-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BvD1Xp6ykUEQlKmBW4Xxgs13FaTO5hqYZ6BRar2Oft5kNoWYq0HGoGj9/1Zx0vv6 lHX3ThFe8nfowpp4tYvkrQ== 0000317340-97-000007.txt : 19970815 0000317340-97-000007.hdr.sgml : 19970815 ACCESSION NUMBER: 0000317340-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIKROS SYSTEMS CORP CENTRAL INDEX KEY: 0000317340 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 141598200 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14801 FILM NUMBER: 97659814 BUSINESS ADDRESS: STREET 1: 3490 U S RTE 1 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6099871513 MAIL ADDRESS: STREET 2: 3490 U S ROUTE 1 BLDG 5 CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED: June 30, 1997 COMMISSION FILE #: 2-67918-NY MIKROS SYSTEMS CORPORATION -------------------------- (Exact Name of Registrant as Specified in Charter) DELAWARE 14-1598-200 -------- ----------- (State or Other Jurisdiction of (I.R.S. Employer Identification#) Incorporation or Organization) 3490 U.S. Route 1, Princeton, NJ 08540 -------------------------------------- (Address of Principal Executive Offices, Including Zip Code) Registrant's Telephone Number, Including Area Code: 609-987-1513 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X]Yes [ ]No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. OUTSTANDING AT CLASS June 30, 1997 - ---------------------------- ---------------- COMMON STOCK, PAR VALUE $.01 12,671,952 SHARES CONVERTIBLE PREFERRED STOCK, 655,000 SHARES PAR VALUE $.01 SERIES B PREFERRED STOCK 1,131,663 SHARES PAR VALUE $.01 SERIES C PREFERRED STOCK 5,000 SHARES PAR VALUE $.01 SERIES D PREFERRED STOCK 690,000 SHARES PAR VALUE $.01 - -------------------------------------------------------------------- MIKROS SYSTEMS CORPORATION TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page # ITEM I - FINANCIAL STATEMENTS Balance Sheets at June 30, 1997 and December 31, 1996 (Unaudited)................................................. 1 Statements of Operations for the Three Months and Six Months Ended June 30, 1997 and 1996 (Unaudited) ........................ 3 Statements of Shareholders' Equity for the Years ended 1995 and 1996 and Six Months Ended June 30, 1997 (Unaudited)................................................. 4 Statements of Cash Flows for the Three Months and Six Months Ended June 30, 1997 and 1996 (Unaudited)......................... 5 Notes to the Financial Statements........................... 6 ITEM II Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 10 PART II - OTHER INFORMATION.................................... 12 MIKROS SYSTEMS CORPORATION BALANCE SHEETS (UNAUDITED) JUNE 30, DECEMBER 31, ASSETS 1997 1996 - ------------------------------ ------------ ------------ CURRENT ASSETS Cash $ 82,364 $ 395,120 Accounts Receivable Government 453,366 441,826 Trade 273,774 198,298 Inventories 309,787 153,192 Other Current Assets 20,976 16,508 ------------ ------------ TOTAL CURRENT ASSETS 1,140,267 1,204,944 ------------ ------------ FIXED ASSETS Equipment 766,528 679,060 Furniture and Fixtures 59,207 59,207 Leasehold Improvements 8,396 3,408 ------------ ------------ 834,131 741,675 Less: Accumulated Depreciation and Amortization (576,113) (535,547) ------------ ------------ FIXED ASSETS, NET 258,018 206,128 ------------ ------------ OTHER ASSETS: Unbilled Receivables 47,788 52,612 Patent Costs, Net 15,197 15,785 Other Assets 24,534 17,825 ------------ ------------ TOTAL OTHER ASSETS 87,519 86,222 ------------ ------------ TOTAL ASSETS $1,485,804 $1,497,294 ============ ============ See Notes to Financial Statements MIKROS SYSTEMS CORPORATION BALANCE SHEETS (UNAUDITED) LIABILITIES AND JUNE 30, DECEMBER 31, SHAREHOLDERS' EQUITY (DEFICIENCY) 1997 1996 - ------------------------------------------ ----------- ------------ CURRENT LIABILITIES Accounts Payable $ 520,751 $ 507,249 Notes Payable Bank 9,271 9,271 Related Parties 365,000 20,000 Other 311,000 18,302 Obligations under Capital Leases 24,997 29,492 Accrued Payroll and Payroll Taxes 38,437 50,922 Accrued Interest 3,079 3,866 Accrued Vacations 71,779 55,285 Accrued Expenses 109,650 128,743 Unliquidated Progress Payments and Other Customer Advances 764,466 507,471 ------------ ------------ TOTAL CURRENT LIABILITIES 2,218,431 1,330,601 ------------ ------------ NOTES PAYABLE Bank 5,367 10,017 Related Parties 162,500 527,500 Others 155,500 446,500 OBLIGATIONS UNDER CAPITAL LEASES-NONCURRENT 2,126 15,585 ------------ ------------ TOTAL LIABILITIES 2,543,924 2,330,203 ------------ ------------ COMMITMENTS AND CONTINGENCIES MANDATORILY REDEEMABLE SERIES C PREFERRED STOCK par value $.01 per share, authorized 150,000 shares, issued and outstanding 5,000 shares in 1997 and 1996 80,450 80,450 ------------ ------------ SHAREHOLDERS' EQUITY (DEFICIENCY) Common Stock, par value $.01 per share, authorized 25,000,000 shares, issued and outstanding 12,671,952 shares in 1997 and 11,846,952 in 1996 126,720 118,470 Preferred Stock, convertible, par value $.01 per share, authorized 2,000,000 shares, issued and outstanding 655,000 shares in 1997 and 1,005,000 in 1996. 6,550 10,050 Preferred Stock, Series B convertible, par value $.01 per share, authorized 1,200,000 shares, issued and outstanding 1,131,663 shares in 1997 and 1996 11,316 11,316 Preferred Stock, Series D, par value $.01 per share 690,000 shares authorized, issued and outstanding in 1997 and 1996 6,900 6,900 Capital in excess of par 10,244,454 10,218,548 Accumulated deficit (11,534,510) (11,278,643) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) (1,138,570) (913,359) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,485,804 $1,497,294 ============ ============ See Notes to Financial Statements MIKROS SYSTEMS CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended, Six Months Ended, June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996 ------------- ------------- ------------- ------------- Revenues: Equipment Sales $ 612,661 $ 54,130 $ 998,065 $ 90,125 Contract Research and Development 594,279 212,446 784,563 320,126 ----------- ---------- ---------- ----------- Total Revenues 1,206,940 266,576 1,782,628 410,251 ----------- ---------- ---------- ----------- Cost of Sales: Equipment Sales 511,955 4,000 809,669 36,312 Contract Research and Development 365,234 297,926 491,523 535,665 ----------- ---------- ---------- ----------- Total Cost of Sales 877,189 301,926 1,301,192 571,977 ----------- ---------- ---------- ----------- Gross Margin 329,751 (35,350) (481,436) (161,726) ----------- ---------- ---------- ----------- Expenses: Research & Development 16,810 57,210 125,819 119,697 Selling, General and Administrative 286,859 199,843 543,126 397,796 Interest 35,814 30,354 68,358 47,272 ----------- ---------- ---------- ----------- Total Operating Expenses 339,483 287,407 737,303 564,765 ----------- ---------- ---------- ----------- Net Income (Loss) ($9,732) ($322,757) ($255,867) ($726,491) =========== ========== ========== =========== Net (Loss) per common share ($0.00) ($0.04) ($0.02) ($0.10) =========== ========== ========== =========== Weighted average number of shares outstanding 12,265,910 7,630,858 12,265,910 7,537,941 =========== =========== ========== ===========
See Notes to Financial Statements MIKROS SYSTEMS CORPORATION STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) (UNAUDITED) Common Preferred Preferred Stock Stock Stock B $.01 PAR $.01 PAR $.01 PAR VALUE VALUE VALUE --------- ------- --------- -------- --------- -------- PAR PAR PAR SHARES VALUE SHARES VALUE SHARES VALUE --------- ------- --------- -------- --------- -------- Balance-December 31, 1994 7,152,108 $71,521 1,005,000 $10,050 1,131,663 $11,316 Year ended December 31, 1995: Issuance of Common Stock 200,000 2,000 Net Loss --------- ------- --------- -------- --------- -------- Balance December 31, 1995 7,352,108 73,521 1,005,000 10,050 1,131,663 11,316 Year Ended December 31, 1996: Issuance of Common Stock 2,582,844 25,829 Sale of Common Stock 1,912,000 19,120 Net Loss --------- ------- --------- -------- --------- -------- Balance-December 31, 1996 11,846,952 118,470 1,005,000 10,050 1,131,663 11,316 Six Months Ended June 30, 1997 Issuance of Common Stock 475,000 4,750 Conversion of Preferred Stock 350,000 3,500 (350,000) (3,500) Net Loss --------- ------- --------- -------- --------- -------- Balance June 30, 1997 12,671,952 $126,720 655,000 $ 6,550 1,131,663 $11,316 ========= ======= ========= ======= ========= ======== Preferred Stock D Capital $.01 PAR in excess Accumulated VALUE of Par Deficit --------- ------- --------- ----------- PAR SHARES VALUE --------- ------- --------- ----------- Balance-December 31, 1994 690,000 $ 6,900 $9,237,864 ($9,183,329) Year ended December 31, 1995: Issuance of Common Stock 10,500 Net Loss (647,673) --------- ------- ---------- ------------ Balance December 31, 1995 690,000 6,900 9,248,364 ( 9,831,002) Year Ended December 31, 1996: Issuance of Common Stock 29,304 Sale of Common Stock 940,880 Net Loss ( 1,447,641) --------- ------- ---------- ------------ Balance-December 31, 1996 690,000 6,900 10,218,548 (11,278,643) Six Months Ended June 30, 1997 Issuance of Common Stock 25,906 Net Loss (255,867) --------- ------- ---------- ------------ Balance March 31, 1997 690,000 $ 6,900 $10,244,454 ($11,534,510) ========= ======= ========== ============
See Notes to Financial Statements MIKROS SYSTEMS CORPORATION STATEMENTS OF CASH FLOW (UNAUDITED) Three Months Ended Six Months Ended June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996 -------------- -------------- ------------- ------------- Cash Flows Provided (Used) by Operating Activities: Net Loss ($9,732) ($286,280) ($255,867) ($690,014) Adjustments to reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization 20,736 15,704 41,154 31,408 Net Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts Receivable (128,110) (195,354) (87,016) (126,140) Unbilled Receivables 0 (16,208) 4,824 (16,526) Inventories (122,598) 40,154 (156,595) 342 Other Current Assets 400 (11,291) (4,468) (16,201) Other Assets (4,719) 375 (6,708) 575 Increase (Decrease) in: Accounts Payable 8,214 (10,966) 13,502 73 Accrued Payroll and Payroll Taxes (10,068) 1,630 (12,485) 21,248 Unliquidated Progress Billings and Other Customer Advances 114,902 (20,982) 256,995 100,000 Other Liabilities and Interest (86,399) 98,994 (3,386) 76,980 --------- --------- -------- ------- Net Cash Provided (Used) by Operations (217,374) (384,224) (210,050) (618,255) --------- --------- --------- -------- Cash Flows Provided (Used) by Investing Activities: Fixed Asset Purchases (22,509) (50,115) (92,456) (50,115) Patents 0 (2,109) 0 (2,109) --------- --------- --------- -------- Net Cash (Used) by Investing Activities: (22,509) (52,224) (92,456) (52,224) Cash Flows Provided (Used) by Financing Activities: Proceeds from Loans 0 402,500 0 640,500 Proceeds from Exercise of Options And Warrants 14,844 5,275 30,656 5,650 Repayment of Debt and Capital Leases (15,596) (3,325) (40,906) (4,875) --------- --------- ---------- -------- Net Cash Provided (Used) by Financing Activities: (752) 404,450 (10,250) 641,275 --------- --------- ---------- -------- Net Increase (Decrease) in Cash (240,635) (31,998) (312,756) (29,204) Cash at Beginning of Period 322,999 80,070 395,120 77,276 --------- --------- --------- -------- Cash at End of Period $ 82,364 $ 48,072 $ 82,364 $ 48,072 ========= ========= ======== ======== Supplemental disclosure of cash flow information: Cash paid during the quarter for interest $ 32,028 $ 28,846 $ 63,589 $ 55,907 ========= ========= ======== ======== See Notes to Financial Statements
MIKROS SYSTEMS CORPORATION NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION - ------------------------------ As permitted by rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the financial statements and related notes included in the Company's 1996 Annual Report on Form 10-K. In the opinion of the management of Mikros Systems Corporation, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position at June 30, 1997, the changes in deficiency in assets, and the results of operations, and cash flows for the three-month and six month periods ended June 30, 1997 and 1996. The results disclosed in the Statements of Operations for the three and six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. NOTE B - NOTES AND LOANS PAYABLE - -------------------------------- 1) Outstanding Debt is summarized as follows: 06/30/97 12/31/96 -------- -------- Notes Payable to Banks $ 14,638 $ 19,288 Other Notes Payable 466,500 464,802 Related Parties 527,500 547,500 -------- -------- $1,008,638 $1,031,590 ========== ========== 2) Financing Transactions - -------------------------- 1996 Financing - -------------- In a series of transactions from February through May 1996, the Company issued secured promissory notes and warrants to raise an aggregate of $641,500 (including $131,250 from officers and directors). The promissory notes are for a term of approximately eighteen months, bear interest at 12% on the unpaid balance, and are secured by certain assets of the Company. In addition, the Company issued warrants to purchase five (5) shares of Common Stock at $0.01 per share for each dollar of debt. The value of the warrants was immaterial and no accounting recognition was given to their issuance. In October 1996 all of the noteholders of the 1996 and the 1992-93 financings agreed to a deferral of principal payments in exchange for the right to convert outstanding debt to Common Stock of the Company at a rate of one (1) share of stock for $1.00 of debt. The Company determined that the fair value of the conversion feature was immaterial. Accordingly, no accounting recognition has been given to this modification of terms. Safeguard Scientifics (Delaware) Inc. (SSI) - ------------------------------------------------------------ On November 15, 1996, the Company, all of its secured creditors from its 1996 and 1992-93 financings and SSI entered into an agreement. Under the agreement SSI paid $1,000,000 to the Company. - - SSI received: 1) 1,912,000 shares of Common Stock of the Company; 2) a warrant to purchase 2,388,000 shares of Common Stock at $0.65 per share; 3) a warrant to purchase 3,071,000 shares at $0.78 per share; 4) a 75% interest in an exclusive, royalty-free, perpetual license of the AM technology in the United States, Canada and Mexico (through SSI's ownership in MBC); and 5) a 33 1/3% interest in the FM and AM technology (through SSI's ownership in 3D). This transaction is more fully described below. - - Two (2) new companies were formed, Data Design and Development Corporation (3D) and Mobile Broadcasting Corporation (MBC). The Company received one-third of 3D in exchange for certain of its AM and FM technology. SSI received one-third of 3D in exchange for a commitment to invest up to $1,000,000 in MBC. The secured creditors received one-third of 3D and released their security interest in the technology transferred. The Company received 25% of MBC for $50. SSI received 75% of MBC for $200,000. - - 3D granted MBC an exclusive, royalty-free, perpetual license to the AM technology in the United States, Canada and Mexico. 3D granted the Company an exclusive, royalty-free, perpetual license to the FM technology in the United States, Canada and Mexico. 3D retained rights to the AM and FM technology in the rest of the world. The Company and MBC entered into a consulting arrangement under which the Company will be paid for the development of the AM technology. 3D will own the rights to such technology. The Company is unable to assign fair values to these transactions. No amount of cash consideration was considered attributable to a sale of the AM or FM technology or to the license thereto. No gain was recognized on the transfer of the technology. The entire amount of the cash consideration received from SSI was recorded as a sale of Common Stock. In connection with the sale of the Common Stock and the Warrants, the Company granted to SSI certain piggyback and demand registration rights with respect to the Common Stock and the Common Stock underlying the Warrants. In addition, the Company granted to SSI a right of first refusal pursuant to which, subject to certain conditions, in the event the Company issues, sells or exchanges any securities, it must first offer such securities to SSI and such offer must remain open and irrevocable for 30 days. Such right of first refusal may only be waived in writing and terminates at such time as SSI owns less than 10% of the Common Stock. Pursuant to the Purchase Agreement, as long as SSI owns 1% or more of the Company's outstanding equity securities, on a fully-diluted basis, the Company is obligated to, among other things: (I) maintain key man life insurance on certain key employees of the Company, of which the Company is in the process of obtaining such insurance; (ii) permit SSI to inspect the operations and business of the Company; and (iii) fix and maintain the number of Directors on the Board of Directors at eight members. In addition, the Purchase Agreement also provides that as long as SSI owns such 1%, the Company is subject to certain negative covenants, including, among other things, restrictions on: (I) transactions with affiliates of the Company; (ii) certain indebtedness; and (iii) amendments to the Company's Certificate of Incorporation and Bylaws. In connection with the transaction, the Company entered into a voting agreement pursuant to which each of Joseph R. Burns, Thomas J. Meaney, Wayne E. Meyer, Frederick C. Tecce and John B. Torkelsen, each a director of the Company (collectively, the "Management Shareholders"), agreed to vote an aggregate of approximately 6,659,214 votes for the election of two designees of SSI to the Board of Directors of the Company. 1992-93 Financing - ----------------- In a series of transactions consummated on October 27, 1992 and April 27, 1993, Joseph R. Burns, Thomas J. Meaney, Wayne E. Meyer, Frederick C. Tecce, and John B. Torkelsen, individually and not as a group, (collectively referred to herein as the "Investors") acquired certain loan and equity interests in the Company from other debt and equity holders. Pursuant to such transactions, each of the Investors acquired, in consideration of an aggregate of $250,000 (each of the Investors individually paying $50,000 in cash), twenty percent of (I) 50,000 shares of Common Stock, $.01 par value ("Common Stock"), of the Company (ii) promissory notes of the Company in the aggregate principal amount of $916,875 (collectively, the "Investor Notes), (iii) warrants ("Series C Warrants") to purchase 97,500 shares of Series C Preferred Stock, $.01 par value, of the Company and (iv) certain loan and equity rights in the Company, including without limitation, rights under loan agreements, an investment agreement, a note purchase agreement, and all documents related to such agreements. Pursuant to such loan documents, among other things, the Company is prohibited from paying dividends on its Common Stock, the Company has granted to the Investors a security interest in all of the assets of the Company and the Investors have the right to designate 2/7ths of the Board of Directors of the Company, which right has not been exercised. Each of Messrs. Burns, Meaney, Meyer and Torkelsen is a Director of the Company. In December 1993, the Investors agreed to reduce the amounts owed by the Company under the Investor Notes, including unpaid interest, in exchange for shares of Common Stock and Preferred Stock issued by the Company. In return for a reduction in debt of $416,875 and accrued interest of $273,125, the Company issued 2,750,000 shares of Common Stock and 690,000 shares of Series D Preferred Stock which provides for an annual cumulative dividend of $.10 per share. The Investor Notes were modified to provide for principal payments in sixteen quarterly installments beginning January 1, 1994 and ending on October 1, 1997. Interest on the unpaid principal balance is due in quarterly installments beginning on March 31, 1994. As additional consideration for the modification of such loans, the Company extended the exercise period for the Series C Warrants until April 25, 1999. As of December 31, 1996, the Company was in arrears on six quarterly principal payments. In October 1996, the Investors authorized deferral of the remaining $312,500 of principal payments until 1998 (See Note D). NOTE C - INVENTORIES - -------------------- Inventories at June 30, 1997 are stated at the lower of cost or market, computed on the first-in, first-out method. NOTE D - RECLASSIFICATION - ------------------------- Certain prior year amounts have been reclassified to conform with the 1997 presentation. Part I. Item II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVENUE - ------- Total revenues were $1,206,940 for the quarter ended June 30, 1997 compared to $266,576 for the same period in 1996 an increase of 452.7%. For the six months ended June 30, 1997 revenues were $1,782,628 compared to $410,251 for the same period in 1996, an increase of 434.5%. For the quarter and six months ended June 30, 1997, equipment revenue was $612,661 and $998,065, respectively, as compared to $54,130 and $90,125 for the same periods in 1996. These increases are due to revenue from shipments in 1997 to the U.S. Navy of AN/USQ-120 data terminal sets. Contract research and development revenues were $594,279 and $784,563 for the quarter and six months ended June 30, 1997 compared to $212,446 and $320,126, respectively for the same periods in 1996. These increases are due mainly to higher activity on commercial contracts in 1997 than in 1996. COST OF SALES - ------------- Equipment cost of sales for the three months ended June 30, 1997 and June 30, 1996 was $511,955 and $4,000, respectively. For the six months ended June 30, 1997 and June 30, 1996, such cost was $809,669 and $36,312, respectively. Contract research and development cost of sales for the three and six months ended June 30, 1997 was $365,234 and $491,523, respectively. For the same periods in 1996, such costs were $297,926 and $535,665, respectively. As a percentage of sales, cost of sales in 1996 was higher than in 1997 primarily because of unabsorbed fixed overhead costs in 1996 due to low revenue volume. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - -------------------------------------------- Selling, General & Administrative expenses were $286,859 for the quarter ended June 30, 1997 compared to $199,843 for the same quarter in 1996 due mainly to higher legal and travel expenses. For the six-month periods in 1997 and 1996, such expenses were $543,126 and $397,796, respectively. INTEREST EXPENSE - ---------------- Interest expenses was $35,814 versus $30,354 for the quarters ended June 30, 1997 and 1996,respectively. For the six months ended June 30, 1997 and June 30, 1996, interest expense was $68,358 and $47,272, respectively. The higher amounts in 1997 are due to higher notes payable than in 1996. NET LOSS - ----------------- Net loss for the quarter ended June 30, 1997 was $9,732 versus $322,757 for the same quarter in 1996. For the six months ended June 30, 1997 and 1996, net loss was $255,867 and $726,491, respectively. The lower losses are due to higher revenues in 1997 than in 1996. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's financial statements for the quarter ended June 30, 1997 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of $9,732 for the quarter ended June 30, 1997, and as of June 30, 1997 had an accumulated deficit of $11,534,510. At June 30, 1997 the Company had negative working capital of $1,078,164 compared to negative working capital of $125,657 at December 31, 1996. For the quarter ended June 30, 1997 the Company used $217,374 for operating activities. For the same period in 1996, the Company used $210,050. The Company expects to continue to incur substantial expenditures to expand its commercial wireless communications business and has formed a strategic alliance with Safeguard Scientifics (Delaware), Inc, as well as entered into a consulting services agreement with Mobile Broadcasting Corporation (see 1996 Financing). In 1996, the Company completed a debt financing of $641,500 (see 1996 Financing). In addition, the Company will consider the sale of additional equity securities under appropriate market conditions, alliances or other partnership agreements with entities interested in supporting the Company's commercial and military programs, or other business transactions which would generate resources sufficient to assure continuation of the Company's operations and research programs. At June 30, 1997 notes payable included $954,000 to creditors who have authorized deferral to 1998 of any principal repayment. Part II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K. a) Exhibits. None. b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Mikros Systems Corporation (Registrant) Dated: August 14, 1997 /s/ Joseph R. Benek Joseph R. Benek Vice President, Finance and Chief Accounting Officer [PREFERRED-MANDATORY] 80,450 [PREFERRED] 24,766 [COMMON] 126,720 [OTHER-SE] (1,290,056) [TOTAL-LIABILITY-AND-EQUITY] 1,485,804 [SALES] 1,782,628 [TOTAL-REVENUES] 1,782,628 [CGS] 1,301,192 [TOTAL-COSTS] 1,301,192 [OTHER-EXPENSES] 668,945 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 68,358 [INCOME-PRETAX] (255,867) [INCOME-TAX] 0 [INCOME-CONTINUING] (255,867) [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] (255,867) [EPS-PRIMARY] (.02) [EPS-DILUTED] (.02) -----END PRIVACY-ENHANCED MESSAGE-----