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

For the fiscal year ended December 31, 2001. Commission file number 2-67918

                      MIKROS SYSTEMS CORPORATION
                      --------------------------
         (Exact name of Registrant as specified in 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)

Registrant's Telephone Number, including area code: 609-987-1513
                                                    ------------

Securities Registered Pursuant to Section 12(b) of the Act:  None
Securities Registered Pursuant to Section 12(g) of the Act:

                   Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  [X] Yes   [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of Form 10KSB or any amendment to this
Form 10KSB. [ X ]










The aggregate market value of the voting stock held by nonaffiliates of
Registrant as of April 15, 2002, was approximately $235,443, based
      on the average
of the bid and asked price quoted by National Quotation Bureau, Inc.
      The number
of shares outstanding of the Registrant's $.01 par value common
      stock as of April
15, 2002 was 31,052,935.


PART I

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

Introduction
------------

Mikros Systems Corporation was founded in 1978 in Albany, New York to exploit
microprocessor technology developed at the General Electric Research and
Development Center for the military defense industry.  The Company's
      headquarters
are located at 707 Alexander Road, Suite 208, Princeton, New Jersey; telephone
(609)987-1513.

The Company supplied technology for military applications through March 1998.
      The
knowledge base and proprietary technology developed were recognized as
       applicable
to the rapidly expanding commercial wireless business.

In 1995, the Company decided to also pursue a business plan which would employ
these advanced techniques to enhance the data transmission rates in the AM
     and FM
radio spectrum.

In 1996, Safeguard Scientifics (Delaware), Inc., invested $1 million in Mikros
      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.  Mikros currently owns a
majority interest in MBC, with the balance of MBC ownership held by Safeguard
Scientifics.

Data Design and Development Corporation (3D) was also founded in 1996
      as part of
the Safeguard Scientific agreement and retains ownership of the AM and FM
technology.  3D has licensed the FM technology rights in North America
      to Mikros
and the AM technology rights in North America to MBC. Mikros owns
     two-thirds  of
the equity of 3D, and Safeguard owns the remaining one-third interest.

Mikros entered negotiations in late 1997 for the sale of its military contracts
to General Atronics Corporation (GAC). The resulting transaction was
     concluded in
1998 and included a $600,000 cash payment and a 2% royalty to be paid to the
Company over four years on all data terminal set sales.  In addition, GAC was
obligated to supply $1,000,000 in engineering services to the Company
        which since
has been expended in the amount of $1.3M.  The Company was provided with
engineering services by GAC pursuant to the agreement which aggregated $234,722
for the year ended December 31, 1999.
Mikros' commercial business assets now consists of both the original FM
technology and the AM Radio technology. Continued development of the FM
technology has been postponed in order to focus on the further development
        of the
AM Radio technology.

The digital system Mikros is developing for AM radio data transmission is
intended to allow simultaneous broadcasting of the present radio signal with a
digital signal. The Company believes that this is accomplished with minimal
disturbance to the existing radio channel. This system will require minor
modifications to the radio station transmitter which is not expected to require
new FCC approval since adjacent channel interference is avoided.

The Company developed a business model for the AM technology during 1999.  This
model combines the AM data transmission technology with the operations of a
nationwide or area wide network of AM radio stations equipped with the minor
modifications to the radio station's transmitter.  Data could be broadcast from
point to multipoint, and the signal received by a small portable receiver to be
developed based on the prototype used in the Company's experimental trials.

During 2001, the Company's Board of Directors decided to explore providing
services to the government business sector in order to further leverage  its
technical knowledge base.  Prior  to its exclusive focus on the commercial
business sector, beginning in 1998, Mikros had been successful in securing a
number of governmental contracts.  For example, Mikros had received over twelve
competitive contract awards through the Small Business Innovative Research
Program.

In March 2002, the U.S. Navy's Dahlgren Division, Naval Surface Warfare Center
(NSWCDD) informed Mikros of its intent to award a Phase I SBIR (Small Business
Innovative Research) contract to Mikros in May 2002.  The contract is valued
at approximately  $75,000 and represents the first stage in the development of
a Multiple Function Distributed Test and Analysis Tool (MFDTAT).  This project
will focus on developing standardized test equipment and testing processes,
using modern artificial intelligence techniques, to provide a foundation for
new, less manpower-intensive methods of system maintenance, alignment, fault
detection and isolation. The potential benefits to the U.S. Navy are:  (1)
increased readiness through reduced maintenance downtime of critical systems;
(2) increased system reliability through predictive failure analysis and
proactive remediation; and (3) more efficient and effective use of technical
manpower through increased automation, distance support, and interactive
training.

Mikros, with the help of Anteon Corporation, as a subcontractor, will
initially focus on the development of an intelligent test and maintenance tool
for the AN/SPY-1 AEGIS Radar.  The objective is to develop a "smart" tool
capable of aiding the technician in the troubleshooting, repair, alignment,
and maintenance efforts necessary to keep the SPY-1 Radar system in peak
operating condition, while at the same time, significantly reducing the
downtime currently required for periodic system alignment and calibration.
Added benefits include a system measurement data collection capability, and
interactive capability for distance support, and an interactive offline
training capability.

Mikros' current strategy is to build a core of highly specialized people to
support the government business, as well as its developments in the commercial
market. Mikros believes that there are significant opportunities for Mikros'
technical team to provide support for many of the larger defense contractors
         that
are required by law to subcontract a significant portion of their governmental
business to smaller contractors.  Mikros has initiated this strategic plan by
contacting various defense contractors that they have successfully assisted in
the past. There is no assurance that any of the contemplated services will be
established.

Marketing
---------

The Company is focused on developing interest in its AM technology and defense
related government business.

Backlog
-------

As of December 31, 2001 and 2000, the Company had no backlog.




Engineering; Research and Development
-------------------------------------

In 1994, the Company began research on a method of optimizing
       spectrum   efficiency
for wireless communications in radio data broadcasting and Personal
Communications Services markets and has continued this effort.

Engineering is a critical factor in the development of the Company's
        present and
future products. The Company previously subcontracted its development work to
General Atronics Corporation, a high technology company primarily involved in
communications and radar equipment for the US Department of Defense and allied
countries. GAC hired key Mikros engineers to continue the AM project when
        Mikros
downsized. GAC was obligated to supply $1,000,000  in engineering services to
Mikros which has been expended on the AM data program with MBC.  The
        Company has
utilized the entire amount of the engineering services by December 31, 1999.

Patents
-------

The Company has two patents covering digital signal processing technology and
our base scheme of implementing Link-11.






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

High technology products such as wireless technology often require large
investments of both money and talent.  Many large companies with greater
financial and human resources than the Company are currently investing
        heavily in
products that could compete directly with Mikros.  There is no assurance
        that the
Company could compete successfully against such competition.

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 the
        Company will be
able to introduce new products to the market before any of its competitors.

Employees
---------

As of April 15, 2002, the Company had three executive employees. The Company
believes its relations with its employees are satisfactory.




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

The Company operates 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.  The Company cautions all
readers to pay particular attention to the descriptions of risks and
uncertainties described below and in other sections of this report and the
Company's other filings with the Securities and Exchange Commission.

The Company does not presently know of any additional risks and uncertainties
that are currently deemed material and which may also impair the Company's
business operations and financial results.  If any of the following risks
actually occur, the Company's business, financial condition or results of
operations could be materially adversely affected.  In such case, the trading
price of the Company's Common Stock could decline and the Company 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.  The Company's 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.

History of Losses, Lack of Liquidity; Working Capital Deficit.  The Company
incurred a net (loss) income of $(77,171) and $109,713 for the years ended
December 31, 2001 and 2000, respectively.  As of December 31, 2001, the Company
had an accumulated deficit of $11,734,347 and had  working capital of $8,523.
        In
addition, the Company expects to incur substantial expenditures to expand its
commercial wireless communications business.  The Company's working capital,
        plus
revenue from its royalty agreement with GAC will not be sufficient to meet such
objectives as presently structured.  There can be no assurance that the Company
will achieve a profitable level of operations in the future.

Additional Financing Requirement; Merger and Partnering Opportunities. The
Company requires additional financing if it chooses to build a datacasting
network around the AM radio stations from which it would lease bandwidth.
Alliances or other partnership agreements must be developed with entities
        who may
be interested in supporting the Company's commercial programs, or
       other business
transactions which would generate resources sufficient to assure
       continuation of
the Company's operations and research programs.  There can be no assurance,
assuming the Company successfully raises additional funds or enters
       into business
alliances, that the Company will identify users for its datacasting network and
thereby  will achieve profitability or positive cash flow.  If the Company is
unable to obtain additional adequate financing or enter into such business
alliances, management will be required to further curtail its operations.
Failure to obtain such additional financing on terms acceptable to the Company,
if coupled with a material shortfall from the Company's current operating plan
could negatively impact the Company's ability to continue operations.

There is a Substantial Doubt About the Company's Ability to Continue as a Going
Concern.  Based on the Company's current plans, the Company believes that its
existing available cash may not be adequate to satisfy current and planned
operations for the next 12 months. Additionally, the Company expects that it
        will
require additional financing prior to a return to profitability.  All of these
factors raise a substantial doubt as to the Company's ability to continue as a
going concern.  If the Company cannot sufficiently improve its profitability or
raise more funds at acceptable terms, the Company could be required to further
reduce its expenditures, further reduce its workforce and possibly explore
additional alternatives including seeking bankruptcy protection.

Our Lack of Operating History in Providing Commercial Wireless Applications
Makes Evaluating Our Future Performance Difficult.  Historically, we developed
and sold technology and products for military applications, primarily to the
U.S. Navy.  The commercial wireless products that the Company intends to
develop perform different functions than our historic products, and are
targeted at an entirely different customer base.  Because the Company has not
previously operated as a provider of commercial wireless products, the Company
has no basis to evaluate its ability to develop, market and sell such
products.  The Company's 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 the Company's capital expenditure plans; and
attract and retain qualified people.

Uncertainty of Market Acceptance.
In 1995, the Company expanded its initiatives in commercial wireless
communications in the current and emerging radio data broadcasting and the
personal communications service markets.  Market acceptance of the Company's
network in the commercial sector will be determined in large part by the
Company's ability to develop a customer base which would have a need to
        broadcast
data and could be convinced of the value and cost effective uses of the
         AM radio
based network.  To date, the Company has limited evidence with which
        to evaluate
the market reaction to its service in the commercial sector because there has
been no commercial experience.  There can be no assurance that the Company's
services will achieve market acceptance.

Limited Marketing Experience.  The Company will be required to develop a
marketing and sales network that will effectively demonstrate the advantages of
its commercial offerings over competing options.  The Company's marketing
experience with its new commercial products is limited, and the Company has not
identified a customer for a commercially feasible application.  The Company
currently performs all its marketing through its own employees and
       through MBC.
There can be no assurance that the Company will be successful in its marketing
efforts, that it will be able to establish adequate sales and distribution
capabilities, or that it will be able to enter into marketing agreements or
relationships with third parties on financially acceptable terms.





Government Regulation. Under current Federal Communications Commission ("FCC")
regulations, designated portions of the FM radio broadcast spectrum, known as
subcarriers, may be used to transmit information in addition to normal station
programming.  Listeners with specially equipped FM radios can decode the
subcarrier information, while standard FM radios continue to receive normal
        radio
station programs.  FM subcarrier broadcasting currently represents a $100
        million
industry operating within well-established and stable FCC regulatory
        guidelines.
Any significant change in these regulatory requirements or the enforcement
thereof could adversely affect the Company's prospects.

Rapid Technological Change; Potential Infringement.  The market for the
        Company's
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 the Company's business.  The Company's future success will depend in part on
its ability to continually enhance its current technology and to develop or
acquire new ideas that address the needs of potential users.  There can be no
assurance that the Company 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 the Company's
        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 the Company.  While the Company is not aware of any such claims, no
infringement studies have been conducted on behalf of the Company.

Competition. High technology applications such as those being developed by the
Company often require large investments of both money and talent.  Many large
entities with greater financial, technical and human resources than the Company
are currently investing heavily in products and services that compete directly
with the Company's contemplated services and underlying products.  There is no
assurance that the Company's 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
the Company will be able to introduce new offerings to the market before any of
its competitors.  As the markets in which the Company competes mature
       and new and
existing companies compete for customers, price competition is likely to
intensify, and such price competition could adversely affect the Company's
results of operations.



Potential Dilutive Effect of Preferred Stock, Warrants and Options; Possible
Adverse Effect on the Company's Ability to Obtain Additional Financing.  The
outstanding securities of the Company 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 the Common
Stock, causing a dilution of the interests of existing stockholders.  Thus, the
terms on which the Company may obtain additional financing during that period
        may
be adversely affected.  The holders of preferred stock, options, and warrants
might be expected to exercise their respective rights to acquire Common
        Stock at
a time when the Company 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 Common Stock at such time, the net tangible book value per
share of the Common Stock might be subject to dilution.

Potential Future Sales.  Future sales of shares by existing stockholders under
Rule 144 of the Securities Act or through the exercise of outstanding
       options or
otherwise could have a negative impact on the market price of the Common
       Stock.
The Company is unable to estimate the number of shares that may be sold under
Rule 144 because such sales depend on the market price for the Common Stock of
the Company, the personal circumstances of the sellers and a variety of other
factors.  Any sale of substantial amounts of Common Stock or other securities
        of
the Company in the open market may adversely affect the market price of the
securities offered hereby and may adversely affect the Company's ability to
obtain future financing in the capital markets as well as create a potential
market overhang.

The Company's Common Stock is Subject to "Penny Stock" Regulations Which May
Affect the Ability of the Company's Shareholders to Sell Their Shares.  The
Company's 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 the Company's common stock to sell their shares in the secondary market.

Regulations of the SEC define '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 of 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.

The Company Relies on Third-Party Contractors for Engineering Services That
May be Difficult to Replace.  The Company currently provides 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 the Company's products and services
until equivalent services, if available, is identified, developed, and
integrated, which could harm the Company's business.

No Dividends.  The Company has never paid cash dividends on its Common Stock.
Any payment of cash dividends in the future will depend upon the Company's
earnings (if any), financial condition and capital requirements.  In addition,
the Company has executed certain loan agreements, which prohibit the
        payment of a
dividend on the 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 the securities offered
hereby.

Public Market; Possible Volatility of Stock Price.  The Company's 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 the Company's securities will be
sustained.  Absent a public trading market, an investor may be unable to
liquidate its investment.  The Company believes that factors such as the
Company's and its competitors' announcements of the availability of
        new services
and new contracts, quarterly fluctuations in the Company's financial
       results and
general conditions in the communications industry could cause the price of the
Common Stock to fluctuate substantially.   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.

Concentration of Share Ownership.  The Company's 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 the outstanding Common Stock and will have
significant influence over the outcome of all matters submitted to the
stockholders for approval, including the election of directors of the Company.
In addition, such influence by management could have the effect of discouraging
others from attempting to take-over the Company, thereby increasing the
likelihood that the market price of the Common Stock will not reflect a premium
for control.



Anti-Takeover Provisions.  The Company has authorized 4,040,000 shares of
preferred stock, which may be issued by the 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 the 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 the Company.  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.





Item 2.  Properties
-------------------

The Company owns no real property.  The Company is currently leasing office
        space
in Princeton, New Jersey.


Item 3.  Legal Proceedings
---------------------------

None.


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

Not Applicable



PART II

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

The following table sets forth the range of high and low closing bid prices of
the Common Stock for the periods indicated as determined by the National
Quotation Bureau, Inc.  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 the Company's Common Stock, do not reflect retail
mark-ups, mark-downs or commissions, and may differ substantially from
        prices in
actual transactions.

                                               Bid
                                        High          Low

2001


  First Quarter				$ 0.0900	    $ 0.0310
  Second Quarter				  0.0450          0.0250
  Third Quarter				  0.0320		0.0230
  Fourth Quarter				  0.0610          0.0150

2000

  First Quarter                 	 $ 1.3125	    $ .0750
  Second Quarter				    .3750         .11
  Third Quarter				    .2450	      .0950
  Fourth Quarter				    .14		.03


The Company has never paid cash dividends on its Common Stock.  Any payment of
cash dividends in the future will depend upon the Company's earnings (if any),
financial condition, and capital requirements.

In addition, the Company has executed certain loan agreements
        which  prohibit the
payment of a dividend on the Common Stock as long as such agreements are in
place. (see "Item 7. Management's Discussion and Analysis of Financial
        Conditions
and Results of Operations - 1992-1993 Financing" and "1996 Financing" below).

As of April 15, 2002, the Company had 375 holders of record of its Common
       Stock.




Item 6.  Selected Financial Data (1)
------------------------------------

                              YEARS ENDED DECEMBER 31,
                                 2001       2000
                      --------------------------------------------
INCOME STATEMENT
 Total Revenue              $ 86,827        $54,144
 Net Income (Loss)           (77,171)       109,713
Income (Loss) per
 common share-Basic                 -             -
     Fully Diluted                  -             -
Weighted average
 number of common
 shares outstanding-
 Basic                     30,948,410    29,559,670
BALANCE SHEET
 Current Assets               147,819       222,813
Current Liabilities           139,296       174,019
Total Assets                  180,612       258,860
 Long-Term Liabilities              -             -
Total Liabilities              219,746      254,469
 Shareholders' Equity
   (Deficiency)		       (39,134)       4,391


(1)  	The above data should be read in conjunction with the financial
	statements of the Company included elsewhere herein.



Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations
----------------------------------------------------------

Critical Accounting Policies And Estimates

The discussion and analysis of the Company's financial condition and results of
operations are based upon the Company's 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
the Company 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, the Company evaluates its
estimates, including those related to bad debts, investments, recoverability of
long-lived assets, income taxes, restructuring charges, and contingencies and
litigation.  The Company bases its estimates on historical experience and on
various other assumptions that the Company believes 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

The Company's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplates the continuation of the Company as a going concern.  The
Company has sustained substantial operating losses in recent years. In
addition, the Company has used substantial amounts of working capital in its
operations.  These conditions raise substantial doubt about the Company's
ability to continue as a going concern.  Management's plans and intentions on
the going concern issue are discussed below.  These financial statements do
not include any adjustments that would be required if the Company were unable
to continue as a going concern.

In order to continue as a going concern, the Company will need to incur
substantial expenditures to develop and market its commercial wireless
communications business.

In view of these matters, realization of a major portion of the assets
reflected in the Company's balance sheet is dependent upon continued
operations of the Company, which in turn is dependent on the Company being
able to obtain financing and/or equity to support further development for its
commercial wireless business and continuing operations.  Management of the
Company believes that actions presently being taken to revise the Company's
operating and financial requirements provide the opportunity to continue as a
going concern.

Results of Operations, General: Historically, the Company derived a large
percentage of its revenues from government contracts. In the last three years,
the Company has been developing commercial applications. While the
        financial data
presented reflects the Company's financial history, it cannot predict future
results as the Company divested its government contracts early in 1998. The
Company's current focus is on the development of its AM data casting
        program and
renewal of government contracting.

The statements contained in this Annual Report on Form 10KSB 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,  Year 2001  compliance, products under development,
        size of markets for
products under development and other statements regarding matters that are not
historical facts, involve predictions.  The Company's 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
10KSB.  Factors that could cause actual results, performance or achievements to
vary materially include, but are not limited to: changes in business
       conditions,
Year 2001 Compliance of the Company's and other vendors' products and related
issues, changes in Mikros' sales strategy and product development plans,
       changes
in the radio digital data marketplace, competition between Mikros and other
companies that may be entering the radio digital data marketplace, competitive
pricing pressures, market acceptance of Mikros' products under development, and
delays in the development of products.

2001 vs. 2000:
-------------

Total revenues in 2001 were approximately $87,000 compared to $54,000
        in 2000, an
increase of 61.1%.

In 2001 and 2000 revenues were derived from royalties earned according
       to Mikros'
agreement with General Atronics Corporation.

General and Administrative expenses were approximately $164,000 in
        2001 compared
to $150,000 in 2000. Interest expense in 2001 was $0 versus $8,000 in 2000.

The Company incurred a net loss of approximately $77,000 in 2001 compared to
approximate net income of $110,000 in 2000. In 2000, the Company derived other
income of approximately $214,000 from the sale of New Jersey tax attributes
       which
was responsible for the net income during the year.



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

The Company's financial statements have been prepared on the basis that the
Company will continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities and commitments in the normal course of
business.  At December 31, 2001, the Company had an accumulated deficit of
$11,700,000 and working capital of $8,000.  We also realized net losses of
$77,000 for the year ended December 31, 2001. This raises substantial
          doubt about
the Company's ability to continue as a going concern.

Since its inception, the Company has financed its operations through debt,
private and public offerings of equity securities and cash generated by
operations.

In 2001, the Company had cash flow used in operations of approximately $34,000
compared to cash flow from operations of approximately $141,000 in 2000. There
was working capital of $9,000 as of December 31, 2001 as compared to  negative
working capital of $49,000 at December 31, 2000.

Commencing April 10, 1998, for a period of four years, the Company is
        receiving
a royalty of 2% of all data terminal sales by General Atronics
        Corporation (GAC).
The royalty agreement provides for quarterly reports and payments based on the
GAC shipments and receipts during the quarter.  The royalties for 2001 were
$86,827.

Mikros is presently seeking $5M in financing in order to implement its business
plan.  There is no guarantee that the Company will be able to obtain the
necessary financing or that the application contemplated will be embraced by
potential users.

The Company intends to continue the development and marketing of its commercial
applications of its wireless communications technology both directly and
        through
its relationship with MBC. In order to continue such development and marketing,
the Company will be required to raise additional funds. The Company intends to
consider the sale of additional debt and equity securities under appropriate
market conditions, alliances or other partnership agreements with entities
interested in supporting the Company's commercial programs, or other business
transactions which would generate resources sufficient to assure
       continuation of
the Company's operations and research programs.  There can be no assurance,
assuming the Company successfully raises additional funds or enters into
        business
alliances, that the Company will achieve profitability or positive cash flow.
         If
the Company is unable to obtain additional adequate financing or enter
       into such
business alliances, management will be required to sharply curtail its
operations.  Failure to obtain such additional financing on terms acceptable to
the Company may materially adversely affect the Company's ability to
        continue as
a going concern.



Debt Financing
--------------

1996 Financing
--------------

In a series of transactions from February through May 1996, the Company issued
secured promissory notes and warrants to raise an aggregate of $641,500
(including $122,500 from officers and directors). The promissory notes were
        for a
term of approximately eighteen months, bearing interest at 12% on the unpaid
balance, and were secured by certain assets of the Company.  In addition, the
Company issued warrants to purchase five (5) shares of Common Stock
        at $0.01 per
share for each dollar of debt.  The value of the warrants was immaterial and no
accounting recognition was given to their issuance.

In October 1996, all of the note holders agreed to a deferral of principal
payments in exchange for the right to convert outstanding debt to Common
      Stock of
the Company at a rate of one (1) share of stock for $1.00 of debt.  The Company
determined that the fair value of the conversion feature was inmaterial.
Accordingly, no accounting recognition has been given to this modification of
terms.

The Company paid the investors all of the interest accrued on promissory notes
payable through May 15, 1998.  At that time, it offered to convert the notes at
face value to stock valued at $0.06 per share in order to restructure
        its
       debt.
During 2000, the remaining note holder converted the debt and
        interest,
        totaling
$43,000 under the 1998 terms.  As a result, 4,840,268 shares
         of common
         stock were
issued

1992-93 Financing
-----------------

The Company paid the investors of the 1992-93 financing all of the interest
accrued on their notes payable through May 15, 1998.  At that time,
        it offered
         to
convert the notes at face value to stock valued at $0.06 per share in order to
restructure its debt.  There were 4,166,668 shares issued as a result.  One of
the investors chose not to convert his notes which totaled $72,500.
        During 2000,
the investor converted his note into 290,000 shares of common stock.


Item 7A.  Quantitative and Qualitative Disclosure About Market Risk
-------------------------------------------------------------------

Not Applicable.




Item 8.	Financial Statements and Supplementary Data
-------------------------------------------------------

The financial statements required to be filed pursuant to this Item 8 are
appended to this report on Form 10KSB.  A list of the financial statement
schedules filed herewith is found at "Item 14  Exhibits, Financial Statement
Schedules and Reports on Form 8-K".

Item 9.	Changes In and Disagreements with Accountants on  Accounting and
Financial Disclosure
------------------------------------------------------------------------------

Not Applicable.



PART III

Item 10.  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


Thomas C. Lynch	 	60			1997			Director

Thomas J. Meaney	 	67			1986			President
and Director

Wayne E. Meyer		75			1988			Chairman of the
Board and
Director

Tom L. Schaffnit		55			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:

Thomas C. Lynch has been a Director of the Company since February 1997. Mr.
Lynch has served as Senior Vice President of Staubach Realty Partners,
         Ltd. since
November 2001.  From August 2000 to November 2001, Mr. Lynch served as Senior
Vice President of Safeguard Securities, Inc. From July 1999 to August 2000, he
was President and Chief Operating Officer of CompuCom Systems, Inc.
        From October
1998 to July 1999, Mr. Lynch served as Executive Vice President and Chief
Operating Officer of CompuCom.  Prior to joining CompuCom in October 1998, Mr.
Lynch had been Senior Vice President of Safeguard Scientifics, Inc., a position
he held from November 1995.  Mr. Lynch is a director of the Eastern Technology
Council, Armed Forces Benefit Association, and a trustee of the U.S. Naval
Academy Foundation.  Mr. Lynch is also a director of Sanchez Computer
        Associates,
Inc. and Nextel International.



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 Corporation.  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, VA and Chadds Ford, PA.

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 which engages in  consulting and advice to industry, government and
academic institutions in matters of system 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, 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".

None of the Company's Directors or executive officers is related to any
other Director or executive officer of the Company.  In connection with the
acquisition of certain debt and equity instruments of the Company from third
parties, Messrs.  Meaney and Meyer, John B. Torkelsen, Frederick C.
        Tecce and the
Estate of Joseph R. Burns (collectively, "the Investors") have the right to
designate 2/7ths of the Board of Directors of the Company.  See Certain
Relationships and Related Transactions.  There are currently four
        members of the
Board.


There were no meetings of the Board of Directors in 2001, not including written
consents of the Directors.

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


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

Thomas J. Meaney	 	67	      President  			  September 1998
and Director

David C. Bryan		47		Executive Vice President  March 2002
					      Chief Operating Officer

Patricia A. Kapp	 	35		Secretary and		  September 1998
Treasurer


Item 11.  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, 1999,
2000 and 2001.


	SUMMARY COMPENSATION TABLE





Annual
Compensation(1)

	Name and Principal Position

Year

Salary ($)

(a)

(b)

(c)

Thomas J. Meaney, President

	2001
	2000
	1999

        0
        0
        0








(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 12.  Security Ownership of Certain Beneficial Owners and
          Management
-------------------------------------------------------------
Common Stock

The following table sets forth certain information, as of  April 15, 2002
with respect to holdings of the Company's Common Stock by (i) each person known
by the Company 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:
Safeguard Scientifics 		       7,371,000(2)  	  20.2
 (Delaware) Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945

Transitions Two,  			 2,137,775(3)	         6.5
  Limited Partnership
920 Hopmeadow Street
Simsbury, Connecticut 06070

      Princeton Valuation Consultants,     2,920,050(4)         9.1
        L.L.C.
      5 Vaughn Drive
      Princeton, New Jersey 08540

(ii)	Current Directors and Named Executives:

Thomas C. Lynch			             - 		    -

Thomas J. Meaney				 3,700,167(5)         11.7

Wayne E. Meyer			 	 3,108,000(6)          9.8

Tom L. Schaffnit				   700,454(7)		   2.2


(iii)	All Current Directors and Officers as a Group
(fourpersons)				7,508,621(5)(6)(7) 	    23.2

*	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 5,459,000 shares issuable upon exercise of warrants, and 504,916
shares of common stock granted by Safeguard to certain of its employees
pursuant to a long-term incentive plan.  Safeguard will continue to
exercise voting rights with respect to these shares until the occurrence
of certain vesting requirements.

(3)	Includes 1,750,275 shares issuable upon conversion of Series B Stock.

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

(5)	Includes 50,000 shares issuable upon conversion of Convertible Preferred
Stock, 199,500 shares issuable upon conversion of Series B Stock and
275,000 shares issuable upon the exercise of warrants.

(6)	Includes 30,000 shares issuable upon conversion of Series B Stock, 100,000
shares issuable upon the exercise of options and 318,750 shares issuable
upon the exercise of warrants.

(7)   Includes 300,454 shares issuable upon the exercise of options.




























Convertible Preferred Stock

The following table sets forth certain information, as of April 15, 2002,
with respect to holdings of the Company's Convertible Preferred
           Stock by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
total number of shares of 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
        L.L.C.				        202,500		  79.4
      5 Vaughn Drive
      Princeton, New Jersey 08540

(ii)	Current Directors and Named Executives:


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
(four 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 Stock

The following table sets forth certain information, as of April 15, 2002,
with respect to holdings of the Company's Series B Stock by (i) each
          person known
by the Company to be the beneficial owner of more than 5% of the
           total number of
shares of Series B 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

Transitions Two, Limited Partnership  583,425			52.9
920 Hopmeadow Street
Simsbury, Connecticut 06070

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

(ii)	Current Directors and Named Executives:

Thomas C. Lynch				    --		       --

Thomas J. Meaney				   66,500			 6.0

Wayne E. Meyer				   10,000			 *

Tom L. Schaffnit				    --			 --

(iii)	All Current Directors and Officers as a Group
(four persons) 				    76,500       		 6.9

*	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 C Stock

The following table sets forth certain information, as of April 15, 2002,
with respect to holdings of the Company's Series C Stock by (i) each
          person known
by the Company to be the beneficial owner of more than 5% of the
          total number of
shares of Series C 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:

Transitions Two, Limited Partnership	 5,000		  100.0
920 Hopmeadow Street
Simsbury, Connecticut 06070





Series D Stock

The following table sets forth certain information, as of April 15, 2002,
with respect to holdings of the Company's Series D Stock by (i) each
           person known
by the Company to be the beneficial owner of more than 5% of the
          total number of
shares of Series D 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,
 L.L.C.					      138,000           20.0
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

The Estate of Joseph R. Burns             138,000		20.0
c/o Mikros Systems Corporation
707 Alexander Road, Bldg 2, Suite 208
Princeton, New Jersey 08540


(ii)	Current Directors and Named Executives:

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
(four 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 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

On November 18, 1996, the Company consummated a Common Stock and Warrant
Agreement (the "Purchase Agreement") with Safeguard Scientifics
           (Delaware), Inc.,
a Delaware corporation ("SSI"), pursuant to which SSI purchased for
           an aggregate
consideration of $1,000,000:  (i) 1,912,000 shares (the "Shares") of
           common stock
of the Company, $0.01 par value ("Common Stock"); (ii) a warrant (the "First
Warrant") to purchase 2,388,000 shares of Common Stock at an exercise price of
$0.65 per share; and (iii) a warrant (the "Second Warrant") to
           purchase 3,071,000
shares of Common Stock at an exercise price of $0.78 per share.  The First
Warrant and the Second Warrant are referred to hereinafter collectively as the
"Warrants."  The exercise prices of the Warrants are subject to adjustment
pursuant to customary anti-dilution provisions.

In connection with the sale of the Shares and the Warrants, the Company granted
to SSI certain piggyback and demand registration rights with respect to the
Shares and the Common Stock underlying the Warrants.  In addition, the Company
granted to SSI a right of first refusal pursuant to which, subject to certain
conditions, in the event the Company issues, sells or exchanges any securities,
it must first offer such securities to SSI and such offer must remain open and
irrevocable for 30 days.  Such right of first refusal may only be waived in
writing and terminates at such time as SSI owns less than ten percent (10%) of
the Shares.

Pursuant to the Purchase Agreement, as long as SSI owns one percent
         (1%) or more
of the Company's outstanding equity securities, on a fully-diluted basis, the
Company is obligated to, among other things: (i) permit SSI to inspect the
operations and business of the Company; and (ii) fix and maintain the number of
Directors on the Board of Directors at eight (8) members.  In addition, the
Purchase Agreement also provides that as long as SSI owns such one
          percent (1%),
the Company is subject to certain negative covenants, including, among other
things, restrictions on:  (i) transactions with affiliates of the Company; (ii)
certain indebtedness; and (iii) amendments to the Company's Certificate of
Incorporation and Bylaws.

In connection with the transaction, the Company entered into a voting agreement
pursuant to which Joseph R. Burns, Thomas J. Meaney, Wayne E. Meyer,
          Frederick C.
Tecce and John B. Torkelsen, (collectively, the "Shareholders"), agreed to vote
an aggregate of approximately 6,659,214 votes for the election of two designees
of SSI to the Board of Directors of the Company.



Also in connection with the transaction, certain of the Company's AM and FM
technology was transferred to Data Design & Development Corporation, a Delaware
corporation ("3D"), pursuant to a contribution agreement. Under the
          contribution
agreement, each of the Company, SSI and certain debtholders of the Company
(including each of the Shareholders) owns one-third of the issued
          and outstanding
capital stock of 3D.  Pursuant to the License Agreement, 3D granted to the
Company an exclusive, royalty-free perpetual right and license in and to the
development and marketing of FM technology in the United States, Canada and
Mexico.  Pursuant to the Technology License Agreement, 3D granted to Mobile
Broadcasting Corporation ("MBC"), a Delaware corporation, a royalty-free,
exclusive, perpetual right and license in and to the marketing of the AM
technology in the  United States, Canada and Mexico. Initially, SSI owned
          75% of
the issued and outstanding capital stock of MBC and the Company
          owned 25% of such
capital stock.

Finally, the Company entered into a Consulting Services Agreement with MBC
pursuant to which the Company provided consulting services to MBC for the
development of the AM technology.


PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K
-----------------------------------------------------------------

(a)  1.	Reference is made to financial statements included under Item 8.

     2.	Reference is made to financial statements included under Item 14(c).

     3.	Description of Exhibits (Pursuant to Item 601 of  Regulation S-K).

Note:  All exhibits that were filed as exhibits (I) to the Company's
           Registration
Statement on Form S-18, File No. 2-67918-NY, as amended, (ii) or, if so
specified, to previously filed Annual Reports on Form 10-K 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)]
     4.1   	Certificate of Designations of Series B Preferred Stock and Series
		C Preferred Stock [Exhibit 4.1 to Form 8-K filed September 12, 1988]
     4.2   	Revised form of Series C Preferred Stock Purchase
           	Warrant issued to Bishop Capital, L.P. as assigned to
           	the Investors.
     4.3   	Form of Series C Preferred Stock Purchase Warrant
           	issued to Unicorn Ventures, Ltd., Renaissance Holdings
           	PLC and Gartmore Information and Financial Trust PLC.
           	[Exhibit 4.5 to Form 10-K for 1988 filed May 15, 1989]
     4.4   	Form of Series C Preferred Stock Purchase Warrant
           	assigned to the Investors. [Exhibit 4.10 to Form 10-K
           	for 1990 filed April 12, 1991]
     4.5   	Form of Series C Preferred Stock Purchase Warrant
           	assigned to the Investors [Exhibit 4.11 to Form 10-K
           	for 1990 filed April 12, 1991]
     4.6   	Assignment and Sale Agreement dated October 27, 1992 by
           	and among Renaissance Holdings PLC, acting by its
           	Receivers, the Company, and each of the Investors and,
           	as to Section 1.1 thereof only, the Chartfield Group,
           	acting by its Receivers [Exhibit 4.1 to Form 8-K filed
           	October 27, 1992]
     4.7   	Loan Modification and Intercreditor Agreement dated
           	October 27, 1992 by and among the Company and the
           	Investors [Exhibit 4.2 to Form 8-K filed October 27,
           	1992]
     4.8   	Certificate of Designations of Serial Preferred Stock
           	[Exhibit 4.16 to Form 10-K for 1993 filed March 30, 1994]



    10.1   	Loan Agreement dated April 26, 1988 between the Company
           	and Bishop Capital, L.P. as assigned to the Investors
           	[Exhibit 10.1 to Form 8-K filed September 12, 1988].
    10.2   	Security Agreement dated April 26, 1988 between the
           	Company and Bishop Capital, L.P. as assigned to the
           	Investors [Exhibit 10.2 to Form 8-K filed September 12,
           	1988]
    10.3   	Amendment to Loan Agreement and Promissory Note dated
           	as of January 27, 1989 between Bishop Capital, L.P. as
           	assigned to the Investors and the Company. [Exhibit
           	10.4 to Form 10-K for 1988 filed May 15, 1989]
    10.4   	Investment Agreement dated as of June 30, 1988 between
           	Unicorn Ventures, Ltd., Unicorn Ventures II, L.P., as
           	assigned to the Investors and the Company [Exhibit 10.6
           	to Form 8-K filed September 12, 1988]
    10.5   	Security Agreement dated June 30, 1988 from the Company
           	to Unicorn Ventures, Ltd. and Unicorn Ventures II, L.P.
           	as assigned to the Investors [Exhibit 10.9 to Form 8-K
           	filed September 12, 1988]
    10.6   	Registration Agreement dated as of June 30, 1988
           	between Unicorn Ventures, Ltd., Unicorn Ventures II,
           	L.P., as assigned to the Investors and the Company
           	[Exhibit 10.10 to Form 8-K filed September 12, 1988]
    10.7   	Consent and Amendment Agreement dated March 31,1989 as
           	assigned to the Investors. [Exhibit 10.10 to Form 10-K
           	for 1988 filed May 15, 1989]
    10.8   	1988 Restricted Stock Award Plan. [Exhibit 10.20 to
           	Form 10-K for 1988 filed May 15, 1989]
    10.9   	Form of Restricted Stock Agreement. [Exhibit 10.21 to
           	Form 10-K for 1988 filed May 15, 1989]
    10.10  	Incentive Stock Option [Exhibit 10(c)(iii) to Form 10-K
           	for the year ended December 13, 1981]
    10.11  	Amended and Restated Stock Option Plan (1988)[Exhibit
           	10.27 to Form 10-K for 1989 filed April 3, 1990]
    10.12  	Security Agreement dated April 19, 1990 from Mikros
           	to Bishop Capital, L.P. as assigned to the Investors
           	[Exhibit 10.35 to Form 10-K for 1990 filed April 12,
           	1991]
    10.13  	Security Agreement dated April 19, 1990 from Mikros to
           	Renaissance Holdings PLC as assigned to the Investors.
           	[Exhibit 10.36 to Form 10-K for 1990 filed April 12,
           	1991]
    10.14  	Consent and Amendment Agreement dated as of April 19,
           	1990 as assigned to the Investors. [Exhibit 10.37 to
           	Form 10-K for 1990 filed April 12, 1991]
    10.15  	Note Modification and Stock Purchase Agreement dated
           	December 31, 1993. [Exhibit 10.47 to Form 10-K for
           	1993 filed March 30, 1994]
    10.16  	Common Stock and Warrant Purchase Agreement dated
           	November 15, 1996 by and between Mikros Systems
           	Corporation and Safeguard Scientifics (Delaware), Inc.
           	[Exhibit 10.1 to Form 8-K filed November 18, 1996]
    10.17  	License Agreement dated November 15, 1996 by and


           	between Mikros Systems Corporation and Data Design and
           	Development Corporation.  [Exhibit 10.2 to Form 8-K
           	filed November 18, 1996]
    10.18  	Technology License Agreement dated November 15, 1996 by
           	and among Data Design and Development Corporation,
           	Mikros Systems Corporation and Mobile Broadcasting
           	Corporation.  [Exhibit 10.3 to Form 8-K filed November
           	18, 1996]
    10.19  	Form of 1996 Warrant with Schedule of Warrants.
     	[Exhibit 10.24 to Form 10-K filed February 28,1997]
    10.20  	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]
    10.21  	Contract to sell defense contracts to General Atronics Corporation
	     	dated April 10, 1998 [Exhibit 10.25 to Form 10-K filed November 13,
	     	1998]
    10.22 	Non-Compete agreement with General Atronics Corporation dated April
           	10,1998 [Exhibit 10.26 to Form 10-K filed November 13, 1998]
    10.23  	Lease agreement with the Daily Plan It for office space dated July
		29, 1998 [Exhibit 10.23 to Form 10-K filed February 28, 1997]
(b)  Reports on Form 8-K
     The Company filed a current Report on Form 8-K with the Securities and
     Exchange Commission on March 15, 2000.
(c)  See (a) 3 above
(d)  Financial Statement Schedules

The following financial statements are incorporated herein:

Independent Auditors' Reports
Balance Sheet at December 31, 2001
Statements of Operations for the years ended December 31, 2001 and 2000
Statements of Shareholders' Equity (Deficiency) for the years ended
           December 31,
 2001 and 2000
Statements of Cash Flows for the years ended December 31, 2001 and 2000
Notes to Financial Statements




	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: April 15, 2002
                          By: /s/
                          --------------------------------
 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/---------------------------		   April 15, 2002
Wayne E. Meyer, Chairman

/s/                                          April 15, 2002
------------------------------
Thomas C. Lynch, Director

/s/
------------------------------		   April 15, 2002
Thomas J. Meaney, Director

/s/                                          April 15, 2002
------------------------------
Tom L. Schaffnit, Director


















	Lipman Selznick & Witkowski
	Raritan Plaza III
	101 Fieldcrest Avenue
	Post Office Box 6204
	Edison, New Jersey 08818-6204
	(732) 225-8888
	FAX (732) 225-5326

	Independent Auditors' Report

To the Board of Directors and Shareholders of
MIKROS SYSTEMS CORPORATION

We have audited the accompanying balance sheet of Mikros Systems Corporation as
of December 31, 2001, and the related statements of operations, changes in
shareholders' equity deficiency and cash flows for the years in the two-year
period ended December 31, 2001.  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 audit.

We conducted our audits in accordance with auditing standards
          generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
           examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes 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, 2001, and the results of its operations and its cash
          flows for each
of the years in the two-year period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note B to the
financial statements, the Company has sustained recurring losses
          from operations
 that raise substantial doubt about its ability to continue as a going
           concern.
Management's plans in regard to these matters are also described
           in Note B.  The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

A Professional Corporation
Lipman Selznick & Witkowski
Edison, New Jersey
March 10, 2002


	MIKROS SYSTEMS CORPORATION
                              BALANCE SHEET

                                      DECEMBER 31,
         ASSETS                           2001
------------------------------       ------------

CURRENT ASSETS
  Cash                                $   94,252

  Accounts Receivable				36,142

  Other Current Assets                    17,425
                                     ------------
TOTAL CURRENT ASSETS                     147,819
                                     ------------

  Equipment                               61,063

  Less: Accumulated Depreciation          51,524
 						 ------------
  							 9,539
                                     ------------
OTHER ASSETS:

  Patent Costs, net                       23,254

                                     ------------
TOTAL ASSETS				 $   180,612
                                     ============

	See Notes to Financial Statements



	MIKROS SYSTEMS CORPORATION
                           BALANCE SHEET (continued)


         LIABILITIES AND                            DECEMBER 31,
 SHAREHOLDERS'  EQUITY  DEFICIENCY                      2001
----------------------------------                  -----------
CURRENT LIABILITIES
  Accounts Payable                                  $   36,110
  Accrued Payroll and Payroll Taxes                     23,198
  Accrued Expenses                                      16,062
  Due to related parties                                48,926
  Customer Advances                                     15,000
                                                   ------------
TOTAL CURRENT LIABILITIES                              139,296

                                                   ------------
COMMITMENTS AND CONTINGENCIES

MANDATORILY 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 31,106,753 shares
                             	                     311,068

  Capital in excess of par value                    11,363,671

  Accumulated Deficit                              (11,734,347)
                                                   ------------
TOTAL SHAREHOLDERS' EQUITY DEFICIENCY	             (39,134)
                                                   ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
   DEFICIENCY				        $    180,612
                                                   ============

	See Notes to Financial Statements












                         MIKROS SYSTEMS CORPORATION
                         STATEMENTS OF OPERATIONS

					Years Ended December 31,
                                        2001          2000
                                    ------------   ----------

 Royalties					$	86,827   $	 54,144

 General and Administrative              163,998      149,630
                                     ------------  -----------
  Loss from Operations                   (77,171)     (95,486)
                                    ------------  -----------
Other Income (expense):
  Interest                                     -       (8,147)
  Sale of New Jersey tax
    attributes  			                 -      214,169
  Gain on sale of equipment                    -        4,377
                                    ------------  -----------
                                               -      210,399
                                    ------------  -----------
 Income (loss) before
  provision for income taxes   	     (77,171)     114,913

Provision for income taxes			     -        5,200
                                    ------------  -----------

Net income (loss)                    $  (77,171)   $  109,713
                                    ============  ===========

Basic income (loss) per share        $    (0.00)  $      0.00

                                    ============  =============
Weighted average number of shares
 outstanding                          30,948,410   29,559,670
                                    ============  =============

See Notes to Financial Statements




















	MIKROS SYSTEMS CORPORATION
	STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY
	YEARS ENDED DECEMBER 31, 2001 AND 2000



$0.01 Par Value
   ----------------------------------------------------------
    Number      Par     Number     Par     Number     Par
   of shares   Value   of shares  Value   of shares  Value
       -----------------------------------------------------------

1826:
 Balance-December 31, 1999  255,000  $2,550  1,131,663  $11,316  690,000 $6,900

Exercise of warrants
Issuance of common stock
Conversion of secured debt
Net Income

 ----------  --------  --------- -------   ---------  -------
1834:
 Balance-December 31, 2000    255,000 2,550  1,131,663  11,316  690,000  6,900

Conversion of accrued liabilities
Conversion of Series B
  preferred stock to common stock                     (29,230)   (292)
Net loss
  ----------  --------  --------- -------   ---------  --------
Balance - December 31, 2001 255,000 $ 2,550 1,102,433  $11,024  690,000  $ 6,900
==========  ========  ========= =======   =========  ========


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

Balance-December 31, 1999      28,588,963  $285,890 $ 11,005,252   $(11,766,889)

Exercise of Warrants              112,500     1,125        1,250
Issuance of common stock           43,750       438            -
Conversion of secured debt      1,873,850    18,738      328,108
Net Income                                        		     109,713
                               ----------  --------  -----------   ------------
Balance-December 31, 2000      30,619,063   306,191   11,334,610    (11,657,176)

Conversion of accrued liabilities 400,000	    4,000       20,000
Conversion of Series B
 preferred stock to common stock   87,690       877        9,061

Net Loss 						             (77,171)
                             ----------  --------- -----------   -------------
Balance - December 31, 2001   31,106,753   $311,068 $ 11,363,671   $(11,734,347)
                              ==========  ========  ===========   =============

                                  See Notes to Financial Statements







                            MIKROS SYSTEMS CORPORATION
                             STATEMENTS OF CASH FLOWS

                                                Years Ended December 31,
                                                2001             2000
                                             ----------      -----------
Cash Flow From Operating Activities:
  Net income (loss)                          $   (77,171)    $   109,713
 Adjustments to reconcile Net income (loss)
 to Net Cash  Provided (used) by
 Operating Activities:
   Depreciation and Amortization                   4,595           2,119
   Common Stock issued for services related       24,000          83,195
  Gain on sale of assets				     -          (4,377)
Net Changes in Operating Assets and Liabilities
  Accounts Receivable                              2,891          (9,033)
  Receivable on sale of tax attributes		40,964         (40,964)
  Other Current Assets                           (16,925)              -
  Accounts Payable                                 6,270         (22,718)
  Accrued Payroll and Payroll Taxes                1,119          (3,161)
  Accrued Expenses                               (18,988)         26,212
                                              -----------      ---------
 Net Cash provided by (used in)
   operating activities			       (33,245)        140,986
                                              -----------      ---------
Cash Flows From Investing Activities:
   Purchase of Equipment                          (1,341)              -
   Proceeds from sale of equipment                     -		6,000
   Patent costs                                        -          (2,206)
                                              -----------      ----------
Net Cash Provided by investing
  Activities				         (1,341)         3,784
                                              -----------      ----------

Cash Flows Provided Financing Activities:
  Repayment from related parties                 (23,124)        (39,043)
  -           2,813
  Proceeds from conversion of preferred stock      9,646               -
  					    -----------      ----------
   Net Cash  (used in)
    financing activities                         (13,478)        (36,230)
                                      -----------      ----------

Net increase (decrease) in cash                  (48,064)        108,550
Cash, Beginning of Year	                        142,316          33,766
                                              -----------       ----------
Cash, end of year                            $    94,252     $   142,316
                                             ============    =============
Supplemental disclosure of cash flow information

  Cash paid during the year for
    Income taxes			            $    5,300                -
                                             ============    =============

Supplemental disclosure of non-cash activities:
Stock Issued from conversion of notes
    payable		                    $        -      $   115,900
                                             ===========     =============

  Conversion of Preferred Stock B to
     Common stock                            $      292      $         -
                                             ===========     =============
See Notes to Financial Statements


  	MIKROS SYSTEMS CORPORATION
                         NOTES TO FINANCIAL STATEMENTS


A. THE COMPANY
--------------

Mikros Systems Corporation was founded in 1978 in Albany, New York to exploit
microprocessor technology developed at the General Electric Research and
Development Center for the military defense industry.  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
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 also pursue
commercial contracts which would employ these 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 agreement and retains
           ownership of
the AM and FM technology.  3D has licensed the FM technology rights in North
America to the Company and the AM technology rights in North America to MBC.
Mikros owns 2/3 of 3D and Safeguard owns the remaining 1/3.

As a result, the Company's Board of Directors determined that it would
          be in the
best interest of the shareholders to sell the government contracts and use the
proceeds to focus exclusively on the commercial contracts, particularly the AM
radio data casting

The Company sold its military contracts to an unrelated third party (the
Purchaser).  The Purchaser entered into a royalty agreement with the
          Company, and
is required to pay 2% royalty on all data terminal set sales over a four year
period that expires in 2002. In addition, the Purchaser was obligated to supply
$1,000,000 in engineering services to the Company, which was
             expended  by the end
of 1999 on the AM data program in cooperation with MBC









B.   SIGNIFICANT ACCOUNTING POLICIES
------------------------------------

Basis of Presentation
---------------------

The Company's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplates the continuation of the Company as a going concern. The
Company has sustained substantial operating losses in recent years. In
addition, the Company has used substantial amounts of working capital in
its operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.  Management's plans and
intentions on the going concern issue are discussed below.  These
financial statements do not include any adjustments that would be required
if the Company were unable to continue as a going concern.

In order to continue as a going concern, the Company will need to incur
	substantial expenditures to develop and market its commercial wireless
	communications business.

     	In view of these matters, realization of a major portion of the
                        assets in
     	the accompanying balance sheet is dependent upon continued operations of
  	the Company, which in turn is dependent on the Company being able to
	obtain financing and/or equity to support further development for its
	commercial wireless  business and continuing operations. Management
	believes that actions presently being taken to revise the Company's
	operating and financial requirements provide the opportunity to continue
	as a going concern.


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.


Equipment
---------

Equipment is stated at cost. Depreciation is computed using the
straight-line method based on estimated useful lives which range from 2 to
5 years. Depreciation expense amounted to $269 and $0 for years ended
December 31, 2001 and 2000, respectively.






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

The Company adopted Statement of Financial Accounting Standards No.128,
	earnings per share, and in accordance with this provision has restated all
	prior periods. Basic earnings per common 	share is computed using the
	weighted average number of shares outstanding. 	The  number of common
	shares that would be issued from the exercise of stock options and
	warrants, and the conversion of convertible preferred stock would be anti-
	dilutive.

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

     	Royalty revenues are recorded when shipments are completed and
                        reported to
     	the Company.


Patents
      -------

Patent costs are amortized over a 17-year life.  Amortization expense
amounted to $4,326 and $2,119 for the years ended December 31, 2001 and
2000, respectively.

Warranty Costs
--------------

The Company expects warranty costs to be minimal.


Cash
 	----

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.  As of December
31, 2001, there was $102,206 in cash on deposit with a financial
institution only $100,000 of which is insured by the FDIC.


C.   FINANCING TRANSACTIONS
---------------------------
1996 Financing
--------------

In a series of transactions from February through May 1996, the Company issued
secured promissory notes and warrants to raise an aggregate of $641,500
(including $122,500 from officers and directors). The promissory notes
            were for a
term of approximately eighteen months, bearing interest at 12% on the unpaid
balance, and were secured by certain assets of the Company.  In addition, the
Company issued warrants to purchase five (5) shares of Common Stock
          at $0.01 per
share for each dollar of debt.  The value of the warrants was immaterial and no
accounting recognition was given to their issuance.

In October 1996, all of the note holders agreed to a deferral of principal
payments in exchange for the right to convert outstanding debt to
           Common Stock of
the Company at a rate of one (1) share of stock for $1.00 of debt.  The Company
determined that the fair value of the conversion feature was inmaterial.
Accordingly, no accounting recognition has been given to this modification of
terms.

The Company paid the investors all of the interest accrued on promissory notes
payable through May 15, 1998.  At that time, it offered to convert the notes at
face value to stock valued at $0.06 per share in order to restructure
           its debt.
During 2000, the sole remaining note holder converted the debt and interest,
totaling $43,000 under the 1998 terms.  A total of 4,840,268 shares of common
stock were issued for conversion of debt.

Safeguard Scientifics (Delaware) Inc. (SSI)
-------------------------------------------

On November 15, 1996, the Company, all of its secured creditors and Safeguard
entered into an agreement. Under the agreement Safeguard paid $1,000,000 to the
Company.

Safeguard received:  1) 1,912,000 shares of Common Stock of the Company; 2) a
warrant to purchase 2,388,000 shares of Common Stock at $0.65 per share; 3) a
warrant to purchase 3,071,000 shares at $0.78 per share; 4) a 75%
          interest in an
exclusive, royalty-free, perpetual license of the AM technology in the United
States, Canada and Mexico (through Safeguard's ownership in MBC); and 5) a  1/3
interest in the FM and AM technology (through Safeguard's ownership
            in 3D).  This
transaction is more fully described below.

Two (2) new companies were formed, Data Design and Development Corporation (3D)
and Mobile Broadcasting Corporation (MBC).  The Company received
           one-third of 3D
in exchange for certain of its AM and FM technology.  Safeguard received one-
third of 3D in exchange for a commitment to invest up to $1,000,000
          in MBC.  The
secured creditors received one-third of 3D and released their security interest
in the technology transferred.  The Company received 25% of MBC for $50.
Safeguard received 75% of MBC for $200,000.  During 2000, the secured creditors
converted their shares of 3D stock into the Company stock.  Accordingly, the
Company has become the majority stockholder of Data Design and Development
Corporation.



3D granted MBC an exclusive, royalty-free, perpetual license to the
           AM technology
in the United States, Canada and Mexico.  3D granted the Company an exclusive,
royalty-free, perpetual license to the FM technology in the United
           States, Canada
and Mexico.  3D retained rights to the AM and FM technology in the rest of the
world.  The Company and MBC entered into a consulting arrangement
          under which the
Company was paid for the development of the AM technology.
          3D owns the rights to
such technology.



The Company is unable to assign fair values to these transactions.
          No amount of
cash consideration was considered attributable to a sale of the AM or FM
technology or to the license thereto.  No gain was recognized on
           the transfer of
the technology.  The entire amount of the cash consideration received from
Safeguard was recorded as a sale of Common Stock.

In connection with the sale of the Common Stock and the Warrants, the Company
granted to Safeguard certain piggyback and demand registration rights with
respect to the Common Stock and the Common Stock underlying the Warrants.  In
addition, the Company granted to Safeguard a right of first refusal pursuant to
which, subject to certain conditions, in the event the Company issues, sells or
exchanges any securities, it must first offer such securities to Safeguard and
such offer must remain open and irrevocable for 30 days.  Such right of first
refusal may only be waived in writing and terminates at such time as Safeguard
owns less than 10% of the Common Stock.

Pursuant to the Purchase Agreement, as long as Safeguard owns 1% or more of the
Company's outstanding equity securities, on a fully-diluted basis, the
         Company is
obligated to, among other things:(i) permit Safeguard to inspect the operations
and business of the Company; and (ii) fix and maintain the number
          of Directors on
the Board of Directors at eight members.  In addition, the Purchase Agreement
also provides that as long as Safeguard owns such 1%, the Company is subject to
certain negative covenants, including, among other things,
          restrictions on:  (i)
transactions with affiliates of the Company; (ii) certain
          indebtedness; and (iii)
amendments to the Company's Certificate of Incorporation and Bylaws.

1992-93 Financing
-----------------

The Company paid the investors of the 1992-93 financing all of the interest
accrued on their notes payable through May 15, 1998.  At that time,
            it offered to
convert the notes at face value to stock valued at $0.06 per share in order to
restructure its debt.  There were 4,166,668 shares issued as a result.  One of
the investors chose not to convert his notes which totaled $72,500.
           During 2000,
the investor converted his note into 290,000 shares of common stock.

D.   DIVIDENDS
--------------
As of December 31, 2001 and 2000, there were dividends in arrears on shares of
Series D Preferred Stock of $552,000 and $483,000 ($.10 per share) respectively.


E.   REVENUES
-------------

Royalty revenues from one customer amounted to 100% of total revenues
         in 2001 and
2000, respectively.






F.  INCOME TAXES
----------------

Income taxes are recorded in accordance with Statement of Financial Accounting
Standards No. 109 "Accounting for  Income Taxes".

The Income tax provision (benefit) is computed as follows:



 2001   	  2000
                             ---------   ---------

Current tax expenses        $        -   $  48,800
Benefit from utilization of
 net operating losses                -     (38,400)
Benefit from utilization of
 State R&D credits                   -      (5,200)
Deferred Tax Expense (Benefit) 459,600     698,700
Decrease in valuation
   Allowance                  (459,600)   (698,700)
                              ---------   ---------

Net Tax Provision           $	       -   $   5,200
                             =========   =========

During 2000, as permitted by New Jersey Statues, the Company has sold their
entire state net operating loss carryforwards and approximately $40,000 of its
available state research and development credits.  The Company
          realized $214,169
from the sale of these tax attributes.

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

                               2001		  2000
                             --------   ----------
Federal statutory rate		 34.0% 	 34.0%
Utilization of net operating
 loss carryforwards             0.0 	(32.5)
State income taxes, net of
 federal tax effect        	  0.0         3.0
Decrease in valuation
 allowance				 (34.0)       0.0
                             ---------  ----------
Effective tax rate              0.0%        4.5%
                             =========  ==========









Total available Net Operating Loss Carry Forwards are reflected in
          the following
schedule:

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

				2002	     $	  923,000        $         -
                              2003             606,000                  -
                              2004             147,000                  -
                              2005              81,000                  -
                              2008                   -             77,000
                              2010             602,000                  -
                              2011           1,422,000                  -
                              2012             339,000                  -
                              2013             277,000                  -
                              2021              77,000                  -
                                           --------------     -------------
                                           $ 4,474,000         $   77,000

The deferred tax asset and deferred tax liability consist of the following:

                               2001          2000
                             ---------    ---------
Deferred tax asset:
  Net Operating loss
  carry forward            $ 1,525,320  $  1,984,920
  Research and Development
    credit				  52,532        52,532
  Valuation Allowance      ( 1,577,852)  ( 2,037,452)
                            ----------   -----------
Net deferred tax asset     $         -  $          -
                            ==========   ===========
Total Deferred tax
 liability        	   $         -  $          -
                            ==========   ===========

Deferred income tax assets and liabilities are computed annually
          for differences
between the financial statement and tax bases of assets and
         liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income.  Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.  Income tax
expense is the tax payable or refundable for the period plus or
           minus the change
during the period in deferred tax assets and liabilities.


G.  RELATED PARTY TRANSACTIONS
-------------------------------

As of December 31, 2001, the Company owed its board members $19,573.



MBC has advanced the Company $48,799 for working capital purposes.
          The obligation
is due on demand without interest.


H.  MANDATORILY REDEEMABLE SERIES C PREFERRED STOCK
----------------------------------------------------

The Series C Preferred Stock, was issued in 1988 in order to satisfy notes
payable and other trade accounts payable pursuant to a debt restructuring. 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 and
redemption is mandatory 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.


I. SERIES B CONVERTIBLE PREFERRED STOCK
---------------------------------------

The Series B Preferred Stock, was issued in 1988 in order to satisfy notes
payable and other trade accounts payable pursuant to a debt
          restructuring.  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.


J.  SERIES D PREFERRED STOCK
-----------------------------

The Series D Preferred Stock was issued in 1993 in order to partially satisfy
notes payable and accrued interest thereon pursuant to a debt
          restructuring.  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.






K.  STOCK OPTIONS AND WARRANTS
-------------------------------

In 1992, the Company adopted an Incentive Stock Option Plan.  The stock option
plan, as amended provides for ten-year options to purchase up to
           2,000,000 shares
of Common Stock at a price equal to the market price of the shares on date of
grant, exercisable at the cumulative rate of 25% per annum.

The Company has adopted the disclosure-only provisions of
           Statement of Financial
Accounting Standards  No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"),  but applies APB Opinion 25 and related interpretations
           in accounting
for its various stock option plans.  There was no compensation
          cost for the years
ended December 31, 2001 and 2000.  Had compensation cost been recognized
consistent with the method prescribed by Statement of Financial Accounting
Standards No. 123, the Company's net loss and loss per share would have been
changed to the pro forma amounts as follows:

                                   2001          2000
                               -----------    -----------
Net income (loss):
               As Reported      $  (85,545)     $ 109,713
                                ==========     ===========
               Proforma         $  (85,545)     $ 109,713
                                ==========     ===========
Basic earnings (loss) per share:

               As Reported      $   (0.00)     $    (0.00)
                                ==========    ===========
               Proforma         $   (0.00)     $    (0.00)
                                ==========    ===========

The fair value of the Company's stock options used to
           compute
           proforma net income
(loss) and net income (loss) per share disclosures
           is the
            estimated present value
at grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions:

     ASSUMPTION                 2001              2000
                            -----------       ----------
     Dividend yield                0%              0%
     Risk free interest rate    6.48%           6.48%
     Expected life              5 years         5 years
     Expected volatility         235%            235%

Proforma net income (loss) reflects only options granted in 1996 and 1995.
Options which were granted in 1997 were subsequently forfeited. In addition,
42.3% of all outstanding options as of December 31, 1998
            were
           forfeited in 1999.
Therefore, the full impact of calculating compensation cost for stock options
issued in 1997 under Statement of Financial Accounting Standards No.
         123 is not
material. Compensation cost for options granted prior to January 1, 1995 is not
considered.




Option activity under the Company's Plan is summarized below:


     Weighted              Weighted
         Average              Average
      Exercise              Exercise

2532: ----------------------------------------------
Options outstanding beginning
240,000    $ 0.1240
Granted 			              -   0.000      361,818      0.1040
Exercised  			               -  0.000      (25,000)     0.0003
Cancelled			               -  0.000            -      0.0000
                                   ---------------------------------------------
2539: Options outstanding, end of year 576,818 $0.1520  576,818 $ 0.1520
                                   =============================================

The following summarizes information about the Company's stock
options outstanding at December 31, 2001:

2577:  Options Outstanding   Options Exercisable
2578:  ----------------------------------   ---------------------------
2579:   Range of  Number  Weighted Avg.  Weighted  Number  Weighted
2580: Exercise Outstanding  Remaining  Avg. Exercise  Exercisable  Avg. Exercise
 Price
2583:  --------  -------- ---------   --------   ---------  -------
  $0.0625  100,000 	 3.9 years        $0.0625         -	       $0.0625
  $0.1875   10,000	 6.3 years        $0.1875        - 	       $0.1875
  $0.50	   30,000	 7.5 years        $0.50             -  	       $0.50
         9.4 years        $0.06               -         $0.06
 10.4 years         $0.15               -             $0.15
 10.6 years             $0.20               -             $0.20

          				  As of December 31,

Common Stock Warrants:         2001        2000
                              -------      -------
Warrants outstanding and
 exercisable at,
 beginning of year          6,627,750     6,759,000
Granted                             -             -
Exercised                           -      (131,250)
Expired or terminated        (793,750)            -
                            ----------    ---------
Warrants outstanding and
 exercisable, end of year   5,834,000     6,627,750
                            ==========    =========

Exercise price per warrant
                             $0.06,         $0.01,
     $0.26          $0.06,
     $0.65, &       $0.10,
                             $0.78          $0.26,
                                            $0.65, &
                                            $0.78


                                    As of December 31,
Series C Preferred
Stock Warrants               2001         2000
                           -------       -------
Warrants outstanding and
 exercisable at, beginning
  of year                   97,500		97,500
Granted                          -             -
Exercised                        -             -
Expired or terminated      (97,500)            -
                           -------       --------
Warrants outstanding and
 exercisable, end of year        -        97,500
                           ========      ========

Exercise price per warrant $     -        $ 1.00
                           ========      ========


L.   PROFIT SHARING PLAN
-------------------------

The Company maintained a 401(K) Profit Sharing Plan. The Plan allowed for a
Company match of employee contributions to the plan up to a limit of one and
one-half percent (1.5%) of annual compensation. The payment of the Company
matching contribution had been suspended since August, 1995.

In 1999, the Company notified its present employees as well as former employees
who remained in the Plan of its intent to terminate the plan.  The Plan was
terminated in 2000.

M.   FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------------

The carrying amounts reflected in the financial statements for cash, loans and
2617:  notes payable approximate the respective fair values due to the short
        maturities
of those instruments.

            December 31, 2000
 -------------------------------       -----------------------------------
             Carrying                              Carrying
    Amount     Fair Value                Amount        Fair Value
  -----------------------------------
Assets
$  94,252    $ 94,252      $  142,316    $  142,316

Liabilities
2629:   Mandatorily redeemable
     -         80,450            -


     (A)	It is not practicable to estimate the fair value of
		mandatorily redeemable preferred stock because of the inability to
          	estimate fair value without incurring excessive costs.




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