SECURITIES AND EXCHANGE
COMMISSION  Washington, D.C. 20549

_________________

# FORM 10-Q

(Mark One)

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

| | For
the quarterly period endedMarch 31, 2006
| | --------------------------------------------

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 number000-23967

|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

|                                                                                  | 
|--------------------------------------------------------------------------------- | 
|Former name, former address and former fiscal year, if changed since last report.

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.    YesX   No

Indicate
 by check mark  whether  the  registrant  is a large  accelerated  filer, an accelerated filer,
or a non-accelerated filer (as  defined in Rule
12b-2  under the  Securities Exchange Act of 1934).

| | Large
accelerated filer [_]        Accelerated filer [_]        Non-accelerated
filer [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

APPLICABLE
 ONLY TO CORPORATE  ISSUERS:  Indicate the number of shares  outstanding of each of the
issuer's  classes of common stock, as of May 11, 2006: 42,300,950 shares of common
stock, $.001 par value per share.

---

---

WIDEPOINT CORPORATION

INDEX

|                                                                    | Page No.
|------------------------------------------------------------------- | --------
|Part I.      FINANCIAL INFORMATION                                  |         
|Item 1.  Condensed Consolidated Financial Statements               
|Condensed Consolidated Balance Sheets as of March 31, 2006,        
|(unaudited) and December 31, 2005 (unaudited)                       | 1       
|Condensed Consolidated Statements of Operations for the three      
|months ended March 31, 2006 and 2005 (unaudited)                    | 2       
|Condensed Consolidated Statements of Cash Flows for the three      
|months ended March 31, 2006 and 2005 (unaudited)                    | 3       
|Notes to Condensed Consolidated Financial Statements                | 4       
|Item 2.  Management's Discussion and Analysis of Financial         
|Condition and Results of Operations                                 | 18      
|Item 3.  Quantitative and Qualitative Disclosures About Market Risk | 23      
|Item 4.  Controls and Procedures                                    | 24      
|Part II.      OTHER INFORMATION                                    
|Item 1A.  Risk Factors                                              | 25      
|Item 6.  Exhibits                                                   | 25      
|SIGNATURES                                                          | 26      
|CERTIFICATIONS                                                      |         

---

# PART 1. FINANCIAL
INFORMATION

# ITEM 1. CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.

# WIDEPOINT CORPORATION
AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                            | March 31,
2006 | December 31,
2005
|------------------------------------------------------------------------------------------- | -------------- | -----------------
|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:                                                                        |                |                  
|Accounts payable                                                                            |                |                  
|Accrued expenses                                                                            |                |                  
|Deferred revenue                                                                            |                |                  
|Short-term portion of deferred rent                                                         |                |                  
|                                                                                            |                |                  
|Total current liabilities                                                                   |                |                  
|                                                                                            |                |                  
|Long-term portion of deferred rent                                                          |                |                  
|Deferred income tax liability                                                               |                |                  
|                                                                                            |                |                  
|Total liabilities                                                                           |                |                  
|Temporary equity:                                                                           |                |                  
|Preferred stock, $0.001 par value; 10,000,000 shares                                        |                |                  
|authorized; 0 and 1,195,714 shares issued and outstanding, respectively                     |                |                  
|Stockholders' equity:                                                                       |                |                  
|Preferred stock, $0.001 par value; 10,000,000 shares                                        |                |                  
|authorized; 998,714 and 0 shares issued and outstanding, respectively                       |                |                  
|Common stock, $0.001 par value; 110,000,000 and 50,000,000 shares authorized, respectively; |                |                  
|39,594,379 and 37,297,729 shares issued and outstanding, respectively                       |                |                  
|Common stock issuable, $0.001 par value; 1,905,390 and 544,398 shares, respectively         |                |                  
|Stock warrants                                                                              |                |                  
|Additional paid-in capital                                                                  |                |                  
|Accumulated deficit                                                                         |                |                  
|                                                                                            |                |                  
|Total stockholders' equity                                                                  |                |                  
|                                                                                            |                |                  
|Total liabilities, temporary equity 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
March 31,
|----------------------------------------------- | ----------------------------
|
|
|Revenues, net                                   |                             
|Cost of sales (including depreciation and       |                             
|amortization of $101,837, and $70,550,          |                             
|respectively, and stock compensation expense of |                             
|$0 and $370,190, respectively)                  |                             
|                                                |                             
|Gross profit                                    |                             
|Sales and marketing                             |                             
|General & administrative                        |                             
|Depreciation expense                            |                             
|                                                |                             
|Loss from operations                            |                             
|Other income, net:                              |                             
|Interest income                                 |                             
|Interest expense                                |                             
|Gain from financial instrument                  |                             
|Other                                           |                             
|                                                |                             
|Net earnings  (loss)                            |                             
|                                                |                             
|Basic net (loss) earnings per share             |                             
|Basic weighted average shares outstanding       |                             
|Diluted net (loss) earnings per share           |                             
|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
March 31,
|-------------------------------------------------------- | ----------------------------
|
|
|Cash flows from operating activities:                    |                             
|Net (loss) earnings                                      |                             
|Adjustments to reconcile net earnings (loss) to net cash |                             
|provided by (used in) operating activities:              |                             
|Depreciation expense                                     |                             
|Amortization expense                                     |                             
|Stock compensation expense                               |                             
|Deferred income taxes                                    |                             
|Deferred financing costs                                 |                             
|Gain from financial instrument                           |                             
|Stock options expense                                    |                             
|Changes in assets and liabilities                        |                             
|Accounts receivable                                      |                             
|Prepaid expenses and other assets                        |                             
|Other assets                                             |                             
|Accounts payable and accrued expenses                    |                             
|Net cash (used in) provided by operating                 |                             
|Activities                                               |                             
|                                                         |                             
|Net cash flows from investing activities:                |                             
|Purchase of property and equipment                       |                             
|Software development costs                               |                             
|                                                         |                             
|Net cash flows used in investing activities              |                             
|                                                         |                             
|Net cash used in financing activities                    |                             
|Borrowings on notes payable                              |                             
|Payments on notes payable                                |                             
|Collections on related party notes                       |                             
|Costs related to registration statement                  |                             
|Proceeds from exercise of stock options                  |                             
|Proceeds from exercise of warrants                       |                             
|Costs related to warrant exercise                        |                             
|                                                         |                             
|Net cash used in financing activities                    |                             
|                                                         |                             
|Net decrease in cash                                     |                             
|                                                         |                             
|Cash and cash equivalents, beginning of                  |                             
|period                                                   |                             
|                                                         |                             
|Cash and cash equivalents, end of period                 |                             
|                                                         |                             
|Supplementary information:                               |                             
|Liabilities incurred but not yet paid relating to        |                             
|registration statement                                   |                             
|Cash paid for interest                                   |                             
|                                                         |                             

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

3

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# WIDEPOINT CORPORATION
AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

WidePoint Corporation
(WidePoint or the Company) is a technology-based provider of
product and services to both the government sector and commercial markets. We specialize
in providing systems engineering, information technology services and information
assurance in the form of identity management services. Our subsidiary, Operational
Research Consultants, Inc. (ORC), is the leading provider of eAuthentication
federal credentialing and federal compliant Public Key Infrastructure (PKI)
managed services to the United States Government. We intend to grow over the next few
years through a combination of organic growth, the acquiring of selective strategic assets
and by operational efficiencies among our subsidiaries.

On October 25, 2004, we completed the
acquisition of ORC. ORC specializes in information technology (IT) integration
and secure authentication processes and software, and providing services to the United
States Government. ORC has been at the forefront of implementing PKI technologies. 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
United States Government. Based on asymmetric key cryptography, 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. The user provides his or her public key to any and all desired persons or
entities. The user does not share the private key with anyone else. The public key will
encrypt all information and/or communication from any sender and the private key will
allow only the holder of the private key to unlock and decrypt such information and/or
communication. Thus, the algorithms used in PKI technologies help to achieve
authentication of users and information, integrity of all data and communications,
non-repudiation or rejection of data and communications, and support confidentiality of
data and communications. PKI also speeds up and simplifies the delivery of products and
services by providing electronic approaches to processes that historically have been paper
based. These electronic solutions depend on PKI for identification and authentication;
data integrity; confidentiality of information and transactions; and non-repudiation to
facilitate mission-related transactions internal to an organization and with external
organizations. ORC is currently the only fully-approved entity that has been designated by the United
States Government as an External Certificate Authority for the U.S. Government. As such,
ORC is authorized to issue all permissible certificate types and services in accordance
with Defense Information Systems Agency and National Security Agency standards, necessary
for the interoperable, secure exchange of information between U.S. Governmental agencies,
contractors, and international allies such as members of NATO.

We are actively seeking the
acquisition of other companies with complementary technical capabilities and we are
focused on providing IT, software and related services to the U.S. Government (both
defense agencies and civilian agencies), state governments, local agencies, and corporate
clients. If successful, we anticipate that we will become a significantly larger company
with broader capabilities and resources than has been the case historically.

The Company has physical locations in
Oakbrook Terrance, Illinois, Fairfax, Virginia, Alexandria, Virginia, and Chesapeake,
Virginia. The Company employees work at various client locations throughout the upper
Midwest, Texas, and Mid-Atlantic areas of the United States.

In addition, most of the
Companys current costs consist primarily of the salaries and benefits paid to the
Companys technical, marketing and administrative personnel and as a result of our
plan to expand our operations through a combination of internal growth initiatives and
merger and acquisition opportunities, we, expect such costs to increase. The
Companys profitability also depends upon both the volume of services performed and
the Companys ability to manage costs. A significant portion of the Companys
costs is labor related, so the Company must effectively manage these costs to achieve and
increase its profitability. To date, the Company has attempted to maximize its operating
margins through efficiencies achieved by the use of the Companys proprietary
methodologies, and by offsetting increases in consultant salaries with increases in
consultant fees received from our clients. The uncertainties relating to our ability to
achieve and maintain profitability, obtain additional funding to fund our growth strategy
and provide the necessary investment to continue to upgrade our management reporting
systems to meet the continuing demands of the present regulatory changes affect the
comparability of the information reflected in the selected consolidated financial
information presented above. We believe that our cash on hand is adequate to finance
operations through 2006.

4

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# 2. Significant
Accounting Policies

Principles of
Consolidation

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

Use of Estimates

The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the
United States 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 years
financial statements have been reclassified to conform to 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 March 31, 2006 and December 31, 2005
cash balances, were $1,596,699 and $2,131,870, respectively, in interest bearing balances
in one bank in excess of federally insured amounts. At times, cash balances held at
financial institutions were in excess of federally insured limits. The Company places its
temporary cash investments with high-credit, quality financial institutions, and as a
result, the Company believes that no significant concentration of 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, consumer product goods, direct
marketing, healthcare and financial services. Credit is extended based on evaluation of a
customers 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. Accounts 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.

|Description                           | Balance at
Beginning of
Period | Additions
Charged to
Costs and
Expenses | Deductions | Balance at
End of
Period
|------------------------------------- | ------------------------------ | --------------------------------------- | ---------- | ------------------------
|For the quarter ended March 31, 2005, |                                |                                         |            |                         
|Allowance for doubtful accounts       |                                |                                         | $          | --                      
|For the quarter ended March 31, 2006, |                                |                                        
|Allowance for doubtful accounts       |                                |                                         | $          | --                      

5

---

Unbilled accounts receivable on
time-and-materials contracts represent costs incurred and gross profit recognized near the
period-end but not billed until the following period. Unbilled accounts receivable on
fixed-price contracts consist of amounts incurred that are not yet billable under contract
terms. At March 31, 2006 and December 31, 2005, unbilled accounts receivable totaled
$49,162 and $38,977, respectively.

Revenue Recognition

The majority 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 history of losses nor has it
identified any specific risk of loss at March 31, 2006 or on December 31, 2005 due to
termination provisions and thus has not recorded provisions for such events.

The Companys other 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. Revenues collected prior to delivery
of service are recognized as deferred revenues.

Significant Customers

For the quarter ended March 31, 2006,
one customer, Baxter Healthcare Corporation, individually represented approximately 10% of
revenues. 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, including the above customer, could have a material adverse effect
on results. For the quarter ended March 31, 2005, two customers, Tangible Software and The
Department of Homeland Security, individually represented 15% and 14% of revenues,
respectively.

Fair value of financial
instruments

The Companys financial
instruments include cash equivalents, accounts receivable, accounts payable, and
short-term debt and other financial instruments associated with the issuance of the
common stock warrants attributable to the preferred stock capital investment in the
Company in October of 2004. The carrying values of cash equivalents, accounts receivable
and accounts payable approximate their fair value because of the short maturity of these
instruments. The carrying amounts of the Companys bank borrowings under its credit
facility approximate fair value because the interest rates are reset periodically to
reflect current market rates.

Prior to December 31, 2005, the
Companys financial instruments also included a financial instrument in which a
valuation for the warrants from the Barron Partners, LP preferred financing agreement
contained a registration rights agreement, which contained a liquidated damages provision.
Accordingly, a Black Scholes calculation was used to determine the fair value of those
warrants which were classified as a financial instrument. The Financial Instrument was
marked to market at March 31, 2005. All of the warrants associated with the Barron
Partners, LP preferred financing agreement were exercised prior to December 31, 2005 and
therefore no financial instrument existed as of March 31, 2006.

Concentrations of Credit
Risk

Financial instruments potentially
subject the Company to credit risk, which consist of cash and cash equivalents and
accounts receivable. As of March 31, 2006, one customer, The Department of Homeland
Security, accounted for approximately 16%, respectively of accounts receivable. As of
December 31, 2005, one customer, The Department of Homeland Security, individually
represented 30% of accounts receivable.

6

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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.

Property and Equipment

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

|                                                | March 31, | December 31,
|----------------------------------------------- | --------- | ------------
|
|Computers, equipment and software               |           |             
|Less- Accumulated depreciation and amortization |           |             
|                                                |           |             
|                                                |           |             
|                                                |           |             

Depreciation expense is computed
using the straight-line method over the estimated useful lives of three years.

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 Statement of Financial Accounting Standards (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 $46,000, amortization expense for PKI-I and
PKI-II for the three month period ending March 31, 2006. WidePoint recorded approximately
$100,000 of amortization expense for PKI-I and PKI-II for the year ended December 31,
2005. Capitalized software costs included in Other Intangibles at March 31, 2006 and
December 31, 2005 were approximately $0.9 million in each case.

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 Statement of Financial Accounting Standards (SFAS) No. 141,
BusinessCombinations, 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.

7

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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
Loss Per Share

Basic income or loss per share
includes no dilution and is computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period. Diluted income or
loss per share includes the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock. The
treasury stock effect of options and warrants to purchase 6,779,233 shares of common
stock outstanding at March 31, 2006 has not been included in the calculation of the net
loss per share as such effect would have been anti-dilutive. The treasury stock effect of
options and warrants to purchase 18,314,748 shares of common stock outstanding at March
31, 2005, respectively, has been included in the calculation of the net income per share
as such effect was dilutive.

Stock-based compensation

In December 2004, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(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.

Prior to January 1, 2006, the Company
accounted for share-based compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations and elected the disclosure option of SFAS no.
123 as amended by SFAS no. 148, Accounting for Stock-Based Compensation 
Compensation and Disclosure. SFAS No. 123 requires that companies either recognize
compensation expense for grants of stock, stock options and other equity instruments based
on fair value, or provide pro forma disclosure of net income and earnings per share in the
notes to the financial statements. Accordingly, the Company measured compensation expense
for stock options as the excess, if any, of the estimated fair market value of the
Companys stock at the date of grant over the exercise price. The following table
details the effect on net income and earnings per share for the three months ended March
31, 2005 had compensation expense for the stock plans been recorded based on the fair
value method under SFAS No. 123.

8

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|                                                            
|------------------------------------------------------------
|
|Net earnings                                                
|Less: Total stock-based employee compensation expense       
|determined under fair value based method for awards granted,
|modified, or settled, net of related tax                    
|                                                            
|Pro forma net earnings                                      
|Earnings per share:                                         
|Basic  - as reported                                        
|Basic - pro forma                                           
|Diluted - as reported                                       
|Diluted - pro forma                                         

The pro forma disclosure is not
likely to be indicative of pro forma results which may be expected in future years
because of the fact that options vest over several years, pro forma compensation expense
is recognized as the options vest and additional awards may also be granted.

For purposes of determining the
effect of these options, the fair value of each option is estimated on the date of grant
based on the Black-Scholes single-option pricing model assuming the following for the
three months ended March 31, 2005:

|                                |            
|------------------------------- | -----------
|
|Expected dividend yield         | --         
|Expected volatility             | 156%       
|Risk-free interest rate         | 2.70 - 4.13
|Expected option life (in years) | 5          

The amount of compensation expense
recognized under FAS 123(R) during the three months ended March 31, 2006 under our plans
was comprised of the following:

|                                                                         
|-------------------------------------------------------------------------
|
|General and administrative expense                                       
|Share-based compensation before taxes                                    
|Related income tax benefits                                              
|Share-based compensation expense                                         
|Net share-based compensation expenses per basic and diluted common shares

9

---

Since we have cumulative operating
losses as of March 31, 2006 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 quarter ended March 31, 2006, 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.  Share-based compensation expense was not
recognized during the quarter ended March 31, 2005.

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 noted in the following table.
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.  The following assumptions were used to determine share-based compensation
expense for the three-month period ended March 31, 2006:

|                                |     
|------------------------------- | ----
|
|Expected dividend yield         | --  
|Expected volatility             | 153%
|Risk-free interest rate         | 4.8%
|Expected option life (in years) | 4   

A summary of the option activity
under our plans during the period ended March 31, 2006 is presented
below:

|                                    
|------------------------------------
|Non-vested at January 1, 2006       
|Granted                             
|Vested                              
|Non-vested at March 31, 2006        
|Total outstanding at January 1, 2006
|Issued                              
|Cancelled                           
|Exercised                           
|Total outstanding at March 31, 2006 
|Total exercisable at March 31, 2006 

10

---

# 3.   Debt

As of December 31, 2005 and March
31, 2006, respectively, the Company maintained no outstanding balances under our senior
lending agreement with RBC-Centura Bank.  The senior lending agreement was executed on
October 25, 2004 and had a maturity date of October 25, 2005, which was extended until
June 1, 2006 at which time it will expire. The Agreement provides for a $2.5 million
revolving credit facility.   Borrowings under the Agreement are collateralized by the
Company's eligible contract receivables, inventory, all of its stock in certain of our
subsidiaries and certain property and equipment, and bear interest at the Prime Rate.

WidePoint's credit
facility requires that the Company maintain specified financial covenants relating to
fixed charge coverage, interest coverage, and debt coverage, and maintain a certain level
of consolidated net worth. As of and during the quarter ended March 31, 2006 and during
the year ended December 31, 2005, respectively, WidePoint was either in compliance with
each of these financial covenants, received waivers, or was allowed to continue to
utilize the credit facility.  The weighted average borrowings under the revolving portion
of the facility during the quarters ended March 31, 2006 and 2005, were $0 and $1.5
million, respectively.

The
total interest fees paid, was approximately $0 and $20,000, respectively, for the
quarters ended March 31, 2006 and 2005, respectively.

# 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.

During 2004, WidePoint completed the
acquisitions of Operational Research Consultants, Inc.  The Company has also capitalized
software development cost associated with its PKI initiative and has established the
purchase price allocation of the assets acquired and have allocated the purchase price of
the components and software capitalization of goodwill and other intangibles as follows:

|                           
|---------------------------
|Amortized Intangible Assets
|                           
|Gross Carrying
amount      
|                           
|                           
|(1)                        
|                           
|                           
|                           
|                           
|                           
|(2)                        
|                           
|                           
|                           
|(3)                        
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           
|                           

11

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| | (1) | The
ORC intangible is made up of the estimated preliminary 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 4.5 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 4 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 4.5 years and is based upon the contractual
life                assigned to the authority to issue PKI certificates by the federal
government.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total weighted average life of
all of the intangibles is approximately 5 years.

There were no amounts of research and
development assets acquired during the quarter ended March 31, 2006, nor any written-off
in the period.

There were no changes in the carrying
amount of goodwill for the quarter ended March 31, 2006.

The goodwill acquired is associated
with the acquisition of ORC in October of 2004. No impairment was required as of March 31,
2006.

# 5. 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 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 December 31, 2005 the
Company had net operating loss carry forwards of approximately $22,800,000 to offset
future taxable income. These carry forwards expire between 2010 and 2025. Under the
provision of the Tax Reform Act of 1986, when there has been a change in an entitys
ownership of 50 percent or greater, utilization of net operating loss carry forwards
may be limited. As a result of WidePoints equity transactions, the Companys
net operating losses will be subject to such limitations and may not be available to
offset future income for tax purposes.

12

---

# 6. Temporary Preferred
Equity

Temporary Preferred Stock

Our certificate of incorporation
authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par
value per share, of which 0 and 1,195,714 shares were outstanding at March 31, 2006 and
December 31, 2005, respectively.

Pursuant to the Certificate of
Designation of Preferences, Rights and Limitations of Series A Convertible Preferred
Stock, filed with the Secretary of State of the State of Delaware on November 9, 2004,
2,045,714 shares of the Companys preferred stock are designated as Series A
Convertible Preferred Stock having the following rights:

Each share of Series A Convertible
Preferred Stock has a conversion rate equal to $0.175 per share and is convertible at the
option of the holder into ten shares of common stock.

The conversion of the Series A
Convertible Preferred Stock is subject to the following conditions:

| | Subject
to waiver, holders of Series A Convertible Preferred Stock do not have the right to
convert any portion of the preferred stock to the extent that after giving effect to such
conversion, the holder (together with any affiliates of the holder), would beneficially
own in excess of 4.99% of the number of shares of the common stock outstanding
immediately after giving effect to such conversion. In the event the converted shares
when issued and combined with all other shares of common stock beneficially owned by the
holder and its affiliates equals, at any time, more than 4.99% of the total number of
then outstanding shares of common stock, then for so long as such holder and its
affiliates beneficially owns more than 4.99% of the total number of then outstanding
shares of common stock, the holder of the converted shares and its affiliates shall have
no more than 22% of the total voting power of all outstanding shares of common stock at
any time.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Holders of WidePoints Series A
Convertible Preferred Stock are entitled to receive a liquidation preference equal to
$1.75 per share in the event of the liquidation, dissolution, or winding up of the
Companys business.

Holders of Series A Convertible
Preferred Stock are not entitled to voting rights. However, unless approved by the holders
of the outstanding Series A Convertible Preferred Stock, the Company cannot: (a) alter or
change adversely the powers, preferences or rights given to the Series A Convertible
Preferred Stock or alter or amend the certificate of designation relating to the Series A
Convertible Preferred Stock, (b) authorize or create any class of stock ranking as to
dividends or distribution of assets upon a liquidation senior to or otherwise pari passu
with the Series A Convertible Preferred Stock, (c) amend the certificate of incorporation
or other charter documents in breach of the certificate of designations, or (d) increase
the authorized number of shares of Series A Convertible Preferred Stock.

Dividends are not payable with
respect to the Series A Convertible Preferred Stock.

Shares of Series A Convertible Preferred
Stock are subject to automatic conversion generally under the following circumstances: (i)
a change in control of WidePoint, (ii) the consummation of a public offering (with a value
of at least $5 million or more) of our common stock, (iii) upon receipt of the consent of
all holders of the Series A Convertible Preferred Stock, or (iv) in the event that the
fair market value of the outstanding shares of our common stock exceeds $100 million.

As a result of the issuance of a
registration rights agreement that contained a liquidated damages clause, the Company was
required to follow the Emerging Issues Task Force EITF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys
Own Stock by the Company. In light of the required accounting treatment under EITF 00-19,
the entire proceeds of the issuance, other than a nominal amount equal to par value, were
allocated to warrants and as such no proceeds were allocated to the preferred stock
issuance at December 31, 2005. As a result of the effectiveness of the registration
statement registering the underlying shares of common stock on February 9, 2006, the
temporary preferred equity has been reclassified to preferred equity for preferred stock
held as of March 31, 2006.

13

---

Registration Rights
Agreement

The shares of common stock issuable
by WidePoint to Barron upon a conversion of shares of the Series A Convertible Preferred
Stock or an election to exercise all or a portion of the warrants will not be registered
under the Securities Act of 1933. To provide for the registration of such underlying
shares, Barron and WidePoint entered into a registration rights agreement, dated October
20, 2004, requiring WidePoint to prepare and file a registration statement covering the
resale of the shares of common stock underlying the Series A Convertible Preferred Stock
and warrants. The registration statement was filed on January 5, 2005. The registration
rights agreement further required WidePoint to use its best efforts to cause such
registration statement to be declared effective by February 22, 2005 (i.e., 120 days
following the closing of the sale of the Series A Convertible Preferred Stock).

The registration rights agreement
also contains a liquidated damages provision which called for Barron to receive from
WidePoint a specified amount if: (i) WidePoint failed to file a registration statement
covering the underlying shares of common stock; (ii) the registration statement is not
declared effective by February 22, 2005; or (iii) the registration statement is not
effective in the period from April 23, 2005 (i.e., 180 days following the October 25, 2004
closing of the preferred financing) through the two years following the date of the
registration rights agreement, subject to permissible blackout periods and registration
maintenance periods. In the event that one of the aforementioned events occurs, the
registration rights agreement calls for WidePoint to pay Barron a cash amount equal to the
lesser of $20,000 or 1% of the purchase price of that portion of the Series A Convertible
Preferred Stock which has not been converted into common stock as of the occurrence of
such event, with such amount to be paid by WidePoint to Barron on a monthly basis after
the occurrence of such event. Barron was entitled to receive the aforementioned damages
until such time as the registration statement was declared effective. The registration
statement registering the underlying shares of common stock was declared effective on
February 9, 2006. Barron has waived any damages through February 9, 2006. If the
registration statement does not remain effective during the above two-year period, the
maximum future damages that would have to be paid subsequent to that date would be
$160,000.

# 7. Stockholders
Equity

The Company is authorized to issue
50,000,000 shares of common stock, $.001 par value per share. At the annual meeting of
stockholders that was held on January 27, 2005, stockholders approved a proposal to
increase the authorized shares of common stock from 50,000,000 to 110,000,000. As of March
31, 2006 there were 39,594,379 shares of common stock outstanding, which does not include
escrowed common stock of 5,555,556 and 2,721,987, respectively, that are associated with
shares issued and held in escrow pending contingent release. The 5,555,556 shares and
816,597 of the 2,721,987 shares will be cancelled as a result of not meeting performance
measures required for their contingent release. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by the rights of the
holders of shares of Series A Convertible Preferred Stock and of any additional series of
preferred stock that may be designated and issued in the future.

Common Stock

On October 25, 2004, WidePoint
completed the acquisition of Operational Research Consultants, Inc., or ORC, a privately
held IT and engineering firm providing mission-critical sensitive and strategic
information security solutions to the United States Government. Pursuant to the terms of a
Purchase Agreement entered into on October 25, 2004, between the Company and the ORC
shareholders, the Company issued 5,555,556 common shares of the Companys stock and
placed it into an escrow to be released to the ORC shareholders in the event they attain
certain performance parameters in 2004 and 2005. As of December 31, 2004 and 2005,
respectively, no common shares were earned and the 5,555,556 shares are presently being
returned and cancelled.

14

---

On April 30, 2004, the Company closed
upon the acquisition of all the issued and outstanding shares of Chesapeake Government
Technologies, Inc. (Chesapeake), pursuant to the terms of an Agreement and
Plan of Merger, dated as of March 24, 2004. This transaction was accounted for as a
consulting arrangement because Chesapeake did not meet the definition of a business under
FAS 141. WidePoint issued 4,082,980 shares of its common stock to stockholders of
Chesapeake in consideration for all of the issued and outstanding shares of Chesapeake
owned by them. In conjunction with this closing, the sole stockholders also entered into
an escrow agreement and deposited 3,266,384 shares of the 4,082,980 newly issued shares of
WidePoint common stock into escrow. The 3,266,384 shares of common stock placed into
escrow was not recorded in equity at the time of the acquisition and will only be released
to the Chesapeake shareholders in the event of the satisfaction of certain conditions set
forth in the merger agreement, which provides that during the period commencing after the
closing of the merger and ending on December 31, 2005, the 3,266,384 shares of common
stock will be released to the Chesapeake shareholders in a ratio based on the amount of
revenues actually received by the Company from the business acquired from Chesapeake. The
December 31, 2005 escrow expiration date could have been extended for one additional year
in the event that it was determined that Chesapeake had achieved certain performance
levels in the latter part of 2005. This event did not occur and as a result the escrow
expiration date was not extended beyond December 31, 2005. Further, in the event that
WidePoint did not receive certain levels of revenues from the business acquired from
Chesapeake, then any of the 3,266,384 shares of common stock to which the Chesapeake
shareholders had not become entitled to receive would be returned to the Company. The
Company recorded in equity 816,596 of the common shares out of 4,082,980 common shares
issued to the Chesapeake shareholders at the time of the acquisition. The Company recorded
the 816,596 common shares at the time of the acquisition as common stock issuable and upon
the issuance of the common stock by the Companys transfer agent on July 13, 2004,
reclassified the common shares as common stock. Further, for the period ending December
31, 2004, the Company recorded in equity and released 544,398 common shares from the
escrow to the Chesapeake shareholders after the filing of the Companys Form 10-K
with the Securities and Exchange Commission with 2,721,987 common shares continuing to be
held within escrow and not recorded within equity. The Company recorded as compensation
expense the initial 816,596 shares issued at the time of the acquisition of Chesapeake. As
a result of meeting certain performance measures, the Company recorded in equity the
release of 544,398 additional common shares on December 31, 2004. These shares were
recorded as common stock issuable as they had not been released from escrow as of December
31, 2004, per an escrow agreement between the Company and the original Chesapeake
shareholders. The remaining unearned Chesapeake shares that had not met certain
performance measures as of December 31, 2004 were not recorded within equity. For the one
year period ending December 31, 2005, the Chesapeake shareholders earned 1,905,390, which
have been recorded as common stock issuable. The remaining 816,597 shares are in the
process of being returned and cancelled. The 1,905,390 shares earned are in the process of
being released from escrow.

Common stock issuable

The Company entered into an escrow
agreement with the original Chesapeake shareholders, which required certain performance
measures to be achieved to cause the shares to be earned and subsequently released. The
difference between the dates the shares were earned and subsequently released from escrow
resulted in a timing difference, which required the Company to record the shares when they
were earned as common stock issuable and subsequently reclassified as common stock upon
the release of the shares from escrow. The Company recorded the shares that have been
earned per certain performance measures at each recording date, while the escrow agreement
only allowed for the release of the shares earned after the Companys fiscal year
filings of its financial statements on Form 10-K, for each respective period, per the
terms of the escrow agreement.

On December 31, 2004 the original
shareholders of Chesapeake earned 544,398 shares, which was released from escrow after the
filing of the Companys Form 10-K for the period ending December 31, 2004, per an
escrow agreement between the Company and the original Chesapeake shareholders. As such,
the shares were recorded as Common Stock Issuable as of December 31, 2004. Upon the filing
of the Companys Form 10-K for the period ending December 31, 2004, the shares were
released from escrow and at that time reclassified as Common Stock. The remaining unearned
Chesapeake common shares held in escrow that have not met certain performance measures as
of December 31, 2005 are in the process of being cancelled and the shares earned are in
the process of being released from escrow.

15

---

Stock Warrants

On November 1, 2005, the Company
issued a warrant to purchase 54,878 shares 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,
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 warrant has a term of 5 years. The Company used a fair-value option pricing model to
value this stock warrant at approximately $14,291. This value has been reflected as part
of stock warrants in the stockholders equity section of the consolidated balance
sheet and was being amortized over the life of the debt as interest expense.

# 8. Financial
Instrument

In October of 2004, the Company
issued warrants to purchase 10,228,571 shares of common stock to Barron Partners, LP as
part of a preferred stock financing. The warrants have a term of 5 years. The Company used
a fair-value option pricing model to value these stock warrants. The value of these
warrants has been reflected as a financial instrument in the short-term liabilities
section of the consolidated balance sheet as a result of the issuance of a registration
rights agreement that included a liquidated damages clause, which is linked to an
effective registration of such securities. Accordingly, the Company applied EITF 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a Companys Own Stock and accounted for the warrants as a liability. In light of
the required accounting treatment under EITF 00-19, the Company was also required to value
the fair market price of the financial instrument as of March 31, 2005. The Company has
recorded a gain on the financial instrument of $996,263 for the period ending March 31,
2005, to adjust the difference between the fair-value of these warrants and the market
price. As of December 31, 2005, all of the warrants issued to Barron Partners, LP were
exercised. As a result, the Company was not required to value the fair market price of the
financial instruments for the period ending March 31, 2006 since the underlying warrants
which were reflected as a financial instrument no longer existed.

# 9. 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. The PKI credentialing and managed services
segment provides PKI credentialing and managed services to United States federal agencies
and federal contractors as a result of regulatory compliance requirements.

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
cost 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:

16

---

|                                                          | Three Months Ended
March 31,
|--------------------------------------------------------- | ----------------------------
|
|Consulting services:                                      |                             
|Revenues                                                  |                             
|Operating income                                          |                             
|Total assets                                              |                             
|PKI Credentialing and Managed Services                    |                             
|Revenues                                                  |                             
|Operating loss (includes amortization expense of $45,838, |                             
|and $14,550, respectively)                                |                             
|Total assets                                              |                             
|Certificates issued                                       |                             
|Total Company                                             |                             
|Revenues                                                  |                             
|Operating loss                                            |                             
|Depreciation expense                                      |                             
|Interest income (expense), net                            |                             
|Gain from financial instruments                           |                             
|Other income                                              |                             
|Net (loss) income                                         |                             
|Total Corporate assets                                    |                             

(1)  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 $208,448 in unallocated corporate costs in
general and administrative expense.

(2) Includes $370,190 in
compensation expense in cost of sales associated with the Chesapeake acquisition, which
is not allocated among the segments, 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 $211,970 in unallocated corporate costs in general and administrative expense.

# 10. Litigation

The Company is not involved in any
material legal proceedings.

17

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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, 2005.

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 technology-based provider of product and services to both the
government sector and commercial markets. We specialize in providing systems engineering,
information technology services and information assurance in the form of identity
management services. Our subsidiary, Operational Research Consultants, Inc. ("ORC"), is
the leading provider of E-Authentication federal credentialing and federal compliant
Public Key Infrastructure ("PKI") managed services to the federal government. We intend
to grow over the next few years through a combination of organic growth, the acquiring of
selective strategic assets and by operational efficiencies among our subsidiaries.

On October 25, 2004, we completed
the acquisition of ORC. 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 (OPKIO) technologies. 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. Based on asymmetric key cryptography, 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. The user provides his or her public key to any and all desired persons or
entities. The user does not share the private key with anyone else. The public key will
encrypt all information and/or communication from any sender and the private key will
allow only the holder of the private key to unlock and decrypt such information and/or
communication. Thus, the algorithms used in PKI technologies help to achieve
authentication of users and information, integrity of all data and communications,
non-repudiation or rejection of data and communications, and support confidentiality of
data and communications. PKI also speeds up and simplifies the delivery of products and
services by providing electronic approaches to processes that historically have been
paper based. These electronic solutions depend on PKI for identification and
authentication; data integrity; confidentiality of information and transactions; and
non-repudiation to facilitate mission-related and transactions internal to an
organization and with external organizations. ORC is currently the only fully-approved entity that has
been designated by the United States Government as fully compliant to issue certificates
as an External Certificate Authority for the U.S. Government. As such, ORC is authorized
to issue all permissible certificate types and services in accordance with Defense
Information Systems Agency and National Security Agency standards, necessary for the
interoperable, secure exchange of information between U.S. Governmental agencies,
contractors, and international allies such as members of NATO.

With the addition of the customer
base and the increase in revenues attributable from the ORC acquisition, WidePoint's
opportunity to leverage and expand further into the federal marketplace has improved
dramatically. ORC's 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 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 been augmented by our recent acquisitions and internal growth
initiatives.

18

---

As a result of these actions
WidePoint's total revenues increased by approximately $14,000 from $2.67 million for the
period ending March 31, 2005 to $2.68 million for the period ending March 31, 2006.  Our
PKI credentialing and managed services segment experienced revenue growth of
approximately 262% with revenues increasing approximately $138,000 from $85,000 for the
period ending March 31, 2005, to $223,000 for the period ending March 31, 2006 as a
result of continuing early adoption of the Federal Governments mandate under the Homeland
Security Directive No. 12 ("HSPD-12").  We issued 1,733 certificates for the period ended
March 31, 2006 as compared to 783 certificates for the period ended March 31,
2005.  Our consulting services segment experienced
declining revenues of approximately $123,000 from $2,584,000 for the period ending March
31, 2005 as compared to $2,461,000 for the period ending March 31, 2006 as a result of
delays in awards and renewals of several contracts, which we expect to enter into during
the second and third quarters of 2006.

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 subject our revenues and operating results to significant
variation 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 and variation in the volume of activity as well as in the number of contracts
commenced or completed during any quarter may cause significant variations in operating
results from quarter to quarter.

With our recent acquisition of 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 30. If a budget for
the next fiscal year has not been approved by that date, our clients may have to suspend
engagements that we are working on until a budget has been approved.  Such suspensions
may cause us to realize lower revenues in the fourth 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 and
implements 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 March 31, 2006 as
Compared to Three Months Ended March 31, 2005

Revenue.  Revenue for the three
month  period  ended March 31,  2006 was  approximately  $2,684,000  as compared to
approximately  $2,670,000  for the three month period ended March 31, 2005.  The increase
in revenue was  primarily attributable to an increase in our Public Key  Infrastructure
 ("PKI")  credentialing and managed services segment, which was partially  offset by a
slight  decline in our  consulting  services  segment as a result of delays in the award
and  renewal  of  several  contracts  which the  Company  anticipates  to occur  during
 the second and third quarters of 2006.  Our PKI  credentialing  and  managed
 services  segment  experienced  revenue  growth of approximately  262% with revenues
 increasing  approximately  $138,000 from $85,000 for the period ending March 31, 2005 to
$223,000  for the period  ending  March 31, 2006 as a result of  continuing  early
 adoption of the federal government's  mandate under the Homeland  Security  Directive
No. 12 ("HSPD-12").  Our consulting  services segment experienced  declining  revenues of
approximately  $123,000 from $2,584,000 for the period ending March 31, 2005 as compared
 to  $2,461,000  for the period  ending  March 31,  2006 as a result of delays in awards
and  renewals  of several contracts, which we expect to enter into during the second
quarter of 2006.

19

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Cost of sales.  Cost of sales for
the three month period ended March 31, 2006,  was  approximately  $1,967,000,  or 73% of
revenues,  a decrease of approximately  $306,000 from cost of sales of approximately
 $2,273,000,  or 85% of revenues,  for the  three  month  period  ended  March  31,
 2005.  The  decrease  in cost of sales  was  primarily attributable to the  compensation
 expense of  approximately  $370,000 from the earnout of 544,397  escrowed shares for the
three month period  ending  March 31, 2005 that did not recur  during the three month
 period  ending March 31, 2006.

Gross  profit.  As a result of the
above,  gross  profit for the three  month  period  ended  March 31,  2006,  was
approximately  $717,000,  or  27% of  revenues,  an  increase  of  approximately
 $320,000  over  gross  profit  of approximately $397,000, or 15% of revenues, for the
three month period ended March 31, 2005.

Sales  and  marketing.  Sales  and
 marketing  expense  for the three  month  period  ended  March  31,  2006,  was
approximately  $204,000,  or 8% of revenues,  an increase of  approximately  $28,000,  as
compared to approximately $176,000,  or 7% of  revenues,  for the three month  period
 ended March 31,  2005.  The  increase  was  materially attributable  to increased  sales
and marketing  expenses  which we initiated  during the three month period ending March
31, 2005 to expand our sales efforts  associated with our PKI  credentialing  and managed
services  offerings and to expand our sales staff.

General and  administrative.
 General and administrative  expenses for the three month period ended March 31, 2006,
were  approximately  $780,000,  or  29%  of  revenues,  an  increase  of  approximately
 $52,000,  as  compared  to approximately  $728,000,  or 27% of  revenues,  incurred by
the Company for the three month  period ended March 31, 2005.  The  increase in general
 and  administrative  expenses  for the three  months  ended  March 31,  2005,  was
primarily  attributable  to our adoption of FAS 123R and the effect of recognizing
 approximately  $61,000 in stock option expense.

Depreciation.  Depreciation  expense
for the three month period ended March 31, 2006, was approximately  $7,000, or less than
1% of  revenues,  an  increase  of  approximately  $800,  as  compared  to  approximately
 $6,200 of such expenses,  or less than 1% of  revenues,  recorded by the Company for the
three month  period ended March 31, 2005. The increase in  depreciation  expense for the
three month period ended March 31, 2006, was primarily  attributable to greater amounts
of depreciable assets.

Interest  income.  Interest  income
for the three month period ended March 31, 2006,  was $18,349,  or less than 1% of
revenues,  an increase of $17,579 as compared to $770,  or less than 1% of revenues,  for
the three month period ended March 31,  2005.  The  increase  in interest  income for the
three month  period  ended March 31,  2005,  was primarily  attributable  to greater
 amounts of cash and cash  equivalents  along with higher  short-term  interest rates
that were available to the Company on investments in money market accounts.

Interest expense.  Interest expense
for the three month period ended March 31, 2006, was $1,596, or less than 1% of revenues,
a decrease of $51,187 as compared to $52,783, or 2% of revenues, for the three month
period ended March 31, 2005.  The decrease in interest expense for the three month period
ended March 31, 2006 was primarily attributable to WidePoint's decrease in interest
expense associated with its recent secured senior lending facility with RBC-Centura which
was utilized in association with the purchase of ORC.

Gain on Financial instrument.  There
was no gain on financial instrument for the three month period ended March 31, 2006 as a
result of the elimination of the financial instrument when all of the Barron warrants
were exercised in December of 2005.  The gain from financial instrument for the three
month period ended March 31, 2005, was approximately $996,000. The gain on financial
instrument represents the decrease during the three months ended March 31, 2005 in the
estimated fair value of the warrants issued to Barron Partners, L. P. in connection with
the preferred stock financing.  The estimated fair value of the warrants decreased
principally because the estimated volatility of the Company's stock declined.  This
decline in turn resulted from the relatively narrow trading range of the Company's stock
in the quarter as compared to past history.  A less volatile stock provides a lower
probability that the warrant holder will be able to eventually realize a gain on
exercise.  The effect of the decreased estimated volatility was partially offset by the
increase in the value of the Company stock underlying the warrants, as well as the
increased market interest rates during the quarter, which have an upward effect on the
warrant value.

20

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Other.  There was no other  income
for the three month  period  ended March 31,  2006.  Other  income for the three month
 period  ended  March 31,  2005,  was  $2,150,  or less  than 1% of  revenues.  Other
 income  was  primarily attributable to finder's fees.

Net  loss.  As a result  of the
 above,  the net loss  for the  three  month  period  ended  March  31,  2006,  was
approximately  $258,000 as compared to the net income of  approximately  $433,000  for
the three months ended March 31, 2005.

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
March 31,
|--------------------------------------------------------- | ----------------------------
|
|Consulting services:                                      |                             
|Revenues                                                  |                             
|Operating income                                          |                             
|Total assets                                              |                             
|PKI Credentialing and Managed Services                    |                             
|Revenues                                                  |                             
|Operating loss (includes amortization expense of $45,838, |                             
|and $14,550, respectively)                                |                             
|Total assets                                              |                             
|Certificates issued                                       |                             
|Total Company                                             |                             
|Revenues                                                  |                             
|Operating loss                                            |                             
|Depreciation expense                                      |                             
|Interest income (expense), net                            |                             
|Gain from financial instruments                           |                             
|Other income                                              |                             
|Net (loss) income                                         |                             
|Total Corporate assets                                    |                             

(1)  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 $208,448           in
unallocated corporate costs in general and administrative expense.

(2)  Includes
$370,190 in compensation expense in cost of sales associated with the
          Chesapeake acquisition, which is not allocated among the segments, 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 $211,970 in
          unallocated corporate costs in general and administrative expense.

21

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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 2005 and through the quarter ended March 31, 2006,
operations were materially financed with working capital, senior debt and the proceeds
from a convertible preferred stock issuance.

Cash used in operating activities for
the quarter ended March 31, 2006, was approximately $324,500 as compared to cash provided
by operating activities of approximately $169,600 for the quarter ended March 31, 2005.
The decrease in cash balances available for operating activities for the quarter ended
March 31, 2005, was primarily a result of a reduction in accounts payable as we paid
professional fees, broker dealer commissions, and consulting fees associated with our Form
S-1 filing, financial restatements, and warrant exercises. Capital expenditures in
property and equipment were approximately $11,000 for the quarter ended March 31, 2006, as
compared to capital expenditures in property and equipment of approximately $1,000 for the
quarter ended March 31, 2005.

As of March 31, 2006, the Company had
a net working capital of approximately $2.9 million. WidePoints primary source of
liquidity consists of approximately $1.9 million in cash and cash equivalents and
approximately $2.6 million of accounts receivable. The decrease in accounts receivable was
primarily the result of the Companys seasonally reduced revenues billed in the
quarter ending December 31, 2005 as compared to quarter ending March 31, 2006 and
improvements in our collection times. Current liabilities include approximately $1.5
million in accounts payable and accrued expenses. The material decrease in liabilities is
predominately the result of the payment of several non-recurring fees and commissions
associated with the Companys Form S-1 filing, financial restatements, and warrant
exercises which occurred in 2005 and the elimination of the financial instrument as of
December 31, 2005.

The Companys business
environment is characterized by rapid technological change, experiences times of high
growth and contraction and is influenced by material events such as mergers and
acquisitions that can substantially change the Companys outlook.

Since 2002, WidePoint has embarked
upon several new initiatives to counter the current negative environment within our
industry and expand our capacity to restore revenue growth. The Company requires
substantial working capital to fund the future growth of its business, particularly to
finance accounts receivable, sales and marketing efforts, and capital expenditures.

There are currently no commitments
for capital expenditures. 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.

On October 25 and 29, 2004,
WidePoint completed financings with Barron Partners L.P. (Barron), a private
equity fund that engages in investing primarily in private investments in publicly traded
entities, for an aggregate amount of $3,580,000, under a preferred stock purchase
agreement and related agreements. Net proceeds from the financing after costs and
expenses, including fees of finders and agents, were approximately $3,030,000. WidePoint
issued an aggregate of 2,045,714 shares of its Series A Convertible Preferred Stock that
are convertible into an aggregate of 20,457,143 shares of its Common Stock at a conversion
rate equal to $0.175 per share. In addition, WidePoint issued to Barron a warrant to
purchase up to an additional 10,228,571 shares of its Common Stock at an exercise price of
$0.40 per common share. The shares of Common Stock which may be acquired by Barron upon
its conversion of its Series A Convertible Preferred Stock and/or the exercise of its
warrant are subject to contractual restrictions which restrict the ability of Barron and
its affiliates to acquire shares of Common Stock which equal no more than 4.99% of the
outstanding shares of WidePoints Common Stock at any time. This contractual
restriction may be removed upon 61 days notice to WidePoint from Barron, but in the event
Barron elects to remove this restriction, then Barron and its affiliates agreed that
Barron and its affiliates can only vote the shares of Common Stock held by Barron and its
affiliates which result in Barron and its affiliates having no more than 22% of the total
voting power of all outstanding shares of WidePoints Common Stock at any time. As a
result of the Barron financing transaction, WidePoint issued warrants to Westcap
Securities, Inc., a registered broker-dealer and WidePoints placement agent in such
transaction, to purchase 511,428 shares of Common Stock at an exercise price of $0.40 per
share, which warrants expire in October 2009.

22

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Pursuant to the registration rights
agreement, between Barron and WidePoint, related to the stock issuances described in the
preceding paragraph, WidePoint filed a registration statement on January 5, 2005, covering
the resale of the shares of Common Stock issuable upon conversion and/or exercise of the
Series A Convertible Preferred Stock and the warrants issued to Barron. Under the
agreement, if the registration statement was not declared effective by April 23, 2005 and
thereafter kept effective through October 20, 2007, subject to permissible blackout
periods and registration maintenance periods, then WidePoint would be required to pay
Barron a maximum penalty of up to $20,000 for each month the registration statement was
not effective. Barron waived this penalty provision through February 9, 2006, when the
registration statement was declared effective by the SEC.

WidePoint 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 ORC or
any other major new subsidiaries, might require external financing that could include
additional debt or equity capital. The Company obtained a one year senior line of credit
from RBC-Centura Bank in October 2004 for up to $2.5 million dollars, collateralized
against accounts receivables, that also allows for the expansion of this line of credit up
to $5.0 million upon the successful completion of an additional acquisition. No borrowings
under the line of credit were outstanding at March 31, 2006. The interest rate on the line
of credit is variable, and is based upon the prime lending rate. Our failure to comply
with the restrictive covenants under our revolving credit facility could result in an
event of default, which, if not cured, amended, or waived, could result in us being
required to repay these borrowings before their due date. To date any covenants with which
we have not been compliant have either been amended or waived or we have been allowed to
continue to utilize the line of credit. At March 31, 2006,2005 we currently are not in
compliance with two of our covenants, which includes our EBITDA to debt ratio covenant and
our net income covenant. RBC-Centura has extended our line of credit until June 1, 2006
and continues to let us draw from this line. Presently we have no borrowings under our
line of credit but if we were to effect borrowings and were forced to refinance these
borrowings on less favorable terms, our results of operations and financial condition
could be adversely affected by increased cost and rate. In addition, the Company raised
approximately $3.6 million dollars in connection with the aforementioned equity
investments by Barron Partners, LP, that were used in the acquisition of ORC. Further, the
Company raised approximately $4.1 million dollars in connection with the attached warrants
associated with the aforementioned equity investments by Barron Partners, LP during the
year ended 2005. 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 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to market risks
related to changes in interest rates and changes in the market value of our investments as
we have no borrowings outstanding under our bank credit agreement as of March 31, 2006 and
we only invest our excess cash in marketable securities in a money market account which
due to the short maturity and our availability to withdraw those securities at any time
does not present any material market exposure.

23

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# ITEM 4. CONTROLS AND
PROCEDURES

# Disclosure Controls and
Procedures

Our management, with the
participation of the Companys Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of our disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended (the Exchange Act) as of March 31, 2006. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31,
2006, our disclosure controls and procedures were effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be disclosed by us
in the reports we file or submit under the Exchange Act and such information is
accumulated and communicated to management as appropriate to allow timely decisions
regarding required disclosure.

# Changes in Internal
Control Over Financial Reporting

The filing of amendments to certain
of the Companys periodic reports under the Exchange Act on January 19, 2006
completed the remediation of certain internal controls weaknesses and can be deemed to be
a material change in the Companys internal control over financial reporting that
occurred during the quarter ended March 31, 2006, as discussed below.

During the first quarter of 2005, in
connection with the Companys preparation of its Annual Report on Form 10-K, the
Company identified a material weakness in the design of its internal control over
financial reporting related to insufficient technical accounting expertise within our
accounting function to resolve non-routine or complex accounting and tax matters that
occurred in connection with (i) our recent material acquisition of Operational Research
Consultants, Inc. in October 2004; and (ii) determination of the proper accounting
treatment of the financial instrument relating to the warrants issued by the Company in
October 2004.

In addition, during the fourth
quarter of 2005, as a result of comments raised by the SEC in connection with the
Companys Registration Statement on Form S-1, the Company determined it would be
necessary to restate prior financial statements to (i) reclassify the amortization expense
associated with the acquisition of ORC to cost of sales, (ii) reclassify the
Companys preferred stock as temporary preferred stock, and (iii) expense certain
costs associated with the Companys acquisition of Chesapeake.

24

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The material weaknesses in our
internal control over financial reporting identified at the end of each of the quarters in
2005 and at December 31, 2005, resulted from insufficient technical accounting expertise
within our accounting function to resolve non-routine or complex accounting and tax
matters that occurred in connection with: (i) our acquisition of ORC in October 2004; (ii)
the determination of the proper accounting treatment of the financial
instrument relating to the warrants issued by the Company to Barron in October 2004;
and (iii) the determination of the proper accounting treatment of the shares of Common
Stock issued and held in escrow following the acquisition by the Company of Chesapeake in
April 2004. The material weaknesses in internal controls resulted in: (i) our late filing
on April 19, 2005 (four days after the extended due date) of our Annual Report on Form
10-K for the year ended December 31, 2004; (ii) the need to restate the recorded amount of
the financial instrument at December 31, 2004 and March 31, 2005 due to the failure to
mark-to-market such instrument at December 31, 2004; (iii) the need to reclassify the
amortized costs relating to the ORC acquisition in cost of sales and not in amortization
and depreciation, and to record the convertible preferred stock issued to Barron as
temporary preferred equity and not permanent preferred equity; and (iv) the need to
restate our financial statements for the year ended December 31, 2004 and the first three
quarters of 2005 to reflect changes in our accounting relating to the Chesapeake
acquisition. The Chesapeake-related restatements: (i) eliminated the intangible asset
associated with the acquisition; (ii) reversed the related amortization expense; (iii)
expensed as consulting fees the cost of the transaction attributable to the cost of
issuance of the non-escrowed shares and other direct costs at the time of the acquisition;
(iv) recorded and expensed as consulting fees in cost of sales the release of the shares
from escrow at December 31, 2004; (v) expensed in cost of sales and recorded the value of
those shares in equity meeting the contractual performance measures that would result in
the release of those shares from escrow after the filing of the Companys Form 10-K
for the year ended December 31, 2005; and (vi) recorded the shares in equity as Common
Stock issuable until such time as they can be reclassified as Common Stock issued shares
upon the release of the shares from escrow.

We began the remediation of the
weakness in our internal control over financial reporting by the employment of a
consulting firm in January 2005 with the requisite accounting expertise to resolve the
above issues, which arose as a result of accounting comments raised by the SEC in
connection with its review of the Companys annual and quarterly reports. We believe
that the past results of the above material weaknesses in our internal control over
financial reporting, and related ineffective disclosure controls and procedures resulting
therefrom, were remedied on January 19, 2006 upon the filing by the Company of amendments
to its prior periodic reports containing restated financial statements reflecting the
resolution of the above accounting issues.

# PART II.

# OTHER INFORMATION

# ITEM 1A. RISK FACTORS

See Risk Factors in the
Companys 2005 annual report on Form 10-K for a complete description of the material
risks it faces. There have been no material changes to our risk factors since December 31,
2005.

# ITEM 6. EXHIBITS.

|(a) | Exhibits
|--- | --------

| | 31.1 | Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------------

| | 31.2 | Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------------

| | 32 | Certification
 of Chief Executive  Officer and Chief Financial  Officer  Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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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: May 15, 2006 | /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               

26