# 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, 2004.

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:   None

Securities registered pursuant to
section 12(g) of the Act:

|Common Stock, par value $.001 per share
|---------------------------------------
|(Title of Class)                       

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.  [X]

Indicate
by check mark whether the registrant is an accelerated filer (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.     $5,847,239.

As
of April 11, 2005, the registrant had 27,780,949 shares of its Common Stock issued and
outstanding.

---

ITEM 1. BUSINESS

# Introduction

WidePoint Corporation (WidePoint or the Company) was incorporated in
Delaware on May 30, 1997. WidePoint is an information technology (IT) services
firm with established competencies in federal government and commercial sector IT
consulting services, including planning, managing and implementing IT solutions, software
and secure authentication processes, and specialized outsourcing arrangements.
WidePoints 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.

From 2000 through 2002, WidePoint
undertook several initiatives in an effort to transition from a millennium solutions
provider to an integrated IT services company. In addition to establishing its corporate
identity and brand imagery and optimizing its organizational structure, management
implemented a services strategy that was responsive to the evolving requirements of its
customers and target markets.

During 2002 and 2003, WidePoint
witnessed a highly competitive economic environment within the commercial IT sector due to
a combination of constrained business investment and an excessive supply of IT
consultants. As a result of these conditions, the Company experienced both reduced gross
margins and decreased demand for the IT services that it provides.

In 2004, WidePoint acquired
Chesapeake Government Technologies, Inc. and Operational Research Consultants, Inc. (ORC) as
part of its strategy to refocus our business development initiatives toward the
substantial increase in government spending on infrastructure and automation that has been
accelerated by recent geopolitical events that have created an unprecedented need for
systems and process expertise across most federal, state and local government markets.
This market is also growing due to the fact that many government legacy systems and
processes are approaching the end of their technologically useful lives, indicating the
need for significant upgrade and enhancement. WidePoint intends to capitalize on the
expected growth in its target markets through strategic acquisitions, and by implementing
its project based enterprise strategy emphasizing industry-wide best practices
disciplines.

Specifically, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), the Federal Privacy Act, concern over lack of
critical infrastructure protection, increasing preoccupation over proprietary design
information, requirements for digital information archiving, and legal and political
expectations for businesses and citizens to be able to conduct business with state and
federal agencies in a secure environment, have increased expectations for 24 hour a day, 7
day a week service and information availability (as well as efficiency and cost savings of
providing electronic/digital forms processing). With the establishment by the
U.S. Government of the Department of Homeland Security (DHS), the U.S. Government is focused on
the requirement to ensure the integrity of sensitive or confidential information.
Addressing the threats to our countrys information infrastructure, such as the
spread of the Code-Red Worm (CRv2)1 to 359,000 computer servers in less than 14
hours, has become a vital component in information assurance and security.

2

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Looking forward, this secured and
authenticated access 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. 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. There must be
no question as to exactly when information is published. 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 society.

As federal agencies and commercial
concerns are separately trying to implement meaningful and efficient security into
Internet/Intranet operations to protect sensitive information and billions of dollars in
transactions each day, WidePoint and its wholly-owned subsidiary ORC are postured to help
these organizations meet the requirements by leveraging already 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. ORCs Common Identity Enabling
Infrastructure (CIEI)© and services fully support these needs.

WidePoint, through its ORC
subsidiary, has solidly established its reputation as an elite provider of information
assurance and security of digital transactions for the U.S. Department of Defense (DoD),
Navy, Air Force, National Security Agency (NSA), US Coast Guard, Office of Management and
Budget (OMB), General Services Administration (GSA), General Accounting Office (GAO),
commercial clients and several state governments. ORC has distinguished itself by
providing the highest levels of professionalism, on-time delivery of solutions and
superior management.

WidePoint, through its ORC
subsidiary, offers iDentity Management and eAuthentication Services©based on existing technology and open systems standards. ORC provides 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 three major US Government
Certifications:

| |  | GSA
eAuthentication Service Provider for Assurance Levels 1, 2, and 3
| | - | ---------------------------------------------------------------------

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

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

---

1 David Moore
(dmoore@caida.org), analysis on the spread of the Code-Red (CRv2) Worm.

3

---

iDentity Management and
eAuthentication Services© fully support Business-to-Government,
Government-to-Government, and Citizen-to-Government secure digital transaction
requirements, and, because ORC-provided digital credentials are an allowable direct charge
or ODC under the Federal Acquisition Regulation rules, the cost of such services and
products can be passed-on to others by ORCs customers in a contract
and/or proposal.

WidePoints organization
emphasizes an intense commitment to its people, its customers, and the quality of its
solutions offerings. As a services organization, our customers are our primary focus.
WidePoint has 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 its 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 substantive reference base with an assortment of Federal Agencies
are available.

WidePoints ORC subsidiary
anticipates capturing a market share in iDentity Management and eAuthentication
Services©,which are expected to be a growing market that will have the
potential of providing significant revenue growth for the Company.

Most of WidePoints current
costs consist of salaries and benefits paid to its technical, marketing and administrative
personnel, as well as the solutions required to maintain the secure facilities that
support the Companys information assurance and security offerings. As a result of
its plan to expand operations through a combination of internal growth initiatives and
acquisition opportunities, such costs are expected to increase. The Companys
profitability depends upon both the volume of services performed and the ability to manage
costs. A significant portion of the Companys cost structure is labor related and it
must effectively manage these costs in order to achieve growth and profitability. To date,
WidePoint 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 charged to its clients.

# Enterprise Strategy

In the continuing effort to
differentiate itself and overcome the highly competitive environment that has been an
obstacle to the expansion of its revenue streams, WidePoint has modified its strategic
plan, including the launch of a federal sector business initiative, continued development
of new technologies and capabilities tied to wireless technologies, and initiated and
expanded several alliances and relationships to enhance its ability to penetrate new
market segments.

As a result of its 2003 efforts, the
Company was awarded a General Services Administration (GSA) Schedule in February 2004 that
enhanced its ability to market to federal government markets. In addition, the Company
acquired Chesapeake Government Technologies, Inc. (Chesapeake) on March 24, 2004. The acquisition
of Chesapeake accelerated our ability to compete for federal business as the result of
Chesapeakes existing alliances and expertise within the federal marketplace.
WidePoint intends to leverage both Chesapeakes capabilities and WidePoints GSA
Schedule to expand its revenue base, even as it continues to look for and analyze growth
alternatives via other selected merger and acquisition opportunities.

4

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On October 25, 2004, we completed the
acquisition of ORC. ORC specializes in
providing IT solutions, including the provision of integration
and secure authentication processes and related IT services to the United States
Government. ORC has been at the forefront of implementing Public Key Infrastructure
(PKI) technologies and ORC is currently the only External Certificate
Authority for the United States 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.

WidePoint intends to leverage both
ORCs and Chesapeakes capabilities, in concert with its pre-existing GSA
Schedule, to expand its existing revenue base. In addition, the Company is actively
seeking to acquire other companies with complementary technical capabilities in IT related
services to the federal government (both defense and civilian), state governments and
local government agencies. If successful, WidePoint anticipates that it will become a
significantly larger company with broader capabilities and resources than has been the
case historically.

At the heart of the Companys
enterprise strategy is the vision of a Commonwealth of semi-autonomous but
tightly intertwined business units, focused on the provision of a broad range of IT-based
solutions to a clearly defined target market. While leveraging financial and support
resources, and motivated to aggressively cross-market and cross-sell, these business units
would retain their entrepreneurial cultures and management teams and be accountable for
the performance and growth of their own lines of business and relationships. WidePoint
believes this model to be quite attractive to individuals who have built quality
businesses with inherent value, but who seek assistance and support in driving their
businesses to the next level of growth and maturity. Such individuals will be provided
with the opportunity to participate in the growth and performance of the total Widepoint
enterprise and potentially capitalize upon the enterprise valuation they have helped build
over the years within their respective organizations.

# Business Strategy and
Services

WidePoints strategy for its
project-based initiatives has been 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 its consultants. The Company
focuses on providing end results with significant, tangible business benefits through
consultants that possess recognized industry-standard certifications and years of
successful project experience. The ancillary strategy for staff augmentation services has
been to provide a value added service based upon the best to market practices
developed internally, that utilizes a rapid response capability to our clients via highly
trained consultants.

The Company presently focuses 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:

5

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

| |  | Consulting
with and advising the customer about 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
| | - | -------------------

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

# Architecture and
Planning Services

IT Strategic Planning

Preparing an Information Architecture
(IA) plan requires analysis, evaluation, integration, administration and maintenance. We
are in an era where many government and commercial entities have an increasingly urgent
need to protect 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. The use of digital signatures and Public Key
enablement are becoming requirements for many who do business electronically with federal,
state and local government agencies, but there are many other aspects of electronic
information assurance that are important for users to consider. WidePoints ORC
subsidiary and WidePoints commercial operations have an established reputation for
developing solutions individually tailored to a customers many needs, while
remaining within that customers schedule and time constraints. WidePoint sees itself
as an advisor to the user, not a sales organization for specific equipment or solutions.
The Company believes that attaining required information security standards for electronic
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.

Software Selection

Through its operating subsidiaries,
WidePoint applies open systems technology and Commercial Off-The-Shelf (COTS) tools, which
complement rather than replace existing systems wherever possible. Further, the
Companys preferred recommendation is to migrate as many existing systems as possible
from their current capabilities to more secure, robust capabilities by augmenting those
systems with COTS 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. WidePoint does not design
unique and proprietary software that forces the customer to work through the Company when
subsequent (and inevitable) upgrades are required. WidePoints ORC subsidiary is GSA
and DoD certified in the PKI arena, mandating that it remain current with policy,
technical and security requirements for IA work on behalf of customers who may communicate
with the Federal Government or DoD.

6

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Management

WidePoints strength is that it
values its people, its customers, and the quality of the services it provides. As a
services organization, the focus of the Companys business is its customers. For that
reason any organizational discussion starts with WidePoints primary customer
interface.

WidePoint has developed thorough,
comprehensive policies, procedures and controls to mitigate the threat, or potential
threat, of compromise or disruption to any portion of the WidePoint 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
trusted roles.

The people selected to fill such
trusted roles have proven to be diligent and trustworthy. The functions performed in these
roles form the basis of trust for each such system. As an added precaution, WidePoint
assigns the roles and functions responsible for security among a group of several
individuals, so that any malicious activity requires collusion. Through sound security
planning based on proven techniques and industry standards, the WidePoint systems were
developed and are operated and maintained to provide digital credentials asserting the
appropriate level of assurance to protect strategic and intellectual property and related
information management.

The policies, procedures and controls
are periodically reviewed for currency and possible upgrade. Random testing is performed
and documented for use as a tool to further refine the means and methods used to maintain
the integrity of each system. Widepoint executive management must authorize all actions
performed by individuals fulfilling trusted roles.

Program/ Project
Management

WidePoint and its subsidiaries
Project Managers are people-oriented systems engineering professionals with leadership
competence capable of determining the most effective ways to meet the customers
requirements. Project Managers are facilitators, integrators, team builders, and
relationship managers. Within its requirements-driven, performance-based, people oriented
environment, Project Managers have responsibility and authority for project requirements.
They are responsible for applying the systems engineering discipline to ensure that the
technical, cost and schedule requirements are clearly defined and communicated and that
quality products and/or services are rendered. The Project Manager is also responsible for
designating resource allocation and for documenting requirements and assessing project
performance. Project Managers are responsible for getting the job done correctly, on time,
and on budget. This is accomplished by authorizing schedule/tasks with efficient and
effective resources.

The Companys Team Leads and
Supervisors are people-oriented engineering professionals capable of determining the most
effective ways to execute assignments delegated by the Project Manager. A Team Lead may be
on a systems engineering or other competency/professional track. Team Leads are
responsible to the Project Manager for the planning and execution of assignments, and to
ensure performance parameters are met within timelines. Team Leads are responsible for
identifying and mitigating risks associated with meeting requirements. If technical,
schedule or resource obstacles cannot be overcome it is the responsibility of Team Leads
to communicate to the Project Manager to achieve resolution.

7

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Competency Leads are specialists or
subject matter experts focused on areas of expertise that meet customer requirements and
provide quality products and services. Development of competencies, from the apprentice
through expert level, will be accomplished by matching task assignments with skill and
knowledge. Competency Leads guide and recommend resource allocation to Project Managers.
Competency expertise will vary depending on project requirements. Individuals with certain
skills may be added or removed from projects, as required. On the job training at the
Company is the key to developing expertise.

# IT Outsource Solutions

Infrastructure Management

Common Identity Enabling
Infrastructure (CIEI)©: On-site and out-source services that support an
organizations Business-to-Government (B2G), Business-to-Business (B2B), Citizen
-to-Business (C2B), Government-to-Government (G2G), and Citizen-to-Government (C2G)
enterprise requirements for:

| |  | Secure
and trusted identity creation and management;
| | - | ----------------------------------------------------

| |  | Authoritative
sources for credentials and entitlements; and
| | - | -----------------------------------------------------------

| |  | Convenient
access to Enterprise resources while maintaining appropriate security.
| | - | ---------------------------------------------------------------------------------

Applications Management

Focused in the medium to high
assurance level market the Companys CIEI© allows enterprise and application
owners to begin where they currently are architecturally and migrate toward a vision of a
secure network identity model. The Company is poised to support these secure network
identity enterprise requirements (in-house or outsourced), by providing seamless
integration of four services that make up CIEI©:

| |  | 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 a business partners, suppliers, customers or employees.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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| |  | 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 Design

By leveraging standards based, mature
commercial-off-the-shelf components that have been proven in the technology market,
CIEI© 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. The Company can also replicate these services (in part or whole) to
provide an enterprise with the following advantages:

| |  | Enabling
organization's applications with multiple I&A/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.
| | - | ------------------------------------------------------------------

Software and
Authentication Technology

By leveraging the Companys
systems engineering experience Widepoint is striving to become one of the nations
premier systems engineering firms with a specialization in information assurance and
security. This is evidenced by the following accomplishments:

| |  | The
Companys ORC subsidiary was distinguished as the first designated DoD Interim
External Certificate Authority (IECA-1) and more recently the first US Government
External Certificate Authority.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ORC
has been distinguished as one of only three GSA Access Certificates for Electronic
Services contract recipients.
| | - | --------------------------------------------------------------------------------------------------------------------

| |  | ORC
is distinguished as the first commercial GSA eAuthentication Service Provider.
| | - | ----------------------------------------------------------------------------------

| |  | ORC
has been engaged as the lead systems engineer for the DoD PKI.
| | - | ------------------------------------------------------------------

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

9

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ORCs eAuthentication, 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, compliant with existing laws and regulations, which
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 your users and relying application.

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 the only ECA authorized 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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 can be provided to each and every American
citizen, as well as, federal, state and local government and business entities 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 is
currently migrating 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 the Company to be the leader in
this market.

WidePoints ability to
successfully expand requires significant revenue growth from increased services to
existing and new clients, as well as successful 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 expansion through successful sales and marketing efforts
and/or acquisitions could have an adverse impact on the Companys revenues and
operating results.

10

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# Clients

Widepoints commercial client
base is located predominantly in the MidWestern region of the United States, while the
government client base is located in the East Coast region of the United States. The
Company has 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 WidePoint has derived,
and may continue to derive in the future, a significant percentage of its total revenues
from a relatively small number of clients. During 2004, two customers, Abbott Laboratories
and The Department of Homeland Security individually represented 12% and 11% of revenues,
respectively. Due to the nature of WidePoints 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 results, but the Company
does not believe at this time that we are substantially dependent upon any one customer.
Further, with the acquisition of ORC, we have expanded the Companys clientele
dramatically with the following additional clients:

| |  | United
States Treasury
| | - | ----------------------

| |  | United
States Patent & Trademark Office
| | - | ---------------------------------------

| |  | Administrative
Office of U.S. Courts
| | - | ------------------------------------

| |  | Department
of Agriculture
| | - | -------------------------

| |  | Census
Bureau
| | - | -------------

| |  | Maritime
Administration
| | - | -----------------------

| |  | General
Services Administration
| | - | -------------------------------

| |  | Commonwealth
of Pennsylvania
| | - | ----------------------------

| |  | Northrop
Grumman IT
| | - | -------------------

| |  | Lockheed
Martin
| | - | ---------------

| |  | Boeing
| | - | ------

| |  | Maryland
Procurement Office
| | - | ---------------------------

| |  | Central
Intelligence Agency
| | - | ---------------------------

| |  | Department
of Defense
| | - | ---------------------

| | ° | Defense
Information Systems Agency
| | - | ----------------------------------

| | ° | Dependent
Schools System
| | - | ------------------------

| | ° | White
House Communication Agency
| | - | --------------------------------

| | ° | U.S.
Navy
| | - | ---------

| | ° | U.S.
Marine Corps
| | - | -----------------

| | ° | U.S.
Air Force
| | - | --------------

| | ° | U.S.
Army
| | - | ---------

| | ° | U.S.
Coast Guard
| | - | ----------------

# Marketing and Sales

WidePoint focuses sales and marketing
efforts on targeting federal government and corporate clients with significant IT budgets
and requirements. Although work is performed for companies in various industries, the
majority of the Companys revenues for 2003 and 2004 were derived from contracts and
projects with manufacturing clients, consumer products clients, healthcare clients, and
financial services clients. Prospectively, the Company expects to derive a majority of its
revenue from contracts with the federal government and related contracting opportunities.

11

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The Company markets its solutions
through its 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 services provided.
Strategic partnerships and alliances provide the Company with additional access to
potential clients.

Because time is of the essence (and
cost is always a factor), WidePoint believes 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, the Company can enable an organization to
quickly deploy a fully operational capability, providing the highest levels of I&A 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. Moreover, because the trial and error phase has been
previously facilitated, the resulting answers can be immediately gleaned, thereby
mitigating overall costs dramatically.

# Backlog

Through its operating subsidiaries,
WidePoint maintains a significant backlog of multiple award government contracts that
include:

GSA contracts that allow it to
actively market specific tasking and initiatives throughout the Federal Government,
including:

| |  | Access
Certificates for Electronic Services (ACES), Contract Number GS00T99ALD0007,
http://aces.orc.com/
| | - | --------------------------------------------------------------------------------------------------------

| |  | Information
     Technology      Professional     Services     FSC     Group     70,     Contract
    Number     GS-35F-0164J,
         http://www.orc.com/contract_vehicles/gsa_fss/it/index.html
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Worldwide
  FSS   for   Professional   Engineering   Services   (PES)   FSC   Class   871,
  Contract   Number   GS-23F-0162L,
         http://www.orc.com/contract_vehicles/gsa_fss/pes/index.html
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | GSA
    Solutions     and     More     (SAM)     FSC     Group     61    Part     V,
    Contract     Number     GS-07F-0099L, http://www.orc.com/contract_vehicles/gsa_fss/s&m/index.html
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company also holds various
Government OMNIBUS contracts through its ORC subsidiary, including:

| |  | Naval
Sea Systems Command multiple award SEAPORT
| | - | ------------------------------------------------

| |  | US
Air Force ITSP
| | - | -----------------

| |  | Pennsylvania
| | - | ------------

Contracts are also held with specific
Government agencies, including:

12

---

| |  | Naval
Supply Systems Command
| | - | ----------------------------

| |  | Department
of Homeland Security
| | - | -------------------------------

| |  | US
Patent and Trademark Office (Subcontract to PPC)
| | - | ---------------------------------------------------

| |  | Defense
Information Systems Agency (Subcontract to Tangible)
| | - | ------------------------------------------------------------

| |  | US
Air Force PKI System Project Office (Subcontract to Anteon)
| | - | --------------------------------------------------------------

Additionally, WidePoints ORC
subsidiary has over two-dozen iDentity Management and eAuthentication Services©
pricing agreements with commercial companies for lots of 1,000, 5,000 and 10,000 credentials
and associated services in various stages of agreement. The iDentity Management and
eAuthentication Services© are expected to be WidePoints largest growth market.

WidePoint also holds several
non-governmental contracts and preferred vendor relationships with major international
corporations to provide IT manpower, consulting support and various outsourcing services.

As of December 31, 2004, the
Companys government contract awards which the Company could compete for task orders
under had a backlog of approximately $575 million. Under these contract vehicles
approximately $42 million was funded with approximately $20 million of that funded amount
expected to occur after the current fiscal year. The Company presently is obligated to
perform approximately $8 million in backlog in the current fiscal year.

# Competition

The market for the services that the
Company provides is highly competitive, fragmented, and is subject to rapid change.
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 is generally based on quality, timeliness, cost of services, and
relevant targeted expertise.

With relation to systems engineering
in the government sector, WidePoints long-range concern is the element of
uncertainty associated with the Federal budget and its impact upon competition among the
many contractors. The Company believes 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 operate in this market have
reputable corporate histories and can draw employees from an enormous pool of suitable
candidates. They have the ability to absorb substantial losses from operations.
Additionally, they have an established network to assimilate data and formulate strategy
in todays competitive environment. Their strength is often their mass, which gives
them flexibility in both proposing and responding to new requirements. Also, while there
are advantages to being small, lack of name recognition becomes a problem in major
contracts, even if past performance is in the Companys favor.

13

---

However, many of these same
corporations have higher overhead costs. They have policies and procedures in effect that
quite frequently cause a longer response time to meet customers needs. Management
personnel within those corporations are usually far removed from their workforce, thus
fostering employee dissatisfaction.

Competition within the information
security market is still fragmented. The most significant competition is in the planning
and analysis portion of the market, in which many of the companies referred to above also
operate, such as: Booz-Allen Hamilton, SAIC, CACI/ AMS, BAE Systems, Northrop Grumman,
etc. However, the market to which the Company provides its CIEI© products and
services has limited competition. Most of that competition (that includes Verisign,
Digital Signature Trust, BeTrusted, and GeoTrust) is focused on low to medium levels of
assurance. WidePoint believes it is the only company that has satisfied all of the
certification requirements to serve the more meaningful medium to high level assurance
market, and further believe this constitutes a twelve to eighteen month advantage over
competition.

Additionally, the Company believes
that its advantage in each of the markets described above is two-fold: highly experienced
personnel and relatively low overhead. WidePoints professional staff has a proven
record of success in meeting service needs of both private industry and public sector
clients. Senior staff personnel hold 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 will allow the
Company to be very competitive.

# Intellectual Property

WidePoints 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 the Company to be the leader in its markets. The Companys ORC
subsidiary holds a Patent for a Digital Parsing Tool that 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, the Company relies upon a combination of trade
secrets, copyright and trademark laws, and contractual restrictions to establish and
protect the ownership of its proprietary methodologies. WidePoint generally enters into
nondisclosure and confidentiality agreements with its employees, partners, consultants,
independent sales agents and clients. As the number of its competitors increase, the
likelihood that such competitors will use similar methodologies increases. Although the
Companys methodologies have never been subject to an infringement claim, there can
be no assurance that third parties will not assert infringement claims against the
Company in the future; that the assertion of such claims will not result in
litigation; or that WidePoint 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 to WidePoint and divert managements attention from its
operations. Although the Company is not aware of any basis upon which a third party could
assert an infringement claim, any infringement claim or litigation could materially
adversely affect the business, operating results and financial condition of the Company.

14

---

# Personnel

As of December 31, 2004, the Company
had 76 full time employees and 4 part-time employees including 6 persons in sales and
recruiting, 62 persons in consulting, and 8 persons in management and administration.
WidePoint also periodically employs additional consultants and temporary employees.

The Companys facilities 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.

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

# SEC Filing Status

Commencing with its quarter ended
March 31, 2005, the Company will file its reports under the Securities Exchange Act of
1934 as a small business issuer as defined in Rule 12b-2 under the Act.

# 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 $3,500 per month. Rent in 2003, under a prior sublease for the
office at One Lincoln Centre was approximately $66,000. Rent in 2004 was approximately
$65,000.

WidePoints ORC subsidiary has
its principal offices at 1736 South Park Court, Chesapeake, Virginia in approximately
2,400 square feet under a lease that expires on April 30, 2006. The annual rent for this
office is approximately $26,400, plus a pro rata share of increases in real estate taxes
and operating expenses.

ORC also maintains two secure
facilities in the Northern Virginia area. The Alexandria office is located at 1625 Prince
Street, Suite 350, Alexandria, Virginia. This office is currently leased through January 31,
2008 for approximately $7,400 per month. The Fairfax office is located at 11250 Waples
Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030. The lease for this office expires February 28,
2009 and costs approximately $28,000 per month. The Alexandria office consists of
approximately 3,100 square feet of office space and the Fairfax office consists of
approximately 11,900 square feet of office space. A pro rata share of increases in real
estate taxes and operating expenses are also paid for these offices.

15

---

Access to ORCs secure
facilities is restricted to authorized personnel. All unknown or unidentified persons are
accompanied or challenged by personnel to prevent unauthorized access and/or disclosure of
sensitive data. Non-cleared maintenance and cleaning personnel are escorted at all times
while in central computer rooms and facilities. ORC employs five levels of physical access
control and two separate physical access alarm systems:

| | Level
1  ORC facilities are located in two buildings each employing security-guarded
entrances during normal working hours and 24-hour security patrolling the premises after
hours and on weekends. Proximity card access is required after hours for building and
elevator access. Cameras are located at all entry points.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
2  ORC proximity cards, issued to all employees requiring access to ORC general
access areas, activate the card reader at the suite doors. Cameras are located at all
entry points.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
3  ORC personnel who have successfully completed the required screening process
validating a routine requirement to work in the operations center are granted access
controlled by ORC Proximity card readers programmed for this level.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
4  ORC personnel who have successfully completed the required screening process
validating a routine requirement to work in this level and have met the appropriate clearance requirements
are granted access to this level controlled by ORC proximity readers programmed for this
level. All personnel must present their proximity card to enter and leave this level.
(Note: Level 3 and 4 are combined in ORCs secondary facility.)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
5  ORC personnel who have successfully completed the required screening process and
are authorized to work on equipment and have met the appropriate clearance requirements,
are granted access to this controlled area via cipher/ proximity reader lock programmed
for this level. All personnel must log in and log out when they enter and leave this
level.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A GSA approved five-drawer security
container (Mosler Safe), located at each ORC facility, provides physical protection of
information related to the privileged access roles. At least two parties are necessary to
do any key management or audit log operations. Separation of activation mechanism
components is protected in separate safe drawers accessible only to personnel in each
separate role. A security check of the facility housing the ORC IA/ IDM resources is made
at least once every 24 hours.

All of ORCs facilities maintain
an interim Top Secret Facility Clearance.

During 2000, several of the
Companys offices were closed and their leases were either sublet, assigned, or have
expired. The Michigan office lease located at 32000 Northwestern Highway, Suite 165,
Farmington Hills, Michigan was sublet to Galaxy Builders in June 2000 on the same terms as
the primary lease for that location. Annual rent in 2004 for that property was
approximately $38,400 and the lease expired on February 24, 2004. The lease for the
Companys former corporate headquarters office located at 20251 Century Boulevard,
Germantown, Maryland was assigned on December 1, 2000 to GHG Holdings, Inc., and such
assigned lease expires on September 30, 2005. The Company remains secondarily liable
if GHG Holdings, Inc. were to default on that assigned lease.

16

---

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.

As of December 31, 2004, ORC was the
defendant in a lawsuit entitled Fleuette v. ORC, C.A. No. 1:04-cv-1054, in the Eastern
District of Virginia, in which Renee Fleuette Gallagher, a former employee of ORC, alleged
that ORC wrongfully terminated her employment with ORC. The plaintiff sought an
unspecified amount of damages from ORC. Prior administrative and judicial proceedings
instituted by Ms. Gallagher against ORC have been dismissed or found to be without merit.
ORC did not believe that it had committed any wrong against Ms. Gallagher and therefore
vigorously defended itself in the lawsuit filed by Ms. Gallagher. As part of the
agreements entered into between WidePoint, ORC and the former stockholders of ORC at the
time of WidePoints acquisition of ORC, the former stockholders of ORC agreed to
indemnify WidePoint and ORC from any liability involving the claims by Ms. Gallagher
against ORC, including the above-captioned lawsuit. In February of 2005, a settlement was
reached between the parties and the complaints were dismissed.

Other than as described above, the
Company is not involved in any material legal proceedings.

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

WidePoints Annual Meeting of
Stockholders was held on January 27, 2005. The following matters were submitted to our
stockholders at that meeting.

The following two persons were
elected by the following votes to serve as Class I directors of the Board of Directors
for three years or until their resignation and/or their successors are elected and
qualified:

|Name           | Votes For  | Votes Withheld
|-------------- | ---------- | --------------
|Mark Mirabile  | 17,467,060 | 2,046,207     
|Norman Wareham | 15,949,957 | 3,563,310     

The following two persons were
elected by the following votes to serve as Class III directors of the Board of Directors
for two years or until their resignation and/or their successors are elected and
qualified:

|Name         | Votes For  | Votes Withheld
|------------ | ---------- | --------------
|Mark Fuller  | 17,469,960 | 2,043,307     
|John Crowley | 17,467,457 | 2,045,810     

17

---

Stockholders also ratified the
increase of the number of authorized shares of Common Stock from 50,000,000 shares to
110,000,000 shares. Such approval was evidenced by a vote of 18,165,595 shares for and
1,343,772 shares against, with 3,900 shares abstaining.

Stockholders ratified an amendment
to WidePoints 1997 Stock Incentive Plan (the Plan) providing for an
increase of 7,000,000 shares in the total number of shares of Common Stock authorized for
issuance under the Plan from 3,000,000 shares to 10,000,000 shares. The amendment was
approved by a vote of 11,480,868 shares for and 2,907,522 shares against, with 5,124,877
shares abstaining.

Finally, the Stockholders ratified
the selection of Grant Thornton, LLP as the independent accountants for WidePoint for the
current fiscal year. Such approval was approved by a vote of 18,369,797 shares for and
1,134,170 shares against, with 9,300 shares abstaining.

18

---

PART II

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

The Companys Common Stock is
quoted on the NASD OTC Bulletin Board under the symbol WDPT and the Frankfurt
and Berlin exchanges under the symbol ZMX. 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 bid prices of the Common Stock for each of the periods
indicated:

|2004           | High  | Low  
|-------------- | ----- | -----
|Fourth Quarter | $0.86 | $0.31
|Third Quarter  | 0.38  | 0.26 
|Second Quarter | 0.53  | 0.29 
|First Quarter  | 0.54  | 0.13 
|2003           | High  | Low  
|Fourth Quarter | $0.17 | $0.09
|Third Quarter  | 0.14  | 0.09 
|Second Quarter | 0.19  | 0.09 
|First Quarter  | 0.17  | 0.08 

As
of April 12, 2005 there were 176 registered holders of record of the Companys Common
Stock and approximately 2,016 beneficial holders of record of the Companys Common
Stock.

Equity Compensation Plan
Information

The
following table sets forth information as of December 31, 2004, with respect to the
Companys compensation plans under which its Common Stock is authorized for issuance:

|                                 | (a)
Number of
securities
to be issued upon
exercise of
outstanding
options,
warrants, andrights | (b)
Weighted average
exercise price of
outstanding
options,
warrants, andrights | (c)
Number of
securities
remaining available
for future issuance
(excluding
securities
reflected incolumn (a))
|-------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------
|Equity Compensation Plans:       |                                                                                                 |                                                                                 |                                                                                                               
|Approved by security holders     | 2,112,000                                                                                       | $0.14                                                                           | 888,000                                                                                                       
|Not approved by security holders | 5,111,111                                                                                       | $0.28                                                                           | - 0 -                                                                                                         
|Total                            | 7,223,111                                                                                       | $0.24                                                                           | 888,000                                                                                                       

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.

Repurchases of Equity Securities

The Company repurchased no shares of
its Common Stock during the fourth quarter of 2004.

19

---

ITEM 6.  SELECTED
FINANCIAL DATA.

The selected financial data presented
below for each of the years in the five-year period ended December 31, 2004 is derived
from our audited consolidated financial statements. You should read the selected financial
data presented below in conjunction with our consolidated financial statements, the notes
to our consolidated financial statements and Item 7Managements
Discussion and Analysis of Financial Condition and Results of Operations.

On October 25, 2004, WidePoint
acquired the stock of Operational Research Consultants, Inc. (ORC), a Virginia
corporation. The accompanying financial data includes the accounts of ORC as of the date
of the acquisition. A further description of that purchase is set forth in the
Companys Form 8-K/A filed on January 7, 2005 with the Securities and Exchange
Commission. On April 30, 2004, WidePoint closed on the acquisition of Chesapeake
Government Technologies, Inc. (Chesapeake), a Delaware corporation. A further
description of that purchase is set forth in the Companys Form 8-K filed on May 14,
2004. On September 29, 2000, WidePoint sold PMC. The accompanying financial data includes
the accounts of PMC through that date of sale. A further description of that sale
transaction is set forth in the Companys Form 8-K/A filed on December 13, 2000 with
the Securities and Exchange Commission.

The reflected changes as a result of
the acquisitions and disposition described above along with the Companys strategy to
continue to acquire additional businesses might cause the data described in the tables
below not to be indicative of the Companys future financial condition or results of
operations.

20

---

# Selected
Financial Data

|                                            |  |  |   |            |  
|------------------------------------------- |  |  | - | ---------- | -
|
|Statement of Operations Data:               |  |  |   |            |  
|Revenues                                    |  |  | $ | 5,542,118  |  
|Cost of revenues                            |  |  |   | 4,066,543  |  
|                                            |  |  |   |            |  
|Gross Profit                                |  |  | $ | 1,475,575  |  
|Sales and marketing expense                 |  |  |   | 596,564    |  
|General and administrative expense          |  |  |   | 1,196,707  |  
|Facilities closing expense                  |  |  |   | --         |  
|Disposition of subsidiary                   |  |  |   | --         |  
|Impairment of long-term assets              |  |  |   | --         |  
|Depreciation and amortization               |  |  |   | 70,896     |  
|                                            |  |  |   |            |  
|Loss from operations                        |  |  |   | (388,592   | )
|                                            |  |  |   |            |  
|Other income (expense):                     |  | 
|Interest income                             |  |  |   | 5,841      |  
|Interest expense                            |  |  |   | (38,144    | )
|Loss from financial instruments             |  |  |   | (204,998   | )
|Other                                       |  |  |   | 2,118      |  
|                                            |  |  |   |            |  
|Net loss before income taxes                |  |  |   | (623,775   | )
|Income taxes (benefit)                      |  |  |   | (816       | )
|                                            |  |  |   |            |  
|Net loss                                    |  |  |   | (622,959   | )
|                                            |  |  |   |            |  
|Basic and diluted loss per share            |  |  | $ | (0.03      | )
|                                            |  |  |   |            |  
|Basic and diluted weighted average          |  | 
|shares outstanding                          |  |  |   | 18,664,148 |  
|                                            |  |  |   |            |  
|Dividends                                   |  |  |   | --         |  
|Total Assets                                |  |  | $ | 9,913,408  |  
|Long-term debt                              |  |  |   | --         |  
|Long-term obligations (Capital leases only) |  |  |   | --         |  
|Capital leases, current portion             |  |  |   | --         |  

21

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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 is
a consulting services firm specializing in planning, managing and implementing
Information Technology (IT) solutions. Its staff consists of business and
computer specialists who help 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.

During 2002 and 2003, WidePoint
witnessed a highly competitive economic environment within the commercial IT sector due to
a combination of constrained business investment and an excessive supply of IT
consultants. As a result of these conditions, the Company experienced both reduced gross
margins and decreased demand for the IT services that it provides.

In 2004, WidePoint acquired
Chesapeake Government Technologies, Inc. (Chesapeake) and Operational Research
Consultants, Inc. (ORC) as part of WidePoints strategy to refocus the Companys
business development initiatives toward the substantial increase in government spending on
infrastructure and automation that has been accelerated by recent geopolitical events that
have created an unprecedented need for systems and process expertise across most
government markets, federal, state and local. This market is also growing due to the fact
that many government legacy systems and processes are approaching the end of their
technologically useful lives, indicating the need for significant upgrade and enhancement.
WidePoint intends to capitalize on the expected growth in its target markets through its
strategic acquisitions, continuing rollout of the ORC Public Key Infrastructure
(PKI) initiative, and by continuing to implement our project based enterprise
strategy emphasizing industry-wide best practices disciplines. With the addition of the
customer base and the increase in revenues attributable from the ORC acquisition,
WidePoints opportunity to leverage and expand further into the federal marketplace
has improved dramatically. ORCs past client successes, top security clearances in
their facilities and with their personnel, and additional breadth of management talent
have expanded the Companys reach into markets that previously were not accessible to
WidePoint. The Company intends to continue to leverage the synergies between the newly
acquired operating subsidiaries and cross sell those technical capabilities into each
separate marketplace serviced by its respective subsidiaries. Further, the Company is
continuing to actively search out new synergistic acquisitions that WidePoint believes
will further enhance the present base of business which has been augmented by its recent
acquisitions and internal growth initiatives.

22

---

As a result of these actions in 2004,
the Companys revenues for the period ending December 31, 2004 increased by
approximately 68% from approximately $3.3 million in 2003 to $5.5 million in 2004. This
increase was materially due to the additional revenues of approximately $2.2 million
generated by ORC from October 25, 2004 through December 31, 2004. ORC generated
approximately $10.5 million in unaudited revenues for the year ending December 31, 2004.
Taken together with the results of WidePoints revenues for the same period, the
combined total materially affects the comparability of the information reflected in the
selected consolidated financial information presented above, and therefore may not be
indicative of the Companys future financial condition or results of operations.
Further, as the Company attempts to continue 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.

In addition, most of the
Companys current costs consist primarily of the salaries and benefits paid to
WidePoint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.  WidePoints profitability also depends upon both the volume of
services performed and the Companys ability to manage costs.  As a
significant portion of the Companys cost is labor related, WidePoint must
effectively manage these costs to achieve and grow its profitability.  To date, the
Company has attempted to maximize its operating margins through efficiencies achieved by
the use of its proprietary methodologies, and by offsetting increases in consultant
salaries with increases in consultant fees received from its clients. The uncertainties
relating to the ability to achieve and maintain profitability, obtain additional funding
to partially fund the Companys growth strategy and provide the necessary investment
to continue to upgrade its management reporting systems to meet the continuing demands of
the present regulatory changes affect the comparability of the information reflected in
the selected consolidated 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;
| | - | --------------------

23

---

| |  | Allowance
for doubtful accounts;
| | - | --------------------------------

| |  | Goodwill
and Other Intangibles
| | - | ------------------------------

| |  | Accounting
for income taxes.
| | - | ----------------------------

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 time-and-material contracts, revenues are computed by
multiplying the number of direct labor-hours expended in the performance of the contract
by the contract billing rates and adding other billable direct costs. In the event of a
termination  of a contract,  all billed and unbilled  amounts  associated  with those
task orders where work has been performed would be billed and collected.  The
 termination  provisions of the contract would be accounted  for at the time of
 termination.  Any  deferred  and/or  amortization  cost  would  either  be billed or
expensed  depending upon the  termination  provisions of the contract.  Further,  the
Company has had no history of losses nor has it  identified  any specific  risk of loss
at December 31, 2004 due to  termination  provisions  and thus has not recorded
provisions for such events.

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.

Goodwill 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.

24

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

The Company reviews its long-lived
assets, including property and equipment, identifiable intangibles, and goodwill 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, 2004, 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 goodwill and other long-lived assets.  Goodwill and long-lived
assets are a significant item on the Companys balance sheet and represent approximately
60% of our total assets.  Any impairment as a result of the estimate utilizing 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.  Goodwill and other long-lived assets are identified on the face of the
Balance Sheet as Goodwill and Intangibles.  Amortization of Intangibles are identified on
the face of the Statement of Operations within Amortization and Depreciation.

The Companys senior management has
discussed the development and selection of the accounting estimate, and the MD&A disclosure
regarding it, with the audit committee of the Companys board of directors.

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 2023. As such, the
Company has recorded a full valuation allowance against net deferred tax assets. Although
WidePoint believes that its estimates are reasonable, no assurance can be given that the
final outcome of these matters will not be different than that which is reflected in the
historical income tax provisions. Such differences could have a material effect on the
income tax provision and net income in the period in which such determination is made.

New Accounting
Pronouncements

In December 2004, the Financial
Accounting Standards Board issued Statement 123 (revised 2004), Share-Based Payment
(Statement 123(R)). This Statement requires that the costs of employee share-based
payments be measured at fair value on the awards grant date using an option-pricing
model and recognized in the financial statements over the requisite service period. This
Statement does not change the accounting for stock ownership plans, which are subject to
American Institute of Certified Public Accountants SOP 93-6, Employers
Accounting for Employee Stock Ownership Plans. Statement 123(R) supersedes Opinion
25, Accounting for Stock Issued to Employees and its related interpretations, and
eliminates the alternative to use Opinion 25s intrinsic value method of accounting,
which the Company is currently using.

25

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Statement 123(R) allows for two
alternative transition methods. The first method is the modified prospective application
whereby 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 will be recognized
over the remaining service period. The compensation cost for that portion of awards will
be based on the grant-date fair value of those awards as calculated for pro forma
disclosures under Statement 123, as originally issued. All new awards and awards that are
modified, repurchased, or cancelled after the adoption date will be accounted for under
the provisions of Statement 123(R). The second method is the modified retrospective
application, which requires that the Company restate prior period financial statements.
The modified retrospective application may be applied either to all prior periods or only
to prior interim periods in the year of adoption of this statement. The Company is
currently determining which transition method it will adopt and is evaluating the impact
Statement 123(R) will have on its financial position, results of operations, EPS and cash
flows when the Statement is adopted. Upon making its determination of the transition
method the Company will adopt Statement 123(R). The Company will adopt this Statement on
January 1, 2006 in accordance with the requirements.

# Results of Operations

Year Ended December 31,
2004 Compared to the Year ended December 31, 2003

Revenues.         Revenues
for the year ended December 31, 2004, were approximately $5.5           million, an
increase of $2.2 million, as compared to revenues of approximately           $3.3 million
for the year ended December 31, 2003. The 68% increase in           revenues in 2004
was primarily attributable to the acquisition of Operational           Research
Consultants, Inc. (ORC). ORC contributed approximately $2.2           million in
revenues subsequent to its acquisition by the Company on October 25,           2004.

Gross profit. Gross profit for
the year ended December 31, 2004, was approximately $1.5 million, or 27% of revenues,
an increase of $0.7 million as compared to gross profit of approximately $0.8 million, or
25% of revenues, for the year ended December 31, 2003. The increase in the amount of
gross profit was materially attributable to greater operating margins within the business
base of the Companys recent acquisition of ORC, which experienced gross margins in
services of approximately 40%.

Sales and marketing. Sales and
marketing expenses for the year ended December 31, 2004 were approximately $0.6
million, or 11% of revenues, as compared to $0.4 million, or 13% of revenues, for the year
ended December 31, 2003. The $0.2 million increase in sales and marketing expenses
for the year ended December 31, 2003, was primarily attributable to an increase in
the amount of sales and marketing expenditures as a result of the Companys recent
acquisition of ORC.

General and administrative.
General and administrative expenses for the year ended December 31, 2004 were
approximately $1.2 million, or 24% of revenues, as compared to $0.7 million, or 21% of
revenues, for the year ended December 31, 2003. The $0.5 million increase in general
and administrative expenses in 2004 was primarily attributable to an increase in the
amount of general and administrative expenses associated with the acquisitions of both
Chesapeake and ORC, and the Companys implementation of its
federal sector business initiative.

26

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Interest income (expense).
Interest income for the year ended December 31, 2004 was $5,841, a decrease of $5,710,
or 51%, as compared to $11,551 for the year ended December 31, 2003. The decrease in
interest income in 2004 was primarily attributable to lesser amounts of available cash and
other securities. Interest expense for the year ended December 31, 2004 was $38,144,
an increase of $36,840, or 2,725%, as compared to $1,304 in interest expense for the year
ended December 31, 2003. The increase in interest expense in 2004 was primarily
attributable to the Companys increase in interest expense associated with its recent
secured senior lending facility with RBC-Centura which was utilized in association with
the purchase of ORC.

Loss from Financial Instruments.
   The Company  recognized  a loss from  financial  instruments  of  approximately
$205,000  in the year ended  December  31,  2004  which  related to the  difference
 between  the fair value of the warrants  issued to Barron  Partners,  LP in connection
 with the preferred stock financing and the market price of the common stock  underlying
 such  warrants at December 31, 2004.  No such loss was  recognized  in the year ended
December 31, 2003.

Net loss. As a result of the
above, the net loss for the year ended December 31, 2004 was approximately $0.6
million, an increase of $0.3 million, as compared to the net loss of approximately $0.3
million for the year ended December 31, 2003.

Year Ended December 31,
2003 Compared to the Year ended December 31, 2002

Revenues.  Revenues
for the year ended December 31, 2003, were approximately $3.3           million, a
decrease of $0.2 million, as compared to revenues of approximately           $3.5 million
for the year ended December 31, 2002. The 6% decrease in revenues           in 2003 was
primarily attributable to negative pricing pressures that resulted           from the
highly competitive economic environment that reduced average billing           rates for
the Companys consultants.

Gross profit.Gross profit for
the year ended December 31, 2003, was $0.8 million, or 25% of revenues, a decrease of $0.2
million as compared to gross profit of $1.0 million, or 29% of revenues, for the year
ended December 31, 2002. The decrease in the amount of gross profit was attributable to a
reduction in revenues and a decrease in operating margins caused by the inability of the
Company to completely offset lower average bill rates with a decrease in corresponding
consultant costs.

Sales and marketing. Sales and
marketing expenses for the year ended December 31, 2003 were $0.4 million, or 13% of
revenues, as compared to $0.5 million, or 15% of revenues, for the year ended December 31,
2002. The $0.1 million decrease in sales and marketing expenses for the year ended
December 31, 2003, was primarily attributable to the Companys attempt to match the
size of the Companys sales force with the operational requirements of the
Companys business.

General and administrative.
General and administrative expenses for the year ended December 31, 2003 were $0.7
million, or 21% of revenues, as compared to $0.6 million, or 18% of revenues, for the year
ended December 31, 2002. The $0.1 million increase in general and administrative expenses
in 2003 was primarily attributable to increases in administrative labor cost.

27

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Interest income (expense).
Interest income for the year ended December 31, 2003 was $11,551, a decrease of $6,107, or
35%, as compared to $17,658 for the year ended December 31, 2002. The decrease in interest
income in 2003 was primarily attributable to lower interest rates. Interest expense for
the year ended December 31, 2003 was $1,304, a decrease of $255, or 16%, as compared to
$1,559 in interest expense for the year ended December 31, 2002. The decrease in interest
expense in 2003 was primarily attributable to the elimination of the capital lease
obligations.

Net loss.As a result of the
above, the net loss for the year ended December 31, 2003 was approximately $0.3 million,
an increase of $0.2 million, as compared to the net loss of approximately $60,000 for
the year ended December 31, 2002.

# 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 2004 and 2003, operations were materially financed with
working capital, senior debt and the proceeds from a convertible preferred stock
issuance.

Cash used in operating activities for
the year ended December 31, 2004, was approximately $0.5 million as compared to cash used
in operating activities of approximately $0.3 million for the year ended December 31,
2003. The decrease in cash balances available for operating activities for the years ended
December 31, 2004 and 2003, respectively, were primarily a result of investments in which
we expanded our sales and general and administrative cost structure to implement our
growth strategy. Capital expenditures in property and equipment were approximately $15,000
for the year ended December 31, 2004, as compared to capital expenditures in property and
equipment of approximately $8,000 for the year ended December 31, 2003.

As of December 31, 2004, the Company
had a net working capital deficit of approximately $4.0 million. Excluding the impact of
the financial instruments associated with the issuance of the common stock warrants
attributable to the preferred stock capital investment by Barron Partners, LP in the
Company in October 2004 and discussed below, the working capital deficit would be reduced by
approximately $3.8 million, resulting in a net working capital deficit of approximately
$0.2 million. WidePoints primary source of liquidity consists of approximately $0.5
million in cash and cash equivalents and approximately $3.0 million of accounts
receivable. Current liabilities include approximately $2.4 million in accounts payable
and accrued expenses; $1.6 million in a line of credit with RBC Centura Bank; and $3.8
million in financial instruments which may be converted to equity upon the extinguishment
of the Companys liquidation damages clause within the registration rights agreement
entered into with Barron Partners, LP.

The market for the Companys
services is experiencing an environment of constrained technology investment resulting
from an economic slowdown that has reduced new technology initiatives. As a result of this
negative environment, the demand for IT consultants ranging from software programmers to
network engineers has been negatively affected. This has reduced demand for consultants,
as well as created an increase in competition from both domestic and foreign firms for the
diminished amount of new and ongoing IT initiatives. WidePoint anticipates a reversal of
these negative events in the future, as economic growth is restored, the constrained
environment in new technology initiatives ebb, and the Company executes its current
mergers and acquisitions strategy. Therefore, the Companys business environment is
characterized by rapid technological change; experiences times of high growth and
contraction and is influenced by material events such as mergers and acquisitions that
can substantially change the Companys outlook.

28

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Since 2002, WidePoint has embarked
upon several new initiatives to counter the current negative environment within our
industry and expand our capacity to restore revenue growth. The Company requires
substantial working capital to fund the future growth of its business, particularly to
finance accounts receivable, sales and marketing efforts, and capital expenditures. There
are currently no commitments for capital expenditures. Future capital requirements will
depend on many factors, including the rate of revenue growth, if any, the timing and extent
of spending for new product and service development, technological changes and market
acceptance of the Companys services.

On October 25 and 29, 2004,
WidePoint completed financings with Barron Partners L.P. (Barron), a private
equity fund that engages in investing primarily in private investments in publicly traded
entities, for an aggregate amount of $3,580,000, under a preferred stock purchase
agreement and related agreements. Net proceeds from the financing after costs and
expenses, including fees of finders and agents, were approximately $3,030,000. WidePoint
issued an aggregate of 2,045,714 shares of its Series A Convertible Preferred Stock that
are convertible into an aggregate of 20,457,143 shares of its Common Stock at a
conversion rate equal to $0.175 per share. In addition, WidePoint issued to Barron a
warrant to purchase up to an additional 10,228,571 shares of its Common Stock at an
exercise price of $0.40 per common share. The shares of Common Stock which may be
acquired by Barron upon its conversion of its Series A Convertible Preferred Stock and/or
the exercise of its warrant are subject to contractual restrictions which restrict the
ability of Barron and its affiliates to acquire shares of Common Stock which equal no
more than 4.99% of the outstanding shares of WidePoints Common Stock at any time.
This contractual restriction may be removed upon 61 days notice to WidePoint from Barron,
but in the event Barron elects to remove this restriction, then Barron and its affiliates
agreed that Barron and its affiliates can only vote the shares of Common Stock held by
Barron and its affiliates which result in Barron and its affiliates having no more than
22% of the total voting power of all outstanding shares of WidePoints Common Stock
at any time. As a result of the Barron financing transaction, WidePoint issued  warrants
to Westcap Securities, Inc., a registered broker-dealer and WidePoints placement
agent in such transaction, to purchase 511,428 shares of Common Stock
at an exercise price of $0.40 per share, which warrants expire in October 2009. On
April 8, 2005, Barron converted 100,000 shares of its preferred stock into 1,000,000
shares of Common Stock.

Pursuant to the registration
rights agreement, between Barron and WidePoint, related to the stock issuances described
in the preceding paragraph, WidePoint filed a registration statement on January 5, 2005,
covering the resale of the shares of Common Stock issuable upon conversion and/or
exercise of the Series A Convertible Preferred Stock and the warrants issued to Barron.
If our registration statement is not declared effective by the Securities and Exchange
Commission by April 23, 2005 and thereafter kept effective through October 20, 2007,
subject to permissible blackout periods and registration maintenance periods, then
WidePoint will be required to pay Barron a maximum penalty of up to $20,000 for each
month the registration statement is not effective.

WidePoint believes that its current
cash position and line of credit is sufficient to meet capital expenditure and working
capital requirements for the near term. However, the growth and technological change of
the market make it difficult to predict future liquidity requirements with certainty.
Over the longer term, the Company must successfully execute its plans to increase revenue
and income streams that will generate significant positive cash flows if it is to sustain
adequate liquidity without impairing growth or requiring the infusion of additional funds
from external sources. Additionally, a major expansion, such as occurred with the
acquisition of ORC or any other major new subsidiaries, might require external financing
that could include additional debt or equity capital. The Company obtained a one year
senior line of credit from RBC-Centura Bank in October 2004 for up to $2.5 million
dollars, collateralized against accounts receivables, that also allows for the expansion
of this line of credit up to $5.0 million upon the successful completion of an additional
acquisition. The interest rate on the line of credit is variable, and is based upon the
prime lending rate. Approximately $1.2 million dollars of the senior line of credit was
utilized in the acquisition of ORC. In addition, the Company raised approximately $3.6
million dollars in connection with the aforementioned equity investments by Barron
Partners, LP, that were used in the acquisition of ORC. There can be no assurance that
additional financing, if required, will be available on acceptable terms, if at all, for
future acquisitions and/or growth initiatives.

# Off-Balance Sheet
Arrangements

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

29

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# Contractual Obligations

The following table summarizes the
Companys contractual obligations at December 31, 2004 and the effect such
obligations are expected to have on liquidity and cash flow in future periods.

|                           
|---------------------------
|Contractual Obligations    
|Long-Term                  
|Capital Lease              
|Convertible debt           
|Operating lease (1)        
|Purchase Obligations       
|Other Long-Term Liabilities
|                           
|Total                      
|                           

(1)    
          WidePoints office located at One Lincoln Center, Oakbrook Terrace,
          Illinois 60181 has a lease which runs through July 31, 2007, with payments
          in 2005 representing an obligation of approximately $42,800 and payments from
          2006 to 2007 representing obligations of approximately $70,600. The office at
          1736 South Park Court, Chesapeake, VA has a lease which runs through April 30,
          2006, with payments in 2005 representing an obligation of approximately $26,700
          and payments in 2006 representing obligations of approximately $9,000. The
          office at 11250 Waples Mill Rd., Fairfax, VA, has a lease which runs through
          March 15, 2009, with payments in 2005 representing an obligation of
          approximately $341,000 and payments in 2006 through 2009 representing
          obligations of approximately $1,188,000. The office at 1625 Prince St.,
          Alexandria, VA, has a lease which runs through January 31, 2008, with payments
          in 2005 representing an obligation of approximately $91,700 and payments in 2006
          through 2008 representing obligations of approximately $191,600.

# 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 differ from those estimates.

30

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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 7A.  QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market
risk associated principally with changes in interest rates associated with its senior
current short-term debt provided by RBC-Centura. These borrowings bear interest at
variable rates and are determined by the Prime Rate. A hypothetical 10% increase in
interest rates would have increased the Companys annual interest expense for the
year ended December 31, 2004 by less than $2,000.

WidePoint does not use derivative
financial instruments for speculative or trading purposes. Excess cash is invested in
short-term, investment grade, interest-bearing securities. Investments are made in
accordance with an investment policy approved by the Board of Directors. Under this
policy, no investment securities can have maturities exceeding one year and the average
maturity of the portfolio cannot exceed 90 days.

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.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

An evaluation was carried out under
the supervision and with the participation of the Companys management, including its
Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the
Companys disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934) as of December 31, 2004. As a result of such evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that the Companys
disclosure controls and procedures are effective to ensure that information required to
be disclosed by the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms. In its efforts to continually monitor
and improve its controls and procedures, the Company has identified a material weakness
in the design of our internal controls due to insufficient technical accounting expertise
within the accounting function to resolve non-routine or complex accounting matters such
as occurs with a material acquisition such as we encountered in our recent acquisition of
Operational Research Consultants, Inc. The Company is currently working to augment its
accounting staff with resources to assist it in complex non-routine accounting issues as
a result of events such as mergers and acquisitions. Further, the Company also identified
a weakness in its controls and procedures in tracking its submissions to the Securities
and Exchange Commission during the fourth quarter of 2004. The Companys resource who was
charged with filing the prior year's Proxy Statement and Annual Report to Shareholders with the Securities and Exchange
Commission failed to complete such submissions and the Company failed to identify such
non-submission. As such, the Company implemented an additional internal control to
correct this event in the future. The additional internal control over financial
reporting, which was instituted during the period ending December 31, 2004, involves an
additional reporting process to track and confirm the filing of requisite filings with
the Securities and Exchange Commission whereby confirmations are routed to executive
management after each new filing is submitted and accepted to track and confirm the
previous submissions. Otherwise, there were no other changes in the Companys internal
control over financial reporting that occurred during the period ended December 31, 2004,
that has materially affected and is reasonably likely to materially affect, the Companys
internal control over financial reporting.

31

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ITEM 9B. OTHER INFORMATION.

None.

32

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# Part III.

ITEM 10.  DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT.

The
following sets forth information regarding the directors, executive officers and certain
significant employees of the Company as of March 31, 2005:

|Name                | Age | Position                                                                    
|------------------- | --- | ----------------------------------------------------------------------------
|Steve L. Komar      | 63  | Chief Executive Officer and Chairman                                        
|James T. McCubbin   | 41  | Vice President, Chief Financial Officer, Secretary, Treasurer and Director  
|James M. Ritter     | 59  | Director and Assistant Secretary                                            
|G.W. Norman Wareham | 52  | Director                                                                    
|Mark Mirabile       | 41  | Vice President, Chief Operations Officer and Director                       
|Daniel Turissini    | 45  | Chief Executive Officer and President-Operational Research Consultants, Inc.
|Mark C. Fuller      | 48  | Director, Chief Executive Officer - Chesapeake Government Technologies, Inc.
|John D. Crowley     | 43  | Director, President - Chesapeake Government Technologies, Inc.              

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.

James T.          McCubbin
has served as a director and as WidePoints Secretary and           Treasurer since
November 1998. Since August 1998, Mr. McCubbin has also           served as Vice
President and Chief Financial Officer. Prior to that time, from           December 1997
to August 1998, Mr. McCubbin served as the Companys           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.

33

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James M.        Ritter
has served as a director since December 1999 and as Assistant Secretary           since
December 2002. Mr. Ritter is the retired Corporate Headquarters Chief
          Information Officer of Lockheed Martin Corporation. Prior to his retirement in
          February 2001, Mr. Ritter was employed at Lockheed Martin Corporation for
          over 32 years in various positions involving high level IT strategic planning
          and implementation, e-commerce development, integrated financial systems, and
          large-scale distributed systems.

G.W. Norman Wareham has served
as a director since December 1997. Mr. Wareham served as Vice President, Secretary
and Chief Financial Officer from September 1996 until August 1998. Mr. Wareham is
President of Wareham Management Ltd. and provides management consulting and accounting
services to public companies in Canada and the United States. Mr. Wareham is a
certified general accountant and has been engaged in the public practice of accounting
for over 20 years.

Mark Mirabile has served as a
director since his appointment in April 2002. Mr. Mirabile has also served as Vice
President and Chief Operations Officer 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.

Mr.      Turissini
presently serves as the Chief Executive Officer of Operational           Research
Consultants, Inc. (ORC), a wholly-owned subsidiary of the           Company.
WidePoint acquired ORC on October 25, 2004. Mr. Turissini was a           founding
partner of ORC in 1991 and served as its Chief Operations 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.

34

---

Mark Fuller was elected to serve as
a Class III director at the Companys Stockholders Meeting on January 27, 2005 and
presently serves as the Chief Executive Officer of Chesapeake, a wholly-owned subsidiary
of the Company. The Company acquired Chesapeake on March 24, 2004. Mr. Fuller was a
co-founder of Chesapeake and has served as its Chief Executive Officer since its
inception in February 2004. Mr. Fuller has also served as Chairman and CEO of Chesapeake
Partners, Inc., a business consulting company, since October 2001. From December 2000 to
October 2002, Mr. Fuller served as President of Network Services for Verizon Avenue, a
wholly-owned subsidiary of Verizon Communications Inc. Verizon Avenue was originally
founded as One Point Communications, where Mr. Fuller served as President of Network
Services from January 1999 to December 2000. Prior thereto, Mr. Fuller served as Vice
President of ACSI (which later became known as e.spire), from November 1994 to November
1998. From August 1993 to November 1994, Mr. Fuller served as Director of MCI Sales for
Teleport Communications Group. From March 1988 to August 1993, Mr. Fuller held various
management positions with MCI Telecommunications, Inc. Mr. Fuller also served 9 years in
the United States Army where he rose to the rank of Major prior to leaving active duty in
March 1988. Mr. Fuller is a graduate of the United States Military Academy at West Point,
New York where he received a Bachelor of Science degree in Applied Science and
Engineering. Effective as of April 8, 2005, Mark Fuller resigned from the Board of
Directors of WidePoint pursuant to the contractual terms of an Agreement and Plan of
Merger, dated March 24, 2004, by and among WidePoint and Chesapeake, as a result of a
notice terminating the employment agreement between WidePoint and Mr. Fuller.

John Crowley was elected to serve as
a Class III director at the Companys Stockholders Meeting on January 27, 2005 and
presently serves as the President of Chesapeake, a wholly-owned subsidiary of the
Company. The Company acquired Chesapeake on March 24, 2004. Mr. Crowley was a co-founder
of Chesapeake and has served as its President since its inception in February 2004. From
September 2002 to March 2004, Mr. Crowley served as Vice President of Strategic
Partnerships and Alliances at AT&T Corp. From March 1992 to September 2002, Mr.
Crowley served as Vice President of Strategic Ventures and Alliances at MCI
Telecommunications, Inc. From 1983 to 1992, Mr. Crowley held various management and
consulting positions with different companies, including United City Traders and
PricewaterhouseCoopers. Mr. Crowley received his Bachelor of Science degree in Business
Administration from Georgetown University.   Effective as of April 8, 2005, John Crowley
resigned from the Board of Directors of WidePoint pursuant to the contractual terms of an
Agreement and Plan of Merger, dated March 24, 2004, by and among WidePoint and
Chesapeake, as a result of a notice terminating the employment agreement between
WidePoint and Mr. Crowley.

Our executive officers are elected
by, and serve at the discretion of, the Board of Directors. There are no family
relationships among any of the Companys executive officers or directors.

# Code of Ethics

The Companys Board of Directors
recently adopted a code of ethics for the chief executive and principal financial and
accounting officers. The Company has posted a copy of the code on its website located at
www.widepoint.com.

ITEM 11. EXECUTIVE COMPENSATION.

The following Summary Compensation
Table sets forth the annual salary (column c) and bonus (column d) paid and options
granted (column g) during each of the past three years to the Chief Executive Officer of
the Company, as well as the executive officers of the Company at December 31, 2004 whose
annual salary and bonus in 2004 exceeded $100,000.

|                     
|---------------------
|
|
|
|
|Steve Komar          
|Chief Executive      
|Officer and President
|                     

35

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|                         |      |          |          |       |       |     |      
|------------------------ | ---- | -------- | -------- | ----- | ----- | --- | -----
|                        
|James McCubbin           | 2004 | $119,000 | $ -0-    | $ -0- | $ -0- | -0- | $ -0-
|Vice President &         | 2003 | $119,000 | $ 31,500 | $ -0- | $ -0- | -0- | $ -0-
|Chief Financial Officer  | 2002 | $119,302 | $ -0-    | $ -0- | $ -0- | -0- | $ -0-
|                        
|Mark Mirabile            | 2004 | $119,000 | $ -0-    | $ -0- | $ -0- | -0- | $ -0-
|Vice President &         | 2003 | $119,000 | $ 43,500 | $ -0- | $ -0- | -0- | $ -0-
|Chief Operations Officer | 2002 | $119,000 | $ -0-    | $ -0- | $ -0- | -0- | $ -0-
|                        

---

|1 | Does
not report the approximate cost to the Company of an automobile allowance furnished to
the above persons, which amounts do not exceed the lesser of either $50,000 or 10% of the
total of the persons annual salary and bonuses for 2004.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following Option Grants Table
sets forth, for each of the named executive officers, information regarding individual
grants of options granted in 2004 and their potential realizable value. Information
regarding individual option grants includes the number of options granted, the percentage
of total grants to employees represented by each grant, the per-share exercise price and
the expiration date. The potential realizable value of the options are based on assumed
annual 0%, 5% and 10% rates of stock price appreciation over the term of the option.

|              
|--------------
|
|
|
|Steve Komar   
|James McCubbin
|Mark Mirabile 
|              

---

| | 1   The
reported amount consists solely of warrants granted by the Company to the named executives as part of a future
performance grant by the Board of Directors of the Company. The warrants are not
issued under the Companys 1997 Stock Incentive Plan. The warrants expiring on
July 13, 2009 for 1,333,333 shares of the Companys Common Stock vest as to 333,333
for each named executive on December 31, 2004, with the remaining warrants vesting per
performance parameters determined by the Compensation Committee of the Board of Directors.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2   Based
on options and warrants for a total of 5,111,111 shares of Common Stock granted to all
employees or directors in 2004.
| | --------------------------------------------------------------------------------------------------------------------------------

| | 3   The per share exercise price is equal to the fair market value per share of Common
Stock on the date of grant of the option.
| | --------------------------------------------------------------------------------------------------------------------------------

36

---

| | 4   The potential realizable values shown in the columns are net of the option exercise
price. These amounts assume annual compounded rates of stock price appreciation of 0%,
5%, and 10% from the date of grant to the option expiration date, a term of five years.
These rates have been set by the U.S. Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, of the Companys Common Stock.
Actual gains, if any, on stock option exercises are dependent on several factors
including the future performance of the Companys Common Stock, overall stock market
conditions, and the optionees continued employment through the vesting period. The
amounts reflected in this table may not actually be realized.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following Option Exercises and
Year-End Value Table is set forth herein because it sets forth, for each of the named
executive officers, information regarding the number and value of unexercised options at
December 31, 2004. No options were exercised by such persons during 2004.

|              
|--------------
|
|
|Steve Komar   
|              
|James McCubbin
|              
|Mark Mirabile 
|              

| | 1 | The
reported options were granted by the Company to the named executive officer under the
Companys 1997 Stock Incentive Plan (the Plan).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | Market
value of underlying shares at December 31, 2004, minus the exercise price.
| | - | ---------------------------------------------------------------------------------

| | 3 | The
above-reported options entitle Mr. Komar to purchase from the Company (i) 500,000 shares
of Common Stock that may be purchased by Mr. Komar from the Company at a price of $0.07
per share until July 7, 2012, pursuant to a stock option grant to him on January 7, 2002,
(ii) 37,500 shares of Common Stock at an exercise price of $0.09 per share through April
24, 2013 pursuant to a stock option granted to him on April 24, 2003, (iii) 50,000 shares
of Common Stock at an exercise price of $0.13 per share through December 31, 2013
pursuant to a stock option granted to him on December 31, 2003, with all such shares
fully vesting on December 31, 2004 or by an earlier vesting decision as may be granted by
the Compensation Committee, and (iv) 333,333 shares of Common Stock at an exercise price
of $0.235 per share through July 13, 2009 pursuant to a warrant issued to Mr. Komar on
July 14, 2004. Does not include (i) 12,500 shares of Common Stock that may be purchased
by Mr. Komar from the Company at a price of $0.09 per share until April 24, 2013 pursuant
to a stock option grant to him on April 24, 2003 which shall vest on April 21, 2005 or by
an earlier vesting decision as may be granted by the Compensation Committee, and (ii) a
warrant to purchase up to 1,000,000 shares of Common Stock at an exercise price of $0.235
granted to Mr. Komar on July 14, 2004, which shall vest upon a determination by the
Compensation Committee that the Company has achieved certain performance goals which
change each year.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

37

---

| | 4 | The
above-reported options entitle Mr. McCubbin to purchase from the Company (i) 500,000
shares of Common Stock that may be purchased by Mr. McCubbin from the Company at a price
of $0.17 per share until January 2, 2011, pursuant to a stock option grant to him on
January 2, 2001, (ii) 1,000 shares of Common Stock that may be purchased by Mr.
McCubbin from the Company at a price of $1.35 per share until July 3, 2010, pursuant to a
stock option granted to him on July 3, 2000 and (iii) 333,333 shares of Common Stock at an
exercise price of $0.235 per share through July 13, 2009 pursuant to a warrant issued to
Mr. McCubbin on July 14, 2004. Does not include a warrant to purchase up to 1,000,000
shares of Common Stock at an exercise price of $0.235 granted to Mr. McCubbin on July 14,
2004, which shall vest upon a determination by the Compensation Committee that the
Company has achieved certain performance goals which change each year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5 | The
above-reported options entitle Mr. Mirabile to purchase from the Company (i) 500,000
shares of Common Stock that may be purchased by Mr. Mirabile from the Company at a price
of $0.17 per share until January 2, 2011, pursuant to a stock option grant to him on
January 2, 2001, (ii) 1,000 shares of Common stock that may be purchased by Mr.
Mirabile from the Company at a price of $1.35 per share until July 3, 2010, pursuant to a
stock option granted to him on July 3, 2000 and (iii) 333,333 shares of Common Stock at an
exercise price of $0.235 per share through July 13, 2009 pursuant to a warrant issued to
Mr. Mirabile on July 14, 2004. Does not include a warrant to purchase up to 1,000,000
shares of Common Stock at an exercise price of $0.235 granted to Mr. Mirabile on July 14,
2004, which shall vest upon a determination by the Compensation Committee that the
Company has achieved certain performance goals which change each year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

No
Long-Term Incentive Plan Awards Table is set forth herein because no long-term incentive
plan awards were made to the above-named executive officers during 2004.

38

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# Employment Agreements
and Arrangements

On
July 1, 2002, the Company entered into an employment agreement with Steve Komar, Chief
Executive Officer and President of the Company. The employment agreement had an initial
term expiring on July 1, 2004 with four renewable one-year options remaining. On July 1,
2004, the Company and Mr. Komar exercised the first of such one-year renewal options. The
agreement provides for (1) a base salary of $40,000 per year, (2) a home office/automobile
expense allowance of $500 per month to cover such expenses incurred in the pursuit of
Company business; (3)a phone allowance of $100 per month to cover such expenses
incurred in the pursuit of Company business; (4)reimbursement for additional
actual business expenses consistent with the Companys existing policies that have
been incurred for the benefit of the Company; (5) paid medical and other benefits
consistent with the Companys existing policies with respect to key executives of the
Company, as such policies may be amended from time to time in the future; and (6)
performance incentive bonuses as may be granted annually at the discretion of the
Compensation Committee of the Board of Directors.

On
July 1, 2002, the Company entered into an employment agreement with James McCubbin, Chief
Financial Officer of the Company. The employment agreement had an initial term expiring on
July 1, 2004 with four renewable one-year options remaining. On July 1, 2004, the Company
and Mr. McCubbin exercised the first of such one-year renewal options. The agreement
provides for (1) a base salary of $119,000 per year, (2) a home office/automobile expense
allowance of $500 per month to cover such expenses incurred in the pursuit of Company
business; (3)reimbursement for additional actual business expenses consistent with
the Companys existing policies that have been incurred for the benefit of the
Company; (4) paid medical and other benefits consistent with the Companys existing
policies with respect to key executives of the Company, as such policies may be amended
from time to time in the future; and (5) performance incentive bonuses as may be granted
annually at the discretion of the Compensation Committee of the Board of Directors.

39

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On
July 1, 2002, the Company entered into an employment agreement with Mark Mirabile, Chief
Operations Officer of the Company. The employment agreement had an initial term expiring
on July 1, 2004 with four renewable one-year options remaining. On July 1, 2004, the
Company and Mr. Mirabile exercised the first of such one-year renewal options. The
agreement provides for (1) a base salary of $119,000 per year, (2) a home
office/automobile expense allowance of $500 per month to cover such expenses incurred in
the pursuit of Company business; (3)reimbursement for additional actual business
expenses consistent with the Companys existing policies that have been incurred for
the benefit of the Company; (4) paid medical and other benefits consistent with the
Companys existing policies with respect to key executives of the Company, as such
policies may be amended from time to time in the future; and (5) performance incentive
bonuses as may be granted annually at the discretion of the Compensation Committee of the
Board of Directors.

# Stock Options

1997
Stock Incentive Plan. In May 1997, the Board of Directors adopted, and in
December 1997 the stockholders of the Company approved, the Companys 1997 Stock
Incentive Plan (the Plan), which provides for the award of a variety of
equity-based incentives, including stock awards, stock options, stock appreciation rights,
phantom shares, performance unit appreciation rights and dividend equivalents
(collectively, Stock Incentives). The Plan is administered by the Compensation
Committee and provides for the grant of Stock Incentives to officers, key employees and
consultants of the Company to purchase up to an aggregate of 3,000,000 shares of Common
Stock at not less than 100% of fair market value of the Common Stock on the date granted.
The vesting and exercisability of any Stock Incentives granted under the Incentive Plan is
subject to the determination of and criteria set by the Committee. As of December 31,
2004, options to purchase a total of 2,112,000 shares of Common Stock under the Plan, at
prices ranging from $0.07 to $1.35 per share, were outstanding, of which options to
purchase 1,684,500 shares were presently exercisable. Subsequent to December 31, 2004, the
shareholders approved an amendment to expand the 1997 Stock Incentive Plan from 3,000,000
to 10,000,000 shares of the Companys Common Stock.

1997
Directors Formula Stock Option Plan. In May 1997, the Board of Directors
adopted, and in December 1997 the stockholders of the Company approved, the Companys
1997 Directors Formula Stock Option Plan (the Director Plan). Other than
Messrs. Wareham and Ritter, directors of the Company who are not employed by the Company
and who do not perform services for the Company are eligible to receive options under the
Director Plan. The Director Plan is administered by a committee that presently consists of
Messrs. Komar and McCubbin. Options become exercisable when vested and expire ten years
after the date of grant, subject to such shorter period as may be provided in the
agreement. A total of 140,000 shares of Common Stock are reserved for possible issuance
upon the exercise of options under the Director Plan. During 2004, options granted to and
vested with the directors were returned to the Company. There are no options presently
outstanding under the Director Plan.

40

---

Other
Options. Options were granted on April 21, 2003 by the Board of Directors
outside of the Director Plan to Messrs. Ritter and Wareham, who abstained from voting on
such matter, for each of Messrs. Ritter and Wareham to purchase (i) 50,000 shares of
Common Stock at a price of $0.09 per share through April 21, 2013, of which options to
purchase 25,000 shares vested on July 21, 2003, 12,500 shares vested on April 21, 2004,
and the remaining 12,500 shares will vest on April 21, 2005, and (ii) 50,000 shares of
Common Stock at a price of $0.13 per share through December 31, 2013 with all of the
shares vesting on December 31, 2004. Options were also granted to a pool of employees of
ORC on October 25, 2004 for 1,111,111 common shares at a grant price of $0.45 of which no
shares were vested as of December 31, 2004.

# Directors Fees

Directors who are not officers or
employees of the Company receive an annual fee of $12,000.

41

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ITEM 12.  SECURITY OWNERSHIP OF
CERTAIN BENFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth the
number of shares of Common Stock beneficially owned as of December 31, 2004 by: (i) each
person known by the Company to be the beneficial owner of 5% or more of such class of
securities, (ii) each director of the Company and (iii) all directors and officers of the
Company as a group.

|Directors, Nominees
and 5% Stockholders | Number of
Shares of
Common Stock(1) | Percent of
Outstanding
Common Stock(1)
|--------------------------------------- | ----------------------------------- | --------------------------------------
|Michael Higgins (2)                     | 1,512,000                           | 5.4%                                  
|Steve Komar (3)                         | 1,785,833                           | 6.4%                                  
|Norman Wareham (4)                      | 87,500                              | 0.1%                                  
|James McCubbin (5)                      | 1,699,333                           | 6.1%                                  
|James Ritter (6)                        | 89,000                              | 0.1%                                  
|Mark Mirabile (7)                       | 1,869,333                           | 6.7%                                  
|Mark Fuller (8)                         | 1,360,991                           | 4.9%                                  
|John Crowley (9)                        | 1,360,993                           | 4.9%                                  
|Jay Wright (10)                         | 1,360,993                           | 4.9%                                  
|Daniel Turissini (11)                   | 875,000                             | 3.1%                                  
|All directors and                      
|officers as a group                    
|(8 persons) (12)                        | 10,488,976                          | 37.8%                                 

---

42

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(1)    
          Assumes in the case of each stockholder listed in the above list that all
          presently exercisable warrants or options held by such stockholder were fully
          exercised by such stockholder, without the exercise of any warrants or options
          held by any other stockholders.

(2)    
          The address of Mr. Higgins is 12408 Rivers Edge Drive, Potomac, Maryland 20854.

(3)    
          Includes (i) 865,000 shares of Common Stock purchased by Mr. Komar from the
          Company on July 8, 2002 in a private transaction without registration under the
          Securities Act of 1933, pursuant to the private offering exemption under Section
          4(2) thereof, (ii) 500,000 shares of Common Stock that may be purchased by Mr.
          Komar from the Company at a price of $0.07 per share until July 7, 2012,
          pursuant to a stock option grant to him on January 7, 2002, (iii) 37,500 shares
          of Common Stock at an exercise price of $0.09 per share through April 24, 2013
          pursuant to a stock option granted to him on April 24, 2003, (iv) 50,000 shares
          of Common Stock at an exercise price of $0.13 per share through December 31,
          2013 pursuant to a stock option granted to him on December 31, 2003, with all
          such shares fully vesting on December 31, 2004 or by an earlier vesting decision
          as may be granted by the Compensation Committee, and (v) 333,333 shares
          of Common Stock at an exercise price of $0.235 per share through July 14, 2009
          pursuant to a warrant granted to him on July 14, 2004. Does not include (i)
          12,500 shares of Common Stock that may be purchased by Mr. Komar from the
          Company at a price of $0.09 per share until April 24, 2013 pursuant to a stock
          option grant to him on April 24, 2003 which shall vest on April 21, 2005 or by
          an earlier vesting decision as may be granted by the Compensation Committee, and
          (ii) a warrant to purchase up to 1,000,000 shares of Common Stock at an exercise
          price of $0.235 granted to Mr. Komar on July 14, 2004, which shall vest upon a
          determination by the Compensation Committee that the Company has achieved
          certain performance goals which change each year.

(4)    
          Includes (i) 37,500 shares of Common Stock that may be purchased by Mr. Wareham
          from the Company at a price of $0.09 per share until April 24, 2013, pursuant to
          a stock option granted to him on April 24, 2003 under the Plan, and (ii) 50,000
          shares of Common Stock that may be purchased by him at a price of $0.13 per
          share through December 31, 2013, under an option granted on December 31, 2003,
          with all such shares vesting on December 31, 2004. Does not include 12,500
          shares of Common Stock that may be purchased by him at a price of $0.09 per
          share through April 24 2013, under an option granted on April 24, 2003, with all
          such shares vesting on April 24, 2005.

(5)    
          Includes (i) 865,000 shares of Common Stock purchased by Mr. McCubbin from the
          Company on July 8, 2002 in a private transaction without registration under the
          Securities Act of 1933, pursuant to the private offering exemption under Section
          4(2) thereof, (ii) 500,000 shares of Common Stock that may be purchased by Mr.
          McCubbin from the Company at a price of $0.17 per share until January 2, 2011,
          pursuant to a stock option grant to him on January 2, 2001, (iii) 1,000
          shares of Common stock that may be purchased by Mr. McCubbin from the Company at
          a price of $1.35 per share until July 3, 2010, pursuant to a stock option
          granted to him on July 3, 2000, and (iv) 333,333 shares of Common Stock at an
          exercise price of $0.235 per share through July 14, 2009 pursuant to a warrant
          granted to him on July 14, 2004. Does not include a warrant to purchase up to
          1,000,000 shares of Common Stock at an exercise price of $0.235 granted to Mr.
          McCubbin on July 14, 2004, which shall vest upon a determination by the
          Compensation Committee that the Company has achieved certain performance goals
          which change each year.

43

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(6)    
          Includes (i) 1,500 shares of Common Stock owned directly by Mr. Ritter, (ii)
          37,500 shares of Common Stock that may be purchased by Mr. Ritter from the
          Company at a price of $0.09 per share until April 24, 2013, pursuant to a stock
          option granted to him on April 24, 2003 under the Plan, and (iii) 50,000 shares
          of Common Stock that may be purchased by him at a price of $0.13 per share
          through December 31, 2013, under an option granted on December 31, 2003, with
          all such shares vesting on December 31, 2004. Does not include 12,500 shares of
          Common Stock that may be purchased by him at a price of $0.09 per share through
          April 24 2013, under an option granted on April 24, 2003, with all such shares
          vesting on April 24, 2005.

(7)    
          Includes (i) 865,000 shares of Common Stock purchased by Mr. Mirabile from the
          Company on July 8, 2002 in a private transaction without registration under the
          Securities Act of 1933, pursuant to the private offering exemption under Section
          4(2) thereof, (ii) 170,000 shares of Common Stock issued to Mr. Mirabile in
          December 1998 in connection with the Companys prior acquisition of
          Eclipse, (iii) 500,000 shares of Common Stock that may be purchased by Mr.
          Mirabile from the Company at a price of $0.17 per share until January 2, 2011,
          pursuant to a stock option grant to him on January 2, 2001, (iv) 1,000 shares of
          Common Stock that may be purchased by Mr. Mirabile from the Company at a price
          of $1.35 per share until July 3, 2010, pursuant to a stock option granted to him
          on July 3, 2000, and (v) 333,333 shares of Common Stock at an exercise price of
          $0.235 per share through July 14, 2009 pursuant to a warrant granted to him on
          July 14, 2004. Does not include a warrant to purchase up to 1,000,000 shares of
          Common Stock at an exercise price of $0.235 granted to Mr. Mirabile on July 14,
          2004, which shall vest upon a determination by the Compensation Committee that
          the Company has achieved certain performance goals which change each year.

(8)    
          Includes 1,360,991 shares of Common Stock issued to Mr. Fuller in March 2004 in
          connection with the Companys acquisition of Chesapeake Government
          Technologies, Inc. (Chesapeake). Does not include a warrant to
          purchase up to 1,814,658 shares of Common Stock at an exercise price of $0.235
          issued to Mr. Fuller in connection with the Companys acquisition of
          Chesapeake, which warrant will become exercisable in the event Mr. Fuller
          achieves certain performance criteria as set forth in the acquisition agreements
          entered into between the Company, Chesapeake and Mr. Fuller in connection with
          such acquisition. Mr. Fuller formerly served as the CEO of Chesapeake, a wholly-owned
          subsidiary of the Company.

(9)    
          Includes 1,360,993 shares of Common Stock issued to Mr. Crowley in March 2004 in
          connection with the Companys acquisition of Chesapeake. Does not include a
          warrant to purchase up to 1,814,658 shares of Common Stock at an exercise price
          of $0.235 issued to Mr. Crowley in connection with the Companys
          acquisition of Chesapeake, which warrant will become exercisable in the event
          Mr. Crowley achieves certain performance criteria as set forth in the
          acquisition agreements entered into between the Company, Chesapeake and Mr.
          Crowley in connection with such acquisition. Mr. Crowley formerly served as the President
          of Chesapeake, a wholly-owned subsidiary of the Company.

44

---

(10)    
          Includes 1,360,993 shares of Common Stock issued to Mr. Wright in March 2004 in
          connection with the Companys acquisition of Chesapeake. Does not include a
          warrant to purchase up to 1,814,658 shares of Common Stock at an exercise price
          of $0.235 issued to Mr. Wright in connection with the Companys acquisition
          of Chesapeake, which warrant will become exercisable in the event Mr. Wright
          achieves certain performance criteria as set forth in the acquisition agreements
          entered into between the Company, Chesapeake and Mr. Wright in connection with
          such acquisition. Mr. Wright serves as a consultant to the Company.

(11)    
          Includes 875,000 shares of Common Stock issued to Mr. Turissini in connection
          with the Companys acquisition in October 2004 of Operational Research
          Consultants, Inc. (ORC). Does not include 1,851,852 shares which are
          held in escrow and subject to possible return to the Company in the event ORC
          does not achieve certain performance levels of a post-closing basis as provided
          in such acquisition agreements. Mr. Turissini serves as the C.E.O. of ORC, a
          wholly-owned subsidiary of the Company.

(12)    
          Includes the shares referred to as included in notes (3), (4), (5), (6), (7),
          (8), (9) and (11) above. Does not include the shares referred to as not included
          in notes (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) above.

# Barron Partners Stock
Ownership

In
October 2004, the Company completed a financing with Barron Partners L.P. (Barron)
for an aggregate amount of $3,580,000, under a preferred stock purchase agreement and
related agreements. As a result of the financing, Barron owns 2,045,714 shares of the
Companys Series A Convertible Preferred Stock, which are convertible into a total
of 20,457,140 shares of Common Stock, and Barron owns warrants entitling it to purchase a
total of 10,228,571 shares of Common Stock. Barrons rights to convert such Series A
Convertible Preferred Stock and/or to exercise such warrants are subject to contractual
limitations which restrict its ability to acquire such shares at any time in the event
Barron would own more than a total of 4.99% of the outstanding shares of Common Stock
following such conversion and/or exercise. The aforementioned restriction may be removed
by Barron upon 61 days notice to the Company from Barron, but in the event that Barron
elects to remove such restriction, then Barron and its affiliates can only vote the
shares of Common Stock held by Barron and its affiliates which result in Barron and its
affiliates having no more than 22% of the total voting power of all outstanding shares of
Common Stock at any time. Assuming that Barron elects to remove the restriction on its
ability to own no more than 4.99% of the outstanding shares of Common Stock, then in the
event Barron were to convert all of its Series A Convertible Preferred Stock into shares
of Common Stock and Barron were to exercise all of its warrants to purchase shares of
Common Stock, then it would own an aggregate of 43% of the then outstanding shares of
Common Stock, subject to the above-described voting restriction. On April 8, 2005, Barron
converted 100,000 shares of preferred stock into 1,000,000 shares of Common Stock.

45

---

Acquisition of Chesapeake
Government Technologies, Inc.

On
April 30, 2004, the Company closed upon the acquisition of all the issued and
outstanding shares of Chesapeake Government Technologies, Inc. (Chesapeake),
pursuant to the terms of an Agreement and Plan of Merger, dated as of March 24, 2004,
by and among the Company, Chesapeake Acquisition Corporation, Chesapeake and Mark Fuller,
John Crowley and Jay Wright, who were the sole stockholders of Chesapeake. The Company
issued 4,082,980 shares of Common Stock to Messrs. Fuller, Crowley and Wright as the
sole stockholders in consideration for all of the issued and outstanding shares of
Chesapeake owned by them. In conjunction with this closing, the sole stockholders also
entered into an escrow agreement with the Company and deposited 3,266,384 shares of the
4,082,980 newly issued shares of Common Stock into escrow.

The
3,266,384 shares of Common Stock placed into escrow will be released to
Messrs. Fuller, Crowley and Wright in the event of the satisfaction of certain
conditions set forth in the merger agreement, which provides that during the period
commencing after the closing of the merger and ending on December 31, 2005, the
3,266,384 shares of Common Stock will be released to Messrs. Fuller, Crowley and
Wright in a ratio based on the amount of revenues actually received by the Company from
the business acquired from Chesapeake. The December 31, 2005, escrow expiration date
may be extended for one additional year by the Company in the event we determine that
Messrs. Fuller, Crowley and Wright have achieved certain performance levels in the
latter part of 2005. In the event the Company does not receive certain levels of revenues
from the business acquired from Chesapeake, then any of the 3,266,384 shares of Common
Stock to which Messrs. Fuller, Crowley and Wright have not become entitled to receive
will be returned to the Company. For the period ending December 31, 2004, 542,220 escrow
shares representing 180,740 escrow shares each were released to Messrs. Fuller, Crowley
and Wright, respectively.

The
merger agreement also provides that in the event the revenues actually received by the
Company from the business acquired from Chesapeake equals or exceeds certain levels before
December 31, 2005, then the Company will prepare a proxy statement for its then next
ensuing Annual Meeting of Stockholders to ask the Companys stockholders to vote upon
a proposal to increase the size of the Board of Directors from a total of seven persons to
a total of nine persons, with one of the candidates for such two newly created director
positions to be nominated by the sole stockholders and with the other candidate to be
mutually agreed upon between the Company and the sole stockholders; provided, however that
at any time after Messrs. Fuller, Crowley or Wright are no longer employed by the
Company, then the persons who are serving on our Board of Directors as designees of
Messrs. Fuller, Crowley and Wright shall resign from their positions as directors of
WidePoint.

46

---

Pursuant
to the terms of the merger agreement, the Company caused Chesapeake to enter into
employment/non-competition agreements with each of Mark Fuller and John Crowley and a
consulting agreement with Jay Wright. As part of the potential compensation that may be
earned by each of Messrs. Fuller, Crowley and Wright, the Company issued to each such
person a warrant to purchase 1,814,658 additional shares of Common Stock at an exercise
price of $0.235 per share, with each such warrant only being exercisable in the event that
the revenues actually received by the Company from the business acquired from Chesapeake
exceed the maximum levels required for the sole stockholders to receive all of the
3,266,384 shares of Common Stock placed in escrow.

In
order to allow WidePoint to consummate the financing transactions with Barron in which
WidePoint needed a sufficient number of authorized but unreserved shares of Common Stock
to underlie a portion of the shares of Series A Convertible Preferred Stock and a portion
of the warrants issued by WidePoint to Barron and Westcap, Messrs. Komar, McCubbin,
Mirabile, Fuller, Crowley and Wright agreed in October 2004 with WidePoint to make the
aggregate amount of 9,443,974 shares of Common Stock underlying their warrants to be
thereafter subject to the approval by WidePoints stockholders of an increase in the
total number of authorized shares of Common Stock of WidePoint. On January 27, 2005, the
stockholders of the Company approved the required amendment to increase the total number of
authorized shares of Common Stock of WidePoint.

Acquisition of
Operational Research Consultants, Inc.

On
October 25, 2004, the Company completed the acquisition of Operational Research
Consultants, Inc. (ORC) a privately held IT and engineering firm providing
mission-critical sensitive and strategic information security solutions to the United
States Government. To finance the acquisition, the Company completed a convertible
preferred financing with Barron, an accredited investor, and utilized a line of credit
which the Company maintains with RBC-Centura Bank. The Company entered into a stock
purchase agreement with ORC and Fred Thornton, Richard Montgomery and Daniel Turissini,
the sole stockholders of ORC, to effectuate the acquisition, and entered into a preferred
stock purchase agreement and a registration rights agreement with Barron in connection
with the financing.

Pursuant
to the stock purchase agreement between the Company, ORC and Messrs. Thornton, Montgomery
and Turissini, the Company agreed to purchase and acquire all of ORCs outstanding
Common Stock. In consideration for the ORC stock, the Company paid Messrs. Thornton,
Montgomery and Turissini an aggregate of $5,000,000 payable in a combination of cash,
promissory note and Common Stock, less a receivables holdback. The receivables holdback
will be held in escrow and released at certain milestone dates over a three-year period
pursuant to a certain formula. The promissory note was extinguished in November of 2005.

47

---

The
aggregate consideration to be paid by the Company to Messrs. Thornton, Montgomery and
Turissini shall be adjusted in the event that ORCs 2004 revenue is less than
$8,000,000 and for any set-offs, recoupments and/or payments of losses. The agreement also
provides a clawback provision in the event that the losses or indemnity amounts exceed the
receivables holdback.

ITEM 13.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.

Promissory Notes with
Executive Officers of the Company

Pursuant
to stock purchase agreements entered into on July 8, 2002, between the Company and each of
Messrs. Komar, McCubbin and Mirabile, the Company privately sold 865,000 shares of Common
Stock to each such person without registration under the Securities Act of 1933, pursuant
to the private offering exemption under Section 4(2) thereof, in consideration for the
issuance by each such person to the Company of a three-year full-recourse promissory note
in the principal amount of $181,650 (which equals $0.07 per share, being the closing price
of the Common Stock on July 8, 2002) and bearing interest at 5% per annum, with equal
annual principal payments of $60,550 being due on July 5th of each year. In 2004, the
largest aggregate amount of indebtedness outstanding under these promissory notes equaled
the total of the following approximate amounts for each such person: Mr. Komar 
$64,000; Mr. McCubbin  $64,000; and Mr. Mirabile  $64,000. As of December 31,
2004, the amount of indebtedness outstanding under these promissory notes equaled the
total of the following approximate amounts for each such person: Mr. Komar  $24,000;
Mr. McCubbin  $24,000; and Mr. Mirabile  $24,000.

ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES

| | Audit
Fees
| | ----------

| | The
Company paid Grant Thornton LLP approximately $53,000 and $33,000 in audit and review
fees for fiscal year 2004 and 2003, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------

| | Audit-Related
Fees
| | ------------------

| | The
Company did not pay Grant Thornton LLP any audit-related fees for fiscal year 2004 or
2003, respectively.
| | -------------------------------------------------------------------------------------------------------------

| | Financial
Information Systems Design and Implementation Fees
| | ------------------------------------------------------------

| | The
Company did not pay Grant Thornton LLP any financial information systems design and
implementation fees for fiscal year 2004 or 2003, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | Tax
Fees
| | --------

| | The
Company did not pay Grant Thornton LLP any tax fees for fiscal year 2004 or 2003,
respectively.
| | ---------------------------------------------------------------------------------------------------

| | All
Other Fees
| | --------------

| | The
Company did not pay Grant Thornton LLP any nonaudit fees for fiscal year 2004 or 2003,
respectively.
| | --------------------------------------------------------------------------------------------------------

48

---

# Part IV.

ITEM 15.  EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES.

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

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

| | Report
of Grant Thornton LLP, Independent Registered Public Accounting Firm
| | ---------------------------------------------------------------------------

| | Consolidated
Balance Sheets as of December 31, 2004 and 2003
| | ------------------------------------------------------------

| | Consolidated
Statements of Operations for the Years Ended December 31, 2004, 2003, and 2002
| | -------------------------------------------------------------------------------------------

| | Consolidated
Statements of Changes in StockholdersEquity for the Years Ended December
2004, 2003, and 2002
| | -----------------------------------------------------------------------------------------------------------

| | Consolidated
Statements of Cash Flow for the Years Ended December 31, 2004, 2003, and 2002
| | ------------------------------------------------------------------------------------------

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

All other schedules are omitted
either because they are not applicable or 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:
| | --- | -----------------------------------------------------------------------------------------

49

---

|EXHIBITNO. | DESCRIPTION
|---------- | -----------

|2.1 | Stock
Purchase  Agreement among ZMAX  Corporation,  Michael C. Higgins and Michael S. Cannon,
 dated November 6, 1996, for the          acquisition  of Century  Services,  Inc.
 (Incorporated  herein by reference to Exhibit 2.1 to the  Registrant's  Registration
         Statement on Form S-4 (File No. 333-29833).)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2 | Agreement
and Plan of Merger between ZMAX Corporation and New ZMAX Corporation, dated June 10,
1999. (Incorporated herein by reference to Exhibit 2.2 to the Registrants
Registration Statement on Form S-4 (File No. 333-29833).)
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 | Form
of Warrant to  Purchase  Common  Stock of ZMAX  Corporation.  (Incorporated  herein by
 reference  to Exhibit  4.2 to the          Registrant's Registration Statement on Form
S-4 (File No. 333-29833).)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | ZMAX
 Corporation  1999  Stock  Incentive  Plan.  (Incorporated  herein  by  reference  to
 Exhibit  10.1 to the  Registrant's          Registration Statement on Form S-4 (File No.
333-29833).)*
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Form
of ZMAX Corporation 1999  Non-qualified  Stock Option Award (form of grant and vesting
 schedule).  (Incorporated  herein          by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | ZMAX
 Corporation  1999  Directors  Formula  Stock  Option  Plan.  (Incorporated  herein by
 reference  to Exhibit 10.3 to the          Registrant's Registration Statement on Form
S-4 (File No. 333-29833).)*
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Form
of ZMAX Corporation  Directors Formula Stock Option Award (form of grant and vesting
schedule).  (Incorporated  herein by          reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Employment
Agreement between Century Services,  Inc. and Michael C. Higgins,  dated November 6,
1996.  (Incorporated herein by          reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

*  Management contract or
compensatory plan

50

---

|10.6 | First
 Amendment to the  Employment  Agreement  between  Century  Services,  Inc. and Michael
C. Higgins,  dated May 21, 1999.          (Incorporated  herein  by  reference  to
 Exhibit  10.6 to the  Registrant's  Registration  Statement  on Form S-4  (File  No.
 333-29833).)*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Employment
 Agreement between Century Services,  Inc. and Joseph Yeh, dated June 18, 1999.
 (Incorporated  herein by reference          to Exhibit 10.7 to the Registrant's
Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 | Separation
 Agreement  between Century Services,  Inc. and Michael S. Cannon,  dated April 22, 1999.
 (Incorporated  herein by          reference to Exhibit 10.8 to the Registrant's
Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 | Consulting
 Agreement  among ZMAX  Corporation,  MBY,  Inc. and Michel  Berty,  dated April 1, 1999.
 (Incorporated  herein by          reference to Exhibit 10.9 to the Registrant's
Registration Statement on Form S-4 (File No. 333-29833).)*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 | Consulting
 Agreement  among  ZMAX  Corporation,  Wareham  Management  Ltd.  and G.W.  Norman
 Wareham,  dated  May 30,  1999.          (Incorporated  herein  by  reference  to
 Exhibit  10.10 to the  Registrant's  Registration  Statement  on Form S-4  (File No.
 333-29833).)*
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 | Consulting
Agreement between ZMAX Corporation and Shafiq Nazerali, dated May 30, 1999. (Incorporated
herein by reference to Exhibit 10.11 to the Registrants Registration Statement on
Form S-4 (File No. 333-29833).)*
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 | Earn
Out Stock Escrow Agreement among ZMAX Corporation, Michael C. Higgins, Michael S. Cannon
and Powell, Goldstein, Frazer & Murphy, dated November 6, 1996. (Incorporated herein
by reference to Exhibit 10.12 to the Registrants Registration Statement on Form S-4
(File No. 333-29833).)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 | ZMAX
Corporation Stockholders Agreement among Michael C. Higgins, Michael S. Cannon and ZMAX
Corporation, dated November 6, 1996. (Incorporated herein by reference to Exhibit 10.13
to the Registrants Registration Statement on Form S-4 (File No.  333-29833).)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 | Stock
Pledge and Security Agreement from Michael C. Higgins in favor of ZMAX Corporation, dated
November 6, 1996. (Incorporated herein by reference to Exhibit 10.14 to the Registrants
Registration Statement on Form S-4 (File No.   333-29833).)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

*  Management contract or
compensatory plan

51

---

|10.15 | Letter
Agreement among ZMAX Corporation,  IMS  International,  Inc., Wan Hsien Information
 International  Corporation,  Ltd.,          Multi-Dimension  International,  and
Institute for  Information  Industry  Regarding the Purchase by ZMAX  Corporation  of the
         "COCACT"  Software  Program,  dated April 30, 1999.  (Incorporated  herein by
reference to Exhibit  10.15 to the  Registrant's          Registration Statement on Form
S-4 (File No. 333-29833).)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 | Letter
Agreement between ZMAX Corporation and Institute for Information Industry Regarding the
Purchase by ZMAX Corporation of the COCACT Software Program, dated April 30,
1999. (Incorporated herein by reference to Exhibit 10.16 to the Registrants
Registration Statement on Form S-4 (File No. 333-29833).)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 | Letter
Agreement between ZMAX Corporation and Wan Hsien Information International Corporation
Ltd. Regarding the Purchase by ZMAX Corporation of the COCACTSoftware
Program, dated April 30, 1999, as amended. (Incorporated herein by reference to Exhibit
10.17 to the Registrants Registration Statement on Form S-4 (File No. 333-29833).)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 | Conversion
Agreement between Fiserv Federal Systems, Inc. and ZMAX Corporation, dated April 28,
1999. (Incorporated herein by reference to Exhibit 10.18 to the Registrants
Registration Statement on Form S-4 (File No. 333-29833).)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 | Agreement
between ZMAX Corporation and Investor Communications Company, LLC, dated as of May 20,
1999. (Incorporated herein by reference to Exhibit 2.2 to the Registrants
Registration Statement on Form S-4 (File No. 333-29833).)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 | Investor
Relations Consulting Agreement between ZMAX Corporation and Investor Communications
Company, LLC, dated as of May 20, 1999. (Incorporated herein by reference to Exhibit
10.20 to the Registrants Registration Statement on Form S-4 (File No. 333-29833).)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 | Agreement
and Plan of Merger, dated as of December 14, 1998, by and among ZMAX Corporation, Eclipse
Acquisition Corporation, Eclipse Information Systems, Inc., and Frank Schultz, Mark
Mirabile, John Schultz, Scott Shedd, Brad Adams, Ron Hilicki, Fred Anderson, Harold
Zimmerman, Chris Gildone, Dave Vittitow, Kristina Palmer, Tom Carroll and Gary Singer.
(Incorporated herein by reference to Exhibit 2 to the Registrants Current Report of
Form 8-K, as filed on December 29, 1998 (File No.   333-555993).)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

*  Management contract or
compensatory plan

52

---

|10.22 | Agreement
and Plan of Merger, dated as of October 1, 1999, by and among ZMAX Corporation, Parker
Acquisition Corporation, Parker Management Consultants, Ltd., Westmont Non-Grantor Trust,
and Kenneth W. Parker and Jennifer L Parker. (Incorporated herein by reference to Exhibit
2 to the Registrants Current Report of Form 8-K, as filed on October 18, 1999 (File
No.   333-55993).)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 | Employment
Agreement between ZMAX Corporation and Michael C. Higgins, dated September 1, 1999.*
(Incorporated herein by reference to Exhibit 10.23 to Registrants Report of Form
10-K, as filed on March 30, 2000 (File No. 000-23967).)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 | Employment
Agreement between ZMAX Corporation and James T. McCubbin, dated September 1, 1999.*
(Incorporated herein by reference to Exhibit 10.24 to Registrants Report of Form
10-K, as filed on March 30, 2000 (File No. 000-23967).)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 | Separation
Agreement between WidePoint Corporation and Michael C. Higgins, dated December 31, 2001.*
|----- | ----------------------------------------------------------------------------------------------------

|10.26 | 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)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 | 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)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 | 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)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 | Agreement
and Plan of Merger by and among WidePoint  Corporation,  Chesapeake Acquisition
 Corporation,  Chesapeake Government          Technologies,  Inc. and Mark C. Fuller,
 John D. Crowley and Jay O. Wright.  (Incorporated herein by reference to Exhibit 10.1
 to the Registrants Current Report on Form 8-K filed on May 14, 2004.)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 | Escrow
Agreement by and among WidePoint  Corporation,  Mark C.  Fuller,  John D.  Crowley,  Jay
O.  Wright and Foley & Lardner          LLP.  (Incorporated  herein by  reference  to
Exhibit  10.2 to the  Registrant's  Current  Report on Form 8-K filed on May 14,
         2004.)
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 | Stock
Pledge  Agreement by and among  WidePoint  Corporation,  Mark C.  Fuller,  John D.
 Crowley,  Jay O.  Wright and Foley &         Lardner  LLP.  (Incorporated  herein by
 reference to Exhibit  10.3 to the  Registrant's  Current  Report on Form 8-K filed on
         May 14, 2004.)
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

*  Management contract or
compensatory plan

53

---

|10.32 | Employment
and Non-Compete  Agreement between WidePoint Corporation and Mark C.  Fuller.*
 (Incorporated herein by reference to          Exhibit 10.4 to the Registrant's Current
Report on Form 8-K filed on May 14, 2004.)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 | Employment
and Non-Compete  Agreement between WidePoint  Corporation and John D.  Crowley.*
 (Incorporated  herein by reference          to Exhibit 10.5 to the Registrant's Current
Report on Form 8-K filed on May 14, 2004.)
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.34 | Consulting
and Non-Compete  Agreement between WidePoint  Corporation and Jay O.  Wright.*
 (Incorporated herein by reference to          Exhibit 10.6 to the Registrant's Current
Report on Form 8-K filed on May 14, 2004.)
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 | Warrant
Agreement  between  WidePoint  Corporation and Mark C.  Fuller.  (Incorporated  herein by
reference to Exhibit 10.7 to          the Registrant's Current Report on Form 8-K filed
on May 14, 2004.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.36 | Warrant
Agreement  between WidePoint  Corporation and John D.  Crowley.  (Incorporated  herein by
reference to Exhibit 10.8 to          the Registrant's Current Report on Form 8-K filed
on May 14, 2004.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 | Warrant
Agreement between WidePoint  Corporation and Jay O.  Wright.  (Incorporated herein by
reference to Exhibit 10.9 to the          Registrant's Current Report on Form 8-K filed
on May 14, 2004.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.38 | 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.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.39 | 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.)
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.40 | 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.)
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.41 | 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.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.42 | 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.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

*  Management contract or
compensatory plan

54

---

|10.43 | 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.)
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.44 | Common
Stock Purchase Warrant between WidePoint Corporation and Westcap Securities Inc.
|----- | ---------------------------------------------------------------------------------------

|10.45 | Common
Stock Purchase Warrant between WidePoint Corporation and Westcap Securities Inc.
|----- | ---------------------------------------------------------------------------------------

|21 | Subsidiaries
of WidePoint Corporation
|-- | -------------------------------------

|23.1 | Consent
of Grant Thornton LLP
|---- | -----------------------------

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

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

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

55

---

# 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 15, 2005 | /s/ STEVE L. KOMAR                          
|                     | Steve L. Komar                              
|                     | Chief Executive Officer                     
|Date: April 15, 2005 | /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 15, 2005 | /s/STEVE L. KOMAR                                                            
|---------------------- | -----------------------------------------------------------------------------
|                       | Steve L. Komar                                                               
|                       | Director and Chief Executive Officer                                         
|Dated:  April 15, 2005 | /s/JAMES T. MCCUBBIN                                                         
|                       | James T. McCubbin                                                            
|                       | Director, Vice President and Chief Financial Officer, Secretary and Treasurer
|Dated:  April 15, 2005 | /s/MARK MIRABILE                                                             
|                       | Mark Mirabile                                                                
|                       | Director, Vice President and Chief Operations Officer                        
|Dated:  April 15, 2005 | /s/JAMES M. RITTER                                                           
|                       | James M. Ritter                                                              
|                       | Director, Assistant Secretary                                                
|Dated:  April 15, 2005 | /s/G.W. NORMAN WAREHAM                                                       
|                       | G.W. Norman Wareham                                                          
|                       | Director                                                                     

56

---

INDEX TO FINANCIAL
STATEMENTS

|                                                                    | Page
|------------------------------------------------------------------- | ----
|Report of Independent Registered Public Accounting Firm             | F-1 
|Consolidated Balance Sheets as of December 31, 2004 and 2003        | F-2 
|Consolidated Statements of Operations for the Years ended          
|December 31, 2004, 2003, and 2002                                   | F-3 
|Consolidated Statements of Stockholders' Equity for the Years ended
|December 31, 2004, 2003, and 2002                                   | F-4 
|Consolidated Statements of Cashflows for the Years ended           
|December 31, 2004, 2003, and 2002                                   | F-5 
|Notes to Consolidated Financial Statements                          | F-6 

---

# REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Board of Directors
and Stockholders of WidePoint Corporation:

We have audited the accompanying
consolidated balance sheet of WidePoint Corporation and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations, shareholders
equity, and cash flows for the years ended December 31, 2004, 2003 and 2002. These
financial statements are the responsibility of the Corporations management. Our
responsibility is to express an opinion on the financial statements based on our audit.

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 also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, 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 at December 31, 2004 and
2003, and the consolidated results of their operations and their consolidated cash flows
for the years ended December 31, 2004, 2003 and 2002, in conformity with accounting
principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Chicago, IllinoisApril
14, 2005

The accompanying notes
are an integral part of these consolidated statements

F-1

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

|Consolidated Balance Sheets                                                     | December 31,
|------------------------------------------------------------------------------- | ------------
|
|Assets                                                                          |             
|Current assets:                                                                 |             
|Cash and cash equivalents                                                       |             
|Accounts receivable, net of allowance of $0 and $18,819 respectively            |             
|Prepaid expenses and other assets                                               |             
|                                                                                |             
|Total current assets                                                            |             
|                                                                                |             
|Property and equipment, net                                                     |             
|Goodwill                                                                        |             
|Intangibles                                                                     |             
|Other assets                                                                    |             
|                                                                                |             
|Total assets                                                                    |             
|                                                                                |             
|Liabilities and stockholders' equity                                            |             
|Current liabilities:                                                            |             
|Accounts payable                                                                |             
|Accrued expenses                                                                |             
|Income taxes payable                                                            |             
|Short-term portion of deferred rent                                             |             
|Short-term borrowings                                                           |             
|Financial instruments                                                           |             
|                                                                                |             
|Total current liabilities                                                       |             
|                                                                                |             
|Long-term portion of deferred rent                                              |             
|Deferred income tax liability                                                   |             
|                                                                                |             
|Total liabilities                                                               |             
|                                                                                |             
|Stockholders' equity:                                                           |             
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714      |             
|shares and no shares issued and outstanding, respectively                       |             
|Common stock, $0.001 par value; 50,000,000 shares authorized; 21,125,393 shares |             
|and 15,579,913 shares issued and outstanding, respectively                      |             
|Stock warrants                                                                  |             
|Related party notes receivable                                                  |             
|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                                      |                                 
|                                                      |                                 
|Gross profit                                          |                                 
|Sales and marketing                                   |                                 
|General and administrative                            |                                 
|Depreciation and amortization                         |                                 
|                                                      |                                 
|Loss from operations                                  |                                 
|Other income (expenses):                              |                                 
|Interest income                                       |                                 
|Interest expense                                      |                                 
|Loss from financial instruments                       |                                 
|Other                                                 |                                 
|                                                      |                                 
|Net loss before provision for income taxes            |                                 
|                                                      |                                 
|Income tax provision                                  |                                 
|                                                      |                                 
|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 Stockholders' Equity

|                                | Preferred Stock | Common Stock | Stock | Related
Party Notes | Additional
Paid-In | Accumulated |      
|------------------------------- | --------------- | ------------ | ----- | ------------------- | ------------------ | ----------- | -----
|
|Balance, January 1, 2002        |                 |              |       | --                  |                    |             | --   
|                                |                 |              |       |                     |                    |             |      
|Adjustment of warrant valuation |                 |              |       | --                  |                    |             | --   
|Sale of common stock            |                 |              |       | --                  |                    |             | --   
|Issuance of related party notes |                 |             
|receivable                      |                 |              |       | --                  |                    |             | --   
|Net loss                        |                 |              |       | --                  |                    |             | --   
|                                |                 |              |       |                     |                    |             |      
|Balance, December 31, 2002      |                 |              |       | --                  |                    |             | --   
|                                |                 |              |       |                     |                    |             |      
|Collections on related          |                 |             
|party notes receivable          |                 |              |       | --                  |                    |             | --   
|Net loss                        |                 |              |       | --                  |                    |             | --   
|                                |                 |              |       |                     |                    |             |      
|Balance, December 31, 2003      |                 |              |       | --                  |                    | $           | --   
|                                |                 |              |       |                     |                    |             |      
|Collections on related          |                 |             
|party notes receivable          |                 |              |       | --                  |                    |             | --   
|Issuance of common stock        |                 |             
|Tripoint                        |                 |              |       | --                  |                    |             | --   
|Issuance of common stock        |                 |             
|- Chesapeake                    |                 |              |       | --                  |                    |             | --   
|Issuance of common stock        |                 |             
|- ORC                           |                 |              |       | --                  |                    |             | --   
|Sale of preferred stock         |                 |              |       | 2,045,714           |                    |             | 2,046
|Expenses associated from        |                 |             
|preferred stock                 |                 |              |       | --                  |                    |             | --   
|Issuance of common              |                 |             
|stock  warrants                 |                 |              |       | --                  |                    |             | --   
|Net loss                        |                 |              |       | --                  |                    |             | --   
|                                |                 |              |       |                     |                    |             |      
|Balance, December 31, 2004      |                 |              |       | 2,045.714           |                    | $           | 2,046
|                                |                 |              |       |                     |                    |             |      

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 (used in) provided |                                 
|by operating activities                                          |                                 
|Depreciation expense                                             |                                 
|Amortization expense                                             |                                 
|Deferred financing costs                                         |                                 
|(Gain) Loss on sale of property and equipment                    |                                 
|Loss from financial instruments                                  |                                 
|Adjustment of warrant valuation                                  |                                 
|Changes in assets and liabilities-                               |                                 
|Accounts receivable                                              |                                 
|Prepaid expenses and other assets                                |                                 
|Accounts payable and accrued expenses                            |                                 
|Income tax payable                                               |                                 
|Deferred tax liability                                           |                                 
|                                                                 |                                 
|Net cash (used in) operating activities                          |                                 
|                                                                 |                                 
|Cash flows from investing activities:                            |                                 
|Purchase of subsidiaries, net of cash acquired                   |                                 
|Purchases of property and equipment                              |                                 
|Proceeds from sale of property and equipment                     |                                 
|                                                                 |                                 
|Cashflows (used in) provided by investing activities             |                                 
|                                                                 |                                 
|Cash flows from financing activities:                            |                                 
|Borrowings on notes payable                                      |                                 
|Payments on notes payable                                        |                                 
|Collections on related party notes                               |                                 
|Net payments on long-term obligations                            |                                 
|Proceeds from issuance of warrants                               |                                 
|Net proceeds from issuance of preferred stock                    |                                 
|                                                                 |                                 
|Cashflows provided by (used in) financing activities             |                                 
|                                                                 |                                 
|Net (decrease) in cash                                           |                                 
|Cash, beginning of period                                        |                                 
|                                                                 |                                 
|Cash and cash equivalents, ending of period                      |                                 
|Supplementary cash flow information:                             |                                 
|Cash paid for-                                                   |                                 
|Interest                                                         |                                 
|                                                                 |                                 
|Income taxes                                                     |                                 
|                                                                 |                                 

The accompanying notes
are an integral part of these consolidated statements

F-5

---

# Notes to Consolidated
Financial Statements

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

WidePoint Corporation is
a consulting services firm specializing in planning, managing and implementing
Information Technology (IT) solutions. Its staff consists of business and
computer specialists who help 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.

During 2002 and 2003, WidePoint
witnessed a highly competitive economic environment within the commercial IT sector due to
a combination of constrained business investment and an excessive supply of IT
consultants. As a result of these conditions, the Company experienced both reduced gross
margins and decreased demand for the IT services that it provides. In 2004, WidePoint
acquired Chesapeake Government Technologies, Inc. (Chesapeake) and Operational
Research Consultants, Inc. (ORC) as part of WidePoints strategy to refocus our
business development initiatives toward the substantial increase in government spending on
infrastructure and automation that has been accelerated by recent geopolitical events that
have created an unprecedented need for systems and process expertise across most
government markets, federal, state and local. WidePoint intends to capitalize on the
expected growth in its target markets through its strategic acquisitions, continue rollout
of ORCs Public Key Infrastructure (PKI) initiative, and by continuing to
implement our project based enterprise strategy emphasizing industry-wide best practices
disciplines. The Company intends to continue to leverage the synergies between its newly
acquired operating subsidiaries and cross sell its technical capabilities into each
separate marketplace serviced by its respected subsidiaries.

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

In addition, most of the
Companys current costs consist primarily of the salaries and benefits paid to the
Companys technical, marketing and administrative personnel and as a result of 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. The
uncertainties relating to its ability to achieve and maintain profitability, obtain
additional funding to fund its growth strategy and provide the necessary investment to
continue to upgrade its management reporting systems to meet the continuing demands of the
present regulatory changes affect the comparability of the information reflected in the
selected consolidated financial information presented above. The Company believes that its
cash on hand and available senior lending facility is adequate to finance operations
through 2005.

F-6

---

|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.

Use of Estimates

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

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. At December 31, 2004 and 2003, cash and cash
equivalents of investments in money market and overnight sweep accounts were $46,065 and
$250,144, respectively. At times, cash balances held at financial institutions were in
excess of federally insured limits. The Company places its temporary cash investments with
high-credit, quality financial institutions, and as a result, the Company believes that no
significant concentration of credit risk exists with respect to these cash investments.

Accounts Receivable

The majority of the Companys
accounts receivable are due from established companies in the following industries:
manufacturing, consumer product goods, direct marketing, healthcare and financial
services. Credit is extended based on evaluation of a customers financial condition
and, generally, collateral is not required. Accounts receivable are due within 30 to 45
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 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-7

---

|Description                           | Balance at
Beginning of
Period | Additions
Charged to
Costs and
Expenses | Deductions | Balance at
End of
Period
|------------------------------------- | ------------------------------ | --------------------------------------- | ---------- | ------------------------
|For the year ended December 31, 2002, |                                |                                         |            |                         
|Allowance for doubtful accounts       |                                |                                         | $          | 30,000                  
|For the year ended December 31, 2003, |                                |                                        
|Allowance for doubtful accounts       |                                |                                         | $          | 3,950                   
|For the year ended December 31, 2004, |                                |                                        
|Allowance for doubtful accounts       |                                |                                         | $          | 18,819                  

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, 2004 and 2003, unbilled accounts receivable totaled $138,529
and $6,207, respectively.

Revenue Recognition

The majority of the Companys
revenues are derived from cost-plus, or time-and-materials contracts. Under cost-plus
contracts, revenues are recognized as costs are incurred and include an estimate of
applicable fees earned. For time-and-material contracts, revenues are computed by
multiplying the number of direct labor-hours expended in the performance of the contract
by the contract billing rates and adding other billable direct costs. In the event of a
termination of a contract, all billed and unbilled amounts associated with those task
orders where work has been performed would be billed and collected.  The termination
provisions of the contract would be accounted for at the time of termination.  Any
deferred and/or amortization cost would either be billed or expensed depending upon the
termination provisions of the contract.  Further, the Company has had no history of
losses nor has it identified any specific risk of loss at December 31, 2004 due to
termination provisions and thus has not recorded provisions for such events.

Significant Customers

During 2004, two customers, Abbott
Laboratories and The Department of Homeland Security, individually represented 12%, and
11% of revenues, respectively. During 2003, four customers, Abbot Laboratories, Spencer
Stuart, Manpower, and Baxter Healthcare, individually represented 18%, 14%, 13%, and 13%
of revenue, respectively.

Fair value of financial
instruments

The Companys financial
instruments include cash equivalents, accounts 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 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.

F-8

---

The Companys financial
instruments also include a financial instrument in which a valuation for the warrants from
the Barron Partners, LP preferred financing agreement contained a registration rights
agreement which contained a liquidating damages provision.  Accordingly, a Black Scholes calculation was used to
determine the fair value of those warrants which are classified as a financial instrument.
The Financial Instrument was marked to market at December 31, 2004.

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, 2004, two customers, The Department of Homeland
Security and Tangible Software, individually represented 24% and 13% of accounts
receivable, respectively. As of December 31, 2003, three customers, Abbott Laboratories,
Meritage Technologies, and BTE Consulting, Inc., individually represented 26% and 11% and
10% of accounts receivable, respectively.

Income Taxes

The Company accounts for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. Under SFAS No.109, deferred tax
assets and liabilities are computed based on the difference between the financial
statement and income tax bases of assets and liabilities using the enacted marginal tax
rate. SFAS No. 109 requires that the net deferred tax asset be reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than not that
some portion or all of the net deferred tax asset will not be realized.

Property and Equipment

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

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

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

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

F-9

---

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 five-year period or other such shorter period as may be required. WidePoint
recorded $9,700 of amortization expense for the year ended December 31, 2004. The Company
recorded no amortization expense for the year ended December 31, 2003 and 2002,
respectively. Capitalized software costs included in Other Intangibles at December 31,
2004 were approximately $0.6 million. WidePoint had no capitalized software costs included
in Other Intangibles at December 31, 2003 and 2002, respectively.

Goodwill, Other
Intangible Assets, and Long-Lived Assets

Goodwill represents costs in excess
of fair values assigned to the underlying net assets acquired. The Company has adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 141,
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-10

---

Basic and Diluted Net
Loss Per Share

Basic income or loss per share
includes no dilution and is computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period. Diluted income or
loss per share includes the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock. The
treasury stock effect of options and warrants to purchase 18,314,748, 2,112,000, and
1,978,000 shares of common stock outstanding at December 31, 2004, 2003, and 2002,
respectively, 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
loss per share for all periods presented are identical.

Reclassifications

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

Stock-based compensation

The Company accounts for stock-based employee
compensation arrangements using the intrinsic value method in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and complies with the disclosure provisions of SFAS No. 123
Accounting for Stock-Based Compensation. Under APB Opinion No. 25,
compensation cost is generally recognized based on the difference, if any, on the date of
grant between the fair value of the Companys common stock and the amount an employee
must pay to acquire the stock. The following table illustrates the effect on net income
and earnings per share if the Company had applied the fair value recognition provisions of
FASB Statement 123, Accounting for Stock-BasedCompensation, using the assumptions
described in Note 8, to its stock-based employee plans.

|                                      | Year ended December 31,
|------------------------------------- | -----------------------
|
|Net loss, as reported                 |                        
|Deduct:  Total stock-based employee   |                        
|compensation expense determined under |                        
|fair value based method for awards    |                        
|granted, modified, or settled, net of |                        
|related tax effects                   |                        
|Pro forma net loss                    |                        
|Loss per share:                       |                        
|Basic and diluted - as reported       |                        
|Basic and diluted - pro forma         |                        

F-11

---

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

For purposes of determining the
effect of these options, the fair value of each option is estimated on the date of grant
based on the Black-Scholes single-option pricing model assuming the following for the
years ended December 31, 2004, 2003 and 2002:

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

New accounting
pronouncements

In December 2004, the Financial
Accounting Standards Board issued Statement 123 (revised 2004), Share-Based Payment
(Statement 123(R)). This Statement requires that the costs of employee share-based
payments be measured at fair value on the awards grant date using an option-pricing
model and recognized in the financial statements over the requisite service period. This
Statement does not change the accounting for stock ownership plans, which are subject to
American Institute of Certified Public Accountants SOP 93-6, Employers
Accounting for Employee Stock Ownership Plans. Statement 123(R) supersedes Opinion
25, Accounting for Stock Issued to Employees and its related interpretations, and
eliminates the alternative to use Opinion 25s intrinsic value method of accounting,
which the Company is currently using.

Statement 123(R) allows for two
alternative transition methods. The first method is the modified prospective application
whereby 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 will be recognized
over the remaining service period. The compensation cost for that portion of awards will
be based on the grant-date fair value of those awards as calculated for pro forma
disclosures under Statement 123, as originally issued. All new awards and awards that are
modified, repurchased, or cancelled after the adoption date will be accounted for under
the provisions of Statement 123(R). The second method is the modified retrospective
application, which requires that the Company restates prior period financial statements.
The modified retrospective application may be applied either to all prior periods or only
to prior interim periods in the year of adoption of this statement. The Company is
currently determining which transition method it will adopt and is evaluating the impact
Statement 123(R) will have on its financial position, results of operations, EPS and cash
flows when the Statement is adopted.  Upon making its determination of the transition
method the Company will adopt Statement 123(R). The Company will adopt this Statement on
January 1, 2006 in accordance with the requirements.

F-12

---

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

|                                                    | December 31,
2004
|--------------------------------------------------- | -----------------
|Borrowings under WidePoint's Senior Debt Agreement: |                  

On
October 25, 2004, the Company executed a senior lending agreement with RBC-Centura. The
Agreement initially provides for a $2.5 million revolving credit facility. The maturity
date of the credit facility is October 25, 2005.

The
maximum available borrowing under revolving credit facility at December 31, 2004 was $2.2
million. Borrowings under the Agreement are collateralized by the Companys eligible
contract receivables, inventory, all of its stock in certain of our subsidiaries and
certain property and equipment, and bear interest at the Prime Rate which was 5%.

WidePoints
credit facility requires that the Company maintain specified financial covenants relating
to fixed charge coverage, interest coverage, and debt coverage, and maintain a certain
level of consolidated net worth. As of and during the year ended December 31, 2004,
WidePoint was in compliance with each of these financial covenants. The weighted average
borrowings under the revolving portion of the facility and the prior agreement during the
year ended December 31, 2004, were $1.5 million. In conjunction with the execution of the
credit facility, the Company recorded $0.1 million in loan origination costs, included in other
assets, which have been amortized ratably over the term of the credit facility.

The
total interest and finders fees paid was approximately $34,000 for the year ended December 31, 2004.

|4. | Acquisition:
|-- | ------------

On October 25, 2004, WidePoint
completed the acquisition of 100 percent of the outstanding common shares of Operational
Research Consultants, Inc., or ORC. ORC specializes in information technology, or IT,
integration and secure authentication solutions and providing services to the United
States Government. The results of operations for ORC have been included in our
consolidated financial statements since that date.

In consideration for the ORC stock,
the Company paid the ORC shareholders an aggregate of $5,000,000 payable in a combination
of cash of approximately $4.6 million, approximately $0.4 million of the Companys
common stock, and approximately $0.1 million in a receivables holdback. In addition an
earnout provision worth up to $5 million in consideration in the form of Company common
stock of up to $2.5 million at $0.45 per common share and cash consideration up to $2.5
million may be realized upon performance parameters disclosed within the purchase
agreement further described in an 8-K filing on October 29, 2004. The earnout provisions
may be realized through December 31, 2005. No earnout provisions have been earned as of
December 31, 2004.

F-13

---

The following table summarizes the
estimated fair values of the assets acquired and liabilities assumed at the date of
acquisition (in thousands):

|                       
|-----------------------
|Current assets         
|PP&E, net              
|Goodwill               
|Intangible assets(1)(2)
|Other assets           
|Current liabilities    
|Deferred tax liability 
|                       
|Total                  

Intangible assets include: (1)
internally generated software and (2) software and customer relationships. Internally
generated software is being amortized over a 6 year life as of August 1, 2004 for
approximately $340,000, with the remaining cost still accumulating. Software and customer
relationship amounts are being amortized using a weighted average life of 6 years and 5
years, respectively.

The following table summarizes the
pro forma statements of operations of ORC and WidePoint consolidated for the periods
ending December 31, 2003 and 2004, respectively;

|                               
|-------------------------------
|Revenues                       
|Net Loss                       
|Loss per share                 
|Basic common shares outstanding

|5. | 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 Decmeber 31st of each
calendar year. These reviews have resulted in no adjustments in goodwill.

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

F-14

---

|                                | As of December 31, 2004
|------------------------------- | -----------------------
|
|Amortized intangible assets     |                        
|ORC Intangible                  |                        
|Chesapeake Intangible           |                        
|PKI Intangible                  |                        
|                                |                        
|Total                           |                        
|                                |                        
|Unamortized intangible assets   |                        
|Other                           |                        
|                                |                        
|Total                           |                        
|Aggregate Amortization Expense: |                        
|For year ended 12/31/04         |                        
|Estimated Amortization Expense: |                        
|For year ended 12/31/05         |                        
|For year ended 12/31/06         |                        
|For year ended 12/31/07         |                        
|For year ended 12/31/08         |                        
|For year ended 12/31/09         |                        

F-15

---

|6. | Promissory
Notes:
|-- | -----------------

Related Party Notes

Pursuant to stock purchase agreements
entered into on July 8, 2002, between the Company and each of Steve L. Komar, James T.
McCubbin and Mark M. Mirabile, the Company privately sold 865,000 shares of its common
stock to each such person without registration under the Securities Act of 1933, pursuant
to the private offering exemption under Section 4(2) thereof, in consideration of a three
(3) year full-recourse, five percent (5%) interest bearing promissory note with equal
annual principal payments due, issued by each such person to the Company in the principal
amount of $60,550, or $181,650 in the aggregate (which equals $0.07 per share, being the
closing price of the Companys common stock on July 8, 2002). Amounts outstanding
under these notes are reflected as a reduction to stockholders equity until paid.

|7. | Income
Taxes:
|-- | -------------

The income tax benefit of $816 for
the year ended December 31, 2004, consisted of a current expense of $110,164 and a
deferred benefit of $110,980. The Company had no provision for income taxes for the years
ended December 31, 2003 and 2002.

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

|                                           | For the Years Ended
December 31,
|------------------------------------------ | --------------------------------
|
|Statutory federal income tax rate          |                                 
|Non-deductible expenses                    |                                 
|Decrease (increase) in valuation allowance |                                 
|Intangibles                                |                                 
|Capitalized software cost                  |                                 
|Section 481(a) adjustment                  |                                 
|Other                                      |                                 
|                                           |                                 
|                                           |                                 
|                                           |                                 

F-16

---

The
deferred tax assets (liabilities) consisted of the following as of December 31, 2004
and 2003:

|                                          | December 31,
|----------------------------------------- | ------------
|
|Deferred tax assets:                      |             
|Net operating loss carryforwards          |             
|AMT credit                                |             
|Capital losses in excess of capital gains |             
|Financial instrument                      |             
|Other assets                              |             
|                                          |             
|Total deferred tax assets                 |             
|                                          |             
|Deferred tax liabilities:                 |             
|Section 481(a) adjustment                 |             
|Intangibles                               |             
|Depreciation and amortization             |             
|Capitalized software costs                |             
|                                          |             
|Total deferred liabilities                |             
|                                          |             
|Net deferred tax asset                    |             
|Less- Valuation allowance                 |             
|                                          |             
|                                          |             
|                                          |             

The
Company has determined that its net deferred tax asset did not satisfy the recognition
criteria set forth in SFAS No. 109 and, accordingly, established a valuation
allowance for 100 percent of the net deferred tax asset, less the deferred liability
related to the Section 481(a) adjustment.

As
of December 31, 2004 the Company had net operating loss carry forwards of
approximately $17,025,000 to offset future taxable income. These carry forwards expire
between 2010 and 2024. 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. The capital losses in
excess of capital gains expire in the year 2005.

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

|                        | 2004 | 2003
|----------------------- | ---- | ----
|Opening balance         |      |     
|Current year adjustment |      |     
|Ending balance          |      |     

|8. | Stockholders
Equity:
|-- | --------------------

The Company is authorized to issue
50,000,000 shares of common stock, $.001 par value per share. At the annual meeting of
stockholders that was held on January 27, 2005, stockholders approved a proposal to
increase the authorized shares of common stock from 50,000,000 to 110,000,000. As of
December 31, 2004, there were 21,125,393 shares of common stock outstanding. The rights,
preferences and privileges of holders of common stock are subject to, and may be adversely
affected by the rights of the holders of shares Series A Convertible Preferred Stock and
of any additional series of preferred stock that may be designated and issued in the
future.

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 2,045,714 shares are outstanding.

F-17

---

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

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

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

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

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

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

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

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

F-18

---

Pursuant
to the terms of a preferred stock purchase agreement, master amendment, warrants and other
related agreements between WidePoint and Barron, on October 25, 2004 and
October 29, 2004, the Company issued and sold, an aggregate of 2,045,714 shares of
our Series A Convertible Preferred Stock and warrants to purchase up to 10,228,571 shares
of common stock for an aggregate price of $3,580,000. Expenses associated with this
financing as of December 31, 2004 were $542,824.

As a result of the issuance of a
registration rights agreement that contained a liquidated damages clause, the Company is
required to follow EITF 00-19, Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own Stock by the Company (see footnote 9).
 In light of the required accounting treatment under EITF 00-19, the entire proceeds of
the issuance were allocated to warrants and as such no proceeds have been allocated to
the preferred stock issuance as of December 31, 2004.

Common Stock

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

On April 30, 2004, the Company
closed upon the acquisition of all the issued and outstanding shares of Chesapeake,
pursuant to the terms of an Agreement and Plan of Merger, dated as of March 24, 2004.
WidePoint issued 4,082,980 shares of its common stock to stockholders of Chesapeake in
consideration for all of the issued and outstanding shares of Chesapeake owned by them. In
conjunction with this closing, the sole stockholders also entered into an escrow agreement
and deposited 3,266,384 shares of the 4,082,980 newly issued shares of WidePoint common
stock into escrow. The 3,266,384 shares of common stock placed into escrow will be
released to the Chesapeake Shareholders in the event of the satisfaction of certain
conditions set forth in the merger agreement, which provides that during the period
commencing after the closing of the merger and ending on December 31, 2005, the
3,266,384 shares of common stock will be released to the Chesapeake Shareholders in a
ratio based on the amount of revenues actually received by the Company from the business
acquired from Chesapeake. The December 31, 2005 escrow expiration date may be
extended for one additional year in the event it is determined that Chesapeake has
achieved certain performance levels in the latter part of 2005. In the event that
WidePoint does not receive certain levels of revenues from the business acquired from
Chesapeake, then any of the 3,266,384 shares of common stock to which the Chesapeake
Shareholders have not become entitled to receive will be returned to the Company. For the
period ending December 31, 2004, the Company will release 544,397 shares from escrow to
the Chesapeake Shareholders upon the filing of the Companys Form 10K with the
securities and exchange commission.

F-19

---

Pursuant to an agreement on April
30, 2004 between the Company and Tripoint Capital Advisors, LLP, the Company issued
500,000 shares of its common stock without registration under the Securities Act of 1933
for services rendered in association with the Chesapeake acquisition. These shares were
reported at the fair value at the date of issuance.

Pursuant to stock purchase agreements
entered into on July 8, 2002, between the Company and each of Steve L. Komar, James T.
McCubbin and Mark M. Mirabile, the Company privately sold 865,000 shares of its common
stock to each such person without registration under the Securities Act of 1933, pursuant
to the private offering exemption under Section 4(2) thereof, in consideration of a three
(3) year full-recourse note. (See note 6)

Stock Warrants

On October 27, 2004 and November 22,
2004, the Company issued 30,612 and 5,556 warrants, 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. The warrant has a term of 5 years. The
Company used a fair-value option pricing model to value this stock warrant at
approximately $14,291. This value has been reflected as part of stock warrants in the
stockholdersequity section of the consolidated balance sheet and are being
amortized over the life of the debt as interest expense.

On October 1, 1999, the Company
issued a stock warrant to purchase 200,000 shares of common stock at $5.00 per share, an
amount that exceeded the stocks trading price on that date, as part of the PMC
acquisition. The warrant has a term of 3 years. The Company used a fair-value option
pricing model to value this stock warrant at approximately $140,000. This value has been
reflected as part of stock warrants in the stockholders equity section of the
consolidated balance sheet and has been included as part of the Companys purchase
accounting for the PMC acquisition. This warrant expired on October 1, 2002 and as such,
the Company reversed the expense recognized in 1999 and reduced the amounts allocated to
deferred compensation and to the warrant.

Related Party Notes

Pursuant to stock purchase agreements
entered into on July 8, 2002, between the Company and each of Steve L. Komar, James T.
McCubbin and Mark M. Mirabile, the Company privately sold 865,000 shares of its common
stock to each such person without registration under the Securities Act of 1933, pursuant
to the private offering exemption under Section 4(2) thereof, in consideration of a three
(3) year full-recourse, five percent (5%) interest bearing promissory note with equal
annual principal payments due, issued by each such person to the Company in the principal
amount of $60,550.00, or $181,650.00 in the aggregate (which equals $0.07 per share, being
the closing price of the Companys common stock on July 8, 2002). Amounts outstanding
under these notes are reflected as a reduction to stockholders equity until paid.

|9. | Financial
Instrument:
|-- | ---------------------

F-20

---

In October of 2004, the Company
issued 10,739,999 warrants to Barron Partners, LP as part of a preferred stock financing.
 The warrants have a term of 5 years.  The Company used a fair-value option pricing model
to value this stock warrant.  The value of these warrants has
been reflected as a financial instrument in the short-term liabilities section of the
consolidated balance sheet as a result of the issuance of a registration rights agreement
that included a liquidated damages clause, which is linked to an effective registration
of such securities.  Accordingly, the Company applied EITF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys
Own Stock and accounted for the warrants as a liability.  In light of the required
accounting treatment under EITF 00-19, the Company is also required to value the fair
market price of the financial instrument as of December 31, 2004.  The Company has
recorded a loss on the financial instrument of $204,998 for the period ending December
31, 2004, to adjust the difference between the fair-value of these warrants and the
market price.

|10. | 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, directors and
consultants of the Company or its affiliates. Under the terms of the Incentive Plan, as
amended, 3,000,000 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 October 25, 2004, the Company issued 1,111,111 options to an
employee pool of ORC. 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.

F-21

---

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.

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, 2002 |                  |                    |                                
|                               |                  |                    |                                
|Granted                        |                  |                    |                                
|Canceled or expired            |                  |                    |                                
|                               |                  |                    |                                
|Outstanding, December 31, 2003 |                  |                    |                                
|                               |                  |                    |                                
|Granted                        |                  |                    |                                
|Canceled or expired            |                  |                    |                                
|                               |                  |                    |                                
|Outstanding, December 31, 2004 |                  |                    |                                
|                               |                  |                    |                                

As of December 31, 2004 and
2003, options and management warrants to purchase 7,223,111 and 1,447,340 shares,
respectively of common stock were exercisable with a weighted average exercise price of
$0.24 and $0.14, respectively. The weighted-average remaining contractual life of the
options outstanding at December 31, 2004 and December 31, 2003, was 6 and
8 years, respectively. The weighted-average fair value of options and management
warrants granted in 2004 and 2003 was $0.28 and $0.04, respectively.

F-22

---

Had compensation expense been
determined based on the fair value of the options at the grant dates consistent with the
method of accounting under SFAS No. 123, the Companys net loss and net loss per
share would have been increased to the pro forma amounts indicated below:

|                                                | For the Years Ended December 31,
|----------------------------------------------- | --------------------------------
|
|Net loss:                                       |                                 
|As reported                                     |                                 
|Pro forma                                       |                                 
|Pro forma basic and diluted net loss per share: |                                 
|As reported                                     |                                 
|Pro forma                                       |                                 

The fair value of each option is
estimated on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: no dividend yield, expected volatility of 140-166 percent,
risk-free interest rates from 2.70 to 4.13 percent and an expected term of
five years.

|11. | Commitments
and Contingencies:
|--- | ------------------------------

The Company has entered into a number
of leases for its offices location as describe 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 2009 and
the total commitments per year are as follows;

|Year Ended
  December 31, | Operating Leases
|------------------------- | ----------------
|2005                      |                 
|2006                      |                 
|2007                      |                 
|2008                      |                 
|2009                      |                 
|                          |                 
|Total                     |                 
|                          |                 

Employment Agreements

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

Litigation

F-23

---

As of December 31, 2004, ORC was the
defendant in a lawsuit entitled Fleuette v. ORC, C.A. No. 1:04-cv-1054, in the Eastern
District of Virginia, in which Renee Fleuette Gallagher, a former employee of ORC, alleged
that ORC wrongfully terminated her employment with ORC. The plaintiff sought an
unspecified amount of damages from ORC. Prior administrative and judicial proceedings
instituted by Ms. Gallagher against ORC have been dismissed or found to be without merit.
ORC did not believe that it had committed any wrong against Ms. Gallagher and therefore
vigorously defended itself in the lawsuit filed by Ms. Gallagher. As part of the
agreements entered into between WidePoint, ORC and the former stockholders of ORC at the
time of WidePoints acquisition of ORC, the former stockholders of ORC agreed to
indemnify WidePoint and ORC from any liability involving the claims by Ms. Gallagher
against ORC, including the above-captioned lawsuit. In February of 2005, a settlement was
reached between the parties and the complaints were dismissed.

Other than as described above, the
Company is not involved in any material legal proceedings.

|12. | Segment
reporting:
|--- | ------------------

During 1998, the Company adopted SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information.
SFAS No. 131 requires a business enterprise, based upon a management approach, to disclose
financial and descriptive information about its operating segments. Operating segments are
components of an enterprise about which separate financial information is available and
regularly evaluated by the chief operating decision maker(s) of an enterprise. Under this
definition, the Company operated as a single segment for all periods presented. The single
segment is comprised of our Consulting services segment within the Commercial and Federal
Marketplaces.

|13. | Selected
Quarterly Financial Data (Unaudited):
|--- | ----------------------------------------------

A summary of selected quarterly
information for 2004 and 2003 is as follows:

|                                                                          
|--------------------------------------------------------------------------
|March 31                                                                  
|Net Sales                                                                 
|Gross Profit                                                              
|Net Loss                                                                  
|Loss per Share                                                            
|2003 Quarter Ended
(in thousands of U.S. dollars except per share amounts)
|March 31                                                                  
|Net Sales                                                                 
|Gross Profit                                                              
|Net Loss                                                                  
|Loss per Share                                                            

F-24