UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  
 FORM
10-Q
 
 xQUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period
ended March 31, 2008
  oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For
the transition period from ______to______
 
 Commission
File Number: 000-14801
  Mikros
Systems Corporation
 (Exact
name of small business issuer as specified in its charter)
 
 Delaware
              14-1598200(State
      or other jurisdiction
                of
      incorporation or organization)
              (I.R.S.
      Employer
                Identification
      No.)
 
 707 Alexander Road,
      Building Two, Suite 208, Princeton, New Jersey
  08540(Address
      of principal executive offices)
 
 (609)
      987-1513(Issuer’s
      Telephone Number, Including Area
Code)
  Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. xYes oNo
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “ smaller
reporting company” in Rule 12b-2 of the Exchange Act.
   Large accelerated filer
              o
              Accelerated filer
              oNon-accelerated filer
              o
              Smaller reporting company
              x(Do not
      check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). oYes xNo
  APPLICABLE
ONLY TO CORPORATE ISSUERS
  State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:  There were 31,766,753 issued and
outstanding shares of the issuer’s common stock, $.01 par value per share, on
May 12, 2008.
 
 
  TABLE OF
CONTENTS
  PART
      I.
              FINANCIAL
      INFORMATION
              PAGE
      #Item
      1.
              Financial
      Statements.
              1Condensed
      Balance Sheet as of  March 31, 2008 (unaudited)
              1Condensed
      Statements Of Income for the Three Months Ended March 31, 2008 and 2007
      (unaudited)
              3Condensed
      Statements Of Cash Flows for the Three Months Ended March 31, 2008 and
      2007 (unaudited)
              4Notes
      To The Unaudited Condensed Financial Statements
              5Item
      2.
              Management’s
      Discussion and Analysis.
              13Item
      4T.
              Controls
      and Procedures.
              20PART
      II.
              OTHER
      INFORMATION
              20Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds.
              20Item
      6.
              Exhibits.
              20SIGNATURES
              21
  
  PART
I.  FINANCIAL INFORMATION
 
 Item
1.  Financial Statements
  MIKROS
SYSTEMS CORPORATION
 CONDENSED
BALANCE SHEET
 (UNAUDITED)
  March
      31,
                2008ASSETSCURRENT
      ASSETSCash
      and Cash Equivalents
              
              $
              336,252Receivables
      on Government Contracts
              
              
              263,214Other
      Current Assets
              
              
              35,911TOTAL
      CURRENT ASSETS
              
              
              635,377Patents
      and Trademarks
              
              
              5,383Less:
      Accumulated Amortization
              
              
              (506
              )4,877PROPERTY
      AND EQUIPMENTEquipment
              
              
              14,625Furniture
      and Fixtures
              
              
              9,26423,889Less:
      Accumulated Depreciation
              
              
              (12,197
              )11,692Deferred
      Tax Asset
              
              
              61,200TOTAL
      ASSETS
              
              $
              713,146
   See
Accompanying Notes to Unaudited Condensed Financial Statements.
  1
  MIKROS
SYSTEMS CORPORATION
 CONDENSED
BALANCE SHEET (UNAUDITED)
 (continued)
 
 March
      31,
                2008LIABILITIES
      AND SHAREHOLDERS’  EQUITYCURRENT
      LIABILITIESAccrued
      Payroll and Payroll Taxes
              
              $
              106,387Accounts
      Payable
              
              
              91,695TOTAL
      CURRENT LIABILITIES
              
              
              198,082Long-term
      Liabilities
              
              
              13,781TOTAL
      LIABILITIES
              
              
              211,863REDEEMABLE
      SERIES C PREFERRED STOCK par value $.01 per share, authorized 150,000
      shares,issued
      and outstanding 5,000 shares (involuntary liquidation value -
      $80,450)
              
              
              80,450SHAREHOLDERS’
      EQUITYPreferred
      Stock, Series B convertible, par value $.01 per share, authorized
      1,200,000 shares, issuedand
      outstanding 1,102,433 shares (involuntary liquidation value -
      $1,102,433)
              
              
              11,024Preferred
      Stock, convertible, par value $.01 per share, authorized 2,000,000 shares,
      issued andoutstanding
      255,000 shares (involuntary liquidation value - $255,000)
              
              
              2,550Preferred
      Stock, Series D, par value $.01 per share 690,000 shares authorized,
      issued and outstanding(involuntary
      liquidation value - $1,518,000)
              
              
              6,900Common
      Stock, par value $.01 per share, authorized 60,000,000 shares, issued and
      outstanding31,766,753
      shares
              
              
              317,668Capital
      in excess of par value
              
              
              11,439,832Accumulated
      Deficit
              
              
              (11,357,141
              )TOTAL
      SHAREHOLDERS’ EQUITY
              
              
              420,833TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
              
              $
              713,146
   See
Accompanying Notes to Unaudited Condensed Financial Statements.
  2
  MIKROS
SYSTEMS CORPORATION
 CONDENSED
STATEMENTS OF INCOME
 (UNAUDITED)
  Three
      Months Ended,March
      31,
                2008
              
              
              March
      31, 2007Revenues:Contract
      Revenue
              
              $
              651,282
              
              
              $
              794,950Cost
      of Sales
              
              
              306,354
              
              
              
              486,234Gross
      Margin
              
              
              344,928
              
              
              
              308,716Expenses:Engineering
              
              
              128,375
              
              
              
              95,433General
      and Administrative
              
              
              194,795
              
              
              
              153,038Total
      Expenses
              
              
              323,170
              
              
              
              248,471Income
      from Operations
              
              
              21,758
              
              
              
              60,245Interest
      Income
              
              
              1,495
              
              
              
              -Income
      Before Income Tax Expense
              
              
              23,253
              
              
              
              60,245Income
      Tax Expense
              
              
              12,500
              
              
              
              29,630Net
      Income
              
              $
              10,753
              
              
              $
              30,615Basic
      and diluted earnings per share
              
              $
              0.00
              
              
              $
              0.00Basic
      weighted average number of Shares outstanding
              
              
              31,766,753
              
              
              
              31,766,753Diluted
      Weighted Average number of Shares outstanding
              
              
              35,496,992
              
              
              
              35,554,354
   See
Accompanying Notes to Unaudited Condensed Financial Statements.
  3
  MIKROS
SYSTEMS CORPORATION
 CONDENSED STATEMENTS
OF CASH FLOWS
 (UNAUDITED)
  Three
      Months EndedMarch
      31,
                2008
              
              
              March
      31, 2007Cash
      Flow From Operating Activities:Net
      Income
              
              $
              10,753
              
              
              $
              30,615Adjustments
      to reconcile Net Income tonet
      cash provided by Operating Activities:Depreciation
      and Amortization
              
              
              1,496
              
              
              
              1,066Deferred
      Tax Provision
              
              
              9,300
              
              
              
              19,100Recognition
      of  Stock Option Expense
              
              
              9,164
              
              
              
              -Net
      Changes in Operating Assets and Liabilities(Increase)
      Decrease in:Receivables
      on Government Contracts
              
              
              40,255
              
              
              
              (46,924
              )Other
      Current Assets
              
              
              (32,374)
              
              
              
              (17,705
              )Increase
      (Decrease) in:Accounts
      Payable
              
              
              (125,850)
              
              
              
              116,593Accrued
      Payroll and Payroll Taxes
              
              
              19,629
              
              
              
              7,627Other
      Accrued Expenses
              
              
              (678)
              
              
              
              26,783Net
      Cash provided by (used in) Operating Activities
              
              
              (68,305)
              
              
              
              137,155Net
      Increase (Decrease) in Cash and Cash Equivalents
              
              
              (68,305)
              
              
              
              137,155Cash
      and Cash Equivalents, beginning of the period
              
              
              404,557
              
              
              
              229,459Cash
      and Cash Equivalents, end of period
              
              $
              336,252
              
              
              $
              366,614
   See
Accompanying Notes to Unaudited Condensed Financial Statements.
  4
  MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 
  NOTE  1
– Basis of Presentation:
  The
financial statements included herein have been prepared by Mikros Systems
Corporation (the “Company”), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations.  These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company’s Annual Report on Form 10-KSB for the year ended December 31,
2007.
  In the
opinion of the Company’s management, the accompanying unaudited financial
statements contain all adjustments, consisting solely of those which are of a
normal recurring nature, necessary to present fairly its financial position as
of March 31, 2008, and the results of its operations and its cash flows for the
three  months ended March 31, 2008 and 2007.
  Interim
results are not necessarily indicative of results for the full fiscal
year.
  NOTE 2 –
REDEEMABLE SERIES C PREFERRED STOCK
 
  The
Redeemable Series C Preferred Stock is not convertible into any other class of
the Company’s stock and is subject  to  redemption at the
Company’s option at any time or at the option of the holder in the event of
“organic changes” (as defined in the Certificate of Designation of the Series C
Preferred Stock), such as capital reorganizations, consolidations, mergers, or
sale of all or substantially all of the Company’s assets. The Company has
historically interpreted this “organic change” to be outside its
control.  Upon any liquidation, dissolution or winding up of the
Company, each holder of Redeemable 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 Redeemable Series C Preferred Stock held by such holder, and the
holders of Redeemable Series C Preferred Stock will not be entitled to any
further payment. The redemption price per share is $16.09.
  5
  MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
  
 NOTE 3 –
SHAREHOLDER’S EQUITY
  SERIES B CONVERTIBLE
PREFERRED STOCK
  Shares of
Series B Preferred Stock are not entitled to any dividends. 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.  Each share of the Series B Preferred Stock 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 Redeemable Series
C Preferred Stock and before any payment is made upon the Company’s Convertible
Preferred Stock, an amount in cash equal to $1.00 for each share of Series B
Preferred Stock held, and such holders will not be entitled to any further
payment.
  CONVERTIBLE PREFERRED
STOCK
 
 Each
share of the convertible preferred stock  is entitled to dividends
when, as and if declared by the Board of Directors of the Company and in the
event any dividend is payable to holders of the Company’s common stock, each
share is entitled to receive a dividend equal to the amount of such common stock
dividend multiplied by the number of shares of common stock into which each
share of convertible preferred stock may be converted.  Each share of
the convertible preferred stock can be redeemed at the Company’s option for
$1.00 per share or can be converted into shares of the Company’s common
stock.  Each share of convertible preferred stock is convertible into one
share of common stock.  This conversion rate is subject to adjustment in
certain circumstances.  Upon any liquidation, dissolution or winding up of
the Company, each holder will be entitled to his or her redemption price once
shareholders of Redeemable Series C Preferred Stock and Series B Preferred stock
have been fully paid.
 
 SERIES D PREFERRED
STOCK
 
 The
Series D Preferred Stock provided 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
Company, each holder of Series D Preferred Stock will be entitled to be paid,
after all distributions or payments are made upon the Company’s Convertible
Preferred Stock, Series B Preferred Stock, and Redeemable Series C Preferred
Stock, an amount in cash equal to  $1.00 plus all unpaid cumulative
dividends 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.
  6
  MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
  During
January 2006, the holders of the shares of Series D Preferred Stock agreed to
waive future accumulation of dividends, effective as of January 1, 2006. As of
December 31, 2005, there were dividends in arrears on shares of Series D
Preferred Stock of $828,000.  Such waiver does not affect dividends
accrued through December 31, 2005.  Accordingly, $828,000 of such
undeclared dividends in arrears remain outstanding at March 31,
2008.
 NOTE 4 –
EARNINGS PER SHARE
  The
Company’s calculation of earnings per share is as follows for the periods
presented:
  Three
      Months EndedMarch
      31, 2008
              
              
              March
      31, 2007Net
      income applicableto
      common Stockholders
              
              $
              10,753
              
              
              $
              30,615Average
      basicShares
      outstanding
              
              
              31,766,753
              
              
              
              31,766,753Assumed
      conversionof
      preferred stock
              
              
              3,562,299
              
              
              
              3,562,299Effect
      of dilutiveoptions
      and warrants
              
              
              205,921
              
              
              
              225,302Average
      dilutedShares
      outstanding
              
              
              35,534,973
              
              
              
              35,554,354Net
      earnings per common sharebasic
      and diluted
              
              $
              0.00
              
              
              $
              0.00
  440,000
shares issuable upon exercise of options were excluded due to their
anti-dilutive effect for the three months ended March 31, 2008.
  No shares
were excluded due to their anti-dilutive effect for the three months ended March
31, 2007.
  7
 MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 NOTE 5 –
REVENUE RECOGNITION
 
 The
Company is engaged in contracts with the Federal Government to help fund the
costs of certain research and development (R & D) activities as the Company
attempts to develop certain technology to be utilized by the US Department of
Defense.  The contracts are cost plus fixed fee contracts and the
Company recognizes revenue under the contracts as it incurs reimbursable
costs.  Each invoice to the federal government includes a component
for the reimbursable direct costs and a portion of overhead and fixed
fees.  The overhead and fixed fees are being billed to the government
at the rate permitted by the Defense Contract Audit Agency.
 
 Certain
arrangements are different from production-type contracts and qualify as
research and development by meeting all of the following
conditions:
 
 -
              Activities
      performed in connection with the contractual arrangement qualify as
      research and development as defined by FASB Statement No. 2-
              The
      contractor retains a right to the data and results of the research and
      development activities-
              The
      contractual arrangement obligates the contractor to perform only on a
      best-efforts basis to achieve the agreed-upon objectives of the research
      and development activity, rather than to deliver a product or service
      meeting defined performance or other (such as design)
      specifications-
              At
      the inception of the contract, the contractor and the customer enter into
      the arrangement with the expectation that costs will be incurred in excess
      of amounts to be funded. This condition will be met if contractual or
      other documentation specifically evidences acknowledgment of this
      expectation by both the contractor and the customer. Implicit in this
      condition is the existence of significant uncertainty at the date the
      contractor enters into the arrangement regarding the likelihood of
      successfully securing follow-on contracts related to the research and
      development activity-
              The
      research and development arrangement is not combined with other contracts
      or segmented in accordance with paragraphs 35  through 42 of SOP
      81-1-
              The
      federal government is the sole or principal expected ultimate customer
      (including foreign military sales) for the research and development
      activity or products directly resulting from the R&D activity subject
      to the arrangements
 Similarly,
when third party contractors are utilized in relation to these contracts, the
Company reviews their performance and upon its determination that the costs are
reimbursable under the contract, it records revenue for such costs in the period
incurred.
  8
 MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 Unbilled
revenue reflects work performed, but not billed at the time, pending contractual
requirements. As of   March 31, 2008, we had $0
of  unbilled revenues.  Billings to customers in excess of
revenue earned are classified as advanced billings, and shown as a liability. As
of  March 31 2008, we had no advanced billings.
 
 The
Company does not currently have any other contracts with the federal government
or any other entities that would require accounting for those contracts using
the percentage-of-completion or completed contract methods of recognizing
revenue.
  NOTE 6 –
INCOME TAX MATTERS
  The
Company routinely conducts an on-going analysis to review the deferred tax
assets and the related valuation allowance that it has recorded against deferred
tax assets, primarily associated with Federal net operating loss
carryforwards.  As a result of this analysis and actual results of
operations, the Company decreased its net deferred tax assets by $9,300 during
the quarter ended March 31, 2008.   Income tax expense includes
expense associated with state tax liabilities.
  NOTE 7 –
SHARE BASE COMPENSATION
 
 Incentive
Stock Option Plan
 
 Stock
options were issued pursuant to an Incentive Stock Option Plan adopted by the
Company in 1992. The ability to grant options under this plan expired in
2002.  Specific terms of the remaining options outstanding under this
plan are set forth in individual stock option agreements.  Generally,
the exercise price of the options is the market price of the Company’s stock on
the date that the option was granted.
 
 As of March 31, 2008, 361,818 options
are still outstanding, fully vested and exercisable.
 
 2007
Stock Incentive Plan
 
 On August
6, 2007, the Board of Directors adopted the Mikros Systems Corporation 2007
Stock Incentive Plan (the “Plan”).  Awards may be made under the Plan
for up to 3,000,000 shares of common stock in the form of stock options or
restricted stock awards.  Awards may be made to the Company’s
employees, officers, directors, consultants or advisors.  The Plan is
administered by the Board of Directors which has full and final authority to
interpret the Plan, select the persons to whom awards may be granted, and
determine the amount, vesting and all other terms of any awards.  To
the extent permitted by applicable law, the Board of Directors may delegate any
or all of its powers under the Plan to one or more committees or subcommittees
of the Board.  The Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended, and is not a
“qualified plan” under Section 401(a) of the Internal Revenue Code of 1986, as
amended.  The Plan has not been approved by the Company’s
shareholders.  As a result, “incentive stock options” as defined under
Section 422 of the Internal Revenue Code may not be granted under the Plan until
such approval is received for the Plan.   The Plan terminates on
August 5, 2017.
  9
 MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 All stock
options granted under the Plan are exercisable for a period of up to ten years
from the date of grant, are subject to vesting as determined by the Board upon
grant, and have an exercise price equal to not less than the fair market value
of our common stock on the date of grant.  Unless otherwise determined
by the Board, awards may not be transferred except by will or the laws of
descent and distribution.  The Board has discretion to determine the
effect on any award granted under the Plan of the death, disability, retirement,
resignation, termination  or other change in employment or other
status of any participant in the Plan.  The maximum number of shares
of common stock for which awards may be granted to a participant under the Plan
in any calendar year is 300,000.
  Upon the
occurrence of a “reorganization event”, defined as the merger of the Company
with or into another corporation as a result of which the Company’s common stock
is converted into or exchanged for cash, securities or other property or is
cancelled, the exchange of all shares of our common stock for cash, securities
or other property pursuant to a share exchange, or the liquidation of the
Company, the Board may take any number of actions.  These actions
include, providing for all options outstanding under the Plan to be assumed by
the acquiring corporation or to become immediately vested and exercisable in
full, and in the case of a reorganization event in which holders of the
Company’s common stock receive a cash payment, to provide for a cash payment to
holders of options equal to the excess, if any, of the per share cash payment
over the exercise price of such options.
  On
October 3, 2007, the Company issued options under our 2007 Stock Incentive Plan
to certain of its employees, officers, directors, advisors and consultants to
purchase an aggregate of 430,000 shares of common stock at an exercise price of
$.55 per share, the last sales price of our common stock on the date of
grant.  The 125,000 options issued to the Company’s directors have a
term of ten years and vest in three equal annual installments over the three
year period commencing on the date of grant. The 305,000 options issued to the
Company’s employees, officers, advisors and consultants have a term of ten years
and vest in five equal annual installments over the five year period commencing
on the date of grant.
  On March
17, 2008, the Company issued options under the 2007 Incentive Plan to an
employee to purchase an aggregate of 10,000 shares of common stock at an
exercise price of  $.62 per share, the last sales price
of  the Company’s common stock on the date of the
grant.  The 10,000 share option issued to the Company
employee  has a term of ten years and vests in  five equal
annual installments over the five year period commencing on the date of
grant.
  In
accordance with the recognition provision on SFAS No. 123(R) the Company
recognized stock-based compensation expense of $9,164 for the quarter ended
March 31, 2008, in the accompanying financial statements. No tax benefits were
recognized related to this stock based compensation. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
  2007
      Grants
              
              
              2008
      Grants3
      year options
              
              
              5
      year options
              
              
              5
      year optionsExpected
      Life
              
              
              3
              
              
              
              5
              
              
              
              7.5Expected
      volatility
              
              
              80
              %
              
              
              95
              %
              
              
              122
              %Risk-free
      interest rate
              
              
              4.07
              %
              
              
              4.44
              %
              
              
              2.71
  10
 MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 The
expected life of options granted is based on each vesting period, respectively.
The expected volatility is based on historical stock prices. The risk-free
interest rate is determined using the U.S. Treasury bill rate at the time of
grant. The Company has never paid a dividend, and as such the dividend yield is
zero. The forfeiture rate is unknown.
  As
of  March 31, 2008, there were no options exercisable under the 2007
Stock Incentive Plan.
 
 The
aggregate intrinsic value of options outstanding at March 31, 2008 under the
2007 Stock Incentive Plan was approximately $162,755.
 
 The
aggregate intrinsic value of stock options above represents the total pre-tax
intrinsic value (the amount by which the current market value of the underlying
stock exceeds the exercise price of the options) that would have been received
by the option holders had they exercised their options on March 31,
2008.  This amount changes based on the changes in the market value in
Mikros Systems Corporation stock.  The fair value (present value of
the estimated future benefit to the option holder) of each option grant is
estimated on the date of the grant using the Black-Scholes option pricing
model.
 
 There
were a total of 440,000 unvested options under the 2007 Stock Incentive Plan at
March 31, 2008, with a fair value of approximately $166,384  and
approximately $147,908 to be recognized in expense as compensation is earned in
future periods.
 
 NOTE 8 –
RECENT ACCOUNTING PRONOUNCEMENTS
  In
September 2006, the FASB issued Statement No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value under
GAAP, and expands disclosures about fair value measurements.  FASB
Statement No. 157 applies to other accounting pronouncements that require or
permit fair value measurements.  The new guidance is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and for interim periods within those fiscal years.  The adoption of
this pronouncement on January 31, 2008 did not have an impact on the Company’s
financial position, results of operations,  and related financial
statement disclosures.
 
 In
December 2007, the FASB issued FASB Staff Position (FSP) FAS 157-2, “Effective
Date of FASB Statement No. 157,” that permits a one-year deferral in
applying the measurement provisions of Statement No. 157 to non-financial assets
and non-financial liabilities (non-financial items) that are not recognized or
disclosed at fair value in an entity’s financial statements on a recurring basis
(at least annually). Therefore, if the change in fair value of a non-financial
item is not required to be recognized or disclosed in the financial statements
on an annual basis or more frequently, the effective date of application of
Statement 157 to that item is deferred until fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. This
deferral does not apply, however, to an entity that applies Statement 157 in
interim or annual financial statements before proposed FSP 157-2 is finalized.
The adoption of FASB Statement No. 157 and FSP FAS 157-2 had no impact on the
Company’s financial statements at March 31, 2008.
  11
 MIKROS
SYSTEMS CORPORATION
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2008
 (UNAUDITED)
 In
February 2007, the FASB Issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115”.  SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair
value.  Unrealized gains and losses on items for which the fair value
option has been elected will be recognized in earnings at each subsequent
reporting date.  SFAS No. 159 is effective for the Company January 1,
2008.  The  adoption of SFAS No. 159 did not have any impact
on the Company.
  FASB
statement No. 141(R) “Business Combinations” was issued in December of 2007.
This Statement establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The Statement also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. The guidance will become
effective as of the beginning of a company’s fiscal year beginning after
December 15, 2008.  FASB No. 141(R ) will impact accounting for
business combinations after January 1, 2009.
 
 In
December 2007, the FASB issued statement No. 160 “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” was issued in
December of 2007. This Statement establishes accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The guidance will become effective as of the beginning of a
company’s fiscal year beginning after December 15, 2008. The Company does not
expect  FASB No. 160 to have a material impact on its financial
statements.
 
 In
December 2007,  Staff Accounting Bulletin No. 110 (SAB 110)
amends and replaces Question 6 of Section D.2 of Topic 14,“Share-Based Payment,” of
the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14
expresses the views of the staff regarding the use of the “simplified” method in
developing an estimate of expected term of “plain vanilla” share options and
allows usage of the “simplified” method for share option grants prior to
December 31, 2007. SAB 110 allows public companies which do not have
historically sufficient experience to provide a reasonable estimate to continue
use of the “simplified” method for estimating the expected term of “plain
vanilla” share option grants after December 31, 2007.  SAB 110 is
effective January 1, 2008. The Company does not expect SAB 110 to have a
material impact on its financial statements.
  NOTE 9 –
SUBSEQUENT EVENTS
 
 In May
2008 the Company was awarded two new contracts for follow-on work based on the
AIRchitect-EMC wireless network design tool developed under the RWSE Phase II
contract.  These are both pilot programs where the Navy is using
AIRchitect-EMC to design shipboard wireless networks for LHD amphibious ships
and CVN aircraft carriers.
  12
 
 CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  This
report contains “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.  All statements other than
statements of historical facts included or incorporated by reference in this
report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and
plans and objective of management for future operations, are forward-looking
statements.  In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as “may,” “will,”
“expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or
“believes” or the negative thereof or any variation there on or similar
terminology or expressions.
 
 These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from results proposed in such
statements.  Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to have been correct.  Important factors
that could cause actual results to differ materially from our expectations
include, but are not limited to: changes in business conditions, changes in our
sales strategy and product development plans, changes in the marketplace,
continued services of our executive management team, our limited marketing
experience, competition between us and other companies seeking Small Business
Innovative Research (SBIR) grants, competitive pricing pressures, market
acceptance of our products under development, delays in the development of
products, and statements of assumption underlying any of the foregoing, as well
as other factors set forth under the caption “Risk Factors” in our Annual Report
on Form 10-KSB for the year ended December 31, 2007 filed with the Securities
and Exchange Commission.
 
 All
subsequent written and oral forward-looking statements attributable to us, or
persons acting on our behalf, are expressly qualified in their entirety by the
foregoing.  Except as required by law, we assume no duty to update or
revise our forward-looking statements based on changes in internal estimates or
expectations or otherwise.
 
 Item
2.  Management’s Discussion and Analysis.
  Mikros
Systems Corporation (the “Company”, “we” or “us”) was founded in 1978. We are an
advanced technology company specializing in the research and development of
electronic systems technology primarily for military
applications.  Classified by the U.S. Department of Defense (DoD) as a
small business, our capabilities include technology management, electronic
systems engineering and integration, radar systems engineering, combat/command,
control, communications, computers and intelligence (C4I) systems engineering,
and communications engineering.
  13
  Overview
  Our
primary business focus is to pursue SBIR programs from the U.S. Department of
Defense, Department of Homeland Security, and other governmental authorities,
and to expand this Government funded research and development into products,
services, and business areas of the Company.  Since 2002, we have been
awarded a number of Phase I, II, and III SBIR contracts.
  Revenues
from our government contracts represented 100% of our revenues for the three
months ended March 31, 2008 and 2007.  We believe that we can utilize
the intellectual property developed under our various SBIR awards to develop
proprietary products for both the government and commercial
marketplace.
 
 Below is
a brief description of certain of the material projects we are working on at
this time.
 
 Adaptive Diagnostic
Electronic Portable Testset (ADEPT®)
  Originally
designated as the Multiple Function Distributed Test and Analysis Tool (MFDAT),
the Adaptive Diagnostic Electronic Programmable Test-Set (ADEPT®) began
as a SBIR investigation in 2002.   We produced an operational,
proof-of-concept, software demonstration/simulation model of an MFDAT system
during Phase I of the program.
  During
Phase II, we produced a fully functioning, stand-alone prototype system capable
of performing alignment and maintenance procedures on the AN/SPY-1 radar, which
is part of the Navy’s Aegis Program. This system validated the concept of using
an automated test tool with a data collection capability to reduce AN/SPY-1A
alignment and calibration time.
  We were
directed to commercialize the MFDAT technology in support of AN/SPY-1 Readiness
Initiatives, and our Navy customer has continued to fund ADEPT development
through a series of contracts awarded in Phase III of the SBIR
process.   We have reduced the size and weight of the initial
design by half, and established manufacturing processes necessary to
consistently produce the system in quantity.
  Our
engineers recently completed integration of a SPY-1 transmitter alignment tool
developed by the radar’s manufacturer. This tool improves overall radar system
performance and is expected to be invaluable tool for technicians aboard all
Aegis ships, especially those supporting the Navy’s Ballistic Missile Defense
(BMD) program.
  ADEPT has
been extensively tested by the Navy on land and at sea. The Navy has recently
directed us to begin deploying ADEPT to its Regional Maintenance Centers (RMC)
for additional evaluation.  We are also working with the Navy to
identify and establish logistics support and training materials for the
equipment.  These are all important steps required to support
widespread fleet insertion. By September 2008, we expect to have delivered more
than 20 ADEPT systems to the Navy.  Long-term plans call for
installation of several ADEPT units per ship, resulting in the potential
delivery of over 200 units.
  14
  Wireless Local Area Network
Systems
  We began
work on another independent SBIR subject area in June 2004.  The
Office of Naval Research awarded us a $100,000 SBIR Phase I contract to analyze
the potential for interference between emerging Wireless Local Area Network
systems (WLANs) and DoD radar systems, and to evaluate and quantify the
potential improvements which may be afforded by selected mitigation
techniques.  This Radar Wireless Spectral Efficiency (RWSE) SBIR Phase
I program was completed in January 2005 and concluded that the potential exists
for mutual interference between WLANs and DoD radars, particularly during
land-based, littoral and harbor navigation operation of DoD
radars.  We recommended that further study of the identified mutual
interference mechanisms was warranted, including empirical testing to
characterize the effects of the interference and the potential mitigation
techniques identified during the Phase I program.
  In May,
2007, we were awarded SBIR Phase II funding through Space and Naval Warfare
Systems Command (SPAWAR), located in San Diego, California.  This $750,000
effort is a spin off of work performed under the SBIR topic entitled Radar
Wireless Spectral Efficiency (RWSE).  This SBIR Phase II effort, entitled
‘Kill Chain Vulnerability Analysis Tool’, focuses on the interaction between
tactical data links and interferers such as hostile jammers.  We are
working closely with engineers from the Naval Air Warfare Center Weapons
Division (NAWCWD), located in China Lake, California, on this project. 
NAWCWD, a division of Naval Air Systems Command (NAVAIR), is responsible for
‘Arming the Fleet’. The technical objective of this effort is to develop
simulation models that can be used to predict the performance of data links in a
jamming environment.
  Radar Wireless Spectral
Efficiency
  On May 1,
2006, we were awarded a follow-on SBIR Phase II contract valued at approximately
$750,000 to investigate implications of installing WiFi networks on aircraft
carriers (CVNs).  We developed the baseline version of the
AIRchitect-EMC “interference-aware” wireless network design tool, which is
designed to permit the Navy to optimize shipboard networks while avoiding
interference between the network and mission-critical shipboard RF systems, such
as radar and communications systems.
  As part
of this program, our engineers performed Wi-Fi propagation surveys aboard the
aircraft carrier USS GEORGE WASHINGTON (CVN-73) and the amphibious assault ship
USS BATAAN (LHD-5).  The empirical results from these surveys were
used to refine the Wi-Fi signal propagation algorithms embedded in the Wireless
Network Planning Tool prototype.  In March 2007, we measured the
shipboard RF environment during actual at-sea operating conditions aboard the
U.S. Navy amphibious assault ship USS KEARSARGE (LHD-3) during its underway
exercise in the Atlantic Ocean near Norfolk, Virginia.
 
 In
October, 2007, we were awarded additional funding for continued development of
the AIRchitect-EMC “interference-aware” wireless network design tool. The
additional funding was awarded to us from SPAWAR.  A modification to
the existing RWSE (Radar Wireless Spectral Efficiency) Phase II SBIR contract
provides an additional $900,000 to support new feature upgrades to the
AIRchitect-EMC software, including full three-dimensional modeling
capabilities.
  15
  Additional
Contracts
 
 In
October, 2007,  we were awarded an SBIR Phase I contract through
SPAWAR.  This $100,000 effort  titled “Small Buoy for Energy
Harvesting” will collaborate in the design and development of a miniaturized,
self-powered ocean buoy which can be deployed at sea for extended periods to
support various on-board payload packages, such as network communications
nodes.  This communication package is designed to allow submarines to
communicate with the Battle Group while operating at speed and depth. Mikros is
pursuing an SBIR Phase II follow-on contract with this customer. If awarded,
Mikros could receive $750K or more to develop the technology
further.
 
 In May
2008, we were awarded two new contracts for follow-on work based on the
AIRchitect-EMC wireless network design tool developed under the RWSE Phase II
contract.  These are both pilot programs where the Navy is using
AIRchitect-EMC to design shipboard wireless networks for LHD amphibious ships
and CVN aircraft carriers.  If these programs are successful, we
believe there are significant related future opportunities to apply
AIRchitect-EMC more broadly as the Navy continues to expand wireless network
deployments.
 
 The first
program is a subcontract to the Navy’s Classified Wireless Networks for Embedded
Forces program, which is a pilot program run by PMW160 and funded by the Office
of Naval Research Rapid Technology Transition program.  AIRchitect-EMC
will be used to help design a shipboard network for use by USMC Marine
Expeditionary Forces, and networks will be installed on two LHD
ships.  This program is funded initially at $50,000 in 2008, with
additional funding expected in 2009
 
 The
second program is funded directly by the Navy’s PMW750 CVN program office, and
covers network design studies for the new aircraft carrier USS Gerald R.
Ford.  This program is valued at $100,000 in 2008, and if successful
may also result in additional funding in 2009.
  Key Performance
Indicator
 
 As
substantially all of our revenue is derived from SBIR contracts with the federal
government, our key performance indicator is the dollar volume of contracts
awarded to us. Increases in the number and value of contracts awarded will
generally result in increased revenues in future periods and assuming relatively
stable variable costs associated with our fulfilling such contracts, increased
profits in future periods.  The timing of such awards is uncertain as
we sell to federal government agencies where the process of obtaining such
awards can be lengthy and at times uncertain.
  Competition
in the SBIR arena is intense, and we compete against numerous small businesses
for SBIR awards.  We believe that the primary competitive factors in
obtaining SBIR contracts are technical expertise, prior relevant experience, and
cost. Our history of completing projects in a timely and efficient manner as
well as the experience of our management and technical personnel position us
well to compete for future SBIR grants.
 
 Outlook
  Our
strategy for continued growth is three-fold.  First, we expect to
continue expanding our technology base, backlog and revenue by continuing our
active participation in the DoD SBIR program and bidding on projects that fall
within our areas of expertise.  These areas include electronic systems
engineering and integration, radar systems engineering, combat/C4I (Command,
Control, Communications, Computers & Intelligence) systems engineering, and
communications engineering.  We believe that we can utilize the
intellectual property developed under our various SBIR awards to develop
proprietary products, such as the ADEPT described above, with broad appeal in
both the government and commercial marketplace.  This state-of-the-art
test equipment can be used by many commercial and governmental customers such as
the FAA, radio and television stations, cell phone stations, and
airlines.  Second, we will continue to pursue SBIR projects with the
Department of Homeland Security, the U.S. Navy, and other government
agencies.  Third, we believe that through our marketing of products
such as ADEPT we will develop key relationships with prime defense system
contractors.  Our strategy is to develop these relationships into
longer-term, key subcontractor roles on future major defense programs awarded to
these prime contractors.
  16
 
 In 2008,
our primary strategic focus will be to continue to: (i) establish ourselves as a
premium provider of research and development and product development
services to the defense industry; and (ii) grow our business, generate profits
and increase our cash reserves through obtaining additional SBIR contracts and
positioning the company to obtain future SBIR contracts.  From an
operational prospective, we expect to focus substantial resources on generating
sales of our ADEPT product.  We intend to capitalize on the Navy
modernization program which could result in two or three ADEPT units being
placed on each destroyer and cruiser in the U.S.Navy, with the potential to
install multiple units on additional U.S. Navy ships and
submarines.
  Over the
longer term, we expect to further develop technology based on existing and
additional SBIR contracts and to develop these technologies into products for
wide deployment to Department of Defense customers and contractors as well as
developing potential commercial applications. As an example, we recently
entered into a memorandum of understanding with a global provider of
telecommunications equipment and related services pursuant to which we will
assist the global provider in marketing its products to the DoD.
  Changes to Critical
Accounting Policies and Estimates
  Our
critical accounting policies and estimates are set forth in our Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007.  As
of  March 31, 2008, there have been no changes to such critical
accounting policies and estimates.
 
 The
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America.  The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities.  On  an on-going basis, we evaluate our
estimates, including those related to bad debts, investments, recoverability of
long-lived assets, income taxes, restructuring charges, if any, and
contingencies and litigation.  We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.  The accounting
estimates and assumptions discussed in this section are those that we consider
to be the most critical to an understanding of our financial statements because
they inherently involve significant judgments and uncertainties.
 
 Results of
Operations
  Three
Months Ended March 31, 2008 and 2007
  We
generated revenues of $651,282 during the three months ended March 31, 2008
compared to $794,950 for the same period in 2007, a
decrease  of  $143,668 or 18%.  The lower revenues
in 2008 were primarily attributable to a reduction of subcontractor and material
directs costs.  These costs are anticipated to be billed and
recognized as revenue in subsequent quarters.   We continue to
bid for and obtain SBIR contracts from the Federal Government.  Based
on current backlog and outstanding bids, we expect revenue to increase in future
periods.
  17
 
 Cost of
sales consist of direct contract costs such as labor,
material, subcontracts, travel, and other direct
costs.   Cost of sales decreased $179,880 or 37% to $306,354
during the three months ended March 31, 2008 compared to $486,234 for the three
months ended March 31, 2007.  The decrease resulted directly
from  lower subcontractor and material contract costs during the three
months ended March 31, 2008 as compared to the three months ended March 31,
2007.
  The
substantial majority of our engineering costs consist of (i) salary, wages and
related fringe benefits paid to engineering employees, (ii) rent-related costs,
and (iii) consulting fees paid to engineering consultants.  As the
nature of these costs benefit the entire organization and all research and
development efforts, and their benefit cannot be identified with a specific
project or contract, these engineering costs are classified as part
of  “engineering overhead” and included in operating
expenses.  Engineering costs for the three months ended March 31, 2008
were $128,375 compared to $95,433 for the three months ended  March
31, 2007, an increase of $32,942 or 35%.  The increase was due
primarily to the additional fringe benefits and engineering travel, salaries,
and consultant costs.
  General
and administrative expenses consist primarily of salary, consulting fees paid to
bid and proposal consultants and related costs,  professional fees,
business insurance, corporate taxes, stock registrar and public company related
costs, travel, and unallowable expenses.  General and administrative
costs for the three months ended March 31, 2008 were $194,795 compared to
$153,038 for the three months ended March 31, 2007, an increase of $41,757 or
27%.  The increase was due primarily to higher costs related to
increased general and administrative salaries, bid and proposal salaries,
additional legal, accounting and audit expenses, and $9,164 of non cash expenses
related to stock option compensation as compared to $0 of such expenses the
three months ended March 31, 2007.
 
 We
recorded an income tax provision of approximately $30,000 and $13,000 for the
three months March 31, 2007 and 2008, respectively.  The income tax
provision for the period ended March 31, 2007 was based upon our 2007 estimated
effective annual tax rate of approximately 49.2%.  The income tax provision
for the period ended March 31, 2008 is based upon our 2008 estimated effective
annual tax rate of approximately 53.8%.  The difference between the
federal statutory tax rate and the estimated effective tax rate in 2008 is
primarily related to state taxes and other permanent book to tax
differences.
 
 The net
income tax expense for the three months ended March 31, 2008 includes $3,300 of
current state income taxes and a reduction to deferred tax assets associated
with the federal net operating loss carryforwards in the amount of
$9,200.
 
 We
generated $10,753 of net income during the three months ended March 31, 2008 as
compared to  $30,615 during the three months ended March 31, 2007, a
decrease of $19,862 or 65%.  The decrease in net income was due to a
combination of a decrease in revenue and increases in engineering and fringe
benefits costs associated with additional personnel and the retention of
engineering consultant, and additional professional
fees.
  18
 Liquidity
and Capital Resources
  Since our
inception, we have financed our operations through debt, private and public
offerings of equity securities, and cash generated by operations.
 For the
three months ended March 31, 2008, net cash used by operations was $68,305
compared to $137,155 of cash provided by operations for the three months ended
March 31, 2007.  The decrease was primarily the result of decreases in
accounts payable and other accrued expenses and an increase in government
receivables during the three months ended March 31, 2008.  We had
working capital of $437,295 as of  March 31, 2008 as compared to
working capital of $407,262 at December  31, 2007.  The
increase was due primarily to the decrease in accounts payable of $125,850 which
was offset by decreases  in cash and accounts receivable
$108,560.
  On
November 16, 2006, we entered into a $50,000 revolving line of credit with Sun
National Bank (the “Lender”) evidenced by a Promissory Note made by us in favor
of the Lender.  The revolving line of credit will be available to us
for two years.  On November 14, 2008, advances will no longer be
available under the revolving line of credit.  At that time, the then
outstanding principal balance will be converted into a five-year term loan with
payments based on a five-year amortization schedule.  The term loan
will be payable in 60 equal monthly installments and be due in full on November
14, 2013. During the first five months of the revolving line of credit, any
outstanding principal balance will bear interest at 5.99% per
annum.  Thereafter, any outstanding principal balance will bear
interest equal to the Sun National Bank Prime Rate.  The loan is
secured by substantially all of our assets pursuant to a Commercial Security
Agreement (the “Security Agreement”) made by us in favor of the Lender and is
guaranteed by Thomas J. Meaney, our President and Chief Financial Officer. There
were no outstanding amounts under this line of credit at March 31, 2008 and
2007.
 
 We
believe our available cash resources and expected cash flows from operations
will be sufficient to fund operations for the next twelve months.  We
do not expect to incur any material capital expenditures during the next twelve
months.
 
 In order
to pursue strategic opportunities, obtain additional SBIR contracts,
or  acquire strategic assets or businesses, we may need to obtain
additional financing or seek strategic alliances or other partnership agreements
with other entities.   In order to raise any such financing, we
anticipate considering the sale of additional debt or equity securities under
appropriate market conditions.  There can be no assurance, assuming we
successfully raise additional funds or enter into business alliances, that we
will achieve profitability or positive cash flow. If we are unable to obtain
additional adequate financing or enter into such business alliances when
required, management will be required to curtail planned
operations.
  Contractual
Obligations
  We lease
our engineering office in Fort Washington, Pennsylvania pursuant to a five-year
lease which continues through November 30, 2010.  Our current monthly
lease payment is $5,468.83, and is subject to an annual increase.
  19
  Off-Balance Sheet
Arrangements
 
 As
of  March  31, 2008, we did not have any relationships with
unconsolidated entities or financial partners, such as entities often referred
to as structured finance or special purpose entities, established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes.  As such, we are not materially exposed to
any financing, liquidity, market or credit risk that could arise if we had
engaged in such relationships.
  Item
4T.  Controls and Procedures.
  An
evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of
1934) was carried out by us under the supervision and with the participation of
our president, who serves as our principal executive officer and principal
financial officer.  Based upon that evaluation, our president
concluded that as of  March 31, 2008, our disclosure controls and
procedures were effective to ensure (i) that information we are required to
disclose in reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (ii) that such information is
accumulated and communicated to management, including our president, in order to
allow timely decisions regarding required disclosure.
  There
were no changes in our internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) or 15d-15(f)) that occurred during the fiscal
quarter ended March 31, 2008, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
  PART
II.  OTHER INFORMATION
  Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
  On March
17, 2008, we issued options under our 2007 Stock Incentive Plan to an employee
to purchase  10,000 shares of common stock at an exercise price
of  $.62 per share, the last sales price of  our common
stock on the date of the grant.  The options have a term of ten years
and vest in  five equal annual installments over the five year period
commencing on the date of grant.  The options were issued in a private
placement transaction pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended, without engaging in any
advertising or general solicitation of any kind and without payment of
underwriting discounts or commissions to any person.
 
 Item
6.  Exhibits
  Exhibit
      31.1
              Certification
      of principal executive officer and principal financial officer pursuant to
      Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as
      amended, as adopted  pursuant to Section 302 of the Sarbanes
      Oxley Act of 2002.
 
 Exhibit
      32.1
              Certification
      of principal executive officer and principal financial officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes
      Oxley Act of 2002.
  20
 
 SIGNATURES
  Pursuant
to the requirements 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 CORPORATIONDate:
      May 15, 2008
              By:
              /s/ Thomas
      J. MeaneyThomas
      J. MeaneyPresident,
      (Principal Executive Officer andPrincipal
      Financial Officer)
 
  21