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

_________________

# FORM 10-Q

(Mark One)

|[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
                    OF 1934           For the quarterly period ended
                       June 30, 2008
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
000-23967

|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)                                                
|One Lincoln Centre, 18W140 Butterfield Road, Suite 1100, Oakbrook Terrace, Ill | 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 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 [X]

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, 2008, 58,090,697
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, 2008           
|                                   | (unaudited) and December 31, 2007 (unaudited)                       
|                                   | Condensed Consolidated Statements of Operations for the three months
|                                   | and six months ended June 30, 2008 and 2007 (unaudited)             
|                                   | Condensed Consolidated Statements of Cash Flows for the three months
|                                   | and six months ended June 30, 2008 and 2007 (unaudited)             
|                                   | Notes to Condensed Consolidated Financial Statements                
|Item 2.                            | Managements Discussion and Analysis of Financial                   
|                                   | Condition and Results of Operations                                 
|Item 4T.                           | Controls and Procedures                                             
|Part II.      OTHER INFORMATION   
|Item 6.                            | Exhibits                                                            
|SIGNATURES                         | 30                                                                  
|CERTIFICATIONS                     |                                                                     

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# PART I. FINANCIAL
INFORMATION

# ITEM 1. CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.

# WIDEPOINT CORPORATION
AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS

|June 30,
2008                                                                 | December 31,
2007
|----------------------------------------------------------------------------- | -----------------
|Assets                                                                        | (unaudited)      
|Current assets:                                                               |                  
|Cash and cash equivalents                                                     |                  
|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:                                                          |                  
|Short-term borrowings                                                         |                  
|Accounts payable                                                              |                  
|Accrued expenses                                                              |                  
|Deferred revenue                                                              |                  
|Short-term portion of capital lease obligation                                |                  
|                                                                              |                  
|Total current liabilities                                                     |                  
|                                                                              |                  
|Long-term debt, 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; 58,090,697 and |                  
|52,558,697 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

|                                                       | Three Months Ended | Six Months Ended
|------------------------------------------------------ | ------------------ | ----------------
|
|
|
|Revenues, net                                          |                    |                 
|Cost of sales (including amortization and depreciation |                    |                 
|of $226,699, $110,069, $440,605, and $220,118,         |                    |                 
|respectively)                                          |                    |                 
|                                                       |                    |                 
|Gross profit                                           |                    |                 
|Sales and marketing                                    |                    |                 
|General & administrative (including stock compensation |                    |                 
|expense 123 (r) of $104,378, $22,687, $476,080, and    |                    |                 
|$86,663, respectively)                                 |                    |                 
|Depreciation expense                                   |                    |                 
|                                                       |                    |                 
|Loss from operations                                   |                    |                 
|Interest income                                        |                    |                 
|Interest expense                                       |                    |                 
|Other expense                                          |                    |                 
|                                                       |                    |                 
|Net loss before income tax                             |                    |                 
|Income tax benefit, net                                |                    |                 
|                                                       |                    |                 
|Net loss                                               |                    |                 
|                                                       |                    |                 
|Basic and diluted net loss per share                   |                    |                 
|                                                       |                    |                 
|Basic and diluted weighted average shares outstanding  |                    |                 

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 loss                                                         |                             |                          
|Adjustments to reconcile net loss to net cash                    |                             |                          
|provided by operating activities:                                |                             |                          
|Depreciation expense                                             |                             |                          
|Amortization                                                     |                             |                          
|Amortization of deferred financing costs                         |                             |                          
|Stock options expense                                            |                             |                          
|Changes in assets and liabilities (net of business combinations) |                             |                          
|Accounts receivable                                              |                             |                          
|Prepaid expenses and other current assets                        |                             |                          
|Accounts payable and accrued expenses                            |                             |                          
|                                                                 |                             |                          
|Net cash 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                                                       |                             |                          
|Costs related to registration statement                          |                             |                          
|Proceeds from exercise of stock options                          |                             |                          
|Proceeds from issuance of stock                                  |                             |                          
|Costs related to issuance of stock                               |                             |                          
|Costs related to financing purchase of                           |                             |                          
|Subsidiary                                                       |                             |                          
|                                                                 |                             |                          
|Net cash provided by (used in)                                   |                             |                          
|financing activities                                             |                             |                          
|                                                                 |                             |                          
|Net 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                                       |                             |                          
|Noncash investing and financing activity -                       |                             |                          
|capital leases for acquisition of                                |                             |                          
|property and equipment                                           |                             |                          
|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

The consolidated balance sheet as of
June 30, 2008, the condensed consolidated statements of operations for the three and six
months ended June 30, 2008 and 2007, and the condensed consolidated statements of cash
flows for the three and six months ended June 30, 2008 and 2007 have been prepared by the
Company and are unaudited. The consolidated balance sheet as of December 31, 2007 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, 2007.

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. Accordingly, these
condensed consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2007. The results of operations for
the three and six months ended June 30, 2008 are not indicative of the operating results
for the full year.

WidePoint Corporation
(WidePoint or the Company) is a leading provider of advanced
information technology products and services, including identity and information assurance
management services, forensic informatics and wireless technology services. WidePoint has
three material operational entities, Operational Research Consultants, Inc. (ORC), iSYS,
LLC (iSYS), and WidePoint Ill, Inc. WidePoint enables organizations to deploy fully
compliant IT services in accordance with government-mandated regulations and advanced
system requirements. In January 2008, we completed the acquisition of iSYS. iSYS
specializes in mobile telecommunications expense management services, forensic
informatics, and information assurance services, predominately to the United States
Government. ORC specializes in IT integration and secure authentication processes and
software, and providing services to the United States 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.

WidePoint was incorporated in
Delaware on May 30, 1997. Our staff consists of business 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. We have developed thorough, comprehensive policies, procedures and controls
to mitigate the threat, or potential threat, of intentional, unintentional, physical,
natural or electronic compromise or disruption of any portion of our systems or services.
The talent and technology are available, and the resident expertise is well-versed in
working together, to ensure goals are achieved quickly and seamlessly. Contract agreements
are already in place and a substantive reference base with an assortment of federal
agencies is available.

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 acquisition of ORC and iSYS and our internal growth initiatives.

4

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The Company has physical locations in
Oakbrook Terrace, Illinois; Fairfax, Virginia; McLean, Virginia; Alexandria, Virginia;
Chesapeake, Virginia; and Columbus, Ohio. The Companys employees are also deployed
at various client locations throughout the upper Midwest and Mid Atlantic areas of the
United States.

# 2. Significant
Accounting Policies

Principles of
Consolidation

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

Use of Estimates

The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.

Reclassifications

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

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. Included in the June 30, 2008 cash balances was
$4,997,267 in interest bearing balances in one bank, mostly in excess of federally insured
amounts, as compared to $1,592,228 in interest bearing balances in one bank for December
31, 2007. The Company places its temporary cash investments with high credit-quality
financial institutions, and as a result, the Company believes that no significant credit
risk exists with respect to these cash investments.

Accounts Receivable

The majority of the Companys
accounts receivable are due from either United States governmental agencies or established
companies in the following industries: manufacturing, healthcare, financial services and
United States Federal government contractors. 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 such bad debt reserve.

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, 2008 and December 31, 2007, unbilled accounts receivable totaled
$1,562,020 and $371,435, respectively.

5

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Revenue Recognition

A portion of the Companys
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, 2008 or on December 31,
2007 due to termination provisions and thus has not recorded provisions for such events.

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 collectibility is probable.

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.

Should the sale of product 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.

Significant Customers

For the quarter ended June 30, 2008,
four customers, the Transportation Security Administration (TSA), the
Department of Homeland Security (DHS), FSS DISA/DITCO-SCOTT (Defense
Information Security Agency), 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 25%, 17%, 12%, and 10% 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, 2007, two customers, the United Space Alliance and XTEC
Incorporated, represented approximately 29% and 13% 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. For
the six-month period ended June 30, 2007, one customer, the Defense Information
Security Agency represented approximately 11% of revenues.

Fair value of
financial instruments

The Companys financial
instruments include cash equivalents, accounts receivable, accounts payable, short-term
debt, long-term debt, and capital leases. The carrying values of cash equivalents,
accounts receivable and accounts payable approximate their fair value because of the
short maturity of these instruments. The carrying amounts of the Companys capital
leases and bank borrowings under its credit facility approximate fair value because the
interest rates are reset periodically to reflect current market rates.

6

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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, 2008, two customers, TSA and DHS , accounted for
approximately 28% and 22% of accounts receivable, respectively. As of December 31, 2007,
two clients, Headquarters Cryptologic Systems Group (HQ CPSG) and United Space Alliance,
represented 24% and 14% of accounts receivable, respectively.

Income Taxes

The Company accounts for income taxes
in accordance with Statement of Financial Accounting Standards (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
also adopted the provisions of Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes  An interpretation of FASB Statement No. 109.

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,
2008 | December 31,
2007
|----------------------------------------------- | ------------- | -----------------
|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.

Software Development Costs

WidePoint accounts for software
development costs 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 other
such shorter period as may be required. WidePoint recorded approximately $14,000 of
amortization expense for PKI-I, $31,000 for PKI-II, and $12,000 for PKI-III for the three
month period ended June 30, 2008. WidePoint was awarded an Authority to Operate
(ATO) under the guidelines associated with our PKI certificates in April of
2008 and initiated amortizing the expense for PKI-III in May of 2008 over an approximate
three year life. Capitalized software costs, net, included in Intangibles, net, at June
30, 2008 and December 31, 2007 were approximately $0.6 million and $0.7 million,
respectively.

7

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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. 141, Business Combinations, and SFAS No. 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 No. 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.

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. Outstanding
options and warrants to purchase 8,009,457 and 7,052,257 common shares, respectively, for
the quarters and six months ended at June 30, 2008 and 2007 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 quarters and six
months ending June 30, 2008 and 2007, respectively, are presented as identical.

Stock-based compensation

In December 2004, the Financial
Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based
Payment, (SFAS No. 123R). This statement requires that the costs of
employee share-based payments be measured at fair value on the awards grant date and
recognized in the financial statements over the requisite service period.

Effective January 1, 2006, the
Company 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 123R. As of January 1,
2006, the cumulative effect of adopting the estimated forfeiture method was not material.

The amount of compensation expense
recognized under SFAS 123(R) during the three and six month periods ended June 30, 2008
and 2007, respectively, under our plans was comprised of the following:

8

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|                                         
|-----------------------------------------
|2008                                     
|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
losses as of June 30, 2008 for which a valuation allowance has been established, we
recorded no income tax benefits for share-based compensation arrangements. 
Additionally, no incremental tax benefits were recognized from stock options exercised
during the three and six months ended June 30, 2008, which would have resulted in a
reclassification to reduce net cash provided by operating activities with an offsetting
increase in net cash provided by financing activities.

The fair value of each option award
is estimated on the date of grant using a Black-Scholes option pricing model
(Black-Scholes model) that uses the assumptions of no dividend yield, risk
free interest rates of between 2.61% and 4.83%, volatility of between 156% to 57%, and
expected life in years of approximately 4 years. 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 six month periods ended June 30, 2008 and 2007
is presented below:

|                             
|-----------------------------
|OUTSTANDING AND NON -VESTED  
|Non-vested at January 1, 2008
|Granted                      
|Vested                       
|Forfeited                    
|Non-vested at March 31, 2008 
|Granted                      
|Vested                       
|Forfeited                    
|Non-vested at June 30, 2008  

9

---

|                                     |  |  |  |           |   |   |      | 
|------------------------------------ |  |  |  | --------- | - | - | ---- | 
|Non-vested at January 1, 2007        |  |  |  | 753,477   |   | $ | 0.67 | 
|Granted                              |  |  |  | --        |   |   | --   | 
|Vested                               |  |  |  | (323,183  | ) | $ | 0.58 | 
|Forfeited                            |  |  |  | (29,250   | ) | $ | 0.43 | 
|Non-vested at March 31, 2007         |  |  |  | 401,044   |   | $ | 0.76 | 
|Granted                              |  |  |  | --        |   |   | --   | 
|Vested                               |  |  |  | --        |   |   | --   | 
|Forfeited                            |  |  |  | --        |   |   | --   | 
|Non-vested at June 30, 2007          |  |  |  | 401,044   |   | $ | 0.76 | 
|OUTSTANDING AND EXERCISABLE          |  | 
|Total outstanding at January 1, 2008 |  |  |  | 7,085,211 |   | $ | 0.37 | 
|Issued                               |  |  |  | 870,000   |   | $ | 0.90 | 
|Cancelled                            |  |  |  | --        |   |   | --   | 
|Exercised                            |  |  |  | 32,000    |   | $ | 0.45 | 
|Total outstanding at March 31, 2008  |  |  |  | 7,923,211 |   | $ | 0.42 | 
|Total exercisable at March 31, 2008  |  |  |  | 6,653,211 |   | $ | 0.32 | 
|Issued                               |  |  |  | --        |   |   | --   | 
|Cancelled                            |  |  |  | 4,800     |   | $ | 0.45 | 
|Exercised                            |  |  |  | --        |   |   | --   | 
|Total outstanding at June 30, 2008   |  |  |  | 7,918,411 |   | $ | 0.42 | 
|Total exercisable at June 30, 2008   |  |  |  | 7,038,411 |   | $ | 0.35 | 
|Total outstanding at January 1, 2007 |  |  |  | 7,103,261 |   | $ | 0.36 | 
|Issued                               |  |  |  | --        |   |   | --   | 
|Cancelled                            |  |  |  | 30,250    |   | $ | 0.48 | 
|Exercised                            |  |  |  | 75,800    |   | $ | 0.34 | 
|Total outstanding at March 31, 2007  |  |  |  | 6,997,211 |   | $ | 0.36 | 
|Total exercisable at March 31, 2007  |  |  |  | 6,596,167 |   | $ | 0.32 | 
|Issued                               |  |  |  | --        |   |   | --   | 
|Cancelled                            |  |  |  | --        |   |   | --   | 
|Exercised                            |  |  |  | 36,000    |   | $ | 0.24 | 
|Total outstanding at June 30, 2007   |  |  |  | 6,961,211 |   | $ | 0.36 | 
|Total exercisable at June 30, 2007   |  |  |  | 6,560,167 |   | $ | 0.32 | 

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

10

---

Aggregate intrinsic value represents
total pretax intrinsic value (the difference between WidePoints closing stock price
on June 30, 2008 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, 2008. This amount changes based on the fair market value of
WidePoints stock. The total intrinsic value of options outstanding as of June 30,
2008 was $5,116,222. The total intrinsic value of options exercisable on June 30, 2008 was
$5,041,442. The total intrinsic value of options exercised for the second quarter of
fiscal 2008 was $0. The Company issues new shares of common stock upon the exercise of
stock options.

At June 30, 2008, 5,145,438 shares
were available for future grants under the Companys 1997 Stock Compensation Plans.
This includes options for 1,080,150 shares previously exercised through June 30, 2008,
under the Companys 1997 Stock Compensation Plans. 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 1997 Stock Compensation Plans.

At June 30, 2008, the Company had
approximately $458,000 of total unamortized compensation expense, net of estimated
forfeitures, related to stock option plans that will be recognized over the weighted
average period of 3.27 years.

Recent Accounting
Pronouncements

SFAS 157. In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 157,Fair Value
Measurements (SFAS 157), which defines fair value, establishes a framework
for measuring fair value under generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 applies to other existing accounting
pronouncements that require or permit fair value measurements, the FASB having previously
concluded in those accounting pronouncements that fair value is the relevant measurement
attribute. While SFAS 157 does not require any new fair value measurements, its
application may change the current practice for fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. On February 8,
2008, the FASB issued FSP FAS 157-2,Effective Date of FASB Statement
No. 157 , which delays the effective date of SFAS 157 for nonfinancial
assets and liabilities to fiscal years beginning after November 15, 2008. The
adoption of SFAS 157 for financial assets and liabilities in the first quarter of 2008 had
no impact on our consolidated financial statements. We are currently evaluating the impact
of SFAS 157 for non-financial assets and liabilities.

SFAS 159. In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS 159) which permits entities to choose to
measure many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS 159 is effective for the
Companys current fiscal year ending December 31, 2008. The adoption of this
statement did not have an impact on the Companys consolidated financial position,
results of operations or cash flows.

SFAS 141(R). In December 2007,
the FASB issued SFAS No. 141(R), Business Combinations(FAS
141(R)), to replace FAS 141, Business Combinations. FAS 141(R)
requires use of the acquisition method of accounting, defines the acquirer, establishes
the acquisition date and broadens the scope to all transactions and other events in which
one entity obtains control over one or more other businesses. This statement is effective
for financial statements issued for fiscal years beginning on or after December 15, 2008
with earlier adoption prohibited. While the Company does not expect that the adoption of
FAS 141(R) will have a material impact on its consolidated financial statements for
transactions completed prior to December 31, 2008, the impact of the accounting change
could be material for business combinations which may be consummated subsequent thereto.

SFAS 160. In December 2007,
the FASB issued Statement of FAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51 (FAS 160). FAS
160 establishes accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the retained interest and gain or loss when a subsidiary is
deconsolidated. This statement is effective for financial statements issued for fiscal
years beginning on or after December 15, 2008 with earlier adoption prohibited. The
Company currently does not have any noncontrolling interests or deconsolidated
subsidiaries and therefore FAS 160 will not have any impact on its consolidated financial
statements.

11

---

# 3. Debt

On January 2, 2008, WidePoint
Corporation (the Company) entered into a Commercial Loan Agreement with
Cardinal Bank relating to a $5,000,000 revolving credit facility and a $2,000,000 term
loan. Advances under the revolving credit facility bear interest at a variable rate equal
to the prime rate plus 0.25% with such variable rate dropping to the prime rate or the
prime rate minus 0.25% depending upon the Company meeting certain performance conditions,
with the repayment date for such facility being April 30, 2009. This new revolving credit
facility replaces the Companys prior $2,000,000 revolving credit facility with
Cardinal Bank. The term loan bears interest at 7.5% annually and the repayment date of
such term loan is January 1, 2012. The balances for the revolving credit facility and the
term loan were approximately $0 and $1.8 million, respectively, at June 30, 2008.

# 4. Goodwill and
Intangible Assets

Effective January 1, 2002, WidePoint
adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires,
among other things, the discontinuance of goodwill amortization. Under SFAS 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.

---

In January 2008, WidePoint completed
the acquisition of iSYS, LLC. (iSYS). The purchase price allocation for the
Companys acquisition of iSYS at this time is still preliminary and subject to final
adjustments. The Company has engaged a subject matter expert consultant to assist it in
its final purchase price allocation. As a result of a requirement in the purchase
agreement between WidePoint and iSYS to measure iSYSs working capital and adjust it
subsequent to the closing and after an audit had been performed, we determined that the
minimum working capital of $2 million dollars was met and that an excess of approximately
$143,000 existed, with such $143,000 being properly adjusted and paid during the second
quarter of 2008. During 2004, WidePoint completed the acquisition of Operational Research
Consultants, Inc. (ORC). The Company also has capitalized software development
costs associated with its PKI initiative, established and/or has estimated the purchase
price allocation of the assets acquired and allocated the purchase price of the components
and software capitalization of goodwill and other intangibles as follows:

|Amortized Intangible Assets | As of June 30, 2008              
|--------------------------- | ---------------------------------
|Gross Carrying
Amount       | Accumulated
Amortization         
|                           
|(1)                         | ORC Intangible (Includes customer
|                            | relationships and PKI business   
|                            | opportunity purchase accounting  
|                            | preliminary valuations)          
|                           
|                           
|(2)                         | PKI-I Intangible (Related to     
|                            | internally generated software)   
|                           
|                           
|(3)                         | PKI-II Intangible (Related to    
|                            | internally generated software)   
|                           
|                           
|(4)                         | PKI-III Intangible (Related to   
|                            | internally generated software)   
|                           
|                           
|(5)                         | iSYS                             
|                           
|                           
|                            | Total                            
|                           
|                           

12

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| |                                  |            | 
| | -------------------------------- | ---------- | 
|
| | Aggregate Amortization Expense:  |            | 
|
| | For quarter ended 6/30/08        | $  212,868 | 
|
| | For the six months ended 6/30/08 | $  413,975 | 
|
|
| | Estimated Amortization Expense:  |            | 
|
| | For year ended 12/31/08          | $  851,470 | 
|
| | For year ended 12/31/09          | $  844,831 | 
|
| | For year ended 12/31/10          | $  645,639 | 
|
| | For year ended 12/31/11          | $  423,522 | 
|
| | For year ended 12/31/12          | $  400,000 | 
|

| | (1) | The
ORC intangible is made up of the purchase accounting associated with the
                    valuation assigned by the Company to ORCs customer
relationships and PKI                     business opportunity. The PKI business
opportunity intangible has an estimated                     life of 6 years and ORCs
customer relationships have an estimated life of                     5 years. The PKI
business opportunity was estimated based upon the contractual                     life
assigned to the authority to issue PKI certificates by the federal
                    government. The fair value of the PKI business opportunity was
estimated using                     the expected present value of future cash flows
estimated by the Company for                     ORCs PKI business opportunity. ORCs
customer relationship intangible                     was estimated based upon an analysis
of the historic life of ORCs present                     customer relationships and
their present contract opportunities. A fair value                     was estimated
using the expected present value of the estimated future cash                     flows
generated from those relationships. The weighted average life of this
                    intangible asset class is 3.5 years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The
PKI-I intangible is related to internally generated software that was
                    associated with ORCs PKI-I development of its phase 1 software
offerings.                     ORC commenced sales of its PKI-I service in August of
2004. It has a weighted                     average life of 3.5 years and is based upon
the contractual life assigned to the                     authority to issue PKI
certificates by the federal government.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The
PKI-II intangible is related to a secondary PKI software development effort
                    by ORC. ORC commenced sales of its PKI-II service in August of 2005.
It has a                     weighted average life of 3.5 years and is based upon the
contractual life                     assigned to the authority to issue PKI certificates
by the federal government.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The
PKI-III intangible is related to an additional PKI software development by
                    ORC to attain an Authority To Operate (ATO) under the
guidelines                     associated with PKI certificates to be issued under a
General Service                     Administration (GSA) credential
program. ORC was issued its ATO                     by the GSA in April of 2008. It has a
weighted average life of 3.0 years as                     based upon the contractual life
assigned by its authority to operate and issue                     PKI certificates by
the federal government.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | The
iSYS intangible is made up of the preliminary estimated purchase accounting
                    allocations associated with the valuation assigned by the Company to
iSYSs                     customer relationships and mobile telecom expense
management                     (MTEM) software. The MTEM software
intangible has an estimated                     life of 5 years and iSYSs customer
relationships have an estimated life of                     5 years. The MTEM software
was estimated based upon a preliminary estimate                     attributed to the
most recent life attributable to the contractual life assigned                     to iSYSs
most recent contract awards and terms. The preliminary estimated                     fair
value of the MTEM software was estimated using the expected present value
                    of future cash flows estimated by the Company for iSYSs
software.                     iSYSs customer relationship intangible was estimated
based upon an                     analysis of the historic life of iSYSs present
customer relationships and                     their present contract opportunities. A
preliminary fair value was estimated                     using the expected present value
of the estimated future cash flows generated                     from those
relationships. The weighted average life of this intangible asset
                    class is 5.0 years. The Company has retained a subject matter expert
consultant                     to conduct an independent analysis to determine the
appropriate valuation of the                     intangibles and both the estimated life
and value may change upon the completion                     of such independent
analysis.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total weighted average life of
all of the intangibles is approximately 3.5 years.

There were no amounts of research and
development assets acquired during the quarter and six months ended June 30, 2008 nor any
written-off in the period.

The changes in the carrying amount of
goodwill for the quarter ended June 30, 2008 and 2007 were as follows:

13

---

|                              | Total
|----------------------------- | -----
|Balance as of January 1, 2007 |      
|Goodwill adjusted             |      
|Balance as of June 30, 2007   |      
|Balance as of January 1, 2008 |      
|Goodwill acquired             |      
|Balance as of  June 30, 2008  |      

The goodwill acquired is associated
with the acquisition of iSYS in January of 2008. Management believes that the carrying
value was not impaired as of June 30, 2008.

# 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 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, less the deferred liability related to the Section 481(a)
adjustment.

As of June 30, 2008, the Company
had net operating loss carry forwards of approximately $20 million to offset future
taxable income. These carry forwards expire between 2010 and 2027. Under the provisions 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. The Company adopted FIN 48 as of January 1, 2007. The
adoption of FIN 48 has not had an impact on the Companys financial position or
results of operations for the six months ended June 30, 2007 and 2008. The Company has no
unrecognized tax benefit, as described in FIN 48, as of June 30, 2008 and our tax position
has not materially changed since December 31, 2007.

# 6. Stockholders
Equity

The Company is authorized to issue
110,000,000 shares of common stock, $.001 par value per share. During the six month period
ended June 30, 2008, 32,000 shares of common stock were issued as the result of the
exercise of employee stock options. As of June 30, 2008, there were 58,090,697 shares of
common stock outstanding.

Common Stock

On April 29, 2008, the Company
entered into a Common Stock Purchase Agreement (Purchase Agreement) with
Deutsche Bank AG, London Branch, and related agreements, as part of a private equity
financing to raise additional funds for working capital. Under the Purchase Agreement,
Deutsche Bank AG 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 AG, London Branch 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.

14

---

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
$437,533.08, 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 $1,092,466.92, 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.

As a result of the capital raises
that we had entered into during the 2nd quarter of 2008, the Company issued a
combined cumulative total of 4,000,000 common shares of the Company which provided gross
proceeds of $4,080,000 and net proceeds after various legal and other expenses of
approximately $3,940,000.

Pursuant to the terms of a Membership
Interest Purchase Agreement between the Company, iSYS, LLC and Jin Kang, the Company
issued 1,500,000 shares of Company common stock at a stock price of $1.20 per common share
of WidePoint Corporation for a value of $1,800,000. The Company also issued an additional
3,000,000 shares of Company common stock, which shares were delivered into escrow to be
held subject to the satisfaction of certain earnout provisions under the Membership
Interest Purchase Agreement, and which shares are subject to return to the Company in the
event such earnout provisions are not achieved under the terms of the Membership Interest
Purchase Agreement. Under the Membership Interest Purchase 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 the 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 4th 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 period
and filing of the Companys Form 10-K. The value of the 1,500,000 shares of
unregistered common stock issued was $1,800,000 and was determined based on the closing
market price of the Companys common shares on January 8, 2008 of $1.20 per common
share.

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.

During 1998, the Company adopted SFAS
No. 131 and 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.

15

---

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:

|                                               | Three Months Ended
June 30, | Six Months Ended
June 30,
|---------------------------------------------- | --------------------------- | -------------------------
|
|Consulting services:                           |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss)                        |                             |                          
|Total assets                                   |                             |                          
|Mobile Telecom Managed Services:               |                             |                          
|Revenues                                       |                             |                          
|Operating income                               |                             |                          
|Total assets                                   |                             |                          
|PKI Credentialing and Managed Services:        |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss) (includes amortization |                             |                          
|expense of $57,598, $45,838, $103,435, and     |                             |                          
|$91,675, respectively)                         |                             |                          
|Total assets                                   |                             |                          
|Total Company                                  |                             |                          
|Revenues                                       |                             |                          
|Operating loss before depreciation expense     |                             |                          
|Depreciation expense                           |                             |                          
|Interest income (expense), net                 |                             |                          
|Net loss                                       |                             |                          
|Total Corporate assets                         |                             |                          
|Total assets                                   |                             |                          

16

---

(1)           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 $397,156 in
unallocated corporate costs in general and administrative           expense of which
$104,378 is comprised of stock options expense.

(2)           Includes $55,270 in
amortization expense in cost of sales associated with the           purchase of ORC,
which is not allocated among the segments and includes $279,360           in unallocated
corporate costs in general and administrative expense.

(3)           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 $959,845 in
unallocated corporate costs in general and administrative           expense of which
$476,080 is comprised of stock options expense.

(4)           Includes $110,539 in
amortization expense in cost of sales associated with the           purchase of ORC,
which is not allocated among the segments and includes $536,414           in unallocated
corporate costs in general and administrative expense.

# 8.           Litigation

The Company is not involved in any
material legal proceedings.

# 9. iSYS Acquisition

Pursuant to the terms of the
Membership Interest Purchase Agreement, the Company paid the following consideration at
the closing: (i) $5,000,000 in cash, (ii) $2,000,000 principal amount in an Installment
Cash Promissory Note, which bears simple annual interest at the initial rate of 7% through
December 31, 2008, and thereafter the simple interest rate will increase to 10% from
January 1, 2009 through the date of maturity, which will be on the earlier of either April
1, 2009 or the filing by the Company of its Annual Report on Form 10-K for the year ending
December 31, 2008, and (iii) the issuance of 1,500,000 shares of Company common stock
issued at a stock price of $1.20 per common share of WidePoint Corporation for a value of
$1,800,000. The Company also issued an additional 3,000,000 shares of Company common
stock, which shares were delivered into escrow to be held subject to the satisfaction of
certain earnout provisions under the Membership Interest Purchase Agreement, and which
shares are subject to return to the Company in the event such earnout provisions are not
achieved under the terms of the Membership Interest Purchase Agreement. The aggregate
purchase price was $9,046,132, including $102,722 of acquisition costs and without
consideration for the contingent issuance of the 3,000,000 earnout shares. The value of
the 1,500,000 unregistered common stock issued was $1,800,000 and was determined based on
the closing market price of the Companys common shares on January 8, 2008 of $1.20
per common share. Subsequent to the closing and as a requirement of the purchase agreement
between WidePoint and iSYS, an audit of the working capital of iSYS was performed to
determine if the minimum requirement of $2 million dollars in working capital existed at
the time of the closing of the purchase. It has been determined that an excess of
approximately $143,000 existed. The excess working capital was therefore adjusted and paid
and the purchase price has been subsequently adjusted.

The Company has not yet finalized the
allocation of the purchase price. The following table summarizes the estimated fair values
of the assets acquired and liabilities assumed based on the latest available information
on iSYS, at January 8, 2008. The allocation of the purchase price was based upon
managements estimates and assumptions:

17

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|                                   | iSYS
at January 8, 2008
|---------------------------------- | -----------------------
|Current assets                     |                        
|Property, plant and equipment, net |                        
|Intellectual property              |                        
|Goodwill                           |                        
|Other non current assets           |                        
|                                   |                        
|Total assets acquired              |                        
|                                   |                        
|Current liabilities                |                        
|                                   |                        
|Total liabilities assumed          |                        
|                                   |                        
|Net                                |                        

The operations of iSYS were included
in the Companys results of operations beginning on January 4, 2008, the acquisition
date. The factors resulting in goodwill were iSYSs name, reputation, and established
key personnel. None of the goodwill will be deductible for tax purposes.

# 10. Subsequent Events

On July 31, 2008, the Registrant
entered into an Asset Purchase Agreement (the Purchase Agreement), by and
among the Registrant, Protexx Acquisition Corporation, Protexx Incorporated
(Protexx), Peter Letizia, Charles B. Manuel, Jr. and William Tabor, pursuant
to which Protexx Acquisition Corporation, a wholly-owned subsidiary of the Registrant,
purchased certain of the assets of Protexx, a provider of software-based authentication
and encryption solutions to government, military, first responder and commercial
enterprises. Protexx Acquisition Corporation acquired such assets in exchange for the
payment of $1.00 and the assumption of approximately $330,000 of liabilities with most of
those liabilities being funds that the Company had provided to Protexx under a short-term
lending facility by and between WidePoint and Protexx. As of June 30, 2008, the balance
under the lending facility was approximately $285,000 and classified within other current
assets. Protexx also may be entitled to receive earnout payments under the Purchase
Agreement in the event that the business conducted with the assets purchased from Protexx
exceeds specified earnings targets in calendar years 2008 and 2009. Half of any earnout
payment earned shall be paid in cash, with the other half to be paid in common stock.

The Company has not yet finalized the
allocation of the purchase price. The operations of Protexx will be included in the
Companys results of operations beginning on July 31, 2008. Protexx had no material
assets and therefore it is anticipated that the majority of the purchase price will be
allocated to goodwill and other intangible assets. The Company does not yet have a
complete set of operating results for Protexx for the six months ended June 30, 2008.

18

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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, 2007.

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
(WidePoint or the Company) is a leading provider of advanced
information technology products and services, including identity and information assurance
management services, forensic informatics, and wireless technology services. WidePoint has
three material operational entities, Operational Research Consultants, Inc. (ORC), iSYS,
LLC (iSYS), and WidePoint Ill, Inc. WidePoint enables organizations to deploy fully
compliant IT services in accordance with government-mandated regulations and advanced
system requirements. In January 2008, we completed the acquisition of iSYS. iSYS
specializes in mobile telecommunications expense management services and forensic
informatics, and information assurance services predominately to the United States
Government. ORC specializes in IT integration and secure authentication processes and
software, and providing services to the United States 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.

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 acquisition of ORC and iSYS and our internal growth initiatives.

With the addition of the customer
base and the increase in revenues attributable from both the iSYS and ORC acquisitions,
WidePoints opportunity to leverage and expand further into the federal marketplace
has improved dramatically. Both companies past client successes, top security
clearances in their facilities and with their personnel, and additional breadth of
management talent have expanded the Companys reach into markets that previously were
not fully accessible to WidePoint. WidePoint intends to continue to leverage the synergies
between the newly acquired operating subsidiaries and cross sell those technical
capabilities into each separate marketplace serviced by its respective subsidiaries.
Further, WidePoint is continuing to actively search out new synergistic acquisitions that
we believe will further enhance the present base of business, which has already been
augmented by our recent acquisitions activity and internal growth initiatives.

WidePoints total revenues
increased by approximately $5.9 million from $3.3 million for the three months ended June
30, 2007 to $9.2 million for the three months ended June 30, 2008. The increase in
revenues during the three month period ending June 30, 2008 as compared to the same three
month period ending June 30, 2007 was primarily a result of the acquisition of iSYS along
with internal growth generated by our consulting services segment partially offset by a
slight decline within our PKI credentialing segment. We anticipate gains throughout our
three segments but those gains may at times be erratic as we experience slight delays in
project phases on a quarter by quarter basis that may be outside of the control of the
Company.

19

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For the three months ended June 30,
2008, our Mobile Telecom Managed Services segment experienced revenue growth of
approximately 500% from approximately $809,000 for the quarter ended June 30, 2007 (prior
to acquisition by WidePoint), to approximately $4,808,000 for the quarter ended June 30,
2008. Our Mobile Telecom Managed Services segment provides a range of services that allow
our customers to better manage all of their mobile devices through a proprietary
application that allows real time inventory tracking, life cycle device management, and
billing, auditing and cost optimization that provides for savings of up to 65% of their
current telecommunication bills. We anticipate that this segment should continue to grow
rapidly as the federal agencies continue to adopt the Companys services under the
recent contract award associated with the Federal Strategic Sourcing Initiative (FSSI), by
the General Services Administration. The FSSI contract will provide a purchasing vehicle
for all federal agencies to purchase mobile telecom managed services from approved
suppliers such as our wholly-owned subsidiary, iSYS. We believe that there are presently
approximately six federal agencies or departments utilizing these managed services, with
materially all of those agencies being supported by iSYS. We believe there are more than
40 federal agencies that can benefit from our services, with approximately 14 of those
federal agencies presently actively engaged through the General Services Administration in
reviewing and showing immediate interest in procuring such managed services. We are also
performing work for various state and local governments, as well as institutions of
advanced learning.

Our consulting services segment
experienced revenue growth of approximately $1,328,000 from approximately $2,104,000 for
the quarter ended June 30, 2007 as compared to approximately $3,432,000 for the quarter
ended June 30, 2008. The increase in revenues for the quarter ended June 30, 2008 as
compared to the quarter ended June 30, 2007 was materially the result of the acquisition
of iSYS augmented by internally generated revenues tied to consulting services work
associated with our PKI credentialing and managed services segment, partially offset by
some slight declines within our commercial environment driven by recent negative economic
conditions in our geographic markets.

For the three months ended June 30,
2008, our PKI credentialing and managed services segment experienced decreased revenue of
approximately 18%, with revenues off approximately $161,000 from $1,186,000 for the
quarter ended June 30, 2007, to $1,025,000 for the quarter ended June 30, 2008. We
anticipate that credential sales and managed services sales will increase in the medium to
long-term time horizons as we continue to fulfill contract wins and witness the expansion
and adoption of The Federation for Identity and Cross-Credentialing Systems (FiXs) and
External Certificate Authority (ECA) programs by the Department of Defense,
the HSPD-12 program by the Federal Government agencies and departments, and other groups
commencing the pilot programs and rollout associated with the expansion of programs which
are being mandated by the Federal Government. During the short-term, we believe that sales
associated with our PKI managed services segment could be erratic as they may be driven by
delivery timeframes controlled by external Company partners and clients that may be
outside the control of the Company. As a result of several recent programs that have been
awarded and initiated in the 2nd quarter of 2008, we believe that the adoption
of PKI credentialing will continue to expand and accelerate into 2009.

Based upon estimates provided by
independent analyst and U.S. government estimates respectively, management believes there
is a base of 5 million to 15 million users for the Companys PKI credentials that is
comprised of U.S. Federal Government agencies employees and their contractors. The
Company further believes that there is a developing market place for PKI credentials
within state and local governments and other national programs that extend beyond the U.S.
Federal Government agencies employees and their contractors. These other
opportunities relate to the requirements underlying the mandates for the HSPD-12 program
that effect state and local governments as well as other national programs. The
Companys PKI credentials are currently priced from approximately $27.50 to $150.00
per user on government pricing schedules depending upon the quantity purchased and the
level of managed services and support selected by the customer. Pricing of the
Companys PKI credentials by user are driven by a competitive marketplace and may
change at any time. The Company believes it is well-positioned to effectively compete
within this market segment as a result of its past successes and experience within the PKI
environment.

A number of factors, including the
progress of contracts, 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 may result in subjecting our revenues and operating results to
periodic variations from quarter to quarter. Because a significant portion of our
expenses, such as personnel and facilities costs, are fixed in the short term, successful
contract performance, as well as timing differences in the volume of activity and the
number of contracts commenced or completed during any quarter may cause significant
variations in operating results from one quarter to the next.

20

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With our acquisitions of iSYS and ORC
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 30th
of each calendar year. 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
quarter and/or first quarter of the year. Further, a change in presidential
administrations and 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.
You should not rely on these comparisons as indicators of future performance as 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 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.  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.

# Results of Operations

Three Months Ended June
30, 2008 as Compared to Three Months Ended June 30, 2007

Revenues, net.Revenues for
the three month period ended June 30, 2008 were approximately $9,264,000 as compared to
approximately $3,289,000 for the three month period ended June 30, 2007. The increase in
revenues was primarily attributable to the acquisition of iSYS and increases in our
consulting services segment, partially offset by slight declines within our PKI managed
services segment. Our Mobile Telecom Managed Services segment experienced revenue growth
of approximately 500% from approximately $809,000 for the quarter ended June 30, 2007
(prior to acquisition by WidePoint), to approximately $4,808,000 for the quarter ended
June 30, 2008. We anticipate that this segment should continue to grow rapidly as the
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. Our consulting services segment experienced revenue growth of
approximately 63% with revenues increasing approximately $1,328,000 from $2,104,000 for
the three month period ended June 30, 2007 as compared to $3,432,000 for the three month
period ended June 30, 2008, as a result of the acquisition of iSYS and an expansion in
federal business during the quarter partially offset by some slight declines in our
commercial environment which has been attributed to the present negative
geographically-biased economic environment.

Our PKI credentialing and managed
services segment experienced slightly decreased revenue of approximately 18% with revenues
decreasing approximately $161,000 from $1,186,000 for the three month period ended June
30, 2007, to $1,025,000 for the three month period ended June 30, 2008. We anticipate that
our PKI credentialing and managed services segment will increase during the second half as
a result of several new mandates and initiatives which occurred during the 2nd
quarter of 2008 that further pressures Agencies and contractors to better comply with
existing government regulations.

Cost of sales.Cost of sales
for the three month period ended June 30, 2008, was approximately $7,647,000, or 83% of
revenues, an increase of approximately $5,510,000 from cost of sales of approximately
$2,137,000, or 65% of revenues, for the three month period ended June 30, 2007. The
absolute increase in cost of sales was primarily attributable to an increase in revenues
while the percentage-based increase in cost of sales was primarily attributable to higher
costs in the work performed within our Mobile Telecom Managed Services segment. We
anticipate improvements in our costs of sales on a percentage basis as our managed
services segment adds economies of scale. We anticipate that cost of sales will decrease
on a percentage basis in the near term as we move beyond the initial start-up phase and
increase our product mix of PKI services which generally realizes higher margins in
relation to our other segments.

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Gross profit. As a result of
the acquisition of iSYS, gross profit for the three month period ended June 30, 2008, was
approximately $1,617,000, or 17% of revenues, an increase of approximately $465,000 over
gross profit of approximately $1,152,000, or 35% of revenues, for the three month period
ended June 30, 2007. The percentage of gross profit was lower in the second quarter of
2008 as compared to the second quarter of 2007 as a result of lower margins associated
with a greater mix of items related to our recent purchase of iSYS in January of 2008. The
margins associated with our work in our mobile telecom management segment we believe will
be inherently lower than what we expect as compared to our PKI managed services segment.
We anticipate gross profit as a percentage of revenues will 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, 2008, was approximately
$247,000, or 3% of revenues, an increase of approximately $27,000, as compared to
approximately $220,000, or 7% of revenues, for the three month period ended June 30, 2007.
The slight increase was materially attributable to an initiative we are pursing to
increase our sales and marketing capabilities and infrastructure. The absolute dollar
amount of sales and marketing should expand in the near term as we expand our initiative
to increase sales and marketing capabilities through the addition of several new hires and
the addition of infrastructural improvements tied to improved tools and services. We
believe that with our niche capabilities and the present latent demand for our services,
the conscious investment in the Companys sales and marketing will support our
ability to expand our revenues.

General and administrative.
General and administrative expenses for the three month period ended June 30, 2008, were
approximately $1,477,000, or 16% of revenues, an increase of approximately $538,000, as
compared to approximately $939,000, or 29% of revenues, recorded by the Company for the
three month period ended June 30, 2007. The increase in general and administrative
expenses for the three months ended June 30, 2008, was primarily attributable to our
acquisition of iSYS, as well as to expanded business development expenditures in the PKI
segment.

Depreciation.           Depreciation
expense for the three month period ended June 30, 2008, was           approximately
$38,700, or less than 1% of revenues, an increase of approximately           $17,100, as
compared to approximately $21,600 of such expenses, or less than 1%           of
revenues, recorded by the Company for the three month period ended June 30,
          2007. The increase in depreciation expense for the three month period ended
June           30, 2008, was primarily attributable to greater amounts of depreciable
assets.

Interest income. Interest
income for the three month period ended June 30, 2008, was approximately $56,100, or less
than 1% of revenues, an increase of approximately $25,900 as compared to approximately
$30,200, or less than 1% of revenues, for the three month period ended June 30, 2007. The
increase in interest income for the three month period ended June 30, 2007, was primarily
attributable to greater amounts of invested cash and cash equivalents, partially offset by
lower short-term interest rates, which were available to the Company on investments in
interest bearing accounts.

Interest expense. Interest
expense for the three month period ended June 30, 2008, was approximately $86,600, or less
than 1% of revenues, an increase of approximately $84,000, as compared to approximately
$2,600, or less than 1% of revenues, for the three month period ended June 30, 2007. The
increase in interest expense for the three month period ended June 30, 2008 was primarily
attributable to greater expenses associated with the debt instruments and an increase in
capital leases held by the Company. We anticipate our interest expense will fall as a
result of recent capital raises for which part of the proceeds were utilized to partially
pay down outstanding debt balances.

Net loss.As a result of the
above, the net loss for the three month period ended June 30, 2008, was approximately
$178,000 as compared to the net loss of approximately $1,000 for the three months ended
June 30, 2007.

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Six Months Ended June 30,
2008 as Compared to Six Months Ended June 30, 2007

Revenues, net. Revenues for
the six month period ended June 30, 2008 were approximately $16,415,000 as compared to
approximately $6,141,000 for the six month period ended June 30, 2007. The increase in
revenues was primarily attributable to the acquisition of iSYS. Our Mobile Telecom Managed
Services segment experienced revenue growth of approximately 300% from approximately
$3,378,000 for the six months ended June 30, 2007 (prior to acquisition by WidePoint), to
approximately $9,294,000 for the six months ended June 30, 2008. We anticipate that growth
of this segment should continue to increase as the 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. Our PKI
credentialing and managed services segment experienced revenue growth of approximately 19%
with revenues increasing approximately $288,000 from $1,496,000 for the six month period
ended June 30, 2007 to $1,784,000 for the six month period ended June 30, 2008 as a result
of various mandates to roll out credential programs to various agencies and contractors.
Our consulting services segment experienced revenue growth of approximately 15% with
revenues increasing approximately $690,000 from $4,646,000 for the six month period ended
June 30, 2007 as compared to $5,336,000 for the six month period ended June 30, 2008 as a
result of the acquisition of iSYS.

Cost of sales. Cost of sales
for the six month period ended June 30, 2008, was approximately $13,694,000, or 83% of
revenues, an increase of approximately $9,432,000 from cost of sales of approximately
$4,262,000, or 69% of revenues, for the six month period ended June 30, 2007. The increase
in cost of sales was materially attributable to the acquisition of iSYS. The higher
percentage marginal cost of sales for the six month period ended June 30, 2008 as compared
to June 30, 2007 was predictable, due to lower margins associated with our Mobile Telecom
Managed Services segment as compared to those that we witness within our PKI credentialing
and managed services segment. We believe that the Mobile Telecom Managed Services segment
margins will continue to have comparatively lower margins as compared to those of the PKI
credentialing and managed services segment and that, on balance, margin should increase as
the PKI credentialing and managed services segment increases as a percentage of the total
revenue mix along with increases in margin growth we anticipate as we witness greater
economies of scale related to both segments.

Gross profit. As a result of
the acquisition of iSYS, gross profit for the six month period ended June 30, 2008, was
approximately $2,721,000, or 17% of revenues, an increase of approximately $787,000 over
gross profit of approximately $1,879,000, or 31% of revenues, for the six month period
ended June 30, 2007.

Sales and marketing.Sales and
marketing expense for the six month period ended June 30, 2008, was approximately
$413,000, or 3% of revenues, an increase of approximately $13,000, as compared to
approximately $400,000, or 7% of revenues, for the six month period ended June 30, 2007.
The increase was materially attributable to the expansion of our business development and
sales efforts.

General and administrative.General and administrative expenses for the six month period ended June 30, 2008, were
approximately $3,158,000, or 19% of revenues, an increase of approximately $1,282,000, as
compared to approximately $1,876,000, or 31% of revenues, recorded by the Company for the
six month period ended June 30, 2007. The absolute dollar increase in general and
administrative expenses for the six months ended June 30, 2008, was primarily attributable
to our acquisition of iSYS, including an increase of approximately $300,000 associated
with our stock compensation expense for FAS 123R for options which were issued to key
personnel of iSYS which were expensed in the first quarter and will not re-occur.

Depreciation expense.Depreciation expense for the six month period ended June 30, 2008, was approximately
$76,000, or less than 1% of revenues, an increase of $38,800, as compared to approximately
$37,200 of such expenses, or less than 1% of revenues, recorded by the Company for the six
month period ended June 30, 2007. The increase in depreciation expenses for the six month
period ended June 30, 2008, was primarily attributable to the increased pool of
depreciable assets.

Interest income.Interest
income for the six month period ended June 30, 2008, was approximately $72,100, or less
than 1% of revenues, an increase of $10,100 as compared to approximately $62,000, or less
than 1% of revenues, for the six month period ended June 30, 2007. The increase in
interest income for the six month period ended June 30, 2008, was primarily attributable
to greater 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, 2008, was approximately $186,100, or less
than 1% of revenues, an increase of $180,200 as compared to approximately $5,900, or less
than 1% of revenues, for the six month period ended June 30, 2007. The increase in
interest expense for the six month period ended June 30, 2008 was primarily attributable
greater expenses associated with the debt instruments and an increase in capital leases
held by the Company.

23

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Net loss.As a result of the
above, the net loss for the six month period ended June 30, 2008, was approximately
$1,041,000 as compared to the net loss of approximately $377,000 for the six months ended
June 30, 2007.

The following table sets forth
selected segment and consolidated operating results and other operating data for the
periods indicated. Segment operating income consists of the revenues generated by a
segment, less the direct costs of revenue and selling, general and administrative costs
that are incurred directly by the segment. Unallocated corporate costs include costs
related to administrative functions that are performed in a centralized manner that are
not attributable to a particular segment.

|                                               | Three Months Ended
June 30, | Six Months Ended
June 30,
|---------------------------------------------- | --------------------------- | -------------------------
|
|Consulting services:                           |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss)                        |                             |                          
|Total assets                                   |                             |                          
|Mobile Telecom Managed Services:               |                             |                          
|Revenues                                       |                             |                          
|Operating income                               |                             |                          
|Total assets                                   |                             |                          
|PKI Credentialing and Managed Services:        |                             |                          
|Revenues                                       |                             |                          
|Operating income (loss) (includes amortization |                             |                          
|expense of $57,598, $45,838, $103,435, and     |                             |                          
|$91,675, respectively)                         |                             |                          
|Total assets                                   |                             |                          
|Total Company                                  |                             |                          
|Revenues                                       |                             |                          
|Operating loss before depreciation expense     |                             |                          
|Depreciation expense                           |                             |                          
|Interest income (expense), net                 |                             |                          
|Net loss                                       |                             |                          
|Total Corporate assets                         |                             |                          
|Total assets                                   |                             |                          

24

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(1)           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 $397,156 in
unallocated corporate costs in general and administrative           expense of which
$104,378 is comprised of stock options expense.

(2)           Includes $55,270 in
amortization expense in cost of sales associated with the           purchase of ORC,
which is not allocated among the segments and includes $279,360           in unallocated
corporate costs in general and administrative expense.

(3)           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 $959,845 in
unallocated corporate costs in general and administrative           expense of which
$476,080 is comprised of stock options expense.

(4)           Includes $110,539 in
amortization expense in cost of sales associated with the           purchase of ORC,
which is not allocated among the segments and includes $536,414           in unallocated
corporate costs in general and administrative expense.

25

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# 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 2007 and through the period ended June 30, 2008, operations
were materially financed with working capital, borrowings against the Companys
credit facilities with Cardinal Bank and equity financing through the issuance of common
stock. During the second quarter of 2008 the Company raised approximately $4.0 million
dollars in additional equity financing through the sale of common stock with two
institutional investors. During the first quarter of 2008 the Company modified its senior
lending facility with Cardinal Bank for up to $5,000,000 through April 1, 2009 at a rate
of prime plus 25 basis points. We have no outstanding balances on our line of credit and
approximately $1.8 million outstanding on our 4 year installment note at June 30, 2008
with Cardinal Bank. Further, on November 5, 2007, the Company entered into a series of
agreements with Protexx, Inc., that allowed for Protexx, Inc. with approval by WidePoint
to borrow up to $330,000 from WidePoint on an installment basis between November 5, 2007
and July 31, 2008. The short-term borrowing facility was fully collateralized against all
of the assets of Protexx, Inc. As of June 30, 2008, Protexx, Inc. had drawn down
approximately $285,000 against the credit facility and on July 31, 2008, the Company
purchased the assets of Protexx for $1.00 and the assumption of the credit facility.

Net cash provided by operating
activities for the quarter ended June 30, 2008, was approximately $13,000, as compared to
cash provided by operating activities of $730,000 for the quarter ended June 30, 2007. The
decrease in cash generated from operating activities for the quarter ended June 30, 2008,
was primarily a result of a reduction in accounts receivable attributable to increased
collections of outstanding balances, partially offset by a substantial paydown of accounts
payable and the reduction of accrued liabilities. Variability in Days Sales Outstanding
and increases in revenue growth as a result of our acquisition of iSYS in January 2008
were contributing factors to these changes.Net cash used in investing activities
for the quarter ended June 30, 2008, was approximately $36,000, as compared to $170,000
used in investing activities in the quarter ended June 30, 2007. The decrease in net cash
used in investing activities primarily reflects lesser asset purchases made within the
quarter. Net cash provided by financing activities amounted to approximately $2,513,000 in
the quarter ended June 30, 2008, as compared to approximately $7,000 of net cash used in
financing activities in the quarter ended June 30, 2007. The increase in net cash provided
by financing activities primarily relates to the Companys recent equity raise of
approximately $4.0 million during the quarter ended June 30, 2008, partially offset by the
repayment of approximately $1.5 million in notes payable.

As of June 30, 2008, the Company had
a net working capital of approximately $3,275,000. The Companys primary source of
liquidity consists of approximately $4.8 million in cash and cash equivalents and
approximately $7.0 million of accounts receivable. The Companys primary use of
liquidity consists of $6.6 million in accounts payable and accrued expenses.

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 that can
substantially change the Companys outlook.

The Company has embarked upon several
new initiatives to expand revenue growth that have included a combination of organic
growth and strategic merger and acquisition opportunities. 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.

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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 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 recently added to its working capital by
selling shares of its common stock in private transactions. The approximate $4.0 million
in proceeds during the 2nd quarter of 2008 has bolstered the Companys
ability to finance working capital requirements and paydown debt allowing for the Company
to integrate and expand our services offerings. 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 4T. 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 in our internal
control over financial reporting discussed below our management, including our Chief
Executive Officer and Chief Financial Officer, concluded that our disclosure controls and
procedures were not effective at the reasonable assurance level as of the end of the
period covered by this report.

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

# Changes in Internal
Control Over Financial Reporting

In our Managements Report on
Internal Control Over Financial Reporting included in the Companys Form 10-K for the
year ended December 31, 2007, management concluded that our internal control over
financial reporting was not effective due to the existence of the material weaknesses as
of December 31, 2007, 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.

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| |  | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The material weaknesses described
above comprise control deficiencies that we discovered in the fourth quarter of fiscal
year 2007 and in the financial close process for fiscal year 2007.

Beginning during the fourth quarter
of fiscal 2007 and in the first quarter of fiscal year 2008, we formulated a remediation
plan and initiated remedial action to address those material weaknesses. We continue to
work on the remedial action addressing those material weaknesses. The elements of the
remediation plan are as follows:

| |  | 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 been
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 have put into place policies and procedures
to document such evidence to comply with our internal control requirements. We have also
retained a financial consultant to assist us in further reviewing and improving our
internal control processes.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The above remedial measures initiated
during the fourth quarter of fiscal year 2007 and pursued in the quarters ended March 31,
2008 and June 30, 2008, have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

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# PART II  OTHER
INFORMATION

# ITEM 6. EXHIBITS.

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

|10.1 | Amendment,
dated as of July 25, 2008, between the Registrant and Steven L. Komar (Incorporated
herein by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed July 31, 2008).*
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Amendment,
dated as of July 25, 2008, between the Registrant and James T. McCubbin (Incorporated
herein by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K,
filed July 31, 2008).*
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Asset
Purchase Agreement, dated July 31, 2008, by and among WidePoint Corporation, Protexx
Acquisition Corporation, Protexx Incorporated,  Peter Letizia, Charles B. Manuel,
Jr. and William Tabor. (Incorporated herein by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed August 6, 2008).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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, 2008 | /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               

30