# SECURITIES AND
EXCHANGE COMMISSIONWASHINGTON, D.C. 20549  FORM 10-K

||X| | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the
fiscal year ended December 31, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

OR

||_| | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the
transition period from _____________ to _____________.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

Commission File Number
000-23967

|WIDEPOINT CORPORATION                                  
|-------------------------------------------------------
|(Exact name of registrant as specified in its charter.)

|Delaware                                 | 52-2040275         
|---------------------------------------- | -------------------
|(State or other jurisdiction of          | (I.R.S. Employer   
|incorporation or organization)           | Identification No.)
|One Lincoln Centre, Oakbrook Terrace, IL | 60181              
|(Address of principal executive offices) | (Zip Code)         

Registrants phone number, including
area code:         (630) 629-0003

Securities registered pursuant to
Section 12(b) of the Act:

Title of each class

Common Stock, $.001 par
value per share

Name of each exchange
on which registered

American Stock
Exchange

Securities registered pursuant to
section 12(g) of the Act:  None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes          No X

Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes          No X

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

---

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [   ]

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 of the Act).

| | Large
accelerated filer        Accelerated filer       Non-accelerated
filer Smaller Reporting Company X
| | --------------------------------------------------------------------------------------------------------

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

Yes
         No X

State
the aggregate market value of the registrants voting and non-voting common equity
held by non-affiliates of the registrant computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as
of the last business day of the registrants most recently completed second fiscal
quarter.    $123,807,418.

As
of March 24, 2008, the registrant had 54,090,697 shares of its Common Stock issued and
outstanding.

DOCUMENTS INCORPORATED
BY REFERENCE

The information called for by Part
III of the Form 10-K is incorporated by reference from the registrants definitive
proxy statement which will be filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this report.

2

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# PART I

|ITEM 1. | BUSINESS.
|------- | ---------

# Background and
Environment

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 a leading provider of E-Authentication Federation
credential services and federal compliant Public Key Infrastructure (PKI) managed services
to the federal government. On January 4,2008 we acquired iSYS LLC
(iSYS), a leading provider of mobile telecom managed services to the United
States Federal Government expanding our service offerings. We intend to grow over the next
few years through a combination of organic growth, the acquiring of selective strategic
assets and acquisitions, and by operational efficiencies among our subsidiaries.

The Company is comprised of the
following two segments: (i) consulting services and (ii) PKI credentialing and managed
services. For additional information related to our segments, see Note 12 to our financial
statements included in this Form 10-K.

WidePoint was incorporated in
Delaware on May 30, 1997. Our staff consists of business process and computer specialists
who help our government and civilian customers augment and expand their resident
technologic skills and competencies, drive technical innovation, and help develop and
maintain a competitive edge in todays rapidly changing technological environment in
business. Our organization emphasizes an intense commitment to our people, our customers,
and the quality of our solutions offerings. As a services organization, our customers are
our primary focus. We have developed thorough, comprehensive policies, procedures and
controls to mitigate the threat, or potential threat, of intentional, unintentional,
physical, natural or electronic compromise or disruption of any portion of our systems or
services. The talent and technology are available, and the resident expertise experienced
in working together, to ensure goals are achieved quickly and seamlessly. Contract
instruments are already in place and a substantive reference base with an assortment of
federal agencies are available.

On October 25, 2004, we completed the
acquisition of ORC. ORC specializes in Information Technology (IT) systems
integration and secure authentication processes and software, and providing services to
the United States Government. ORC has been at the forefront of implementing
E-Authentication Federation and PKI technologies. These identity management technologies
are 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 effectively deploys a public
key and a private key to each individual and or device, ensuring that the private key is
only accessible to that individual and/ or device. Thus, the algorithms used in PKI
achieve a level of authentication of users and information that maintains a high integrity
of all data and communications, non-repudiation of data and communications, and
confidentiality of data and communications. The public key also enables encryption of all
information and/or communication from any sender, where the associated private key allows
only the holder of that key to unlock and decrypt such information and/or communication.
PKI and E-Authentication technologies also speed up and simplify the delivery of products
and services by providing a common, secure, electronic approach to processes that
historically have been paper based and single or reduced sign-on to multiple electronic
applications without degrading security across mission-related transactions internal to an
organization and with external organizations. ORC is designated by the United States
Government as the first External Certificate Authority for the U.S. Government. 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.

3

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WidePoint offers these iDentity
Management and eAuthentication Services© based on existing technology and open
systems standards, providing Identification and Authentication (I&A) interoperability
among users and relying parties (Government, businesses, trading partners, and citizens)
at the assurance level and rigor required by the owner of the protected resource. These
services include four major US Government Certifications:

| |  | GSA
E-Authentication Federation
| | - | -------------------------------

| |  | US
Government External Certificate Authority (ECA)
| | - | --------------------------------------------------

| |  | GSA
Access Certificates for Electronic Services (ACES)
| | - | ------------------------------------------------------

| |  | GSA
Shared Service Provider (SSP), supporting the Federal PKI Common Policy Framework,
HSPD-12, and Federal Information Processing Standard (FIPS) 201 initiatives
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

These iDentity Management and
eAuthentication Services© fully support Business-to-Government,
Government-to-Government, and Citizen-to-Government secure digital transaction
requirements, and, because our PIVotal ID© digital credentials are an
allowable direct charge (ODC) under the Federal Acquisition Regulation rules,
the cost of such services and products can be passed-on by ORCs
customers in government contracts and/or proposals.

Over the past several years WidePoint
focused on the consolidation of its acquisition of ORC, accelerating the rollout of
the ORC E-Authentication Federation and PKI identity management initiatives, and
continuing to implement our project based enterprise strategy, emphasizing our
industry-wide best practices disciplines. With the addition of the customer base and the
increase in revenues attributable to the ORC acquisition, WidePoints opportunity to
leverage and expand further into the federal marketplace has improved dramatically.
ORCs past client successes, top facility security clearances, security personnel
expertise, and additional breadth of management talent have expanded our reach into
markets that previously were not accessible to WidePoint. We intend to continue to market
and sell our technical capabilities into the governmental and commercial marketplace.
Further, we are continuing to actively search out new synergistic acquisitions that we
believe may further enhance our present base of business and service offerings, and in
January 2008 we acquired iSYS, which augmented our information assurance offerings and
expanded our reach into the federal government.

Looking forward, the strong
authenticated identity management market opportunity expands by orders of magnitude as
information is increasingly circulated on the internet among limited, but frequently
changing audiences of specifically named individuals. Society has dictated that digital
transactions must have the capability to prove who the provider of a piece of information
is (by name, not simply office), as well as to verify that no one has modified the
information subsequent to its issuance. Federal, State and local legislation increasingly
demands that there must be no question as to exactly when information is published, that
there must be a means of reviewing an auditable history of transactions and there must
also be a means to archive all information securely, as well as a means to recall the
information from the secure archive at a later time. The information age has created an
urgent need for these requirements to be realized in an environment that is easy to use,
suitable for senior executives and managers, highly reliable, and that supports the
increasingly mobile demands of our democracy.

4

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WidePoint and our wholly-owned
subsidiary, ORC, are strategically postured to help federal agencies and commercial
concerns implement meaningful and efficient security into internet/intranet operations to
protect sensitive information and billions of dollars in transactions each day.
ORCs Common Identity Enabling Infrastructure (CIEI)© and PIVotal
ID© services fully support these needs by leveraging existing infrastructures and
creating a digital credential for each individual and device recognized and accepted both
internally to an organization and externally by any other infrastructure recognizing
federally authorized credentials as trustworthy.

The iSYS acquisition in January 2008
further expands our customer base and our information assurance offerings while adding
forensic informatics and mobile telecom managed services to the services that we provide.
iSYS was formed in 2002 as a single member limited liability corporation with operations
in the greater Washington, D.C. area and Columbus, Ohio. They provide services
predominately to the United States federal government and have recently expanded their
operations into local and state jurisdictions and to commercial enterprises. We believe
that the introduction of our capabilities in providing credentialing services to the iSYS
client base will provide cross-selling opportunities and differentiation of our newly
expanded services as a result of the acquisition of iSYS.

WidePoint has solidly established our
reputation as an elite provider of these information assurance and security of digital
transactions for the U.S. Department of Defense (DoD), the U.S. Navy, the U.S. Air Force,
the U.S. National Security Agency (NSA), the U.S. Coast Guard, U.S. Office of Management
and Budget (OMB), U.S. General Services Administration (GSA), the U.S. General Accounting
Office (GAO), several state governments and Fortune 500 commercial clients. WidePoint has
distinguished itself by providing the highest levels of professionalism, on-time delivery
of solutions and superior managed services. WidePoint anticipates capturing a significant
market share within the identity management marketplace for which we believe has the
potential of providing significant revenue growth for the Company.

Most of our current costs consist of
salaries and benefits paid to our technical, marketing and administrative personnel, as
well as the solutions required to maintain the secure facilities and infrastructure that
support our information assurance and security offerings. As a result of our plan to
expand operations through a combination of internal growth initiatives and acquisition
opportunities, such costs are expected to increase. Our profitability depends upon both
the volume of services performed and the ability to manage costs. A significant portion of
our cost structure is labor related and we must effectively manage these costs in order to
achieve growth and profitability. To date, we have attempted to maximize our operating
margins through efficiencies achieved by the use of our proprietary methodologies and by
offsetting increases in consultant salaries with increases in consultant fees charged to
our clients.

5

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# Enterprise Strategy

In the continuing effort to
differentiate our services and overcome the highly competitive environment within the
general IT marketplace, we have modified our strategic plan; including the launch of a
federal sector business initiative, continued development of new capabilities, and the
initiation and expansion of several alliances and relationships to expand our ability to
penetrate new market segments.

WidePoints acquisition of ORC
provided a number of large indefinite delivery, indefinite quantity (IDIQ)
contracts that extend WidePoints capability to expand our revenue base, including,
but not limited to:

| |  | Information
Technology Professional Services, FSC Group 70, GSA FSS # GS-35F-0164J $100 million
ceiling for each contract action offers a full range of IT Professional Services to all
federal Government agencies on a fee-for-service basis. This contract is also available
to state and local governments under a cooperative procurement agreement. Most
significant under this contract ORC also holds:
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Special
item categories 132-60, 132-61, and 132-62 for Authentications services under the GSA IT
Professional Services contract. This certified ORC as the first contractor authorized to
provide authentication products and services to provide for authentication of individuals
for purposes of physical and logical access control, electronic signature, performance of
e-business transactions and delivery of government services. Authentication products and
services consist of hardware, software components and supporting services that provide
for identity assurance.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
Managed Validation Service (MVTS) contract provides PKI certificate validation services
for those e-Gov initiatives and other Federal agency information applications that elect
to use it. The MVTS contract directly benefits stakeholders, including Federal, State,
and local government entities, private industry, the scientific community, and the
public. It improves efficiencies and reduces costs by providing identity authentication
services in a consistent fashion.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Worldwide
Federal Supply Schedule for Management, Organizational and Business Improvement Services
(MOBIS), FSC Group 874, GSA FSS # GS-10F-0152M  $100 million ceiling contract that
offers a full range of services and products to enable all Federal Government Agencies to
improve performance, quality, timeliness and efficiency throughout their organizations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Worldwide
Federal Supply Schedule for Professional Engineering Services (PES), FSC Class 871, GSA
FSS # GS-23F-0162L  $100 million ceiling contract that offers a full range of
Professional Engineering Services to all federal Government agencies on a fee-for-service
basis. There are four primary engineering disciplines (Chemical, Civil, Electrical and
Mechanical) addressed under PES.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | GSA
Solutions and More (SAM), FSC Group 61 Part V, GSA FSS # GS-07F-0099L  $100 million
ceiling contract that offers supply power distribution equipment, generators, and
batteries worldwide.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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| |  | SeaPort-e
Contract N00178-04-D-4099  $100 million ceiling contract to provide engineering,
technical, and programmatic support services to the Naval Surface Warfare Centers (NSWC)
and the Naval Undersea Warfare Centers (NUWC).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, WidePoint has extended
its business development reach with strategic partners who package our identity management
solutions and services under branded offerings. Partnerships with companies such as RSA
 the Security Division of EMC, Siemens, Maximus, Tumbleweed, American Management
Systems, and Wave Systems have added additional marketing personnel to our sales team.

We intend to leverage our internal
resources and these partnerships to expand our revenue base, as we continue to seek and
analyze growth alternatives via selective acquisition growth opportunities and service
offering expansion opportunities. In addition, we are actively seeking the acquisition of
other companies with complementary technical capabilities in IT, software and information
assurance related services to the federal government (both defense and civilian), state
governments, local governments, and commercial entities. If successful in our organic
growth and acquisition activities, we anticipate that we will become a larger company with
broader capabilities and resources.

# Business Strategy and
Services

Our strategy for our project-based
initiatives is to apply a structured delivery methodology based on industry standard best
practices, enhanced with a set of deliverable templates that boost productivity and
effectiveness through the services of our staff. We focus on providing end results with
significant, tangible business benefits through personnel that possess recognized
industry-standard certifications, expertise and years of successful project execution
experience. The ancillary strategy of staff augmentation services provides our customer
base with value added services based on the best to market practices developed
internally that utilizes a rapid response capability tailored to our clients needs.

WidePoints focus is on
planning, implementing and supporting IT-based initiatives with the following services:

# Systems Engineering and
Integration

Systems engineering and integration
consists of working with government and commercial clients to develop a plan, policies and
specific requirements that are tailored to their unique needs. An electronic information
approach, policy and implementation plan for any customer is developed after conducting an
analysis of that customers requirements, including:

| |  | Survey
of existing systems hardware and software;
| | - | -------------------------------------------------

| |  | Review/
audit of current requirements, directives, etc.;
| | - | --------------------------------------------------------

| |  | Presentation
of tools, systems and techniques available to support customer needs;
| | - | ----------------------------------------------------------------------------------

| |  | Consultation
with and advice to customer concerning optimum investment options within available
budget, including phasing recommendations;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | Information
assurance and security technology update and refresh;
| | - | -----------------------------------------------------------------

| |  | Support
services such as training, education and help desk;
| | - | -----------------------------------------------------------

| |  | Data
archiving; and
| | - | -------------------

7

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| |  | Consulting
for application development, establishment of enterprise directories and establishment of
validation capabilities across a heterogeneous environment.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

By the use of our leverage standards
based, mature commercial-off-the-shelf components that have been proven in the technology
market, our identity management and other services offer the efficiency of a common
solution for multiple applications within an enterprise and interoperability with the
Federal Government and trading partners. We can also replicate these services (in part or
whole) to provide an enterprise the following advantages:

| |  | Enabling
organizations applications with multiple IA/validation interfaces rapidly;
| | - | ------------------------------------------------------------------------------------

| |  | Enabling
enterprise applications to have enterprise or local access to account data;
| | - | ------------------------------------------------------------------------------------

| |  | Centralizing
enterprise configuration management, managing information with multiple authentication
methods;
| | - | ------------------------------------------------------------------------------------------------------------

| |  | Enabling
 local  policy  to  determine  trusted   authentications   by  each  application  (i.e.,
         application does not inherit trust that is not wanted);
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Implementing
 of components  designed to manage  specific tasks so that  applications do not have
         to support all authentication functions natively;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Enabling
an easy migration path from less elegant eAuthentication schemes through higher
assurance, including full PKI implementations and federated identities; and,
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Enabling
organizations to leverage a government approved solution.
| | - | ------------------------------------------------------------------

Focused in the medium to high assurance
level market, our CIEI© and PIVotal ID© branding allows enterprise and
application owners to begin where they currently are architecturally and migrate toward a
vision of a secure network identity model. We are poised to support these secure network
identity enterprise requirements (in-house or outsourced), by providing seamless
integration of four services:

| |  | iDentity
Management  providing infrastructure and processes that provide for creation
and maintenance of an identity, including centralized administration and self-service of
user accounts.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | eAuthentication  providing
authoritative repositories for identity, network and/or resource profiles combined with
security services that enable identification, validation and support for authorization.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Access
Management  providing authorization, audit functions and session management
that enable enterprise and application owners to define access rights for individuals
carrying out roles such as business partners, suppliers, customers or employees.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Provisioning
and Workflow  implementing business policies across enterprises, applications
and data that support a higher degree of automation (devices such as identity tokens,
credit cards, cell phones and personal computers).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Architecture and
Planning Services

Preparing an IT Architecture requires
analysis, evaluation, integration, administration and maintenance. We are in an era where
many government and commercial entities have an increasingly urgent need to enhance their
digital presence while protecting sensitive business and personal information from the
internet information thieves of our time. Indeed, some would argue that protecting shared
information and having the opportunity to guarantee trusted digital identity verification
must be assured before full communications can take place. WidePoint has an established
reputation for developing solutions individually tailored to a customers many needs,
while remaining within that customers schedule and time constraints. We are an
advisor to our clients, not a sales organization for specific equipment or software.

8

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We believe that effective IT
communications and computer systems need not be seen as requiring huge dollar outlays,
inevitably requiring wholesale replacement of existing systems, servers, hardware,
software and security tools/firewalls, etc. Through our operating subsidiaries, we apply
open systems technology and commercial off-the-shelf (COTS) tools, which
complement rather than replace existing systems wherever possible. Further, our preferred
recommendation is to migrate as many existing systems as possible from their current
capabilities to more effective, robust capabilities by augmenting those systems with
supported products. One objective is to make changes that are largely invisible to
operators and managers so there is little in the way of training challenges for the
customer and only modest requirements for equipment investment. We do not design unique
and proprietary software that forces the customer to work through us or tie them to a
costly internal IT development organization when subsequent (and inevitable) upgrades are
required.

WidePoints strength is that we
value our people, our customers, and the quality of the services we provide. As a services
organization, the focus of our business is our customers. We have developed thorough,
comprehensive policies, procedures and controls to mitigate the threat, or potential
threat, of compromise or disruption to any portion of our systems as a result of
intentional, unintentional, physical, natural or electronic means. These policies,
procedures and controls are implemented and adhered to by those individuals fulfilling
various trusted roles key to our customer service.

The people selected to fill trusted
roles have proven to be diligent and trustworthy. The functions performed in these roles
form the basis of trust our clients have in our capabilities. For our managed services, we
also assign roles and functions responsible for security among several people, so that any
malicious activity would require collusion. Through sound security planning based on
proven techniques and industry standards, our systems are operated and maintained to
provide the highest level of reliability and availability to our clients depending on
these services. These policies, procedures and controls are periodically reviewed for
currency. Random testing is performed and documented for use as a tool to further refine
the means and methods used to maintain the integrity of our managed services.

WidePoints management staff is
composed of people-oriented systems engineering professionals with leadership competence
capable of determining the most effective ways to meet the clients requirements. Our
client focused management team includes facilitators, integrators, team builders, and
relationship managers. Within our requirements-driven, performance-based, people-oriented
environment, our project managers have responsibility and authority for all project
requirements. They are responsible to the client for applying the systems engineering
discipline to ensure that the technical, cost and schedule requirements are clearly
defined and communicated and quality products and/or services are rendered. Our project
managers are responsible for getting the job done correctly, on time, and on budget.

Our mid-level management team are
people-oriented engineering professionals capable of determining the most effective ways
to execute delegated assignment(s). They are complimented by competency specialists (or
subject matter experts) focused on area(s) of expertise that meet our customer
requirements and provide quality products and services. WidePoint develops our member
competencies from the apprentice through expert level by matching task assignments with
skill and knowledge. Competency expertise varies depending on project requirements.
Individuals with certain skills may be added or removed from projects, as required. On the
job training at our Company is key to developing expertise.

9

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# IT Outsource Solutions

By leveraging our systems engineering
experiences, we have become one of the nations premier systems engineering firms
with a specialization in managed information assurance and security solutions. This is
evidenced by the following accomplishments:

| |  | Distinguished
as the first designated DoD Interim External Certificate Authority (IECA-1) and more
recently the first US Government External Certificate Authority.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Distinguished
as one of only three GSA Access Certificates for Electronic Services contract recipients.
| | - | -------------------------------------------------------------------------------------------------------

| |  | Distinguished
as the first commercial GSA eAuthentication Service Provider.
| | - | ---------------------------------------------------------------------------

Our ORC subsidiary had been engaged
as the lead systems engineer for the DoD PKI.

ORC is certified by the GSA
E-Authentication Program Management Office as an E-Authentication Federation Service
Provider to facilitate public access to the services offered by Federal Government
agencies through use of information technologies, including on-line access to computers
for purposes of reviewing, retrieving, providing, and exchanging information. Our ORC
subsidiary offers various authentication credentials that include Userid/Password (Level 1
and 2 assurance), as well as Digital Certificates (Level 3 and 4 assurance).

Our E-Authentication Federation
services, defined by the System Security Plan for Operational Research Consultants
(ORC) Information Assurance/ Identity Management (IA/ IDM)© supports multiple
authentication methods, from Level 1 Userid/Password to Level 3 Digital Certificates to
authenticate users and validate their credentials. Real-time consumer and business
authentication methods are used to extend ORCs eAuthentication offering, allowing an
organization to address broad audiences of users for eGovernment and internal applications
in a timely manner. These are proven capabilities that are compliant with existing laws
and regulations that can be integrated and rapidly deployed. ORCs eAuthentication
services apply a variety of proven methods that can be incorporated and validated quickly,
developing confidence among users and relying applications.

ORC is certified as a trusted third
party under the US Government ECA program, as defined by the ORC External
Certification Authority (ECA) Certification Practice Statement© and the
ORC External Certification Authority (ECA) Key Recovery Practice
Statement©". ORC is currently one of two ECA authorized providers to issue
Server (Device) Certificates and Code Signing Certificates, in addition to personal
certificates.

| |  | Server
Certificates provide trusted verification of the identity of web/application servers and
enable those servers to support encrypted (Secure Sockets Layer) transaction protection.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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| |  | Code
Signing Certificates provide trusted verification of the integrity of software and
documents.
| | - | --------------------------------------------------------------------------------------------------

ORC is a certified trusted third
party under the GSA ACES program to provide digital certificates to the citizenry of the
United States, as defined by the ORC ACES Certification Practice
Statement©". The ACES certificates are available to provide each and every
American citizen, as well as federal, state and local government and business entities the
accepted digital certificate to conduct business electronically with Federal agencies,
such as the Veterans Administration, Social Security Administration and any other
agency offering services via the internet. In addition to the ACES contract, ORC is
authorized as a trusted third party to sell ACES certificates directly to the business and
private citizen communities. This offering has currently migrated to an ORC ACES/Shared
Service Provider (SSP) capability that will expand the ACES program to offering full B2G
and G2G PKI services.

The documents, described above,
define the system and process intellectual property that allows us to be the leader in
this market.

Our ability to successfully expand
requires significant revenue growth from increased services performed for existing and new
clients, as well the potential for strategic acquisitions and/or mergers. The realization
of these events depends on many factors, including successful strategic sales and
marketing efforts and the identification and acquisition of appropriate businesses. Any
difficulties encountered in our expansion through successful sales and marketing efforts
and/or acquisitions could have an adverse impact on our revenues and operating results.

# Clients

Our commercial client base is located
predominantly in the continental United States, while our government client base is
located in the Mid-Atlantic region of the United States. We have experience and expertise
in the successful completion and staff augmentation of projects in the following
industries: Federal Government agencies and associated contractor suppliers,
manufacturing, consumer product goods, direct marketing, healthcare and financial
services.

| |  | Historically,
we have derived, and may continue to derive in the future, a significant percentage of
our total revenues from a relatively small number of clients. However, for the year ended
December 31, 2007, no one customer represented more than 10% of our revenues. For the
year ended December 31, 2006, one customer, Headquarters Cryptologic Systems Group (HQ
CPSG), represented 29% of our revenues, and we therefore were materially dependent on
such customer. 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 may have a material adverse effect on our business and
financial results.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Marketing and Sales

We focus sales and marketing efforts
on targeting federal government and corporate clients with significant IT and identity
management budgets and requirements. While we perform work for companies in various
industries, the majority of our revenues for 2007 and 2006 were derived from contracts and
projects with U.S. federal government agencies, U.S. federal government contractors,
manufacturing clients, consumer products clients, healthcare clients, and financial
services clients. Prospectively, we expect a majority of our revenue to be derived from
contracts with the federal government and related contracting opportunities.

11

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We market our solutions through our
direct sales force, and alliances with several strategic partnerships in specific
industries. The direct sales force is responsible for providing highly responsive, quality
service and ensuring client satisfaction with our services. Strategic partnerships and
alliances provide us with additional access to potential clients.

Because of the mandates of the
federal government and the urgency of our countrys critical infrastructure
protection, we believe our proven CIEI© and services will scale well to the
commercial market. By eliminating the lead-time needed to become operational while waiting
for in-house development efforts, we can enable an organization to quickly deploy a fully
operational capability, providing the highest levels of authentication of users and
devices, securing of sensitive data, time-stamping and archiving of data, and an auditable
process flow. Further, the credentials used to accomplish all of these requirements are
interoperable with any other agency or organization choosing to accept Federal-compliant
credentials. The resulting answers can be immediately realized, thereby mitigating overall
costs dramatically.

# Government Contracts

Our contracts with the U.S.
Government, and many contracts with other entities, permit the government client to
modify, curtail or terminate the contract at any time for the convenience of the
government or for default by the contractor. If a contract is terminated for convenience,
we are generally reimbursed for our allowable costs through the date of termination and
are paid a proportionate amount of the stipulated profit or fee attributable to the work
actually performed. Although contract and program modifications, curtailments or
terminations have not had a material adverse effect on us in the past, no assurance can be
given that such modifications, curtailments or terminations will not have a material
adverse effect on our financial condition or results of operations in the future.

In addition, the U.S. Government and
other government entities may terminate a contract for default. If a contract is
terminated for default, we may be unable to recover amounts billed or billable under the
contract and may be liable for other costs and damages. Although terminations for default
have not occurred to us in the past and, thus, have not had a material adverse effect on
us in the past, no assurance can be given that such terminations will not have a material
adverse effect on our financial condition or results of operations in the future.

# Competition

The market for the services that we
provide is highly competitive, includes a large number of competitors, and is subject to
rapid change. Our primary competitors include participants from a variety of market
segments, including publicly and privately held firms, large accounting and consulting
firms, systems consulting and implementation firms, application software firms, service
groups of computer equipment companies, and other general management consulting firms.
Increasingly, companies with third-world and emerging markets operations bases are also
targeting this market. Competition generally is based on quality, timeliness, cost of
services, and relevant targeted expertise.

12

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With relation to systems engineering
in the governmental sector, our long-range concern is the uncertainty in the federal
budget, and its impact upon competition among the many contractors. We believe that the
best way to meet the challenge of this market is to maintain a low overhead, employ
quality personnel, and continue to deliver a product of the highest quality. Many
corporations that are active in this market have reputable corporate histories and a great
number of employees from which to draw. They have the ability to absorb losses in
operation. Additionally, they have an established network to assimilate data and formulate
strategy in todays competitive environment. Their strength is often their mass that
gives them flexibility in both proposing and responding to new requirements. Also, while
there are advantages to being small, name recognition is a problem in major contracts even
if we have been successful in our past performance.

However, some of these same
corporations have higher overhead costs. They have policies and procedures in effect that
quite frequently require a longer response time to meet the needs of the customer.
Management personnel can be far removed from their workforce, thus fostering employee
dissatisfaction.

Within the information security
market the competition is still minimal. The most significant competition is in the
planning and analysis portion of the market, in which many of the same companies referred
to above, also participate, such as: Booz-Allen Hamilton, SAIC, CACI/AMS, BAE Systems,
Northrop Grumman, and others. However, the market in which we provide our CIEI©
products and services has limited competition. Most of that competition (such as Verisign
and Digital Signature Trust) are focused on low to medium levels of assurance. We believe
we are presently the only company that has satisfied all of the certification requirements
to serve the more targeted medium to high level assurance market, and, as such, we believe
that we maintain an advantage over our competition.

Additionally, we believe our
advantages in each of the markets described above are two-fold: highly experienced
personnel and relatively low overhead. Our professional staff has a proven record of
success in meeting service needs of both private industry and public sector clients. Our
senior staff personnel include individuals with advanced degrees in science, engineering,
and operations research, specializing in the resolution of complex operational problems.
Experienced personnel, competitive overhead, and being first to market should allow us to
continue to be very competitive.

# Intellectual Property

Our intellectual property primarily
consists of methodologies developed for use in application development solutions. The
services, described above, define the system and process intellectual property that allows
us to be the leader in our markets. In addition, our ORC subsidiary holds a patent for a
digital parsing toolthat provides a secure repository gateway that will allow
users, including first time users, the ability to immediately establish and access
accounts by presenting their certificates to a directory validated by the gateway. In this
manner, we rely upon a combination of trade secrets, copyright and trademark laws, and
contractual restrictions to establish and protect the ownership of our proprietary
methodologies. We generally enter into nondisclosure and confidentiality agreements with
our employees, partners, consultants, independent sales agents and clients. As the number
of our competitors increase, the likelihood that such competitors will use similar
methodologies increases. Although our methodologies have never been subject to an
infringement claim, there can be no assurance that third parties will not assert
infringement claims against us in the future; that the assertion of such claims will not
result in litigation; or that we would prevail in such litigation or be able to obtain the
license for the use of any allegedly infringed intellectual property from a third party on
commercially reasonable terms. Further, regardless of its outcome, litigation can result
in substantial costs and divert managements attention from our operations. Although
we are not aware of any basis upon which a third party could assert an infringement claim,
any infringement claim or litigation could materially adversely affect our business,
operating results and financial condition.

13

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# Personnel

As of December 31, 2007, we had a
total of 52 employees with 46 full time employees and 6 part-time employees. We also
periodically employ additional consultants and temporary employees. With the acquisition
of iSYS in January 2008 we have added approximately 35 full time employees.

Our offices are located in areas
populated by military (both retired and active duty) and highly skilled civilian
personnel. Potential employees possessing the unique qualifications required are readily
available for both part-time and full-time employment. The primary method of soliciting
personnel is through recruiting resources directly utilizing all known sources that
include electronic databases, public forums, and personal networks of friends and former
coworkers.

We believe that our future success
will depend in part on our continued ability to attract and retain highly skilled
managerial, technical, sales and support personnel. There can be no assurance that we will
be able to continue to attract and retain personnel necessary for the development of our
business. We generally do not have employment contracts with our employees, but we do
maintain employment agreements with our key employees. However, confidentiality and
non-disclosure agreements are in place with many of our employees. None of our employees
are subject to a collective bargaining agreement. We believe that our relations with our
employees are good.

# Available Information

Our internet address is
www.widepoint.com. We make available through our website our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC

|ITEM 2. | PROPERTIES.
|------- | -----------

The Companys principal
executive office consists of approximately 3,500 square feet of office space located at
One Lincoln Centre, Suite 1100, Oakbrook Terrace, Illinois, which is leased through July
2007 for approximately $8,900 per month. The annual rent including a pro rata share of
real estate taxes and operating expenses for this office is approximately $106,400, plus a
pro rata share of increases in real estate taxes and operating expenses.

14

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WidePoints ORC subsidiary has
its principal offices at 1723 South Park Court, Chesapeake, Virginia in approximately
2,400 square feet under a month-to-month lease that expires on April 30, 2009. The annual
rent for this office is approximately $30,700, plus a pro rata share of increases in real
estate taxes and operating expenses.

ORC also maintains a secure facility
in Fairfax, VA. The Fairfax office is located at 11250 Waples Mill Road, South Tower,
Suite 210, Fairfax, Virginia 22030. The lease for this office expires March 15, 2009 and
costs approximately $32,200 per month. ORC also maintains a office located at 1625
Prince Street, Suite 350, Alexandria, Virginia.

Our acquisition of iSYS in January
2008 added two facilities that are leased; the iSYS corporate headquarters located at 7926
Jones Branch Drive, McLean, VA with an annual rent of approximately $48,900 expiring November 30, 2009 and a
call center for the iSYS mobile telecom managed services group in Columbus, OH with an
annual rent of approximately $50,300 expiring May 31, 2012.

WidePoint believes that it can obtain
additional facilities required to accommodate its projected needs without difficulty and
at commercially reasonable prices, although no assurance can be given that it will be able
to do so.

|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------

We are not involved in any material
legal proceedings.

|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

None.

|ITEM 4A. | EXECUTIVE OFFICERS OF THE REGISTRANT.
|-------- | -------------------------------------

The following sets forth information
regarding the executive officers and certain significant employees of the Company as of
March 15, 2008:

|Name                | Age | Position                                                                            
|------------------- | --- | ------------------------------------------------------------------------------------
|Steve L. Komar      | 66  | Chief Executive Officer and Chairman of the Board                                   
|James T. McCubbin   | 43  | Vice President, Chief Financial Officer, Secretary, Treasurer, and Director         
|Mark F. Mirabile    | 45  | Vice President and Chief Operations Officer                                         
|Daniel E. Turissini | 48  | Vice President, Chief Technology Officer and Chief Executive Officer and President -
|                    |     | Operational Research Consultants, Inc.                                              
|Jin Kang            | 43  | Chief Executive Officer and President - iSYS LLC.                                   

Steve L. Komar has served as a
director since December 1997 and became Chairman of the Board of Directors in October
2001. Mr. Komar has also served as Chief Executive Officer since December 2001. From June
2000 until December 2001, Mr. Komar served as a founding partner in C-III Holdings, a
development stage financial services company. From 1991 to June 2000, Mr. Komar served as
Group Executive Vice President of Fiserv, Inc., a company that provides advanced data
processing services and related products to the financial industry. From 1980 to 1991, Mr.
Komar served in a number of financial management positions with CitiGroup, including the
role of Chief Financial Officer of Diners Club International and Citicorp Information
Resources, respectively. Mr. Komar is a graduate of the City University of New York with a
Bachelor of Science Degree in Accounting and holds a Masters Degree in Finance from Pace
University.

15

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James T. McCubbin has served as a
director and as our Secretary and Treasurer since November 1998. Since August 1998, Mr.
McCubbin has also served as our Vice President and Chief Financial Officer. Prior to that
time, from December 1997 to August 1998, Mr. McCubbin served as Vice President,
Controller, Assistant Secretary and Treasurer. Prior to the commencement of his employment
with WidePoint in November 1997, Mr. McCubbin held various financial management positions
with several companies in the financial and government sectors. Mr. McCubbin is a graduate
of the University of Maryland with a Bachelor of Science Degree in Finance and a Masters
Degree in International Management. Mr. McCubbin is also a director and chairman of the
audit committee for Red Mile Entertainment, Inc. Red Mile Entertainment, Inc. is a
worldwide developer and publisher of interactive entertainment software. Headquartered in
Sausalito, California, the company creates, incubates and licenses premier intellectual
properties and develops products for console video game systems, personal computers and
other interactive entertainment platforms.

Mark F. Mirabile served as a director
from April 2002 until March 5, 2007. Mr. Mirabile also continues to serve as Vice
President and Chief Operations Officer, a position he has held since December 2001. From
June 2000 to November 2001, Mr. Mirabile served as Vice President of Sales and Marketing.
Prior to that time, from November 1992 to May 2000, Mr. Mirabile served as the Vice
President of Eclipse Information Systems, Inc., a wholly-owned subsidiary of WidePoint.
Mr. Mirabile was a co-founder of Eclipse Information Systems, Inc. prior to its
acquisition by WidePoint in December 1998. Mr. Mirabile has over 20 years experience in IT
at both the executive and technical levels. He has an Associates degree in Applied
Science-Accounting from Daley Community College in Chicago.

Daniel E. Turissini has served as the
Vice President and Chief Technology Officer of WidePoint since December 2005. Mr.
Turissini has also served as the Chief Executive Officer of Operational Research
Consultants, Inc. (ORC), a wholly-owned subsidiary, since our acquisition of
ORC on October 25, 2004. Mr. Turissini was a founding partner of ORC in 1991 and served as
ORCs principal operating officer since its inception. An innovator in systems
engineering and integration, Mr. Turissini has focused in the field of Information
Assurance and Information Security while at ORC. While under his leadership, ORC has
played a key systems integrator role for the DoD Public Key Infrastructure (PKI), the
standard information assurance program being implemented across all branches of the DoD (a
user community of approximately 36 million personnel, devices, and applications) and has
been certified as the first of three certificate authorities for the Department of
Defenses External Certificate Authority (ECA) program and by the General Services
Administration to provide Access Certificates for Electronic Services (ACES). From 1982
until 1991, Mr. Turissini held various systems engineering and acquisition management
positions in support of the U.S. Federal Government with a variety of companies including
Tracor Applied Sciences, Inc., National Technologies Associates, Inc., and Gibbs and Cox,
Inc. From 1981 to 1982, Mr. Turissini served in the Merchant Marine on various vessels as
Engineer and Mate. Mr. Turissini is a graduate of the United States Merchant Marine
Academy with a Bachelor of Science Degree in Engineering and holds a Masters of
Engineering Administration from The George Washington University.

16

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Jin Kang serves as the Chief
Executive Officer and President of iSYS LLC. (iSYS), a wholly-owned subsidiary
of the Company, since our acquisition of iSYS on January 4, 2008. Mr. Kang founded the
company in 1999 and has managed iSYS since its inception. Mr. Kang has over 20 years of
professional experience in the Federal Government Information Technology Services field.
Prior to founding iSYS, Mr. Kang was a Division Manager for Science Applications
International Corporation (SAIC). His responsibilities included the Combined DNA Index
System (CODIS), a marquee program for the FBI Laboratory Division. As the Engineering
Manager for Northrop Grumman Corporation, Mr. Kang played a critical role in the
successful management of the Defense Medical Information Systems/Systems Integration,
Design Development, Operations and Maintenance Services (D/SIDDOMS) contract from its
inception with zero revenues to a program of $190 million in sales. Mr. Kang had
management responsibility for all personnel and contract performance for the D/SIDDOMS
contract for U.S. Health Affairs. Mr. Kang received a Bachelor and a Masters Degrees in
Computer Science and Computer Systems Management from the University of Maryland.

Our executive officers are appointed
by and serve at the discretion of the board of directors. There are no family
relationships among any of our executive officers or directors.

17

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# PART II

|ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES.
|------- | -------------------------------------------------------------------------------------------------------------

The Companys Common Stock has
been quoted on the American Stock Exchange since September 26, 2006 under the symbol
WYY and the Frankfurt and Berlin exchanges under the symbol ZMX.
From July 6, 2000 to September 25, 2006 the Companys Common Stock was traded on the
OTC Bulletin Board under the symbol WDPT. From July 5, 2000 to March 1, 2001
the Companys Common Stock was traded on the NASDAQ SmallCap Market under the symbol
WDPT.

The stock prices listed below
represent the high and low closing prices of the Common Stock on the AMEX since September
26, 2006, and the high and low closing bid prices of the Common Stock on the OTC Bulletin
Board for each of the periods indicated:

|2007           | High | Low
|-------------- | ---- | ---
|Fourth Quarter |      |    
|Third Quarter  |      |    
|Second Quarter |      |    
|First Quarter  |      |    

|2007           | High | Low
|-------------- | ---- | ---
|Fourth Quarter |      |    
|Third Quarter  |      |    
|Second Quarter |      |    
|First Quarter  |      |    

As
of March 19, 2008 there were 163 registered holders of record of the Companys Common
Stock.

18

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Equity Compensation Plan
Information

The
following table sets forth information as of December 31, 2007, with respect to the
Companys compensation plans under which its Common Stock is authorized for issuance:

|                                 | (a) | (b) | (c)
|-------------------------------- | --- | --- | ---
|
|Equity Compensation Plans:       |     |     |    
|Approved by security holders     |     |     |    
|Not approved by security holders |     |     |    
|Total                            |     |     |    

Dividend Policy

The Company has never paid cash
dividends on its Common Stock and intends to continue this policy for the foreseeable
future. WidePoint plans to retain earnings for use in growing its business base. Any
future determination to pay cash dividends will be at the discretion of the Board of
Directors of the Company and will be dependent on WidePoints results of operations,
financial condition, contractual and legal restrictions and any other factors deemed by
the management and the Board of Directors to be a priority requirement of the business.

Recent Sales of
Unregistered Securities

In January 2008, WidePoint issued to
Mr. Jin Kang, the sole owner of iSYS, 1,500,000 shares in its Common Stock in connection
with its acquisition of iSYS. WidePoint also issued into escrow 3,000,000 shares in its
Common Stock to Mr. Kang subject to earnout provisions under a stock purchase agreement
between WidePoint and Mr. Kang. All such shares were sold pursuant to the private
offering exemption under Section 4(2) of the Securities Act of 1933. The price of
WidePoints common stock at the closing of the iSYS transaction on January 8, 2008
was $1.20 per common share.

Repurchases of Equity
Securities

The Company repurchased no shares of
its Common Stock during the fourth quarter of 2007.

19

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|ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

# Forward Looking Statements

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
credential 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. In January 2008, we acquired iSYS, LLC, a United
States federal contractor with specific services in mobile telecom management services,
forensic informatics, and information assurance.

WidePoint was incorporated in
Delaware on May 30, 1997. Our staff consists of business and computer specialists who help
our government and civilian customers augment and expand their resident technologic skills
and competencies, drive technical innovation, and help develop and maintain a competitive
edge in todays rapidly changing technological environment in business. Our
organization emphasizes an intense commitment to our people, our customers, and the
quality of our solutions offerings. As a services organization, our customers are our
primary focus. We have developed thorough, comprehensive policies, procedures and controls
to mitigate the threat, or potential threat, of intentional, unintentional, physical,
natural or electronic compromise or disruption of any portion of our systems or services.
The talent and technology are available, and the resident expertise experienced in working
together, to ensure goals are achieved quickly and seamlessly. Contract instruments are
already in place and a substantive reference base with an assortment of Federal agencies
are available.

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 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 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 transactions internal to
an organization and with external organizations. ORC is currently 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.

20

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Over the past several years WidePoint
focused on the consolidation of its recent acquisition of ORC, accelerating the rollout of
the ORC E-Authentication and PKI identity management initiatives, and continuing to
implement our project based enterprise strategy, emphasizing our industry-wide best
practices disciplines. With the addition of the customer base and the increase in revenues
attributable to the ORC acquisition, WidePoints opportunity to leverage and expand
further into the federal marketplace improved dramatically. ORCs past client
successes, top facility security clearances, security personnel expertise, and additional
breadth of management talent have expanded our reach into markets that previously were not
accessible to WidePoint. We intend to continue to market and sell our technical
capabilities into the governmental and commercial marketplace. Further, we are continuing
to actively search out new synergistic acquisitions that we believe may further enhance
our present base of business and service offerings, such as our recent acquisition of iSYS
LLC in January 2008 that augments our prior acquisition of ORC.

The Companys revenues for the
period ending December 31, 2007 decreased by approximately 22% from approximately $18.0
million in 2006 to $14.1 million in 2007. This decrease was materially attributable to a
reduction in revenues in our consulting services segment that was not wholly offset by the
growth in revenues in our PKI credentialing and managed services segment.

Our PKI credentialing and managed
services segment experienced revenue growth of approximately 103% with revenues increasing
approximately $1,812,000 from approximately $1,751,000 for the year ended December 31,
2006, to approximately $3,563,000 for the year ended December 31, 2007, as a result of
continuing adoption of the Federal Governments HSPD-12 program and the continuing
adoption of the Department of Defense External Certificate Program (ECA)
program. In the long-term we anticipate that our PKI credentialing and managed service
segment should continue to increase as we witness further adoption of the ECA program and
the Homeland Security Presidential Directive Number 12 (HSPD-12) program is
increasingly adopted by the federal government agencies and departments. In the short-term
we do anticipate a greater variability in revenue growth as we move from the pilot to the
full deployment stage in programs with several federal government initiatives associated
with the Department of Defense, the Department of Homeland Security, and several other
state and Local government programs.

21

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

Our consulting services segment
experienced decreasing revenues of approximately $5.6 million from approximately $16.2
million for the year ended December 31, 2006 as compared to approximately $10.6 million
for the year ended December 31, 2007. The decrease in revenues for the year ended December
31, 2007 as compared to the year ended December 31, 2006 was materially the result of a
reduction in the sale of software associated with the various HSPD-12 programs that did
not re-occur in 2007 as a result of budget delays, as well as to a reduction in
consultants billable hours in 2007. In 2006, there were two sales of
OEM software to a single customer that aggregated to approximately $7,000,000 that did not
recur in 2007.  The reduction in billable hours in 2007 as compared to
2006 was a result of difficulties in sourcing candidates for available open positions with
the necessary skills throughout the year.

As the Company attempts to implement
its strategy of strategic growth driven both by internal growth and potential merger and
acquisition activity, we believe that future performance may continue to affect the
comparability of the information reflected in the selected consolidated financial
information presented above.

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 acquisition of ORC and our
subsequent acquisition of iSYS in January 2008, 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.

22

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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 to provide the necessary
investment to continue to upgrade its management reporting systems to meet the continuing
demands of the present regulatory changes may also affect the comparability of the
information reflected in the financial information presented above.

# Critical Accounting
Policies and Estimates

The Companys consolidated
financial statements are prepared in accordance with accounting principles generally
accepted in the United States, or U.S. GAAP. These accounting principles require us to
make certain estimates, judgments and assumptions. WidePoint believes that the estimates,
judgments and assumptions upon which the Company relies are reasonably based upon
information available to it at the time that these estimates, judgments and assumptions
are made. These estimates, judgments and assumptions can affect the reported amounts of
assets and liabilities as of the date of the financial statements, as well as the reported
amounts of revenue and expenses during the periods presented. To the extent there are
material differences between these estimates, judgments and assumptions and actual
results, the Companys financial statements will be affected. The significant
accounting policies that WidePoint believes are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:

| |  | Revenue
recognition;
| | - | --------------------

| |  | Allowance
for Doubtful Accounts;
| | - | --------------------------------

| |  | Goodwill;
| | - | ---------

| |  | Intangibles;
| | - | ------------

| |  | Accounting
for income taxes;
| | - | ----------------------------

23

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| |  | Stockbased compensation.
| | - | -------------------------

In many cases, the accounting
treatment of a particular transaction is specifically dictated by U.S. GAAP and does not
require managements judgment in its application. There are also areas in which
managements judgment in selecting among available alternatives would not produce a
materially different result. The Companys senior management has reviewed these
critical accounting policies and related disclosures with its Audit Committee. See Notes
to Consolidated Financial Statements, which contain additional information regarding
accounting policies and other disclosures required by U.S. GAAP.

Revenue Recognition

The majority of WidePoint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 fixed-price contracts, revenue is generally recorded as
delivery is made. For time-and-material contracts, revenues are computed by multiplying
the number of direct labor-hours expended in the performance of the contract by the
contract billing rates and adding other billable direct costs. In the event of a
termination of a contract, all billed and unbilled amounts associated with those task
orders where work has been performed would be billed and collected. The termination
provisions of the contract would be accounted for at the time of termination. Any deferred
and/or amortization cost would either be billed or expensed depending upon the termination
provisions of the contract. Further, the Company has had no material history of losses nor
has it identified any specific risk of loss at December 31, 2007 due to termination
provisions and thus has not recorded provisions for such events.

The Company also recognizes
revenue including multiple element arrangements, in accordance with the provisions of SAB
No. 104 and EITF 00-21. Revenue arrangements with multiple elements are divided into
separate units of accounting if certain criteria are met, including whether the delivered
item has value to the customer on a stand-alone basis and whether there is objective and
reliable evidence of the fair value of the undelivered items. Revenue is recognized as
specific elements indicated in sales contracts are executed. If an element is essential to
the functionality of an arrangement, the entire arrangements revenue is deferred
until that essential element is delivered. The fair value of each undelivered element that
is not essential to the functionality of the system is deferred until performance or
delivery occurs. The fair value of an undelivered element is based on vendor specific
objective evidence or third party evidence of fair value as appropriate. If an undelivered
element exists, the Company will determine the fair value of the undelivered element and
subtract the fair value of the undelivered element from the total consideration under the
arrangement. The residual amount is the Companys estimate of the fair value of the
delivered element. Costs associated with inconsequential or perfunctory elements in
multiple element arrangements are accrued at the time of revenue recognition.

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.

24

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Allowance for Doubtful
Accounts

WidePoint determines its Allowance by
considering a number of factors, including the length of time trade accounts receivable
are past due, previous loss history, the customers current ability to pay its
obligations, and the condition of the general economy and the industry as a whole. The
Company makes judgments as to its ability to collect outstanding receivables based on
these factors and provide allowances for these receivables when collections become
doubtful. Provisions are made based on specific review of all significant outstanding
balances. Because of the Companys history of minimal credit losses and the nature of
the Companys customers at the time, no allowance for doubtful accounts was believed
necessary at December 31, 2007 or at December 31, 2006.

Goodwill

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,
Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. These standards require the use of the purchase method of
accounting for business combinations, set forth the accounting for the initial recognition
of acquired intangible assets and goodwill and describe the accounting for intangible
assets and goodwill subsequent to initial recognition. Under the provisions of these
standards, goodwill is not subject to amortization and annual review is required for
impairment. The impairment test under SFAS No. 142 is based on a two-step process
involving (i) comparing the estimated fair value of the related reporting unit to its net
book value and (ii) comparing the estimated implied fair value of goodwill to its carrying
value. Impairment losses are recognized whenever the implied fair value of goodwill is
less than its carrying value. The Companys annual impairment testing date is
December 31. Goodwill is a significant item on the Companys balance sheet and
represents approximately 22% of our total assets as of December 31, 2007. Goodwill is
identified on the face of the Balance Sheet.

Intangibles

The Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets on January 1, 2006. Intangible assets are recorded at
cost and amortized over their estimated useful lives using the straight-line method. Each
asset is continually evaluated by management to determine if its carrying value will be
realized based upon the estimated discounted cash flow expected from the asset. Additional
amortization is recognized in the period a decline in value is identified.

The Company also 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. The application of purchase accounting to a business
acquisition requires that the Company identify the individual assets acquired and
liabilities assumed and estimate the fair value of each.

25

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The intangibles recognized in the
acquisition are amortized over the Companys estimate of 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 and identifiable intangibles 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.

As of December 31, 2007, the Company
is not aware of any known trends, demands, commitments, events or uncertainties that are
reasonably likely to occur and materially affect the methodology or the assumptions the
Company has used to value long-lived assets. Long-lived assets are a significant item on
the Companys balance sheet and represent approximately 38% of our total assets. Any
impairment as a result of the estimate utilizing undiscounted net cash flows to determine
the assumed value of long-lived assets could have a significant impact on the
Companys financial condition, changes in financial condition and results of
operations. Long-lived assets are identified on the face of the Balance Sheet as
Intangibles. Amortization of Intangibles is identified on the face of the Statement of
Operations within Cost of Sales.

Specific intangibles arose as a
result of the Companys acquisition of ORC. The Company allocated approximately
$1,145,000 ($445,000 net book value at December 31, 2007) to customer list and
relationships and $2,526,000 to goodwill. The Companys senior management has
discussed the development and selection of the accounting estimates relating to the
purchase accounting for the ORC acquisition, the amortization period of the acquired
intangibles and the lack of impairment of the assets, and the MD&A disclosure
regarding those estimates, with the audit committee of the Companys board of
directors. Also, the Company engaged MP&S Valuations to perform an independent
analysis to provide a qualified opinion on the Companys methodology and calculations
in determining the related intangibles valuations associated with the purchase accounting
for the ORC acquisition.

Accounting for Income
Taxes

WidePoint accounts for income taxes
in accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under the asset and liability method of SFAS No. 109, deferred
income taxes are recognized for the expected future tax consequences of temporary
differences between financial statement carrying amounts, and the tax bases of existing
assets and liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled.

The Company has incurred historical
net operating losses, or NOLs, for federal income tax purposes. Accordingly, no federal
income tax provision has been recorded to date and there are no taxes payable. In
assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon generation of
future taxable income during the periods in which those temporary differences become
deductible.

Based upon the level of historical
losses that may limit utilization of NOL carry forwards in future periods, management is
unable to predict whether these net deferred tax assets will be utilized prior to
expiration. The unused NOL carry forwards expire in years 2010 through 2027. As such, the
Company has recorded a full valuation allowance against net deferred tax assets. WidePoint
believes that its estimates are reasonable, given the lack of historical earnings and the
fact that there may be significant limitations placed on the use of the NOL carryforwards.
There is, however, a significant possibility that the Company will have sufficient income
in the future to utilize substantial portions of the deferred tax assets. No assurance can
be given that the final outcome of these matters will not be different than that which is
described above. Such a change in the estimate reflected in the historical income tax
provisions could have a material effect on the income tax provision and net income in the
period in which such determination is made.

26

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Stockbased compensation

The Company adopted SFAS 123R
effective January 1, 2006, which requires recognition of compensation expense for all
stock option or other equity-based awards that vest or become exercisable after the
options effective date. The Company elected the modified prospective application
transition method of adoption and, as such, prior period financial statements have not
been restated. Under this method, the fair value of all stock options granted or modified
after adoption must be recognized in the Consolidated Statement of Operations
and total compensation cost related to non-vested awards not yet recognized, as determined
under the original provisions of SFAS 123, must also be recognized in the
Consolidated Statement of Operations as vesting occurs.

As part of our implementation,
management has established assumptions required for a basis of determining the fair value
of stock options as calculated using the Black-Scholes option-pricing model. Management
believes the results and conclusions relating to the assumptions, including; expected
term, volatility, risk-free interest rate, and dividend rate are reasonable based on
historical trends and expected future events. Management is not aware of any matters that
would materially alter the assumptions used in the valuation of the stock options under
the Black-Scholes option-pricing model. The forfeiture rates utilized in conjunction with
the recognized stock compensation expense is reasonable and reflective of the expected
rates for potentially cancelled, unvested stock options. Stock based compensation
recognized during the period is properly stated and calculated as promulgated by SFAS
123R.

# Results of Operations

Year Ended December 31,
2007 Compared to the Year ended December 31, 2006

Revenues.    
          Revenues for the year ended December 31, 2007, were approximately $14.1
          million, a decrease of $3.9 million, as compared to revenues of approximately
          $18.0 million for the year ended December 31, 2006. This decrease was
          materially attributable to decreased sales associated with consulting services
          and software, partially offset by increased sales associated with the rollout of
          contract awards in support of the federal governments HSPD-12 mandate and
          the DODs ECA program.

Our PKI credentialing and managed
services segment experienced revenue growth of approximately 103% with revenues increasing
$1,812,000 from approximately $1,751,000 for the year ended December 31, 2006, to
approximately $3,563,000 for the year ended December 31, 2007, as a result of continuing
adoption of the Federal Governments mandate under HSPD-12 and the continuing
adoption of the ECA program by the Department of Defense and its federal contractors. In
the long-term we anticipate that our PKI credentialing and managed services sales should
continue to increase as we witness the continued adoption of the ECA program by the
Department of Defense federal contractors and the HSPD-12 program is increasingly adopted
by the Federal Government agencies and departments. In the short-term we do anticipate a
greater variability in revenue growth as we either await contract awards that have been
delayed or as certain pilot programs expand to fully implemented programs in support of
the HSPD-12 initiative.

Our consulting services segment
experienced decreased revenues of $5.6 million from approximately $16.2 million for the
year ended December 31, 2006 as compared to approximately $10.6 million for the year ended
December 31, 2007. The decrease in revenues for the year ended December 31, 2007 as
compared to the year ended December 31, 2006 was materially the result of a reduction in
the sale of software associated with the various HSPD-12 programs that did not recur in
2007 as a result of budget delays, along with a reduction in consultants billable hours in
2007. In 2006, there were two sales of
OEM software to a single customer that aggregated to approximately $7,000,000 that did not
recur in 2007.  The reduction in billable hours in 2007 as compared to 2006 was a result of
difficulties in sourcing candidates for available open positions with the necessary skills
throughout the course of the year.

Cost of Sales.Cost of sales
for the year ended December 31, 2007, was approximately $10.6 million, or 75% of revenues,
a decrease of approximately $3.7 million below cost of sales of approximately $14.3
million, or 79% of revenues, for the year ended December 31, 2006. The absolute dollar
decrease in cost of sales was materially attributable to lower revenues while the
improvement in the gross profit margin was materially attributable to an
improvement in the sales mix of higher margin services.  The proportion of PKI products and
services in 2007 was 25% of total revenue compared to 10% of total revenue in 2006. The
PKI products and services generate higher profit margins for the Company.

27

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The cost elements related to
consultant salaries, benefits and expenses at both ORC and WidePoint are substantially
similar.

Gross profit. Gross profit for
the year ended December 31, 2007, was approximately $3.6 million, or 25% of
revenues, a decrease of $134,000 as compared to gross profit of approximately $3.7
million, or 21% of revenues, for the year ended December 31, 2006.

Sales and marketing. Sales and
marketing expenses for the year ended December 31, 2007 were approximately $0.9
million, or 6% of revenues, as compared to approximately $0.9 million, or 5% of revenues, for the year
ended December 31, 2006. The slight increase in sales and marketing expenses for the
year ended December 31, 2007, was primarily attributable to an increase in the amount
of sales and marketing expenditures for additional labor as a result of increased bid and
proposal efforts related to the expansion of our PKI managed services segment.

General and administrative.
General and administrative expenses for the year ended December 31, 2007 were
approximately $3.2 million, or 22% of revenues, as compared to $3.3 million, or 19% of
revenues, for the year ended December 31, 2006. The $0.1 million decrease in general
and administrative expenses in 2007 was primarily attributable to the recognition of lower
employee stock options expense of approximately $0.2 million for the year ended
December 31, 2007 as compared to approximately $0.4 million for the year ended
December 31, 2006.

Depreciation expense.Depreciation expense for year ended December 31, 2007, was approximately $83,000, or
less than 1% of revenues, an increase of $48,000, as compared to approximately $35,000 of
such expenses, or less than 1% of revenues, recorded by the Company for the year ended
December 31, 2006. The increase in depreciation expenses for the year ended December 31,
2006, was primarily attributable to the increased pool of depreciable assets.

Interest income (expense).
Interest income for the year ended December 31, 2007 was $104,000, an increase of
$12,000 as compared to $93,000 for the year ended December 31, 2006. The increase in
interest income in 2007 was primarily attributable to greater amounts of available cash
and other securities. Interest expense for the year ended December 31, 2007 was
$14,000 an increase of $4,000 as compared to $10,000 of interest expense for the year
ended December 31, 2006. The increase in interest expense in 2007 was primarily
attributable to capital lease purchases by ORC.

Income tax benefit. There was
no income tax benefit for 2007, as compared to an income tax benefit for the year ended
December 31, 2006 of $83.

Net
loss. As a result of the above, the net loss for the year ended December 31, 2007
was approximately $0.5 million, an increase of $0.1 million, as compared to the net loss
of approximately $0.4 million for the year ended December 31, 2006.

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.

28

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|                                      
|--------------------------------------
|Consulting services                   
|Revenues                              
|Operating income                      
|Total assets                          
|PKI Credentialing and Managed Services
|Revenues                              
|Operating income                      
|Total assets                          
|Total Company                         
|Revenues                              
|Operating loss                        
|Depreciation expense                  
|Interest income (expense), net        
|Income tax benefit                    
|Net loss                              
|Total Corporate assets                
|Total assets                          

|(1) | Includes
$221,078 in amortization expense in cost of sales associated with the
               purchase of ORC, which is not allocated among the segments and includes
$964,372                in unallocated corporate costs in sales, general and
administrative expense.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
$221,078 in amortization expense in cost of sales associated with the purchase of ORC,
which is not allocated among the segments and includes $1,122,379 in unallocated
corporate costs in sales, general and administrative expense.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

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# Liquidity and Capital
Resources

The Company has, since inception,
financed its operations and capital expenditures through the sale of preferred and common
stock, seller notes, convertible notes, convertible exchangeable debentures, senior
secured loans and the proceeds from the exercise of the warrants related to a convertible
exchangeable debenture. During 2007 and 2006, operations were primarily financed with
working capital, senior debt, and stock option and warrant exercises.

Cash used by operating activities for
the year ended December 31, 2007, was approximately $455,000 as compared to cash provided
by operating activities of approximately $508,000 for the year ended December 31,
2006.  The decrease in cash balances available for operating activities for the year
ended December 31, 2007, was primarily a result of a reduction in accounts payable and
deferred revenues.  Capital expenditures in property and equipment were approximately
$132,000, excluding any capital leases for the year ended December 31, 2007, as compared
to capital expenditures in property and equipment of approximately $72,000, excluding
capital leases for the year ended December 31, 2006.  During the fourth quarter of 2007,
the Company entered into a secured credit facility with Protexx, a PKI software and
services company with which we have a strategic business relationship. The credit facility for
approximately $100,000 was fully utilized and drawn down through December 31, 2007. The
credit facility is collateralized by all of the assets of Protexx. During the first
quarter of 2008, the credit facility was extended until June 30, 2008 and increased to
$200,000. The facility bears interest at 10% simple interest.

The Company had decreases in its
balance sheet in cash and cash equivalents, accounts receivables, prepaid expenses, and
intangibles, offset by an increase in property and equipment and other assets, with
decreases in accounts payable, accrued expenses, and deferred revenue, further offset by
increases in capital lease obligations as of December 31, 2007 as compared to December 31,
2006. The decrease in assets and decrease in the liabilities in the Companys balance
sheet were primarily due to the reduction in revenues in 2007 as compared to 2006.

As of December 31, 2007, the Company
had net working capital of approximately $3.3 million. WidePoints primary source of
liquidity consists of approximately $1.8 million in cash and cash equivalents and
approximately $4.8 million of accounts receivable. Current liabilities include
approximately $3.4 million in accounts payable and accrued expenses. The Companys
business environment is characterized by rapid technological change, experiencing times of
high growth and contraction, and is influenced by material events such as mergers and
acquisitions that can substantially change the Companys performance and outlook.

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 material 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.

WidePoint believes that its current
cash position is sufficient to meet capital expenditure and working capital requirements
through 2008. 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 might require external financing that could include
additional debt or equity capital. In January 2008, the Company acquired iSYS LLC with
proceeds of approximately $3.8 million from the Companys credit facility with Cardinal Bank. 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.

30

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On January 2, 2008, the Company
entered into a Commercial Loan Agreement with Cardinal Bank relating to a $5,000,000
revolving credit facility and a $2,000,000 term loan. Advances under the revolving credit
facility will bear interest at a variable rate equal to the prime rate plus 0.25% and the
repayment date for such facility is April 30, 2009. This new revolving credit facility
replaces the Companys prior $2,000,000 revolving credit facility with Cardinal Bank.
The term loan bears interest at 7.5% annually and the repayment date of such term loan is
January 1, 2012.

On January 4, 2008, the Company
completed the closing of the acquisition of all the issued and outstanding membership
interests of iSYS from Mr. Jin Kang, the sole owner-member of iSYS, pursuant to the terms
of a Membership Interest Purchase Agreement, dated as of January 2, 2008, between the
Company, iSYS, and Jin Kang. Pursuant to the terms of the Membership Interest Purchase
Agreement, the Company paid Jin Kang the following consideration at the closing: (i)
$5,000,000 in cash, (ii) $2,000,000 principal amount in an Installment Cash Promissory
Note, which bears simple annual interest at the initial rate of 7% through December 31,
2008, and thereafter the simple interest rate will increase to 10% from January 1, 2009
through the date of maturity, which will be on the earlier of either April 1, 2009 or the
filing by the Company of its Annual Report on Form 10-K for the year ending December 31,
2008, and (iii) the issuance of 1,500,000 shares of Company common stock. The Company also
issued an additional 3,000,000 shares of Company common stock in the name of Jin Kang,
which shares were delivered into escrow to be held subject to the satisfaction of certain
earnout provisions under the Membership Interest Purchase Agreement, and which shares are
subject to return to the Company in the event such earnout provisions are not achieved
under the terms of the Membership Interest Purchase Agreement. Under the terms of the
Membership Interest Purchase Agreement, Jin Kang also entered into an Employment and
Non-Compete Agreement, dated as of January 4, 2008.

The subsequent credit facility and
acquisition will increase the amount of debt and interest expense the Company will need to
support, along with corresponding increases in assets and estimated proforma projected
revenues and profits from operations. For the fiscal year ended December 31, 2007, iSYS is
projected to have approximately $20 million in revenues and net income of approximately
$1.4 million dollars. The estimated proforma financials representing both the Company and
iSYS for the period ending December 31, 2007 reflects pro forma revenues of approximately $34
million and pro forma positive cashflows for such year after allowing for interest expense from the
increased debt service of the credit facility to acquire iSYS. For more information
concerning our acquisition of iSYS and the estimated proforma impact of the acquisition,
please see our Form 8-K/A no. 1 filing on March 21, 2008.

# Off-Balance Sheet
Arrangements

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

31

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# Other

Inflation has not had a significant
effect on the Companys operations, as increased costs to the Company have generally
been offset by increased prices of products and services sold, although this has been more
recently compromised by some of the competitive pricing pressures referenced under
Competition in Item 1 of this document.

The preparation of 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 substantially differ from those
estimates.

This report contains forward-looking
statements setting forth the Companys beliefs or expectations relating to future
revenues and profitability. Actual results may differ materially from projected or
expected results due to changes in the demand for the Companys products and
services, uncertainties relating to the results of operations, dependence on its major
customers, risks associated with rapid technological change and the emerging services
market, potential fluctuations in quarterly results, and its dependence on key employees
and other risks and uncertainties affecting the technology industry generally. 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.

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
|------- | -------------------------------------------

The consolidated financial statements
and schedules required hereunder and contained herein are listed under Item 15 below.

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

Effective January 1, 2007, Epstein,
Weber & Conover, PLC (EWC) combined its practice with Moss Adams LLP
(Moss Adams) and therefore resigned as the independent registered public
accounting firm of WidePoint. The Company was notified of such resignation on January 22,
2007. According to information provided to the Company, all of the partners of EWC have
become partners of Moss Adams.

On February 24, 2006, the Company
engaged EWC as its independent registered public accounting firm. From the date of
engagement of EWC through January 22, 2007, there were no disagreements (within the
meaning of Item 304 of Regulation S-K) between the Company and EWC on any matters of
accounting principles or practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved to the satisfaction of EWC, would have been referred to
in its report. EWCs report on the Companys financial statements for the year
ended December 31, 2005 did not contain an adverse opinion or a disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope, or accounting principles.

32

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On January 22, 2007, the Audit
Committee of the Board of Directors of the Company engaged the independent accounting firm
of Moss Adams to serve as its new independent accounting firm effective January 22, 2007.

|ITEM 9A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

# Disclosure Controls and
Procedures

We maintain disclosure controls and
procedures designed to provide reasonable assurance that material information required to
be disclosed by us in the reports we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms, and that the information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. We performed an
evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period
covered by this report. Based on the existence of the material weaknesses discussed below
in Managements Report on Internal Control Over Financial Reporting, our
management, including our Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures were not effective at the reasonable assurance
level as of the end of the period covered by this report.

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

33

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# Managements Report
on Internal Control Over Financial Reporting

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended, as a process designed by, or under the
supervision of, our principal executive and principal financial officers and effected by
our board of directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

| |  | pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | provide
reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with
authorizations of our management and directors; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material
effect on the financial statements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements.
Additionally, projections of any evaluation of effectiveness to future periods are subject
to the risks that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2007. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.

Based on this assessment, management
concluded that our internal control over financial reporting was not effective as of
December 31, 2007 due to the existence of the material weaknesses as of December 31, 2007,
discussed below. A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected.

34

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| |  | Inadequate
segregation of duties within a significant account or process.We did not have
appropriate segregation of duties within our internal controls that would ensure the
consistent application of procedures in our financial reporting process by existing
personnel. We also did not have appropriate software application controls as a result of the inadequate segregation of
duties to ensure the integrity of our financial consolidation schedules and footnote disclosure reports
are consistent and accurate.  This control deficiency could result in a misstatement to substantially all of
our financial statement accounts and disclosures that would result in a material
misstatement to the annual or interim financial statements that would not be prevented or
detected. Accordingly, management has concluded that this control deficiency constitutes
a material weakness.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Inadequate
documentation of the components of internal control.We did not maintain documented
policies and evidence of compliance with our internal controls that would ensure the
consistent application of procedures in our financial reporting process by existing
personnel. This control deficiency could result in a misstatement to substantially all of
our financial statement accounts and disclosures that would result in a material
misstatement to the annual or interim financial statements that would not be prevented or
detected. Accordingly, management has concluded that this control deficiency constitutes
a material weakness.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

This annual report does not include an attestation
report of the Company's registered public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered public
accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management's report in this annual report.

# Remediation Plan for
Material Weaknesses

The material weaknesses described
above in Managements Report on Internal Control Over Financial Reporting
comprise control deficiencies that we discovered in the fourth quarter of fiscal year 2007
and in the financial close process for fiscal year 2007.

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

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

| |  | Inadequate
documentation of the components of internal control. We commenced a thorough review
of our documentation and where necessary we have put into place policies and procedures
to document such evidence to comply with our internal control requirements. We have also
retained a financial consultant to assist us in further reviewing and improving our
internal control processes.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35

---

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

# Changes in Internal
Control Over Financial Reporting

During the fourth quarter of fiscal
year 2007 and the first quarter of 2008, we undertook a number of measures to remediate
the material weaknesses discussed under Managements Report on Internal Control
Over Financial Reporting, above. Those measures, described under Remediation
Plan for Material Weaknesses, initiated during the fourth quarter of fiscal year
2007, have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

Other than as described above, there
have been no changes in our internal control over financial reporting during the fourth
quarter of fiscal year 2007 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------

None.

# PART III.

|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|-------- | -------------------------------------------------------

Except for the information regarding executive
officers required by Item 401 of Regulation S-K, which is included in
Part I of this Annual Report on Form 10-K as Item 4A, pursuant to General
Instruction G(3) of Form 10-K, the information called for by this item is hereby
incorporated by reference from our definitive proxy statement or amendment hereto to be
filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.

|ITEM 11. | EXECUTIVE COMPENSATION.
|-------- | -----------------------

Pursuant to General Instruction G(3)
of Form 10-K, the information called for by this item is hereby incorporated by reference
from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this report.

36

---

|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
|-------- | -----------------------------------------------------------------------------------------------

Pursuant to General Instruction G(3)
of Form 10-K, the information called for by this item is hereby incorporated by reference
from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this report.

|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|-------- | --------------------------------------------------------------------------

Pursuant to General Instruction G(3)
of Form 10-K, the information called for by this item is hereby incorporated by reference
from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this report.

|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------

Pursuant to General Instruction G(3)
of Form 10-K, the information called for by this item is hereby incorporated by reference
from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this report.

37

---

# PART IV.

|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|-------- | -------------------------------------------

| | (a) | Financial
Statements and Financial Statement Schedule
| | --- | -----------------------------------------------------

| | (1) | Financial
Statements:
| | --- | ---------------------

| | Report
of Moss Adams LLP, Independent Registered Public Accounting Firm
| | -----------------------------------------------------------------------

| | Consolidated
Balance Sheets as of December 31, 2007 and 2006
| | ------------------------------------------------------------

| | Consolidated
Statements of Operations for the Years Ended December 31, 2007 and 2006.
| | -------------------------------------------------------------------------------------

| | Consolidated
Statements of Changes in StockholdersEquity for the Years Ended December
2007 and 2006.
| | -----------------------------------------------------------------------------------------------------

| | Consolidated
Statements of Cash Flow for the Years Ended December 31, 2007 and 2006.
| | ------------------------------------------------------------------------------------

| | Notes
to Consolidated Financial Statements
| | ------------------------------------------

All other schedules are omitted
either because they are not applicable or not required, or because the required
information is included in the financial statements or notes thereto:

| | (b) | Exhibits:
The following exhibits are filed herewith or incorporated herein by reference:
| | --- | ----------------------------------------------------------------------------------------

38

---

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

|2.1 | Membership
Interest Purchase Agreement, dated as of January 2, 2008, between the Company, iSYS
         LLC, and Jin Kang.  (Incorporated
         herein by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K
filed on January 8, 2008.)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1 | Amended
and Restated Certificate of Incorporation of WidePoint Corporation. (Incorporated
         herein by reference to Exhibit A to the Registrants Definitive Proxy Statement,
as filed on          December 27, 2004.)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 | Bylaws
of ZMAX Corporation.  (Incorporated herein by reference to Exhibit 3.6 to the
         Registrants Registration Statement on Form S-4 (File No. 333-29833).)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 | Certificate
Of Designations, Rights And Preferences Of The Series A Convertible Preferred Stock
         between WidePoint Corporation and Barron Partners LP (Incorporated herein by
reference to          Exhibit 10.4 to the Registrants Current Report on Form 8-K/A filed
on November 2, 2004.)
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | Employment
Agreement  between WidePoint Corporation and Steve Komar, dated July 1, 2002.*
         (Incorporated herein by reference to Exhibit 10.26 to Registrants Report of
Form 10Q, as filed          on August 15, 2002 (File No.  000-23967)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Employment
Agreement  between WidePoint Corporation and James McCubbin, dated July 1, 2002.*
         (Incorporated herein by reference to Exhibit 10.26 to Registrants Report of
Form 10Q, as filed          on August 15, 2002 (File No.  000-23967)
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Employment
Agreement  between WidePoint Corporation and Mark Mirabile, dated July 1, 2002.*
         (Incorporated herein by reference to Exhibit 10.26 to Registrants Report of
Form 10Q, as filed          on August 15, 2002 (File No.  000-23967)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Preferred
Stock Purchase Agreement Between WidePoint Corporation and Barron Partners LP.
         (Incorporated herein by reference to Exhibit 10.1 to the Registrants Current
Report on Form          8-K/A filed on November 2, 2004.)
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Common
Stock Purchase Warrant between WidePoint Corporation and Barron Partners LP.
         (Incorporated herein by reference to Exhibit 10.2 to the Registrants Current
Report on Form          8-K/A filed on November 2, 2004.)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Registration
Rights Agreement between WidePoint Corporation and Barron Partners LP.
         (Incorporated herein by reference to Exhibit 10.3 to the Registrants Current
Report on Form          8-K/A filed on November 2, 2004.)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

* Management contract or
compensatory plan.

39

---

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

|10.7 | Stock
Purchase  Agreement between  WidePoint  Corporation,  Operational  Research  Consultants,
 Inc.          (Incorporated  herein by  reference to Exhibit 10.5 to the  Registrant's
 Current  Report on Form          8-K/A filed on November 2, 2004.)
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 | Master
Amendment  between  WidePoint  Corporation and Barron Partners L.P.  (Incorporated
 herein          by  reference  to  Exhibit  10.1  to the  Registrant's  Current  Report
 on  Form  8-K  filed  on          November 11, 2004.)
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 | Loan
and Security  Agreement,  dated as of October 22, 2004,  by and between RBC Centura Bank
and          the Registrant.  (Incorporated  herein by reference to Exhibit 10.46 to the
 Registrant's  Annual          Report on Form 10-K for the year  ended  December  31,
 2004,  as filed  with Form  10-K/A  No. 1          thereto.)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 | Letter
 Amendment to Loan and Security  Agreement,  dated as of February 7, 2005,  by and
between          RBC Centura Bank and the  Registrant.  (Incorporated  herein by
reference to Exhibit 10.47 to the          Registrant's  Annual  Report on Form 10-K for
the year ended  December  31,  2004,  as filed with          Form 10-K/A No. 1 thereto.)
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 | Form
of  Letter  Agreement  between  Goldman,  Sachs & Co.,  Barron  Partners  L.P.  and
 WidePoint          Corporation,  as  executed  on April  26,  2005.  (Filed  as  Exhibit
 10.46 to the  Registrant's          Amendment No. 1 to Form S-1 as filed on May 5, 2005.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 | Form
of  Letter  Agreement  between  Goldman,  Sachs & Co.,  Barron  Partners  L.P.  and
 WidePoint          Corporation,  as  executed  on April  28,  2005.  (Filed  as  Exhibit
 10.47 to the  Registrant's          Amendment No. 1 to Form S-1 as filed on May 5, 2005.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 | Employment
 and  Non-Compete   Agreement  between  WidePoint   Corporation,   Operational  Research
         Consultants, Inc and Daniel Turissini.* (Incorporated herein by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 | Addendum
to Employment  and  Non-Compete  Agreement  between the Registrant and Daniel E.
Turssini,          effective  as of July  25,  2007.  *(Incorporated  herein  by
 reference  to  Exhibit  10.1 to the          Registrant's Current Report on Form 8-K
filed on July 30, 2007.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 | Commercial
 Loan  Agreement,  dated  August 16,  2007,  between  the  Company  and  Cardinal  Bank.
         (Incorporated  herein by reference to Exhibit 10.1 to the Registrant's  Current
Report on Form 8-K          filed on August 21, 2007.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 | Security
 Agreement,  dated August 16, 2007,  between the Company and Cardinal  Bank.
 (Incorporated          herein by  reference  to  Exhibit  10.2 to the  Registrant's
 Current  Report on Form 8-K filed on          August 21, 2007.)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

* Management contract or compensatory
plan.

40

---

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

|10.17 | Promissory
 Note,  dated  August  16,  2007,  issued by the  Company  in favor of  Cardinal  Bank.
        (Incorporated  herein by reference to Exhibit 10.3 to the Registrant's  Current
Report on Form 8-K         filed on August 21, 2007.)
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 | Promissory
Note, dated November 5, 2007, between Protexx,  Inc. and its subsidiaries,  including but
        not limited to 22THEN LLC, as borrower,  WidePoint  Corporation,  as lender, and
Peter Letizia, as         guarantor.  (Incorporated  herein by reference to Exhibit 10.1
to the Registrant's  Current Report         on Form 10-Q filed on November 9, 2007.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 | Revolving
Line of Credit  Agreement,  dated as of November 5, 2007, by and among Protexx,  Inc. and
        its  subsidiaries,  including  but not limited to 22THEN  LLC,  as  borrower,
 Peter  Letizia,  as         guarantor,  and WidePoint  Corporation,  as lender.
 (Incorporated  herein by reference to Exhibit         10.2 to the Registrant's Current
Report on Form 10-Q filed on November 9, 2007.)
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 | Security
 Agreement,  dated  as of  November  5,  2007,  given  by  Protexx,  Inc.  and each of
its         subsidiaries and 22THEN LLC,  collectively,  as debtors, to and in favor of
WidePoint Corporation,         as secured party.  (Incorporated  herein by reference to
Exhibit 10.3 to the Registrant's  Current         Report on Form 10-Q filed on November
9, 2007.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 | Software
 Escrow  Agreement,  dated  as of  November  5,  2007,  between  22THEN  LLC  and
 Protexx         Incorporated,  collectively,  as supplier,  WidePoint  Corporation,  as
user,  and Foley & Lardner         LLP, as escrow  agent.  (Incorporated  herein by
 reference  to Exhibit  10.4 to the  Registrant's         Current Report on Form 10-Q
filed on November 9, 2007.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 | $2,000,000
 Installment Cash Promissory Note, dated January 4, 2008,  issued by the Company in favor
        of Jin Kang.  (Incorporated  herein by  reference  to  Exhibit  10.1 to the
 Registrant's  Current         Report on Form 8-K filed on January 8, 2008.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 | Employment
and Non-Compete  Agreement,  dated as of January 4, 2008,  between the Company,  iSYS LLC
        and Jin Kang. *  (Incorporated  herein by reference  to Exhibit 10.2 to the
 Registrant's  Current         Report on Form 8-K filed on January 8, 2008.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 | Commercial
 Loan  Agreement,  dated  January  2, 2008,  between  the  Company  and  Cardinal  Bank.
        (Incorporated  herein by reference to Exhibit 10.3 to the Registrant's  Current
Report on Form 8-K         filed on January 8, 2008.)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 | Security
 Agreement,  dated January 2, 2008,  between the Company and Cardinal  Bank.
 (Incorporated         herein by  reference  to  Exhibit  10.4 to the  Registrant's
 Current  Report on Form 8-K filed on         January 8, 2008.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

* Management contract or
compensatory plan.

41

---

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

|10.26 | $5,000,000
 Promissory  Note,  dated  January 2, 2008,  issued by the  Company in favor of Cardinal
        Bank.  (Incorporated  herein by reference to Exhibit 10.5 to the  Registrant's
 Current  Report on         Form 8-K filed on January 8, 2008.)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 | Security
 Agreement,  dated January 2, 2008,  between the Company and Cardinal  Bank.
 (Incorporated         herein by  reference  to  Exhibit  10.6 to the  Registrant's
 Current  Report on Form 8-K filed on         January 8, 2008.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 | $2,000,000
 Promissory  Note,  dated  January 2, 2008,  issued by the  Company in favor of Cardinal
        Bank.  (Incorporated  herein by reference to Exhibit 10.7 to the  Registrant's
 Current  Report on         Form 8-K filed on January 8, 2008.)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 | Debt
 Subordination  Agreement,  dated  January 2, 2008,  between  the Company  and  Cardinal
 Bank.         (Incorporated  herein by reference to Exhibit 10.8 to the Registrant's
 Current Report on Form 8-K         filed on January 8, 2008.)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21 | Subsidiaries
of WidePoint Corporation   (Filed herewith).
|-- | ---------------------------------------------------------

|23.1 | Consent
of Moss Adams LLP(Filed herewith).
|---- | ------------------------------------------

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

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

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

42

---

# 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: | April 11, 2008 | /s/ STEVE L. KOMAR                          
|      |                | Steve L. Komar                              
|      |                | Chief Executive Officer                     
|Date: | April 11, 2008 | /s/ JAMES T. MCCUBBIN                       
|      |                | James T. McCubbin                           
|      |                | Vice President - Principal Financial Officer

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons, on behalf of the Registrant and in the capacities and on
the dates indicated.

|Dated: | April 11, 2008 | /s/ STEVE L. KOMAR                                  
|------ | -------------- | ----------------------------------------------------
|       |                | Steve L. Komar                                      
|       |                | Director and Chief Executive Officer                
|Dated: | April 11, 2008 | /s/ JAMES T. MCCUBBIN                               
|       |                | James T. McCubbin                                   
|       |                | Director, Vice President and Chief Financial Officer
|Dated: | April 11, 2008 | /s/ JAMES M. RITTER                                 
|       |                | James M. Ritter                                     
|       |                | Director                                            
|Dated: | April 11, 2008 | /s/ MORTON S. TAUBMAN                               
|       |                | Morton S. Taubman                                   
|       |                | Director                                            
|Dated: | April 11, 2008 | /s/ RON S. OXLEY                                    
|       |                | Ron Oxley                                           
|       |                | Director                                            
|Dated: | April 11, 2008 | /s/ OTTO GUENTHER                                   
|       |                | Otto Guenther                                       
|       |                | Director                                            
|Dated: | April 11, 2008 | /s/ GEORGE NORWARD                                  
|       |                | George Norward                                      
|       |                | Director                                            

43

---

INDEX TO FINANCIAL
STATEMENTS

Page

|Report of Independent Registered Public Accounting Firm             | F-1
|------------------------------------------------------------------- | ---
|Consolidated Balance Sheets as of December 31, 2007 and 2006        | F-2
|Consolidated Statements of Operations for the Years ended          
|December 31, 2007, and 2006                                         | F-3
|Consolidated Statements of Stockholders' Equity for the Years ended
|December 31, 2007, and 2006                                         | F-4
|Consolidated Statements of Cashflows for the Years ended           
|December 31, 2007, and 2006                                         | F-5
|Notes to Consolidated Financial Statements                          | F-6

44

---

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders        of WidePoint Corporation:

We have audited the accompanying
consolidated balance sheets of WidePoint Corporation and subsidiaries as of December 31,
2007 and 2006 and the related consolidated statements of operations, stockholders
equity and cash flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion of these financial statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of WidePoint Corporation and subsidiaries as of December 31, 2007 and
2006 and the results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of America.

/s/Moss Adams LLP Scottsdale,
Arizona April 11, 2008

F - 1

---

WIDEPOINT CORPORATION
AND SUBSIDIARIES       Consolidated Balance Sheets

|                                                                             | December 31,
|---------------------------------------------------------------------------- | ------------
|
|Assets                                                                       |             
|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                                          |             
|Short-term portion of capital lease obligation                               |             
|Total current liabilities                                                    |             
|                                                                             |             
|Capital lease obligation, net of current portion                             |             
|                                                                             |             
|Total liabilities                                                            |             
|                                                                             |             
|Stockholders' equity:                                                        |             
|Preferred stock, $0.001 par value; 10,000,000 shares                         |             
|authorized; 0 and 195,214 shares issued and outstanding,                     |             
|respectively, liquidation value $3,416,245                                   |             
|Common stock, $0.001 par value; 110,000,000 shares authorized, respectively; |             
|52,558,697 and 50,494,759 shares issued and outstanding, respectively        |             
|Stock warrants                                                               |             
|Additional paid-in capital                                                   |             
|Accumulated deficit                                                          |             
|                                                                             |             
|Total stockholders' equity                                                   |             
|                                                                             |             
|Total liabilities and stockholders' equity                                   |             
|                                                                             |             

The accompanying notes
are an integral part of these consolidated statements

F - 2

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated statements
of operations

|                                                             | For the Years Ended December 31,
|------------------------------------------------------------ | --------------------------------
|
|Revenues, net                                                |                                 
|Cost of revenues (including depreciation and amortization of |                                 
|$446,387 and $428,394, respectively)                         |                                 
|                                                             |                                 
|Gross profit                                                 |                                 
|Sales and marketing                                          |                                 
|General and administrative                                   |                                 
|Depreciation expense                                         |                                 
|                                                             |                                 
|Loss from operations                                         |                                 
|Other income (expenses):                                     |                                 
|Interest income                                              |                                 
|Interest expense                                             |                                 
|                                                             |                                 
|Net loss before provision for income taxes                   |                                 
|                                                             |                                 
|Income tax benefit                                           |                                 
|                                                             |                                 
|Net loss                                                     |                                 
|                                                             |                                 
|Basic and diluted net loss per share                         |                                 
|                                                             |                                 
|Basic and diluted weighted-average shares outstanding        |                                 
|                                                             |                                 

The accompanying notes
are an integral part of these consolidated statements

F - 3

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Statements
of Changes in Stockholders Equity

|                            | Temporary Equity | Permanent Equity |  |           |   |   |       |   |  |         
|--------------------------- | ---------------- | ---------------- |  | --------- | - | - | ----- | - |  | --------
|
|
|Balance,                    |                  |                  |  |           |   |   |       |   |  |         
|December 31, 2005           |                  |                  |  | 1,195,714 |   | $ | 1,196 |   |  | --      
|                            |                  |                  |  |           |   |   |       |   |  |         
|Issuance of                 |                  |                  |  | --        |   |   | --    |   |  |         
|common stock                |                  |                 
|Issuance of                 |                  |                 
|common stock --             |                  |                 
|options exercises           |                  |                  |  |           |   |   |       |   |  |         
|Issuance of                 |                  |                 
|common stock -              |                  |                 
|Chesapeake                  |                  |                  |  | --        |   |   | --    |   |  |         
|Conversion of               |                  |                 
|preferred stock             |                  |                  |  | (197,000  | ) |   | (197  | ) |  | (803,500
|Reclass from                |                  |                 
|Temporary to Permanent      |                  |                 
|equity                      |                  |                  |  | (998,714  | ) |   | (999  | ) |  | 998,714 
|Costs associated            |                  |                 
|from registration           |                  |                 
|statement                   |                  |                  |  | --        |   |   | --    |   |  |         
|Issuance of                 |                  |                 
|common stock    warrants    |                  |                  |  | --        |   |   | --    |   |  |         
|Stock options expense       |                  |                  |  |           |   |   |       |   |  |         
|Net loss                    |                  |                  |  |           |   |   |       |   |  |         
|                            |                  |                  |  |           |   |   |       |   |  |         
|Balance,                    |                  |                 
|December 31, 2006           |                  |                  |  | --        |   | $ | --    |   |  | 195,214 
|                            |                  |                  |  |           |   |   |       |   |  |         
|Issuance of common          |                  |                 
|stock -- options exercises  |                  |                  |  |           |   |   |       |   |  |         
|                            |                  |                  |  |           |   |   |       |   |  |         
|Conversion of               |                  |                 
|preferred stock             |                  |                  |  |           |   |   |       |   |  | (195,214
|Costs associated            |                  |                 
|from registration statement |                  |                  |  | --        |   |   | --    |   |  |         
|                            |                  |                  |  |           |   |   |       |   |  |         
|Stock options expense       |                  |                  |  |           |   |   |       |   |  |         
|Net loss                    |                  |                  |  |           |   |   |       |   |  |         
|Balance,                    |                  |                 
|December 31, 2007           |                  |                  |  | --        |   | $ | --    |   |  | --      
|                            |                  |                  |  |           |   |   |       |   |  |         

---

The accompanying notes
are an integral part of these consolidated statements

F - 4

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Statements
of Cash Flows

|                                                                | For the Years Ended December 31,
|--------------------------------------------------------------- | --------------------------------
|
|Cash flows from operating activities:                           |                                 
|Net loss                                                        |                                 
|Adjustments to reconcile net loss to net cash provided by (used |                                 
|in) operating activities                                        |                                 
|Depreciation expense                                            |                                 
|Amortization expense                                            |                                 
|Stock compensation expense                                      |                                 
|Stock options expense                                           |                                 
|Changes in assets and liabilities-                              |                                 
|Accounts receivable                                             |                                 
|Prepaid expenses and other assets                               |                                 
|Accounts payable and accrued expenses                           |                                 
|                                                                |                                 
|Net cash provided by (used in) operating activities..           |                                 
|Cashflows from investing activities:                            |                                 
|Software development costs                                      |                                 
|Purchases of property and equipment                             |                                 
|                                                                |                                 
|Net cash used in investing activities                           |                                 
|                                                                |                                 
|Cashflows from financing activities:                            |                                 
|Principal payments on notes payable                             |                                 
|Principal payments under capital lease obligation               |                                 
|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) increase in cash                                 |                                 
|Cash and cash equivalents, beginning of period                  |                                 
|                                                                |                                 
|Cash and cash equivalents, ending of period                     |                                 
|                                                                |                                 
|Supplementary cash flow information:                            |                                 
|Liabilities incurred but not yet paid relating to registration  |                                 
|statement                                                       |                                 
|                                                                |                                 
|Noncash investing and financing activity - capital leases for   |                                 
|acquisition of property and equipment                           |                                 
|Insurance policies financed by short term notes payable         |                                 
|Cash paid for-                                                  |                                 
|Interest                                                        |                                 
|                                                                |                                 
|Income taxes                                                    |                                 
|                                                                |                                 

The accompanying notes
are an integral part of these consolidated statements

F - 5

---

# WidePoint Corporation
and Subsidiaries

# Notes to Consolidated
Financial Statements

|1. | Basis
of Presentation, Organization, Nature ofOperations:
|-- | ---------------------------------------------------------

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 a leading provider of E-Authentication federal
credential 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 or acquisitions, 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 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 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 transactions internal to
an organization and with external organizations. 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.

F - 6

---

We intend to continue to market and sell our technical
capabilities into the governmental and commercial marketplace. Further, we are continuing
to actively search out new synergistic acquisitions that we believe may further enhance
our present base of business and service offerings, which has been augmented by our recent
acquisition of ORC and our internal growth initiatives. In January 2008 we acquired iSYS
LLC, a provider of mobile telecom management services, forensic informatics services, and
information assurance services predominately to the United States federal government.

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, and Mid Atlantic areas of the United States.

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 its
plan to expand its operations through a combination of internal growth initiatives
and merger and acquisition opportunities, the Company expects 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.  As a
significant portion of the Companys costs is labor related, the Company 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 the Companys proprietary methodologies, and by offsetting increases in
consultant salaries with increases in consultant fees received from its clients.

|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 intercompany amounts have been eliminated.

F - 7

---

Use of Estimates

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

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 December 31, 2007 cash
balances was $1,592,228 in interest bearing balances in one bank in excess of federally
insured amounts, as compared to $1,924,324 for December 31, 2006. The Company places its
temporary cash investments with high credit-quality financial institutions, and as a
result, the Company believes that no significant credit risk exists with respect to these
cash investments.

Accounts Receivable

The majority of the Companys
accounts receivable is due from the Federal Government and established private sector 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.

F - 8

---

|Description                           | Balance at
Beginning of
Period | Additions
Charged to
Costs and
Expenses | Deductions | Balance at
End of
Period
|------------------------------------- | ------------------------------ | --------------------------------------- | ---------- | ------------------------
|For the year ended December 31, 2006, |                                |                                         |            |                         
|Allowance for doubtful accounts       |                                |                                         | $          | --                      
|For the year ended December 31, 2007, |                                |                                        
|Allowance for doubtful accounts       |                                |                                         | $          | --                      

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 December 31, 2007 and 2006, unbilled accounts receivable totaled $371,435
and $354,123, 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 fixed-price contracts, revenues are generally recorded as
delivery is made. For time-and-material contracts, revenues are computed by multiplying
the number of direct labor-hours expended in the performance of the contract by the
contract billing rates and adding other billable direct costs. In the event of a
termination of a contract, all billed and unbilled amounts associated with those task
orders where work has been performed would be billed and collected. The termination
provisions of the contract would be accounted for at the time of termination. Any deferred
and/or amortization cost would either be billed or expensed depending upon the termination
provisions of the contract. Further, the Company has had no material history of losses nor
has it identified any specific material risk of loss at December 31, 2006 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 and the Company's PKI credential. In such cases revenue is recognized
when there is persuasive evidence that an arrangement exists (generally a purchase order
has been received or contract signed), delivery has occurred, the charge for the software
is fixed or determinable, and collectibility is probable.

Revenue from the sale of PKI
credentials is recognized when delivery occurs. Arrangements with customers on PKI related
contracts may involve multiple deliverable elements. In these cases, the Company applies
the principles prescribed in Emerging Issues Task Force Abstract (EITF) 00-21
Revenue Arrangements with Multiple Deliverables. The Company analyzes various
factors, including a review of the nature of the contract or product sold, the terms of
each specific transaction, the relative fair values of the elements required
by EITF 00-21, any contingencies that may be present, its historical experience with like
transactions or with like products, the creditworthiness of the customer, and other
current market and economic conditions.

Should the sale of product or
software involve an arrangement with multiple elements (for example, the sale of PKI
Credential Seats along with the sale of maintenance, hosting and support to be delivered
over the contract period), the Company allocates revenue to each component of the
arrangement using the residual value method based on the fair value of the undelivered
elements. The Company defers revenue from the arrangement equivalent to the fair value of
the undelivered elements and recognizes the remaining amount at the time of the delivery
of the product or when all other revenue recognition criteria have been met.

F - 9

---

Significant Customers

During 2007, no customer individually
represented at least 10% of revenues. During 2006, one customer, Headquarters Cryptologic
Systems Group (HQ CPSG), individually represented 29% of revenues, and we therefore are
materially dependent upon such customer. 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 customers,
would have a material adverse effect on results.

Fair value of
financial instruments

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

Concentrations of Credit
Risk

Financial instruments that
potentially subject the Company to credit risk consist of cash and cash equivalents and
accounts receivable. As of December 31, 2007, two clients, Headquarters Cryptologic
Systems Group (HQ CPSG) and United Space Alliance, represented 24% and 14% of accounts
receivable, respectively. As of December 31, 2006, one customer, Headquarters Cryptologic
Systems Group (HQ CPSG), represented 54% of accounts receivable.

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:

F - 10

---

|                                                | 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 to five 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 $183,352 of amortization expense for the year ended December
31, 2007, as compared to $183,351 of amortization expense for the year ended December 31,
2006. Capitalized software costs, net, included in Other Intangibles at December 31, 2007 were
approximately $0.7 million, as compared to approximately $0.7 million of capitalized
software costs included in Other Intangibles at December 31, 2006.

Goodwill, 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,
Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. These standards require the use of the purchase method of
accounting for business combinations, set forth the accounting for the initial recognition
of acquired intangible assets and goodwill and describe the accounting for intangible
assets and goodwill subsequent to initial recognition. Under the provisions of these
standards, goodwill is not subject to amortization and annual review is required for
impairment. The impairment test under SFAS No. 142 is based on a two-step process
involving (i) comparing the estimated fair value of the related reporting unit to its net
book value and (ii) comparing the estimated implied fair value of goodwill to its carrying
value. Impairment losses are recognized whenever the implied fair value of goodwill is
less than its carrying value. The Companys annual impairment testing date is
December 31.

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

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

F - 11

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Basic and Diluted Net
Loss Per Share

Basic earnings or loss per share
includes no dilution and is computed by dividing net earnings or loss by the
weighted-average number of common shares outstanding for the period. Diluted earnings or
loss per share includes the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock. The
inclusion of the conversion of preferred stock, outstanding options and warrants to purchase 7,176,257 and
9,146,447 shares, respectively, for the years ended December 31, 2007 and 2006 has not been included in the calculation of the net loss per share as such
effect would have been anti-dilutive. As a result of these items, the basic and diluted net
loss per share for the years ending December 31, 2007 and December 31, 2006, respectively, are
presented as identical.  Subsequent to December 31, 2007,
1,500,000 shares were issued in connection with the iSYS acquisition as well as an
additional 3,000,000 placed in escrow for the related earnout provisions.

Stock-based compensation

Employee stock-based
compensation:

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

Effective January 1, 2006, the
Company adopted the provisions of SFAS No. 123R using the modified prospective application
transition method. Under this method, compensation cost for the portion of awards for
which the requisite service has not yet been rendered that are outstanding as of the
adoption date is recognized over the remaining service period. The compensation cost for
that portion of awards is based on the grant-date fair value of those awards as calculated
for pro forma disclosures under SFAS No. 123, as originally issued. All new awards that
are modified, repurchased, or cancelled after the adoption date are accounted for under
provisions of SFAS No. 123R. Prior periods have not been restated under this transition
method. The Company recognizes share-based compensation ratably using the straight-line
attribution method over the requisite service period. In addition, pursuant to SFAS No.
123R, the Company is required to estimate the amount of expected forfeitures when
calculating share-based compensation, instead of accounting for forfeitures as they occur,
which was the Companys practice prior to the adoption of SFAS 123R.

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
years ended December 31, 2007 and 2006:

|                        | 2007 | 2006
|----------------------- | ---- | ----
|Dividend yield          |      |     
|Risk-free interest rate |      |     
|Volatility factor       |      |     
|Expected life in years  |      |     

The amount of compensation expense
recognized under SFAS 123(R) during the years ended December 31, 2007 and December 31,
2006 under our plans was comprised of the following:

|                                                                          | Year ended
December 31, 2007 | Year ended
December 31, 2006
|------------------------------------------------------------------------- | ---------------------------- | ----------------------------
|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 |                              |                             

Since we have cumulative operating
losses as of December 31, 2007 and December 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 year ended December 31, 2007 and December 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.

F - 12

---

A summary of the option activity
under our plans during the years ended December 31, 2007, and 2006, respectively, is
presented below:

|                                       | # of Shares | Weighted average
Grant date fair value
Per share
|-------------------------------------- | ----------- | ------------------------------------------------
|NON-VESTED                             |             |                                                 
|Non-vested at January 1, 2006          |             |                                                 
|Granted                                |             |                                                 
|Vested                                 |             |                                                 
|Forfeited                              |             |                                                 
|Non-vested at December 31, 2006        |             |                                                 
|Granted                                |             |                                                 
|Vested                                 |             |                                                 
|Forfeited                              |             |                                                 
|Non-vested at December 31, 2007        |             |                                                 
|OUTSTANDING AND EXERCISABLE            |             |                                                 
|Total outstanding at January 1, 2006   |             |                                                 
|Issued                                 |             |                                                 
|Cancelled                              |             |                                                 
|Exercised                              |             |                                                 
|Total outstanding at December 31, 2006 |             |                                                 
|Issued                                 |             |                                                 
|Cancelled                              |             |                                                 
|Exercised                              |             |                                                 
|Total outstanding at December 31, 2007 |             |                                                 
|Total exercisable at December 31, 2007 |             |                                                 

The aggregate remaining contractual
lives in years for the options outstanding and exercisable on December 31, 2006 and 2007
was 3.86 and 3.75 respectively.

F - 13

---

Aggregate intrinsic value represents
total pretax intrinsic value (the difference between WidePoints closing stock price
on December 31, 2007 and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option holders
exercised their options on December 31, 2007. This amount changes based on the fair market
value of WidePoints stock. The total intrinsic value of options outstanding as of
December 31, 2007 and 2006, respectively, were $5,200,151 and $13,310,592.  The total intrinsic value of options exercisable on
December 31, 2007 and 2006, respectively, were $5,151,104 and $12,239,348. The total intrinsic value of options exercised during
the year ended December 31, 2007 and 2006, respectively, were $161,412 and $1,498,962. The Company issues new shares of common
stock upon the exercise of stock options.

At December 31, 2007, 6,246,138
shares were available for future grants under the Companys 1997 Stock Compensation
Plans. This includes options for 1,048,150 shares previously exercised through 2007 under
the Companys 1997 Stock Compensation Plans. This does not include warrants to
purchase 3,999,999 shares granted and vested to members of the senior management team that
were not issued under the Companys 1997 Stock Compensation Plans.

At December 31, 2007, the Company had
approximately $260,749 of total unamortized compensation expense, net of estimated
forfeitures, related to stock option plans that will be recognized over the weighted
average period of 3.4 years.

Non-employee stock-based compensation:

The Company accounts for stock-based
non-employee compensation arrangements using the fair value recognition provisions of FASB
Statement 123, Accounting for Stock-Based Compensationand Emerging Issues
Task Force EITF 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

New accounting
pronouncements

In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements (SFAS 157). This standard establishes a
single authoritative definition of fair value, sets out a framework for measuring fair
value and expands disclosures about fair value measurements. SFAS 157 applies to fair
value measurements already required or permitted by existing standards. SFAS 157 will be
effective for the Companys fiscal year ending December 31, 2008. The Company is
currently evaluating the requirements of SFAS 157 and has not yet determined the impact on
its financial condition and results of operations.

In September 2006, the FASB issued
SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132
(R) (SFAS 158). This pronouncement requires an employer to make certain
recognitions, measurements, and disclosures regarding defined benefit postretirement
plans. The Company does not have any defined benefit postretirement plans, and SFAS 158
will not have any impact on its financial condition and results of operations.

F - 14

---

In September 2006, the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the
Effects of Prior Year Misstatements in Current Year Financial Statements (SAB 108).
SAB 108 provides guidance on consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality assessment. SAB
108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108
did not have an impact on the Companys consolidated financial statements.

In December 2007, the Financial
Accounting Standards Board  (FASB) issued Statement
No. 141(Revised 2007), Business Combinations(SFAS 141(R)) and Statement
No. 160, Accounting and Reporting of Non-controlling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS 160). These statements
will significantly change the financial accounting and reporting of business combination
transactions and non-controlling (or minority) interests in consolidated financial
statements. SFAS 141(R) requires companies to: (i) recognize, with certain exceptions,
100% of the fair values of assets acquired, liabilities assumed, and non-controlling
interests in acquisitions of less than a 100% controlling interest when the acquisition
constitutes a change in control of the acquired entity; (ii) measure acquirer shares
issued in consideration for a business combination at fair value on the acquisition date;
(iii) recognize contingent consideration arrangements at their acquisition-date fair
values, with subsequent changes in fair value generally reflected in
earnings; (iv) with certain exceptions, recognize pre-acquisition loss and gain
contingencies at their acquisition-date fair values; (v) capitalize in-process research
and development (IPR&D) assets acquired; (vi) expense, as incurred,
acquisition-related transaction costs; (vii) capitalize acquisition-related
restructuring costs only if the criteria in SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities, are met as of the acquisition date; and
(viii) recognize changes that result from a business combination transaction in an
acquirers existing income tax valuation allowances and tax uncertainty accruals as
adjustments to income tax expense. SFAS 141(R) is required to be adopted concurrently with
SFAS 160 and is effective for business combination transactions for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. Early adoption of these statements is prohibited. We believe
the adoption of these statements will have a material impact on significant acquisitions
completed after December 15, 2008.

In December 2007, the Securities and
Exchange Commission published SAB Staff Accounting Bulletin (SAB) 110, which amends SAB
107 to allow for the continued use, under certain circumstances, of the
simplified method in developing an estimate of the expected term of so-called
plain vanilla stock options accounted for under FAS 123R, Share Based Payment
(FAS 123R).  SAB 110 provides that the SEC staff will accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007 for plain
vanilla options. Our adoption of SAB 110 is not expected to have a material effect
on our consolidated financial position or results of operations.

F - 15

---

In
December 2007, the FASB ratified the EITF consensus on EITF Issue No. 07-1,
Accounting for Collaborative Arrangements,that discusses how parties to a
collaborative arrangement (which does not establish a legal entity within such
arrangement) should account for various activities. The consensus indicates that costs
incurred and revenues generated from transactions with third parties (i.e. parties outside
of the collaborative arrangement) should be reported by the collaborators on the
respective line items in their income statements pursuant to EITF Issue No. 99-19,
Reporting Revenue Gross as a Principal Versus Net as an Agent.,Additionally, the
consensus provides that income statement characterization of payments between the
participants in a collaborative arrangement should be based upon existing authoritative
pronouncements; analogy to such pronouncements if not within their scope; or a reasonable,
rational, and consistently applied accounting policy election. EITF Issue No. 07-1 is
effective beginning January 1, 2009 and is to be applied retrospectively to all
periods presented for collaborative arrangements existing as of the date of adoption. We
are evaluating the impact, if any, the adoption of this consensus will have on our results
of operations, financial position or cash flows.

The
Emerging Issues Task Force (EITF) reached a consensus on EITF Issue
No. 06-4, The Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF No.
06-4). EITF No. 06-4 addresses whether the postretirement benefit associated with an
endorsement split-dollar life insurance arrangement is effectively settled in accordance
with SFAS No. 106, Employers Accounting for Postretirement Benefits Other
Than Pensions and APB Opinion No. 12, Omnibus Opinion1967",
upon entering into such an arrangement. EITF No. 06-4 is effective for fiscal years
beginning after December 15, 2007. We will adopt EITF No. 06-4 in the first quarter
of 2008.

The EITF reached a consensus on EITF
Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards (EITF No. 06-11). EITF No. 06-11 addresses how an entity
should recognize the income tax benefit received on dividends that are (a) paid to
employees holding equity-classified nonvested shares, equity-classified nonvested share
units, or equity-classified outstanding share options and (b) charged to retained
earnings under SFAS No 123R. EITF No. 06-11 is effective for fiscal years beginning after
December 15, 2007. Management is considering the impact that may result from the
adoption of EITF No. 06-11.

In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently required to be
measured at fair value. SFAS 159 will be effective for us on January 1, 2008. The Company
is currently evaluating the impact of adopting SFAS 159 on the Companys financial
position, cash flows, and results of operations but does not believe it will have any
impact on its financial condition and results of operations.

F - 16

---

|3. | Debt:
|-- | -----

The Company entered into a senior
lending agreement with Cardinal Bank on August 16, 2007. The senior lending agreement has
a maturity date of September 1, 2008. The Agreement provides for a $2 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 its subsidiaries
and certain property and equipment, and bear interest at the prime rate minus 0.25%. The
credit facility contains specific financial covenants related to working capital levels
and consolidated net worth. There were no borrowings under the credit facility at December 31, 2007. In January
of 2008, the Company terminated this credit facility and entered into a new credit facility
with Cardinal Bank for up to $7 million. See footnote 11, subsequent events for a further
description of the new credit facility.

|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
acquisition of Operational Research Consultants, Inc. As a result of this acquisition the
Company has acquired goodwill and intangibles. The following details the components of
goodwill and intangibles:

---

|                                                                   | As of December 31, 2007
|------------------------------------------------------------------ | -----------------------
|
|Amortized intangible assets                                        |                        
|(1)    ORC Intangible (Includes customer relationships and PKI     |                        
|business opportunity purchase accounting valuations)               |                        
|(2)    PKI-I Intangible (Related to internally generated software) |                        
|(3)    PKI-II Intangible                                           |                        
|(4)    PKI-III Intangible                                          |                        
|                                                                   |                        
|Total                                                              |                        
|                                                                   |                        

F - 17

---

|Aggregate Amortization Expense: | 
|------------------------------- | 
|For year ended 12/31/04         | 
|For year ended 12/31/05         | 
|For year ended 12/31/06         | 
|For year ended 12/31/07         | 
|                                | 

|Estimated Future Amortization Expense: | 
|-------------------------------------- | 
|For year ended 12/31/08                | 
|For year ended 12/31/09                | 
|For year ended 12/31/10                | 

|(1) | The
ORC intangible is made up of the estimated purchase accounting associated
               with the valuation assigned by the Company to ORCs customer
relationships                and its PKI business opportunity. The purchase accounting
for ORC has been                finalized after the completion of the Companys
intangible valuation                methodology by an independent appraisal performed for
the Company. The PKI                business opportunity intangible has an estimated life
of 6 years and ORCs                customer relationship has an estimated life of 5
years. The PKI business                opportunity intangible life 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 intangible 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 remaining
life of                this intangible asset class is approximately 2.3 years.  The gross carrying amount
and accumulated amortization as of December 31, 2006, respectively, were $1,145,523 and $479,003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 remaining life of approximately 2.6 years and is
based upon the                contractual life assigned to the authority to issue PKI
certificates by the                federal government.  The gross carrying amount and accumulated
amortization as of December 31, 2006, respectively, were $334,672 and $126,108.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 remaining life of approximately 3 years and is
based upon the                contractual life assigned to the authority to issue PKI
certificates by the                federal government.  The gross carrying amount and accumulated
amortization as of December 31, 2006, respectively, were $649,991 and $166,863.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The
PKI-III intangible is related to an additional PKI software development
               effort by ORC that was initiated in 2007. ORC is expected to commence sales on or about March 2008 of
its                PKI-III services. It is estimated that it will have a useful life
of 3.0                years.  No estimated future amortization expense has been determined for PKI-III.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

There were no amounts of research
and development assets acquired in 2007 or 2006, nor any written off in the periods.

F - 18

---

The changes in the carrying amount
of goodwill for the year ended December 31, 2007 and 2006 are as follows:

|                                | Total
|------------------------------- | -----
|Balance as of January 1, 2006   |      
|Goodwill adjusted               |      
|Balance as of December 31, 2006 |      
|Balance as of January 1, 2007   |      
|Goodwill adjusted               |      
|Balance as of December 31, 2007 |      

The goodwill acquired is associated
with the acquisition of ORC in October of 2004. Management believes that as of December
31, 2007 the carrying value of the goodwill of ORC was not impaired.

|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 also adopted the
provisions of Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes  An interpretation of FASB Statement No. 109.

Income taxes for the years ended
December 31 are as follows:

|                             | 2007 | 2006
|---------------------------- | ---- | ----
|Current Provision/(benefit)  |      |     
|Deferred Provision/(benefit) |      |     
|                             |      |     
|                             |      |     
|                             |      |     

F - 19

---

The
provision (benefit) for income taxes results in effective rates, which differs from the
federal and state statutory rate as follows:

|                                                                              | 2007 | 2006
|----------------------------------------------------------------------------- | ---- | ----
|Statutory federal income tax rate                                             |      |     
|State income taxes, net of federal benefit                                    |      |     
|Non-deductible expenses                                                       |      |     
|Increase (decrease) in valuation allowance                                    |      |     
|                                                                              |      |     
|Expiration of state NOL carryforward and   change in state effective tax rate |      |     
|                                                                              |      |     
|Other                                                                         |      |     
|                                                                              |      |     
|                                                                              |      |     
|                                                                              |      |     

There has been no
expense
recognized for these options. As the amount of this tax expense has not been realized
because of the net operating loss carryforwards,
there will be no credit to additional paid in capital until the associated benefit is
realized through a reduction of income taxes payable. During the year ended December 31, 2007, the Company recognized $174,716 in
expense for book purposes for stock-based compensation. For tax purposes, the Company
recognized an expense of $162,080 for stock option related compensation expense in the
year ended December 31, 2007.The deferred tax assets (liabilities) consisted of the
following as of December 31, 2007 and 2006:

|                                 | December 31,
|-------------------------------- | ------------
|
|Deferred tax assets:             |             
|Net operating loss carryforwards |             
|AMT credit                       |             
|Stock based compensation         |             
|Other assets                     |             
|                                 |             
|Total deferred tax assets        |             
|Deferred tax liabilities:        |             
|Intangibles                      |             
|Capitalized software costs       |             
|                                 |             
|Total deferred tax liabilities   |             
|Net deferred tax asset           |             
|Less- Valuation allowance        |             
|                                 |             
|                                 |             
|                                 |             

F - 20

---

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.

As of December 31, 2007, the
Company had federal and state net operating loss carry forwards of approximately $21 million and $7 million,
respectively, to offset
future taxable income. These carry forwards expire between 2010 and 2027 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. There were no capital losses in excess of capital
gains that expired in 2007.

Changes in the valuation allowance
for the years ended December 31, are as follows:

|                    | 2007 | 2006
|------------------- | ---- | ----
|Opening balance     |      |     
|Decrease (increase) |      |     
|Ending balance      |      |     

As a result of WidePoints
equity transactions, the Companys net operating losses will be subject to such
limitations and may not be available to offset future income for tax purposes. To date the
Company has not completed a Section 382 analysis. In June 2006, the FASB issued
Interpretation 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48), which became effective for years
beginning on January 1, 2007. FIN 48 addressed the determination of how tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, the Company must recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be sustained on
examination by taxing authorities, based on the technical merits of the position. The
Companys assessments of its tax positions in accordance with FIN 48 did not result
in changes that had a material impact on results of operations, financial condition or
liquidity. While the Company does not have any interest and penalties related to
unrecognized tax benefits, the Companys policy is to recognize such expenses as tax
expense.

|6. | Stockholders
Equity:
|-- | --------------------

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 195,214 shares were outstanding at December 31, 2007 and
2006, respectively. Preferred stock of 1,000,500 shares were converted during the year
ended 2006 into 10,005,000 shares of Common Stock.

Common Stock

The Company is authorized to issue
110,000,000 shares of common stock, $.001 par value per share. During the year ended
December 31, 2006, 10,005,000 shares of common stock were issued as the result of the
conversion of 1,000,500 preferred shares by Barron, 400,000 shares of common stock were
issued as the result of the exercise of warrants to purchase 400,000 shares by Westcap
Securities, and 770,600 shares of common stock were issued as the result of the exercise
of employee stock options to purchase 770,600 shares. During the year ended December 31,
2007 111,800 shares of common stock were issued as the result of the exercise of employee
stock options to purchase 111,800 shares. As of December 31, 2007 there were 52,558,697
shares of common stock outstanding.  See Note 11, Subsequent events for information concerning the
issuance of additional common shares as a result of the iSYS acquisition in January 2008.

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.

F - 21

---

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 warrants have a term of 5 years. The Company used a fair-value option pricing model to
value these stock warrants at approximately $14,291. This value has been reflected as part
of stock warrants in the stockholders equity section of the consolidated balance
sheet.

|7. | Stock
Options and Stock-Based Compensation:
|-- | -------------------------------------------

1997 Stock Incentive Plan

In May 1997, the Company adopted
the 1997 Stock Incentive Plan (the Incentive Plan). The purpose of the
Incentive Plan is to provide additional compensation to employees, officers, and
consultants of the Company or its affiliates. Under the terms of the Incentive Plan, as
amended, 10,000,000 shares of common stock have been reserved for issuance as incentive
awards under the Incentive Plan. The number of shares of Company common stock associated
with any forfeited stock incentive will be added back to the number of shares that can be
issued under the Incentive Plan. Awards under the Incentive Plan and their terms are
determined by a committee (the Committee) that has been selected by the
Board of Directors. The Incentive Plan permits the Committee to make awards of a variety
of equity-based incentives (collectively, Stock Incentives).

The Incentive Plan allows for the
grant of incentive stock options and nonqualified stock options. The exercise price of the
options will be established by the Committee. The term of an option will be specified in
the applicable agreement provided, however, that no option can be exercised ten years
after the date of grant. In addition to stock options, the Incentive Plan also allows for
the grant of other Stock Incentives, including stock appreciation rights, stock awards,
phantom shares, performance unit appreciation rights and dividend equivalent rights. These
Stock Incentives will be subject to the terms prescribed by the Committee in accordance
with the provisions of the Incentive Plan.

In February 1998, the Company
amended the Incentive Plan to permit the adjustment of the terms and conditions of
outstanding options. On January 27, 2005, the shareholders of the Company approved an
amendment to increase the common stock reserved for issuance as incentive awards under the
Incentive Plan to 10,000,000.

1997 Directors Formula
Stock Option Plan

In May 1997, the Company adopted
the 1997 Directors Formula Stock Option Plan (the Director Plan). The Company
has reserved 120,000 shares of common stock to underlie stock options granted under the
Director Plan. Any shares associated with forfeited options are added back to the number
of shares that underlie stock options to be granted under the Director Plan.

The awards of stock options under the
Director Plan are determined by the express terms of the Director Plan. Generally, only
non-employee directors of the Company who do not perform services for the Company are
eligible to participate in the Director Plan. The Director Plan provides for option grants
to purchase 12,000 shares of common stock upon a non-employee directors initial
appointment to the Board of Directors. The options will vest immediately to
8,000 shares of common stock underlying such options, will vest to an additional
2,000 shares after the directors completion of the first year of continued
service to the Company, and will vest to the remaining 2,000 shares after the
completion of the second year of continued service to the Company. Each option granted
pursuant to the Director Plan will be evidenced by an agreement and will be subject to
additional terms as set forth in the agreement. Options become exercisable when vested and
expire ten years after the date of grant, subject to any shorter period that may be
provided in the agreement.

F - 22

---

The following is a summary of the
WidePoint options and management warrant activity:

|                               | Number of
Shares | Option Price
Range | Weighted-
Average
Exercise Price
|------------------------------ | ---------------- | ------------------ | --------------------------------
|Outstanding, December 31, 2005 |                  |                    |                                 
|                               |                  |                    |                                 
|Granted                        |                  |                    |                                 
|Exercised                      |                  |                    |                                 
|                               |                  |                    |                                 
|Canceled or expired            |                  |                    |                                 
|                               |                  |                    |                                 
|Outstanding, December 31, 2006 |                  |                    |                                 
|                               |                  |                    |                                 
|Granted                        |                  |                    |                                 
|Exercised                      |                  |                    |                                 
|Canceled or expired            |                  |                    |                                 
|                               |                  |                    |                                 
|Outstanding, December 31, 2007 |                  |                    |                                 
|                               |                  |                    |                                 

|8. | Commitments
and Contingencies:
|-- | ------------------------------

The company has entered into a number
of leases for its office locations as described above in Note 1. The Companys
commitments and contingencies are as follows for its operating leases, which include those
leases, and other operating leases. The terms of the operating leases run through 2013 and
the total commitments per year are as follows:

|Year Ended
December 31, | Operating
Leases
|----------------------- | ----------------
|2008                    |                 
|2009                    |                 
|2010                    |                 
|2011                    |                 
|Beyond 2011             |                 
|                        |                 
|Total                   |                 
|                        |                 

F - 23

---

Capital Leases

| | The
Company has leased certain equipment under capital lease arrangements. Future minimum
payments required under the leases are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------

|                                   | 
|---------------------------------- | 
|Year2008                           | 
|2009                               | 
|2010                               | 
|                                   | 
|                                   | 
|Less portion representing interest | 
|                                   | 
|Net minimum lease payments         | 
|Under capital leases               | 
|Current portion                    | 
|                                   | 
|Long-term portion                  | 

The capital leases entered into in
the year ended December 31, 2007 are for periods of two to three years. Total carrying
value of assets under capital leases at December 31, 2007 was $238,013. Depreciation for
the year ended December 31, 2007 was $57,471, and accumulated depreciation at December 31,
2007 was $82,718.

Employment Agreements

The Company has employment agreements
with certain executives that set forth compensation levels and provide for severance
payments in certain instances.

Litigation

The Company is not involved in any
material legal proceedings.

|9. | Segment
reporting:
|-- | ------------------

Segments are defined by SFAS No. 131,
ÒDisclosures about Segments of an Enterprise and Related Information,Ó as
components of a company in which separate financial information is available and is
evaluated by the chief operating decision maker, or a decision making group, in deciding
how to allocate resources and in assessing performance.

During 1998, the Company adopted SFAS
No. 131 and until December 31, 2005 the Company was comprised of a single segment, which
was comprised of our consulting services segment within our Commercial and Federal
Government Marketplaces. As of January 1, 2006, the Company added a second segment, which
consists of PKI credentialing and managed services. 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.

F - 24

---

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

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

|                                      
|--------------------------------------
|Consulting services                   
|Revenues                              
|Operating income                      
|Total assets                          
|PKI Credentialing and Managed Services
|Revenues                              
|Operating income                      
|Total assets                          
|Total Company                         
|Revenues                              
|Operating loss                        
|Depreciation expense                  
|Interest income (expense), net        
|Income tax benefit                    
|Net loss                              
|Total Corporate assets                
|Total assets                          

F - 25

---

|(1) | Includes
$221,078 in amortization expense in cost of sales associated with the
               purchase of ORC, which is not allocated among the segments and includes
$964,372                in unallocated corporate costs in sales, general and
administrative expense.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
$221,078 in amortization expense in cost of sales associated with the purchase of ORC,
which is not allocated among the segments and includes $1,122,379 in unallocated
corporate costs in sales, general and administrative expense.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | Note Receivable:
|--- | ----------------

In November 2007, the Company
entered into a secured credit facility with Protexx, a PKI software and services company
with whom the Company has a strategic business relationship. The credit facility calls for
the Company to provide up to approximately $100,000 to Protexx. The facility was fully
utilized and drawn down to $100.000 at December 31, 2007. The balance is presented within
Prepaid Expenses and Other Assets in the accompanying balance sheet at December 31, 2007.
The credit facility is collateralized by all of the assets of Protexx. During the first
quarter of 2008, the credit facility was extended until June 30, 2008 and increased to
$200,000. The facility bears interest at 10% simple interest.

|11. | Subsequent
Events:
|--- | ------------------

On January 2, 2008, the Company
entered into a Commercial Loan Agreement with Cardinal Bank relating to a $5,000,000
revolving credit facility and a $2,000,000 term loan. Advances under the revolving credit
facility will bear interest at a variable rate equal to the prime rate plus 0.25% and the
repayment date for such facility is April 30, 2009. This new revolving credit facility
replaces the Companys prior $2,000,000 revolving credit facility with Cardinal Bank.
The term loan bears interest at 7.5% annually, is ratably paid down monthly over the 4 year term on a straight line basis,
and the repayment date of such term loan is January 1, 2012.

Pursuant to the terms of the Membership Interest
Purchase Agreement, the Company paid the following consideration at the closing:
(i) $5,000,000 in cash, (ii) $2,000,000 principal amount in an Installment Cash
Promissory Note, which bears simple annual interest at the initial rate of 7% through
December 31, 2008, and thereafter the simple interest rate will increase to 10% from
January 1, 2009 through the date of maturity, which will be on the earlier of either
April 1, 2009 or the filing by the Company of its Annual Report on Form 10-K for the year
ending December 31, 2008, and (iii) the issuance of 1,500,000 shares of Company common
stock issued at a stock price of $1.20 per common share of WidePoint Corporation for a value of
$1,800,000. The Company also issued an additional 3,000,000 shares of Company common stock, which shares were delivered into escrow to be held subject to the
satisfaction of certain earnout provisions under the Membership Interest Purchase
Agreement, and which shares are subject to return to the Company in the event such
earnout provisions are not achieved under the terms of the Membership Interest Purchase
Agreement. The aggregate purchase price was $8,902,722 including $102,722 of acquisition costs and without consideration for the
contingent issuance of the 3,000,000 earnout shares. The value of the 1,500,000
unregistered common stock issued was $1,800,000 and was determined based on the closing
market price of the Companys common shares on January 8, 2008 of $1.20 per common
share.

The Company has not yet finalized
the allocation of the purchase price. The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed based on the latest available
information on iSYS, at December 31, 2007. The allocation of the purchase price was based
upon managements estimates and assumptions:

F - 26

---

|                                   | iSYS
at December 31, 2007
|---------------------------------- | -------------------------
|Current assets                     |                          
|Property, plant and equipment, net |                          
|Intellectual property              |                          
|Goodwill                           |                          
|Other non current assets           |                          
|                                   |                          
|Total assets acquired              |                          
|                                   |                          
|Current liabilities                |                          
|                                   |                          
|Total liabilities assumed          |                          
|                                   |                          

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

The accompanying consolidated pro
forma information gives effect to the iSYS acquisition as if it had occurred on January 1,
2006 and its results of operations were included in the years ended December 31, 2007 and
2006 for the full period. The pro forma information is included only for purposes of
illustration and does not necessarily indicate what the Companys operating results
would have been had the acquisition of iSYS been completed on January 1, 2006.

|                                           | Year Ended
December 31, 2007 | Year Ended
December 31, 2006
|------------------------------------------ | ---------------------------- | ----------------------------
|Revenue                                    |                              |                             
|                                           |                              |                             
|Net income (loss)                          |                              |                             
|                                           |                              |                             
|Income (loss) per share, basic and diluted |                              |                             

F - 27