UNITED STATESSECURITIES
AND EXCHANGE COMMISSION  Washington, D.C. 20549

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# FORM 10-Q

(Mark One)

|[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT                OF
1934
|--- | -------------------------------------------------------------------------------------------------------

| | For
the quarterly period ended                        June 30, 2009
| | -------------------------------------------------------------------

OR

|[   ] | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                SECURITIES
EXCHANGE ACT OF 1934
|----- | -------------------------------------------------------------------------------------------------------

| | For
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 22nd St., 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

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  No

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.

|Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company
|----------------------- | ----------------- | --------------------- | -------------------------

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes             No       X

As of August 11, 2009, 60,684,823
shares of common stock, $.001 par value per share, were outstanding.

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WIDEPOINT CORPORATION

INDEX

|                                   |                                                                     
|---------------------------------- | --------------------------------------------------------------------
|                                   |                                                                     
|Part I.      FINANCIAL INFORMATION |                                                                     
|Item 1.                            | Condensed Consolidated Financial Statements                         
|                                   | Condensed Consolidated Balance Sheets as of June 30, 2009           
|                                   | (unaudited) and December 31, 2008 (unaudited)                       
|                                   | Condensed Consolidated Statements of Operations for the three months
|                                   | and six months ended June 30, 2009 and 2008 (unaudited)             
|                                   | Condensed Consolidated Statements of Cash Flows for the three months
|                                   | and six months ended June 30, 2009 and 2008 (unaudited)             
|                                   | Notes to Condensed Consolidated Financial Statements                
|Item 2.                            | Managements Discussion and Analysis of Financial                   
|                                   | Condition and Results of Operations                                 
|Item 4.                            | Controls and Procedures                                             
|Part II.      OTHER INFORMATION   
|Item 2.                            | Unregistered Sales of Equity Securities and Use of Proceeds         
|Item 5.                            | Other Information                                                   
|Item 6.                            | Exhibits                                                            
|SIGNATURES                         | 28                                                                  
|CERTIFICATIONS                    

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# PART I. FINANCIAL
INFORMATION

# ITEM 1. CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.

# WIDEPOINT CORPORATION
AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                              | June 30,    | December 31,
|----------------------------------------------------------------------------- | ----------- | ------------
|
|Assets                                                                        | (unaudited)
|Current assets:                                                               |             |             
|Cash and cash equivalents                                                     |             |             
|Accounts receivable                                                           |             |             
|Unbilled accounts receivable                                                  |             |             
|Prepaid expenses and other assets                                             |             |             
|Total current assets                                                          |             |             
|Property and equipment, net                                                   |             |             
|Goodwill                                                                      |             |             
|Intangibles, net                                                              |             |             
|Other assets                                                                  |             |             
|                                                                              |             |             
|Total assets                                                                  |             |             
|                                                                              |             |             
|Liabilities and stockholders equity                                          |             |             
|Current liabilities:                                                          |             |             
|Related party note payable                                                    |             |             
|Short term note payable                                                       |             |             
|Accounts payable                                                              |             |             
|Accrued expenses                                                              |             |             
|Deferred revenue                                                              |             |             
|Short-term portion of long-term debt                                          |             |             
|Short-term portion of capital lease obligation                                |             |             
|Total current liabilities                                                     |             |             
|Deferred income tax liability                                                 |             |             
|Long-term debt, net of current portion                                        |             |             
|Deferred rent, net of current portion                                         |             |             
|Capital lease obligation, net of current portion                              |             |             
|                                                                              |             |             
|Total liabilities                                                             |             |             
|Stockholders equity:                                                         |             |             
|Common stock, $0.001 par value; 110,000,000 shares authorized; 58,305,514 and |             |             
|58,275,514 shares issued and outstanding, respectively                        |             |             
|Stock warrants                                                                |             |             
|Additional paid-in capital                                                    |             |             
|Accumulated deficit                                                           |             |             
|                                                                              |             |             
|Total stockholders equity                                                    |             |             
|                                                                              |             |             
|Total liabilities and stockholders equity                                    |             |             
|                                                                              |             |             

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

1

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# WIDEPOINT CORPORATION
AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                       |  |  |   |           
|------------------------------------------------------ |  |  | - | ----------
|
|
|
|
|Revenues, net                                          |  |  | $ | 10,392,282
|Cost of sales (including amortization and depreciation |  | 
|of $242,755, $226,699, $485,891, and $440,605,         |  | 
|respectively)                                          |  |  |   | 8,190,224 
|                                                       |  |  |   |           
|Gross profit                                           |  |  |   | 2,202,058 
|Sales and marketing                                    |  |  |   | 265,317   
|General & administrative (including stock compensation |  | 
|expense 123 (r) of $75,857, $104,378, $106,587, and    |  | 
|$476,080, respectively)                                |  |  |   | 1,576,711 
|Depreciation expense                                   |  |  |   | 41,105    
|                                                       |  |  |   |           
|Income (Loss) from operations                          |  |  |   | 318,925   
|Interest income                                        |  |  |   | 4,651     
|Interest expense                                       |  |  |   | (33,701   
|Other expense                                          |  |  |   | --        
|                                                       |  |  |   |           
|Net income (loss) before income tax                    |  |  | $ | 289,875   
|Deferred income tax expense                            |  |  |   | 39,223    
|                                                       |  |  |   |           
|Net income (loss)                                      |  |  | $ | 250,652   
|                                                       |  |  |   |           
|Basic earnings (loss) per share                        |  |  | $ | 0.004     
|                                                       |  |  |   |           
|Basic weighted average shares outstanding              |  |  |   | 58,305,514
|                                                       |  |  |   |           
|Diluted earnings (loss) per share                      |  |  | $ | 0.004     
|                                                       |  |  |   |           
|Diluted weighted average shares outstanding            |  |  |   | 61,562,251

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

2

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# WIDEPOINT CORPORATION
AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                  | Three Months
Ended June 30, | Six Months
Ended June 30,
|------------------------------------------------- | --------------------------- | -------------------------
|
|
|Cash flows from operating activities:             |                             |                          
|Net income (loss)                                 |                             |                          
|Adjustments to reconcile net income (loss) to     |                             |                          
|net cash provided by operating activities:        |                             |                          
|Deferred income tax expense                       |                             |                          
|Depreciation expense                              |                             |                          
|Amortization                                      |                             |                          
|Amortization of deferred financing costs          |                             |                          
|Stock options expense                             |                             |                          
|Loss (Gain) on disposal of equipment              |                             |                          
|Changes in assets and liabilities (net of         |                             |                          
|business combinations):                           |                             |                          
|Accounts receivable and unbilled accounts         |                             |                          
|receivable                                        |                             |                          
|Prepaid expenses and other current assets         |                             |                          
|Other assets                                      |                             |                          
|Accounts payable and accrued expenses             |                             |                          
|Deferred revenue                                  |                             |                          
|                                                  |                             |                          
|Net cash (used in) provided by                    |                             |                          
|operating activities                              |                             |                          
|                                                  |                             |                          
|Cashflows from investing activities:              |                             |                          
|Purchase of subsidiary, net of cash acquired      |                             |                          
|Purchase of property and equipment                |                             |                          
|Software development costs                        |                             |                          
|                                                  |                             |                          
|Net cash used in investing activities             |                             |                          
|                                                  |                             |                          
|Cashflows from financing activities:              |                             |                          
|Borrowings on notes payable                       |                             |                          
|Principal payments on notes payable               |                             |                          
|Principal payments under capital  lease           |                             |                          
|obligation                                        |                             |                          
|Proceeds from exercise of stock options           |                             |                          
|Proceeds from issuance of stock                   |                             |                          
|Costs related to issuance of stock                |                             |                          
|Costs related to renewal fee for line of credit   |                             |                          
|Costs related to financing purchase of            |                             |                          
|subsidiary                                        |                             |                          
|                                                  |                             |                          
|Net cash (used in) provided by                    |                             |                          
|financing activities                              |                             |                          
|                                                  |                             |                          
|Net (decrease) increase in cash                   |                             |                          
|Cash and cash equivalents, beginning of period    |                             |                          
|                                                  |                             |                          
|Cash and cash equivalents, end of period          |                             |                          
|                                                  |                             |                          
|Supplementary Information:                        |                             |                          
|Promissory Note issued for iSYS acquisition       |                             |                          
|                                                  |                             |                          
|Liabilities incurred but not yet paid relating to |                             |                          
|stock issuance                                    |                             |                          
|Value of 1.5 million common shares issued as      |                             |                          
|consideration in the acquisition of iSYS          |                             |                          
|Cash paid for interest                            |                             |                          

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

3

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WIDEPOINT CORPORATION
AND SUBSIDIARIES

# NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

# 1. Basis of
Presentation, Organization and Nature of Operations

WidePoint Corporation
(WidePoint or the Company) is a technology-based provider of
product 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 of highly
specialized regional IT consulting companies.

Our expertise lies within three
business segments. The three segments offer unique solutions in identity management
services utilizing certificate-based security solutions; wireless telecommunication
expense management systems; and other associated IT consulting services and products in
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., along with a development stage company, Protexx Acquisition
Corporation doing business as Protexx. In January 2008, we completed the acquisition
of iSYS. iSYS specializes in mobile telecommunications expense management services and
forensic informatics, and information assurance services predominantly to the U.S.
Government. In July 2008, we completed the purchase of the operating assets and
proprietary intellectual property of Protexx, Inc. Protexx specializes in identity
assurance and mobile and wireless data protection services. ORC specializes in IT
integration and secure authentication processes and software, and providing 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.

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 consolidated balance sheet as of
June 30, 2009, the condensed consolidated statements of operations for the three and six
months ended June 30, 2009 and 2008, respectively, and the condensed consolidated
statements of cash flows for the three and six months ended June 30, 2009 and 2008,
respectively, have been prepared by the Company and are unaudited. The consolidated
balance sheet as of December 31, 2008 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, 2008.

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 and six months ended June 30, 2009 are not indicative of the
operating results for the full year.

# 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.

4

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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.

Significant Customers

For the quarter ended June 30, 2009,
three customers, the Department of Homeland Security (DHS), the Transportation
Security Administration (TSA), and the Washington Headquarters Services
(WHS), an agency of the Department of Defense (DoD) that provides
services for many DoD agencies and organizations, represented approximately 27%, 22%, and
19% of revenues, respectively.  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
results.  For the quarter ended June 30, 2008, four customers, the TSA, DHS, the FSS
DISA/DITCO-SCOTT (Defense Information Security Agency), and the WHS represented
approximately 25%, 17%, 12%, and 10% of revenues, respectively.  For
the six-month period ended June 30, 2009, three customers, DHS, TSA,
and WHS, represented approximately 24%, 23%, and 18% of revenues, respectively. For
the six-month period ended June 30, 2008 three customers, TSA, DHS,
and WHS, represented approximately 26%, 19%, and 13% of revenues, respectively.

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 June 30, 2009, three customers, DHS, TSA and WHS accounted for
approximately 34%, 21%, and 12%, respectively, of accounts receivable and unbilled
accounts receivable. As of December 31, 2008, three clients, DHS, TSA, and WHS,
represented approximately 24%, 17%, and 14%, respectively, of accounts receivable and
unbilled accounts receivable.

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 warrants attributable to the preferred stock
capital investment in the Company in October of 2004. 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.

The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements (SFAS 157) on January 1, 2008. SFAS 157, among other things, defines
fair value, establishes a consistent framework for measuring fair value and expands
disclosure for each major asset and liability category measured at fair value on either a
recurring or nonrecurring basis. SFAS 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a basis for considering such
assumptions, SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value as follows:

| | Level
1: Observable inputs such as quoted prices in active markets;
| | -------------------------------------------------------------------

5

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| | Level
2: Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; and
| | -----------------------------------------------------------------------------------------------------------------------

| | Level
3: Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
| | -------------------------------------------------------------------------------------------------------------------------------------------

For certain financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and other
current liabilities, the carrying amounts approximate their fair value due to the
relatively short maturity of these balances.

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.

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 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
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.

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 June 30, 2009 and December 31, 2008, unbilled accounts receivable totaled
approximately $1,414,000 and $2,302,000, respectively.

Revenue Recognition

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 is recognized when delivery occurs. Arrangements with customers on PKI related
contracts may involve multiple deliverable elements. In these cases, the Company applies
the principles prescribed in Emerging Issues Task Force Abstract (EITF) 00-21,
Revenue Arrangements with Multiple Deliverables. 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 required by EITF 00-21, 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.

6

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Additionally, revenues are derived
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.

Should the sale of products or
software involve an arrangement with multiple elements (for example, the sale of PKI
Credential Seats along with the sale of maintenance, hosting and support to be delivered
over the contract period), 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.

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 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 June 30, 2009 and December 31, 2008, respectively,
due to termination provisions and thus has not recorded provisions for such events.

Income Taxes

The Company accounts for income taxes
in accordance with SFAS No. 109 (SFAS 109), Accounting for Income Taxes.
Under SFAS 109, 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. SFAS 109 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.

Property and Equipment

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

|                                                | June 30, | December 31,
|----------------------------------------------- | -------- | ------------
|
|Automobiles, computers, equipment and software  |          |             
|Less- Accumulated depreciation and amortization |          |             
|                                                |          |             
|                                                |          |             
|                                                |          |             

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.

In accordance with the American
Institute of Certified Public Accountants Statement of Position 98-1 Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use, the Company
capitalizes costs related to software and implementation in connection with its internal
use software systems.

7

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Software Development Costs

WidePoint accounts for software
development costs (or internally developed intangible assets) related to
software products for sale, lease or otherwise marketed in accordance with SFAS No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed. For projects fully funded by the Company, 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 $67,000 of amortization expense for the
three month period ended June 30, 2009, as compared to approximately $58,000 for the three
month period ended June 30, 2008. WidePoint capitalized approximately $1,000 for the three
month period ended June 30, 2009. There were no capitalized costs for the three month
period ended June 30, 2008. Capitalized software development costs, net, included in
Intangibles, net, on the Companys condensed consolidated balance sheets at June 30,
2009 were approximately $0.5 million, compared to approximately $0.6 million at December
31, 2008. During the first quarter of 2009, we estimated that we will be capitalizing
approximately $50,000 more prior to the issuance of the Authority To Operate
(ATO), but the project timeframe has been extended into the 2nd
half of 2009 with the same estimated costs of $50,000. Upon completion, we will commence
amortizing the ATO over an approximate three year life.

Goodwill, Other
Intangible Assets, and Long-Lived Assets

Goodwill represents costs in excess
of fair values assigned to the underlying net assets acquired. The Company has adopted the
provisions of SFAS No. 141R, Business Combinations, and SFAS No. 142 (SFAS 142),
Goodwill and Other Intangible Assets. These standards require the use
of the purchase method of accounting for business combinations, set forth the accounting
for the initial recognition of acquired intangible assets and goodwill and describe the
accounting for intangible assets and goodwill subsequent to initial recognition. Under the
provisions of these standards, goodwill is not subject to amortization and annual review
is required for impairment. The impairment test under SFAS 142 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 31. As of December 31, 2008, no impairment had occurred. We have not
identified any new impairments as of June 30, 2009.

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
Earnings (Loss) Per Share

Basic earnings or loss per share
includes no dilution and is computed by dividing net earnings or loss by the
weighted-average number of common shares outstanding for the period. Diluted earnings or
loss 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 3,256,737 and
2,488,037 shares of common stock outstanding for the three and six months ended June 30,
2009, respectively has been included in the calculations of the diluted net income per
share. Outstanding options and warrants to purchase 7,918,411 and 91,046 shares,
respectively, for the three and six months ended June 30, 2008 have not been included in
the calculation of the net loss per share as such effect would have been anti-dilutive. As
a result of these items, the basic and diluted net loss per share for the three and six
months ended June 30, 2008 are presented as identical. Earnings per common share were
computed as follows for the three and six months ended June 30, 2009 and June 30, 2008:

8

---

|                                        
|----------------------------------------
|June 30,
2009                           
|Basic Earnings Per Common Share:        
|Net income (Loss)                       
|                                        
|Weighted average number of common shares
|                                        
|Earnings (Loss) per common share.       
|                                        
|Diluted Earnings Per Common Share:      
|Net income (Loss)                       
|                                        
|Weighted average number of common shares
|Incremental shares from assumed         
|conversions of stock options            
|                                        
|Adjusted weighted average number of     
|common shares                           
|                                        
|Earnings (Loss) per common share        
|                                        

Stock-based compensation

The Company previously adopted the
provisions of SFAS No. 123R using the modified prospective application transition method.
Under this method, compensation cost for the portion of awards for which the requisite
service has not yet been rendered that are outstanding as of the adoption date is
recognized over the remaining service period. The compensation cost for that portion of
awards is based on the grant-date fair value of those awards as calculated for pro forma
disclosures under SFAS No. 123, as originally issued. All new awards that are modified,
repurchased, or cancelled after the adoption date are accounted for under provisions of
SFAS No. 123R. Prior periods have not been restated under this transition method. The
Company recognizes share-based compensation ratably using the straight-line attribution
method over the requisite service period. In addition, pursuant to SFAS No. 123R, the
Company is required to estimate the amount of expected forfeitures when calculating
share-based compensation, instead of accounting for forfeitures as they occur, which was
the Companys practice prior to the adoption of SFAS No. 123R.

The amount of compensation expense
recognized under SFAS No. 123R during the three and six month periods ended June 30, 2009
and 2008, respectively, under our plans was comprised of the following:

|                                         
|-----------------------------------------
|2009                                     
|General and administrative expense       
|Share-based compensation before taxes    
|Share-based compensation expense         
|Net share-based compensation expenses per
|basic and diluted common share           

Since we have cumulative operating
tax losses as of June 30, 2009 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 six months ended June 30, 2009, 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.

9

---

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 of between 2.04% and 4.83%, volatility of between 57% to 156% and
expected life in years of approximately 3 years. The option awards are for the period from
1999 through 2009. 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.  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 and six month periods ended June 30, 2009 and 2008 is presented
below:

NON-VESTED

|                             
|-----------------------------
|Non-vested at January 1, 2009
|Granted                      
|Vested                       
|Forfeited                    
|                             
|                             
|Non-vested at March 31, 2009 
|                             
|Granted                      
|Vested                       
|Forfeited                    
|                             
|                             
|Non-vested at June 30, 2009  
|                             
|Non-vested at January 1, 2008
|Granted                      
|Vested                       
|Forfeited                    
|                             
|                             
|Non-vested at March 31, 2008 
|                             
|Granted                      
|Vested                       
|Forfeited                    
|                             
|Non-vested at June 30, 2008  
|                             

10

---

OUTSTANDING AND
EXERCISABLE

|                                    
|------------------------------------
|Total outstanding at January 1, 2009
|Issued                              
|Cancelled                           
|Exercised                           
|                                    
|                                    
|Total outstanding at March 31, 2009 
|                                    
|Total exercisable at March 31, 2009 
|                                    
|Issued                              
|Cancelled                           
|Exercised                           
|                                    
|                                    
|Total outstanding at June 30, 2009  
|                                    
|Total exercisable at June 30, 2009  
|                                    
|Total outstanding at January 1, 2008
|Issued                              
|Cancelled                           
|Exercised                           
|                                    
|                                    
|Total outstanding at March 31, 2008 
|                                    
|Total exercisable at March 31, 2008 
|                                    
|Issued                              
|Cancelled                           
|Exercised                           
|                                    
|                                    
|Total outstanding at June 30, 2008  
|                                    
|Total exercisable at June 30, 2008  
|                                    

The aggregate remaining contractual
lives in years for the options outstanding and exercisable on June 30, 2009 were 2.78 and
2.03, respectively. In comparison, the aggregate remaining contractual lives in years for
the options outstanding and exercisable on June 30, 2008 were 3.27 and 2.97, respectively.

Aggregate intrinsic value represents
total pretax intrinsic value (the difference between WidePoints closing stock price
on June 30, 2009 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 June 30, 2009. 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 June 30, 2009 were $2,469,904 and $2,446,054, respectively. The total
intrinsic value of options exercised for the second quarter of fiscal 2009 was $0. The
Company issues new shares of common stock upon the exercise of stock options.

At June 30, 2009, 4,511,438 shares
were available for future grants under the Companys 2008 Stock Incentive Plan. This
does not include 3,999,999 warrants granted and vested to members of the senior management
team that were not issued under the Companys Stock Incentive Plans.

At June 30, 2009, the Company had
approximately $352,000 of total unamortized compensation expense, net of estimated
forfeitures, related to stock option plans that will be recognized over the weighted
average period of 4.33 years.

11

---

On May 11, 2009, the Companys
 Compensation  Committee of the Board of Directors  voted to cancel 950,000 options held
by management and other employees (the Cancelled  Options) and issue  replacement
 options to such  individuals  (the Replacement  Options).  The optionees all concurred
with such action by the  Compensation  Committee.   The Cancelled Options had varying
 exercise prices ranging from $0.85 to $2.80 with a weighted  average exercise price of
$1.06.  The exercise price of the Replacement  Options was set at $0.54.  Other than the
exercise  price,  there are no differences in the terms between the Cancelled Options and
the Replacement  Options.  The incremental  additional fair value of the Replacement
Options was calculated to be approximately  $64,000,  which was determined by calculating
the fair value of the Cancelled  Options as they existed on May 11, 2009 immediately
 prior to cancellation as compared to the fair value on the same date of the  exercise
 price of the  Replacement  Options.   This  amount of  additional  fair value of the
Replacement  Options  will be  recognized  over the  vesting  period of the  Replacement
 Options.   Since  some of the Replacement  Options were fully vested at May 11, 2009,
 there was an expense of  approximately  $45,000  recognized in the three months ended
June 30, 2009 as a result of the  cancellation of the Cancelled  Options and the issuance
of the Replacement Options.

Non-employee stock-based
compensation:

The Company accounts for stock-based
non-employee compensation arrangements using the fair value recognition provisions of 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.

Recent Accounting
Pronouncements

# Fair Value Pronouncements

In May 2009, the FASB issued SFAS No.
165, Subsequent Events (SFAS 165). SFAS 165 establishes general
standards of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. SFAS 165
sets forth (1), the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (2) the circumstances under which
an entity should recognize events or transactions occurring after the balance sheet date
in its financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. SFAS 165 is effective
for interim or annual financial periods ending after June30, 2009. The Company has
evaluated subsequent events through August 14, 2009 which is the date that these financial
statements were filed with the Securities and Exchange Commission.

In June 2009, the FASB issued SFAS
No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principlesa replacement of FASB Statement No. 162
(SFAS 168). The FASB Accounting Standards Codification
(Codification) will be the single source of authoritative nongovernmental U.S.
generally accepted accounting principles. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative GAAP for SEC
registrants. SFAS 168 is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as described in SFAS 168. All
other accounting literature not included in the Codification is nonauthoritative.

# 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 June 30, 2009, 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 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 June 30, 2009.

12

---

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 June 30, 2009, we owed approximately $1.4 million under the term note.

The Company also had a subordinated
seller financed note for $2 million in favor of Jin Kang, a related party of the Company
and the former owner and current officer of iSYS, LLC, which was due the earlier of April
1, 2009 or upon the filing of the Companys Form 10-K. The note bore interest at the
simple rate of 7% through December 31, 2008, that increased to 10% on January 1 and
remained in effect at 10% through the repayment of the note. On March 17, 2009, the
Company entered into a Debt Modification Agreement and Commercial Loan Agreement with
Cardinal Bank. The new agreement excluded the subordination agreement of Jin Kang from our
prior credit facility, which allowed for the repayment of the sellers note on March
27, 2009. As of June 30th, 2009 the Company does not have any outstanding
balances due Mr. Kang under any sellers notes. The Sellers note was paid from
excess cash balances held by the Company as a result of positive operational cashflows
from operations.

# 4. Goodwill and
Intangible Assets

WidePoint previously adopted SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires, among
other things, the discontinuance of goodwill amortization. Under SFAS No. 142, 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. These reviews have resulted
in no adjustments in goodwill.

The changes in the carrying amount of
goodwill for the year ended December 31, 2008 and 2007 are as follows:

|                                | Total
|------------------------------- | -----
|Balance as of December 31, 2007 |      
|iSYS acquisition                |      
|                                |      
|Balance as of December 31, 2008 |      
|iSYS acquisition-related costs  |      
|                                |      
|Balance as of June 30, 2009     |      

In 2008, $6,049,771 in goodwill was
acquired as a result of the acquisition of iSYS, LLC. Management believes that as of June
30, 2009 the carrying value of our goodwill was not impaired. There were no goodwill
adjustments made in the three month period ended June 30, 2009.

# Purchased and Internally
Developed Intangible Assets

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

13

---

|                                      
|--------------------------------------
|Gross Carrying
Amount                 
|Purchased Intangible Assets           
|ORC Intangible (Includes customer     
|relationships and PKI business        
|opportunity purchase accounting       
|preliminary valuations)               
|                                      
|iSYS (includes customer               
|relationships, internal use           
|software and trade name)              
|                                      
|Protexx (Identity Security            
|Software)                             
|                                      
|                                      
|                                      
|Internally Developed Intangible Assets
|ORC PKI-I Intangible (Related to      
|internally generated software)        
|ORC PKI-II Intangible (Related to     
|internally generated software)        
|ORC PKI-III Intangible (Related       
|to internally generated software)     
|ORC PKI-IV Intangible (Related to     
|internally generated software)        
|ORC PKI-V Intangible (Related to      
|internally generated software)        
|                                      
|                                      
|                                      
|Total                                 
|                                      
|Aggregate Amortization Expense:       
|For the three months ended 6/30/09    
|For the six months ended 6/30/09      
|Estimated Amortization Expense:       
|For the year ended 12/31/09           
|For the year ended 12/31/10           
|For the year ended 12/31/11           
|For the year ended 12/31/12           
|For the year ended 12/31/13           
|                                      
|Total                                 
|                                      

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 during the three month period ended June 30, 2009 nor any
written-off in the period.

# 5. Income Taxes

The Company accounts for income taxes
in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS
No. 109, 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. SFAS No. 109 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 has further adopted the provisions of Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes  An interpretation of FASB
Statement No. 109. As required by FIN 48, 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 in accordance with FIN 48 did not result in changes that
had a material impact on results of operations, financial condition or liquidity. As of
December 31, 2008 and at June 30, 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 2001 through 2008. Additionally, the Company may be subject to examinations by
various state taxing jurisdictions for tax years 2001 through 2008. The Company is
currently not under examination by the IRS or any state tax jurisdiction.

As of June 30, 2009, the Company had
net operating loss (NOL) carry forwards of approximately $21,000,000 to offset future
taxable income. These carry forwards expire between 2010 and 2028. 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. To date the Company has not completed a Section 382
analysis.

No tax benefit has been realized
associated with the exercise of stock options in the three and six months ended
June 30, 2009 and 2008 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 set forth in SFAS
No. 109 and, accordingly, established a valuation allowance for 100 percent of
the net deferred tax asset.

15

---

The Company incurred a deferred
income tax expense of approximately $78,000 for the six months ended June 30, 2009. This
deferred income tax expense was originally established at December 31, 2008 at
approximately $157,000, and 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.
SFAS No. 109 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. During the quarter ended
June 30, 2009, no shares of common stock were issued as the result of the exercise of
employee stock options. As of June 30, 2009 there were 58,305,514 shares of common stock
outstanding.

Common Stock

On January 8, 2008, pursuant to
the terms of a Membership Interest Purchase Agreement (the Membership
Agreement) between the Company, iSYS, LLC and Jin Kang, dated January 4, 2008,
the Company issued 1,500,000 shares of Company common stock on January 8, 2008 at a
stock price of $1.20 per common share (based on the closing market price of the
Companys common shares the issuance date) for a value of $1,800,000. The Company
also issued an additional 3,000,000 shares of Company common stock on January 8,
2008, which shares were delivered into escrow to be held subject to the satisfaction of
certain earnout provisions under the Membership Agreement. Under the Membership Agreement
the initial $1.4 million in earnings before interest, taxes, depreciation and
amortization (EBITDA) from iSYS is excluded from the earnout for the initial
3 years, with 66% of the value in excess of such initial $1.4 million being paid
to the former owner of iSYS, with 50% of the amount being paid in cash and 50% being
valued and released in escrow shares. In the fourth year the value in excess of 50% is
used instead of 66%, with the total earnout capped at $6 million, with $3 million
payable in cash and $3 million payable in the release of earnout shares. Performance
of the earnout is measured annually and awarded within 30 days following the end of
the Companys fiscal year and filing of the Companys Form 10-K for that year.
As of December 31, 2008 performance measures were attained allowing for the release
of 184,817 common shares valued at $1.00 per common share from the common shares placed
into escrow at the time of the acquisition of iSYS by the Company.

On April 29, 2008, the Company
entered into a Common Stock Purchase Agreement (Purchase Agreement) with
Deutsche Bank AG, London Branch (Deutsche Bank), and related agreements, as
part of a private equity financing to raise additional funds for working capital. Under
the Purchase Agreement, Deutsche Bank agreed to purchase 2,500,000 shares of WidePoint
common stock for a total purchase price of $2,550,000, or $1.02 per share. Pursuant to the
Purchase Agreement, the Company issued 2,500,000 shares of its common stock to Deutsche
Bank on May 2, 2008. The offer and sale of the shares were not registered under the
Securities Act of 1933, as amended, in reliance on the private offering
exemption provided under Section 4(2) thereof.

On May 16, 2008, the Company
entered into two Common Stock Purchase Agreements (collectively, the Endurance
Purchase Agreements) with Endurance Partners, L.P. and Endurance Partners (Q.P),
L.P., and related agreements, as part of a private equity financing to raise additional
funds for working capital. Under the Endurance Purchase Agreements, Endurance Partners,
L.P. agreed to purchase 428,954 shares of WidePoint common stock for a total purchase
price of $437,533, or $1.02 per share, and Endurance Partners (Q.P.), L.P. agreed to
purchase 1,071,046 shares of WidePoint common stock for a total purchase price of
$1,092,467, or $1.02 per share. Pursuant to the Endurance Purchase Agreements, on
May 19, 2008, the Company issued 428,954 shares of its common stock to Endurance
Partners, L.P. and 1,071,046 shares of its common stock to Endurance Partners (Q.P.), L.P.
The offer and sale of the shares were not registered under the Securities Act of 1933, as
amended, in reliance on the private offering exemption provided under
Section 4(2) thereof.

16

---

As a result of the equity
transactions to raise additional capital that we entered into during the second quarter of
2008, the Company issued a combined cumulative total of 4,000,000 common shares of the
Company which provided gross proceeds of approximately $4.1 million and net proceeds
after various legal and other expenses of $3.9 million.

On July 31, 2008, pursuant to
the terms of the Asset Purchase Agreement between the Company, Protexx Acquisition
Corporation, a Delaware corporation, Protexx Incorporated, a Delaware corporation
(Protexx), and Peter Letizia, Charles B. Manuel, Jr. and William Tabor, the
Company issued 2,500,000 shares of its common stock in the name of Protexx and delivered
such shares to the parties escrow agent to be held in escrow pending the possible
release of such shares as part of the potential earnout to which Protexx may be entitled
under the Purchase Agreement for calendar year 2008. The 2008 earnout was not attained.
For calendar year 2009, Protexx shall have the opportunity to earn an additional Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000) worth of privately issued shares
of WidePoint common stock as part of the earnout for that calendar year. The maximum
number of shares of WidePoint common stock that Protexx shall have the opportunity to earn
for calendar year 2009 shall be equal to the number of shares of WidePoint common stock
that results from Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) divided by
the greater of (x) One Dollar and Twenty-Five Cents ($1.25) or (y) the average
closing sale price of the WidePoint common stock for the twenty (20) trading days
immediately preceding December 31, 2009.

Stock Warrants

On November 1, 2005, the Company
issued a warrant to purchase 54,878 shares of common stock at a price of $0.80 per share
to Hawk Associates as part of a consulting agreement in which Hawk Associates agreed to
act as the Companys investor relations representative. The warrant has a term of 5
years. We are accounting for this award in accordance with EITF 96-18.

On October 27, 2004 and November 22,
2004, the Company issued two warrants to purchase 30,612 shares and 5,556 shares of common
stock at a price of $0.49 and $0.45 per share, respectively, to Liberty Capitol as part of
a consulting agreement in which Liberty Capitol assisted the Company in arranging its
senior debt financing with RBC-Centura Bank. The warrants have a term of 5 years. The
Company used a fair-value option pricing model to value these stock warrants at
approximately $14,291. This value has been reflected as part of stock warrants in the
stockholders equity section of the consolidated balance sheet.

# 7. Segment reporting

Segments are defined by SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, 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.

Until December 31, 2005 the Company
was comprised of a single segment, which was comprised of our consulting services segment
within our Commercial and Federal Government Marketplaces. As of January 1, 2006, the
Company added a second segment, which consists of PKI credentialing and managed services.
As of January 4, 2008, the Company added a third segment upon the acquisition of iSYS, LLC
for mobile telecom expense management.

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.

The following table presents
information about reported segments along with the items necessary to reconcile the
segment information to the totals reported in the accompanying consolidated financial
statements:

17

---

|                                               | Three Months
Ended June 30, | Six Months
Ended June 30,
|---------------------------------------------- | --------------------------- | -------------------------
|
|Mobile Telecom Managed Services:               |                             |                          
|Revenues                                       |                             |                          
|Operating income after depreciation expense    |                             |                          
|Consulting services:                           |                             |                          
|Revenues                                       |                             |                          
|Operating income                               |                             |                          
|PKI Credentialing and Managed Services:        |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss) (includes amortization |                             |                          
|expense of $66,993, $57,598, $133,987, and     |                             |                          
|$103,436, respectively)                        |                             |                          
|Total Company                                  |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss) before depreciation    |                             |                          
|expense                                        |                             |                          
|Depreciation expense                           |                             |                          
|Interest income (expense), net                 |                             |                          
|Income tax expense                             |                             |                          
|Net earnings (loss)                            |                             |                          

|(1)              Includes
$55,270 in amortization expense in cost of sales associated with the           purchase
of ORC and $64,417 in amortization expense in cost of sales associated           with the
purchase of iSYS and $42,205 in amortization expense in cost of sales
          associated with internally developed intangibles, which are not allocated among
          the segments and includes $538,645 in unallocated corporate costs in general
and           administrative expense of which $75,857 is comprised of stock options
expense.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2)              Includes
$55,270 in amortization expense in cost of sales associated with the           purchase
of ORC and $100,000 in amortization expense in cost of sales associated           with
the purchase of iSYS, which are not allocated among the segments and           includes
$435,874 in unallocated corporate costs in general and administrative           expense
of which $104,378 is comprised of stock options expense.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3)              Includes
$110,539 in amortization expense in cost of sales associated with the           purchase
of ORC and $128,833 in amortization expense in cost of sales associated           with
the purchase of iSYS and $84,411 in amortization expense in cost of sales
          associated with internally developed intangibles, which are not allocated among
          the segments and includes $986,856 in unallocated corporate costs in general
and           administrative expense of which $106,587 is comprised of stock options
expense.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4)              Includes
$110,539 in amortization expense in cost of sales associated with the           purchase
of ORC and $200,000 in amortization expense in cost of sales associated           with
the purchase of iSYS, which are not allocated among the segments and           includes
$1,035,878 in unallocated corporate costs in general and administrative           expense
of which $476,080 is comprised of stock options expense.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8.           Subsequent Events

On July 8, 2009, each of Steve L.
Komar, James T. McCubbin and Mark F. Mirabile exercised, in the form of a cashless
exercise, his respective warrant to purchase 1,333,333 shares of common stock of the
Company, which warrant was previously issued to such individual pursuant to a Warrant
Purchase Agreement, dated July 14, 2004, by and between the Company and each such
individual. As a result of his respective cashless exercise of such warrant, each of Steve
L. Komar, James T. McCubbin and Mark F. Mirabile, as applicable, was issued 793,103
shares of common stock of the Company, with 540,230 shares of common stock of the Company
being withheld by the Company from each such warrant as payment of the respective exercise
price of each such warrant.

18

---

As of August 14, 2009, each of the
Company, iSYS, LLC and Jin Kang entered into a supplement to Exhibit A (the Exhibit
A Supplement) in respect of the Membership Agreement (as defined above), by and
among the Company, iSYS, LLC and Jin Kang. The Exhibit A Supplement was entered into for
the purpose of clarifying the earnout formula agreed to between the parties, particularly
with respect to EBITDA for each earnout year of the Membership Agreement. The Exhibit A
Supplement clarifies that EBITDA shall include Interest Income net of Interest Expense
from Cash Balances exceeding $1.4 million for each of the measurement years (as each of
the terms Interest Income, Interest Expense and Cash
Balance are defined in the Membership Agreement). In addition, pursuant to the
Exhibit A Supplement, the adjustment to EBITDA under the Membership Agreement shall
consist of the following fixed amounts for each of the 2009, 2010 and 2011 earnout years,
respectively: $100,000, $100,000 and $150,000. All other provisions and calculations of
Exhibit A to the Membership Agreement and the earnout formula remain unchanged by the
Exhibit A Supplement. A copy of the Exhibit A Supplement is attached as Exhibit 10.1 to
this Form 10-Q.

19

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# 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, 2008.

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 product 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 of highly specialized regional IT consulting companies.

Our expertise lies within three
business segments. The three segments offer unique solutions in identity management
services utilizing certificate-based security solutions; wireless telecommunication
expense management systems; and other associated IT consulting services and products in
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),
which we acquired in January 2008; and WidePoint IL, Inc., operated together with
Protexx Acquisition Corp., doing business as Protexx, which we acquired in July 2008:

ORC specializes in IT integration and
secure authentication processes and software, and providing 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, forensic informatics, and information
assurance services, predominantly to various agencies and departments of the U.S.
Government.

Protexx, which was a development
stage company when we acquired it, specializes in identity assurance, and mobile and
wireless data protection products and services.

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 purchase of Protexx, 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 governmental 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.
The Company intends to continue to leverage the synergies between its newly-acquired
operating subsidiary, and cross sell its technical capabilities into each separate
marketplace serviced by our respective subsidiaries.

20

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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 governmental 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 may
negatively affect the rate at which the federal government purchases the services that we
offer.

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 June
30, 2009 as Compared to Three Months Ended June 30, 2008

Revenues, net.Revenues for
the three month period ended June 30, 2009 were approximately $10,392,000 as compared to
approximately $9,264,000 for the three month period ended June 30, 2008. The increase in
revenues was primarily attributable to increases in our Mobile Telecom Managed Services
and PKI credentialing and managed services segments partially offset by a decline in our
consulting services segment.

| |  | Our
Mobile Telecom Managed Services (MTEM) segment experienced revenue
growth of approximately 48% from approximately $4,808,000 for the quarter ended June 30,
2008, to approximately $7,114,000 for the quarter ended June 30, 2009. The positive
revenue performance primarily resulted from 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

---

| |  | Our
PKI credentialing and managed services segment experienced revenue growth of
approximately 30%. Revenues increased approximately $311,000 from $1,025,000 for the
three month period ended June 30, 2008, to $1,336,000 for the three month period ended
June 30, 2009. This positive revenue performance primarily resulted from 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
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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Our
consulting services segment experienced decreasing revenue of approximately 43%.
Revenues decreased from $3,432,000 for the three month period ended June 30, 2008 to
$1,942,000 for the three month period ended June 30, 2009. This primarily resulted from
timing delays occurring in the 2nd quarter, which pushed sales of certain
products and services into the third quarter of 2009. While this segment experiences
fluctuations from quarter to quarter, we are hopeful that we will soon witness a
bottoming trend in revenues as the economy slowly recovers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of sales.Cost of sales
for the three month period ended June 30, 2009, was approximately $8,190,000 (or 79% of
revenues), as compared to cost of sales of approximately $7,647,000 (or 83% of revenues),
for the three month period ended June 30, 2008. 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 June 30, 2009, was approximately $2,202,000 (or 21% of
revenues), as compared to gross profit of approximately $1,617,000 (or 17% of revenues),
for the three month period ended June 30, 2008. The percentage of gross profit was higher
in the second quarter of 2009 as compared to the second quarter of 2008 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 in the near term 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 June 30, 2009, was approximately
$265,000, (or 3% of revenues) as compared to approximately $247,000 (or 3% of revenues),
for the three month period ended June 30, 2008. This slight increase was primarily
attributable to an initiative we are pursuing to increase our sales and marketing
capabilities and infrastructure. The absolute dollar amount of sales and marketing should
expand slightly in the near term as we expand our initiative to increase 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.

22

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General and administrative.
General and administrative expenses for the three month period ended June 30, 2009, were
approximately $1,577,000 (or 15% of revenues), as compared to approximately $1,477,000 (or
16% of revenues) recorded by the Company for the three month period ended June 30, 2008.
This increase in general and administrative expenses over those for the three months ended
June 30, 2008, was primarily attributable to slight increases in general and
administrative costs incurred to support our increasing revenue base. We anticipate that
our general and administrative costs 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.

Depreciation.           Depreciation
expense for the three month period ended June 30, 2009, was           approximately
$41,000 (or less than 1% of revenues), as compared to           approximately $39,000 of
such expenses (or less than 1% of revenues) recorded by           the Company for the
three month period ended June 30, 2008. This increase in           depreciation expense
over those for the three month period ended June 30, 2008,           was primarily
attributable to greater amounts of 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 raise our depreciation expenses.

Interest income. Interest
income for the three month period ended June 30, 2009, was approximately $5,000 (or less
than 1% of revenues), as compared to approximately $56,000 (or less than 1% of revenues),
for the three month period ended June 30, 2008. This decrease in interest income for the
three month period ended June 30, 2009, 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 federal government.

Interest expense. Interest
expense for the three month period ended June 30, 2009, was approximately $34,000 (or less
than 1% of revenues), as compared to approximately $87,000 (or less than 1% of revenues),
for the three month period ended June 30, 2008. This decrease in interest expense for the
three month period ended June 30, 2009 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 period ended June 30, 2009 were approximately $39,000 as compared to no
income taxes for the three month period ended June 30, 2008. The Company incurred a
deferred income tax expense of approximately $39,000 for the three month period ended June
30, 2009, 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 (loss).As a result
of the above, the net income for the three month period ended June 30, 2009, was
approximately $251,000 as compared to the net loss of approximately $178,000 for the three
months ended June 30, 2008.

Six Months Ended June 30,
2009 as Compared to Six Months Ended June 30, 2008

Revenues, net. Revenues for
the six month period ended June 30, 2009 were approximately $20,528,000 as compared to
approximately $16,415,000 for the six month period ended June 30, 2008. This increase in
revenues was primarily attributable to increases in our MTEM and PKI credentialing and
managed services segments, partially offset by a decline in our consulting services
segment.

| |  | Our
MTEM segment experienced revenue growth of approximately 45% from approximately
$9,295,000 for the six months ended June 30, 2008 to approximately $13,471,000 for the
six months ended June 30, 2009. This positive revenue performance primarily resulted from
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 by 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 opportunities to potentially provide our
services, and we are also initiating a new strategy to expand into state and local
municipalities and commercial enterprises through a sales channel strategy utilizing
intermediaries. We believe that these efforts should further expand our reach beyond the
federal sector and help to support the long-term growth of this segment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

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| |  | Our
PKI credentialing and managed services segment experienced revenue growth of
approximately 54%. Revenues increased approximately $960,000, from $1,784,000 for the six
month period ended June 30, 2008 to $2,744,000 for the six month period ended June 30,
2009 as a result of various mandates to roll out credential programs to various agencies
and contractors. This positive revenue performance primarily resulted from 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
various federal agency mandates continue to be implemented 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 will support the continued
long-term growth of this segment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Our
consulting services segment experienced decreasing revenue of approximately 19%. Revenues
decreased approximately $1,023,000, from $5,336,000 for the six month period ended June
30, 2008, as compared to $4,313,000 for the six month period ended June 30, 2009. This
revenue decrease primarily resulted from timing delays occurring in the 2nd quarter,
which pushed sales of certain products and services into the third quarter of 2009. While
this segment experiences fluctuations from quarter to quarter, we believe that we are
presently witnessing a bottoming trend in revenues. We believe that, as the economy
slowly recovers, we should witness a return to positive revenue growth of this segment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of sales. Cost of sales
for the six month period ended June 30, 2009, was approximately $16,283,000 (or 79% of
revenues), as compared to cost of sales of approximately $13,694,000 (or 83% of revenues),
for the six month period ended June 30, 2008. 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
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 improved margins as a result of lower
revenues attributable to software resales in relation to higher direct
consulting services revenue. 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 six month period ended June 30, 2009, was approximately $4,245,000 (or 21% of
revenues), as compared to a gross profit of approximately $2,721,000 (or 17% of revenues),
for the six month period ended June 30, 2008. The percentage of gross profit was higher in
the first half of 2009 as compared to the first half of 2008 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 in the
near term 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 six month period ended June 30, 2009, was approximately $495,000
(or 2% of revenues), as compared to approximately $413,000 (or 3% of revenues), for the
six month period ended June 30, 2008. This increase was materially attributable to the
expansion of our sales and marketing outreach efforts.

General and administrative.General and administrative expenses for the six month period ended June 30, 2009, were
approximately $3,113,000 (or 15% of revenues), as compared to approximately $3,158,000 (or
19% of revenues), recorded by the Company for the six month period ended June 30, 2008.
This decrease in general and administrative expenses for the six months ended June 30,
2009, was primarily attributable to a decrease in stock compensation expense under SFAS
No. 123R as a result of options issued to employees in connection with the iSYS
acquisition in January 2008.

24

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Depreciation expense.Depreciation expense for the six month period ended June 30, 2009, was approximately
$84,000 (or less than 1% of revenues), as compared to approximately $76,000 (or less than
1% of revenues), recorded by the Company for the six month period ended June 30, 2008.
This increase in depreciation expenses for the six month period ended June 30, 2009, was
primarily attributable to the greater amounts of depreciable assets.

Interest income.Interest
income for the six month period ended June 30, 2009, was approximately $19,000 (or less
than 1% of revenues), as compared to approximately $72,000 (or less than 1% of revenues),
for the six month period ended June 30, 2008. This decrease in interest income for the six
month period ended June 30, 2009, was primarily attributable to lesser amounts of cash and
cash equivalents available to the Company over this time period.

Interest expense.Interest
expense for the six month period ended June 30, 2009, was approximately $114,000 (or less
than 1% of revenues), as compared to approximately $186,000 (or less than 1% of revenues),
for the six month period ended June 30, 2008. This decrease in interest expense for the
six month period ended June 30, 2009 was primarily attributable to the reduction in the
outstanding balance of debt instruments held by the Company.

Income taxes.Income taxes for
the six month period ended June 30, 2009 were approximately $78,000 as compared to no
income taxes for the six month period ended June 30, 2008. The Company incurred a deferred
income tax expense of approximately $78,000 for the six month period ended June 30, 2009
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 for 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 (loss).As a result
of the above, the net income for the six month period ended June 30, 2009, was
approximately $380,000, as compared to the net loss of approximately $1,041,000 for the
six months ended June 30, 2008.

# 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 2008 and through the period ended June 30, 2009, operations
were materially financed with working capital, borrowings against the Companys
credit facilities with Cardinal Bank and through the private sale of securities. During
the first quarter of 2009 the Company modified its senior lending facility with Cardinal
Bank, which senior lending facility now allows for the Company to borrow up to $5 million
at a rate of prime plus 50 basis points. The new senior lending facility replaced the
prior senior lending facility with Cardinal Bank. This senior lending facility matures on
June 1, 2010. This senior lending facility, as modified, provides the Company with
continuing liquidity to fund the operations of the business supporting additional contract
awards and strategic opportunities to expand the Companys strategic goals and
objectives. Further, on November 5, 2007, the Company entered into a series of agreements
with Protexx, Inc., a company from which WidePoint acquired substantially all of the
assets and intellectual property in July of 2008. These agreements allowed for Protexx,
Inc. to borrow up to $250,000 from WidePoint on an installment basis between November 5,
2007 and July 31, 2008. The short-term borrowing facility was converted and eliminated by
WidePoint at the time of the asset purchase of Protexx, Inc.

Net cash provided by operating
activities for the six months ended June 30, 2009, was approximately $1.0 million, as
compared to cash provided by operating activities of $2.3 million for the six months ended
June 30, 2008. This decrease in cash generated from operating activities for the six
months ended June 30, 2009 was primarily a result of a decrease in unbilled accounts
receivable. Net cash used in investing activities for the six months ended June 30, 2009,
was approximately $0.1 million, as compared to $5.0 million used in investing activities
for the six months ended June 30, 2008. The decrease in net cash used in investing
activities was primarily attributable to no acquisition activity during the period. Net
cash used in financing activities amounted to approximately $2.4 million in the six months
ended June 30, 2009, as compared to cash provided by financing activities of approximately
$5.6 million in the quarter ended June 30, 2008. This decrease in net cash provided by
financing activities primarily related to the reduction of acquisition indebtedness and
Cardinal Bank loans.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.

25

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As of June 30, 2009, the Company had
a net working capital of approximately $3.5 million. The Companys primary source of
liquidity consists of approximately $3.0 million in cash and cash equivalents and
approximately $7.5 million of accounts receivable and unbilled accounts receivable.
Current liabilities include approximately $5.3 million inaccounts payable and
accrued expenses. The reduction in Current liabilities for the six months ended June 30,
2009 was predominately associated with the payment of sellers notes.

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. The Company added to its working capital
during the second quarter of 2008 by selling shares of its common stock in private
transactions. The approximate $4.1 million in proceeds has bolstered the Companys
ability to finance working capital requirements. 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
under the heading Material Weaknesses 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.

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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.

# Material Weaknesses

In our Managements Report on
Internal Control Over Financial Reporting included in our Form 10-K for the year ended
December 31, 2008, management concluded that our internal control over financial reporting
was not effective due to the existence of the material weaknesses as of December 31, 2008,
discussed below. A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected.

| |  | Inadequate
segregation of duties within a significant account or process.We 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Inadequate
documentation of the components of internal control.We did not maintain documented
policies and evidence of compliance with 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Income
Tax Accounting.We engage outside parties to assist us in accounting for income
taxes. We have not implemented an effective review process for accounting for income
taxes which could lead to errors occurring in the amounts and disclosures for income
taxes. Accordingly, management has concluded that this control deficiency constitutes a
material weakness.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Remediation Plan for
Material Weaknesses

The material weaknesses described
above comprise control deficiencies that we discovered in the fourth quarter of fiscal
year 2007 and during the financial close process for fiscal year 2008. Upon our
acquisition of iSYS in January 2008, we further determined that the material
weaknesses described above were also present in iSYS internal controls. We
specifically noted weaknesses associated with the process of recognizing a certain segment
of the iSYS revenue and associated direct costs.

Beginning and during the fourth
quarter of fiscal 2007, we formulated a remediation plan and initiated remedial action to
address those material weaknesses at WidePoint. During the first quarter of 2008, we
expanded the scope of our remediation plan to address the material weaknesses related to
the internal controls and procedures of iSYS. We have continued our remediation actions
through the second quarter of 2009 and expect to continue working on our remediation plan
through December 31, 2009. The elements of the remediation plan are as follows:

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| |  | Inadequate
segregation of duties within a significant account or process.We commenced a
thorough review of our accounting staffs duties and where necessary we have begun
segregating such duties with other personnel.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Inadequate
documentation of the components of internal control. We commenced a thorough review
of our documentation and where necessary we are putting into place policies and
procedures to document such evidence to comply with our internal control requirements. We
are specifically addressing policies to properly review and recognize a certain segment
of the iSYS revenue and associated direct costs. We have also retained a financial
consultant to assist us in further reviewing and improving our internal control
processes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Inadequate
Income Tax Accounting review process.We commenced a search and review of outside
experts to assist us in developing an effective review process for accounting for income
taxes.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

# Changes in Internal
Control Over Financial Reporting

During the first half of fiscal year 2009,
we undertook a number of measures to remediate the material weaknesses discussed above.
Those measures, described under Remediation Plan for Material Weaknesses,
undertaken during the first half of fiscal year 2009 continue into the second half of
2009. We anticipate these measures will have materially affected, 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 first or
second quarters of 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

# PART II  OTHER
INFORMATION

# ITEM 2. Unregistered Sales
of Equity Securities and Use of Proceeds.

On July 8, 2009, each of Steve L.
Komar, James T. McCubbin and Mark F. Mirabile exercised, in the form of a cashless
exercise, his respective warrant to purchase 1,333,333 shares of common stock of the
Company, which warrant was previously issued to such individual pursuant to a Warrant
Purchase Agreement, dated July 14, 2004, by and between the Company and each such
individual. As a result of his respective cashless exercise of such warrant, each of Steve
L. Komar, James T. McCubbin and Mark F. Mirabile, as applicable, was issued 793, 103
shares of common stock of the Company, with 540,230 shares of common stock of the Company
being withheld by the Company from each such warrant as payment of the respective exercise
price of each such warrant. The shares issued pursuant to the exercise of these warrants
have not been registered under the Securities Act of 1933, as amended (the
Securities Act). Such shares are exempt from the registration requirements
under the Securities Act pursuant to the private offering exemption under
Section 4(2) of the Securities Act.

# ITEM 5. Other Information

As of August 14, 2009, each of the
Company, iSYS, LLC and Jin Kang entered into a supplement to Exhibit A (the Exhibit
A Supplement) in respect of the Membership Agreement (defined above), by and among
the Company, iSYS, LLC and Jin Kang. The Exhibit A Supplement was entered into for the
purpose of clarifying the earnout formula agreed to between the parties, particularly with
respect to EBITDA for each earnout year of the Membership Agreement. The Exhibit A
Supplement clarifies that EBITDA shall include Interest Income net of Interest Expense
from Cash Balances exceeding $1.4 million for each of the measurement years (as each of
the terms Interest Income, Interest Expense and Cash
Balance are defined in the Membership Agreement). In addition, pursuant to the
Exhibit A Supplement, the adjustment to EBITDA under the Membership Agreement shall
consist of the following fixed amounts for each of the 2009, 2010 and 2011 earnout years,
respectively: $100,000, $100,000 and $150,000. All other provisions and calculations of
Exhibit A to the Membership Agreement and the earnout formula remain unchanged by the
Exhibit A Supplement. A copy of the Exhibit A Supplement is attached as Exhibit 10.1 to
this Form 10-Q.

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# ITEM 6. EXHIBITS.

|EXHIBIT |            
|------- | -----------
|NO.     | DESCRIPTION

|10.1 | Supplement
to Exhibit A to the Membership Interest Purchase Agreement, dated as of August 14, 2009.
|---- | ---------------------------------------------------------------------------------------------------

|31.1 | 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).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------

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# 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 CORPORATION                
|---------------------- | -------------------------------------
|Date:  August 14, 2009 | /s/ STEVE L. KOMAR                   
|                       | Steve L. Komar                       
|                       | President and Chief Executive Officer
|                       | /s/ JAMES T. MCCUBBIN                
|                       | James T. McCubbin                    
|                       | Vice President - Principal Financial 
|                       | and Accounting Officer               

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