MIKROS SYSTEMS CORPORATION
3490 U.S. Route #1, Bldg. #5
Princeton, NJ 08540
(609) 987-1513
August 30, 1996
SECURITIES AND EXCHANGE COMMISSION
450 5th Street, NW
Judiciary Plaza
Washington, DC 20549
RE: MIKROS SYSTEMS CORPORATION/2nd Quarter 10Q-A
Dear Sirs:
Pursuant to the Securities Exchange Act of 1934, as amended, Mikros Systems
Corporation, a Delaware corporation (the "Corporation"), hereby encloses
herewith amended pages for form 10Q filed on August 12, 1996 and August 16,
1996 for the quarter ending June 30, 1996.
This filing is being effected by direct transmission to the Securities and
Exchange Commission's (the "Commission") EDGAR System.
If you have any questions or comments concerning this filing, kindly contact
the undersigned.
Very truly yours,
/s/ Joseph R. Benek
- --------------------
Joseph R. Benek
Vice President Finance & Treasurer
Enc.
<PAGE>
MIKROS SYSTEMS CORPORATION
BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
- ------------------------------ ------------ ------------
CURRENT ASSETS
Cash $ 48,072 $ 77,276
Accounts Receivable
Government 216,744 65,186
Trade 27,549 52,967
Inventories 199,855 76,321
Other Current Assets 27,760 11,559
------------ ------------
TOTAL CURRENT ASSETS 519,980 283,309
------------ ------------
FIXED ASSETS
Equipment 624,512 574,397
Furniture and Fixtures 59,207 59,207
Leasehold Improvements 3,408 3,408
------------ ------------
687,127 637,012
Less: Accumulated Depreciation
and Amortization (496,093) (465,955)
------------ ------------
FIXED ASSETS, NET 191,034 171,057
------------ ------------
SECURITY DEPOSITS 426 1,001
UNBILLED RECEIVABLES 75,207 58,681
PATENT COSTS, NET 33,785 32,947
------------ ------------
TOTAL ASSETS $ 820,432 $546,995
============ ============
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND JUNE 30, DECEMBER 31,
SHAREHOLDERS' EQUITY (DEFICIENCY) 1996 1995
- ------------------------------------------ ----------- ------------
CURRENT LIABILITIES
Accounts Payable $ 269,006 $ 268,933
Notes Payable
Bank 133,271 134,271
Related Parties and Others 678,667 30,000
Obligations under Capital Leases 23,717 6,403
Accrued Payroll and Payroll Taxes 35,556 14,308
Accrued Interest 2,883 11,442
Accrued Vacations 49,219 49,188
Unliquidated Progress Billings 160,353 - 0 -
Accrued Expenses 262,882 89,982
------------ ------------
TOTAL CURRENT LIABILITIES 1,615,554 604,527
------------ ------------
NOTES PAYABLE
Bank 14,667 18,542
Related Parties and Others 304,333 312,500
OBLIGATIONS UNDER CAPITAL LEASES-NONCURRENT 7,120 11,827
------------ ------------
TOTAL LIABILITIES 1,941,674 947,396
------------ ------------
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 1996 and 1995 80,450 80,450
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common Stock, par value $.01 per share,
authorized 25,000,000 shares, issued and
outstanding 7,894,608 shares in 1996 and
7,352,108 in 1995 78,946 73,521
Preferred Stock, convertible,
par value $.01 per share, authorized 2,000,000
shares, issued and outstanding 1,005,000 shares
in 1996 and 1995 10,050 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 1996 and 1995 11,316 11,316
Preferred Stock, Series D,
par value $.01 per share 690,000 shares authorized,
issued and outstanding in 1996 and 1995 6,900 6,900
Capital in excess of par 9,248,589 9,248,364
Accumulated deficit (10,557,493) (9,831,002)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) (1,201,692) (480,851)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $820,432 $546,995
============ ============
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION> Three Months Ended, Six Months Ended,
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<C> <C> <C> <C>
Revenues:
Equipment Sales $ 54 130 $ 483,284 $ 90,125 $ 990,677
Contract Research and Development 212,446 612,006 320,126 1,359,984
----------- ---------- ---------- -----------
Total Revenues 266,576 1,095,290 410,251 2,350,661
----------- ---------- ---------- -----------
Cost of Sales:
Equipment Sales 4,000 336,227 36,312 703,009
Contract Research and Development 355,136 490,908 655,362 1,130,750
----------- ---------- ---------- -----------
Total Cost of Sales 359,136 827,135 691,674 1,833,759
----------- ---------- ---------- -----------
Gross Margin (92,560) 268,155 (281,423) 516,902
----------- ---------- ---------- -----------
Expenses:
Selling, General and Administrative 199,843 237,354 397,796 455,932
Interest 30,354 13,865 47,272 26,013
----------- ---------- ---------- -----------
Total Expenses 230,197 251,219 445,068 481,945
----------- ---------- ---------- -----------
Net Income (Loss) ($322,757) $ 16,936 ($726,491) $ 34,957
=========== ========== ========== ===========
Net Income (Loss) per share ($0.04) $0.00 ($0.10) $ 0.00
=========== ========== ========== ===========
Weighted average number of
shares outstanding 7,630,858 7,352,108 7,537,941 7,252,108
=========== =========== ========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
<TABLE>
<CAPTION> 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
--------- ------- --------- -------- --------- --------
<C> <C> <C> <C> <C> <C>
Balance-December 31, 1993 7,132,108 $71,321 1,005,000 $10,050 1,131,663 $11,316
Year ended December 31, 1994:
Issuance of Common Stock 20,000 200
Net Income
--------- ------- --------- -------- --------- --------
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 Income (Loss)
--------- ------- --------- -------- --------- --------
Balance-December 31, 1995 7,352,108 73,521 1,005,000 10,050 1,131,663 11,316
Issuance of Common Stock 542,500 5,425
Net Income (Loss)
--------- ------- --------- -------- --------- --------
Balance June 30, 1996 7,894,608 $78,946 1,005,000 $10,050 1,131,663 $11,316
========= ======= ========= ======= ========= ========
Preferred
Stock D Capital
$.01 PAR in excess Accumulated
VALUE of Par Deficit
--------- ------- --------- -----------
PAR
SHARES VALUE
--------- ------- --------- -----------
Balance-December 31, 1993 690,000 $ 6,900 $9,236,814 ($9,334,964)
Year ended December 31, 1994:
Issuance of Common Stock 1,050
Net Income 151,635
--------- ------- ---------- ------------
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 Income (Loss) (647,673)
--------- ------- ---------- ------------
Balance-December 31, 1995 690,000 6,900 9,248,364 ( 9,831,002)
Issuance of Common Stock 225
Net Income (Loss) (726,491)
--------- ------- ---------- ------------
Balance June 30, 1996 690,000 $ 6,900 $9,248,589 ($10,557,493)
========= ======= ========== ============
</TABLE>
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
Cash Flows Provided (Used) by Operating <C> <C> <C> <C>
Activities:
Net Income (Loss) ($322,757) $ 16,936 ($726,491) $ 34,957
Adjustments to reconcile Net Income (Loss)
to Net Cash Provided (Used) by Operating
Activities:
Depreciation and Amortization 15,704 15,745 31,408 32,495
Net Changes in Operating Assets and
Liabilities:
(Increase) Decrease in:
Accounts Receivable (195,354) 13,629 (126,140) 688,337
Unbilled Receivables (16,208) 100,026 (16,526) (92,448)
Inventories (83,722) (33,635) (123,534) (6,836)
Other Current Assets (11,291) (13,749) (16,201) (17,984)
Other Assets 375 0 575 (575)
Increase (Decrease) in:
Accounts Payable (10,966) 70,205 73 (77,290)
Accrued Payroll and Payroll Taxes 1,630 (7,293) 21,248 30,120
Other Liabilities and Interest 238,365 (83,639) 337,333 (311,934)
--------- --------- --------- ----------
Net Cash Provided (Used) by Operations (384,224) 78,225 (618,255) 278,842
--------- --------- --------- ----------
Cash Flows Provided (Used) by Investing
Activities:
Fixed Asset Purchases (50,115) (28,736) (50,115) (60,176)
Patents (2,109) (6,276) (2,109) (6,276)
--------- --------- --------- ---------
Net Cash (Used) by Investing Activities (52,224) (35,012) (52,224) (66,452)
Cash Flows Provided (Used) by Financing
Activities:
Proceeds from Current Financing 402,500 0 640,500 0
Proceeds from Issuance of Common Stock 5,275 12,500 5,650 12,500
Payments on Long Term Debt (3,325) (73,594) (4,875) (95,976)
--------- --------- --------- ---------
Net Cash Provided (Used) by Financing
Activities: 404,450 (61,094) 641,275 (83,476)
--------- --------- --------- ---------
Net Increase (Decrease) in Cash (31,998) (17,881) (29,204) 128,914
Cash at Beginning of Period 80,070 265,388 77,276 118,593
--------- --------- --------- ---------
Cash at End of Period $ 48,072 $247,507 $48,072 $247,507
========= ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the quarter for interest $ 28,846 $12,714 $55,907 $ 25,429
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
<PAGE>
Part I. Item II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUE
- -------
Total revenues were $266,576 for the quarter ended June 30, 1996 compared to
$1,095,290 for the same period in 1995, a decrease of 75.7%. For the six
months ended June 30, 1996 total revenues were $410,251, compared to $2,350,661
for the same period in 1995, a decrease of 82.5%. For the quarter and six
months ended June 30, 1996, equipment revenues were $54,130 and $90,125,
respectively, compared to $483,284 and $990,677, respectively, for the same
periods in 1995. These decreases are due mainly to the fact that in 1995 the
Company had revenues from a large contract from the Applied Physics Laboratory,
Johns Hopkins University. Contract Research and Development revenues were
$212,446 and $612,006 for the quarters ended June 30, 1996 and 1995,
respectively, a decrease of 65.3%. For the six months ended June 30, 1996 and
June 30, 1995 Contract Research and Development revenues were $320,126 and
$1,359,984, respectively, a decrease of 76.5%. These decreases are due
primarily to the higher level in 1995 of revenues from several large
development contracts for the U.S. Navy. In 1996 thus far, the Company has
experienced a delay in the placement of orders from the U.S. Navy.
COST OF SALES
- -------------
Equipment cost of sales for the three months ended June 30, 1996 and 1995 was
$4,000 (7.4% of revenue) and $336,227 (69.6% of revenue), respectively. For
the six months ended June 30, 1996 and June 30, 1995 equipment cost of sales
was $36,312 (40.3% of revenue) and $703,009 (71.0% of revenue), respectively.
Cost of sales of Contract Research and Development revenues was $355,136
(167.1% of revenue) and $490,908 (80.2% of revenue) for the three months ended
June 30, 1996 and 1995, respectively. For the six months ended June 30, 1996
and 1995, such cost of sales was $655,362 (204.7% of revenue) and $1,130,750
(83.1% of revenue), respectively. Equipment cost of sales as a percent of
revenue is lower in the 1996 periods than in 1995 because a greater share of
development costs is funded in 1996 than in 1995. As a percent of revenue,
cost of sales of Contract Research and Development revenues is higher in 1996
than in 1995 due to the unabsorption of fixed overhead costs because of the
Company's low order volume during the periods.
INTEREST EXPENSE
- ----------------
Interest expense was $30,354 versus $13,865 for the quarters ended June 30,
1996 and June 30, 1995, respectively. For the six months ended June 30, 1996
and June 30, 1995, interest expense was $47,272 and $26,013 respectively. The
higher 1996 amounts are due to an increase in outstanding debt in 1996 from
1995.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, General and Administrative expenses amounted to $199,843 for the
quarter ended June 30, 1996 compared to $237,354 for the same quarter in 1995
(a decrease of 15.8%) due mainly to lower travel and salary expenses in the
1996 period. Selling, General and Administrative expenses were $397,796 and
$455,932 for the six months ended June 30, 1996 and June 30, 1995,
respectively, (a decrease of 12.8%) also due mainly to lower travel and
salary expenses.
NET INCOME (LOSS)
- -----------------
Net Loss for the quarter ended June 30, 1996 was $322,757 compared to net
income of $16,936 for the quarter ended June 30, 1995. For the six months
ended June 30, 1996 net loss amounted to $726,491 versus net income of $34,957
for the same period in 1995. The decrease in the 1996 period versus 1995 is
due mainly to the development costs mentioned above and lower levels of
revenue.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's financial statements for the quarter and six months ended June 30,
1996 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 net loss of $286,280 and
$690,014, respectively, for the quarter and six months ended June 30, 1996, and
at June 30, 1996 had an accumulated deficit of $10,521,016. At June 30, 1996
the Company had negative working capital of $1,059,097 compared to negative
working capital of $321,218 at December 31, 1995. For the quarter and six
months ended June 30, 1996 the Company used $384,224 and $618,255,
respectively, in operating activities. For the same periods in 1995 the
Company provided $78,225 and $278,842, respectively. The Company expects to
continue to incur substantial expenditures to expand its commercial wireless
communications business. The Company's working capital, plus revenue from
product sales and research contracts from its military business will not be
sufficient to meet such objectives as presently structured. Management
recognizes that the Company must generate additional resources and consider
reduction in operating costs in order to continue operations with resources
available. In May 1996, the Company completed a debt financing of $605,500
(see 1996 Financing under Note "A" to Financial Statements). 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.
The Company has retained investment banking counsel to advise it on the possible
sale of equity securities as well as to introduce and assist in the evaluation
of potential merger and partnering opportunities. No assurance can be given,
however, that the Company will be successful in raising additional capital
beyond the recent current debt financing effort. Further, there can be no
assurances, assuming the Company successfully raises additional funds or enters
into a business alliance, that the Company will achieve profitability or
positive cash flow. If the Company is unable to obtain additional adequate
financing or enter into such business alliance, management will be required to
sharply curtail its operations.
<PAGE>
[DESCRIPTION] ART. 5 FDS FOR 2ND QUARTER 10-Q
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] JUN-30-1996
[CASH] 48,072
[SECURITIES] 0
[RECEIVABLES] 319,500
[ALLOWANCES] 0
[INVENTORY] 199,855
[CURRENT-ASSETS] 519,980
[PP&E] 684,938
[DEPRECIATION] (493,905)
[TOTAL-ASSETS] 820,432
[CURRENT-LIABILITIES] 1,615,554
[BONDS] 0
[PREFERRED-MANDATORY] 80,450
[PREFERRED] 28,266
[COMMON] 78,946
[OTHER-SE] (1,308,904)
[TOTAL-LIABILITY-AND-EQUITY] 820,432
[SALES] 410,356
[TOTAL-REVENUES] 410,356
[CGS] 691,674
[TOTAL-COSTS] 691,674
[OTHER-EXPENSES] 397,796
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 47,272
[INCOME-PRETAX] (726,491)
[INCOME-TAX] 0
[INCOME-CONTINUING] (726,491)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (726,491)
[EPS-PRIMARY] (.10)
[EPS-DILUTED] (.10)
</TABLE>
