SECURITIES AND EXCHANGE COMMISSION
	                    WASHINGTON, D.C. 20549
                    ----------------------------------
                              FORM 10-KSB
         	ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
     	               SECURITIES EXCHANGE ACT OF 1934

   For the fiscal year ended December 31, 2005
   Commission file number 2-67918

                      MIKROS SYSTEMS CORPORATION
                      --------------------------
         (Name of Small Business Issuer in Its Charter)
            Delaware                        14-1598200
            --------                        ----------
 (State or other jurisdiction of          (I.R.S. Employer
  incorporation or organization)           Identification No.)

 707 Alexander Road, Suite 208, Princeton, New Jersey 08540
(Address of principal executive offices, Including Zip Code)

Issuer's Telephone Number, including area code: 609-987-1513
                                                ------------
Securities Registered Pursuant to Section 12(b) of the Exchange Act:  None
Securities Registered Pursuant to Section 12(g) of the Exchange Act:

                   Common Stock, $.01 par value

Check whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [  ]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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

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

Indicate by check mark whether the issuer is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  [  ]

The issuer?s revenues for the fiscal year ended December 31, 2005 were
approximately $1,550,000.

The aggregate market value of the voting and non-voting common equity held by
nonaffiliates of the issuer as of March 22, 2006, was approximately
$4,087,154, based on the average of the bid and asked price quoted by National
Quotation Bureau, Inc.

The number of shares outstanding of the issuer's $.01 par value common stock
as of March 22, 2006 was 31,766,753.

				Transitional Small Business Disclosure Format

				Yes:________           No: ____X____


PART I

Item 1.  Description of Business
--------------------------------

Mikros Systems Corporation ("Mikros" or the "Company?) 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 (DoD) as a small business, our capabilities include
technology management, electronic systems engineering and integration, radar
systems engineering, combat/command, control, communications, computers and
intelligence (C4I) systems engineering, and communications engineering. Our
headquarters are located at 707 Alexander Road, Suite 208, in Princeton, New
Jersey.


History of the Company
----------------------

Founded in 1978 in Albany, New York, Mikros was formed to leverage the
microprocessor advancements coming out of the nearby General Electric Research
and Development Center into state-of-the-art digital signal processing
applications for the defense industry.  We specialized in developing
technology and products advancing the state of military RF (radio frequency or
wireless) and underwater data communications.  Through several U.S. Navy Small
Business Innovation Research (SBIR) awards in the early 1990s, we developed
and fielded the AN/USQ-120 Multi-Frequency Link-11 Data Terminal Set in wide
use today in Aegis cruisers and destroyers.

In the mid 1990s, we began shifting our core business area away from military
communication applications to the rapidly expanding commercial wireless
communications arena.  Our advanced DSP technology base and core competencies
enabled us to develop unique, proprietary technology, high-speed data
broadcasting techniques utilizing the commercial AM and FM radio spectrum.  In
1998, we sold our military communications business to an unrelated third
party.

Due to dwindling capital and a limited commercial market demand for wireless
data broadcasting (one-way communication) applications, we re-entered the
military electronic systems business in 2002 upon expiration of our non-
compete restrictions imposed by the 1998 sale of our military communications
business.  Because of our past successes in the U.S. DoD SBIR program (11
awards from 1988 through 1996), we began pursuing SBIR awards within our areas
of expertise.

In May 2002, the U.S. Navy?s Dahlgren Division, Naval Surface Warfare Center
awarded us a $100,000 Phase I SBIR contract to investigate the feasibility of
a Multi-Function Distributed Analysis Tool, or MFDAT.  As envisioned, the
MFDAT was to be a semi-automated, intelligent test tool designed to support
U.S. Navy technical personnel in the maintenance, alignment and diagnosis of
complex electronic systems.  The overall objectives of the MFDAT program were:

   - To achieve higher readiness through reduced maintenance downtime and
     better system assurance;
   - To increase system reliability by supporting predictive failure analysis
     and proactive remediation; and
   - To promote more effective use of technicians through increased
     automation, distance support and interactive training.

The completed Phase I program produced an operational, proof-of-concept,
software demonstration/simulation model of the MFDAT system.

In August 2003, we were awarded a $750,000 Phase II SBIR contract from NSWCDD
to continue our development of the MFDAT system.  The Phase II program
produced a prototype system capable of performing alignment and maintenance
procedures on the Aegis AN/SPY-1A radar system.  This MFDAT prototype system
proved the viability of incorporating the functionality of multiple electronic
test equipment into a single, programmable system.

In general, the MFDAT technology developed enables common testing processes,
training, and equipment for electronic system support thereby providing a
viable path toward meeting the U.S. Navy?s readiness goals while reducing the
dependency on manpower, manpower training, and discrete test equipment.  The
success of our MFDAT Phase II program prompted the U.S. Navy to award an
additional $250,000 enhancement to the Phase II contract to accelerate the
transitioning, or "commercializing" in SBIR parlance, of the technology into a
product suitable for naval shipboard use. With the exception of some final
data item deliverables such as a final prototype test/inspection report and
contract summary report, we have completed all the tasking required under the
Phase II SBIR contract.  We expect this contract to be officially completed by
the end of April 2006.

In September 2004, we received an SBIR Phase III contract from NSWCDD valued
at approximately $2,400,000 to commercialize our MFDAT technology into a
fully-integrated, man-portable test tool qualified for U.S. Navy fleet use.
This contract secures our SBIR data rights in the MFDAT technology for a
period of five years beyond the last delivery under the contract.  We have
named the resulting product ADEPTTM, an acronym for the Adaptive Diagnostic
Electronic Portable Testset, and have registered the name for trademark
protection. Its initial application is as a computer-aided alignment and
maintenance tool for the AN/SPY-1 radar system, which is the primary air, and
surface radar for the Aegis Combat System installed on the Ticonderoga (CG-47)
and Arleigh Burke (DDG-51) class warships.  Key anticipated benefits of ADEPT?
include:

   - Significant reduction in system calibration, alignment, maintenance, and
     repair times;
   - Improved system readiness, availability, and performance;
   - More effective use of technical manpower through increased automation,
     distance support, and interactive training;
   - Distance support capable enabling "expert" remote (shore-based) system
     support and fleet-wide system analysis;
   - Reduction in the amount of electronic test equipment required for
     organizational level support; and
   - Modular and programmable to overcome current test equipment obsolescence
     issues and to support capability enhancements in future systems.

The first ADEPT? production units were manufactured in 2005 and are currently
undergoing qualification testing.  In March 2006, an amendment to this SBIR
Phase III contract increased funding by approximately $2,950,000 and extended
the period of performance through February 2008.  The contract amendment calls
for an expansion of ADEPT? applications to include all Aegis ship variants for
cruisers and destroyers.

Also in 2004, we began work on another independent SBIR subject area.  In June
2004, the Office of Naval Research awarded us a $100,000 SBIR Phase I contract
to analyze the potential for interference between emerging Wireless Local Area
Network systems (WLANs) and DoD radar systems, and to evaluate and quantify
the potential improvements which may be afforded by selected mitigation
techniques.  This Radar Wireless Spectral Efficiency (RWSE) SBIR Phase I
program was completed in January 2005 and concluded that the potential exists
for mutual interference between WLANs and DoD radars, particularly during
land-based, littoral and harbor navigation operation of DoD radars.  We
recommended that further study of the identified mutual interference
mechanisms was warranted, including empirical testing to characterize the
effects of the interference and the potential mitigation techniques identified
during the Phase I program.

In April 2005, under the MFDAT Phase III program, we subcontracted
the manufacturing of the ADEPTTM equipment to DRS Laurel Technologies in
Johnstown, Pennsylvania.  A contract for $876,000 has been awarded
by Mikros to DRS Laurel Technologies. This new equipment is to be
marketed under the ADEPTTM product name and is planned for installation
in the U.S. Navy?s Aegis Cruisers.

In May 2005, under the MFDAT Phase III program, we subcontracted to In-Phase
Technologies, Inc. of Clarksburg, New Jersey to assist in ADEPTTM
software development, integration and qualification.  A contract for
$299,000 has been awarded by Mikros to In-Phase Technologies, Inc.

In July 2005, we awarded a subcontract to Lockheed Martin Corporation
in Moorestown, New Jersey to provide engineering technical services in support
of the ADEPT? Phase III SBIR production and qualification contract.  As the
design agent of the AN/SPY-1 radar system, Lockheed Martin will be providing
expertise to assist us in the verification and qualification of ADEPT? as
a SPY-1 maintenance and alignment tool.  The total value of this time and
materials subcontract is expected to be approximately $100,000.

Mikros has received the first production ADEPTTM enclosure.  The new enclosure
was exhibited at the Autotestcon 2005 trade show in September 2005. Currently,
the ADEPTTM  unit is undergoing functional and environmental testing in
preparation for field testing. Mikros is in contract negotiations with the
U.S. Navy to continue the development and field testing of ADEPTTM. A photo of
the new ADEPTTM production unit may be seen on the Mikros website
(www.mikros.us).  In conjunction with ongoing research and projects, Mikros
has filed several patents with the U.S. Patent and Trademark Office (USPTO).

Mikros continues to pursue several SBIR projects with Homeland Security, the
U.S. Navy, and other government agencies.

Two RWSE follow-on proposals were submitted to the U.S. Navy following the
successful conclusion of the RWSE SBIR Phase I program. In December 2005, we
were informed by the U.S. Navy that one of those proposals had been selected
for a Phase II SBIR contract award.  The winning proposal is for the
continuing research and development into the potentially detrimental
interaction between commercial WLANs (e.g., Wi-Fi) and U.S. Navy radar
systems.  Under this new program, we will be evaluating the introduction of
Wi-Fi networks onboard U.S. Navy carriers and developing a CVN Wi-Fi network
planning tool.


Corporate Growth & Strategy
---------------------------

Our strategy for continued growth is two-fold.  First, we expect to continue
expanding our technology base, backlog, and revenue by continuing our active
participation in the DoD SBIR program, bidding on projects that fall within
our areas of expertise ? electronic systems engineering and integration, radar
systems engineering, combat/C4I (Command, Control, Communications, Computers &
Intelligence) systems engineering, and communications engineering.  We believe
that we can utilize the intellectual property developed under our various SBIR
awards to develop proprietary products, such as the ADEPT described above,
with broad appeal in both the government and commercial marketplace. This
state-of-the-art test equipment can be used by many commercial and
governmental customers such as the FAA, radio and TV stations, cell phone
stations and airlines.

Second, we believe that through our marketing of products such as ADEPT? we
will develop key relationships with prime defense system contractors.  Our
strategy is to develop these relationships into longer-term, key subcontractor
roles on future major defense programs awarded to these prime contractors.

Competition
-----------

Competition in the SBIR arena is very high, and there are numerous small
businesses against which we compete for SBIR awards.  In our general business
area of electronic defense systems and products, we also compete against many
larger companies with greater financial and human resources than we possess.


Intellectual Property
---------------------

We have two patents covering digital signal processing technology and our base
scheme of implementing Link-11.  We also have developed and continue to
develop intellectual property (technology and data) under our SBIR contracts.
Under the ADEPT? development program, we have filed for three technology
patents dealing with maintenance procedure automation and dynamic maintenance
personnel training, and we expect to file additional patents in the near
future.

Under SBIR data rights, we are protected from unauthorized use of SBIR-
developed technology and data for a period of five years after acceptance of
all items to be delivered under a particular SBIR contract or any follow-on
contract.


Employees
---------

As of December 31, 2005, we had three full-time employees working at our Fort
Washington, Pennsylvania Research & Development Center and three part-time
employees.  None of the employees belong to a labor union.  We believe
relations with our employees are satisfactory.  We also use the services of
subcontractors and/or consultants as necessary to aid in software and hardware
development and for the manufacture of products.


Available Information
---------------------

Mikros maintains a website located at http://www.mikros.us.  On or through our
website we make available at no cost our annual, quarterly, and current
reports, and any amendments to those reports, as soon as reasonably
practicable after electronically filing such reports with the U.S. Securities
and Exchange Commission ("SEC").  Information contained on our website is not
part of this report or any other report filed with the SEC.





ITEM 2.  PROPERTIES.

Our headquarters are located at 707 Alexander Road, Building 2, Suite 208,
Princeton, New Jersey 08540-6331 where we maintain our principal executive
offices. Our engineering research, design and development facility is located
at 220 Commerce Drive, Suite 300, Fort Washington, Pennsylvania 19034, where
we lease approximately 2,513 square feet of general office space.  The lease
agreement related to this property terminates in November 2010.  We also lease
a marketing office at Three Crystal Park, 2231 Crystal Drive, Suite 1005,
Arlington, Virginia 22202-3742.


ITEM 3.  LEGAL PROCEEDINGS.

We know of no material, active, or pending legal proceedings against Mikros,
nor are we involved as a plaintiff in any material proceeding or pending
litigation.  There are no proceedings in which any of our directors, officers,
or affiliates, or any registered or beneficial shareholder, is an adverse
party or has a material interest adverse to our interest.

Risk Factors
------------

We operate in a rapidly changing business environment that involves
substantial risk and uncertainty.  The following discussion addresses some of
the risks and uncertainties that could cause, or contribute to causing, actual
results to differ materially from expectations.  We caution all readers to pay
particular attention to the descriptions of risks and uncertainties described
below and in other sections of this Annual Report on Form 10-KSB and our other
filings with the SEC.

We do not presently know of any additional risks and uncertainties that are
currently deemed material and which may also impair our business operations
and financial results.  If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected.  In such case, the trading price of our Common Stock could
decline and we may be forced to consider additional alternatives, including
bankruptcy.

This Annual Report on Form 10-KSB also contains forward-looking statements
that involve risks and uncertainties.  Our actual results could differ
materially from those anticipated in the forward-looking statements as a
result of certain factors, including the risks described below and elsewhere
in this Annual Report on Form 10-KSB.

We have a history of operating losses and continue to experience a lack of
liquidity and working capital deficits. Although we had net income of $134,525
and a working capital surplus of $115,596 for the year ended December 31,
2005, as of December 31, 2005, we still had an accumulated deficit of
$(11,663,505).

We may experience substantial variability in our quarterly operating results.
Our revenue, gross profit, operating income and net income may vary
substantially from quarter to quarter due to a number of factors. Many
factors, some of which are not within our control, may contribute to
fluctuations in operating results. These factors include the following:

-  market acceptance of our new products;

-  budgetary constraints of our customers;

-  new product and service introductions by our competitors or us;

-  our employment patterns;

-  market factors affecting the availability or costs of qualified
   technical personnel;

-  timing and customer acceptance of our new product and service
   offerings;

-  length of sales cycle; and

-  industry and general economic conditions.

Our success depends on the services of our senior management and our ability
to hire and retain additional skilled personnel.  The future success of our
company depends on the personal efforts and abilities of the members of our
senior management team to provide strategic direction, develop business,
manage operations and maintain a cohesive and stable environment.
Specifically, we are dependent upon Thomas J. Meaney, President and Chief
Executive Officer, and David C. Bryan, Executive Vice President and Chief
Operating Officer.  We do not have employment agreements with any key
personnel. Furthermore, our performance also depends on our ability to attract
and retain management and qualified professional and technical operating
staff. Competition for these skilled personnel is intense. The loss of
services of any key executive, or inability to continue to attract and retain
qualified staff, could have a material adverse effect on our business, results
of operations and financial condition. We do not maintain any key employee
insurance on any of our executives.

We have limited operating history in providing commercial wireless
applications. Historically, we developed and sold technology and products for
military applications, primarily to the U.S. Navy.  The commercial wireless
products that we intend to develop perform different functions than our
historic products, and are targeted at an entirely different customer base.
Because we have not previously operated as a provider of commercial wireless
products, we have no basis to evaluate our ability to develop, market and sell
such products.  Our ability to commercialize these products and services and
generate operating profits and positive operating cash flow will depend
principally upon our ability to:

-  develop and manufacture commercially attractive products;

-  attract and retain an adequate number of customers;

-  enter new markets and compete successfully in them;

-  manage operating expenses; raise additional capital to fund our
   capital expenditure plans; and

-  attract and retain qualified personnel.

We have limited marketing experience.  We will be required to develop a
marketing and sales network that will effectively demonstrate the advantages
of our commercial offerings over competing options.  Our marketing experience
with our new commercial products is limited, and we have not identified a
customer for a commercially feasible application.  We currently perform all
our marketing through our own employees.  There can be no assurance that we
will be successful in our marketing efforts, that we will be able to establish
adequate sales and distribution capabilities, or that we will be able to enter
into marketing agreements or relationships with third parties on financially
acceptable terms.



The market for our products is subject to rapid technological change.  The
market for our products and planned products is characterized by rapid changes
in technology, including the potential introduction of new types of wireless
communications and digital signal processor technologies which could have a
material adverse impact on our business.  Our future success will depend in
part on our ability to continually enhance our current technology and to
develop or acquire new ideas that address the needs of potential users.  There
can be no assurance that we will be successful in developing new products or
procedures that respond to technological changes. There can be no assurance
that research and development by competitors will not render our technology
obsolete or uncompetitive.  In addition, in a technology-based industry, there
can be no assurance that a claim of patent or other infringement will not be
made against us.  While we are not aware of any such claims, no infringement
studies have been conducted on our behalf.

Our industry is highly competitive. High technology applications such as those
being developed by us often require large investments of both money and
talent.  Many large entities with greater financial, technical and human
resources than us are currently investing heavily in products and services
that compete directly with our contemplated services and underlying products.
There is no assurance that our offerings can be successfully marketed against
such competition.  In addition, being first in the market with new high
technology is a critical factor in a company?s success in the market.  There
is no assurance that we will be able to introduce new offerings to the market
before any of our competitors.  As the markets in which we compete mature and
new and existing companies compete for customers, price competition is likely
to intensify, and such price competition could adversely affect our results of
operations.



We may issue additional shares of our capital stock that could dilute the
value of your shares. Our outstanding securities include shares of convertible
preferred stock, options and warrants.  During the respective terms of the
options and warrants, and when the preferred stock is outstanding, the holders
thereof are given an opportunity to profit from a rise in the market price of
our common stock, causing a dilution of the interests of existing
stockholders.  Thus, the terms on which we may obtain additional financing
during that period may be adversely affected.  The holders of preferred stock,
options and warrants may exercise their respective rights to acquire our
common stock at a time when we would, in all likelihood, obtain needed capital
through a new offering of securities on terms more favorable than those
provided by these outstanding securities.  In the event that such holders
exercise their rights to acquire shares of our common stock at such time, the
net tangible book value per share of our common stock will be subject to
dilution.

Future sales of our securities by existing stockholders could adversely affect
the market price of our common stock.  Future sales of shares by existing
stockholders under Rule 144 of the Securities Act of 1933 or through the
exercise of outstanding options or warrants or otherwise could have a negative
impact on the market price of our common stock.  We are unable to estimate the
number of shares that may be sold under Rule 144 because such sales depend on
the market price for our common stock, the personal circumstances of the
sellers and a variety of other factors.  Any sale of substantial amounts of
our common stock or of our other securities in the open market may adversely
affect the market price of our common stock and may adversely affect our
ability to obtain future financing in the capital markets as well as create a
potential market overhang.

Our common stock is subject to ?penny stock? regulations which may affect the
ability of our stockholders to sell their shares.  Our common stock is subject
to Rule 15g-9 under the Securities Exchange Act, which imposes additional
sales practice requirements on broker/dealers that sell such securities to
persons other than established customers and ?accredited investors?
(generally, an individual with a net worth in excess of $1,000,000 or an
annual income exceeding $200,000, or $300,000 together with his or her
spouse's income). For transactions covered by this rule, a broker/dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written consent to the transaction prior to the sale.
Consequently, the rule may adversely affect the ability of the holders of our
common stock to sell their shares in the secondary market.

SEC regulations define a ?penny stock? to be any non-Nasdaq equity security
that has a market price (as therein defined) of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction involving penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
The SEC also requires disclosure about commissions payable to both the
broker/dealer and its registered representative and information regarding
current quotations of the securities. Finally, the SEC requires that monthly
statements be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.

Our earnings may be adversely affected when we change our accounting policy
with respect to employee stock options.  Stock options are an important
component of compensation packages for our senior-level employees. We
currently do not deduct the expense of employee stock option grants from our
income. However, in December 2004, the Financial Accounting Standards Board
adopted a new policy requiring companies to recognize compensation costs in
their financial statements for share-based payment transactions, including
stock option grants to employees. Beginning January 1, 2006, we will be
required to record the value of stock options issued to employees as an
expense. When we change this accounting policy, our earnings could be
materially adversely affected.  We are currently evaluating the impact that
this standard will have on our operating results.

We rely on third-party contractors for engineering services that may be
difficult to replace.  We currently provide all engineering services through
third-party contractors such as Anteon Corporation.  These services may not
continue to be available on commercially reasonable terms, if at all.
Services that are not immediately replaceable would need to be internally
developed, which could take substantial time and resources.  The loss or
inability to maintain any of these engineering service providers could result
in delays in the development of our products and services until equivalent
services, if available, are identified, developed, and integrated, which could
harm our business.

We have never paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future.  We have never paid cash dividends
on our common stock.  Any payment of cash dividends in the future will depend
upon our earnings (if any), financial condition and capital requirements. We
do not anticipate paying dividends in the foreseeable future. In addition, we
have executed certain loan agreements, which prohibit the payment of a
dividend on our common stock as long as such agreements are in place.
Accordingly, any potential investor who anticipates the need for current
dividends from its investment should not purchase any of our securities.

Our common stock is thinly traded and the price of our common stock may
experience price volatility.  Our common stock currently is traded over-the-
counter on the NASD Bulletin Board.  There can be no assurance that an active
market in any of our securities will be sustained.  Absent a public trading
market, an investor may be unable to liquidate its investment.  We believe
that factors such as the announcements of the availability of new services and
new contracts by us or our competitors, quarterly fluctuations in our
financial results and general conditions in the communications industry could
cause the price of our common stock to fluctuate substantially. If
stockholders seek to sell their shares in a thinly traded stock, it may be
difficult to obtain the price desired.  In addition, stock markets have
experienced extreme price volatility in recent years.  This volatility has had
a substantial effect on the market prices of securities issued by many
companies for reasons unrelated to the operating performance of the specific
companies.

Our share ownership is highly concentrated.  Our directors, officers and
principal stockholders, and certain of their affiliates, beneficially own
approximately 41.1% (without giving effect to any outstanding options,
warrants or other convertible securities) of our outstanding common stock and
will have significant influence over the outcome of all matters submitted to
the stockholders for approval, including the election of our directors.  In
addition, such influence by management could have the effect of discouraging
others from attempting to take control of us, thereby increasing the
likelihood that the market price of our common stock will not reflect a
premium for control.



We have adopted certain anti-takeover provisions.  We have authorized
4,040,000 shares of preferred stock, which may be issued by our board of
directors on such terms, and with such rights, preferences and designations as
the board may determine. Issuance of such preferred stock, depending upon the
rights, preferences and designations thereof, may have the effect of delaying,
deterring or preventing a change in control of our company.  The 2,052,433
shares of issued and outstanding preferred stock have certain rights and
preferences, including dividend and liquidation preferences, which also may
have the effect of delaying, deterring or preventing a change in control of
us.  In addition, certain ?anti-takeover? provisions of the Delaware General
Corporation Law (the ?DGCL?), among other things, restrict the ability of
stockholders to effect a merger or business combination or obtain control of
the Company, and may be considered disadvantageous by a stockholder.

Corporate governance requirements are likely to increase our costs and make it
more difficult to attract and retain qualified directors. We are subject to
corporate governance requirements under the Sarbanes-Oxley Act of 2002, as
well as rules adopted pursuant to that legislation by the SEC.  We expect that
these and other new laws, rules and regulations will increase our legal and
financial compliance costs and place a significant burden on management.  We
also expect that new regulatory requirements will make it more difficult and
more expensive for us to obtain director and officer liability insurance.  We
may be required to accept reduced coverage or incur significantly higher
premium costs to obtain coverage.  These new requirements are also likely to
make it more difficult for us to attract and retain qualified individuals to
serve as members of our board of directors or committees of the board,
particularly the audit committee.

In addition, as of December 31, 2007, we will become subject to the
requirements of Section 404 of the Sarbanes-Oxley Act.  To date, we have taken
limited actions with respect to compliance under Section 404.  We may need to
hire additional personnel and/or engage outside consulting firms to assist in
our efforts to comply with Section 404.  Any failure to improve our internal
accounting controls or other problems with our control systems could result in
delays or inaccuracies in reporting financial information or non-compliance
with SEC reporting and other regulatory requirements, any of which could
adversely affect or business and stock price.


Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------


None.



PART II

Item 5.	Market for the Registrants' Common Equity and Related Stockholder
Matters
------------------------------------------------------------------------------

Our common stock is quoted on the OTC Bulletin Board under the trading symbol
?MKRS?. The following table sets forth the range of high and low bid prices of
our common stock for the periods indicated as reported by the OTC Bulletin
Board.  The quoted prices represent only prices between dealers on each
trading day as submitted from time to time by certain of the securities
dealers wishing to trade in our common stock, do not reflect retail mark-ups,
mark-downs or commissions, and may differ substantially from prices in actual
transactions.

                                               Bid
                                        High          Low

2005

  First Quarter				$ 0.2000	    $ 0.1400
  Second Quarter				  0.2900          0.1450
  Third Quarter				  0.2400          0.1600
  Fourth Quarter				  0.2100          0.1610


2004

  First Quarter			      $ 0.1600        $ 0.0370
  Second Quarter				  0.1100		0.0600
  Third Quarter				  0.2000		0.0700
  Fourth Quarter				  0.2800		0.1500


The last price of our common stock as reported on the OTC Bulletin Board as of
March 22, 2006 was $0.29 per share.

We have never paid cash dividends on our common stock.  Any payment of cash
dividends in the future will depend upon our earnings (if any), financial
condition, and capital requirements.  The declaration and payment of dividends
on our common stock is subject to the discretion of our board of directors and
to certain contractual restrictions and limitations imposed under the DGCL. We
do not anticipate paying dividends in the foreseeable future.

As of March 22, 2006, we had 443 holders of record of our common stock.




Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations
----------------------------------------------------------

Critical Accounting Policies And Estimates

The discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America.  The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities.  On an on-going basis, we evaluate our estimates,
including those related to bad debts, investments, recoverability of long-
lived assets, income taxes, restructuring charges, and contingencies and
litigation.  We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.

Revenue Recognition

Revenue from research and development contracts is recognized as work is
performed and costs are incurred.  Billings to the federal government are
generally recognized in accordance with the terms of the applicable contracts,
and utilize provisional indirect rates during the year.  These rates are
subject to audit by applicable government agencies.  Unbilled revenue reflects
work performed, but not billed at the time pending contractual requirements
and are classified as a current asset.   Billings to customers in excess of
revenue earned are classified as advanced billings, and shown as a liability.


Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123(R), ?Share-Based Payment.?  Statement No. 123(R) replaces
Statement No. 123, ?Accounting for Stock-Based Compensation,? and supersedes
APB Opinion No. 25, ?Accounting for Stock Issued to Employees.?  Statement No.
123(R) requires compensation costs related to share-based payment transactions
to be recognized in the financial statements over the period that an employee
provides service in exchange for the award.  Public companies are required to
adopt the new standard using a modified prospective method and may elect to
restate prior periods using the modified retrospective method.  Under the
modified prospective method, companies are required to record compensation
cost for new and modified awards over the related vesting period of such
awards prospectively and record compensation cost prospectively for the
unvested portion, at the date of adoption, of previously issued and
outstanding awards over the remaining vesting period of such awards.  No
change to prior periods presented is permitted under the modified prospective
method.  Under the modified retrospective method, companies record
compensation costs for prior periods retroactively through restatement of such
periods using the exact pro forma amounts disclosed in the companies'
footnotes.  Also, in the period of adoption and after, companies record
compensation cost based on the modified prospective method.


On April 14, 2005, the SEC adopted a new rule that amends the compliance dates
for FASB?s Statement of Financial Accounting Standards No. 123 (revised 2004),
?Share-Based Payment? (?SFAS No. 123R?). Under the new rule, Mikros is
required to adopt SFAS No. 123R in the first annual period beginning after
December 15, 2005 for small business issuers. The adoption of this
Interpretation did not have an impact on our financial condition or results of
operations.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (?SAB No.
107?), ?Share-Based Payment?, providing guidance on option valuation methods,
the accounting for income tax effects of share-based payment arrangements upon
adoption of SFAS No. 123(R), and the disclosures subsequent to adoption.  The
Company will adopt SFAS No. 123(R)and provide SAB No. 107 required disclosures
effective January 1, 2006, using the modified prospective method with no
restatement.  The impact of future option or stock grants is dependent upon
the quantity and nature of future stock-based compensation grants.

In May 2005, FASB issued SFAS 154, ?Accounting Changes and Error
Corrections?. The Statement requires retroactive application of a voluntary
change in accounting principle to prior period financial statements unless it
is impracticable. SFAS 154 also requires that a change in method of
depreciation, amortization, or depletion for long-lived, non-financial assets
be accounted for as a change in accounting estimate that is affected by a
change in accounting principle.  SFAS 154 replaces APB Opinion 20, ?Accounting
Changes?, and SFAS 3, ?Reporting Accounting Changes in Interim Financial
Statements?. SFAS 154 will be effective for accounting changes and corrections
of errors made in fiscal years beginning after December 15, 2005.  Management
currently believes that adoption of the provisions of SFAS 154 will not have a
material impact on our financial statements.

In June 2005, FASB?s Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 05-6, ?Determining the Amortization Period of Leasehold Improvements
Purchased after Lease Inception or Acquired in a Business Combination? (?EITF
05-6?).  This guidance requires that leasehold improvements acquired in a
business combination or purchased subsequent to the inception of a lease be
amortized over the shorter of the useful life of the assets or a term that
includes required lease periods and renewals that are reasonably assured at
the date of the business combination or purchase.  This guidance is applicable
only to leasehold improvements that are purchased or acquired in reporting
periods beginning after June 29, 2005.  We are evaluating the impact, if any,
of EITF 05-6 on our financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, ?Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51.?  FIN 46 was revised in December 2003.  This
Interpretation provides new guidance for the consolidation of variable
interest entities (VIEs) and requires such entities to be consolidated by
their primary beneficiaries if the entities do not effectively disperse risk
among parties involved.  The Interpretation also adds disclosure requirements
for investors that are involved with unconsolidated VIEs.  The disclosure
requirements apply to all financial statements issued after December 31, 2003.
The consolidation requirements apply to companies that have interests in
special purpose entities for periods ending after December 15, 2003.
Consolidation of other types of VIEs is required in financial statements for
periods ending after December 15, 2004.  The adoption of this Interpretation
did not have an impact on our financial condition or results of operations.




Results of Operations
---------------------

General

In 2002, we re-entered the military electronic systems business and began
pursuing SBIR awards within our areas of expertise.  Revenues from our
government contracts represented 100% of our revenues for the years ended
December 31, 2005 and 2004.  We believe that we can utilize the intellectual
property developed under our various SBIR awards to develop proprietary
products for both the government and commercial marketplace.

In 2006, we received additional funding in the amount of $2.95 million from
The Department of the Navy for the continuation of the development and
production of the ADEPT? maintenance tool for U.S. Navy surface combatants.
This modification will expand the application of ADEPT? to include all Aegis
ship variants for cruisers and destroyers.  This market totals over 80 ships
plus shore-based facilities.  Future potential markets include foreign navies
and other U.S. Navy ships.  This maintenance and training tool allows U.S.
Navy personnel to engage cutting-edge technology to reduce maintenance time
and enhance skill levels of shipboard personnel.

We also have been notified by the U.S. Navy that we have been selected for a
Phase II SBIR contract award to continue our research and development into the
potentially detrimental interaction between commercial WLANs (e.g., Wi-Fi) and
U.S. Navy radar systems.  Under the SBIR topic entitled Radar Wireless
Spectral Efficiency (RWSE), Mikros will be evaluating the introduction of Wi-
Fi networks onboard U.S. Navy carriers and developing a CVN Wi-Fi network
planning tool.

The statements contained in this Annual Report on Form 10-KSB that are not
historical facts are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995).  Such forward-looking
statements may be identified by, among other things, the use of forward-
looking terminology such as ?believes,? ?expects,? ?may,? ?will,? ?should? or
?anticipates? or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. These forward-looking statements, such as statements regarding
anticipated future revenues, products under development, size of markets for
products under development and other statements regarding matters that are not
historical facts, involve predictions.  Our actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements contained in this Annual Report on Form
10-KSB.  Factors that could cause actual results, performance or achievements
to vary materially include, but are not limited to: changes in business
conditions, changes in our sales strategy and product development plans,
changes in the radio digital data marketplace, competition between us and
other companies that may be entering the radio digital data marketplace,
competitive pricing pressures, market acceptance of our products under
development, and delays in the development of products.


Compliance with Sarbanes-Oxley Requirements
-------------------------------------------

Section 404 of the Sarbanes-Oxley Act of 2002 requires management to perform
an evaluation of its internal control over financing reporting and have our
independent auditors attest to such evaluation as of December 31, 2007.  We
have been actively preparing for the implementation of this requirement by,
among other things, establishing an ongoing program to document, evaluate and
test the systems and processes necessary for compliance.  While we anticipate
that we will be able to comply on a timely basis with these requirements,
unforeseen delays may occur which could prevent us from achieving timely
compliance.  If we fail to complete our evaluation on a timely basis and in a
satisfactory manner, or if our external auditors are unable to attest on a
timely basis to the adequacy of our internal control, we may be subject to
additional scrutiny surrounding our internal control over financial reporting.

2005 vs. 2004
-------------

Total contract revenues in 2005 were approximately $1,550,000 compared to
$1,044,000 in 2004, an increase of 48.5%. The increase was due to increased
billings on the Phase III SBIR contract offset, in part, by lower billings on
the Phase II SBIR contract. Additionally and as a result of these contracts,
our cost of sales increased from approximately $714,000 in 2004 to
approximately $933,000 in 2005, an increase of approximately 30.7%.

In 2005 and 2004, contract revenues were derived entirely from SBIR contracts.

General and administrative expenses were approximately $305,000 in 2005
compared to $191,000 in 2004. These expenses increased due to higher costs
incurred for administrative and bid and proposal salaries and related costs.
No interest expense was incurred in 2005 or 2004.

Engineering expenses were approximately $230,000 in 2005 compared to
approximately $114,000 in 2004. There were higher engineering costs for the
year ended December 31, 2005 due to the SBIR Phase III contract and rental
costs associated with the lease of the research and development office located
in Fort Washington, Pennsylvania.

In 2004, we recognized other income of approximately $67,000 as the result of
changing our estimates associated with certain obligations. No such amounts
were recorded in 2005.

We realized net income of approximately $135,000 in 2005 compared to net
income of approximately $92,000 in 2004, an increase due in part to a deferred
tax benefit of approximately $65,000 and the implementation of the Phase III
SBIR contract.  Such increase was offset by the near completion of the Phase
II SBIR contract and the non-recurring nature of our other income recognized
in 2004.  Excluding other income recognized in 2004, net profit in 2005
increased by approximately $110,000 compared to 2004.

Liquidity and Capital Resources
-------------------------------

Since our inception, we have financed our operations through debt, private and
public offerings of equity securities and cash generated by operations.

In 2005, we had cash flow provided by operations of approximately $32,000
compared to cash flow provided by operations of approximately $85,000 in 2004
primarily resulting from the change in estimates related to certain
obligations previously discussed. There was working capital of approximately
$116,000 as of December 31, 2005 as compared to a working capital of
approximately $43,000 at December 31, 2004.

We maintain a line of credit facility for maximum borrowings of up to $34,000.
Outstanding balances on this line of credit accrue interest at the bank?s
published prime rate.  This line matures in October 2006 and payment has been
personally guaranteed by our President.  There were no outstanding amounts
under this line of credit at December 31, 2005.

We anticipate considering the sale of additional debt and equity securities
under appropriate market conditions, alliances or other partnership agreements
with entities interested in supporting our government programs, or other
business transactions which would generate resources sufficient to assure
continuation of our operations and research programs.  There can be no
assurance, assuming we successfully raise additional funds or enter into
business alliances, that we will achieve profitability or positive cash flow.
If we are unable to obtain additional adequate financing or enter into such
business alliances, management will be required to sharply curtail our
operations.

Item 7.	Financial Statements
--------------------------------

The financial statements required to be filed pursuant to this Item 7 are
appended to this report on Form 10-KSB beginning on page F-1.


Item 8.	Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
------------------------------------------------------------------------------

On February 17, 2004, we accepted the resignation of Lipman, Selznick &
Witkowski ("Lipman") as our independent auditors and engaged the services of
Beard Miller Company LLP as independent auditors.  The change in auditors was
effective February 17, 2004.  This determination was approved by our board of
directors.  Beard Miller Company LLP audited our financial statements for the
fiscal years ended December 31, 2005, 2004 and 2003.  During our two fiscal
years ended December 31, 2002 and 2001, there were no disagreements between
Mikros and Lipman on any matter of accounting principles or practices,
financial disclosure, or auditing scope or procedure, which disagreements, if
not resolved to Lipman's satisfaction, would have caused Lipman to make
reference to the subject matter of the disagreement in connection with its
reports. Lipman's prior audit report on our financial statements for each of
the two fiscal years in the period ended December 31, 2002 and 2001 contained
no adverse opinion or disclaimer of opinion and was not modified or qualified
as to uncertainty, with the exception of a going concern matter, audit scope,
or accounting principles.


Item 8A. Controls and Procedures
--------------------------------

Based on his evaluation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31,
2005, our president (principal executive officer and principal financial
officer) has concluded that our disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC?s rules and forms and are operating in an effective manner.

There have not been any changes in our internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that
occurred during the Company?s most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


Item 8B.  Other Information
---------------------------

None.



PART III

Item 9.  Directors and Executive Officers of the Company
---------------------------------------------------------

The current members of the Board of Directors of the Company are as follows:

      				       Served as a		Positions with
Name				Age		Director Since		the Company

Paul G. Casner		68			2002			Director


Thomas C. Lynch	 	63 			1997			Director

Thomas J. Meaney	 	71			1986			President
       and Director

Wayne E. Meyer		79			1988			Chairman of the
       Board and
       Director

Tom L. Schaffnit		59			2000			Director

The principal occupation and business experience, for at least the past five
years, of each current director and named executive is as follows:

Paul G. Casner, Jr. has been a director of the Company since May 2002. From
1999 to March 2005, Mr. Casner served as Executive Vice President and Chief
Operating Officer of DRS Technologies, Inc.  From 1994 to 1998, Mr. Casner
served as President of the Electronic Systems Group of DRS Technologies.
Before joining DRS Technologies, Mr. Casner was the Chairman and Chief
Executive Officer of Technology Applications and Service Company.  Mr. Casner
has over 35 years of Defense Industry experience, including several senior
positions in Business Management, Technical Management, Strategic Planning and
Business Development. He is a member of the Naval Reserve Association and is a
Commodore of the Navy League of the United States, in addition to other
professional affiliations. Mr. Casner is also a director of ACE-COMM
Corporation.

Thomas C. Lynch has been a Director of the Company since February 1997. Mr.
Lynch is currently Senior Vice President of The Staubach Company. From August
2000 to November 2001, Mr. Lynch served as Senior Vice President of Safeguard
Scientifics, Inc. From 1998 to August 2000, he was Executive Vice President
and later became President and Chief Operating Officer of CompuCom Systems,
Inc. Prior to joining CompuCom, Mr. Lynch had been Senior Vice President of
Safeguard Scientifics, Inc., a position he held from November 1995.  Mr. Lynch
serves as a Director on the following boards:  Pennsylvania Eastern Technology
Council, Epitome Systems, Telkonet, Armed Forces Benefit Association, Catholic
Leadership Institute, National Center for the American Revolution at Valley
Forge and USO World Board of Governors.  He has served as President of Valley
Forge Historical Society and Chairman of the Cradle of Liberty Council, Boy
Scouts of America. He currently serves as a trustee of the US Naval Academy
Foundation.



Thomas J. Meaney has been a Director of the Company since July 1986 and was
Chairman of the Board from June 1997 to February 1999. He was appointed
President in June 1986 and continued to serve until February 1997.  On
September  30, 1998, he was reappointed President of the Company.  From
February 1983 to June 1986, Mr. Meaney was Senior Vice President and Director
of Robotic Vision Systems Incorporated ("RVSI"), a manufacturer of robotic
vision systems.  Mr. Meaney served as a Director of RVSI until 1991 when he
resigned from the post.  Prior to 1983 and for more than five years, he was
Vice President - Business Development, International of Norden Systems and
President - Norden Systems Canada, both divisions of United Technologies
Corporation and developers of computer and electronic products and systems.
He presently owns his own defense consulting company with offices in
Arlington, Virginia and Chadds Ford, Pennsylvania.  Mr. Meaney is also a
director of Ocean Power Technologies, Inc.

Wayne E. Meyer has been a Director of the Company since April 1988, Chairman
of the Board 1990 to 1997, and re-elected as Chairman in February 1999. From
1986 to present, he has been the Founder and President of the W.E. Meyer
Corporation, based in Arlington, Virginia. The company engages in consulting
and advice to industry, government and academic institutions in matters of
systems engineering, project management, strategic planning and military and
electronic designs.  He enlisted in the U.S. Navy as an Apprentice Seaman in
1943 and retired in 1985 in the rank of Rear Admiral.  As a national authority
on Ballistic Missile Defense, he serves on numerous boards, groups and panels.

Tom L. Schaffnit has been a Director of the Company since June 2000.  Since
March 1999, he has been President of Schaffnit Consulting, Inc., a technology-
related management consulting company specializing in wireless data
communications and automotive telematics.  He was President of CUE Data
Corporation from February 1997 to March 1999, responsible for creating and
implementing new datacasting services on a nationwide FM subcarrier paging
network.  Previously, he served as a Senior Manager with Deloitte & Touche
Consulting Group, and as Director with Nordicity Group (since acquired by
PricewaterhouseCoopers). Mr. Schaffnit remains actively involved in the
evolution of wireless technology, and is co-author of the book "The
Comprehensive Guide to Wireless Technologies".

Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, officers and
stockholders who beneficially own more than 10% of any class of our equity
securities registered pursuant to Section 12 of the Exchange Act to file
initial reports of ownership and reports of changes in ownership with respect
to our equity securities with the SEC.  All reporting persons are required by
SEC regulation to furnish us with copies of all reports that such reporting
persons file with the SEC pursuant to Section 16(a).
Based solely on our review of the copies of such forms received by us and upon
written representations of such reporting persons, we believe that all
reporting persons are in compliance with all Section 16(a) filing requirements
applicable to such reporting persons.

Information Concerning the Board of Directors and Corporate Governance

Our board of directors held a total of three meetings during 2005. No director
attended fewer than 75% of the meetings held by the board of directors, except
for Thomas C. Lynch and Wayne E. Meyer.

Upon consideration of the criteria and requirements regarding director
independence set forth in the rules of the National Association of Securities
Dealers, Inc. ("NASD"), our board of directors has determined that a majority
of its members are independent.

In March 2004, the board of directors formed an Audit Committee; however, we
did not establish a compensation committee or a nominating committee. The full
board of directors continues to perform the functions of a compensation
committee and a nominating committee.

The members of the Audit Committee are Thomas C. Lynch, Wayne E. Meyer and Tom
L. Schaffnit.  The board of directors has determined that each of such members
is independent as independence is defined in NASD Rule 4200(a)(15) and Rule
10A-3(b)(1) of the Exchange Act and that the Audit Committee composition will
meet the requirements of NASD Rule 4350(d)(2).

The Audit Committee oversees and monitors management's and the independent
outside auditors' participation in the accounting and financial reporting
processes and the audits of the financial statements of the Company.  The
Audit Committee has the responsibility to appoint, compensate, retain and
oversee the work of the outside independent auditors and to consult with the
independent auditors and the appropriate officers of the Company on matters
relating to outside auditor independence, corporate financial reporting,
accounting procedures and policies, adequacy of financial accounting and
operating controls, and the scope of audits. The Audit Committee is governed
by an Audit Committee Charter, which was adopted on March 10, 2004.

We are currently reviewing a written code of business conduct and ethics
that will apply to our principal executive officer and principal financial and
accounting officer, or persons performing similar functions. We anticipate
adopting such code of business conduct and ethics during the second quarter of
2006.  We intend to disclose any amendments to, or waivers from, our code of
business conduct and ethics that are required to be publicly disclosed
pursuant to SEC rules by filing such amendment or waiver with the SEC.

Board Compensation
------------------

Each member of our board of directors receives reimbursement of expenses
incurred in connection with his or her services as a member of our board.






The following table identifies the current executive officers of the Company:


            Capacities in 	         In Current
Name				Age		Which Served		Position Since
----------------        ---         -------------           --------------

Thomas J. Meaney	 	71	      President  			  September 1998
and Director

David C. Bryan		51		Executive Vice President  March 2002
					      Chief Operating Officer

Patricia A. Kapp	 	39		Secretary and		  September 1998
Treasurer


Item 10.  Executive Compensation
--------------------------------

The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to
the Company's Chief Executive Officer and the four most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000 (collectively, the "Named Executives") during the years ended
December 31, 2003, 2004 and 2005.


	SUMMARY COMPENSATION TABLE





Annual
Compensation(1)

	Name and Principal Position

Year

Salary ($)
                  (a)
(b)
   (c)

Thomas J. Meaney, President

2005
2004
2003

  $52,800.00
  $14,025.00
      375.00


David C. Bryan, Executive Vice President

2005
2004
2003

  $156,000.00
    96,712.50
    20,425.00


(1)	The costs of certain benefits are not included because they did not
exceed, in the case of each Named Executive, the lesser of $50,000 or 10% of
the total of annual compensation reported in the above table.




Item 11.  Security Ownership of Certain Beneficial Owners and
          Management
------------------------------------------------------------------------

The following is certain information about our equity compensation plans
as of December 31, 2005:


                              Equity Compensation Plan Information

              (a)				(b)				(c)
              ---------------------------------------------------------------
										Number of securities
              Number of securities to					remaining available for
		  be issued upon		Weighted-average		future issuance under
                 exercise of outstanding	exercise price of		equity compensation
options, warrants and  outstanding options,	plans (excluding
                  rights		        warrants and rights		securities reflected in
										column (a))
Plan Category
------------------------------------------------------------

Equity compensation plans
 approved by
 security holders	    391,818		$0.1914			   		   -

Equity compensation plans
 not approved by
 security holders		-		   -		    			   -

         		--------------		------------------		------------------

         Total		    391,818		$0.1914			                  -
  ==================             ==================




Common Stock

The following table sets forth certain information, as of March 22, 2006 with
respect to holdings of our common stock by (i) each person known by us to be
the beneficial owner of more than 5% of the total number of shares of common
stock outstanding as of such date, (ii) each of the current directors and
Named Executives, and (iii) all current directors and officers as a group.

  					 Amount and Nature
	   			          of Beneficial	       Percent
Name of Beneficial Owner	     Ownership(1)		Of Class


(i) Certain Beneficial Owners:

    Princeton Valuation Consultants, 2,920,050(2)         8.9
    L.L.C.
    5 Vaughn Drive
    Princeton, New Jersey 08540

Current Directors and Named Executives:


Paul G. Casner				 1,474,200(3)	   4.5

Thomas C. Lynch			       1,474,200(3)	   4.5

Thomas J. Meaney				 6,649,642(4)       19.1

Wayne E. Meyer			 	 4,263,450(5)       12.9

Tom L. Schaffnit				 2,174,654(6)	   6.6

All Current Directors and Officers as a Group
(seven persons)		            16,629,146(7)       42.4


*	Less than 1%

(1)	Except as otherwise indicated, all shares are beneficially owned and the
sole investment and voting power is held by the persons named.



(2)	Includes 202,500 shares issuable upon conversion of Convertible
Preferred Stock and 695,883 shares issuable upon conversion of Series B
Convertible Preferred Stock.

(3)   Includes 1,091,800 shares issuable upon the exercise of warrants.

(4)	Includes 50,000 shares issuable upon conversion of Convertible Preferred
Stock, 1,949,775 shares issuable upon conversion of Series B Convertible
Preferred Stock and 1,091,800 shares issuable upon the exercise of
warrants.

(5)	Includes 30,000 shares issuable upon conversion of Series B Convertible
Preferred Stock, 100,000 shares issuable upon the exercise of options
and 1,091,800 shares issuable upon the exercise of warrants.

(6)   Includes 341,395 shares issuable upon the exercise of options and
      1,091,800 shares issuable upon the exercise of warrants.

(7)	See Notes 3 through 6.  Also includes 30,000 shares issuable upon the
	exercise of options held by other officers.






Convertible Preferred Stock

The following table sets forth certain information, as of March 22, 2006, with
respect to holdings of our Convertible Preferred Stock by (i) each person
known by us to be the beneficial owner of more than 5% of the total number of
shares of our Convertible Preferred Stock outstanding as of such date, (ii)
each of the current directors and Named Executives, and (iii) all current
directors and officers as a group.

           Amount and Nature
     					     of Beneficial	 Percent
Name of Beneficial Owner	     Ownership(1)     	 of Class

(i)	Certain Beneficial Owners:

Princeton Valuation Consultants         202,500         79.4
  L.L.C.
5 Vaughn Drive
Princeton, New Jersey 08540

(ii)	Current Directors and Named Executives:

	Paul G. Casner			   --			   --

Thomas C. Lynch				   --			   --

Thomas J. Meaney				   50,000		  19.6

Wayne E. Meyer				   --			   --

Tom L. Schaffnit				   --                --


(iii)	All Current Directors and Officers as a Group
(seven persons)			        50,000	        19.6


(1)	Except as otherwise indicated, all shares are beneficially owned and the
sole investment and voting power is held by the persons named.



Series B Convertible Preferred Stock

The following table sets forth certain information, as of March 22, 2006,
with respect to holdings of our Series B Convertible Preferred Stock by (i)
each person known by us to be the beneficial owner of more than 5% of the
total number of shares of our Series B Convertible Preferred Stock outstanding
as of such date, (ii) each of the current directors and Named Executives, and
(iii) all current directors and officers as a group.

           Amount and Nature
       					of Beneficial	      Percent
Name of Beneficial Owner	        Ownership(1)           of Class

(i)	Certain Beneficial Owners:

The Mercantile & General 		   91,342			 8.3
Reinsurance Company, PLC
Moorfields House
Moorfields
London EC2Y 9AL

Princeton Valuation Consultants,      231,961			21.0
 L.L.C
5 Vaughn Drive
Princeton, New Jersey 08540

(ii)	Current Directors and Named Executives:

Paul G. Casner				    --			 --

Thomas C. Lynch				    --		       --

Thomas J. Meaney				  649,925			59.0

Wayne E. Meyer				   10,000			 *

Tom L. Schaffnit				    --			 --

(iii)	All Current Directors and Officers as a Group
(seven persons)				   659,925	     		59.0

*	Less than 1%

(1)	Except as otherwise indicated, all shares are beneficially owned and the
sole investment and voting power is held by the persons named.







Redeemable Series C Preferred Stock

The following table sets forth certain information, as of March 22, 2006, with
respect to holdings of our Redeemable Series C Preferred Stock by (i) each
person known by us to be the beneficial owner of more than 5% of the total
number of shares of our Redeemable Series C Preferred Stock outstanding as of
such date, (ii) each of the current directors and Named Executives, and (iii)
all current directors and officers as a group.

       Amount and Nature
  						of Beneficial	  	Percent
Name of Beneficial Owner	        Ownership(1)           of Class

(i)	Certain Beneficial Owners:

(ii)  Current Directors and Named Executives:

Paul G. Casner				  --			   --

Thomas C. Lynch				  --			   --

Thomas J. Meaney				 5,000		  100.0

Wayne E. Meyer				  --			   --

Tom L. Schaffnit				  --			   --

(iii) All Current Directors and Officers as a Group
(seven persons)				 5,000		  100.0


* Less than 1%

(1) 	Except as otherwise indicated, all shares are beneficially owned and the
	sole investment and voting power is held by the persons named.



Series D Preferred Stock

The following table sets forth certain information, as of March 22, 2006, with
respect to holdings of our Series D Preferred Stock by (i) each person known
by us to be the beneficial owner of more than 5% of the total number of shares
of our Series D Preferred Stock outstanding as of such date, (ii) each of the
current directors and Named Executives, and (iii) all current directors and
officers as a group.


       Amount and Nature
   						of Beneficial		Percent
Name of Beneficial Owner		   Ownership(1)     	of Class

(i)	Certain Beneficial Owners:

Princeton Valuation Consultants,          138,000	      20.0
 L.L.C.
5 Vaughn Drive
Princeton, New Jersey 08540

Frederick C. Tecce				138,000		20.0
c/o Mikros Systems Corporation
707 Alexander Road, Bldg 2, Suite 208
Princeton, New Jersey 08540

JoAnne E. Burns                            69,000		10.0
c/o Mikros Systems Corporation
707 Alexander Road, Bldg 2, Suite 208
Princeton, New Jersey 08540

George W. Taylor					 69,000           10.0
c/o Mikros Systems Corporation
707 Alexander Road, Bldg 2, Suite 208
Princeton, New Jersey 08540

(ii) Current Directors and Named Executives:

Paul G. Casner					--			 --

Thomas C. Lynch					--		       --

Thomas J. Meaney					138,000		20.0

Wayne E. Meyer					138,000		20.0

Tom L. Schaffnit					--			 --


(iii)	All Current Directors and Officers as a Group
(seven persons)					276,000	      40.0


(1)	Except as otherwise indicated, all shares are beneficially owned and the
sole investment and voting power is held by the persons named.










Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

None.




Item 13.  Exhibits
-----------------------------------------------------------------


Note:  All exhibits that were filed as exhibits (i) to our Registration
Statement on Form S-18, File No. 2-67918-NY, as amended, or (ii) if so
specified, to previously filed Annual Reports on Form 10-KSB or to previously
filed Current Reports on Form 8-K, are indicated by a parenthesis setting
forth the exhibit number by which the exhibits were identified in said
Registration Statement and are hereby incorporated by reference.

      3.1	Certificate of Incorporation [Exhibit 2(I)].
      3.2  	By-laws [Exhibit 2(II)].
      3.3   Form of Certificate of Amendment to Certificate of
           	Incorporation [Exhibit 2(III)].
      3.4  	Form of Certificate of Amendment of Incorporation with
           	respect to increase of authorized shares [Exhibit IV)].
      3.5   Certificate of Designations of Series B Preferred Stock and Series
C Preferred Stock [Exhibit 4.1 to Form 8-K filed September 12,
1988].
      3.6  	Certificate of Designations of Serial Preferred Stock
           	[Exhibit 4.16 to Form 10-K for 1993 filed March 30, 1994].
     10.1   1988 Restricted Stock Award Plan. [Exhibit 10.20 to
           	Form 10-K for 1988 filed May 15, 1989].
     10.2  	Form of Restricted Stock Agreement. [Exhibit 10.21 to
           	Form 10-K for 1988 filed May 15, 1989].
     10.3  	Incentive Stock Option [Exhibit 10(c)(III) to Form 10-K
           	for the year ended December 13, 1981].
     10.4  	Amended and Restated Stock Option Plan (1988)[Exhibit
           	10.27 to Form 10-K for 1989 filed April 3, 1990].
     10.5  	Form of 1996 Warrant with Schedule of Warrants.
     		[Exhibit 10.24 to Form 10-K filed February 28,1997].
     10.6  	Registration Statement of shares included in the
 	     	Incentive Stock Option Plan (1981)and the 1992
     		Incentive Stock Option Plan [Form S-8/S-3 filed April 25,1997].
     10.7   Contribution Agreement dated as of January 28, 2003.
       between the Company and Paul G. Casner, Thomas C. Lynch, Thomas J.
Meaney, Wayne E. Meyer and Tom L. Schaffnit [Exhibit 10.24 to Form
10-KSB filed March 31, 2003].
31.1	Certification of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
     32.1   Certification of principal executive officer and principal
            financial officer pursuant to Section 906 of the Sarbanes-Oxley
            Act of 2002, 18 U.S.C. 1350.



Item 14. Principal Accountant Fees and Services
-----------------------------------------------

Audit Fees
----------
We have engaged Beard Miller Company LLP for the audit of our financial
statements for the years ended December 31, 2005 and 2004 and the reviews of
the financial statements included in each of our quarterly reports on Form 10-
QSB during the years ended December 31, 2005 and 2004 for a fee of $25,500 and
$18,008, respectively.

Audit-Related Fees
-----------------

There were no fees billed by our independent accountants for audit-related
services during the fiscal years ended December 31, 2005 and 2004.


Tax Fees
--------

There were no fees billed by our independent accountants for tax fees for the
years ended December 31, 2005 and 2004.


All Other Fees
--------------

There were no fees billed by our independent accountants for non-audit
services during the years ended December 31, 2005 and 2004.


Audit Committee Pre-Approval Policies and Procedures
----------------------------------------------------

All auditing services and non-audit services (other than the de minimis
exceptions provided by Exchange Act) provided to us by our independent
accountants must be pre-approved in the future by the Audit Committee. Any
future Audit-Related Fees and Tax Fees will be pre-approved by the Audit
Committee.






						SIGNATURE PAGE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                              MIKROS SYSTEMS CORPORATION
                              --------------------------
                                     (Registrant)



Dated: March 31, 2006
                          By: /s/ Thomas J. Meaney
                          --------------------------------
        Thomas J. Meaney, President


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the date indicated.


Signatures                                   Date


/s/ Wayne E. Meyer
---------------------------		   	   March 31, 2006
Wayne E. Meyer, Chairman


/s/ Paul G. Casner
---------------------------		   	   March 31, 2006
Paul G. Casner, Director


/s/ Thomas C. Lynch                    	   March 31, 2006
------------------------------
Thomas C. Lynch, Director


/s/  Thomas J. Meaney
------------------------------		   March 31, 2006
Thomas J. Meaney, Director


/s/  Tom L. Schaffnit                        March 31, 2006
------------------------------
Tom L. Schaffnit, Director






       Report of Independent Registered
       Public Accounting Firm




To the Board of Directors and Shareholders of
MIKROS SYSTEMS CORPORATION
Princeton, New Jersey

We have audited the accompanying balance sheet of Mikros Systems Corporation
as of December 31, 2005, and the related statements of operations,
shareholders? equity, and cash flows for the years ended December 31, 2005 and
2004.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company?s internal
control over financial reporting.  Accordingly, we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mikros Systems Corporation as
of December 31, 2005, and the results of its operations and its cash flows for
the two years then ended in conformity with accounting principles generally
accepted in the United States of America.


       /s/ Beard Miller Company LLP



Beard Miller Company LLP
Reading, Pennsylvania
March 3, 2006












       MIKROS SYSTEMS CORPORATION
                              BALANCE SHEET

                                      DECEMBER 31,
         ASSETS                           2005
------------------------------       ------------

CURRENT ASSETS
  Cash                                $  110,154

  Receivables on Government Contracts    102,359

  Other Current Assets                    16,893
                                     ------------
TOTAL CURRENT ASSETS                     229,406
                                     ------------

  Patents						 5,330

  Less: Accumulated Amortization          (1,333)
                                     ------------
                                           3,997


  Equipment                               11,524

  Less: Accumulated Depreciation          (2,267)
 						 ------------
  							 9,257
                                     ------------

  Deferred Tax Asset				65,000
                                     ------------

TOTAL ASSETS				 $   307,660
                                     ============

	See Notes to Financial Statements



























				MIKROS SYSTEMS CORPORATION
                           BALANCE SHEET (continued)


         LIABILITIES AND                            DECEMBER 31,
 SHAREHOLDERS'  EQUITY (DEFICIENCY)                      2005
----------------------------------                  -----------
CURRENT LIABILITIES

  Taxes Payable					   $   5,200
  Accrued Payroll and Payroll Taxes                  $  50,438
  Accounts Payable                                      58,171
                                                   ------------
TOTAL CURRENT LIABILITIES                              113,809
                                                   ------------

  Long-term Liabilities				      15,788
                                                   ------------

TOTAL LIABILITIES					     129,597

REDEEMABLE SERIES C PREFERRED STOCK
  par value $.01 per share, authorized 150,000
  shares, issued and outstanding 5,000 shares
                                                        80,450
                                                    -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)


  Preferred Stock, convertible, par value $.01
  per share, authorized 2,000,000 shares, issued
  and outstanding 255,000 shares
                                                         2,550

  Preferred Stock, Series B convertible, par value
  $.01 per share, authorized 1,200,000 shares, issued
  and outstanding 1,102,433 shares                      11,024

  Preferred Stock, Series D, par value $.01 per share
  690,000 shares authorized, issued and outstanding      6,900

  Common Stock, par value $.01 per share,
  authorized 60,000,000 shares, issued and
  outstanding 31,766,753 shares
	                          	                   317,668

  Capital in excess of par value                    11,422,976

  Accumulated Deficit                              (11,663,505)
                                                   ------------
TOTAL SHAREHOLDERS' EQUITY    	          	      97,613
                                                   ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
   DEFICIENCY				              $    307,660
                                                   ============

	See Notes to Financial Statements























                       MIKROS SYSTEMS CORPORATION
                         STATEMENTS OF OPERATIONS

				  		Years Ended December 31,
                                        2005          2004
                                    ------------   -----------

 Contract Revenues			$  1,549,669   $1,043,714

 Cost of sales				     932,717      714,451
                                    ------------   -----------

 Gross margin				     616,952	329,263
                                    ------------   -----------
 Expenses
   Engineering				     229,610	113,832
   General and Administrative            305,317      190,884
                                     ------------  -----------
   Total expenses                        534,927      304,716
                                     ------------  -----------

 Income from operations       	      82,025       24,547

 Other Income:
   Interest                        		     0           36
   Other Income                                0       67,298
                                     ------------  -----------
 Net income before income taxes           82,025       91,881

 Income taxes 				     (52,500)          0
						 ------------  -----------

 Net income                           $  134,525    $  91,881
                                     ============  ===========

Basic and diluted earnings
   per share 			 	  $     0.00    $    0.00
                                     ============  ===========
Weighted average number of shares
 outstanding                          31,766,753    31,566,753
                                    ============  =============

See Notes to Financial Statements




















MIKROS SYSTEMS CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 2005 AND 2004



$0.01 Par Value
1951:  -------------------------------------------------------------
 Par     Number     Par     Number       Par
1953:  of shares   Value   of shares  Value   of shares    Value
1954:  --------------------------------------------------------------

1956: Balance, January 1, 2004
                     255,000  $2,550  1,102,433  $11,024  690,000  $6,900

Net loss

1960:   ----------  -------  ---------  -------   --------- --------
1961:  Balance,December 31, 2004
                     255,000  2,550 1,102,433  11,024  690,000  6,900


Net income
---------- ------  ----------  -------   --------- --------
Balance, December 31, 2005
                      255,000   $2,550   1,102,433  $11,024    690,000   $6,900
1967:    ========== ======  =========-  =======   ========= ========


                                       Capital in
    Common Stock       excess of     Accumulated
     $0.01 Par Value     Par Value       Deficit	     Total
      ------------------------------------------------------------------
                               Number      Par
                              of shares   Value
      ------------------------------------------------------------------

Balance,January 1, 2004
         31,766,753  $317,668 $ 11,422,976   $(11,889,912)    (128,794)

Net Income
                      		                91,882        91,882
----------  --------  -----------   ------------    ---------
Balance,December 31, 2004
          31,766,753  $317,668   11,422,976    (11,798,030)     (36,912)


Net Income						                      134,525      134,525
----------  --------- -----------   -------------    ---------
Balance, December 31, 2005
           31,766,753   $317,668 $ 11,422,976   $(11,663,505)   $  97,613
1992:  ==========  ========  ===========   =============   ==========

                                  See Notes to Financial Statements

























MIKROS SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS



                                                Years Ended December 31,
                                                    2005         2004
                                             ------------    -----------
Cash Flow From Operating Activities:
 Net income                                  $   134,525     $    91,881
 Adjustments to reconcile net income
 to net cash provided by operating activities:
 Depreciation and Amortization                      2,663          5,100
 Impairment loss on fixed assets and patents            0          6,836

Net Changes in Operating Assets and Liabilities
  Accounts Receivable                              69,782        (121,593)
  Other Current Assets                            (12,812)             48
  Accounts Payable                                (22,818)         37,707
  Accrued Payroll and Payroll Taxes                 3,412             848
  Accrued expenses and other liabilities          (77,809)         64,068
  Deferred Taxes    					  (65,000)			0
                                               -----------      ---------

Net Cash Provided By operating activities          31,943	       84,895

Cash Flow From Investing Activities:

   Purchase of Equipment				  (10,182)             0
   Costs associated with patent development        (5,330)             0
                                               -----------      ----------

Net Cash Used In Investing Activities:            (15,512)             0

                                               -----------      ----------
Net Increase in Cash                               16,431          84,895

Cash, Beginning of year 	                      	   93,723            8,828
                                     		      -----------      ----------
Cash, end of year                            $    110,154    $    93,723
                                             =============   =============



See Notes to Financial Statements



				   MIKROS SYSTEMS CORPORATION
                         NOTES TO FINANCIAL STATEMENTS


NOTE 1 -  THE COMPANY
---------------------

Mikros Systems Corporation (the ?Company?) was founded in 1978 in Albany, New
York.  The Company's headquarters are located at 707 Alexander Road, Suite
208, Princeton, New Jersey; telephone (609)987-1513.

Initially, the Company supplied technology for military applications. The
related knowledge base and proprietary technology developed was recognized as
applicable to the rapidly expanding wireless business in the commercial
sector.

In 1995, the Company's Board of Directors decided the Company should pursue
commercial contracts which would employ advanced techniques to enhance the
data transmission rates in the AM and FM radio spectrum. Since the Company had
limited resources, it was decided to pursue the AM technology.

In 1996, Safeguard Scientifics (Delaware), Inc., (Safeguard) invested
$1,000,000 in the Company in exchange for 10% ownership in the Company.  At
the same time, Mobile Broadcasting Corporation (MBC) was created to exploit
the AM radio technology, particularly in mobile or portable platforms such as
automobiles.  Initially, Safeguard invested $1,000,000 in MBC for 75%
ownership and the Company owned the remaining 25%.  The Company's share in MBC
was subsequently increased to 50%, as a result of the Company's investment in
the development of this technology.

Data Design and Development Corporation (3D) was founded in 1996 as a part of
the Company's agreement with Safeguard Scientific and retained ownership of
the AM and FM technology.  3D had licensed the FM technology rights in North
America to the Company and the AM technology rights in North America to MBC.
Mikros owned 2/3 of 3D and Safeguard owned the remaining 1/3.

In November 2002, Safeguard Scientifics sold its equity interests in MBC, 3D
and the Company to Paul G. Casner, Thomas Lynch, Thomas J. Meaney, Wayne E.
Meyer and Tom L. Schaffnit, each of whom is a Director of the Company.  Mr.
Meaney also is President, Chief Executive Officer and Chief Financial Officer
of the Company.  Each of such individuals acquired from Safeguard Scientifics
(Delaware), Inc. 382,400 shares of the Company?s Common Stock and warrants to
purchase 1,091,800 shares of Common Stock.  In January 2003, Messrs. Casner,
Lynch, Meaney, Meyer and Schaffnit each contributed the equity interests of
MBC and 3D to the capital of the Company.  Upon this contribution, MBC and 3D
became wholly owned subsidiaries of the Company.  The Company subsequently
dissolved MBC and 3D during 2003.

In May 2002, the Company entered into a phase I research contract with the
Naval Surface Warfare Center in Dahlgren, Virginia.  This contract was
designed to help fund the development of a certain technology to be utilized
by the U.S. Department of Defense.  This contract provided for research
funding of approximately $100,000 in 2002 and 2003.

In 2004 and 2003, the Company?s only revenues were generated from Phase I, II
and III research contracts with the Naval Surface Warfare Center in Dahlgren,
Virginia. The Phase II contract was entered into on August 8, 2003 and is
expected to continue through the first quarter of 2005.  The contract provided
for initial research funding of $150,000, which was later increased to
$600,000. The contract also provides for supplemental funding of up to
$250,000, at the option of the issuer. The Contract is a cost plus a fixed fee
contract and the Company is billing its actual costs on a bi-weekly basis.  As
of December 31, 2004, the Company had billed $930,000 under this phase II
contract.

In June 2004, the Company was awarded a Small Business Innovation Research
(SBIR) Phase I contract from the Office of Naval Research.  Valued at
approximately $100,000, the contract is for researching and evaluating
techniques to minimize interference between the U.S. Navy radar and wireless
communication systems.

In September 2004, the Company was awarded a Small Business Innovation
Research (SBIR) Phase III contract from the Naval Surface Warfare Center ?
Dahlgren, Virginia valued at approximately $2,400,000, the contract is to
complete the development and to begin initial production of an intelligent
test tool for Navy radars.  The Multi-Function Distributed Analysis Tool
(MFDAT) has been designed by the Company under the SBIR Phase II contract,
which began in August 2003.  As of December 31, 2005, the Company had billed
$1,512,328 under this Phase III contract.

On March 2, 2006, the Company announced that it had received additional
funding in the amount of $2.95M from The Department of the U.S. Navy for the
continuation of the development and production of the ADEPT? maintenance tool
for U.S. Navy surface combatants.  This modification will expand the
application of ADEPT? to include all Aegis ship variants for cruisers and
destroyers.  This market totals over 80 ships plus shore-based facilities.
Future potential markets include foreign navies and other U.S. Navy ships.
This maintenance and training tool allows U.S. Navy personnel to engage
cutting-edge technology to reduce maintenance time and enhance skill levels of
shipboard personnel.




NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------


Use of Estimates
----------------

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period.  Actual results could differ from those
estimates.


Accounts Receivable on Government Contract
------------------------------------------

Accounts receivable are stated at outstanding balances, less an allowance for
doubtful accounts, if necessary.  When necessary, the allowance for doubtful
accounts is established through provisions charged against operations.
Accounts deemed to be uncollectible are charged against the allowance and
subsequent recoveries, if any, are credited to the allowance.  The allowance
for doubtful accounts is maintained at a level considered adequate to provide
for losses that can be reasonably anticipated.  Management?s periodic
evaluation of the adequacy of the allowance is based on past experience,
agings of the receivables, adverse situations that may affect a customers?
ability to pay, current economic conditions and other relevant factors.  This
evaluation is inherently subjective as it requires estimates that may be
susceptible to significant change.  Unpaid balances remaining after the stated
payment terms are considered past due.  No allowance for doubtful accounts was
recorded at December 31, 2005.


Cash
----

Cash balances consist of balances that are immediately available to the
company and are held by financial institutions.  These balances may, at times,
exceed FDIC insured limits.


Equipment
---------

Equipment is stated at cost. Depreciation is computed using the straight-line
method based on estimated useful lives of 3 years. Depreciation expense
amounted to $1,330 and $5,100 for years ended December 31, 2005 and 2004,
respectively. During the fourth quarter of 2004 and based upon the review of
its fixed assets, the Company recorded an impairment charge of $6,836, which
was the remaining carrying value of certain assets that were believed to have
no further use to the Company.  This charge is included in the accompanying
statement of operations for the year ended December 31, 2004 as general and
administrative expenses.


Earnings per Common Share
-------------------------

The Company reports earnings per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), Earnings
Per Share.  SFAS No. 128 requires the presentation of basic and diluted
earnings per share in conjunction with the disclosure of the methodology used
in computing such earnings per share.  Basic earnings per share excludes the
dilutive effect of securities and other contracts and is computed by dividing
income available to common stockholders by the weighted average common shares
outstanding during the period.  Diluted earnings per share takes into account
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised and converted into common stock.

Stock Options
-------------

The Company has adopted Statement of Financial Accounting Standards No. 123
(SFAS No. 123), Accounting for Stock-Based Compensation, which requires
expanded disclosures of stock-based compensation arrangements.  SFAS No. 123
encourages, but does not require, compensation cost to be measured based on
the fair value of the equity instrument awarded. It allows the Company to
continue to measure compensation cost for these plans using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees. The Company
has elected to continue to recognize compensation cost based on the intrinsic
value of the equity instrument awarded to employees as prescribed in APB 25.
SFAS No. 123 requires company?s that continue to utilize APB 25 to make pro-
forma disclosures of net income and earnings per share as if the fair-value
method of accounting prescribed by SFAS No. 123 had been applied.  Management
has determined that proforma net income and earnings per share information is
not materially different than reported net income and earnings per share.






Revenue Recognition
-------------------

Revenues under the Phase I, Phase II, and Phase III contracts are recognized
when the Company incurs reimbursable costs under the contract.  During 2005
and 2004, all contract revenues were recognized on contracts with the Federal
Government.

Patents
-------

The Company has two patents covering digital signal processing technology and
our base scheme of implementing Link-11.  The Company also has developed and
continue to develop intellectual property (technology and data) under our SBIR
contracts. Under the ADEPT? development program, the Company has filed for
three technology patents dealing with maintenance procedure automation and
dynamic maintenance personnel training, and expects to file additional patents
in the near future. In 2005, the Company was amortized the costs of its
provisional patents in the amount of $1,333. These patent costs are being
amortized over their one-year legal life.


Income Taxes
------------

The Company accounts for its income taxes under the liability method
prescribed by SFAS No. 109, Accounting for Income Taxes.  Deferred tax assets
and liabilities are determined based on the difference between the financial
statement and the tax bases of assets and liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.
Deferred tax expense is the result of changes in deferred tax assets and
liabilities.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion of
the deferred tax asset will not be realized.

Deferred Rent
-------------

Rent expense under operating leases providing for rent abatements and fixed
non-contingent escalations is recognized on a straight-line basis over the
term of each individual underlying lease. The cumulative net excess of
recorded rent expense over lease payments made is reflected on the balance
sheet as deferred rent and is included within long-term accrued expenses.


Recently Issued Accounting Standards
------------------------------------

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, ?Accounting for Stock-Based Compensation,? and supersedes
APB Opinion No.25, ?Accounting for Stock Issued to Employees,? and its related
implementation guidance.  Statement No. 123(R) will require compensation costs
related to share-based payment transactions to be recognized in the financial
statements (with limited exceptions).  The amount of compensation cost will be
measured based on the grant-date fair value of the equity or liability
instruments issued.  Compensation cost will be recognized over the period that
an employee provides service in exchange for the award.  This statement is
effective for the Company as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005.  The Company is
currently evaluating the impact that this standard will have on its result of
operations and financial position.

On April 14, 2005, the SEC adopted a new rule that amends the compliance dates
for FASB?s Statement of Financial Accounting Standards No. 123 (revised 2004),
?Share-Based Payment? (?SFAS No. 123R?). Under the new rule, Mikros is
required to adopt SFAS No. 123R in the first annual period beginning after
December 15, 2005 for small business issuers. The adoption of this
Interpretation did not have an impact on the Company?s financial condition or
results of operations.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (?SAB No.
107?), ?Share-Based Payment?, providing guidance on option valuation methods,
the accounting for income tax effects of share-based payment arrangements upon
adoption of SFAS No. 123(R), and the disclosures subsequent to adoption.  The
Company will adopt SFAS No. 123(R)and provide SAB No. 107 required disclosures
effective January 1, 2006, using the modified prospective method with no
restatement. The impact of future option or stock grants is dependent upon the
quantity and nature of future stock-based compensation grants.

In May 2005, FASB issued SFAS 154, ?Accounting Changes and Error
Corrections?. The Statement requires retroactive application of a voluntary
change in accounting principle to prior period financial statements unless it
is impracticable. SFAS 154 also requires that a change in method of
depreciation, amortization, or depletion for long-lived, non-financial assets
be accounted for as a change in accounting estimate that is affected by a
change in accounting principle.  SFAS 154 replaces APB Opinion 20, ?Accounting
Changes?, and SFAS 3, ?Reporting Accounting Changes in Interim Financial
Statements?. SFAS 154 will be effective for accounting changes and corrections
of errors made in fiscal years beginning after December 15, 2005.  Management
currently believes that adoption of the provisions of SFAS 154 will not have a
material impact on our financial statements.

In June 2005, FASB?s Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 05-6, ?Determining the Amortization Period of Leasehold Improvements
Purchased after Lease Inception or Acquired in a Business Combination? (?EITF
05-6?).  This guidance requires that leasehold improvements acquired in a
business combination or purchased subsequent to the inception of a lease be
amortized over the shorter of the useful life of the assets or a term that
includes required lease periods and renewals that are reasonably assured at
the date of the business combination or purchase.  This guidance is applicable
only to leasehold improvements that are purchased or acquired in reporting
periods beginning after June 29, 2005.  The Company is evaluating the impact,
if any, of EITF 05-6 on our financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, ?Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51.?  FIN 46 was revised in December 2003.  This
Interpretation provides new guidance for the consolidation of variable
interest entities (VIEs) and requires such entities to be consolidated by
their primary beneficiaries if the entities do not effectively disperse risk
among parties involved.  The Interpretation also adds disclosure requirements
for investors that are involved with unconsolidated VIEs.  The disclosure
requirements apply to all financial statements issued after December 31, 2003.
The consolidation requirements apply to companies that have interests in
special purpose entities for periods ending after December 15, 2003.
Consolidation of other types of VIEs is required in financial statements for
periods ending after December 15, 2004.  The adoption of this Interpretation
did not have an impact on the Company?s financial condition or results of
operations.


NOTE 3 ? STOCKHOLDERS? EQUITY
-----------------------------

SERIES B CONVERTIBLE PREFERRED STOCK
------------------------------------

Each share of Series B Preferred Stock is convertible into three shares of the
Company's common stock at a price of $.33 per share of common stock to be
received upon conversion and entitles the holder thereof to cast three votes
on all matters to be voted on by the Company's shareholders.  Upon any
liquidation, dissolution, or winding up of the Company, each holder of Series
B Preferred Stock will be entitled to be paid, after all distributions of
payments are made upon the Series C Preferred Stock and before any payment is
made upon the Company's Convertible Preferred Stock, an amount in cash equal
to $1.00 for each share of Series B Preferred Stock held, and such holders
will not be entitled to any further payment.


CONVERTIBLE PREFERRED STOCK
---------------------------

Each share of the convertible preferred stock can be redeemed at the
Company's option for $1 per share or can be converted into shares of
the Company's common stock.  Each share of preferred stock is
convertible into one share of common stock.  This conversion rate is
subject to adjustment in certain circumstances.  Upon any liquidation,
dissolution or winding up of the Company, each holder will be entitled
to their redemption price once shareholders of Series B and Series C
preferred stock have been fully paid.


SERIES D PREFERRED STOCK
------------------------

The Series D Preferred Stock provides for an annual cumulative dividend of
$.10 per share.  The shares are not convertible into any other class of stock
and are subject to redemption at the Company's option at any time at a
redemption price of $1.00 per share plus all unpaid cumulative dividends.
Upon liquidation, dissolution or winding up of the Corporation, each holder of
Series D Preferred Stock will be entitled to be paid, after all distributions
or payments are made upon the Corporation's Convertible Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock, an amount in cash
equal to the Redemption Price for each share of Series D Preferred Stock held
by such holder. The holders of Series D Preferred Stock will not be entitled
to any further payment.

As of December 31, 2005, there were dividends in arrears on shares of Series D
Preferred Stock of $828,000. During January 2006, the holders of the shares of
Series D Preferred Stock agreed to waive future accumulation of dividends,
effective as of January 1, 2006.  Such waiver does not affect dividends
accrued through December 31, 2005.





COMMON STOCK WARRANTS
---------------------

Certain shareholders hold warrants that give such shareholders the right to
purchase, at any time, 5,459,000 shares of the Company?s common stock.

These warrants expire in November 2006 and can be exercised at a price of $.78
per share for the purchase of 3,071,000 shares of common stock and $.65 per
share for the purchase of 2,388,000 shares of common stock.  None of the
warrants were exercised as of December 31, 2005.


NOTE 4 - INCOME TAXES
---------------------

The income tax provision is comprised of the following:


    					   2005   	   2004
                             ---------   ---------
Current tax expense         	$ 29,000    $     0
Deferred tax expense (benefit) (65,000)    25,548
Increase (decrease) in
  valuation allowance          (16,500)   (25,548)
                              ---------   ---------

Net Tax Provision           $	 (52,500) $      0
                             ==========   =========

The difference between the statutory federal income tax rate
and the effective Company tax rate is as follows:

                               2005		  2004
                             --------   ----------
Federal statutory rate		 34.0%	 34.0%
State taxes                     6.0         6.0
Utilization of net operating
 loss carry forward	       (34.0%)	(40.0%)
Reduction of deferred tax
  Valuation allowance          (70.0)         0
                             ---------  ----------
Effective tax rate             (64.0%)	  0.0%
                             =========  ==========



Total available net operating loss carry forwards at December 31, 2005
are reflected in the following schedule:

                     		YEAR         AVAILABLE FOR      AVAILABLE FOR
              			 OF             FEDERAL            STATE
            		     EXPIRATION       TAX PURPOSES      TAX PURPOSE


                              2010             600,000              79,000
                              2011           1,422,000                  -
                              2017             339,000                  -
                              2019             307,000                  -
                              2021              77,000                  -
                              2022              39,000                  -
				2023		  107,000
                                           --------------     -------------
                                           $ 2,891,000         $    79,000
                                           ==============     =============


During 2005, federal net operating loss carry forwards of approximately
$83,000 were utilized by the Company for purposes of the Company?s tax
provision. Consequently, the Company?s valuation allowance associated with the
related deferred tax assets was reduced by approximately $16,500 and $26,000
in 2005 and 2004, respectively.

The deferred taxes consist of the following as of December 31:

                               2005          2004
                             ---------    ---------
Deferred tax asset:
  Net operating loss
  carry forwards           $    982,940 $  1,022,043
  Valuation allowance          (917,940) ( 1,022,043)
                             ----------   -----------
Net deferred tax asset     $     65,000 $        -
                             ==========   ===========

NOTE 5 - STOCK OPTIONS
----------------------

The Company has outstanding stock options for the purchase of the Company?s
common stock.  These options were issued pursuant to a stock option plan
adopted by the Company in 1992. The ability to grant options under this plan
expired in 2002.  Specific terms of the remaining options outstanding under
this plan are dictated by the term of individual stock option agreements.
Generally, the exercise price of the options is the market price of the
Company?s stock on the date that the option was granted.

A summary of the status of the Company?s stock option plan as of December 31,
2005 and 2004 is presented below:

              Weighted              Weighted
               Average              Average
              Exercise              Exercise
Price        2004     Price
     -----------------------------------------
Options outstanding beginning
  of year  401,818   $0.1913     401,818     $0.1913
Granted 			             -         -           -           -
Exercised  			             -         -           -           -
Cancelled			       (10,000)        -           -           -
                                     -----------------------------------------
Options outstanding, end of year
                          391,818   $0.1914     401,818     $0.1913
                                     =========================================

Options exercisable, end of year: 	391,818   0.1914      401,818     0.1913
					================================











The following table summarizes information about options outstanding at
December 31, 2005:
					        2005
                               Options Outstanding
   ---------------------------------------------------------
               Number        Weighted Avg.       Options
   Exercise  Outstanding       Remaining       Exercisable at
   Prices   at 12/31/05    Contractual Life       12/31/05
                                (Years)
   --------  -----------    ----------------   -------------
  $0.1500	  280,000 		   4.08   		    280,000
  $0.2200      81,818		   4.67        	     81,818
  $0.5000	   30,000      	   0.58		     30,000

              391,818                      	    391,818
              =======                              =========

Note 6 ? EARNINGS PER SHARE
---------------------------

The Company?s calculation of earnings per share is as follows:


        2005	        2004
       -----        -----

Net income applicable to common
 stockholders				      $     134,525   $     91,881
                                              ==========    ==========
Average basic shares outstanding             31,766,753     31,566,753

Assumed conversion of preferred stock	    3,562,299      3,562,299
Effect of dilutive options and warrants          80,000           -
                                              ----------   -----------
Average dilutive shares outstanding          35,409,052     35,329,052
                                             ===========   ===========

Net income per common share - basic and
 diluted					       $     0.00   $      0.00
                                             ============  ===========

A total of 5,570,818 common stock options and warrants were not included in
the computation of diluted earnings per share because of their anti-dilutive
effect for the year ended December 31, 2005. A total of 10,000 shares of
common stock options were not included in the above calculation due to
expiration during 2005.

A total of 5,860,818 common stock options and warrants were not included in
the computation of diluted earnings per share because of their anti-dilutive
effect for the year ended December 31, 2004.


Note 7 ? LINE OF CREDIT
-----------------------

The Company maintains a line of credit facility for maximum borrowings of up
to $34,000.  Outstanding balances on this line of credit accrue interest at
the bank?s published prime rate.  This line matures in October 2006 and
payment has been personally guaranteed by the Company?s President.  There were
no amounts outstanding under this line at December 31, 2005.


NOTE 8 - COMMITMENTS
--------------------

The Company leases its executive office and marketing facilities through
month-to-month leases. The Company?s engineering-research, design and
development lease agreement runs through November 30, 2010.   Total rent
expense during 2005 and 2004 was $45,254 and $21,100, respectively.  The
Company executed a new lease for engineering office space located in Fort
Washington, Pennsylvania that commenced on September 1, 2005 and continues for
63 months.  The first monthly payment of $5,181.00 was due on January 1, 2006
and the terms of the lease include an annual rate increase through the end of
the lease.


Note 9 - SERIES C REDEEMABLE PREFERRED STOCK
---------------------------------------------

The Series C Preferred Stock is not convertible into any other class of the
Company's stock and is subject to redemption at the Company's option at any
time or if certain events occur, such as capital reorganizations,
consolidations, mergers, or sale of all or substantially all of the Company's
assets. Upon any liquidation, dissolution or winding up of the Company, each
holder of Series C Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any other class of stock of the Company,
an amount in cash equal to the redemption price for each share of Series C
Preferred Stock held by such holder, and the holders of Series C Preferred
Stock will not be entitled to any further payment. The redemption price per
share is $16.09.




											Exhibit 31.1

CERTIFICATION

I, Thomas J. Meaney, certify that:

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

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

3. 	Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the small business issuer as of, and for, the periods presented in
this report;

4. 	I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-
15(e)) for the small business issuer and have:

a)	designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to me by others within those entities, particularly
during the period in which this report is being prepared;

b)	[Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986]

c)	evaluated the effectiveness of the small business issuer?s
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report
based on such evaluation; and

d)	disclosed in this report any change in the small business issuer?s
internal control over financial reporting that occurred during the
small business issuer?s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect,
the small business issuer?s internal control over financial
reporting; and

5. 	I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the small business issuer?s auditors and
the audit committee of the small business issuer?s board of directors
(or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the small business
issuer?s ability to record, process, summarize and report
financial information; and
b)	any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer?s internal control over financial reporting.

					/s/ Thomas J. Meaney _______________
Dated:	March 31, 2006	Thomas J. Meaney, President, Chief
					Executive Officer and Chief Financial Officer
					(Principal Executive Officer and
					Principal Financial Officer)


EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
		In connection with the Annual Report on Form 10-KSB of Mikros
Systems Corporation (the ?Company?) for the year ended December 31, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
?Report?), the undersigned, Thomas J. Meaney, President, Chief Executive
Officer and Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, that:
2733:  (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 results of operations of the
    Company.


					/s/ Thomas J. Meaney* ___________
Dated:	March 31, 2006	Thomas J. Meaney, President, Chief
					Executive Officer and Chief Financial Officer
					(Principal Executive Officer and
					Principal Financial Officer)

*A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.