UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549








FORM
10-Q




(Mark
One)




x
            QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For the quarterly
      period ended March
      31, 2010ORo
            TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For the transition
      period from
  ____________ to ____________




Commission
file number 001-33035





WIDEPOINT
CORPORATION


(Exact
name of registrant as specified in its charter)




Delaware
            
            52-2040275(State or other
      jurisdiction of
            
            (IRS Employer
      Identification No.)incorporation or
      organization)18W100 22ndSt., Oakbrook Terrace,
      IL
            
            60181(Address of
      principal executive offices)
            
            (Zip
      Code)




Registrant’s
telephone number, including area code:  (630)
629-0003





Indicate by check 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 o





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).   Yes o  No o


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 the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):





Large
accelerated filer o      Accelerated
filer o   
Non-accelerated filer o    Smaller
reporting company x





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


Yes o No x





As of May
17, 2010, 61,375,333 shares of common stock, $.001 par value per share, were
outstanding.











WIDEPOINT
CORPORATION





INDEX




Page
      No.Part
      I.
              FINANCIAL
      INFORMATIONItem
      1.
              Condensed
      Consolidated Financial Statements
              
              2Condensed
      Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
      31, 2009 (unaudited)
              
              2Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2010 and 2009 (unaudited)
              
              3Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2010 and 2009 (unaudited)
              
              4Notes
      to Condensed Consolidated Financial Statements
              
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              19Item
      4.
              Controls
      and Procedures
              
              23Part
      II.
              OTHER
      INFORMATIONItem
      6.
              Exhibits
              
              25SIGNATURES
              
              26CERTIFICATIONS
  1





PART I. FINANCIAL
INFORMATION





ITEM 1. CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.


WIDEPOINT
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




March
      31,
            
            
            December 31,2010
            
            
            2009Assets
            
            (unaudited)Current
      assets:Cash
      and cash equivalents
            
            $
            3,349,382
            
            
            $
            6,238,788Accounts
      receivable, net of allowance of $52,650 and $52,650,
      respectively
            
            
            6,775,176
            
            
            
            7,055,525Unbilled
      accounts receivable
            
            
            1,774,440
            
            
            
            1,334,455Prepaid
      expenses and other assets
            
            
            376,184
            
            
            
            359,563Total
      current assets
            
            
            12,275,182
            
            
            
            14,988,331Property
      and equipment,
      net
            
            
            520,412
            
            
            
            538,811Goodwill
            
            
            10,399,737
            
            
            
            9,770,647Other
      Intangibles,
      net
            
            
            1,574,282
            
            
            
            1,381,580Other
      assets
            
            
            64,890
            
            
            
            75,718Total
      assets
            
            $
            24,834,503
            
            
            $
            26,755,087Liabilities
      and stockholders’ equityCurrent
      liabilities:Short
      term note payable
            
            $
            55,117
            
            
            $
            102,074Accounts
      payable
            
            
            4,797,985
            
            
            
            7,120,168Accrued
      expenses
            
            
            2,412,789
            
            
            
            2,304,995Deferred
      revenue
            
            
            650,365
            
            
            
            768,504Short-term
      portion of long-term debt
            
            
            529,799
            
            
            
            520,855Short-term
      portion of deferred rent
            
            
            45,992
            
            
            
            54,497Short-term
      portion of capital lease
      obligation
            
            
            95,155
            
            
            
            112,576Total
      current liabilities
            
            
            8,587,202
            
            
            
            10,983,669Deferred
      income tax
      liability
            
            
            353,004
            
            
            
            313,782Long-term
      debt, net of current portion
            
            
            469,273
            
            
            
            604,048Fair
      value of earnout liability
            
            
            300,000
            
            
            
            —Deferred
      rent, net of current portion
            
            
            21,760
            
            
            
            7,312Capital
      lease obligation, net of current portion
            
            
            56,142
            
            
            
            67,632Total
      liabilities
            
            $
            9,787,381
            
            
            $
            11,976,443Stockholders’
      equity:Common
      stock, $0.001 par value; 110,000,000 shares authorized; 61,375,333 shares
      issued and outstanding, respectively
            
            
            61,375
            
            
            
            61,375Stock
      warrants
            
            
            24,375
            
            
            
            24,375Additional
      paid-in capital
            
            
            67,903,574
            
            
            
            67,874,394Accumulated
      deficit
            
            
            (52,942,202
            )
            
            
            (53,181,500
            )Total
      stockholders’ equity
            
            
            15,047,122
            
            
            
            14,778,644Total
      liabilitiesand
      stockholders’ equity
            
            $
            24,834,503
            
            
            $
            26,755,087





The
accompanying notes are an integral part of these condensed consolidated
financial statements.




2





WIDEPOINT
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





Three
      MonthsEnded
      March 31,2010
            
            
            2009(unaudited)Revenues,
      net
            
            $
            11,163,056
            
            
            $
            10,135,382Cost
      of sales (including amortization and depreciation of $226,285 and
      $243,136, respectively)
            
            
            8,639,221
            
            
            
            8,092,280Gross
      profit
            
            
            2,523,835
            
            
            
            2,043,102Sales
      and marketing
            
            
            343,007
            
            
            
            229,466General
      and administrative (including share-based compensation expense of $29,180
      and $30,730, respectively)
            
            
            1,831,811
            
            
            
            1,536,271Depreciation
      expense
            
            
            49,734
            
            
            
            43,007Income
      from operations
            
            
            299,283
            
            
            
            234,358Interest
      income
            
            
            6,614
            
            
            
            14,088Interest
      expense (loss)
            
            
            (27,377
            )
            
            
            (80,299
            )Net
      income before income tax expense
            
            
            278,520
            
            
            
            168,147Deferred
      income tax expense
            
            
            39,222
            
            
            
            39,222Net
      income
            
            $
            239,298
            
            
            $
            128,925Basic
      net income per share
            
            $
            0.004
            
            
            $
            0.002Basic
      weighted average shares outstanding
            
            
            61,375,333
            
            
            
            58,294,514Diluted
      net income per share
            
            $
            0.004
            
            
            $
            0.002Diluted
      weighted average shares outstanding
            
            
            62,974,353
            
            
            
            59,302,205




The
accompanying notes are an integral part of these condensed consolidated
financial statements.





3





WIDEPOINT
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





Three
      Months
              Ended
      March 31,2010
            
            
            2009(unaudited)Cash
      flows from operating activities:Net
      income
            
            $
            239,298
            
            
            $
            128,925Adjustments
      to reconcile net income to net cash provided by operating
      activities:Deferred
      income tax expense
            
            
            39,222
            
            
            
            39,222Depreciation
      expense
            
            
            72,978
            
            
            
            57,258Amortization
      of intangibles
            
            
            203,041
            
            
            
            228,885Amortization
      of deferred financing costs
            
            
            2,911
            
            
            
            842Share-based
      compensation expense
            
            
            29,180
            
            
            
            30,730Changes
      in assets and liabilities (net of business combinations):Accounts
      receivable and unbilled accounts receivable
            
            
            (159,636
            )
            
            
            208,064Prepaid
      expenses and other current assets
            
            
            25,379
            
            
            
            53,033Other
      assets
            
            
            7,917
            
            
            
            15,007Accounts
      payable and accrued expenses
            
            
            (2,633,815
            )
            
            
            1,593,103Deferred
      revenue
            
            
            (118,139
            )
            
            
            (167,730
            )Net
      cash (used in) provided by operating activities
            
            
            (2,291,664
            )
            
            
            2,187,339Cash
      flows from investing activities:Purchase
      of asset/subsidiary, net of cashAcquired
            
            
            (370,000
            )
            
            
            —Purchase
      of property and equipment
            
            
            (10,904
            )
            
            
            (7,726
            )Software
      development costs
            
            
            (14,324
            )
            
            
            (11,682
            )Net
      cash used in investing activities
            
            
            (395,228
            )
            
            
            (19,408
            )Cashflows
      from financing activities:Principal
      payments on notes payable
            
            
            (173,603
            )
            
            
            (2,160,205
            )Principal
      payments under capital leaseobligation
            
            
            (28,911
            )
            
            
            (30,158
            )Proceeds
      from exercise of stock options
            
            
            —
            
            
            
            3,750Costs
      related to renewal fee for line of credit
            
            
            —
            
            
            
            (12,000
            )Net
      cash used in financing activities
            
            
            (
      202,514
            )
            
            
            (2,198,613
            )Net
      decrease in cash and cash equivalents
            
            
            (2,889,406
            )
            
            
            (30,682
            )Cash
      and cash equivalents, beginning of period
            
            
            6,238,788
            
            
            
            4,375,426Cash
      and cash equivalents, end of period
            
            $
            3,349,382
            
            
            $
            4,344,744Supplemental cash flow
      information:Cash
      paid for interest
            
            $
            25,281
            
            
            $
            228,416




The
accompanying notes are an integral part of these condensed consolidated
financial statements.




4




WIDEPOINT
CORPORATION AND SUBSIDIARIES





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





1.
            Basis
      of Presentation




WidePoint
Corporation (“WidePoint” or the “Company”) is a provider of technology-based
products and services to both the government sector and commercial markets.
WidePoint was incorporated in Delaware on May 30, 1997.  We have
grown through the merger with and acquisition of highly specialized regional IT
consulting companies.





Our
expertise lies within three business segments operated through six wholly-owned
operational entities.  Our three business segments include: Wireless
Mobility Management (formerly referred to as our “Wireless Telecommunications
Expense Management Services” segment), Cybersecurity Solutions (formerly
referred to as our “Identity Management” segment), and Consulting Services and
Products.  These segments offer unique solutions and proprietary
intellectual property (“IP”) in mobile and wireless full life cycle management
solutions; cybersecurity solutions with specific subject matter expertise, U.S.
government certifications and authorizations, and IP in identity management and
information assurance services utilizing certificate-based security solutions;
and other associated IT consulting services and products through which we
provide specific subject matter expertise in IT Architecture and Planning,
Software Implementation Services, IT Outsourcing, and Forensic
Informatics.





WidePoint
has three material operational entities, Operational Research Consultants, Inc.
(“ORC”), iSYS, LLC (“iSYS”), and WidePoint IL, Inc. (operating in conjunction
with WP NBIL.), and with two early stage development companies: Protexx
Acquisition Corporation, doing business as Protexx, and Advanced Response
Concepts Corporation, doing business as Advanced Response Concepts. ORC
specializes in IT integration and secure authentication processes and software,
and is a provider of services to the U.S. Government.  ORC has been at
the forefront of implementing Public Key Infrastructure
(PKI) technologies.  PKI technology uses a class of algorithms in
which a user can receive two electronic keys, consisting of a public key and a
private key, to encrypt any information and/or communication being transmitted
to or from the user within a computer network and between different computer
networks. PKI technology is rapidly becoming the technology of choice to enable
security services within and between different computer systems utilized by
various agencies and departments of the U.S. Government.  iSYS
specializes in mobile telecommunications expense management services and
forensic informatics, as well as information assurance services, predominantly
to the U.S. Government.  WP IL and WP NBIL provides information
technology consulting services predominately to large commercial
enterprises.  Protexx specializes in identity assurance and mobile and
wireless data protection services.





In
February 2010, we completed the asset purchase and assumption of certain
liabilities from Vuance, Inc, including acquisition of their Government Services
Division.  These assets are now housed in our wholly owned Subsidiary
Advanced Response Concepts Corporation.  Advanced Response Concepts
develops and markets leading-edge secure critical response management solutions
designed to improve coordination within emergency services and critical
infrastructure agencies.





Our staff
consists of business process and computer specialists who help our government
and civilian customers augment and expand their resident technologic skills and
competencies, drive technical innovation, and help develop and maintain a
competitive edge in today’s rapidly changing technological environment in
business. Our organization emphasizes an intense commitment to our people, our
customers, and the quality of our solutions offerings. As a services
organization, our customers are our primary focus.





The
condensed consolidated balance sheet as of March 31, 2010, the condensed
consolidated statements of operations and statements of cash flows for the three
months ended March 31, 2010 and 2009, respectively, have been prepared by the
Company and are unaudited.  The condensed consolidated balance sheet
as of December 31, 2009 was derived from the audited consolidated financial
statements included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2009.





The
unaudited condensed consolidated financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”).  Pursuant to such regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is the opinion of management that all
adjustments (which include normal recurring adjustments) necessary for a fair
statement of financial results are reflected in the interim periods
presented.  The results of operations for the three months ended March
31, 2010 are not indicative of the operating results for the full
year.





5





2.
            Significant
      Accounting Policies




Principles
of Consolidation




The
accompanying condensed consolidated financial statements include the accounts of
acquired entities since their respective dates of acquisition.  All
significant inter-company amounts have been eliminated in
consolidation.





Use
of Estimates




The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  The more significant areas requiring use of
estimates and judgment relate to revenue recognition, accounts receivable
valuation reserves, realizability of intangible assets, realizability of
deferred income tax assets and the evaluation of contingencies and
litigation.  Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances.  Actual results could differ from those
estimates.





Reclassifications





Certain
amounts in prior year financial statements have been reclassified to conform to
the current year presentation.





Accounting
Standards Updates




In
September, 2009, FASB issued Accounting Standard Update No. 13 (“ASU 13”),
Multiple Element Revenue Arrangements, which applies to ASC Topic 605, Revenue
Recognition.  ASU 13, among other things, establishes the use of the
best estimate of selling price to determine the separate units of accounting in
a multiple element arrangement in the absence of vendor-specific objective
evidence (“VSOE”) or third party evidence (“TPE”).  ASU 13 also
removes the requirement to use the residual method to allocate arrangement
consideration to the separate units of accounting in an arrangement, and instead
requires the use of management’s best estimate of the relative selling prices of
each unit of accounting to determine the consideration allocation. ASU 13 is
effective for arrangements entered into or materially modified in a fiscal year
beginning on or after June 15, 2010. This update to the ASC will be applied on a
prospective basis, and management is in the process of evaluating whether the
update will materially change the pattern and timing of the Company’s
recognition of revenue.




Significant
Customers




For the
quarter ended March 31, 2010, three customers, the Transportation Security
Administration (“TSA”), the Department of Homeland Security (“DHS”), and the
Washington Headquarters Services (“WHS”), an agency within the Department of
Defense (“DoD”) that provides services for many DoD agencies and organizations,
represented the percentages of our revenue set forth in the table
below.  Due to the nature of our business and the relative size of
certain contracts, which are entered into in the ordinary course of business,
the loss of any single significant customer could have a material adverse effect
on our results of operations.





For
      the Three Months Ended
              March
      31,Customer
      Name
            
            2009
              (%)
              Revenue
            
            
            2008
              (%)
              RevenueTransportation
      Security Administration (“TSA”)
            
            
            24
            %
            
            
            24
            %Department
      of Homeland Security (“DHS”)
            
            
            20
            %
            
            
            21
            %Washington
      Headquarters Services (“WHS”)
            
            
            17
            %
            
            
            18
            %




6




Concentrations
of Credit Risk




Financial
instruments potentially subject the Company to credit risk, which consist of
cash and cash equivalents and accounts receivable.  As of March 31,
2010 and December 31, 2009, respectively, three customers, DHS, WHS, and TSA
represented the percentages of our accounts receivable and unbilled accounts
receivable as set forth in the table below:





Customer
      Name
            
            As
      of
              March
      31,
              2010
              (%)
              Receivables
            
            
            As
      of
              December
      31,
              2009
              (%)
              ReceivablesDepartment
      of Homeland Security (“DHS”)
            
            
            31
            %
            
            
            30
            %Transportation
      Security Administration (“TSA”)
            
            
            17
            %
            
            
            26
            %Washington
      Headquarters Services (“WHS”)
            
            
            12
            %
            
            
            20
            %




Fair
value of financial instruments




The
Company’s financial instruments include cash equivalents, deferred revenue,
accounts receivable, notes receivable, accounts payable, short-term debt and
other financial instruments associated with the issuance of the common
stock.  The carrying values of cash equivalents, accounts receivable,
notes receivable, and accounts payable approximate their fair value because of
the short maturity of these instruments. The carrying amounts of the Company’s
bank borrowings under its credit facility approximate fair value because the
interest rates are reset periodically to reflect current market
rates.





Cash
and Cash Equivalents




Investments
purchased with original maturities of three months or less are considered cash
equivalents for purposes of these consolidated financial
statements.  The Company maintains cash and cash equivalents with
various major financial institutions in excess of federally insured
limits.  The Company’s financial institution participates in the
FDIC’s Transaction Account Guarantee (TAG) Program whereby all non-interest
bearing transactions accounts are fully guaranteed by the FDIC for the entire
amount of the account through June 30, 2010.  Effective May 15, 2009,
deposits not covered under the temporary TAG program at FDIC-insured
institutions are insured up to at least $250,000 per depositor through December
31, 2013. On January 1, 2014, the standard insurance amount will return to
$100,000 per depositor for all account categories except for IRAs and other
certain retirement accounts, which will remain at $250,000 per
depositor.





Accounts
Receivable





The
majority of the Company’s accounts receivable is due from the federal government
and established private sector companies in the following industries:
manufacturing, customer product goods, direct marketing, healthcare, and
financial services.  Credit is extended based on evaluation of a
customer’s financial condition and, generally, collateral is not
required.  Accounts receivable are usually due within 30 to 60 days
and are stated at amounts due from customers net of an allowance for doubtful
accounts if deemed necessary.  Customer account balances outstanding
longer than the contractual payment terms are reviewed for collectability and
after 90 days are considered past due.





The
Company determines its allowance for doubtful accounts by considering a number
of factors, including the length of time trade accounts receivable are past due,
the Company’s previous loss history, the customer’s current ability to pay its
obligation to the Company, and the condition of the general economy and the
industry as a whole.  The Company writes off accounts receivable when
they become uncollectible, and payments subsequently received on such
receivables are credited to the allowance for doubtful accounts.





The
Company has not historically maintained a bad debt reserve for our federal
government or commercial customers as we have not witnessed any material or
recurring bad debt charges and the nature and size of the contracts has not
necessitated the Company’s establishment of such a bad debt
reserve.  Upon specific review and our determination that a bad debt
reserve may be required, we will reserve such amount if we view the account as
potentially uncollectible.




7




The
Company is following a customer’s procedural guidelines in pursuing final
approval and collection of a single sales invoice of approximately
$500,000.  The aging of this invoice exceeds the 90 day past due threshold
noted above.  However, the Company believes that it has adequately
responded to the customer’s questions and substantiated the billing to the
customer and that it is probable that the balance will be fully collected upon
completion of this customer’s formal process.





Unbilled
Accounts Receivable





Unbilled
accounts receivable on time-and-materials contracts represent costs incurred and
gross profit recognized near the period-end but not billed until the following
period.  Unbilled accounts receivable on fixed-price contracts consist
of amounts incurred that are not yet billable under contract
terms.  At March 31, 2010 and December 31, 2009, unbilled
accounts receivable totaled approximately $1,774,000 and $1,334,000,
respectively.





Revenue
Recognition




The
Company has revenue contracts with customers, which may involve multiple
deliverable elements.  The Company analyzes various factors, including
a review of the nature of the contract or product sold, the terms of each
specific transaction, the relative fair values of the elements, any
contingencies that may be present, historical experience with like transactions
or with like products, the creditworthiness of the customer, and other current
market and economic conditions.  The Company allocates revenue to each
component of the arrangement using the residual value method based on the fair
value of the undelivered elements. The Company defers revenue from the
arrangement equivalent to the fair value of the undelivered elements and
recognizes the remaining amount at the time of the delivery of the product or
when all other revenue recognition criteria have been met.





Revenue
from the sale of PKI credentials is recognized when delivery
occurs.  Arrangements with customers on PKI related contracts may
involve multiple deliverable elements.   The Company analyzes various
factors, including a review of the nature of the contract or product sold, the
terms of each specific transaction, the relative fair values of the elements,
any contingencies that may be present, its historical experience with like
transactions or with like products, the creditworthiness of the customer, and
other current market and economic conditions.





Revenue
from our mobile telecom expense management services (“MTEMS”) is recognized upon
delivery of services as they are rendered.  Arrangements with
customers on MTEMS-related contracts are recognized ratably over a period of
performance.





Revenue
from the sale of PKI credentials whereby the Company controls issuance of the
credentials is recognized when delivery occurs or the credential is available to
the customer.  In connection with the sale of PKI credentials the
Company generates revenues from the delivery of non-customized software. In such
cases revenue is recognized when there is persuasive evidence that an
arrangement exists (generally a purchase order has been received or contract
signed), delivery has occurred, the charge for the software is fixed or
determinable, and collectability is probable.





Revenue
from the sale of PKI credentials whereby the customer controls issuance of the
credential (for example, the sale of PKI Credential Seats along with the sale of
maintenance, hosting and support to be delivered over the contract period), is
allocated by the Company to each component of the arrangement using the residual
value method based on the fair value of the undelivered elements. The Company
defers revenue from the arrangement equivalent to the fair value of the
undelivered elements and recognizes the remaining amount at the time of the
delivery of the product or when all other revenue recognition criteria have been
met.





A portion
of our revenues are derived from cost-plus or time-and-materials contracts.
Under cost-plus contracts, revenues are recognized as costs are incurred and
include an estimate of applicable fees earned. For time-and-material contracts,
revenues are computed by multiplying the number of direct labor-hours expended
in the performance of the contract by the contract billing rates and adding
other billable direct costs.  In the event the estimated costs of a
contract are greater then the remaining revenues to be recognized, the Company
estimates and reserves the total costs required to perform the contract at the
time such event becomes known to the Company.





In the
event of a termination of a contract, all billed and unbilled amounts associated
with those task orders where work has been performed would be billed and
collected. The termination provisions of the contract would be accounted for at
the time of termination. Any deferred and/or amortization cost would either be
billed or expensed depending upon the termination provisions of the contract.
Further, the Company has had no material history of losses nor has it identified
any material specific risk of loss at March 31, 2010 and 2009, respectively, due
to termination provisions and thus has not recorded provisions for such
events.





8


Income
Taxes




The
Company accounts for income taxes in accordance with authoritative guidance that
requires that deferred tax assets and liabilities be computed based on the
difference between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate.  The guidance
requires that the net deferred tax asset be reduced by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
portion or all of the net deferred tax asset will not be
realized.  The Company recognizes the impact of an uncertain tax
position taken or expected to be taken on an income tax return in the financial
statements at the amount that is more likely than not to be sustained upon audit
by the relevant taxing authority. An uncertain income tax position will not be
recognized in the financial statements unless it is more likely than not of
being sustained.







Property
and Equipment




Property
and equipment are stated at cost, net of accumulated depreciation and
amortization.  Property and equipment consisted of the
following:





March
      31,
                2010
            
            
            December
      31,
                2009Automobiles,
      computers, equipment and software
            
            $
            1,238,732
            
            
            $
            1,194,831Less–
      Accumulated depreciation and amortization
            
            
            (718,320
            )
            
            
            (656,020
            )$
            520,412
            
            
            $
            538,811





Depreciation
expense is computed using the straight-line method over the estimated useful
lives of between two and five years depending upon the classification of the
property and/or equipment.





The
Company capitalizes costs related to software development (including certain
upgrades and enhancements that result in additional functionality) and
implementation in connection with its internal use software
systems.  All preliminary project stage and post implementation costs
(including training and maintenance) are expensed as incurred.





Software
Development Costs





For
software development costs (or “internally developed intangible assets”) related
to software products for sale, lease or otherwise marketed, significant
development costs are capitalized from the point of demonstrated technological
feasibility until the point in time that the product is available for general
release to customers.  Once the product is available for general
release, capitalized costs are amortized based on units sold, or on a
straight-line basis over a six-year period or such other such shorter period as
may be required. WidePoint recorded approximately $70,000 of amortization
expense for the three month period ended March 31, 2010, as compared to
approximately $67,000 for the three month period ended March 31,
2009.  WidePoint capitalized approximately $14,000 for the three month
period ended March 31, 2010, as compared to approximately $12,000 for the three
month period ended March 31, 2009. Capitalized software development costs, net,
included in Intangibles, net, on the Company’s condensed consolidated balance
sheets at March 31, 2010 were approximately $0.3 million, compared to
approximately $0.4 million at December 31, 2009.





During
2009, we estimated that we would be capitalizing approximately $50,000 more
prior to the issuance of the Authority To Operate (“ATO”), but the project
timeframe has been extended into April of 2010 with an estimated cost of
approximately $65,000.  Upon completion, we will commence amortizing
the ATO over an approximate three year life.





9


Goodwill,
Other Intangible Assets, and Long-Lived Assets




Goodwill
is not subject to amortization and annual review is required for
impairment.  The impairment test is based on a two-step process
involving (i) comparing the estimated fair value of the related reporting unit
to its net book value and (ii) comparing the estimated implied fair value of
goodwill to its carrying value.  Impairment losses are recognized
whenever the implied fair value of goodwill is less than its carrying
value.  The Company’s annual impairment testing date is December 31st.
As of December 31, 2009, no impairment had occurred. We have not identified any
impairment as of March 31, 2010.





The
Company recognizes an acquired intangible apart from goodwill whenever the
intangible arises from contractual or other legal rights, or when it can be
separated or divided from the acquired entity and sold, transferred, licensed,
rented or exchanged, either individually or in combination with a related
contract, asset or liability.  Such intangibles are amortized over
their useful lives.  Impairment losses are recognized if the carrying
amount of an intangible subject to amortization is not recoverable from expected
future cash flows and its carrying amount exceeds its fair value.





The
Company reviews its long-lived assets, including property and equipment,
identifiable intangibles, and goodwill annually or whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable.  To determine recoverability of its long-lived assets,
the Company evaluates the probability that future undiscounted net cash flows
will be less than the carrying amount of the assets.





Basic
and Diluted Net Income Per Share




Basic net
income per share includes no dilution and is computed by dividing net income by
the weighted-average number of common shares outstanding for the period. Diluted
net income per share includes the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.  The treasury stock effect of the conversion of
options and warrants to purchase 1,599,020 and 1,007,691 shares of common stock
outstanding for the three months ended March 31, 2010 and 2009, respectively,
has been included in the calculations of the diluted net income per share. Net
income per common
share was computed as follows:




For
      the Three Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009Basic
      Net Income Per Common Share:Net
      income
            
            $
            239,298
            
            
            $
            128,925Weighted
      average number of common shares
            
            
            61,375,333
            
            
            
            58,
      294,514Income
      per common share
            
            $
            0.004
            
            
            $
            0.002Diluted
      net Incomeper
      Common Share:Net
      income
            
            $
            239,298
            
            
            $
            128,925Weighted
      average number of common shares
            
            
            61,375,333
            
            
            
            58,294,514Incremental
      shares from assumed conversions of stock options
            
            
            1,599,020
            
            
            
            1,007,691Adjusted
      weighted average number of common shares
            
            
            62,974,353
            
            
            
            59,302,205Income
      per common share
            
            $
            0.004
            
            
            $
            0.002





10




Stock-based
compensation





The
Company recognizes share-based compensation ratably using the straight-line
attribution method over the requisite service period.  In addition,
the Company is required to estimate the amount of expected forfeitures when
calculating share-based compensation.





The
amount of compensation expense recognized during the three month periods ended
March 31, 2010 and 2009, respectively, under our plans was comprised of the
following:





Three
      Months ended
              March
      31,2010
            
            
            2009General
      and administrative expense
            
            $
            29,180
            
            
            $
            30,730Share-based
      compensation before taxes
            
            
            29,180
            
            
            
            30,730Total
      net share-based compensation expense
            
            $
            29,180
            
            
            $
            30,730Net
      share-based compensation expenses per basic and diluted common
      share
            
            
            nil
            
            
            
            nil





Since we
have cumulative operating tax losses as of March 31, 2010, for which a valuation
allowance has been established, we recorded no income tax benefits for
share-based compensation arrangements.  Additionally, no incremental tax
benefits were recognized from stock options exercised during the three months
ended March 31, 2010, which would have resulted in a reclassification to reduce
net cash provided by operating activities with an offsetting increase in net
cash provided by financing activities.





The fair
value of each option award is estimated on the date of grant using a
Black-Scholes option pricing model (“Black-Scholes model”), which uses the
assumptions of no dividend yield, risk free interest rates and expected life in
years of approximately 3 years.  The option awards are for the period
from 1999 through 2010. Expected volatilities are based on the historical
volatility of our common stock. The expected term of options granted is based on
analyses of historical employee termination rates and option exercises. The
risk-free interest rates are based on the U.S. Treasury yield for a period
consistent with the expected term of the option in effect at the time of the
grant.





Three
      Months
              Ending
              March
      31,
              2010Expected
      dividend yield
            
            
            0Expected
      volatility
            
            
            102%
            %Risk-free
      interest rate
            
            
            1.40
            %Expected
      life – Employees options
            
            3.0
      yearsExpected
      life – Board of directors options
            
            
            n/a




11




Share-based
compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest during
the period.  The estimated forfeiture rates are based on analyses of
historical data, taking into account patterns of involuntary termination and
other factors.  A summary of the option activity under our plans during the
three month periods ended March 31, 2010 and 2009 is presented
below:




NON-VESTED





#
      of Shares
            
            
            Weighted
      average grant date fair value per shareNon-vested
      at January 1, 2010
            
            
            1,215,004
            
            
            $
            0.39Granted
            
            
            75,000
            
            
            $
            0.41Vested
            
            
            120,001
            
            
            $
            0.05Forfeited
            
            
            -
            
            
            
            -Non-vested
      at March 31, 2010
            
            
            1,170,003
            
            
            $
            0.43Non-vested
      at January 1, 2009
            
            
            1,314,000
            
            
            $
            0.57Granted
            
            
            -
            
            
            
            -Vested
            
            
            119,996
            
            
            $
            0.80Forfeited
            
            
            -
            
            
            
            -Non-vested
      at March 31, 2009
            
            
            1,194,004
            
            
            $
            0.55





OUTSTANDING AND
EXERCISABLE





#
      of Shares
            
            
            Weighted
      average grant date fair value per shareTotal
      outstanding at January 1, 2010
            
            
            4,517,411
            
            
            $
            0.54Issued
            
            
            75,000
            
            
            $
            0.65Cancelled
            
            
            1,000
            
            
            $
            1.35Exercised
            
            
            -
            
            
            
            -Total
      outstanding at March 31, 2010
            
            
            4,591,411
            
            
            $
            0.54Total
      exercisable at March 31, 2010
            
            
            3,421,408
            
            
            $
            0.44Total
      outstanding at January 1, 2009
            
            
            8,523,411
            
            
            $
            0.45Issued
            
            
            -
            
            
            
            -Cancelled
            
            
            1,000
            
            
            $
            1.35Exercised
            
            
            30,000
            
            
            
            0.13Total
      outstanding at March 31, 2009
            
            
            8,492,411
            
            
            $
            0.45Total
      exercisable at March 31, 2009
            
            
            7,298,407
            
            
            $
            0.38





The
aggregate remaining contractual lives in years for the options outstanding and
exercisable on March 31, 2010 were 4.43 and 3.67, respectively.  In
comparison, the aggregate remaining contractual lives in years for the options
outstanding and exercisable on March 31, 2009, were 3.01 and 2.28,
respectively.





Aggregate
intrinsic value represents total pretax intrinsic value (the difference between
WidePoint’s closing stock price on March 31, 2010, and the exercise price,
multiplied by the number of in-the-money options) that would have been received
by the option holders had all option holders exercised their options on March
31, 2010. The intrinsic value will change based on the fair market value of
WidePoint’s stock. The total intrinsic values of options outstanding and
exercisable as of March 31, 2010, were $1,241,373 and $1,203,423, respectively.
The total intrinsic value of options exercised for the first quarter of fiscal
2010 was approximately $0. The Company issues new shares of common stock upon
the exercise of stock options.  At March 31, 2010, 4,436,438 Shares
were available for future grants under the Company’s 2008 Stock Incentive
Plan.




12


At March
31, 2010, the Company had approximately $313,000 of total unamortized
compensation expense, net of estimated forfeitures, related to stock option
plans that will be recognized over the weighted average period of 3.70
years.





Non-employee
stock-based compensation:





The
Company accounts for stock-based non-employee compensation arrangements using
the fair value recognition provisions of ASC 505-50, “Equity-Based Payments to
Non-Employees” (formerly known as FASB Statement 123, Accounting for Stock-Based
Compensationand “Emerging Issues Task Force” EITF 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services).


3.
                Debt




The
Company entered into a senior lending agreement with Cardinal Bank on August 16,
2007.  In January of 2008, the Company modified this credit facility
with Cardinal Bank to allow for up to $7 million, which included a four-year
term note for $2 million that the Company had entered into with Cardinal Bank in
January 2008. The Company borrowed approximately $1.8 million under this credit
facility to finance the acquisition of iSYS, LLC in January of 2008 and repaid
the advance in full in May 2008 from the proceeds raised in a subsequent capital
raise that occurred in April and May of 2008.  As of March 31, 2010,
the Company had no borrowings under this credit facility, which previously had a
$5 million borrowing cap at an interest rate of 6.5%.  As explained
below, this credit facility was superseded by the Company’s new revolving credit
facility entered into with Cardinal Bank.





On March
17, 2009, the Company entered into a Debt Modification Agreement and Commercial
Loan Agreement (“2009 Commercial Loan Agreement”) with Cardinal Bank. This new
revolving credit facility replaced the Company’s prior $5 million revolving
credit facility with Cardinal Bank. The 2009 Commercial Loan Agreement allows
for the Company to borrow up to $5 million. The repayment date of the revolving
credit facility was extended to June 1, 2010 and advances under the revolving
credit facility will bear interest at a variable rate equal to the prime rate
plus 0.5% with an interest rate floor of 5%. Borrowings under the 2009
Commercial Loan Agreement were collateralized by the Company’s eligible contract
receivables, inventory, all of its stock in certain of its subsidiaries and
certain property and equipment. As part of the credit facility, the Company must
comply with certain financial covenants that include tangible net worth and
interest coverage ratios.  The Company was in full compliance with
these financial covenants on May 17, 2010.





The
Company also has a four-year term note with Cardinal Bank that we entered into
January 2008 in the principal amount of $2 million, which bears interest at the
rate of 7.5% with 48 equal principal and interest payments. At March 31, 2010,
we owed approximately $1.0 million under the term note.





4.
              Goodwill
      and Intangible Assets





Goodwill
is to be reviewed at least annually for impairment. The Company has elected to
perform this review annually on December 31st of each calendar year. We
have not identified any impairment as of March 31, 2010.


The
changes in the carrying amount of goodwill for the three-month period ended
March 31, 2010 and for the year ended December 31, 2009, respectively, are
as follows:





TotalBalance
      as of December 31, 2008
            
            $
            8,575,881iSYS
      additional earn-outpurchase
      consideration
            
            
            1,194,766Balance
      as of December 31, 2009
            
            $
            9,770,647Advanced
      Response Concepts asset purchase
            
            
            629,090Balance
      as of March 31, 2010
            
            $
            10,399,737




13




In the
three month period ended March 31, 2010, $629,089 in goodwill was acquired as a
result of the acquisition of the assets of the government business of Vuance,
Inc. by the Company’s wholly-owned subsidiary, Advanced Response Concepts.
Management believes that as of March 31, 2010, the carrying value of our
goodwill was not impaired.  Goodwill and the description of the
Vuance/Advanced Response Concepts asset purchase is more fully described in Note
8.





Purchased
and Internally Developed Intangible Assets





The
following table summarizes purchased and internally developed intangible assets
subject to amortization:





As
      of March 31, 2010Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              Weighted
      Average Amortization Period (in years)Purchased
      Intangible AssetsORC
      Intangible (Includes customer relationships and PKI business opportunity
      purchase accounting preliminary valuations)
              
              $
              1,145,523
              
              
              $
              (1,122,113
              )
              
              
              5iSYS
      (includes customer relationships, internal use software and trade
      name)
              
              $
              1,230,000
              
              
              $
              (579,751
              )
              
              
              5Protexx
      (Identity Security Software)
              
              $
              506,463
              
              
              $
              (281,369
              )
              
              
              3Advanced
      Response Concepts (includes preliminary values for customer relationships
      and first responder security software)
              
              $
              381,420
              
              
              $
              (15,893
              )
              
              
              4$
              3,263,406
              
              
              $
              (1,999,126
              )
              
              
              4Internally
      Developed Intangible AssetsORC
      PKI-I Intangible (Related to internally generated
software)
              
              $
              334,672
              
              
              $
              (315,271
              )
              
              
              6ORC
      PKI-II Intangible (Related to internally generated
    software)
              
              $
              649,991
              
              
              $
              (573,593
              )
              
              
              6ORC
      PKI-III Intangible (Related to internally generated
    software)
              
              $
              211,680
              
              
              $
              (135,240
              )
              
              
              3ORC
      PKI-IV Intangible (Related to internally generated
    software)
              
              $
              42,182
              
              
              $
              (26,947
              )
              
              
              3ORC
      PKI-V Intangible (Related to internally generated
software)
              
              $
              126,029
              
              
              $
              (3,501
              )
              
              
              31,364,554
              
              
              $
              (1,054,552
              )
              
              
              5Total
              
              $
              4,627,960
              
              
              $
              (3,053,678
              )
              
              
              5Aggregate
      Amortization Expense:For
      the three months ended 3/31/10
              
              $
              203,041Estimated
      Amortization Expense:For
      the year ending 12/31/10
              
              $
              722,502For
      the year ending 12/31/11
              
              $
              467,823For
      the year ending 12/31/12
              
              $
              325,032For
      the year ending 12/31/13
              
              $
              254,020For
      the year ending 12/31/14
              
              $
              7,946Total
              
              $
              1,777,323




14




The total
weighted average life of all of the intangibles is approximately 3
years.




There
were no amounts of research and development assets acquired nor any
written-off  during the three month period ended March 31, 2010
..





5.
            Income
      Taxes




The
Company accounts for income taxes in accordance with ASC 740, “Income Taxes”
(formerly known as SFAS No. 109, “Accounting for Income Taxes”). Deferred
tax assets and liabilities are computed based on the difference between the
financial statement and income tax bases of assets and liabilities using the
enacted marginal tax rate.  Income tax accounting guidance requires
that the net deferred tax asset be reduced by a valuation allowance if, based on
the weight of available evidence, it is more likely than not that some portion
or all of the net deferred tax asset will not be realized.  The
Company recognizes the financial statement benefit of a tax position only after
determining that the relevant tax authority would more likely than not sustain
the position following an audit.  For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax
authority.  The Company’s assessments of its tax positions did not
result in changes that had a material impact on results of operations, financial
condition or liquidity. As of March 31, 2010 and December 31, 2009 the Company
had no unrecognized tax benefits. While the Company does not have any interest
and penalties in the periods presented, the Company’s policy is to recognize
such expenses as tax expense.





The
Company files U.S. federal income tax returns with the Internal Revenue Service
(“IRS”) as well as income tax returns in various states. The Company may be
subject to examination by the IRS for tax years 2002 through 2009. Additionally,
the Company may be subject to examinations by various state taxing jurisdictions
for tax years 2002 through 2009. The Company is currently not under examination
by the IRS or any state tax jurisdiction.





As of
March 31, 2010, the Company had net operating loss (NOL) carry forwards of
approximately $15 million to offset future taxable income. There are also up to
approximately in $8 million in state tax NOL carry forwards.  These
carry forwards expire between 2010 and 2029. In assessing the ability to realize
of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon generation of
future taxable income during the periods in which those temporary differences
become deductible. Based upon the level of historical losses that may limit
utilization of NOL carry forwards in future periods, management is unable to
predict whether these net deferred tax assets will be utilized prior to
expiration. Under the provision of the Tax Reform Act of 1986, when there has
been a change in an entity’s ownership of 50 percent or greater,
utilization of net operating loss carry forwards may be limited. As a result of
WidePoint’s equity transactions, the Company’s net operating losses will be
subject to such limitations and may not be available to offset future income for
tax purposes. In the fourth quarter of 2009, the Company completed its
“Section 382” analysis and preliminarily determined that some of the
Company’s net operating losses may be limited as a result of expirations that
may occur prior to the utilization of those net operating losses under the
limitations from certain changes of control that  occurred in past
years.  Utilization of the NOL carryforwards will be subject to an
annual limitation under Section 382 of the Internal Revenue Code of 1986 and
similar state provisions due to ownership change limitations that have occurred.
These ownership changes will limit the amount of NOL carryforwards that can be
utilized to offset future taxable income. In general, an ownership change, as
defined by Section 382, results from transactions increasing ownership of
certain stockholders or public groups in the stock of the corporation by more
than 50 percentage points over a three-year period. An analysis was performed
which indicated that multiple ownership changes have occurred in previous years
which created annual limitations on our ability to utilize NOL and tax credit
carryovers. Such limitations will result in approximately $4,907,000 of tax
benefits related to federal NOL carryforwards that will expire unused.
Accordingly, the related NOL carryforwards have been removed from deferred tax
assets accompanied by a corresponding reduction of the valuation allowance. Due
to the existence of the valuation allowance, limitations created by future
ownership changes, if any, related to our operations in the U.S. will not impact
our effective tax rate.





15


No tax
benefit has been realized associated with the exercise of stock options for the
three months ended March 31, 2010 and 2009, respectively, because of the
existence of net operating loss carryforwards. There will be no credit to
additional paid in capital for such until the associated benefit is realized
through a reduction of income taxes payable.





The
Company has determined that its net deferred tax asset did not satisfy the
recognition criteria and, accordingly, established a valuation allowance for
100 percent of the net deferred tax asset.





The
Company incurred a deferred income tax expense of approximately $39,000 for the
three months ended March 31, 2010 and 2009, respectively. This deferred income
tax expense is attributable to the differences in our treatment of the
amortization of goodwill for tax purposes versus book purposes as it relates to
our acquisition of iSYS in January 2008. Because the goodwill is not
amortized for book purposes but is for tax purposes, the related deferred tax
liability cannot be reversed until some indeterminate future period when the
goodwill either becomes impaired and/or is disposed of. The deferred tax
liability can be offset by deferred Income tax assets that may be recognized In
the future and the deferred tax expense is a non-cash expense. Income tax
accounting guidance requires the expected timing of future reversals of deferred
tax liabilities to be taken into account when evaluating the realizability of
deferred tax assets. Therefore, the reversal of deferred tax liabilities related
to the goodwill is not to be considered a source of future taxable income when
assessing the realization of deferred tax assets. Because the Company has a
valuation allowance for the full amount of the deferred income tax asset, the
deferred income liability associated with the tax deductible goodwill has been
recorded and not offset against existing deferred income tax
assets.




6.
              Stockholders’
      Equity




The
Company is authorized to issue 110,000,000 shares of common stock, $.001 par
value per share.  As of March 31, 2010, there were 61,375,333 shares
of common stock outstanding.  During the quarter ended March 31, 2010,
no shares of common stock were issued.







7.
            Segment
      reporting





Segments
are defined by authoritative guidance as components of a company in which
separate financial information is available and is evaluated by the chief
operating decision maker, or a decision making group, in deciding how to
allocate resources and in assessing performance.  Management evaluates
segment performance primarily based on revenue and segment operating
income.





The
Company operates as three segments, which include Wireless Mobility Management,
Cybersecurity Solutions, and IT consulting services.





Segment
operating income consists of the revenues generated by a segment, less the
direct costs of revenue and selling, general and administrative costs that are
incurred directly by the segment.  Unallocated corporate costs include
costs related to administrative functions that are performed in a centralized
manner that are not attributable to a particular segment.  These
administrative function costs include costs for corporate office support, all
office facility costs, costs relating to accounting and finance, human
resources, legal, marketing, information technology and company-wide business
development functions, as well as costs related to overall corporate
management.





16


The
following table sets forth selected segment and consolidated operating results
and other operating data for the periods indicated. Segment operating income
consists of the revenues generated by a segment, less the direct costs of
revenue and selling, general and administrative costs that are incurred directly
by the segment. Unallocated corporate costs include costs related to
administrative functions that are performed in a centralized manner that are not
attributable to a particular segment.  Management does not analyze
assets for decision making purposes as it relates to the segments below.
Accordingly, information is not available for long-lived assets or total
assets.





Three
      Month Period Ending March 31, 2010Wireless
            
            
            Cyber
            
            
            Consulting
            
            
            Corp
            
            
            ConsolRevenue
            
            $
            6,919,812
            
            
            $
            1,425,507
            
            
            $
            2,817,737
            
            
            $
            -
            
            
            $
            11,163,056Operating
      incomeincluding
      amortization anddepreciation
      expense
            
            
            679,244
            
            
            
            285,366
            
            
            
            107,414
            
            
            
            (772,741
            )
            
            
            299,283Interest
      Income (expense), net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (20,763
            )
            
            
            (20,763
            )Pretax
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            278,520Income
      tax expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (39,322
            )
            
            
            (39,222
            )Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            239,298Three
      Month Period Ending March 31, 2009Wireless
            
            
            Cyber
            
            
            Consulting
            
            
            Corp
            
            
            ConsolRevenue
            
            $
            6,356,460
            
            
            $
            1,407,852
            
            
            $
            2,371,070
            
            
            $
            -
            
            
            $
            10,135,382Operating
      income (loss)Including
      amortization and depreciation expense
            
            
            602,354
            
            
            
            225,429
            
            
            
            16,677
            
            
            
            (610,102
            )
            
            
            234,358Interest
      Income (expense), net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (66,211
            )
            
            
            (66,211
            )Pretax
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            168,147Income
      tax expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (39,222
            )
            
            
            (39,222
            )Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            128,925




8.
            Advanced Response Concepts
      Corporation Asset Purchase.





On
January 29, 2010, the Company, together with its wholly-owned subsidiary,
Advanced Response Concepts Corporation, a Delaware corporation (“Advanced
Response Concepts”), entered into an Asset Purchase Agreement with Vuance, Inc.
a Delaware corporation (“Vuance”) and Vuance’s sole shareholder, Vuance, Ltd., a
public company organized in the State of Israel under the Israeli Companies Law
(the “Vuance Agreement”), pursuant to which Advanced Response Concepts acquired
certain assets and assumed certain liabilities of Vuance as further specified in
the Vuance Agreement.  Advanced Response Concepts acquired all assets
of the collective business of Vuance relating to its Government Services
Division, including but not limited to the operation by Vuance of identity
assurance and priority resource management solutions, as well as crime scene
management and information protection, and other activities related or
incidental thereto and the development, maintenance, enhancement and provision
of software, services, products and operations for identity management and
information protection, offered primarily to state and local government agency
markets.





17


The
Company has engaged a valuation consultant to assist in finalizing the
determination of the purchase price and fair value of assets and liabilities
acquired and this process has not been completed as of the end of the quarter.
As such, amounts disclosed are provisional and subject to change based on the
final determination of the purchase price and fair value of assets and
liabilities acquired.  The purchase price was based upon management’s
estimates and assumptions using the latest available information.  The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed in this business combination:




Advanced
      Response Concepts
              Jan.
      29, 2010Consideration:Cash
            
            $
            370,000Cash
      to be paid (post-closing adjustments)
            
            
            13,700Contingent
      consideration arrangement
            
            
            300,000Fair
      value of total consideration transferred
            
            $
            683,700Approximate
      acquisition related costs (including general & administrative expenses
      in WidePoint’s income statement for the period ending March 31,
      2010)
            
            $
            70,000Recognized
      amounts of identifiable assets acquired & liabilities
      assumed:Current
      Assets
            
            $
            42,000Property,
      plant, and equipment, net
            
            
            43,675Identifiable
      intangible assets
            
            
            381,420Current
      liabilities assumed
            
            
            (412,483
            )Total
      identifiable net assets & liabilities assumed
            
            
            54,612Goodwill
            
            
            629,088Total
            
            $
            683,700





The
operations of Advanced Response Concepts have been included in the Company’s
results of operations beginning on January 29, 2010, the acquisition
date.





The
earnout provision of the Vuance Agreement provides for additional consideration
of up to $1,500,000 during the earnout period of the calendar years 2010 - 2012,
subject to Advanced Response Concepts receiving minimum qualified revenues of at
least $4,000,000 per year.  In the event Advanced Response Concepts
receives at least $4,000,000 in qualified revenues in an earnout year Vuance
will have the right to receive an earnout payment equal to twenty percent (20%)
of the amount by which such qualified revenues for that earnout year exceed
$4,000,000; provided, however, that the first $270,000 of any such earnout
payment will be retained by the Company for its sole account as reimbursement
for certain accounts payable and deferred revenue liabilities assumed by
Advanced Response Concepts in connection with the Vuance Agreement.




18




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.





The
following discussion and analysis of the financial condition and results of
operations of the Company should be read in conjunction with the financial
statements and the notes thereto which appear elsewhere in this quarterly report
and the Company’s Annual Report on Form 10-K for the year ended December 31,
2009.





The
information set forth below includes forward-looking
statements.  Certain factors that could cause results to differ
materially from those projected in the forward-looking statements are set forth
below.  Readers are cautioned not to put undue reliance on
forward-looking statements.  The Company disclaims any intent or
obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.





Overview





WidePoint
Corporation is a technology-based provider of products and services to both the
government sector and commercial markets. WidePoint was incorporated in Delaware
on May 30, 1997. We have grown through the merger with and acquisition of
highly specialized regional IT consulting companies.




Our
expertise lies in three business segments operated through six wholly-owned
operational entities.  Our three business segments include: Wireless
Mobility Management (formerly referred to as our “Wireless Telecommunications
Expense Management Services” segment), Cybersecurity Solutions (formerly
referred to as our “Identity Management” segment), and Consulting Services and
Products.  These segments offer unique solutions and proprietary
intellectual property (“IP”) in mobile and wireless full life cycle management
solutions; cybersecurity solutions with specific subject matter expertise, U.S.
government certifications and authorizations, and IP in identity management and
information assurance services utilizing certificate-based security solutions;
and other associated IT consulting services and products through which we
provide specific subject matter expertise in IT Architecture and Planning,
Software Implementation Services, IT Outsourcing, and Forensic Informatics. For
additional information related to our three business segments and operational
entities, see our Overview Section of Management’s discussion and analysis of
financial condition and results of operations and our consolidated financial
statements in this Form 10-Q.





See Note
7 to the Condensed Consolidated Financial Statements included in this report for
a description of the operating results for each segment.





We intend
to continue to market and sell our technical capabilities into the governmental
and commercial marketplace. Further, we are continuing to actively search out
new synergistic acquisitions that we believe may further enhance our present
base of business and service offerings, which has already been augmented by our
acquisitions of ORC and iSYS, our asset purchases of Protexx and Advanced
Response Concepts, and our internal growth initiatives.





With the
addition of the customer base and the increase in revenues attributable to our
iSYS acquisition, WidePoint’s opportunity to leverage and expand further into
the federal government marketplace has improved substantially. iSYS’s past
client successes, top security clearances for their personnel, and additional
breadth of management talent have expanded the Company’s reach into markets that
previously were not fully accessible to WidePoint. Further supplemented by the
addition of the Protexx and Advanced Response Concepts asset acquisitions, the
Company intends to continue to leverage the synergies between its newly-acquired
operating subsidiaries, and cross sell its technical capabilities into each
separate marketplace serviced by our respective business segments.





Our
revenues and operating results may vary significantly from quarter-to-quarter,
due to revenues earned on contracts, the number of billable days in a quarter,
the timing of the pass-through of other direct costs, the commencement and
completion of contracts during any particular quarter, the schedule of the
government agencies for awarding contracts, the term of each contract that we
have been awarded and general economic conditions.  Because a
significant portion of our expenses, such as personnel and facilities costs, are
fixed in the short term, successful contract performance and variation in the
volume of activity as well as in the number of contracts commenced or completed
during any quarter may cause significant variations in operating results from
quarter to quarter.





As a
result of our acquisitions, which predominantly operate in the U.S. federal
government marketplace, we rely upon a larger portion of our revenues from the
federal government directly or as a subcontractor. The federal government’s
fiscal year ends September 30.  If a budget for the next fiscal
year has not been approved by that date, our clients may have to suspend
engagements that we are working on until a budget has been
approved.  Such suspensions may cause us to realize lower revenues in
the fourth calendar quarter (first quarter of the government’s fiscal
year).  Further, a change in senior government officials, or
realignment of responsibilities, may negatively affect the rate at which the
federal government purchases the services that we offer.





19


As a
result of the factors above, period-to-period comparisons of our revenues and
operating results may not be meaningful. These comparisons are not indicators of
future performance and no assurances can be given that quarterly results will
not fluctuate, causing a possible material adverse effect on our operating
results and financial condition.





In
addition, most of WidePoint’s current costs consist primarily of the salaries
and benefits paid to WidePoint’s technical, marketing and administrative
personnel as well as vendor-related costs in connection with our Mobile Telecom
Managed Services segment.  As a result of our plan to expand
WidePoint’s operations through a combination of internal growth initiatives
and merger and acquisition opportunities, WidePoint expects such costs
to increase.  WidePoint’s profitability also depends upon both the volume
of services performed and the Company’s ability to manage costs.  As a
significant portion of the Company’s cost is labor related, WidePoint must
effectively manage these costs to achieve and grow its profitability.  The
Company must also manage our telephony airtime plans and other vendor related
offerings under our Mobile Telecom Managed Services provided to our customers as
they also represent a significant portion of our costs.  To date, the
Company has attempted to maximize its operating margins through efficiencies
achieved by the use of its proprietary methodologies, and by offsetting
increases in consultant salaries with increases in consultant fees received from
its clients.  The uncertainties relating to the ability to achieve and
maintain profitability, obtain additional funding to partially fund the
Company’s growth strategy and provide the necessary investment to continue to
upgrade its management reporting systems to meet the continuing demands of the
present regulatory changes affect the comparability of the information reflected
in the financial information presented above.





Our staff
consists of business process and computer specialists who help our government
and civilian customers augment and expand their resident technologic skills and
competencies, drive technical innovation, and help develop and maintain a
competitive edge in today’s rapidly changing technological environment in
business.  Our organization emphasizes an intense commitment to our
people, our customers, and the quality of our solutions offerings.  As
a services organization, our customers are our primary focus.





Results
of Operations





Three Months Ended March 31,
2010 as Compared to Three Months Ended March 31, 2009





Revenues,
net.Revenues for the three month period ended March 31, 2010,
were approximately $11.2 million as compared to approximately $10.1 million for
the three month period ended March 31, 2009.  The increase in revenues
was primarily attributable to increases in all three of our segments as a result
of the performance of recent contract awards and expansions made predominately
by our federal agency customers.





§
            Our
      Mobile Telecom Managed
      Services (“MTEM”) segment experienced revenue growth of
      approximately 9% from approximately $6.4 million for the quarter ended
      March 31, 2009 to approximately $6.9 million for the quarter ended March
      31, 2010.  The positive revenue performance primarily resulted
      from the execution of new contract awards and renewals and expansion work
      from our current customer base.  We anticipate that this segment
      should continue to demonstrate positive revenue growth in the future as
      federal agencies continue to adopt the Company’s services under the recent
      contract award associated with the federal strategic sourcing initiative,
      or FSSI, by the General Services Administration.  In addition,
      we expect future revenue growth of this segment to be further bolstered by
      the drive of federal agencies and departments to expand the efficiencies
      and savings that services such as our Mobile Telecom Managed Services have
      to date proven to generate for these groups.  Also, we are
      presently pursuing several significant service contract award
      opportunities at a number of federal agencies and are also initiating a
      new strategy to expand into state and local municipalities and commercial
      enterprises through a sales channel strategy utilizing intermediaries to
      potentially expand our reach beyond the federal sector and help to support
      the long-term growth of this
segment.





§
            Our
      PKI credentialing and
      managed services segment experienced relatively flat revenue growth
      with revenues of approximately $1.4 million for the three month periods
      ended March 31, 2010 and 2009, respectively.  We anticipate that
      this segment should continue to demonstrate revenue growth in the future
      as various federal agency mandates continue to be implemented in order to
      strengthen their requirements for greater levels of identity management
      and better protect the federal information technology infrastructure
      thereof.  We have entered into a number of affiliations with
      partners who support the end user base, which facilitate access to these
      various federal agencies and the technology infrastructure in order to
      take advantage of these identity management improvement
      mandates.  We believe these new partnerships should widen our
      sales reach, which we anticipate should support the continued long-term
      growth of this segment.




20




§
            Our
      consulting services
      segment experienced revenue growth of approximately
      19%.  Revenues increased from approximately $2.3 million for the
      three month period ended March 31, 2009 to $2.9 million for the three
      month period ended March 31, 2010.  This positive revenue
      performance primarily resulted from new contract awards and renewals and
      expansion work from our current customer base occurring in this
      quarter.




Cost of
sales.Cost of salesfor the three month
period ended March 31, 2010, was approximately $8.6 million (or 77% of
revenues), as compared to cost of sales of approximately $8.1 million (or 80% of
revenues), for the three month period ended March 31, 2009.  This
absolute increase in cost of sales was primarily attributable to an increase in
revenues.  The decrease in our cost of sales as a percentage of
revenues was primarily attributable to margin improvements in all three of our
segments.  Our MTEM and PKI segments realized greater margins from the
benefit of economies of scale with our direct costs centers realizing greater
efficiencies.  Our consulting services segment realized greater
margins as a result of a larger mix of higher margin consulting services, versus
a lesser amount of lower margin software reselling that was realized during the
quarter.  We anticipate improvements in our costs of sales on a
percentage basis as our MTEM and PKI segments add economies of scale, which may
be partially offset at times by the fluctuation in our consulting services
segment revenue mix.





Gross
profit.  Gross profit for the three month period ended March
31, 2010 was approximately $2.6 million (or 23% of revenues), as compared to
gross profit of approximately $2.0 million (or 20% of revenues), for the three
month period ended March 31, 2009.  The percentage of gross profit was
higher in the first quarter of 2010 as compared to the first quarter of 2009 as
a result of higher margins associated with improved economies of scale in our
MTEM and PKI segments and a greater mix of higher margin direct consulting
services as compared to lower margin software reselling in our consulting
services segment.  We anticipate gross profit as a percentage of
revenues should increase as cost of sales as a percentage of revenues decreases
due to a greater mix of higher margin services.  We believe as
revenues expand in the future there will be periods of variability in margin
growth associated with changes in our product mix.





Sales and
marketing.  Sales and marketing expense for the three month
period ended March 31, 2010, was approximately $343,000, (or 3% of revenues) as
compared to approximately$229,000 (or 2% of revenues), for the three month
period ended March 31, 2009.  The absolute dollar amount of sales and
marketing expanded slightly as we increased our sales and marketing capabilities
through the addition of several new hires, tools, and services infrastructure
improvements.  We believe that with our niche capabilities and the
present latent demand for our services the investment within our sales and
marketing will support our ability to continue to expand our
revenues.





General and
administrative.  General and administrative expenses for the
three month period ended March 31, 2010, were approximately $1.8 million (or 16%
of revenues), as compared to approximately $1.5 million (or 15% of revenues)
recorded by the Company for the three month period ended March 31,
2009.  This increase in general and administrative expenses over those
for the three months ended March 31, 2009, was primarily attributable to
increases in general and administrative costs as we added a new subsidiary
Advanced Response Concepts that added to our general and administrative expense
base, along with a one time increase in legal expenses associated with the
purchase of the assets of the government business of Vuance, Inc., which we are
operating as Advanced Response Concepts.  We anticipate that our
general and administrative costs in absolute dollars may rise slightly in the
future as our support costs rise to facilitate our expectations of a greater
revenue base as we continue our efforts to comply with pending additional
financial compliance requirements.  We believe that our general and
administrative costs on a percentage of revenue basis will level out or decrease
in future financial reporting periods.





Depreciation.  Depreciation
expense for the three month period ended March 31, 2010, was approximately
$50,000 (or less than 1% of revenues), as compared to approximately $43,000 of
such expenses (or less than 1% of revenues) recorded by the Company for the
three month period ended March 31, 2009.  This increase in
depreciation expense over those for the three month period ended March 31, 2009,
was primarily attributable to recent acquisitions of additional depreciable
assets.  We do not anticipate any material changes within depreciation
expense in the short-term.  However, as our revenue base increases
within our MTEM and PKI segments, there may be a need from time to time to
increase the purchase of equipment in support of new revenue streams that may
then raise our depreciation expenses.





21


Interest
income.  Interest income for the three month period ended March
31, 2010, was approximately $7,000 (or less than 1% of revenues), as compared to
approximately $14,000 (or less than 1% of revenues), for the three month period
ended March 31, 2009.  This decrease in interest income for the three
month period ended March 31, 2010, was primarily attributable to lesser amounts
of invested cash and cash equivalents, and combined with lower short-term
interest rates that were available to the Company on investments in interest
bearing accounts.  We do not anticipate any material changes in trends
in our interest income for the near-term as a result of continuing low
short-term interest rates presently payable by financial institutions in
connection with the present monetary policy of the U.S. federal
government.





Interest
expense.  Interest expense for the three month period ended
March 31, 2010, was approximately $27,000 (or less than 1% of revenues), as
compared to approximately $80,000 (or less than 1% of revenues), for the three
month period ended March 31, 2009.  This decrease in interest expense
for the three month period ended March 31, 2010, was primarily attributable to
lesser expenses associated with the debt instruments held by the Company. We
anticipate our interest expense will continue to decrease as the Company
continues to pay down the principal on its term note held by Cardinal
Bank.





Income taxes.Income taxes
for the three month periods ended March 31, 2010 and March
31, 2009 each were approximately $39,000. The Company incurred a deferred
income tax expense of approximately $39,000 for each three month period, as a
result of the recognition of a deferred tax liability attributable to the
differences in our treatment of the amortization of goodwill for tax purposes
versus book purposes as it relates to our acquisition of iSYS in January
2008.  As goodwill is amortized for tax purposes but not book purposes
and is considered a permanent asset rather than a temporary asset, the related
deferred tax liability cannot be reversed until some indeterminate future period
when the goodwill either becomes impaired and/or is disposed of.





Net income.As a
result of the above, the net income for the three month period ended March 31,
2010, was approximately $239,000 as compared to the net income of approximately
$129,000 for the three months ended March 31, 2009.





Liquidity
and Capital Resources





The
Company has, since inception, financed its operations and capital expenditures
through the sale of preferred and common stock, seller notes, convertible notes,
convertible exchangeable debentures, senior secured loans and the proceeds from
the exercise of the warrants related to a convertible exchangeable
debenture.  During 2009 and through the period ended March 31, 2010,
operations were primarily financed with working capital, senior debt, and stock
option and warrant exercises.





Net cash
used in operating activities for the three months ended March 31, 2010, was
approximately $2.3 million, as compared to cash provided by operating activities
of $2.2 million for the three months ended March 31, 2009.  This
decrease in cash generated and increase in cash used in from operating
activities for the three months ended March 31, 2010 was primarily a result of a
decrease in accounts payable and accrued expenses as a result of an acceleration
of vendor payments during the first quarter of 2010.  Net cash used in
investing activities for the three months ended March 31, 2010, was
approximately $395,000, as compared to $19,000 in cash used in investing
activities for the three months ended March 31, 2009.  The increase in
net cash used in investing activities was primarily attributable to the asset
acquisition of the government business assets of Vuance, Inc. by the Company.
Net cash used in financing activities amounted to approximately $203,000 in the
three months ended March 31, 2010, as compared to net cash used in financing
activities of approximately $2.2 million in the three months ended March 31,
2009. This decrease in net cash used in financing activities primarily related
to the reduction of acquisition indebtedness during the first quarter ended
March 31, 2010 as compared to the first quarter of March 31, 2009 in which we
paid down the remaining amounts of the Sellers Note issued to Jin Kang, a
related party of the Company and the former owner and current officer of iSYS,
LLC, in connection with our acquisition of iSYS, LLC.  As a result of the
Company’s capital raising in 2008 and profitability in 2009, the Company has had
excess liquidity to absorb the pay-down of short-term and long-term debt, while
still maintaining sufficient levels of capital resources to fund
operations.





22


As of
March 31, 2010, the Company had a net working capital of approximately $3.7
million.  The Company’s primary source of liquidity consists of
approximately $3.3 million in cash and cash equivalents and approximately $8.5
million of accounts receivable and unbilled accounts
receivable.  Current liabilities include approximately $7.2 million
inaccounts payable
and accrued expenses.   The reduction in current liabilities for
the three months ended March 31, 2010 was predominately associated with the
reduction of accounts payable and accrued liabilities as a result of the
acceleration of vendor invoices during the first quarter of 2010.





The
Company’s business environment is characterized by rapid technological change,
periods of high growth and contraction and is influenced by material events such
as mergers and acquisitions, with each of the foregoing able to substantially
change the Company’s outlook.





The
Company has embarked upon several new initiatives to expand revenue growth which
has included both acquisitions and organic growth.  The Company
requires substantial working capital to fund the future growth of its business,
particularly to finance accounts receivable, sales and marketing efforts, and
capital expenditures.




Currently
there are no material commitments for capital expenditures and software
development costs. Future capital requirements will depend on many factors,
including the rate of revenue growth, if any, the timing and extent of spending
for new product and service development, technological changes and market
acceptance of the Company’s services.




Management
believes that its current cash position is sufficient to meet capital
expenditure and working capital requirements for the near
term.  However, the growth and technological change of the market make
it difficult to predict future liquidity requirements with
certainty.  Over the longer term, the Company must successfully
execute its plans to increase revenue and income streams that will generate
significant positive cash flows if it is to sustain adequate liquidity without
impairing growth or requiring the infusion of additional funds from external
sources. Additionally, a major expansion, such as that which occurred with the
acquisition of iSYS or any other potential new subsidiaries, might require
external financing that could include additional debt or equity capital. There
can be no assurance that additional financing, if required, will be available on
acceptable terms, if at all, for future acquisitions and/or growth
initiatives.




Off-Balance
Sheet Arrangements





The
Company has no existing off-balance sheet arrangements as defined under SEC
regulations.




ITEM 4. CONTROLS AND
PROCEDURES




Disclosure
Controls and Procedures





We
maintain disclosure controls and procedures designed to provide reasonable
assurance that material information required to be disclosed by us in the
reports 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 that the information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
We performed an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on the existence of the material weaknesses discussed below in “Material
Weakness in Internal Control Over Financial Reporting,” our management,
including our Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures were not effective at the reasonable
assurance level as of the end of the period covered by this report.




We do not
expect that our disclosure controls and procedures will prevent all errors and
all instances of fraud. Disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are met. Further,
the design of disclosure controls and procedures must reflect the fact that
there are resource constraints, and the benefits must be considered relative to
their costs. Because of the inherent limitations in all disclosure controls and
procedures, no evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control deficiencies and
instances of fraud, if any. The design of disclosure controls and procedures
also is based partly on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.





23


Material
Weakness in Internal Control Over Financial Reporting





A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.





Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009.  In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework.





Based on
this assessment, management concluded that our internal control over financial
reporting was not effective as of December 31, 2009 due to the existence of the
following material weaknesses:





Inadequate segregation of duties
within a significant account or process. Management determined that it
did not have appropriate segregation of duties within our internal controls that
would ensure the consistent application of procedures in our financial reporting
process by existing personnel. This control deficiency could result in a
misstatement to substantially all of our financial statement accounts and
disclosures that would result in a material misstatement to the annual or
interim financial statements that would not be prevented or detected.
Accordingly, management has concluded that this control deficiency constitutes a
material weakness.





Lack of sufficient subject matter
expertise.Management determined that it lacks certain subject
matter expertise accounting for and the disclosure of complex transactions. Our
financial staff currently lacks sufficient training or experience in accounting
for complex transactions and the required disclosure therein.





Remediation
Plan for Material Weaknesses





The
material weaknesses described above in “Material Weaknesses in Internal Control
Over Financial Reporting” comprise control deficiencies that we discovered
during the financial close process for the December 31, 2009 fiscal
period.




Management
has commenced a remediation plan during the first quarter of 2010 that will be
implemented during our fiscal year 2010, which includes (i) recruiting and
adding specific financial subject matter experts as consultants or employees to
the financial staff and, (ii) augmenting and allowing for additional training
and education for select members of our financial staff.





We
believe that these measures, if effectively implemented and maintained, will
remediate the material weaknesses discussed above.





Changes
in Internal Control Over Financial Reporting





We are
currently undertaking the measures discussed above to remediate the material
weaknesses discussed under “Material Weaknesses in Internal Control Over
Financial Reporting” above.  Those measures, described under
“Remediation Plan for Material Weaknesses,” were commenced during the first
quarter of 2010, will continue to be implemented during our fiscal year 2010,
and will materially affect, or are reasonably likely to materially affect, our
internal control over financial reporting.





Other
than as described above, there have been no changes in our internal control over
financial reporting during the three-month period ended March 31, 2010 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.





Because
of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements.  Further, because of changes in conditions,
effectiveness of internal controls over financial reporting may vary over
time.  Our system contains self-monitoring mechanisms, and actions are
taken to correct deficiencies as they are identified.





24





PART
II – OTHER INFORMATION




ITEM
6.  EXHIBITS.




EXHIBIT
              NO.
            
            DESCRIPTION31.1
            
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (Filed herewith).31.2
            
            Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (Filed herewith).32
            
            Certification of
      Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (Filed
  herewith).





25




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.




WIDEPOINT
      CORPORATIONDate: May
      17, 2010
              
              /s/
      STEVE L. KOMARSteve
      L. KomarPresident
      and Chief Executive Officer


May
      17, 2010
              
              /s/
      JAMES T. MCCUBBINJames
      T. McCubbinVice
      President – Principal Financialand
      Accounting Officer
  26