Mikros Systems Corporation Announces Second Quarter Financial Results; Revenues Increase 26%, Income From Operations Increases 9%

    PRINCETON, N.J., Aug. 14 /EMWNews/ -- Mikros Systems

Corporation (OTC Bulletin Board: MKRS), announced its financial results for

the three and six months ended June 30, 2008. Revenues for the second

quarter increased $217,897 or 26% to $1,062,832 as compared to $844,935 for

the second quarter of 2007. Income from operations during the quarter

increased $6,426 or 9% to $77,304 from $70,878 for the second quarter of

2007.



    Year to date, revenues increased $74,229 or 5% to $1,714,114 as

compared to $1,639,885 for the six months ended June 30, 2007. Income from

operations year to date decreased $31,891 or 24% to $99,061 from $130,952

for the six months ended June 30, 2008. The Company's cash position

continues to grow, it remains on target for 2008 growth in line with its

operating budget, and second half revenues are anticipated to approximate

first half revenues.



    Mikros continues to invest for the future. The decrease in net income

was due partially to the cost of additional engineering work on independent

research and development projects, including development and testing of a

prototype buoy for the Phase I Navy Power Buoy SBIR. The Company also

experienced increased personnel costs including professional consulting

fees related to higher levels of bid and proposal activities as well as

stock option and incentive compensation. These expenses were expected and

are in line with the Company's operating budget. Management believes these

additional expenses in 2008 will contribute to the growth of the Company in

future periods.



    Chief Executive Officer Tom Meaney stated, "We are very pleased with

our second quarter results. Our marketing and research efforts in the first

quarter are starting to pay off as evidenced by the increase in revenue

during the second quarter. We remain on budget, our cash position continues

to increase, and we expect our business will continue to grow throughout

the remainder of 2008. We are fully focused on both developing our existing

programs, including ADEPT, RWSE, AIRchitect-EMC, and Autonomous Power

Buoys, and targeting new R&D opportunities in the Department of Defense and

Homeland Security SBIR programs. Over the years, we have developed many

deep customer relationships and built a strong reputation in the defense

industry. We believe that we can build off of these relationships to expand

into engineering support services. For example, our recent Seaport-e

contract gives us the opportunity to partner with other defense contractors

to bid for a wide array of engineering service contracts for the entire

Naval Enterprise, including Naval Air Systems Command, Space and Naval

Warfare Systems Command, Naval Supply Systems Command, Military Sealift

Command, Naval Facilities Command, Strategic Systems Programs, the United

States Marine Corps, and other Department of Defense agencies."



    Adaptive Diagnostic Electronic Portable Testset (ADEPT)



    The ADEPT equipment has been tested aboard three US Navy ships and at

several Lockheed Martin land-based test sites. Test results have been very

positive. Instrumentation embedded into ADEPT has shown close correlation

with stand-alone test equipment currently in use. Navy technicians have

recognized time savings of more than 50% when using ADEPT to perform

routine radar maintenance. ADEPT's unique ability to catalog

instrumentation data collected during the maintenance process and

facilitate radar troubleshooting from remote locations will be exhibited as

part of the distance support demonstration for the Navy's Trident Warrior

exercise in 2009.



    Mikros recently completed Integrated Logistics Support (ILS) plans and

other elements required for fielding ADEPT aboard operating Navy ships. An

initial order for up to four units in support of the lead ships undergoing

modernization could come by the end of the Government's fiscal year. This

order hinges on the approval of submitted test results and plans, the

availability of Government funding, and the timeliness of end-of-year

Government contracting processes.



    At least 84 Aegis ships have been identified that could benefit from

ADEPT equipment. At 2 to 3 units per ship, Mikros anticipates additional

orders for more than 200 systems over the next 3 years. The Company is

engaged in discussions with other Navy program managers to begin

development of ADEPT for use on other electronic systems, and extending its

applicability to other Navy ships, to include carriers, submarines,

amphibious assault craft, and the new Littoral Combat Ship (LCS). Mikros is

also investigating the potential of a large international market for ADEPT,

as many allied countries have, or are purchasing, Aegis and other Navy

ships for use in their own Navies.



    Wireless Programs



    Mikros continues to execute two ongoing SBIR programs in wireless R&D.

With its partner and subcontractor Intell-Check -- Mobilisa, Inc. Mikros is

advancing development of the AIRchitect-EMC "interference-aware" wireless

network design software. The Company is also working with Naval Air Warfare

Center (NAWC) at China Lake to develop a new generation of simulation

software that will be used to evaluate jamming effects on missiles and

other weapons.



    During the second quarter, Mikros was awarded two small study programs

to use the AIRchitect-EMC design tool to help develop wireless networks for

amphibious ships (LHD class) and aircraft carriers (CVN class). The Company

believes these new contracts represent the first of multiple opportunities

to use AIRchitect-EMC software to design wireless network installations

aboard Navy ships. The Company is exploring an opportunity to establish a

long term Indefinite-Delivery, Indefinite-Quantity (IDIQ) contract with the

Navy to support future shipboard wireless installations and other wireless

networking efforts.



    The Company is also exploring several strategies for further expanding

the wireless business, including a strategic partnership with a major cell

phone manufacturer to develop defense and homeland security applications

with the US Army National Guard. To date, two proposals have been submitted

to potential customers.



    Autonomous Power Buoys



    Mikros has also teamed with Ocean Power Technologies, Inc to develop

and market autonomous PowerBuoys(R) to the US Navy, Coast Guard, and

Department of Homeland Security. PowerBuoys(R) convert wave, wind and solar

energy to continuous electric power for use by maritime sensors and

communication devices. After successfully completing a Phase I SBIR study

on this technology, both companies invested their own funds to develop and

test a prototype buoy to use as a marketing tool. PowerBuoys(R) have the

advantage of longer life in the water as compared to buoys powered by

batteries or diesel generators, as they require less maintenance and do not

need to be refueled periodically. The Company is currently seeking Phase II

or III funding under the SBIR program to accelerate the development of this

technology.



    Mikros and Ocean Power Technologies, Inc. are exhibiting this buoy

product at the Office of Naval Research Annual Science and Technology Forum

from August 12-14, 2008 in Washington, DC. The response at the show by

senior Navy leadership has been very positive.

    About Mikros



    Mikros Systems Corporation is an advanced technology company

specializing in the research and development of electronic systems

technology primarily for military applications. Classified by the U.S.

Department of Defense as a small business, its capabilities include

technology management, electronic systems engineering and integration,

radar systems engineering, combat/command, control, communications,

computers and intelligence systems engineering, and communications

engineering. Mikros' primary business is to pursue and obtain contracts

from the Department of Homeland Security, U.S. Navy, and other governmental

authorities. For more information on Mikros visit: http://www.mikros.us.



    Important Information about Forward-Looking Statements: All statements

in this news release other than statements of historical facts are

forward-looking statements which contain our current expectations about our

future results. Forward-looking statements involve numerous risks and

uncertainties. We have attempted to identify any forward-looking statements

by using words such as "anticipates," "believes," "could," "expects,"

"intends," "may," "should" and other similar expressions. Although we

believe that the expectations reflected in all of our forward-looking

statements are reasonable, we can give no assurance that such expectations

will prove to be correct. Such statements are not guarantees of future

performance or events and are subject to known and unknown risks and

uncertainties that could cause the Company's actual results, events or

financial positions to differ materially from those included within the

forward-looking statements. Such factors include, but are not limited to,

changes in business conditions, changes in our sales strategy and product

development plans, changes in the marketplace, continued services of our

executive management team, our limited marketing experience, competition

between us and other companies seeking SBIR grants, competitive pricing

pressures, market acceptance of our products under development, delays in

the development of products, statements of assumption underlying any of the

foregoing, and other factors disclosed in our annual report on Form 10-KSB

for the year ended December 31, 2007 and other filings with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking

statements, which speak only as of the date made. Except as required by

law, we undertake no obligation to disclose any revision to these

forward-looking statements to reflect events or circumstances after the

date hereof.








                          MIKROS SYSTEMS CORPORATION

                           CONDENSED BALANCE SHEET

                                 (UNAUDITED)



                                                      June 30,    December 31,

                                                        2008         2007

    ASSETS



    CURRENT ASSETS



    Cash and Cash Equivalents                         $468,873     $404,557

    Receivables on Government Contracts                295,079      303,469

    Other Current Assets                                38,262       17,547



    TOTAL CURRENT ASSETS                               802,214      725,573



    Patents and Trademarks                               5,383        5,383

    Less: Accumulated Amortization                        (591)        (422)

                                                         4,792        4,961

    PROPERTY AND EQUIPMENT

    Equipment                                           14,625       14,625

    Furniture and Fixtures                               9,264        9,264

                                                        23,889       23,889



    Less: Accumulated Depreciation                     (13,430)     (10,786)



                                                        10,459       13,103



    Deferred Tax Asset                                  30,757       70,500



    TOTAL ASSETS                                      $848,222     $814,137



    LIABILITIES AND SHAREHOLDERS' EQUITY



    CURRENT LIABILITIES



    Accrued Payroll and Payroll Taxes                 $103,689      $86,757

    Accounts Payable and Accrued Expenses              180,883      217,545

    Taxes Payable                                        4,249       14,009



    TOTAL CURRENT LIABILITIES                          288,821      318,311



    Long-term Liabilities                               13,103       14,460



    TOTAL LIABILITIES                                  301,924      332,771



    REDEEMABLE SERIES C PREFERRED STOCK par value

     $.01 per share, authorized 150,000 shares, Issued

     and outstanding 5,000 shares (involuntary

     liquidation value - $80,450)                       80,450       80,450



    SHAREHOLDERS' EQUITY



    Preferred Stock, Series B convertible, par value

     $.01 per share, authorized 1,200,000 shares,

     issued and outstanding 1,102,433 shares

     (involuntary liquidation value - $1,102,433)       11,024       11,024



    Preferred Stock, convertible, par value $.01 per

     share, authorized 2,000,000 shares, issued and

     outstanding 255,000 shares (involuntary

     liquidation value - $255,000)                       2,550        2,550



    Preferred Stock, Series D, par value $.01 per

     share 690,000 shares authorized, issued and

     outstanding (involuntary liquidation value -

     $1,518,000)                                         6,900        6,900



    Common Stock, par value $.01 per share,

     authorized 60,000,000 shares, issued and

     outstanding 31,766,753 shares                     317,668      317,668



    Capital in excess of par value                  11,450,482   11,430,668



    Accumulated Deficit                            (11,322,776) (11,367,894)



    TOTAL SHAREHOLDERS' EQUITY                         465,848      400,916



    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $848,222     $814,137







                          MIKROS SYSTEMS CORPORATION

                        CONDENSED STATEMENTS OF INCOME

                                 (UNAUDITED)



                             Three Months Ended,         Six Months Ended

                            June 30,     June 30,      June 30,     June 30,

                              2008         2007          2008         2007

    Revenues:



    Contract Revenue     $1,062,832     $844,935    $1,714,114   $1,639,885



    Cost of Sales           617,672      520,246       924,026    1,006,480



    Gross Margin            445,160      324,689       790,088      633,405



    Expenses:



    Engineering             157,055       96,271       285,430      191,704

    General &

     Administrative         210,801      157,540       405,597      310,749



    Total Expenses          367,856      253,811       691,027      502,453



    Income from Operations   77,304       70,878        99,061      130,952



    Other Income: Interest      695        2,419         2,191        2,589



    Income Before Income

     Tax Expense             77,999       73,297       101,252      133,541



    Income Tax Expense

     (Benefit)               43,633      (46,700)       56,133      (17,070)



    Net Income              $34,366     $119,997       $45,119     $150,611



    Basic and diluted

     earnings per share       $0.00        $0.00         $0.00        $0.00



    Basic weighted

     average number

     of Shares

     outstanding         31,766,753   31,766,753    31,766,753   31,766,753



    Diluted Weighted

     Average number

     of Shares

     outstanding         35,231,234   35,449,489    35,237,012   35,453,895







                          MIKROS SYSTEMS CORPORATION

                      CONDENSED STATEMENTS OF CASH FLOWS

                                 (UNAUDITED)



                                                         Six Months Ended

                                                       June 30,     June 30,

                                                         2008         2007

    Cash Flow From Operating Activities:

    Net Income                                         $45,119     $150,611



    Adjustments to reconcile Net Income to net cash

     provided by Operating Activities:



    Depreciation and Amortization                        2,813        2,323

    Deferred Tax Provision (Benefit)                    39,743      (34,100)

    Recognition of Stock Option Expense                 19,813            -



    Net Changes in Operating Assets and Liabilities

     (Increase) Decrease in:



    Receivables on Government Contracts                  8,390     (186,995)



    Other Current Assets                               (20,715)     (19,885)



    Increase (Decrease) in:



    Accounts Payable                                   (83,462)     109,711

    Accrued Payroll and Payroll Taxes                   16,932       10,594

    Other Accrued Expenses                              35,683       22,137



    Net Cash provided by Operating Activities           64,316       54,396



    Cash Flow from Investing Activities:



    Purchase of Furniture and Fixtures                       -       (9,264)



    Net Cash used in Investing Activities                    -       (9,264)



    Net Increase in Cash and Cash Equivalents           64,316       45,132



    Cash and Cash Equivalents, beginning

     of the period                                     404,557      229,459



    Cash and Cash Equivalents, end of period          $468,873     $274,591