SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, DC 20549
                               FORM 10-Q
           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                OF THE SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED: June 30, 1998    COMMISSION FILE #: 2-67918-NY

                      MIKROS SYSTEMS CORPORATION
                      --------------------------   
          (Exact Name of Registrant as Specified in Charter)

          DELAWARE                             14-1598200
          --------                             ----------  
(State or Other Jurisdiction of    (I.R.S. Employer Identification#)
 Incorporation or Organization)

           707 Alexander Road, Suite 208, Princeton, NJ 08540
           -------------------------------------------------     
     (Address of Principal Executive Offices, Including Zip Code)

   Registrant's Telephone Number, Including Area Code: 609-987-1513

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
                                                 OUTSTANDING  AT
           CLASS                                   June 30, 1998 
----------------------------                     ----------------
COMMON STOCK, PAR VALUE $.01                       13,451,452 SHARES

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
























--
<PAGE>

                      MIKROS SYSTEMS CORPORATION

                           TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                 Page #

   ITEM I - FINANCIAL STATEMENTS

   Balance Sheets at June 30, 1998 and December 31, 1997
   (Unaudited)................................................. 1

   Statements of Operations for the Three Months Ended and the
   Six Months Ended June 30, 1998 and 1997 (Unaudited)......... 3

   Statements of Shareholders' Equity for the Years ended 
   1996 and 1997 and Six Months Ended June 30, 1998 (Unaudited).4 

   Statements of Cash Flows for the Three Months Ended and the 
   Six Months ended June 30, 1998 and 1997(Unaudited).......... 5

   Notes to the Financial Statements........................... 6


   ITEM II

   Management's Discussion and Analysis of Financial
   Condition and Results of Operations......................... 10


PART II - OTHER INFORMATION.................................... 12

<PAGE>
<PAGE>

                      MIKROS SYSTEMS CORPORATION
                            BALANCE SHEETS
                              (UNAUDITED)


                                     JUNE 30,    DECEMBER 31,
          ASSETS                       1998           1997
------------------------------    ------------    ------------

CURRENT ASSETS
  Cash                            $  298,694      $   85,592 

  Accounts Receivable
    Government                             -         342,726 
    Trade                                  -         112,258 
    Royalties                          4,177               -
       
  Inventories                              -           5,293

  Prepaid Engineering Services       770,581               -

  Other Current Assets                 6,271           9,561 
                                  ------------    ------------

TOTAL CURRENT ASSETS               1,079,723         555,430 
                                  ------------    ------------

PROPERTY & EQUIPMENT

  Equipment                           72,004         135,530 

  Furniture and Fixtures                   -          50,241 
                                  ------------    ------------
TOTAL                                72,004         185,771
  Less:  Accumulated Depreciation   ( 15,344)       (100,672)
                                  ------------    ------------
PROPERTY & EQUIPMENT, NET             56,660          85,099 
                                  ------------    ------------

OTHER ASSETS:
 Unbilled Receivables                      -           3,837 

 Patent Costs, Net                    14,021          14,609

 Other Assets                         17,429          17,048
                                  ------------    ------------
TOTAL OTHER ASSETS                    31,450          35,494
                                  ------------    ------------

TOTAL ASSETS                      $1,167,833      $  676,023
                                  ============    ============

                   See Notes to Financial Statements


<PAGE>
                      MIKROS SYSTEMS CORPORATION
                            BALANCE SHEETS
                              (UNAUDITED)

           LIABILITIES AND                          JUNE 30,    DECEMBER 31,
    SHAREHOLDERS' DEFICIENCY                          1998          1997
------------------------------------------         -----------   ------------
CURRENT LIABILITIES
  Accounts Payable                                 $  125,199     $  685,139 
  Notes Payable
    Bank                                                5,337          9,271 
    Related Parties                                   547,500        547,500
    Other                                             446,500        446,500
  Obligations under Capital Leases                     23,967         23,967 
  Accrued Payroll and Payroll Taxes                    32,486         35,391
  Accrued Interest                                     19,213         34,712
  Accrued Vacations                                     6,371         84,821
  Accrued Expenses                                    102,462         84,241
  Deferred Contract                            770,581              -
  Unliquidated Progress Payments and Other
  Customer Advances                                    15,000        122,849
                                                  -----------   ------------
TOTAL CURRENT LIABILITIES                           2,094,616       2,074,391 
                                                  ------------   ------------
NOTES PAYABLE -Bank                                         -            716 
                                                  ------------   ------------
TOTAL LIABILITIES             2,094,616      2,075,107                          
                                                  ------------  ------------

COMMITMENTS AND CONTINGENCIES

MANDATORILY REDEEMABLE SERIES C PREFERRED STOCK 
  par value $.01 per share, authorized 150,000
  shares, issued and outstanding 5,000 shares 
  in 1998 and 1997                                     80,450         80,450 
                                                   ------------  ------------
SHAREHOLDERS' DEFICIENCY
  Common Stock, par value $.01 per share,
  authorized 25,000,000 shares, issued and
  outstanding 13,451,452 shares in 1998 and 1997      134,515        134,515 

  Preferred Stock, convertible,
  par value $.01 per share, authorized 2,000,000
  shares, issued and outstanding 255,000 shares
  in 1998 and 1997                                      2,550          2,550

  Preferred Stock, Series B convertible, par value
  $.01 per share, authorized 1,200,000 shares, issued
  and outstanding 1,131,663 shares in 1998 and 1997    11,316         11,316 
 
  Preferred Stock, Series D, par value $.01 per
  share, 690,000 shares authorized, issued and
  outstanding in 1998 and 1997                          6,900          6,900 

  Capital in excess of par                         10,248,378     10,248,378 

  Accumulated deficit                             (11,410,892)   (11,883,193)
                                                  ------------   ------------
TOTAL SHAREHOLDERS' DEFICIENCY                     (1,007,233)    (1,479,534)
                                                  ------------   ------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY     $1,167,833     $   676,023
                                                  ============   ============

                        See Notes to Financial Statements
<PAGE>
<PAGE>

                        MIKROS SYSTEMS CORPORATION
                         STATEMENTS OF OPERATIONS
                               (UNAUDITED)

                          Three Months Ended,           Six Months Ended,
                    June 30, 1998  June 30, 1997   June 30, 1998   June 30, 1997
                    -------------  -------------   -------------   -------------
Revenues:
 Equipment Sales       $       -      $  612,661     $333,592      $  998,065
 Contract Research             -         594,279       46,874         784,563
   and Development
 Royalty                     4,177             -        4,177                -
                         ----------   ----------    ----------    ----------- 
Total Revenues               4,177    1,206,940      384,643      1,782,628   
                         ----------   ----------    ----------    -----------

Cost of Sales:
  Equipment Sales            4,169      511,955      321,787        809,669
  Contract Research          2,515      365,234       44,429        491,523 
     and Development
                        ----------     ----------   ----------    -----------
Total Cost of Sales          6,684      877,189       366,216     1,301,192 
                         ---------     ----------   ----------    -----------
Gross Margin                (2,507)     329,751        18,427       516,902
                        ----------     ----------   ----------    -----------

Expenses:
  Research & Development   229,419       16,810       327,966       125,819
  Selling, General          75,684      286,859       219,654       543,126
    and Administrative
  Interest                  16,670       35,814        49,101        68,358
                        ----------      ----------   ----------   -----------
Total Expenses             321,773      339,483       596,721       737,303
                        ----------      ----------   ----------   -----------
Net Operating Income     (324,280)       (9,732)      472,301      (255,867)
  (Loss)
                        ----------      ----------   ----------   -----------
Gain on Sale of            763,955            -       763,955             -
  Government Contracts
Gain on Settlement of Accounts   
       Payable Debt        286,640            -       286,640             -
                        ----------      ----------   ----------   -----------
Net Income (Loss)         $726,315       ($9,732)   $ 472,301      ($255,867)   
                       ===========      ==========   ==========   ===========

Net Income (Loss)           $0.05           $   -   $0.04          ($  0.02)
  per share            ===========      ==========   ==========   ===========

Weighted average number of
 shares outstanding    13,451,452      12,265,910    13,451,452    12,265,910
                      ===========      ===========   ==========    ===========
                
           

                See Notes to Financial Statements
   
<PAGE>
<PAGE>
                            MIKROS SYSTEMS CORPORATION
                 STATEMENTS OF SHAREHOLDERS  DEFICIENCY
                                   (UNAUDITED)
<TABLE>
<CAPTION>                Common            Preferred           Preferred     
                          Stock             Stock             Stock B 
                       $.01 PAR          $.01 PAR            $.01 PAR
                          VALUE            VALUE               VALUE
                       ---------  -------  --------  -------- --------  ------- 
                                    PAR                  PAR             PAR
                        SHARES     VALUE     SHARES     VALUE   SHARES  VALUE
                       ---------  -------  ---------  --------  ------  --------
                            <C>        <C>      <C>         <C>      <C>   <C>

Balance December 31,   7,352,108  $73,521  1,005,000 $10,050 $1,131,663  $11,316
  1995
Year Ended December 31, 1996:
Issuance of Common     2,582,844   25,829
   Stock
Sale of Common Stock   1,912,000   19,120
Net Income (Loss)
                       ---------  -------  ---------  ------- ---------  -------
Balance-December 31,  11,846,952  118,470  1,005,000  10,050  1,131,663  11,316
  1996
Year Ended December 31, 1997 
Issuance of Common      854,500   8,545
  Stock
Conversion of           750,000   7,500   (750,000) (7,500)
  Preferred Stock
Net Income (Loss)                 
                      ---------  -------  --------- -------- ---------  --------
Balance December 31, 13,451,452  134,515    255,000  2,550   1,131,663  11,316
  1997
Six  Months Ended 
  June 30, 1998
Net Income (Loss)                          
                     --------    -------  --------- -------- --------- --------
Balance June 30, 199813,451,452 $134,515  255,000  $2,550  1,131,663 $11,316   
                     ========== ======== ========= ======  ========= =======
                           
                             Preferred
                               Stock D               Capital
                              $.01 PAR              in excess    Accumulated
                                VALUE                of Par        Deficit
                              ---------  -------    ---------    -----------
                                           PAR
                               SHARES     VALUE
                              ---------  -------    ---------    -----------
Balance December 31, 1995       690,000   $6,900   $ 9,248,364   ($9,831,002)
Year Ended December 31, 1996:
Issuance of Common Stock                                29,304
Sale of Common Stock                                   940,880
Net Income (Loss)                                                ( 1,447,641)
                              ---------  -------    ----------   ------------
Balance-December 31, 1996       690,000    6,900    10,218,548   (11,278,643)
Year Ended December 31, 1997
Issuance of Common Stock                                29,830
Conversion of Preferred Stock
Net Income (Loss)                                                   (604,550)
                              ---------  -------    ----------   ------------
Balance December 31, 1997       690,000    6,900    10,248,378  ( 11,883,193)

Six Months Ended 
June 30, 1998
Net Income (Loss)                                                    472,301
                              ---------  -------    ----------   ------------
Balance June 30,1998            690,000  $ 6,900   $10,248,378  ($11,410,892)
                              =========  =======    ==========   ============
</TABLE>
                        See Notes to Financial Statements
<PAGE>
<PAGE>
                                            MIKROS SYSTEMS CORPORATION
                                             STATEMENTS OF CASH FLOWS
                                                  (UNAUDITED)

                             Three Months Ended           Six Months Ended
                      June 30, 1998  June 30,1997  June 30, 1998  June 30, 1997
                      -------------  -------------  -------------  -------------
Cash Flows Provided (Used) 
  by Operating Activities:
  Net Income (Loss)        $726,315     ($9,732)      $472,301    ($255,867)

Adjustments to reconcile Net Income (Loss)
 to Net Cash Provided (Used) by Operating
Activities:
  Depreciation and Amortization 2,344     20,736          4,689       41,154 
  Gain from Sale of Defense Contracts, Net of
    Equipment and t        (575,662)           -       (575,662)           -
      Engineering Credit 
Non Cash Settlement of     (286,640)           -       (286,640)           -
  Accounts Payable
Net Changes in Operating Assets and
 Liabilities:
 (Increase) Decrease in:
   Accounts Receivable       50,140     (128,110)        450,807      (87,016) 
   Unbilled Receivables           -            -         3,837          4,824
   Inventorie                     -     (122,598)        5,293       (156,595) 
   Other Current Assets       3,639          400         3,290         (4,468)
   Other Assets                 (1)       (4,719)         (381)        (6,708)  
 Increase (Decrease) in:
   Accounts Payable       (249,375)        8,214         (273,500)     13,502
   Accrued Payroll         (12,821)      (10,068)          (2,905)    (12,485)
    and Payroll Taxes
   Unliquidated Progress Payments and
      Customer Advances          -       114,902         (107,849)    256,995 
   Other Liabilities and   (72,556)      (86,399)         (75,728)      (3,386)
      Interest
                           ---------     ---------        ---------  ----------
 Net Cash Provided (Used) (414,617)     (217,374)         (382,248)    (210,050)
   by Operations
                           ---------     ---------        ---------  ----------
Cash Flows Provided (Used) by Investing      
 Activities:
 Sale of Government        600,000             -           600,000          - 
   Contracts
 Equipment Purchases             -       (22,509)                -      (92,456)
                          ---------     ---------         ---------     --------
Net Provided (Used) by s   600,000       (22,509 )         600,000      (92,456)
  Investing Activities
Cash Flows Provided (Used) by Financing
 Activities:
  Proceeds from Issuance of      -        14,844                -        30,656
    Common Stock
  Repayment of Debt and     (2,325)      (15,596)          (4,650)      (40,906)
    Capital Leases
                          ---------     ---------         ---------    -------  
Net Cash Provided (Used) by Financing
 Activities:                (2,325)         (752)          (4,650)     (10,250) 
                          ---------     ----------        ---------     --------
Net Increase (Decrease)    183,058      (240,635)         213,102      (312,756)
  in Cash
Cash at Beginning          115,636       322,999           85,592      395,120
  of Period
                          ---------     ---------         ---------    ---------
Cash at End of Period     $298,694      $  82,364         $298,694     $ 82,364
                          =========     =========         =========    =========
Supplemental disclosure of cash flow
 information:
 Cash paid for interest    $63,165        $32,028          $63,384     $63,589  
                          =========     =========         =========    =========
Supplemental disclosure of non-cash transactions:
  Credit for Engineering Services from
  Sale of Government     $1,000,000    $       -        $1,000,000   $      -   
    Contracts
                         ===========    =========         =========    ======== 
  Engineering Services   $  229,419    $        -       $  229,419   $        -
    Credit Utilized
                         ===========    =========         =========    ======== 
                                          See Notes to Financial Statements


<PAGE>
<PAGE>
                    
                    MIKROS SYSTEMS CORPORATION
                NOTES TO THE FINANCIAL STATEMENTS
                           (UNAUDITED)

NOTE A - BASIS OF PRESENTATION 
------------------------------
The Company's financial statements have been prepared in conformity with
generally accepted accounting principles, 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. Further, at June 30,
1998, the Company s current liabilities exceeded its current assets by
$1,014,893, and at December 31, 1997, the Company s current liabilities
exceeded its current assets by $1,518,961.
     
As shown in the accompanying financial statements, the Company incurred a net
operating loss of $324,280 for the quarter ended June 30, 1998, and as of
June 30, 1998 incurred a year to date operating loss of $578,294. The Company
recorded extraordinary gains as described below during the second quarter of
1998.  The net income after extraordinary gains was $726,315 and $472,301 for
the quarter and year to date at June 30, 1998, respectively. The accumulated
deficit was $11,410,892 as of June 30, 1998. 

The Company recorded a significant portion of its extraordinary gain from the
sale of its government contracts during the second quarter which amounted to
$763,955. The balance of the gain will be recorded within the next twelve
months as the $1,000,000 engineering services credit (part of the terms of the
sale) is utilized. (For further explanation see Liquidity and Cash Resources
included in this report.) During the second quarter of 1998, $229,419 of the
engineering services credit was used.

Commencing in April 1998, the Company began negotiating settlement agreements
with its vendors to settle its accounts payable for reduced amounts. As such,
the Company recorded an extraordinary gain of $286,640 during the second
quarter of 1998. The Company continues to work towards settlement with its
remaining accounts payable vendors.

As of June 30, 1998, the Company was in arrears for its June, 1998 interest 
payments and could not meet its principal repayment obligations in 1998.
Management is attempting to restructure its notes obligations with related
parties and other note holders. Based on the proposed restructuring of debt,
management has ceased to record interest expense as of May 15, 1998.

In order to continue as a going concern, the Company will utilize its
engineering credit with a strategic partner to develop 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 restructure
its obligations and to obtain financing to support continuing operations.
Management believes that actions presently  being taken to revise the

 <PAGE>
Company s operating and financial requirements provide the opportunity to
continue as a going concern.  

As permitted by rules of the Securities and Exchange Commission applicable to
quarterly reports on Form 10-Q, these notes are condensed and do not contain
all disclosures required by generally accepted accounting principles.
Reference should be made to the financial statements and related notes
included in the Company's 1997 Annual Report on Form 10-K.

In the opinion of the management of Mikros Systems Corporation, the
accompanying financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the Company's financial
position at June 30, 1998, the changes in deficiency in assets, and the
results of operations, and cash flows for the three month and six month
periods ended June 30, 1998 and 1997.
           
The results disclosed in the Statements of Operations for the three and six
months ended June 30, 1998 are not necessarily indicative of the results to be
expected for the full year.


 NOTE B - NOTES AND LOANS PAYABLE
--------------------------------
1) Outstanding Debt is summarized as follows:

                                            06/30/98      12/31/97
                                            --------      --------
  Notes Payable to Banks                    $  5,337         9,987
  Related Parties                            547,500       547,500
  Other Notes Payable                        446,500       446,500
                                            --------      --------
                                            $999,337    $1,003,987
                                          ==========    ==========

2)  Financing Transactions
--------------------------

1996 Financing
--------------
In a series of transactions from February through May 1996, the Company issued
secured promissory notes and warrants to raise an aggregate of $641,500
(including $140,000 from officers and directors).

The promissory notes are for a term of approximately eighteen months, bear
interest at 12% on the unpaid balance, and are secured by certain assets of
the Company. In addition, the Company issued warrants to purchase five (5)
shares of Common Stock at $0.01 per share for each dollar of debt.  The value
of the warrants was immaterial and no accounting recognition was given to
their issuance.

In October 1996 all of the noteholders of the 1996 and the 1992-93 financings
agreed to a deferral of principal payments in exchange for the right to
convert outstanding debt to Common Stock of the Company at a rate of one (1)
share of stock for $1.00 of debt.  The Company determined that the fair value
of the conversion feature was immaterial.  Accordingly, no accounting
recognition has been given to this modification of terms.

As of June 30, 1998, the Company was in arrears for its June, 1998 interest 
payments and could not meet its principal repayment obligations in 1998.
Management is attempting to restructure its notes obligations with related
parties and other note holders. Based on the proposed restructuring of debt,
management has ceased to record interest expense as of May 15, 1998.


<PAGE>
 Safeguard Scientifics (Delaware) Inc. (SSI)
------------------------------------------------------------
On November 15, 1996, the Company, all of its secured creditors from its 1996
and 1992-93 financings and SSI entered into an agreement.  Under the agreement
SSI paid $1,000,000 to the Company.  

-    SSI received:  1) 1,912,000 shares of Common Stock of the Company; 2) a
     warrant to purchase 2,388,000 shares of Common Stock at $0.65 per share;
     3) a warrant to purchase 3,071,000 shares at $0.78 per share; 4) a 75%
     interest in an exclusive, royalty-free, perpetual license of the AM
     technology in the United States, Canada and Mexico (through SSI's
     ownership in MBC); and 5) a 33 1/3% interest in the FM and AM technology
     (through SSI's ownership in 3D).  This transaction is more fully
     described below.

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

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

The Company is unable to assign fair values to these transactions.  No amount
of cash consideration was considered attributable to a sale of the AM or FM
technology or to the license thereto.  No gain was recognized on the transfer
of the technology. The entire amount of the cash consideration received from
SSI was recorded as a sale of Common Stock.
 
In connection with the sale of the Common Stock and the Warrants, the Company
granted to SSI certain piggyback and demand registration rights with respect
to the Common Stock and the Common Stock underlying the Warrants.  In
addition, the Company granted to SSI a right of first refusal pursuant to
which, subject to certain conditions, in the event the Company issues,
sells or exchanges any securities, it must first offer such securities to SSI
and such offer must remain open and irrevocable for 30 days.  Such right of
first refusal may only be waived in writing and terminates at such time as SSI
owns less than 10% of the Common Stock.

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

In connection with the transaction, the Company entered into a voting
agreement pursuant to which each of Joseph R. Burns, Thomas J. Meaney, Wayne

<PAGE>
E. Meyer, Frederick C. Tecce and John B. Torkelsen, each a director of the
Company (collectively, the "Management Shareholders"), agreed to vote an
aggregate of approximately 6,659,214 votes for the election of two designees
of SSI to the Board of Directors of the Company.

1992-93 Financing
-----------------
In a series of transactions consummated on October 27, 1992 and April 27,
1993, Joseph R. Burns, Thomas J. Meaney, Wayne E. Meyer, Frederick C. Tecce,
and John B. Torkelsen, individually and not as a group, (collectively referred
to herein as the "Investors") acquired certain loan and equity interests in
the Company from other debt and equity holders. 

Pursuant to such transactions, each of the Investors acquired, in
consideration of an aggregate of $250,000 (each of the Investors individually
paying $50,000 in cash), twenty percent of (i) 50,000 shares of Common Stock,
$.01 par value ("Common Stock"), of the Company (ii) promissory notes of the
Company in the aggregate principal amount of $916,875 (collectively, the
"Investor Notes), (iii) warrants ("Series C Warrants") to purchase 97,500
shares of Series C Preferred Stock, $.01 par value, of the Company and (iv)
certain loan and equity rights in the Company, including without limitation,
rights under loan agreements, an investment agreement, a note purchase
agreement, and all documents related to such agreements.

Pursuant to such loan documents, among other things, the Company is prohibited
from paying dividends on its Common Stock, the Company has granted to the
Investors a security interest in all of the assets of the Company and the
Investors have the right to designate 2/7ths of the Board of Directors of the
Company, which right has not been exercised.  Each of Messrs. Burns, Meaney,
Meyer and Torkelsen is a Director of the Company.

In December 1993, the Investors agreed to reduce the amounts owed by the
Company under the Investor Notes, including unpaid interest,  in exchange for
shares of Common Stock and Preferred Stock issued by the Company. In return
for a reduction in debt of $416,875 and accrued interest of $273,125, the
Company issued 2,750,000 shares of Common Stock and 690,000 shares of Series D
Preferred Stock which provides for an annual cumulative dividend of $.10 per
share. The Investor Notes were modified to provide for principal payments in
sixteen quarterly installments beginning January 1, 1994 and ending on 
October 1, 1997.

Interest on the unpaid principal balance is due in quarterly installments
beginning on March 31, 1994. As additional consideration for the modification
of such loans, the Company extended the exercise period for the Series C
Warrants until April 25, 1999.  As of December 31, 1996, the Company was in
arrears on six quarterly principal payments.  In October 1996, the Investors
authorized deferral of the remaining $312,500 of principal payments until
1998.

As of June 30, 1998, the Company was in arrears for its June, 1998 interest 
payments and could not meet its principal repayment obligations in 1998.
Management is attempting to restructure its notes obligations with related
parties and other note holders. Based on the proposed restructuring of debt,
management has ceased to record interest expense as of May 15, 1998. 

NOTE C - INVENTORIES
--------------------
Inventories as of December 31, 1997 are stated at lower of cost or market,
using the first-in, first-out method. No inventories exist at June 30, 1998.  

<PAGE>
Part I. Item II.

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

REVENUE
-------
Total revenues were $4,177 for the quarter ended June 30, 1998 and $384,643
for the six months ended June 30, 1998 compared to $1,206,940 for the three
months ended June 30, 1997 and $1,782,628 for the six months ended June 30,
1997.

In 1998, revenues from equipment sales were $333,592 or 86.7% of total revenue
compared to $998,065 or 56% of total revenue for the six months ended June 30,
1997. The 1998 equipment revenues represent final revenues on the Company s
government contracts.
  
Research and development revenues in 1998 were $46,874 or 12.2.% for the first
quarter and $784,563 or 44.0% of total revenue for the first quarter in 1997.
The 1998 research and development revenues represent the revenues on two
contracts which were completed in the first quarter.

The $4,177 in royalty revenues represent the initial royalties due to the
Company  pursuant to its agreement with General Atronics Corporation relative
to the Company s sale of its defense contracts. The royalty revenue represents
1.1% of the Company s 1998 revenues. 
  
COST OF SALES
-------------
Total Cost of Sales for the quarter ended June 30, 1998 was $6,684 which
represents depreciation of equipment relative to the Company s commercial
development equipment and final costs relating to the elimination of the
Company s engineering department.  It represents 160% of revenues for the
quarter ended June 30, 1998. Total costs of sales equaled $877,189 or 72.7% of
total revenue for the same period in 1997.

Equipment Cost of Sales was $321,787 or 96.4% of equipment revenue for the six
months ended June 30, 1998 compared to $809,669 or 81.1% of equipment revenue
for the same period in 1997. Cost of Sales of Contract R & D was $44,429 or
94.8% of Contract R & D revenue and $491,523 or 37.8% of Contract R & D
revenue in the first quarters of 1998 and 1997, respectively.  In 1998, the
higher Cost of Sales percentages were mainly because of unabsorption of fixed
overhead costs due to low volume of revenue.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Selling, General and Administrative expenses $75,684 for the quarter, and
$219,654 year to date,  versus $286,859 for the quarter and $543,126 year to
date as of June 30, 1997, a decrease of 73.6% and 47.1% respectively.  This
decrease is due mainly to downsizing which began in the second quarter of 1997
and continued through the second quater of 1998.

INTEREST EXPENSE
----------------
Interest expense was $16,670 in the quarter ended June 30, 1998 compared to
$35,514 for the same quarter in 1997. For the six months ended June 30, 1998
and 1997, respectively, interest expense was $49,101 and $68,358. Based on the
proposed restructuring of debt, management has ceased to record interest
expense as of May 15, 1998. 
 
NET INCOME (LOSS)
-----------------
Net Income for the quarter ended June 30, 1998 was $726,315 versus a net loss
of $9,732 for the same period in 1997. The Net Income resulted from 
<PAGE>
extraordinary gain  from the Company s divestiture of its government contracts
($763,955) as well as gain from the settlement of accounts payable debt
($286,640). 

The net operating loss for the current quarter was $324,280 and the year to
date was net operating loss was $578,294 in 1998. This compares with a net
operating loss of $9,732 for the quarter and $255,867 year to date in 1997.
The increase in net operating losses is directly attributable to the
constriction of business in both Equipment and Contract Research & Development
in 1998.         

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's financial statements for the quarter ended June 30,1998 have
been prepared on a going concern basis which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course
of business. 

The Company incurred a net income of $472,301  and year to date as of June 30,
1997 had an accumulated deficit of $11,410,892.  At June 30, 1998 the Company
had negative working capital of $1,014,893 compared to negative working
capital of $1,518,961 at December 31, 1997.  For the quarter ended June 30,
1998 the Company used $414,617 operating activities. For the same period in
1997, the Company used $217,374. Year to date, the Company used $382,448 and
$210,050 by opearating activities in 1998 and 1997, respectively.  The Company
expects to continue to incur substantial expenditures to expand its commercial
wireless communications business.

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

As of June 30, 1998, the Company was in arrears on its June, 1998  interest
payments and could not meet its principal repayment obligation in 1998.
Management is attempting to restructure its note obligations with related
parties and other note holders. Pursuant to the plans to restructure debt, the
Company ceased to record interest expense on its related party and other notes
payable as of May 15, 1998.

In addition, the Company has negotiated a settlement with over 80% of its
vendor accounts payable.

During 1998, management has divested its military contracts to General
Atronics Corporation (GAC). The agreement, which was finalized in April, 1998,
included terms that included cash in the amount of $600,000, a $1,000,000
credit for engineering services and future royalties. The Company is utilizing
the engineering services credit to continue development of its AM radio
technology. Because GAC hired key Mikros engineers which were involved in the
development, Mikros was able to continue the development and maintain
continuity for the project. As of June 30, 1998, the engineering services
provided by GAC was $229,419. 

Commencing April 10, 1998, for a period of four years, the Company will
receive a royalty of 2% of all data terminal sales by GAC. The royalty
agreement provides for quarterly reports and payments based on the GAC
shipments and receipts during the quarter.

The Company has negotiated a settlement with over 80% of its vendor accounts
payable.

<PAGE>
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 restructure
its obligations and to obtain financing to support 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.  

<PAGE>
<PAGE>
Part II.    OTHER INFORMATION

Item 6.     EXHIBITS AND REPORTS ON FORM 8-K.

a)  Exhibits.  None.
b)  Reports on Form 8-K.
    No reports on Form 8-K have been filed during the
    quarter for which this report is filed.

<PAGE>
<PAGE>
                            SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.


                                MIKROS SYSTEMS CORPORATION
                                       (Registrant)

Dated: November 24, 1998

                                /s/    
                                -----------------------
                                Thomas J. Meaney
                                President