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: September 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 September 30, 1997
----------------------------------------------- ---------------------------
COMMON STOCK, PAR VALUE $.01 13,241,452 SHARES
CONVERTIBLE PREFERRED STOCK, 455,000 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 September 30, 1997 and December 31, 1996
(Unaudited)............................................................. 1
Statements of Operations for the Three Months and Nine Months Ended
September 30, 1997 and 1996 (Unaudited) ................................ 3
Statements of Shareholders' Equity for the Years ended
1995 and 1996 and Nine Months Ended September 30, 1997
(Unaudited)............................................................. 4
Statements of Cash Flows for the Three Months and Nine Months Ended
September 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
<PAGE>
MIKROS SYSTEMS CORPORATION
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
- ------------------------------ ------------ -------------
CURRENT ASSETS
Cash $ 10,202 $ 395,120
Accounts Receivable
Government 151,050 441,826
Trade 578,254 198,298
Inventories 547,004 153,192
Other Current Assets 21,044 16,508
------------ ------------
TOTAL CURRENT ASSETS 1,307,553 1,204,944
------------ ------------
FIXED ASSETS
Equipment 770,477 679,060
Furniture and Fixtures 59,207 59,207
Leasehold Improvements 8,396 3,408
----------- ------------
838,080 741,675
Less: Accumulated Depreciation
and Amortization (596,396) (535,547)
------------ ------------
FIXED ASSETS, NET 241,684 206,128
------------ ------------
OTHER ASSETS:
Unbilled Receivables 3,840 52,612
Patent Costs, Net 14,903 15,785
Other Assets 24,533 17,825
------------ ------------
TOTAL OTHER ASSETS 43,276 86,222
------------ -------------
TOTAL ASSETS $1,592,514 $1,497,294
============ ============
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SEPTEMBER 30, DECEMBER 31,
SHAREHOLDERS' EQUITY (DEFICIENCY) 1997 1996
- ---------------------------------------------------------- --------------
CURRENT LIABILITIES
Accounts Payable $ 505,160 $ 507,249
Notes Payable
Bank 9,271 9,271
Related Parties 527,500 20,000
Other 466,500 18,302
Obligations under Capital Leases 20,774 29,492
Accrued Payroll and Payroll Taxes 34,245 50,922
Accrued Interest 3,079 3,866
Accrued Vacations 79,748 55,285
Accrued Expenses 296,265 128,743
Unliquidated Progress Payments and Other
Customer Advances 412,073 507,471
------------ ------------
TOTAL CURRENT LIABILITIES 2,354,616 1,330,601
------------ ------------
NOTES PAYABLE -NONCURRENT
Bank 3,042 10,017
Related Parties 0 527,500
Others 0 446,500
OBLIGATIONS UNDER CAPITAL LEASES- 30 15,585
NONCURRENT
------------ ------------
TOTAL LIABILITIES 2,357,688 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 35,000,000 shares, issued and
outstanding 13,241,452 shares in 1997 and
11,846,952 in 1996 132,415 118,470
Preferred Stock, convertible, par value $.01 per share, authorized 2,000,000
shares, issued and outstanding 455,000 shares
in 1997 and 1,005,000 in 1996. 4,550 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 10,246,603 10,218,548
Accumulated deficit (11,247,408) (11,278,643)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY (845,624) (913,359)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,592,514 $1,497,294
============ ============
See Notes to Financial Statements
<PAGE>
MIKROS SYSTEMS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended, Nine Months Ended,
9/30/97 9/30/96 9/30/97 9/30/96
------------- ------------- ---------- ----------
Revenues:
Equipment Sales $ 1,270,127 $ 21,134 $ 2,268,192 $ 111,259
Contract Research 711,705 197,406 1,496,268 517,532
and Development
----------- --------- ---------- ---------
Total Revenues 1,981,832 218,540 3,764,460 628,791
----------- ---------- ---------- ---------
Cost of Sales:
Equipment Sales 901,241 13,571 1,710,910 49,883
Contract Research 596,280 196,593 1,087,803 732,258
and Development
----------- ---------- ------------ ---------
Total Cost of Sales 1,497,521 210,164 2,798,713 782,141
----------- ---------- ---------- -----------
Gross Margin 484,311 8,376 965,747 (153,350)
----------- ---------- ---------- -----------
Expenses:
Research & Development (16,694) 73,129 109,125 192,826
Selling, General and 180,434 228,458 723,560 626,254
Administrative
Interest 33,469 33,937 101,827 81,209
---------- ---------- ---------- ----------
Total Operating 197,209 335,524 934,512 900,289
Expenses
----------- ---------- ---------- ----------
Net Income (Loss) $ 287,102 ($327,148) $ 31,235 ($1,053,639)
=========== ========== ========== ===========
Net Income (Loss) per $ .02 ($0.04) ------- ($0.13)
common share
=========== ========== ========== ===========
Weighted average number of
shares outstanding 12,490,250 8,349,192 12,490,250 8,349,192
=========== =========== ========== ===========
See Notes to Financial Statements
<PAGE>
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, 199 11,846,952 118,470 1,005,000 10,050 1,131,663 11,316
Nine Months Ended
September 30, 1997
Issuance of Common Stock 844,500 8,445
Conversion of Preferred Stock550,000 5,500 (550,000)(5,500)
Net Income
------------- ------- ------- ------- -------- ------
Balance September 30, 1997 13,241,452 $132,415 455,000 $ 4,550 1,131,663 $11,316
========= ======= ======== ===== ========= =======
Preferred
Stock D Capital
$.01 PAR in excess Accumulated
VALUE of Par Deficit
--------- ------- --------- -----------
SHARES PAR
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, 199 690,000 6,900 10,218,548 (11,278,643)
Nine Months Ended
September 30, 1997
Issuance of Common Stock 28,055
Net Income 31,235
--------- ------------ --------------- --------------
Balance September 30, 1997 690,000 $ 6,900 $10,246,603 ($11,247,408)
========= ======= ========== ============
See Notes to Financial Statements
<PAGE> MIKROS SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
---------- --------- ------- ---------
Cash Flows Provided (Used) by Operating
Activities:
Net Incomes $287,102 (327,148) $31,235 ($1,053,639)
Adjustments to reconcile Net Income (Loss)
to Net Cash Provided (Used) by Operating
Activities:
Depreciation & Amortization 20,577 17,469 61,731 48,877
Net Changes in Operating Assets and
Liabilities:
(Increase) Decrease in:
Accounts Receivable (2,164) 170,191 (89,180) 27,525
Unbilled Receivables 43,948 0 48,772 0
Inventories (237,217) (331,339) (393,812) (454,873)
Other Current Assets (68) (19,964) (4,536) (36,165)
Other Assets 0 635 (6,708) 1,210
Increase (Decrease) in:
Accounts Payable (15,591) 175,372 (2,089) 175,445
Accrued Payroll (4,192) (6,411) (16,677) 14,837
Unliquidated Progress Billings and
Other Customer Advances (352,393) 0 (95,398) 512,599
Other Liabilities and Interest 194,584 (234,970) 191,198 102,363
---------- ---------- --------- ----------
Net Cash Provided (Used)
by Operating Activities: (65,414) (43,566) (275,464) (661,821)
---------- --------- ----------- ---------
Cash Flows Provided (Used) by Investing
Activities:
Fixed Asset Purchases (3,949) (4,000) (96,405) (54,115)
Patents 0 0 0 (2,109)
----------- -------- ----------- --------
Net Cash (Used) by Investing
Activities: (3,949) (4,000) (96,405) (56,224)
Cash Flows Provided (Used) by Financing
Activities:
Proceeds from Loans 0 36,000 0 676,500
Proceeds from Exercise of Options
And Warrants 5,844 11,698 36,500 17,348
Repayment of Debt and Capital
Leases (8,643) (18,522) (49,549) (23,397)
----------- ---------- --------- ---------
Net Cash Provided (Used) by Financing
Activities: (2,799) 29,176 (13,049) 670,451
----------- ---------- ---------- ---------
Net Increase (Decrease) in Cash (72,162) (18,390) (384,918) (47,594)
Cash at Beginning of Period 82,364 48,072 395,120 77,276
------------ --------- --------- ---------
Cash at End of Period $ 10,202 $29,682 $ 10,202 $ 29,682
========= ========= ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the quarter
for interest $ 31,919 $ 33,970 $ 95,508 $ 89,877
========= ======== ======== ========
See Notes to Financial Statements
<PAGE> 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 September 30, 1997, the changes in deficiency in assets,
and the results of operations, and cash flows for the three-month and nine
month periods ended September 30, 1997 and 1996.
The results disclosed in the Statements of Operations for the three and nine
months ended September 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:
09/30/97 12/31/96
-------- ---------
Notes Payable to Banks $ 12,313 $ 19,288
Other Notes Payable 466,500 464,802
Related Parties 527,500 547,500
------------ -----------
$1,006,313 $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 September 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.
<PAGE>
Part I. Item II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUE
- -------------
Total revenues were $1,981,832 for the quarter ended September 30, 1997 compared
to $218,540 for the same period in 1996. For the nine months ended September
30, 1997 revenue were $3,764,460 compared to $628,791 for the same period in
1996. For the quarter and nine months ended September 30, 1997, equipment
revenues were $1,270,127 and $2,268,192, respectively, compared to $197,406 and
$111,259, respectively for the same periods in 1996. These increases in
equipment revenue are due to shipments in 1997 to the U.S. Navy of AN/USQ-120
data terminal sets.
Contract research and development revenues were $711,705 and $197,406 for the
quarters ended September 30, 1997 and 1996, respectively. For the nine months
ended September 30, 1997 and 1996 such revenue was $1,496,268 and $517,352
respectively. These increases are due primarily to higher activity on
commercial contracts in 1997 than in 1996.
COST OF SALES
- ---------------------
Equipment cost of sales for the three months ended September 30, 1997 and 1996
was $901,241 (71.0% of revenue) and $13,571 (64.2% of revenue), respectively.
For the nine months ended September 30, 1997 and September 30, 1996, such cost
was $1,710,910 (75.4% of revenue) and $49,883 (44.8% of revenue), respectively.
Contract research and development cost of sales for the three and nine months
ended September 30, 1997 was $596,280 (83.8% of revenue) and $1,087,803
(72.7% of revenue), respectively.
For the same periods in 1996, such costs were $196,593 (99.6% of revenue) and
$732,258 (141.5% of revenue), respectively. As a percentage of revenue, cost of
sales was higher in 1996 than in 1997 mainly because of unabsorbed fixed
overhead costs in 1996 due to low revenue volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- ---------------------------------------------------------------------------
Selling, General and Administrative expenses were $180,434 for the quarter
ended September 30, 1997 compared to $228,458 for the same quarter in 1996 due
mainly to lower salary and travel expenses.
For the nine-months period in 1997 and 1996 such expenses were $723,560 and
$626,254 respectively.
INTEREST EXPENSE
- ---------------------------
Interest expenses was $33,469 versus $33,937 for the quarters ended September
30,1997 and 1996, respectively. For the nine months ended September 30, 1997
and September 30, 1996, interest expense was $101,827 and $81,209, respectively.
The higher amounts in 1997 are due to higher notes payable than in 1996.
NET INCOME
- -----------------
Net Income for the quarter ended September 30, 1997 was $287,102 versus a loss
of $327,148 for the same quarter in 1996. This resulted in net income for the
nine months ended September 30, 1997 of $31,235 versus a net loss of $1,053,639
for the same period in 1996. The improvement is due mainly to substantially
higher revenues in 1997.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
The Company's financial statements for the quarter ended September 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 had net income of $287,102 in the quarter ended September 30,
1997, and as of September 30, 1997 had an accumulated deficit of $11,247,408.
At September 30, 1997 the Company had negative working capital of $1,047,063
compared to negative working capital of $125,657 at December 31, 1996. For the
quarter ended September 30, 1997 the Company used $3,949 for operating
activities. For the same period in 1996, the Company used $43,566. 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 September 30, 1997 notes payable included
$954,000 to creditors who have authorized deferral to 1998 of any principal
repayment.
<PAGE>
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.
<PAGE>
SIGNATURES
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: November 11, 1997 /s/ Joseph R. Benek
---------------------------------
Joseph R. Benek
Vice President, Finance
and Chief Accounting Officer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEPT-30-1997
<CASH> 10,202
<SECURITIES> 0
<RECEIVABLES> 733,144
<ALLOWANCES> 0
<INVENTORY> 547,004
<CURRENT-ASSETS> 21,044
<PP&E> 838,080
<DEPRECIATION> 596,396
<TOTAL-ASSETS> 1,592,514
<CURRENT-LIABILITIES> 2,354,616
<BONDS> 0
80,450
22,766
<COMMON> 132,415
<OTHER-SE> (1,000,805)
<TOTAL-LIABILITY-AND-EQUITY> 1,592,514
<SALES> 3,764,460
<TOTAL-REVENUES> 3,764,460
<CGS> 2,798,713
<TOTAL-COSTS> 2,798,713
<OTHER-EXPENSES> 832,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,827
<INCOME-PRETAX> 31,235
<INCOME-TAX> 0
<INCOME-CONTINUING> 31,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,235
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
