future periods:

 
Total1 Year or Less1-3 YearsOver 3 YearsOperating Leases$              111,228$              88,982$    22,246$                        -Notes Payable
$   1,983,381

$   1,483,381

$  500,000

$                  -
$         2,094,609$         1,572,363$         522,246$                        -
 

**ITEM 7. FINANCIAL STATEMENTS**

**ASTROCOM CORPORATION**Plymouth, Minnesota

December 31, 2002 and 2001
FINANCIAL STATEMENTSIncluding Independent Auditors' Report

TABLE OF CONTENTS
**Independent Auditors' Report**15**Financial Statements**     Balance Sheets16     Statements of Operations17     Statements of Shareholders'        Deficit18     Statements of Cash Flows19     Notes to Financial Statements20 - 31
INDEPENDENT AUDITORS' REPORT

Shareholders, Board of Directors, and AuditCommitteeAstrocom CorporationPlymouth, Minnesota
We have audited the accompanying balance sheetof Astrocom Corporation as of December 31, 2002 and the related statements ofoperations, shareholders' deficit and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based onour audit. The financial statements of Astrocom Corporation as of December 31,2001, were audited by other auditors whose report dated April 2, 2002 on thosestatements, included an explanatory paragraph that described the recurringoperating losses of the Company and its dependence upon raising additionalcapital to continue its operations discussed in Note 12 to the financialstatements.
We conducted our audit in accordance withauditing standards generally accepted in the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statementsreferred to above present fairly, in all material respects, the financialposition of Astrocom Corporation as of December 31, 2002 and the results of itsoperations and its cash flows for the year then ended in conformity withaccounting principles generally accepted in the United States of America.
The accompanying financial statements havebeen prepared assuming the Company will continue as a going concern. As morefully described in Note 12, the Company has experienced recurring operatinglosses and is dependent upon raising additional capital to continue itsoperations. These conditions raise substantial doubt about the Company's abilityto continue as a going concern. The financial statements do not include anyadjustments that might result from the outcome of this uncertainty.
/s/ VIRCHOW, KRAUSE & COMPANY, LLP
Minneapolis, MinnesotaFebruary 26, 2003
 

**ASTROCOM CORPORATION****BALANCE SHEETSDecember 31, 2002 and 2001*****ASSETS***

         

                 2002        

                         2001        

**CURRENT        ASSETS **                                 

         

         

Cash and cash        equivalents                        

$                 382,710        

$                 116,135        

Accounts        receivable, net                           

                       8,590        

                     60,421        

Inventories,        net                                                 

                   162,516        

                   422,753        

Prepaid        expenses                                           

                     11,130

                     14,816

Total        Current Assets        

                   564,946

                   614,125

**PROPERTY        AND EQUIPMENT, NET  **                                                       

                     36,446 

                     57,792

**OTHER        ASSETS    **                

         

         

Deposit        

                     10,000        

                     10,000        

Debt        issuance costs, net        

                   119,691        

                              -         

Intangible        assets, net        

                              -

                       8,021

Total        Other Assets        

                   129,691 

                     18,021

**TOTAL        ASSETS**
$                 731,083$                 689,938
***LIABILITIES AND SHAREHOLDERS' DEFICIT***

**CURRENT        LIABILITIES**

         

         

Notes        payable, net of original issue discount                     

$              1,400,910        

$                 898,646        

Current        portion of capital lease obligation        

                       1,206        

                       1,993        

Due to        related parties                               

                     84,060        

                     49,272        

Accounts        payable                                     

                     25,215        

                     37,248        

Accrued        compensation                             

                   135,435        

                   378,924        

Accrued        expenses        

                   292,138 

                   216,767 

Total        Current Liabilities        

                1,938,964        

                1,582,850        

**LONG-TERM        LIABILITIES**

         

         

Accrued        compensation        

                   150,000        

                              -         

Notes        payable        

                   500,000 

                              -  

Total        Liabilities        

                2,588,964 

                1,582,850   

**SHAREHOLDERS'         DEFICIT**

         

         

Preferred        stock, $1.00 par value per share,        

         

         

          5,000,000 shares authorized        

         

         

          0 shares issued and outstanding        

 -        

 -        

Common        stock, $.10 par value per share,        

 

         

75,000,000        shares authorized        

         

         

26,448,943        shares issued and outstanding        

                2,644,498        

                2,644,498        

Additional        paid-in capital        

                9,952,478        

                9,475,148        

Accumulated        deficit        

            (14,454,857) 

            (13,012,558) 

Total        Shareholders'  Deficit        

              (1,857,881) 

                 (892,912)

**TOTAL        LIABILITIES AND SHAREHOLDERS'  DEFICIT**
$                  731,083

$                  689,938

See accompanying notes to financial statements.

**ASTROCOM CORPORATION****STATEMENTS OF OPERATIONSYears Ended December 31, 2002 and 2001**

       

                     2002              

                  2001                

**NET      SALES**

$                        328,174      

$                       605,884      

**COST      OF PRODUCTS SOLD**

                               372,514      

                           573,896      

Gross      Profit (Loss)      

                              (44,340)      

                             31,988      

**OPERATING      EXPENSES**

       

       

Selling      and Administrative      

                738,078      

            1,052,082      

Research      and Development      

                               325,659      

                           624,944      

Total      Operating Expenses      

                            1,063,737      

                 1,677,026       

Operating      Loss      

                         (1,108,077)      

                    (1,645,038)      

**OTHER      INCOME (EXPENSE)**

       

       

Interest      Expense      

             (336,308)      

             (263,047)      

Interest      Income      

                    1,486      

                    6,357      

Other      Income (Expense)      

                                     600      

                               (500)      

Net      Other Expense      

                            (334,222)      

                        (257,190)      

Net      Loss      
(1,442,299)(1,902,228)
Net      loss per common share - basic and diluted      
$                        (0.05)$                       (0.07)
Weighted      average number of common shares outstanding - basic and diluted      
26,448,943      26,448,943      
See accompanying notes to financial statements.

**ASTROCOM CORPORATION****STATEMENTS OF SHAREHOLDERS' DEFICITYears Ended December 31, 2002 and 2001**

**Common Stock**
**Additional  Paid-In****Accumulated****Total   Shareholders'****Shares****Amount****Capital****Deficit****Deficit****BALANCES, December 31,    2000**26,448,943$ 2,644,498$9,223,398$ (11,110,330)$ 757,566         Issuance of warrants related to              convertible debt--251,750-251,750         Net loss
-

-

-

(1,902,228)

(1,902,228)
**BALANCES,     December 31, 2001**26,448,9432,644,4989,475,148(13,012,558)(892,912)      Warrants issued in connection          with convertible notes payable--98,129-98.129    Beneficial    conversion value of           convertible notes payable--98,129-98,129      Warrants issued in connection           with accounts payable--41,250-41,250    Reduction    of accrued salary           owed to shareholders--239,822-239,822        Net loss
-

**-**

**-**

(1,442,299)

(1,442,299)
**BALANCES,****December 31, 2002**26,448,943$ 2,644,498$ 9,952,478$ (14,454,857)$ (1,857,881)
See accompanying notes to financial statements.

**ASTROCOM CORPORATION****STATEMENTS OF CASH FLOWSYears Ended December 31, 2002 and 2001**
              2002          

                      2001                

**CASH      FLOWS FROM OPERATING ACTIVITIES**

       

       

Net      Loss      

$      (1,442,299)      

$       (1,902,228)      

Adjustments      to reconcile net loss to net cash flows used in operating activities      

       

Depreciation      and amortization      

               72,434      

                276,501      

Amortization      of original issue discount      

             180,141      

                            -      

Changes      in operating assets and liabilities:      

       

       

Accounts      receivable, net      

               51,831      

                 (3,341)      

Inventories, net      

             260,237      

                132,998      

Prepaid expenses      

                 3,686      

                  62,996      

Due to related parties      

               34,788      

                  49,272      

Accounts payable      

               18,593      

               (84,637)      

Accrued compensation      

             133,141      

                354,066      

Accrued expenses      

                       201,318      

                                     -      

Net      cash flows used in operating activities      

               (486,130)      

                    (1,114,373)      

**CASH      FLOWS FROM  INVESTING      ACTIVITIES**

       

       

Purchases      of property and equipment      

                                  -      

                          (15,122)      

Net      cash flows used in investing activities      

                                  -      

                               (15,122)      

**CASH      FLOWS FROM FINANCING ACTIVITIES**

       

       

Payments      for debt issuance costs      

          (121,508)      

                            -      

Proceeds      from notes payable      

                         -      

                960,000      

Proceeds      from note payable and warrants issued      

             875,000      

                            -      

Payments      on capital lease obligation      

                           (787)      

                            (8,842)      

Net      cash provided by financing activities      

                       752,705      

                           951,158      

**Increase      (Decrease) in Cash and Cash Equivalents**

 266,575      

(178,337)      

Cash      and cash equivalent -                                    Beginning of Year      

                       116,135      

                           294,472      

**Cash      and cash equivalent -                    End      of Year**
$    382,710$        116,135**Supplemental cash flow information:          **Interest paid$    112,755$                    447
**Noncash      investing and financing activities:**
       

       

Common      stock warrants issued for debt issuance costs      

$            41,250      

$                         -      

Accounts      payable converted to notes payable      

$            30,626      

$                         -      

Accrued      interest converted to notes payable      

$          112,755      

$                         -      

Common      stock warrants issued with notes payable      

$          165,836      

$                         -      

Reduction      of accrued salaries owed to shareholders      

$          239,822      

$                         -      

See accompanying notes to financial statements.

**ASTROCOM CORPORATION**NOTES TO FINANCIAL STATEMENTSDecember 31, 2002 and 2001
**NOTE 1 - Nature of Business and Significant AccountingPolicies**

*Nature of Business and Operations*
Astrocom Corporation (the Company) designs, manufactures and markets advanceddigital communications equipment for the data transmission needs of corporationsand other large organizations. Sales for the Company's products are basedprimarily in the United States and Canadian markets.
*Cash and Cash Equivalents*
For purposes of reporting cash flows, the Company considers all investmentswith a maturity of three months or less when purchased to be cash equivalents.The Company maintains its cash in high quality financial institutions. Thebalances, at times, may exceed federally insured limits.
*Revenue Recognition*
Generally, revenue is recognized upon shipment of product, FOB shippingpoint. For products sold to distributors and subject to the specifics of theagreement, revenue is usually not recognized until sale of the unit to anend-user during the first 120 days following the sale to the distributor; afterthat period, all remaining revenue less any adjustments is recognized. Forevaluation units subsequently purchased, revenue is not recognized until paymentis received. At December 31, 2002, there were no outstanding units to adistributor.
*Accounts Receivable*
The Company reviews customers' credit history before extending unsecuredcredit and establishes an allowance for uncollectible accounts based uponfactors surrounding the credit risk of specific customers and other information.Invoices are due 30 days after presentation. Accounts receivable over 30 daysare considered past due. The Company does not accrue interest on past dueaccounts receivable. The Company writes off accounts receivable when they aredeemed uncollectible. Accounts receivable are shown net of an allowance foruncollectible accounts of $7,600 and $9,000 at December 31, 2002 and 2001,respectively.
*Inventories*
Inventories are stated at the lower of cost or market, determined on anaverage cost basis.

For emerging products, such as PowerLinkTM, the Company has recorded areserve of 15% of the value of inventory associated with that product line. Eachremaining line item of inventory is analyzed for value of inventory actuallymoved on an annual basis. Any item that has not moved for two years and any itemthat is known to be obsolete is fully reserved. In 2002, the Company determinedthat the IMUX platform will not provide a viable future platform for PowerLinkTMgrowth; as a result, all inventory unique to IMUX has been fully reserved. Alsoin 2002, the Company revised its reserve policy for legacy products fromreserving two-thirds of the cost over one-year's usage to reserving the fullcost of inventory over one-year's usage.
*Property and Equipment, Net*
Leasehold improvements, machinery and equipment are carried at cost anddepreciated over estimated useful lives ranging from five to ten years using thestraight-line or double-declining-balance methods. Improvements are capitalizedwhile maintenance, repairs and minor renewals are expensed when incurred.Leasehold improvements are depreciated over the shorter of the lease term or theestimated useful life.
*Licenses Acquired*
The cost of licenses acquired was capitalized and amortized over theirestimated two to four year useful life. Amortization expense was $8,021 and$34,971 for the years ended December 31, 2002 and 2001, respectively. As ofDecember 31, 2002, all costs of licenses were fully amortized.
*Debt Issuance Costs*
Debt issuance costs are amortized over the one year life of the loan usingthe straight-line method, which approximates the interest method. Amortizationexpense was $47,763 and $0 for the years ended December 31, 2002 and 2001,respectively. Estimated amortization expense for the year ending December 31,2003 is $119,691.
*Income Taxes*
The Company accounts for income taxes using the asset and liability approach,which requires the recognition of deferred tax assets and liabilities for taxconsequences of temporary differences between the financial statement income taxreporting bases of assets and liabilities based on currently enacted rates andlaws. These temporary differences include depreciation, allowance for doubtfulaccounts, inventory valuation adjustments, accrued expenses and net operatinglosses. Deferred taxes are reduced by a valuation allowance to the extent thatrealization of the related deferred tax asset is not assured.
*Stock-Based Compensation*
In accordance with Accounting Principles Board (APB) Opinion No. 25 andrelated interpretations, the Company uses the intrinsic value-based method formeasuring stock-based compensation cost which measures compensation cost as theexcess, if any, of the quoted market price of the Company's common stock at thegrant date over the amount the employee must pay for the stock. The Company'sgeneral policy is to grant stock options at fair value at the date of grant.Options and warrants issued to nonemployees are recorded at fair value, asrequired by Statement of Financial Accounting Standards (SFAS) No. 123,"Accounting for Stock-Based Compensation," using the Black Scholespricing model.

Had compensation cost been recognized based on the fair values of options atthe grant dates consistent with the provisions of SFAS No. 123, the Company'snet loss and basic and diluted net loss per common share would have beenincreased to the following pro forma amounts:
              2002                        2001          Net loss:   As reported$   (1,442,299)$ (1,902,228)   Pro forma$   (1,529,788)$ (2,073,298)Basic and diluted net loss per share:   As reported$                     (.05)$                   (.07)   Pro forma$                     (.06)$                   (.08)Stock-based compensation:   As reported$                           -$                         -   Pro forma$                 87,489$             171,070
In determining the compensation cost of the options granted during the yearsended December 31, 2002 and 2001, as specified by SFAS No. 123, the fair valueof each option grant has been estimated on the date of grant using the Black-Scholesoption pricing model and the weighted average assumptions used in thesecalculations are summarized as follows:

2002
2001
Risk-free interest rate
3.5%
4.55%
Expected life of options granted
5 years
5 years
Expected volatility range
323.7%
126.6%
Expected dividend yield
0%
0%*Warranties*
In November 2002, the Financial Accounting Standards Board (FASB) issuedInterpretation (FIN) No. 45, "Guarantor's Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness ofOthers." It requires additional disclosures related to product warrantyliabilities. The disclosure requirements in the interpretation are effective forfinancial statements of annual periods ending after December 15, 2002. TheCompany adopted the annual disclosure requirement.

The Company offers warranties on its products sold to customers, which rangesfrom 2-years, 5-years and lifetime depending on the product. A liability forwarranties is established at the time the product is sold. Warranty and repaircosts are charged against the accrual when incurred. Accrued liabilities areanalyzed and adjusted by management throughout the year. The change in accruedwarranties is as follows for the years ended December 31:
 
2002
2001
Balance, beginning of year
$ 13,720
$13,720
Increase in reserve
6,944
6,509
Reductions for warranty costs
(6,944)
(6,509)
Balance, end of year
$13,720
$13,720*Shipping and Handling Costs*
The Company records amounts being charged to customers for shipping andhandling as sales and costs incurred in cost of products sold.
*Advertising*
Advertising costs are charged to operations when incurred. Advertisingexpense was $3,922 and $2,005 for the years ended December 31, 2002 and 2001,respectively.
*Research and Development*
The Company expenses all costs related to product research and development asincurred. Research and development expense was $325,659 and $624,944 for theyears ended December 31, 2002 and 2001, respectively.
*Financial Instruments*
The carrying amounts for all financial instruments approximates fair value.The carrying amounts for cash and cash equivalents, accounts receivable,accounts payable, accrued compensation and accrued expenses approximate fairvalue because of the short maturity of these instruments. The fair value ofsubordinated notes payable approximates the carrying amounts based upon theCompany's expected borrowing rate with similar remaining maturities.
*Use of Estimates*
The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the amounts reported inthe financial statements and accompanying notes. Actual results could differfrom those estimates.
*Net Loss Per Common Share*
Basic net loss per common share is based on the weighted average commonshares outstanding and excludes the dilutive effect of options, warrants andconvertible securities, while diluted net loss per common share includes sucheffects if dilutive. For all years presented, the Company's basic and dilutednet loss per common share is the same because the effects of all options,warrants and convertible securities were antidilutive.
*Recently Issued Accounting Pronouncements*
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections," effective for fiscal years beginning after May 15, 2002. SFASNo. 145 streamlines the reporting of debt extinguishments and requires that onlygains and losses from extinguishments meeting the criteria in AccountingPrinciples Board Opinion No. 30 will be classified as extraordinary. Thus, gainsand losses arising from extinguishments that are part of a company's recurringoperations are not reported as an extraordinary item. The Company believes theadoption of SFAS No. 145 will not have a material effect on its financialposition or its results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for CostsAssociated with Exit or Disposal Activities." SFAS No. 146 requires therecognition of a liability for a cost associated with an exit or disposalactivity when the liability is incurred versus the date the Company commits toan exit plan. In addition SFAS No. 146 states the liability should be initiallymeasured at fair value. The requirements of SFAS No. 146 are effective for exitor disposal activities that are initiated after December 31, 2002. The Companybelieves the adoption of SFAS No. 146 will not have a material effect on theCompany's financial position or results of operations.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of CertainFinancial Institutions." SFAS No. 147 is effective October 1, 2002. Theadoption of SFAS No. 147 did not have a material effect on the Company'sfinancial position or results of operations.

In December of 2002, the FASB issued SFAS No. 148, "Accounting forStock-Based Compensation Transition and Disclosure." SFAS No. 148 is anamendment to SFAS No. 123 providing alternative methods of transition for avoluntary change to the fair value based method of accounting for stock basedemployee compensation and also provides additional disclosure about the methodof accounting for stock-based employee compensation. Amendments are effectivefor financial statements for fiscal years ending after December 15, 2002 and forinterim periods beginning after December 15, 2002. The Company adopted theannual disclosure provisions of SFAS No. 148. The Company has currently chosento not adopt the voluntary change to the fair value based method of accountingfor stock-based employee compensation, pursuant to SFAS No. 148, which, ifadopted, could have a material effect on the Company's financial position andresults of operations.

**NOTE 2 - Property and Equipment**

Property and equipment consisted of the following at December31:

2002

2001

Leasehold improvements
$ 1,070
$ 1,070
Machinery and equipment
389,577
389,579
Office furniture and fixtures
372,852

372,852
 
763,499
763,501
Less: accumulated depreciation and amortization
(727,053)

(705,707)
 
$ 36,446
$ 57,794
Depreciation and amortization expense on property and equipment was $21,346and $241,530 for the years ended December 31, 2002 and 2001, respectively.

**NOTE 3 - Inventories**

Inventory consisted of the following at December 31:

2002

2001

Purchased parts, materials, and supplies
$ 393,089
$ 399,139
Work in process
201,719
226,982
Finished products
57,923
84,599
Less obsolescence reserve
(490,215)

(287,967)
 
$ 162,516
$ 422,753
**NOTE 4 - Debt**

*Lease Settlement Costs*
During 1993, the Company assumed lease guarantees for certain operations soldin 1990 when the buyer filed bankruptcy. The settlement with lessors wasrecorded at its present value of $125,000 using an 8% interest rate. During1997, the Company renegotiated the settlement agreement extending the paymentterms through 2001. The final settlement payment of $1,993 was due in 2001, andhas been in default since August 1, 2001. At December 31, 2002, the balance wasreduced to $1,206 and the Company is making monthly installments.
*Notes Payable*
During 2001, the Company borrowed $175,000 and $790,000 through issuance ofsubordinated promissory notes and subordinated convertible promissory notes,respectively. Of these notes and convertible notes, $125,000 and $160,000,respectively, were issued to the Company's President and directors. Inconnection with the subordinated convertible promissory notes issued, theCompany issued warrants to purchase 1,975,000 shares of common stock at $.40 pershare. The notes payable bear interest at a rate of 12%, payable at theirsix-month and one year maturity dates, respectively. The convertible notes areconvertible into common stock of the Company at the lower of $.20 per share or80% of the lowest price per share for which the Company has sold shares of itscommon stock (in a minimum offering of 100,000 shares) during the term of eachparticular note. Subordinated convertible promissory notes of $370,000 were dueand were in default as of June 15, 2002. The remaining notes balances have beenrenewed and mature on June 16, 2003. (See below)

The warrants issued in connection with the subordinated convertiblepromissory notes were valued and recorded as a discount to the convertible notespayable which is being accreted as interest expense over the twelve-month termof each note. There were no notes converted into shares of the Company's commonstock during the years ended December 31, 2002 and 2001. The carrying value ofthe subordinated convertible promissory notes at December 31, 2001 was $723,646net of a $66,354 discount. These notes were renewed, see the followingparagraph. The contingent beneficial conversion feature at 80% of the price ofstock issued during the notes' term will be recorded if and when common sharesare issued during the term of the notes.

During June 2002, the Company renewed the previous notes including accruedinterest of $680,850. In connection with the subordinated convertible promissorynotes, the Company issued warrants to the lenders to purchase 2,256,888 commonshares at $.20 per share through June 2007. The debt is also convertible intocommon stock of the Company at a conversion rate of $.10 per share through June2003 or payable in cash on that date. The warrants issued in connection with therenewal were valued based on the Black Scholes pricing model. The resultingoriginal issue discount, the fair value of the warrant, and the beneficialconversion of the note payable into common stock as defined in EITF 00-27,"Application of Issue No. 98-5 to Certain Convertible Instruments" (EITF00-27), is being amortized as additional interest expense over the life of thenote using the straight line method, which approximates the interest method. Thecarrying value of the subordinated convertible promissory notes at December 31,2002 was $1,015,691, net of a discount of $62,064.

During April 2002 the Company borrowed $300,000 and issued warrants to thelenders to purchase 750,000 common shares at $.40 per share through April 2007.The debt is also subordinated and convertible into common shares of the Companyat a conversion rate of $.10 per share through April 2003 or payable in cash onthat date. The proceeds were allocated between the notes, and the fair value ofthe warrants issued based on the Black Scholes pricing model. The resultingoriginal issue discount, the fair value of the warrant, and the beneficialconversion of the note payable into common stock as defined in EITF 00-27, isbeing amortized over the life of the note using the straight line method, whichapproximates the interest method. The carrying value of the convertible notes atDecember 31, 2002 was $288,750, net of a discount of $11,250.

During July 2002 the Company borrowed $75,000 and issued warrants to thelenders to purchase 187,500 common shares at $.40 per share through July 2007.The debt is also subordinated and convertible into common stock of the Companyat a conversion rate of $.10 per share through July 2003 or payable in cash onthat date. The proceeds were allocated between the notes, and the fair value ofthe warrants issued based on the Black Scholes pricing model. The resultingoriginal issue discount, the fair value of the warrant, and the beneficialconversion of the note payable into common stock as defined in EITF 00-27, isbeing amortized over the life of the note using the straight line method, whichapproximates the interest method. The carrying value of the convertible notes atDecember 31, 2002 was $68,906, net of a discount of $6,094.

During August 2002, the Company converted an outstanding account payablebalance into a subordinated convertible note payable for $27,563. In connectionwith the debt, the Company issued warrants to purchase 76,565 common shares at$.20 per share through August 2007. The debt is also convertible into commonstock of the Company at a conversion rate of $.10 per share through August 2003or payable in cash on that date. The proceeds were allocated between the note,and the fair value of the warrants issued based on the Black Scholes pricingmodel. The resulting original issue discount, the fair value of the warrant, andthe beneficial conversion of the note payable into common stock as defined in EITF 00-27, is being amortized over the life of the note using the straight linemethod, which approximates the interest method. The carrying value of thesubordinated and convertible notes at December 31, 2002 was $27,563, net of adiscount of $3,063.

During December 2002, the Company borrowed $500,000 from various lenders. Thedebt is convertible into common stock of the Company at a conversion rate of$.05 per share through December 2004 or payable in cash on that date. Theoutstanding balance at December 31, 2002 of these convertible notes was$500,000.

The only subordinated promissory notes payable that are secured are the notesissued during December 2002 which are secured by substantially all assets of theCompany. All outstanding notes bear interest at 12%.

Interest expense to related parties for the years ended December 31, 2002 and2001 was $142,968 and $155,555, respectively. Accrued interest to relatedparties at December 31, 2002 and 2001 was $56,517 and $43,430, respectively.

In connection with the debt borrowings, the Company issued 1,375,000five-year warrants at a price of $.10 per warrant to various agents ascommissions.

During 2001, proceeds raised from the issuance of the short-term notespayable were primarily used to fund the operations of the business.

**NOTE 5 - Accrued Compensation**

In 2000, certain employees elected to defer their salaries to improve cashavailability for the operations of the business. Effective January 24, 2001, theindividual employees who have deferred salaries were allowed to convert theirdeferred salaries to shares of the Company's common stock under the same termsas the convertible notes payable issued in 2001. The deferred salary was$355,321 in 2001. During 2002, $239,822 of accrued salaries was contributed toshareholders' deficit.

During 2002, certain employees elected to defer their salaries to improvecash availability for the operation of the business. The deferred salary is$150,000 and is not due until December 2004 and accrues interest at 12%. AtDecember 31, 2002, the total amount of deferred compensation is $271,495, ofwhich $150,000 is long-term.

**NOTE 6 - Operating Lease**

The Company leases office space requiring base monthly rent of $7,415including real estate taxes and operating expenses through March 2004. Rentexpense was $120,482 and $120,307 for the years ended December 31, 2002 and2001, respectively.

Future minimum lease payments are as follows for the years ending December31:

2003
$  88,982
2004
$  22,246

     Total
$ 111,228
**NOTE 7 - Shareholders' Equity**

*Preferred Stock*
On April 5, 2000, each share of the preferred stock was callable at theoption of the Company at a price of $2.00 per share. In August 2000, the 200,000preferred shares were converted to common stock at $.46 per share. The preferredstock bore a coupon rate of 6% payable quarterly. Cumulative dividends inarrears at both December 31, 2002 and 2001 were $39,861 and are included inaccrued expenses.
*Common Stock*
In 1996, the Company sold 3,501,000 units in a private placement of itscommon stock, resulting in net proceeds to the Company of $3,046,000. Each unitsold in the private placement consisted of one share of common stock and oneredeemable warrant. Each redeemable warrant entitled the holder to purchase oneshare of common stock at $1.50 per share. During 1999, the Company extended theexpiration date of the redeemable warrants from September 1999 to September 2001and reduced the exercise price to $.75 per share. The warrants expired in 2001.In connection with the private placement, the Company granted the selling agenta warrant to purchase 350,100 shares of common stock at an exercise price of$1.00 per share. The warrant expired in 2002.

During 2001, a vendor owned by a member of the Board of Directors providedengineering services to the Company. A portion of the fees are payable in commonstock and warrants of the Company based on an agreed upon conversion priceranging from $.05 to $.20 per share. As of December 31, 2002, the accruedexpense of $78,306 is the equivalent to 517,013 shares of common stock andwarrants for the purchase of 195,766 shares of common stock.

**NOTE 8 - Stock Options and Warrants**

The Company's stock option plans authorize the granting of up to 4,000,000incentive and non-qualified stock options generally at an exercise price equalto the grant date market value of the underlying stock. Options grantedgenerally vest over a period of 48 months with a five-year term.

A summary of outstanding options is as follows:
 
Options Reserved         for Grant
Options        Outstanding
Weighted Average ExercisePrice Per Share
Balance- December 31, 2000
2,458,333
1,541,667$  .29
     Granted
(1,305,000)
1,305,000.16
     Canceled
                                            200,000
                                        (200,000)                                                              .27
Balance- December 31, 2001
1,353,333
2,646,667.23
     Granted
(480,000)
480,000.10
     Canceled
                                               530,000
                                      530,000)                                                               .31
Balance- December 31, 2002
1,403,333
2,596,667$       .18
At December 31, 2002, the 2,596,667 options outstanding had an exercise pricefrom $.10 to $.59. At December 31, 2002, outstanding options had a weightedaverage remaining contractual life of 2.8 years.

The number of options exercisable at December 31, 2002 was 2,009,167 at aweighted average exercise price of $.19 per share.

The weighted average fair value of options granted during the years endedDecember 31, 2002 and 2001 was $.10 and $.14 per share, respectively.
*Warrants*
The Company has granted warrants for the purchase of shares of the Company'scommon stock to officers, directors and certain debt and equity holders. Withthe exception of warrants granted to certain officers, the warrants are fullyvested upon issuance and expire at varying dates through 2008. Information withrespect to warrants granted is summarized as follows:
 
Warrants
Warrant Price      Per Share
Outstanding- December 31, 2000
9,833,116
$ .19 to $1.94
     Granted
2,225,000
.175 to .40
     Exercised
                   (3,681,000)
                        .75 to 1.50
Outstanding- December 31, 2001
8,377,116
.175 to 1.94
     Granted
4,645,953
.10 to .40
     Expired
                   (1,300,100)
                        .50 to 1.94
Outstanding- December 31, 2002
11,722,969
$.10 to $.47
The weighted-average grant date fair value of warrants granted during theyear ended December 31, 2002 was $.03 per warrant.

In January 2001, the Company issued a warrant to its corporate controller forthe purchase of 250,000 shares of common stock at $.175 per share. The warrantvested immediately and expires January 2, 2006.

In April 2001, the Company issued warrants to its President in connectionwith the issuance of convertible notes, for the purchase of 250,000 shares ofcommon stock at $.40 per share. The warrants vested immediately and expire April21, 2006.

In 2002, the Company issued warrants to its President and certain Board ofDirectors in connection with the issuance of convertible notes for the purchaseof 480,405 shares of common stock at prices ranging from $.20 to $.40 per share.The warrants vested immediately and expire through June 2007.

**NOTE 9 - Income Taxes**

Deferred tax assets and liabilities consisted of thefollowing at December 31:
 
           2002              
                   2001           
Net operating loss carryforwards
$    4,785,000
$    4,267,000
Inventories
169,000
98,000
Accrued expenses
                           99,000
                              160,000
     Deferred tax assets
5,053,000
4,525,000
Depreciation and amortization
                           (4,000)
                             (21,000)
     Deferred tax liability
                           (4,000)
                             (21,000) 
5,049,000
4,504,000
Less valuation allowance
          (5,049,000)
                   (4,504,000)
     Net deferred tax asset
$                       -
$                         -
Income tax computed at the U.S. Federal statutory rate reconciled to theeffective tax rate is as follows for the years ended December 31:
 
           2002             
         2001        
Federal statutory tax rate benefits
(35.0)%
(35.0)%
State tax, net of federal benefit
(5.0)%
(5.0)%
Permanent differences
2.1%
7.9%
Change in valuation allowance
                                   37.9%
                        21.1%
     Effective tax rate
0.0%
0.0%
The Company has federal and state net operating loss carryforwards atDecember 31, 2002 of approximately $14,000,000 and $8,800,000, respectively,which are available to reduce income taxes payable in future years. Thesecarryforwards will expire at various times from year 2004 through year 2022.There were no carryforwards that expired in 2002. The annual usage of theCompany's net operating loss carryforwards may be limited by provisions of theTax Reform Act of 1986 (TRA). Under TRA, if a company experiences a change inownership of more than 50% (by value) of its outstanding stock over a three-yearperiod, the use of its pre-change in ownership net operating loss carryforwardsmay be limited each year until the loss is exhausted or the carryover periodexpires.

**NOTE 10 - Retirement Plan**

The Company has a Retirement Savings Plan for its employees which allowsparticipants to make contributions by salary reduction pursuant to section401(k) of the Internal Revenue Code. The Company may match up to 25% of theemployees' contributions to a maximum of 3% of the employee's annual salary.There were no Company matching contributions to the Plan during the years endedDecember 31, 2002 and 2001.

**NOTE 11 - Major Customers**

For the year ended December 31, 2002, the Company had net sales to onecustomer, which totaled 20% of total net sales for the year. There was $3,060due from this customer at December 31, 2002.

For the year ended December 31, 2001, the Company had net sales to onecustomer, which totaled 33% of the total net sales for the year. There was$24,616 due from this customer at December 31, 2001.

**NOTE 12 - Going Concern**

The accompanying financial statements have been prepared assuming the Companywill continue as a going concern, which contemplates the realization of assetsand the satisfaction of liabilities in the normal course of business. TheCompany has experienced recurring operating losses, depleting most of itsavailable capital. The Company is dependent on obtaining future financing tocontinue as a going concern. Management is actively pursuing additionalfinancing and evaluating other alternatives. However, there can be no assurancethat the Company will be successful in obtaining financing on terms favorable tothe Company.

**NOTE 13 - Contingent Liability**

On June 1, 1992, the Company sold and assigned to The Crepeau Company ("Crepeau")all rights, duties and liabilities the Company had under a lease, as Tenant,from the St. Paul Port Authority, as Landlord, which covered office andmanufacturing space and land at 120 West Plato Boulevard, St. Paul, Minnesota(the "Lease"). The Lease was dated September 1, 1997 and ran throughAugust 31, 2007. On August 11, 2000, Crepeau filed Chapter 11 bankruptcy.Subsequent to Crepeau's bankruptcy filing, a Mutual Release was entered into byand between the St. Paul Port Authority and Crepeau, dated May 31, 2001, whereinthe Port Authority released Crepeau from any obligations to pay and perform theobligations of Tenant under the Lease (the "Release"). While theCompany was not a party to the Release, the language in the Release did notspecifically exclude the Company from the benefit of the Release provisions infavor of the Tenant. Although upon assignment of the Lease from the Company toCrepeau, the Company remains potentially liable to the Port Authority for leasedefaults, the Company believes that, as a result of the Release, the Company hasa defense to any claim by the St. Paul Port Authority against it alleging breachof the Lease.

**ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING**

    No disagreements with accountants have occurred within the two-year periodended December 31, 2002, which required reporting on Form 8-K.

    On December 5, 2002 the Company filed a Form 8-K andreported that as of December 4, 2002, theBoard of Directors of Astrocom Corporation wherein it approvedthe engagement of the firm of Virchow Krause & Co. LLP as the independentauditors of the Company for the fiscal year ending December 31, 2002, inreplacement of the firm of Ernst & Young LLP, which resigned as auditors ofthe Company effective December 3, 2002. The audit committee of the Board ofDirectors approved the change in auditors on December 3, 2002.

**PART III**

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

**DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS**

**DIRECTORS**

     The Company's Restated Articles of Incorporation provide that the Board ofDirectors shall consist of not less than three nor more than fifteen members, asdetermined from time to time by the Board of Directors, divided into threeclasses as nearly equal in size as possible.

     The term of each class of directors is three years, and the term of one classexpires each year in rotation. The terms of Ronald B. Thomas and Douglas M. Pihlexpire in 2003; and the term of Gary L. Deaner expires in 2004. The terms ofDuane S. Carlson and Marius O. Poliac were scheduled to end in 2002. SinceAstrocom Corporation did not hold an annual meeting in 2002, Mr. Carlson and Mr.Poliac continue to serve as the directors are elected to serve office untiltheir successors are elected and qualified. Officers serve at the discretion ofthe Board of Directors.

     Certain information with respect to the current directors of the Company isset forth below. The Common Stock ownership of each director is provided under"Security Ownership of Certain Beneficial Owners and Management."
Name
AgePositions HeldDirector SinceDuane S. Carlson67Director1998Gary S. Deaner63Director1998Douglas M. Pihl63Director1997Marius O. Poliac51Director2001Ronald B. Thomas59President, Chief Executive Officer,  Chief Financial        Officer, Treasurer and Director1997
**EXECUTIVE OFFICERS**
NameAgePositionRonald B. Thomas59President, Chief Executive Officer,  Chief Financial        Officer, Secretary and Treasurer
     Frederic H. Sweeny was elected Vice President of Sales and Marketing on March17, 2000 and left the Company to pursue other opportunities effective August 31,2002.

**OTHER PERSONNEL**
NameAgePositionJohn M. Bucher51Director of Operations and ControllerBradley F. Pearson45Director of Sales and Marketing
     **John M. Bucher** joined Astrocom in 1999. Prior to that, he was theManufacturing Business Office Manager for the electronic contract manufacturingbusiness segment of General Dynamics Information Systems. He has also beenemployed by Computing Devices International, Control Data, Martin Marietta andFMC, and has held various positions in production and program management,subcontracts management and industrial engineering.

     **Duane S. Carlson** was elected a director of the Company in 1998. Mr.Carlson has been a business consultant since 1997. His previous experience wasas Executive Vice President and CFO of NetStar, Inc., a computer networkingequipment company, from 1990-1997. Mr. Carlson is also a director of ApplianceRecycling Centers, Inc.

     **Gary L. Deaner** was elected a director of the Company in 1998. Mr. Deanerhas been Managing Director of Raintree Associates, a consulting group, sinceJune 1998. He was Vice President of Marketing and Strategic Planning of J.River, Inc., a developer of communications and security software, from1996-1998. Mr. Deaner was Vice President of Marketing for Digi Internationalfrom 1985-1991; in 1991 he was appointed President of Arnet Corporation, awholly owned Digi subsidiary; and during 1994-1996, he served as the VicePresident and General Manager of the Digi LAN Connect Group. Mr. Deaner is adirector for Satellite Mobil Systems, Inc.

     **Bradley F. Pearson** joined Astrocom in 2000, from Andtech Corporation, aninternational distributor of Compaq, HP, Digital and Sun memory products. Duringhis previous 20 years, Mr. Pearson has held various sales management positionswith Ingram Micro, ADC Telecommunications and Inland Associates, where he gainedextensive experience developing technology product sales channel programs.

     **Douglas M. Pihl** was elected a director of the Company in 1997. SinceApril 1998, Mr. Pihl has served as Chairman and Chief Executive Officer ofMathStar, Inc., a developer of DSP integrated circuits. Mr. Pihl has beenChairman of Vital Images, Inc., a publicly held provider of software for themedical industry, since August 1997 and was Chief Executive Officer fromFebruary 1998 to January 2000. Mr. Pihl was Chairman of RocketChips, Inc., aprivately-held developer of high-speed silicon CMOS communication chips, fromNovember 1996 until the acquisition of RocketChips by Xilinx, Inc. in November2000, and was also Chief Financial Officer from October 1999 to the acquisitiondate. From 1991 to 1996, Mr. Pihl served as President and Chief ExecutiveOfficer of NetStar, Inc. From 1996 to 1997 Mr. Pihl served as a consultant toAscend Communications, Inc. following the acquisition of NetStar by Ascend. Heis also a board member of publicly traded Printware, Inc.

     **Marius O. Poliac**, Ph.D., was elected a director of the Company in 2001.Dr. Poliac has been Chairman of Poliac Research Corporation, a Software andEmbedded Systems consulting firm, since 1989. His previous experience includesthe position of Vice President of Engineering of Medwave, Inc., a medicalequipment manufacturer, from 1992 to 1997. Dr. Poliac has a number of scientificpublications and is listed as an inventor on over 15 US patents. Dr. Poliac isalso a substantial investor in the Company and provides engineering consultingservices to the Company through his firm.

     **Ronald B. Thomas** joined the Company in 1997. He was elected a director onJune 26, 1997, Chief Executive Officer effective June 27, 1997, Presidenteffective June 30, 1997 and Secretary and Treasurer on October 13, 1997. Mr.Thomas was a private investor from 1987-1997. He was a founder of Ciprico, Incand served as Chairman and CEO from 1978 to 1987; he also served as a directorfor Ciprico from 1978 to 1999.

**ACTIONS AND COMMITTEES OF THE BOARD OF DIRECTORS**

During 2002, there were six meetings or written minutes of action of theBoard of Directors and three meetings or written minutes of action of theCompany's Audit Committee. The Company's Compensation Committee (comprised ofall outside directors) and standing Nominating Committee (consisting of thosedirectors whose terms as directors do not expire at the next scheduled meetingof the shareholders) did not meet during the year.

**REPORT OF THE AUDIT COMMITTEE - MARCH 26, 2003**

     The Audit Committee is a standing committee of the Board of Directors; itsprimary function is to assist the Board in fulfilling its oversightresponsibilities by reviewing the financial information that will be provided tothe shareholders and others, the systems of internal controls that managementand the Board of Directors have established, and the external audit processes.In fulfilling its oversight responsibilities, the Committee reviewed the auditedfinancial statements in the Annual Report with management including a discussionof the quality, not just the acceptability, of the accounting principles, thereasonableness of significant judgments, and the clarity of disclosures in thefinancial statements.

     On December 3, 2002, the Committee selected Virchow, Krause & Company,LLP to be retained as the outside auditors of the Company. Upon completion ofthe audit, the Committee met with independent auditors on March 26, 2003 todiscuss the results of their examinations, their evaluations of the Company'sinternal controls, and the overall quality of the Company's financialreporting.

     The Committee reviewed with the independent auditors, who are responsible forexpressing an opinion on the conformity of those audited financial statementswith accounting principles generally accepted in the United States of America,their judgments as to the quality, not just the acceptability, of the Company'saccounting principles and such other matters as are required to be discussedwith the Committee under such generally accepted auditing standards. Inaddition, the Committee has discussed with the independent auditors the auditors'independence from management and the Company including the matters in thewritten disclosures required by the Independence Standards Board and consideredthe compatibility of nonaudit services with the auditors' independence.

     In addition, the Committee reviewed its charter, originally adopted by theBoard of Directors on May 24, 2000, and ratified modifications/clarificationsrelated to requirements of the Sarbanes-Oxley Act of 2002. The Board ofDirectors subsequently approved the revised charter. (See Exhibit 99.2 for therevised Audit Committee Charter).

     In reliance on the reviews and discussions referred to above, the Committeerecommended to the Board of Directors (and the Board has approved) that theaudited financial statements be included in the Annual Report on Form 10-KSB forthe year ended December 31, 2002 for filing with the Securities and ExchangeCommission.

s/ Duane S. CarlsonDuane S. Carlson, Committee Chair      and Audit Committee Financial Expert

s/ Douglas M. PihlDouglas M. Pihl

s/ Marius O. PoliacMarius O. Poliac

**COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934**

Section16(a) of the Securities Exchange Act of 1934 requires the Company's directorsand executive officers, and persons who own more than 10% of the Company's outstandingstock, to file with the Securities and Exchange Commission initial reports ofownership and reports of changes in ownership of common stock and other equitysecurities of the Company.  To theCompany's knowledge, during the fiscal year ended December 31, 2002, allSection 16(a) filing requirements applicable to its officers, directors andgreater than 10% beneficial owners were satisfied other than Form 5 reports forthe year ending December 31, 2002 and Form 4 reports for 2003 reporting sharesgranted to directors pursuant to the Company Stock Option Plan and sharespurchased and granted pursuant to directors' participation in Company's privateplacements as discussed in this filing.

**ITEM 10.  EXECUTIVE COMPENSATION**

The following table contains certain information regarding the compensationpaid or accrued by the Company during the three-year period January 1, 2000,through December 31, 2002, to the Company's Chief Executive Officer. No otherexecutive officer of the Company received compensation in excess of $100,000 in2002.
  
**Annual      Compensation (1)**
**Long Term      Compensation**
**Name and  Principle Position**

**Year**
**Salary**
**Bonus**
**Other**
**Securities      Underlying Options**
Ronald B. Thomas,      President and Chief      Executive Officer (2)

2002      2001      2000

120,000(3)(7)120,000(5)(7)120,382(6)(7)

-      -      -

-      -      -

None (4)      None (4)      None  (4)

(1)Does not include any amounts paid under the Company's group medical andhospitalization plan that is available generally to all employees.  Does not include the value of certainnoncash compensation or benefits made available to executive officers, whichwere less than amounts required to be reported pursuant to applicable SECregulations.

(2) Mr.Thomas joined the Company in 1997 and was elected Chief Executive Officereffective June 27, 1997.

(3)Includes $90,426 in accrued salaries for 2002. See also Note (7).

(4)Does not include warrants granted to Mr. Thomas. See Thomas Warrants.

(5)Includes $98,894 in accrued salaries for 2001. See also Note (7).

(6)Includes $85,000 in accrued salaries for 2000. See also Note (7).

(7) Toimprove cash availability for the Company, Mr. Thomas has accepted an agreementto defer $100,000 in salary until December 2004 at 12% interest and hascontributed $150,000 of accrued salaries to shareholders' deficit.

**OPTION GRANTS IN 2002**

     There were no option grants in 2002 to the named executiveofficer.

**AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES**

     There are no unexercised options held nor were there anyexercised by the named executive officer during 2002.

**COMPENSATION OF DIRECTORS**

     The Company's 1998 Stock Option Plan provides that eachnon-employee member elected to the Board, and each employee member of the Boardwho later becomes a non-employee member of the Board, will automatically begranted a non-qualified option for 10,000 shares at 100% of fair market value.

     The Company's 1998 Stock Option Plan, as amended by the Boardof Directors on January 3, 2000, also provides that each non-employee director,serving as of the beginning of each calendar year, shall automatically begranted a non-qualified option to purchase 120,000 shares at 100% of fair marketvalue on the date of grant for his or her services to the Company. Suchnon-qualified options vest as to 1/12th of the 120,000 shares at the end of eachcalendar month during the year following the grant of the non-qualified option.

**1998 STOCK OPTION PLAN**

     In 1998 the shareholders approved the 1998 Stock Option Plan(the "1998 Plan") of the Company. The 1998 Plan allows the Company togrant both incentive stock options and non-qualified options.

     Incentive stock options may only be granted to any full-timeor part-time employee (which term includes, but is not limited to, officers anddirectors who are also employees) of the Company or of its present and futuresubsidiary corporations. Non-qualified options may be granted to other persons,including, but not limited to, members of the Board of Directors, consultants orindependent contractors providing services to the Company, or its present andfuture subsidiary corporations.

     Each non-employee member of the Board of Directors firstelected to the Board after approval of the 1998 Plan by the shareholders, andeach employee member of the Board who became a non-employee member of the Boardafter said date, was automatically granted a non-qualified option for 10,000shares at 100% of fair market value.

     Each non-employee director of the Company, serving as of thebeginning of each calendar year, shall automatically be granted a non-qualifiedoption under the 1998 Plan providing for the purchase of 120,000 shares of theCompany's Common Stock at 100% of the fair market value of such Common Stock onthe date of grant for his/her services to the Company during such year. Suchnon-qualified option received by a non-employee director shall vest as to 1/12thof the 120,000 shares of the Company's Common Stock at the end of each calendarmonth during the year as long as the non-employee director has continued toserve as a director of the Company. Each non-employee director of the Companyelected during a calendar year shall automatically be granted a non-qualifiedoption providing for the purchase of a pro rata portion of 120,000 shares, whichshall vest monthly during the balance of the calendar year.

     The 1998 Plan currently provides for the issuance of 4,000,000shares of Common Stock. As of March 14, 2003, no shares had been purchasedpursuant to the exercise of options granted under the 1998 Plan. Options topurchase an aggregate 3,056,667 shares are outstanding under the 1998 Plan andexpire at varying times between May 28, 2003 and January 2, 2008. As of March29, 2003, no options to purchase shares had been granted to employees in 2003,and options to purchase an aggregate 480,000 shares had been granted todirectors in 2003.

**1988 STOCK OPTION PLAN**

     The Company's 1988 Stock Option Plan allowed the Company togrant both incentive stock options and non-qualified stock options.

     The 1988 Plan, as amended, provided for the issuance of2,000,000 shares of Common Stock. The Plan terminated on February 21, 1998. Asof March 14, 2003, 414,125 shares had been purchased pursuant to the exercise ofoptions granted under the 1988 Plan. There are no outstanding options under thisplan.

**ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT**

     The following table sets forth as of March 14, 2003, certaininformation with respect to the beneficial ownership of the Common Stock (i) byeach person who is known by the Company to beneficially own more than fivepercent (5%) of the outstanding Common Stock, (ii) by each of the Company'sNamed Executive Officers and each Director, and (iii) by all current executiveofficers and Directors as a group. Unless otherwise noted, each person or groupidentified has sole voting and investment power with respect to the sharesshown.

Name and Address  of Beneficial Owner

Amount of      Nature of Beneficial Ownership (9)
Percent of Class  (8)

Duane S. Carlson      3500 Holly Lane North #60      Plymouth, MN 55447

543,378(1)
2.02%
Gary L. Deaner      3500 Holly Lane North #60      Plymouth, MN 55447

491,667(2)
1.83%
Perkins Capital Management      730 East Lake Street      Wayzata, MN 55391

2,187,150(3)
8.10%
Douglas M. Pihl      3500 Holly Lane North #60      Plymouth, MN 55447

433,750(4)
1.61%
Marius O. Poliac      3500 Holly Lane North #60      Plymouth, MN 55447

1,172,075(5)
4.34%
John E. Rogers      80 South Eighth Street, Suite 4628      Minneapolis, MN 55402

2,937,068(6)
10.88%
Ronald B. Thomas      3500 Holly Lane North #60      Plymouth, MN 55447

5,839,098(7)
19.06%
All Directors and Officers as a Group      (5 Persons)

 

8,479,968 (1)(2)(4)(5)(7)
 

26.07%
(1)Includes 493,378 shares that would be issuable within 60 days if warrants andstock options held by Mr. Carlson were exercised.

(2)Includes 441,667 shares that would be issuable within 60 days if stock optionsheld by Mr. Deaner were exercised.

(3)Based on a Schedule 13G/A filed February 3, 2003 with the Securities andExchange Commission by Perkins Capital Management, Inc.  Perkins CapitalManagement claims solevoting power over 1,650,000 shares and sole dispositive power over 4,396,877which includes 329,720 shares in a convertible note and 1,199,300 warrantsexercisable within 60 days held by clients of Perkins Capital Management, Inc.

(4)Includes 420,000 shares that would be issuable within 60 days if stock optionsheld by Mr. Pihl were exercised.

(5)Includes 529,925 shares that would be issuable within 60 days if stock optionsand warrants held by Mr. Poliac were exercised.  Does not include 712,779shares and warrants that will be issuedfor partial payment for services rendered which is carried as a currentliability on the balance sheet. 

(6)Includes 537,068 shares that would be issuable within 60 days if warrants heldby Mr. Rogers were exercised. 

(7)Includes 4,191,619 shares that would be issuable within 60 days if warrantsheld by Mr. Thomas were exercised.  See"Thomas Warrants."

(8)Each figure showing the percentage of outstanding shares owned beneficially hasbeen calculated by treating as outstanding and owned the shares which would beissuable within 60 days if stock options and/or warrants held by the indicatedowner were exercised. 

(9)Excludes shares that could result from conversion of subordinated convertiblepromissory notes that may be held by the individuals or entities listed.

**ITEM12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

     **THOMAS WARRANTS**

     Effective July 2, 1997, the Company issued a warrant entitlingRonald B. Thomas to purchase 2,892,403 shares of the Company's Common Stock at aprice of $.47 per share. The right to purchase the shares may be exercised atany time through July 1, 2007.

     Effective August 27, 1998, the Company issued a warrantentitling Ronald B. Thomas to purchase 739,613 shares of the Company's CommonStock at a price of $.35 per share. The right to purchase the shares may beexercised at any time through August 27, 2008.

     Effective April 20, 2001, as a result of a $100,000 loan madeto the Company by Mr. Thomas, the Company issued a one-year 12% SubordinatedConvertible Promissory Note and a 5-year Non-callable Warrant entitling Mr.Thomas to purchase 250,000 shares of the Company's Common Stock at a price of$.40 per share. The warrant is exercisable through April 21, 2006.

     Effective April 1, 2002, as a result of a $10,000 loan made tothe Company by Mr. Thomas, the Company issued a one-year 12% SubordinatedConvertible Promissory Note and a 5-year Non-callable Warrant entitling Mr.Thomas to purchase 25,000 shares of the Company's Common Stock at a price of$.40 per share. The warrant is exercisable through April 2, 2007.

     Effective June 15, 2002, in return for a one-year extension ofthe April 20, 2001 $100,000 loan plus accrued interest, the Company issued aone-year 12% Subordinated Convertible Promissory Note and a 5-year Non-callableWarrant entitling Mr. Thomas to purchase 284,603 shares of the Company's CommonStock at a price of $.20 per share. The warrant is exercisable through June 15,2007.

     Effective November 8, 2001,as a result of a $100,000 loan madeto the Company by Mr. Thomas, the Company issued to Mr. Thomas a six-month 12%Subordinated Promissory Note. As of December 31, 2002, the note was in default;however, effective March 1, 2003, the Company retired the original note andissued a new, two-year 12% Subordinated Promissory Note for $115,452 (originalnote plus accrued interest).

     Effective December 27, 2002, as a result of a $50,000 loanmade by Mr. Thomas in conjunction with the Company's private placementoffering, the Company issued to Mr. Thomas a secured, two-year convertible note.The note bears an interest rate of 12% per annum, is convertible into shares ofthe Company's common stock at $.05 per share, and is secured by all of theCompany's assets, except accounts receivable.

**PART IV**

**ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K**

(a) (1) The Financial Statements and Financial Statement Schedules are      included in Part II of this Form 10-KSB.

**(a)(2) Listing of Exhibits:**

3(i) Restated Articles of Incorporation of the Company [incorporated by      reference to Exhibit 19 to Form 10-Q for the quarter ended June 30, 1984      (File No.0-8482)].

3(ii) Restated Bylaws of the Company [incorporated by reference to      Exhibit 3(ii) to Form 10-K for the year ended December 31, 1984 (File No.      0-8482)].

3(iii) Amendment to Restated Bylaws of the Company adopted by the      directors on June 25, 1985 [incorporated by reference to Exhibit 3(iii) to      Form 10-K for the year ended December 31, 1986 (File No. 0-8482)].

3(iv) Amendment to Restated Articles of Incorporation of the Company      approved by shareholders at May 20, 1987 meeting [incorporated by      reference to Exhibit 3(iv) to Form 10-K for the year ended December 31,      1987 (File No. 0-8482)].

3(v) Amendment to Restated Bylaws of the Company adopted by the      directors on February 21,1988 [incorporated by reference to Exhibit 3(iv)      to Form 10-K for the year ended December 31, 1988 (File 0-8482)].

3(vi) Amendment to Restated Bylaws of the Company adopted by the      directors on July 31, 1989 [incorporated by reference to Exhibit 3(vi) to      Form 10-K for the year ended December 31,1989(File 0-8482)].

3(vii) Amendment to Restated Articles of Incorporation of the Company      approved by shareholders at December 20, 1996 meeting [incorporated by      reference to Exhibit 3(vii) to Form 10-KSB for the year ended December 31,      1996 (File 0-8482)].

3(viii) Amendment to Restated Articles of Incorporation of the Company      approved by shareholders at May 23, 2001 [incorporated by reference to      Exhibit 3(viii) to Form 10-KSB for the year ended December 31, 2001 (File      0-8482)].

10(i) 1988 Stock Option Plan of the Company as approved by shareholders      at May 25, 1988 meeting [incorporated by reference to Exhibit 10(iv) to      Form 10-K for the year ended December 31, 1988 (File No. 0-8482)].

10(ii) Amendment to 1988 Stock Option Plan of the Company adopted by      the directors on October 17, 1988 [incorporated by reference to Exhibit      10(v) to Form 10-K for the year ended December 31, 1989 (File No.      0-8482)].

10(iii) Amendment to 1988 Stock Option Plan of the Company adopted by      the directors on January 25, 1996 and approved by the shareholders on May      23, 1996 [incorporated by reference to Exhibit 10(iii) to Form 10-KSB      Report for the year ended December 31, 1996 (File No. O-8482)].

10(iv) Lease Agreement between the Company and Port Authority of the      City of St. Paul, dated September 1, 1977 [incorporated by reference to      Exhibit 1 to Form 8-K Report for September 27, 1977 (File No. 0-8482)].

10(v) Asset Sale Agreement between the Company's subsidiary, Circuit      Board One, Inc. and Visi-Tour Vision, Inc., dated March 16, 1990      [incorporated by reference to Exhibit 10(viii) to Form 10-K Report for the      year ended December 31, 1989 (File No. 0-8482)].

10(vi) Agreement for Assignment and Assumption of Lease between the      Company and the Crepeau Company, dated January 16, 1992 [incorporated by      reference to Exhibit 10(xi) to Form 10-K Report for the year ended      December 31, 1991 (File 0-8482)].

10(vii) Lease Agreement between the Company and Plymouth Ponds      Development II, LLC, dated March 30, 1999 (incorporated by reference to      Exhibit 10 to Form 10-QSB Report for the quarter ended March 31, 1999      (File 0-8482)]

10(viii) Warrant issued to Ronald B. Thomas, dated July 2, 1999      [incorporated by reference to Exhibit 10(xv) to Form 10-KSB Report for the      year ended December 31, 1997 (File 0-8482)].

10(ix) Warrant issued to Ronald B. Thomas, dated August 27, 1998      [incorporated by reference to Exhibit 10(i) to Form 10-QSB Report for the      quarter ended September 30, 1998 (File 0-8482)].

10(x) 1998 Stock Option Plan of the Company as approved by Shareholders      at May 28, 1998 meeting [incorporated by reference to Exhibit 10(xv) to      Form 10-KSB Report for the year ended December 31, 1998 (File 0-8482)].

10(xi) Amendment to 1998 Stock Option Plan of the Company adopted by      the directors on March 6, 2000 and approved by the Shareholders on May 24,      2000. [incorporated by reference to Exhibit 10(xi) to Form 10-KSB Report      for the year ended December 31, 2000 (File 0-8482)].

10(xii) Security Agreement, dated December 27, 2002, granting a first      security interest to purchasers of an aggregate $500,000 in Notes.

99.1  Certification Pursuant To 18 U.S.C. Section 1350, as adopted pursuant      to Section 906 of the Sarbanes-Oxley Act Of 2002

99.2  Audit Committee Charter, as revised March 26, 2003

(b) Reports on Form 8-K:     

     There were two reports of Form 8-K during the fourth quarter of the fiscalyear ended December 31, 2002.

     On December 5, 2002 the Company reported that as of December 4, 2002, theBoard of Directors of Astrocom Corporation (the "Company") approvedthe engagement of the firm of Virchow Krause & Co. LLP as the independentauditors of the Company for the fiscal year ending December 31, 2002, inreplacement of the firm of Ernst & Young LLP, which resigned as auditors ofthe Company effective December 3, 2002. The audit committee of the Board ofDirectors approved the change in auditors on December 3, 2002.

     On December 23, 2002, Astrocom Corporation announced that it has receivedsubscriptions for $500,000 in secured convertible notes and expects to close onsuch subscriptions within the next 7 to10 days. The notes were offered primarilyto accredited investors holding subordinated convertible promissory notes issuedby Astrocom in April and July 2002. The notes bear an interest rate of 12% perannum and are convertible into shares of the company's common stock at $.05 pershare. At closing, the company will grant to such investors a security interestin all of the company's assets, except accounts receivable.

**ITEM 14.  CONTROLS AND PROCEDURES**

     Within 90 days prior to the date of the Report, we carried out an evaluation,under the supervision and with the participation of our chief executive andfinancial officer, of the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)of the Securities Exchange Act of 1934). Based upon that evaluation, our ChiefExecutive and Financial Officer concluded that our disclosure controls andprocedures are effective in alerting them on a timely basis to materialinformation required to be disclosed in our periodic reports to the Securitiesand Exchange Commission. There have been no significant changes in our internalcontrols or in other factors which could significantly affect internal controlssubsequent to such evaluation.

**SIGNATURES**

In accordance with Section 13 or 15(d) of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

                                                               ASTROCOM CORPORATION

Dated: March 31, 2003                           By: s/ Ronald B. Thomas                                                               Ronald B. Thomas,                                                               President, Chief Executive Officer,                                                               and Chief Financial Officer

In accordance with the Exchange Act, this report has been signed below by thefollowing persons, on behalf of the registrant on March 31, 2003 in thecapacities indicated.

s/ Ronald B. Thomas                               President, Chief Executive Officer, Chief Financial                                                               Officer and Director

s/ John M. Bucher                                   Director of Operations and Corporation ControllerJohn M. Bucher

s/ Duane S. Carlson                                Director Duane S. Carlson

s/ Gary L. Deaner                                         Director Gary L. Deaner

s/ Douglas M. Pihl                                        Director Douglas M. Pihl

s/ Marius O. Poliac                                 Director Marius O. Poliac

No Annual Report will be furnished to security holderssubsequent to the filing of this report.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald B. Thomas, President, Chief Executive Officer and Chief FinancialOfficer, certify that:

1. I have reviewed this annual report on Form 10-KSB of Astrocom Corporation;

2. Based on my knowledge, this annual report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this annualreport;

3. Based on my knowledge, the financial statements, and other financialinformation included in this annual report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that    material information relating to the registrant, including its consolidated    subsidiaries, is made known to us by others within those entities,    particularly during the period in which this annual report is being    prepared;

b) evaluated the effectiveness of the registrant's disclosure controls    and procedures as of a date within 90 days prior to the filing date of this    annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the    effectiveness of the disclosure controls and procedures based on our    evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based onour most recent evaluation, to the registrant's auditors and the audit committeeof registrant's board of directors (or persons performing the equivalentfunctions):

a) all significant deficiencies in the design or operation of internal    controls which could adversely affect the registrant's ability to record,    process, summarize and report financial data and have identified for the    registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other    employees who have a significant role in the registrant's internal controls;    and

6. The registrant's other certifying officers and I have indicated in thisannual report whether there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

Date: March 31, 2003                                           ASTROCOM CORPORATION                                                                             By:   s/ Ronald B. Thomas                                                                             Ronald B. Thomas, President, Chief Executive                                                                             Officer & Chief Financial Officer

Exhibit 10(xii)

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (this "Agreement") is entered into asof this 27th day of December, 2002, by and between Astrocom Corporation, aMinnesota corporation (the "Company"), and Industricorp & Co. FBOT.C. Carpenters; Richard P. Maves; Daniel Thums and Catherine Thums; Levine& Staller, PA 401(k) Safe Harbor PSP FBO Paul T. Chan; Merle L. Durby andBlanche Durby; Harry Goldenberg; S. Albert D. Hanser; Steve Gessner and CarolGessner; Lee A. Levine; Rogness Family Trust, Eileen Rogness and LaVern Rogness,Trustees; Michael McHugh and Sharon McHugh; Kenneth E. King; Harold G. Wahlquist;Joseph & Carol Farmer Revocable Trust, Joseph J. Farmer and Carol Farmer,Trustees; Les & LeAnn Rogness Family Trust, Leslie G. Rogness and LeAnn K.Rogness Trustees; A.J. McDonald, III; Robert Odegard and Carolyn Odegard; MaryLach; Kurt J. King; Norman Fletcher; Eugene C. Mathey; and Katherine D. TownsendLimited Partnership, Douglas W. Hansen, Trustee acting as General Partner;Poliac Research Corporation; Post Holdings, LLC; and Ronald B. Thomas (eachindividually a "Secured Party" and collectively the "SecuredParties").

     WHEREAS, in accordance with the terms of that certain ConfidentialPrivate Placement Memorandum, dated November 27, 2002 (the"Memorandum"), the Company has executed and delivered to each SecuredParty a convertible promissory note in the amount subscribed to by such SecuredParty (each a "Note" and collectively the "Notes"); and

     WHEREAS, in accordance with the terms of the Memorandum, the Notesheld by the Secured Parties are to be secured by this Agreement;

     NOW, THEREFORE, in consideration of the foregoing recitals which areexpressly incorporated herein by reference, the following terms, covenants andconditions, and other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto agree asfollows:

     1. Grant of Security Interest. To secure the obligations of theCompany under the Notes (the "Obligations"), the Company hereby grantsto the Secured Parties a security interest in all of the Company's assetsdescribed on Exhibit A attached hereto, which is incorporated herein byreference. Such assets described on Exhibit A are collectively referred to asthe "Collateral." The parties acknowledge that the Collateral does notinclude any accounts receivable of the Company.

     2. Representations and Warranties. The Company herebyrepresents and warrants to the Secured Parties that the Company has full powerand authority to execute this Agreement, to perform the Company's obligationshereunder, and to subject the Collateral to the security interest createdhereby.

     3. Covenants. So long as any of the Obligations remains unpaid,the Company further covenants and agrees to the following:

(a) The Company shall execute such financing statements and other        instruments and perform such acts as the Secured Parties may reasonably        request to establish and maintain a valid and properly perfected        security interest in the Collateral.

(b) The Company shall at all times keep accurate and complete records        of the Collateral and permit the Secured Parties to inspect the records        and the Collateral at such times and as often as such Secured Parties        may reasonably request.

     4. Events of Default and Remedies.

(a) Any one or more of the following shall constitute an Event of        Default:

(i) Default in the payment when due of the principal of any Note,            or in the payment of interest on any Note, which default shall            continue for 10 days after written notice thereof to Company; or

(ii) The Company shall be declared bankrupt under the bankruptcy            laws of any jurisdiction; or

(iii) The holder or holders of any promissory notes issued by the            Company outstanding prior to the date of this Agreement, or a            creditor or creditors, shall obtain a judgment or judgments against            the Company under the laws of any jurisdiction or jurisdictions in            an amount in excess of $100,000, in the aggregate.

(b) Upon any Event of Default, the Secured Parties may exercise all        rights and remedies under the Notes, and enforce all rights and remedies        under any applicable law, including without limitation the rights and        remedies available upon default to a secured party under the Uniform        Commercial Code as adopted in the State of Minnesota. Notwithstanding        the foregoing, however, no rights or remedies available to a secured        party under any applicable law, or available to a Secured Party by        reason of this Agreement, shall be exercised until such time as        sixty-five percent (65%) of the Secured Parties with respect to which        the Company then owes outstanding Obligations consent in writing to        action being taken; such consent shall be obtained prior to any such        rights being exercised.

     5. Survival of Representations, Warranties and Covenants. Allrepresentations, warranties and covenants contained in this Agreement shallsurvive the execution, delivery and performance of this Agreement and thecreation and payment of the Obligations.

     6. Preservation of Rights. The Secured Parties shall not beobligated to preserve any rights the Company may have against prior parties, torealize on the Collateral at all or in any particular manner or order, or toapply any cash proceeds of the Collateral in any particular order ofapplication. Provided, however, that any cash proceeds of the Collateralreceived by the Secured Parties shall be applied proportionately to theoutstanding Obligations owing to Secured Parties on the Notes at the time ofreceipt of the cash proceeds.

     7. Reimbursement of Expenses. The Company shall reimburse theSecured Parties for all expenses (including fees and disbursements of counsel)reasonably incurred by the Secured Parties in the defense or enforcement of thesecurity interests granted hereby, including expenses incurred in any bankruptcyproceeding.

     8. Termination. This Agreement and the security interestgranted hereunder shall terminate as to each Secured Party on the first date asof which all principal of and interest, if any, on such Secured Party's Noteshall have been paid, by conversion of such Note or otherwise.

     9. Severability. The invalidity of all or any part of anysection of this Agreement shall not render invalid the remainder of thisAgreement or the remainder of such section. If any provision of this Agreementis so broad as to be unenforceable, such provision shall be interpreted to beonly as broad as is enforceable.

     10. Amendments. The terms, covenants and conditions of thisAgreement may be amended only with the written consent of the Company andwritten agreement by eighty percent (80%) of the Secured Parties.

     11. Complete Agreement; Specific Inconsistencies. ThisAgreement, the Notes and all other agreements, instruments or documents executedand/or delivered in connection therewith embody the entire agreement andunderstanding between the Company and the Secured Parties with respect to thesubject matter hereof and thereof, and supersede all prior agreements andunderstandings whether oral or written with respect to the subject matter hereofand thereof. To the extent of any specific inconsistencies between thisAgreement and any other loan document, this Agreement shall govern. Additionalrequirements imposed by any other loan document shall not constitute specificinconsistencies.

     12. Counterparts. This Agreement may be executed in any numberof counterparts and all such counterparts taken together shall be deemed toconstitute one and the same instrument. The Agreement shall become effective asand when the Company and the Secured Parties have executed this Agreement or acounterpart thereof. 

     13. Governing Law. This Agreement shall be governed by andconstrued in accordance with the laws of the State of Minnesota.

* * * * * * * *      

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EXHIBIT A (To Security Agreement)

In order to secure payment and performance of the Obligations, the Companyhereby grants to Secured Party a security interest (the "SecurityInterest") in all of the following assets of the Company, and all proceedsthereof (the "Collateral"):

A. Inventory of the Company, whether now owned or hereafter acquired; and

B. All equipment, furniture, and trade fixtures of the Company, whether    now owned or hereafter acquired; and

C. All general intangibles of the Company, whether now owned or hereafter    acquired, including, but not limited to, copyrights, unregistered trademarks    and service marks, licenses, trade secrets, good will, trade names, customer    lists, contract rights, permits and franchises, and the right to use the    Company's name;

together with all substitutions and replacements for and products of any ofthe foregoing property and together with proceeds of any and all of theforegoing property and, in the case of all tangible Collateral, together withall accessions and (i) all accessories, attachments, parts, equipment andrepairs now or hereafter attached or affixed to or used in connection with anysuch goods, and (ii) all warehouse receipts, bills of lading and other documentsof title now or hereafter covering such goods.

The Collateral specifically does not include anyaccounts receivable of the Company which may now exist or may hereafter arise.
Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Astrocom Corporation (the"Company") on Form 10-KSB for the period ending December 31, 2002 asfiled with the Securities and Exchange Commission on the date hereof (the"Report"), I, Ronald B. Thomas, President, Chief Executive Officer,and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350,as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or    15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all    material respects, the financial condition and result of operations of the    Company.

Date: March 31, 2003                                           ASTROCOM CORPORATION                                                                              By:   s/ Ronald B. Thomas                                                                            Ronald B. Thomas, President, Chief Executive                                                                            Officer & Chief Financial Officer

Exhibit 99.2

Astrocom Corporation Audit Committee Charter

The Audit Committee ("Committee") is a standing committee of theBoard of Directors. Its primary function is to assist the Board in fulfillingits oversight responsibilities by reviewing the financial information that willbe provided to the shareholders and others, the systems of internal controlsthat management and the Board of Directors have established, and the externalaudit processes.

The Audit Committee shall be comprised of no less than three(3) Independent members from the Board of Directors and appointed by the Board.Independent means: 1) not receiving, other than for service on the board, anyconsulting, advisory, or other compensatory fee from the Company, and 2) notbeing an affiliated person (i.e. a person able to exert influence on theCompany, often but not solely, resulting from a significant minority ownershipposition, and as more definitively set out by Securities and Exchange Act Rules12b-2 and 144 and SEC rules and regulations promulgated in accordance with theSarbanes-Oxley act of 2002) of the Company, or any subsidiary of the Company.The Chair of this Committee will also be appointed by the Board.
At least one member of the Audit Committee will be an "Audit CommitteeFinancial Expert". In determining whether a member is a Financial Expert,the Audit Committee shall consider whether a person has (1) an understanding ofgenerally accepted accounting principles and financial statements; (2)experience in the preparation or auditing of financial statements of generallycomparable companies and the application of such principles in connection withthe accounting for estimates, accruals, and reserves; (3) experience withinternal accounting controls; and (4) an understanding of audit committeefunctions. The Company must disclose annually that the Audit Committee includesat least one Financial Expert.

The Committee shall meet at least two times per year or more frequently ascircumstances require. The Company's Chief Financial Officer serves as staff tothe Committee, however the Committee may ask members of management or others toattend its meetings and hold such executive sessions as it deems necessary.

In meeting its responsibilities, the Committee is expected/authorized to:

1) Provide an open channel of communication between the outside auditor,  management, and the Board.

2) Determine that management has established and maintained an adequate  system of internal controls appropriate for the Company.

3) Review and update the Committee's charter periodically as needed, at  least annually.

4) Select and approve the outside auditor and the fee to be paid to the  outside auditor. The outside auditor is ultimately accountable to the Audit  Committee representing the Board of Directors, and the Committee has the  ongoing direct authority and responsibility to select, evaluate, set fees for  and replace outside auditors.

5) Ensure that the outside auditor does not provide any non-audit services  including: (1) bookkeeping or other services related to the accounting records  or financial statements of the audit client; (2) financial information systems  design and implementation; (3) appraisal or valuation services, fairness  opinions, or contribution-in-kind reports; (4) actuarial services; (5)  internal audit outsourcing services; (6) management or human resources  functions; (7) broker / dealer, investment adviser, or investment banking  services; (8) legal services and expert services unrelated to the audit; or  (9) any other service that the Committee determines is impermissible. The  outside auditor may engage in any permitted non-audit service (including tax  services) not listed above, only if the activity is pre-approved by the  Committee and, if the activity is material, disclosed in its periodic  financial reports, as appropriate, to shareholders, and the SEC and/or other  financial regulatory bodies.

6) Ensure that the lead audit or coordinating partner and the reviewing  partner must rotate off of the audit every 5 years.

7) Confirm and assure the independence of the outside auditor, including a  review of any permitted non-audit services and related fees charged by the  outside auditor. Obtain a formal written statement from the outside auditors  delineating all relationships with the Company. Ensure that the Board Chair,  President, CEO, CFO, and any Controller, Chief Accounting Officer or persons  in an equivalent position have not been employed by the company's audit firm  during the 1-year period preceding the current year audit.

8) Consider, in consultation with the outside auditor, the audit scope and  plan of the outside auditor.

9) Consider and review with management and the outside auditor:

a) The adequacy of the Company's system of internal controls including    computerized information system controls and security and the presence of a    records retention / destruction policy.

b) Any related significant findings and recommendations of the outside    auditor together with management's responses thereto.

c) Management's responsibility to communicate the importance of internal    control and ensure that all employees and contractors who are involved in    the system of internal controls possess an understanding of their roles and    responsibilities, including that employees and contractors may freely and    without fear of reprisals, address issues relating to internal control,    accounting, financial statement disclosure matters or violations of federal    or state laws to the Committee in the event that they believe these issues    have not been adequately addressed by Management.

d) Any communications required by auditing standards generally accepted    in the United States including, specifically, communications from the    outside auditor about fraud, illegal acts, and deficiencies in internal    control.

e) The adequacy of the CEO and CFO's written statement accompanying the    audit report which certifies the appropriateness of the financial statements    and disclosures contained in the audit report, and that those financial    statements and disclosures fairly present, in all material respects, the    operations and financial condition of the Company.

10) Review with management and the outside auditor at the completion of the  annual audit and if and as appropriate, at the time of quarterly reviews and  filings:

a) The Company's annual financial statements and related footnotes, and    any other filings with financial regulatory bodies such as the SEC,

b) The outside auditor's audit of the financial statements and the    auditor's report thereon,

c) Any significant changes required in the outside auditor's audit    plan,

d) Management's handling of any proposed adjustments identified by the    outside auditor,

e) Any serious difficulties or disputes with management encountered    during the course of the audit, including any restrictions on the scope of    the outside auditor's work or access to required information,

Significant accounting and reporting issues, including complex or unusual    transactions identified by the outside auditor, and recent professional and    regulatory pronouncements to include an understanding of their impact on the    financial statements. All material accounting policies and practices used,    alternative treatments of financial information within accounting principles    generally accepted within the United States that have been discussed with    management, ramifications of the use of such alternative disclosures and    treatments, and the treatment preferred by the outside auditor,

Any legal and regulatory matters that may have a material impact on the    financial statements,

Any matters which the outside auditor believes should be addressed to the    Committee as a result of the outside auditor's review of executive    perquisites and a representative sample of travel and expense reimbursements    of the Company's President and CEO,

Any matters which the outside auditor believes should be addressed to the    Committee as a result of the auditors quarterly review of the Company's    financial statements,

j) Any other matters related to the conduct of the audit that are to be    communicated to the Committee under auditing standards generally accepted in    the United States.

11) Whenever requested, or as considered useful or appropriate by Committee  members, meet with the outside auditor, and management in separate executive  sessions to discuss any matters that the Committee or these groups believe  should be discussed privately with the Committee.

12) Review and approve, upon the advice of counsel, the terms of any  material extension of credit to a Director or executive officer of the  Company.

14) Approve a code of ethics for Company officers, and review it annually  for adequacy. Obtain annually an assurance in writing from each officer that  they have complied with the code of ethics.

15) Report Committee actions to the Board of Directors with such  recommendations, as the Committee may deem appropriate.

The Committee shall have the power to conduct or authorize investigationsinto any matters within the Committee's scope of responsibilities. TheCommittee shall be empowered to retain independent counsel, accountants, orothers to assist it in the conduct of any investigation. The Committee willperform such other functions as assigned by law, the Company's charter orbylaws, or the Board of Directors.

Date Adopted by the Board of Directors: May 24, 2000

Revision Date, if any: March 26, 2003

 

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