# SECURITIES AND
EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

# FORM 10-K/A No. 3

Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934

Amendment No. 3 to
Annual Report on Form 10-K for the year ended December 31, 2004

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

|Delaware                        | 000-23967    | 52-2040275         
|------------------------------- | ------------ | -------------------
|(State or other jurisdiction of | (Commission  | (I.R.S. Employer   
|incorporation or organization)  | File Number) | 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

The
undersigned registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10-K for the year ended December 31, 2004,
as previously amended by Amendment No. 2 filed on August 17, 2005, as set forth in the pages attached hereto:

|        |            |                                                                                      
|------- | ---------- | -------------------------------------------------------------------------------------
|Part II | Item 6     | Selected Consolidated Financial Information                                          
|        | Item 7     | Management's Discussion and Analysis of Financial Condition and Results of Operations
|        | Item 8     | Financial Statements                                                                 
|        | Item 9A    | Controls and Procedures                                                              
|Part IV | Item 15(a) | Financial Statements and Financial Statement Schedule                                
|        | Item 15(b) | Exhibits                                                                             

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this amendment to be signed on its behalf by the undersigned, thereunto duly authorized.

|                        | WidePoint Corporation                     
|----------------------- | ------------------------------------------
|Date:  January 19, 2006 | By:  /s/ James T. McCubbin                
|                        | James T. McCubbin                         
|                        | Vice President and Chief Financial Officer

---

INTRODUCTORY NOTE

This Amendment No. 3 of the Companys
Annual Report on Form 10-K has been revised as a result of certain Restatements made by
the Company, which are further described in the Financial Statements, note No. 1.

# Part II.

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 and subsequently amended with the Securities and
Exchange Commission on January 19, 2006.  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 and subsequently amended on August 17, 2005.  On September
29, 2000, WidePoint sold Parker Management Consultants, Ltd. (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.

2

---

# Selected Financial Data

|                                            | As Restated
2004 | 2003 | 2002 | 2001       | 2000
|------------------------------------------- | ---------------- | ---- | ---- | ---------- | ----
|Statement of Operations Data:               |                  |      |      |            |     
|Revenues                                    |                  |      | $    | 5,542,118  |     
|Cost of revenues                            |                  |      |      | 4,484,469  |     
|                                            |                  |      |      |            |     
|Gross Profit                                |                  |      |      | 1,057,649  |     
|Sales and marketing expense                 |                  |      |      | 596,564    |     
|General and administrative expense          |                  |      |      | 1,626,454  |     
|Facilities closing expense                  |                  |      |      | --         |     
|Disposition of subsidiary                   |                  |      |      | --         |     
|Impairment of long-term assets              |                  |      |      | --         |     
|Depreciation and amortization               |                  |      |      | 15,713     |     
|                                            |                  |      |      |            |     
|Loss from operations                        |                  |      |      | (1,181,082 | )   
|                                            |                  |      |      |            |     
|Other income (expense):                     |                  |     
|Interest income                             |                  |      |      | 5,841      |     
|Interest expense                            |                  |      |      | (38,144    | )   
|Loss from financial instruments             |                  |      |      | (3,070,617 | )   
|Other                                       |                  |      |      | 2,118      |     
|                                            |                  |      |      |            |     
|Net loss before income taxes                |                  |      |      | (4,281,884 | )   
|Income taxes (benefit)                      |                  |      |      | (816       | )   
|                                            |                  |      |      |            |     
|Net loss                                    |                  |      | $    | (4,281,068 | )   
|                                            |                  |      |      |            |     
|Basic and diluted loss per share            |                  |      | $    | (0.26      | )   
|                                            |                  |      |      |            |     
|Basic and diluted weighted average          |                  |     
|shares outstanding                          |                  |      |      | 16,657,947 |     
|                                            |                  |      |      |            |     
|Dividends                                   |                  |      |      | --         |     
|Total Assets                                |                  |      | $    | 8,391,426  |     
|Long-term debt                              |                  |      |      | --         |     
|Long-term obligations (Capital leases only) |                  |      |      | --         |     
|Capital leases, current portion             |                  |      |      | --         |     

3

---

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.

# Restatement and 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.

4

---

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.

Management of the Company determined
that we had not correctly accounted for the Chesapeake acquisition as 1) it should not
have resulted in the recognition of an intangible asset, 2) Company shares that were
placed in escrow for release only upon the achievement of certain future revenue should
not have been recognized immediately, but instead, only upon the achievement of certain
contingencies, and 3) as a result of timing differences between the actual issuance by
the Company of shares earned and issued, the Company should have recorded those
shares earned as of December 31, 2004 as common stock issuable and not as common stock as
those shares were not issued until June 30, 2005.  For further information related to the
quantitative effects of the restatement, see note 1 of the Companys financial statements.

While the Companys management
believes that the Company did acquire assets in a business sense when it acquired the
stock of Chesapeake, these assets, consisting primarily of Chesapeakes relationships
with various sources of potential business opportunities, did not meet the criteria for
recognition as assets under Statement of Financial Accounting Standards No. 141 (SFAS 141).
 Additionally, the acquisition could not give rise to goodwill because Chesapeake was in
the development stage at the time of acquisition and therefore not considered a business.

5

---

Management has acquiesced to the use
of the ORC revenue as a basis for release of the escrowed shares under the belief that
the revenue of ORC, which management believes was acquired as a result of Chesapeake
relationships, qualifies as revenue for determination of the release of escrowed shares.
 For financial reporting purposes, however, the text of the Chesapeake agreement does not
provide sufficient objective evidence of linkage between release of the shares and ORC
revenue to allow for capitalizing the cost of the release as additional acquisition cost
of ORC.   A portion of the shares escrowed in the Chesapeake transaction were released
based on ORCs sales in that year.

As a consequence of these
determinations, previously issued financial statements are being restated to eliminate
the intangible asset associated with the Chesapeake acquisition, reverse the related
amortization expense, expense as consulting fees the cost of the transaction attributable
to the cost of issuance of the non-escrowed shares and other related direct costs at the
time of acquisition, and to record and expense as consulting fees the release of the
shares from escrow at December 31, 2004.

We also determined that certain
amortization costs related to the ORC acquisition should have been recorded in cost of
sales and not in amortization and depreciation; and we determined that under our October
and November 2004 Barron financing agreements, preferred stock recorded should have been
classified as temporary preferred equity and not permanent preferred equity.  As such, we
have restated our financial statements for the year ended December 31, 2004.  At December
31, 2004, the goodwill, intangibles, preferred stock (temporary equity), additional
paid-in capital, and accumulated deficit were adjusted from previously reported amounts
to properly reflect the appropriate accounting treatment.

# Critical Accounting
Policies and Estimates

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

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

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

| |  | Goodwill;
| | - | ---------

6

---

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

| |  | 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.

The Companys other revenues
are derived from the delivery of non-customized software. In such cases revenue is
recognized when there is persuasive evidence that an arrangement exists (generally a
purchase order has been received or contract signed), delivery has occurred, the charge
for the software is fixed or determinable, and collectibility is probable.

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

Goodwill represents costs in excess
of fair values assigned to the underlying net assets acquired. The Company has adopted
the provisions of Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. These standards require the use of the purchase method of
accounting for business combinations, set forth the accounting for the initial
recognition of acquired intangible assets and goodwill and describe the accounting for
intangible assets and goodwill subsequent to initial recognition. Under the provisions of
these standards, goodwill is not subject to amortization and annual review is required
for impairment. The impairment test under SFAS No. 142 is based on a two-step process
involving (i) comparing the estimated fair value of the related reporting unit to its net
book value and (ii) comparing the estimated implied fair value of goodwill to its
carrying value. Impairment losses are recognized whenever the implied fair value of
goodwill is less than its carrying value. The Companys annual impairment testing
date is December 31. Goodwill is a significant item on the Companys balance sheet
and represents approximately 33% of our total assets.  Goodwill is identified on the face
of the Balance Sheet.

7

---

Intangibles

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

As of December 31, 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 long-lived assets.  Long-lived
assets are a significant item on the Companys balance sheet and represent approximately
20% 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.  Long-lived assets are identified on the face of the
Balance Sheet as Intangibles.  Amortization of Intangibles are identified on
the face of the Statement of Operations within Cost of Sales.

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.

8

---

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.

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.

9

---

In May 2003, the FASB issued
Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS 150), which
establishes standards for how companies classify and measure certain financial
instruments with characteristics of both liabilities and equity. It requires companies to
classify a financial instrument that is within its scope as a liability (or an asset in
some circumstances). We believe that the adoption of SFAS 150 will not result in a material change in our financial statements.

# 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 $1.1 million, or 19% of
revenues, an increase of $0.3 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 primarily attributable to higher billing rates as a result of the greater
demand for the IT security skill sets of the consultants at ORC, partially offset by the
recording of the issuance of 544,398 shares of the Companys common stock to the former
Chesapeake shareholders as a result of meeting performance measures related to the
realization of revenues by ORC during the fourth quarter ended December 31, 2004.  The
release of those shares from escrow represented a compensation expense in cost of sales
of approximately $381,000.

The cost elements related to
consultant salaries, benefits and expenses at both ORC and WidePoint are substantially
similar.  ORCs ability to contain its salary, benefit, and other cost elements on both
an absolute and per capita basis, while revenue per capita has been increasing, has
resulted in  WidePoints realization of an improvement in gross profit for the year ended
December 31, 2004 as compared to December 31, 2003.

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.

10

---

General and administrative.
General and administrative expenses for the year ended December 31, 2004 were
approximately $1.6 million, or 29% of revenues, as compared to $0.7 million, or 21% of
revenues, for the year ended December 31, 2003. The $0.9 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, the Companys implementation of its federal sector business
initiative and the recording of the issuance of 500,000 shares of the Companys
common stock to TriPoint Capital Advisors for corporate advisory services that resulted
in a compensation expense of approximately $72,000.

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
$3,071,000  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 $4.3
million, an increase of $4.0 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.

11

---

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.

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.

The Company had material increases
in our balance sheet in accounts receivables, prepaid expenses, goodwill, intangibles,
accounts payable and accrued expenses as of December 31, 2004 as compared to December 31,
2003.  The increases in the assets and liabilities in our balance sheet were primarily
due to our recent acquisition of ORC.   Accounts receivable increased as a result of the
increase in revenues from ORC and prepaid expenses increased as a result of the
additional cost associated with operating ORC.  The increase in accounts receivable
attributable to the ORC acquisition allowed the Company to secure a senior line of credit
for up to $2.5 million dollars.  The line of credit allowed the Company to partially
finance the purchase of ORC and presently provides additional liquidity and working
capital for the Company.  As a result of the acquisition of ORC, the Companys accounts
receivable aging has declined.  This has primarily been as a result of a longer payment
cycle at ORC.  ORC invoices monthly while WidePoint invoices, weekly and monthly.  As a
result of the monthly billing cycle at ORC, the Company has experienced a longer average
period to collect its accounts receivable from its clients.  As of December 31, 2004, the
Company has not witnessed any problems associated with collectibility or billing problems
with any major customers or any significant changes in credit terms, collection efforts,
credit utilization and/or delinquency policies.  Goodwill and intangible assets increased
as a result of the purchase accounting related the purchase of ORC.
 Accounts payable and accrued expenses increased as a result of the increased cost of
operating ORC.

12

---

As of December 31, 2004, the Company
had a net working capital deficit of approximately $6.9 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 $2.2 million in accounts payable and accrued expenses; $1.6 million in a
line of credit with RBC Centura Bank; and $6.6 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.

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.

13

---

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. Barron has waived the penalty provision of up to $20,000 through September 30, 2005.

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.  Our failure to comply with the restrictive covenants
under our revolving credit facility could result in an event of default, which, if not
cured, amended, or waived, could result in us being required to repay these borrowings
before their due date. To date any covenants with which we have not been compliant have
either been amended or waived and we continue to work with RBC-Centura to structure
appropriate covenants that match our present business condition and environment.
 Although we currently are not in compliance with two of our covenants, which includes
our ebitda to debt ratio covenant and our net income covenant, RBC-Centura has waived
such violations until such time as the Company delivers to RBC-Centura the Companys
financial statements for the quarter ended June 30, 2005 evidencing that the Company is
in compliance with the above covenants.  If we are forced to refinance these borrowings
on less favorable terms, our results of operations and financial condition could be
adversely affected by increased cost and rate.   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.

14

---

# Off-Balance Sheet
Arrangements

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

# 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 (2)                  
|                           

(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.

15

---

(2)    The
above table does not include the financial instrument that is reported as a current
liability on the Companys balance sheet at December 31, 2004 and is discussed in Note 10
to the Companys consolidated financial statements contained herein.  Such financial
instrument (which amounted to $6,648,571 at December 31, 2004) does not fall within the
above five categories of contractual obligations called for by the table.  The
recordation of that short-term liability resulted from the issuance of warrants by the
Company to Barron Partners, LP in October 2004 and the related registration rights
agreement that included a liquidated damages clause, requiring the fair value of the
warrants to be treated as a derivative financial instrument under EITF 00-19.

# 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.

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

ITEM 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTAL DATA

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

ITEM 9A. CONTROLS AND PROCEDURES.

16

---

# Disclosure Controls and
Procedures

The
Companys  disclosure  controls and  procedures  are designed to ensure that
 information  required to be disclosed by the Company in the reports  that it files or
submits  under the  Securities  Exchange Act of 1934 is recorded,  processed,  summarized
 and reported,  within the time periods  specified in the Securities and Exchange
 Commissions  rules and forms,  and include  controls and procedures  designed to
ensure that such  information  is  accumulated  and  communicated  to the Companys
 management,  including its principal executive and financial officers,  to allow timely
decisions  regarding required  disclosure.  Based on the evaluation of the effectiveness
 of the  Companys  disclosure  controls and  procedures  as of December 31, 2004
 required by Rule  13a-15(b)  under the Securities  Exchange Act of 1934 and conducted by
the Companys chief  executive  officer and chief  financial  officer,  such
officers concluded  that the Companys  disclosure  controls and  procedures  were
not effective as of December 31, 2004.  That  conclusion  was based on the fact that
during the first  quarter of 2005,  the Company  identified  a material  weakness in
its  internal control over  financial  reporting  due to  insufficient
 technical  accounting  expertise  within the  accounting  function to resolve
non-routine  or complex  accounting  and tax matters such as those that occur in
 connection  with a material  acquisition  such as the Companys recent  acquisition
of Operational  Research  Consultants,  Inc. The existence of that weakness was further
demonstrated by the subsequent determination during 2005 of the need for certain
financial statement corrections and restatements. Additional  information  regarding those
matters is set forth below under  Changes in Internal  Control Over  Financial
 Reporting.  As a result of that material  weakness,  the Company failed to timely
file its Annual Report on Form 10-K for the year ended  December 31, 2004.  The Company
filed a Form 12b-25  extending the March 31, 2005 filing due date for the report to April
15, 2005, but did not file the report until April 19, 2005.

In
November 2004, the Company  discovered  that its proxy  statement,  dated November 17,
2003 and used in connection with the Companys  annual  meeting of  shareholders  on
December  18, 2003,  had not been filed with the SEC as  required,  and its 2002 annual
report to shareholders  (which  consisted of a one-page cover letter attached to the
Companys  Annual Report on Form 10-K for the year ended  December 31,  2002,  which had
been timely  filed) had not been  submitted  to the SEC as  required.  On November 12,
2004,  the Company filed such proxy material and submitted such annual report to
 shareholders  to the  Commission.  The late filing resulted from the fact that the
service  provider  that had been engaged by the Company in 2003 to Edgarize and file the
proxy  statement  and submit the annual  report to  shareholders  inadvertently  failed
to make such  filing  and  submission.  The  service  provider  acknowledged
responsibility  for its failure to make such filings,  and the Company  engaged  another
 service  provider that Edgarized and made the filings.  In the fourth  quarter of 2004,
 the Company  instituted an additional  internal  reporting  process to track and confirm
the timely filing of reports with the SEC whereby  confirmations are routed to executive
 management after each new filing is submitted and accepted to track and confirm the
timely filing.  That new internal  control was instituted  during the quarter ended
December 31, 2004 and was in place at December 31, 2004.

17

---

# Changes in Internal
Control Over Financial Reporting

In
connection with the evaluation by the principal  executive officer and principal
 financial officer of the Company required by Rule 13a-15(d)  under the  Securities
 Exchange Act of 1934,  such officers  determined  that the following  change in the
Companys internal  control over financial  reporting  occurred during the quarter ended
December 31, 2004, that has materially  affected,  or is reasonably  likely to
 materially  affect,  the  Companys  internal  control  over  financial  reporting.  As
 discussed  above  under Disclosure  Controls and Procedures, that change in internal
control over financial  reporting was designed to remediate the weakness in the Companys
 internal  control over financial  reporting  relating to the tracking of the timeliness
of its filings and  submissions with the SEC. That change  implemented  an additional
 internal  control that  involved an  additional  reporting  process to track and confirm
the filing of SEC filings  whereby  confirmations  are routed to executive  management
 after each new filing is submitted  and accepted to track and confirm the filing.

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

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

The
material  weakness in internal  controls  resulted in (i) our late filing on April 19,
 2005 (four days after the  extended  due date) of our Annual  Report on Form 10-K for
the year ended December 31, 2004,  (ii) the need to restate the recorded  amount of
the  financial  instrument at December 31, 2004 and March 31, 2005 due to the failure to
 mark-to-market  such  instrument at December 31, 2004, and (iii) the need to restate the prior financial statements as set forth in this amendment. In order to remediate  that
material  weakness,  we  engaged a consulting  firm in January 2005 with the requisite
accounting  expertise,  and are continuing to use the services of that firm in connection
with such complex  accounting  matters.  That action  constituted a change in the Companys
 internal  control over  financial  reporting  that occurred  during the first quarter of
2005. To date,  the Company has not expended any material  costs,  nor does it estimate
it will expend any material  costs  associated with  engaging  the  accounting
 consultancy  firm the  Company  hired to  assist it in its  technical  accounting
 requirements.  The accounting consultancy firm does not have any relationship with our
current independent auditors.

We
believe that the material weakness in our internal controls will be remediated during the
first quarter of 2006 as we expect the above-referenced complex accounting issues
will have been resolved, and further believe that the total costs associated with the
remediation will be immaterial.

18

---

# 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:
| | --- | -----------------------------------------------------------------------------------------

19

---

|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

20

---

|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

21

---

|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

22

---

|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

23

---

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

---

*  Management contract or
compensatory plan

24

---

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

|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.  (Filed
with the Companys Annual Report on Form 10-K for the year ended December 31, 2004).
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.45 | Common
Stock Purchase Warrant between WidePoint Corporation and Westcap Securities Inc. (Filed
with the Companys Annual Report on Form 10-K for the year ended December 31, 2004).
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.46 | Loan
and Security Agreement, dated as of October 22, 2004, by and between RBC Centura Bank and
WidePoint Corporation. (Filed with the Companys Annual Report on Form 10-K/A No. 1 for the year ended December 31, 2004).
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.47 | Letter
Amendment to Loan and Security Agreement, dated as of February 7, 2005, by and between
RBC Centura Bank, WidePoint          Corporation and the subsidiaries of WidePoint
Corporation. (Filed with the Companys Annual Report on Form 10-K/A No. 1 for the year ended December 31, 2004).
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21 | Subsidiaries
of WidePoint Corporation (Filed with the Companys Annual Report on Form 10-K for
the year ended December 31, 2004).
|-- | ---------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

25

---

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 Changes in 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 

26

---

# 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.

As discussed in Note 1, the Company
has restated its consolidated financial statements for the year ended December 31, 2004.

/s/ Grant Thornton LLP

Chicago, Illinois
April 14, 2005,
except for the effects of the restatement as
discussed in Note 1, titled
Basis of Presentation, Organization,
Nature of Operations, and Restatement as to which
the date is January 19, 2006

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                                                               |             
|                                                                                |             
|Temporary equity:                                                               |             
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714      |             
|shares and no shares issued and outstanding, respectively                       |             
|Stockholders (deficit) equity:                                                 |             
|Common stock, $0.001 par value; 50,000,000 shares authorized; 17,859,009 shares |             
|and 15,579,913 shares issued and outstanding, respectively                      |             
|Common stock issuable, $0.001 par value; 544,398 shares                         |             
|Stock warrants                                                                  |             
|Related party notes receivable                                                  |             
|Additional paid-in capital                                                      |             
|Accumulated deficit                                                             |             
|                                                                                |             
|Total stockholders (deficit) equity                                            |             
|                                                                                |             
|Total liabilities, temporary equity and stockholders (deficit) equity          |             
|                                                                                |             

The accompanying notes
are an integral part of these consolidated statements

F-2

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated statements
of operations

|                                                                                                | For the Years Ended December 31,
|----------------------------------------------------------------------------------------------- | --------------------------------
|
|Revenues, net                                                                                   |                                 
|Cost of revenues (including depreciation and amortization of $46,547, $0, and $0, respectively, |                                 
|and stock compensation expense of $381,079, $0, and $0, repectively)                            |                                 
|                                                                                                |                                 
|Gross profit                                                                                    |                                 
|Sales and marketing                                                                             |                                 
|General and administrative                                                                      |                                 
|Depreciation expense                                                                            |                                 
|                                                                                                |                                 
|Loss from operations                                                                            |                                 
|Other income (expenses):                                                                        |                                 
|Interest income                                                                                 |                                 
|Interest expense                                                                                |                                 
|Loss from financial instruments                                                                 |                                 
|Other                                                                                           |                                 
|                                                                                                |                                 
|Net loss before provision for income taxes                                                      |                                 
|                                                                                                |                                 
|Income tax benefit                                                                              |                                 
|                                                                                                |                                 
|Net loss                                                                                        |                                 
|                                                                                                |                                 
|Basic and diluted net loss per share                                                            |                                 
|                                                                                                |                                 
|Basic and diluted weighted-average shares outstanding                                           |                                 
|                                                                                                |                                 

The accompanying notes
are an integral part of these consolidated statements

F-3

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Statements
of Changes in Stockholders Equity

|                                | Temporary EquityPreferred Stock | Permanent EquityCommon Stock | Common
Stock | Stock     | Related
Party Notes | Additional
Paid-In | RestatedAccumulated | Permanent Equity
|------------------------------- | ------------------------------- | ---------------------------- | ------------ | --------- | ------------------- | ------------------ | ------------------- | ----------------
|
|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        |                                 |                             
|issuable - Chesapeake           |                                 |                              |              | --        |                     |                    | --                  |                 
|Issuance of common stock        |                                 |                             
|- Chesapeake                    |                                 |                              |              | --        |                     |                    | --                  |                 
|December 31, 2004 Issuance      |                                 |                             
|of common stock                 |                                 |                             
|issuable - 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 |                                 
|operating activities                                  |                                 
|Deferred tax benefit                                  |                                 
|Depreciation expense                                  |                                 
|Amortization expense                                  |                                 
|Stock compensation expense                            |                                 
|Deferred financing costs                              |                                 
|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                                    |                                 
|                                                      |                                 
|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 and cash equivalents, 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, Nature of Operations, and Restatement:
|-- | ---------------------------------------------------------------------------

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

---

Restatement.

Management of the Company determined
that we had not correctly accounted for the Chesapeake acquisition as 1) it should not
have resulted in the recognition of an intangible asset, 2) Company shares that were
placed in escrow for release only upon the achievement of certain future revenue should
not have been recognized immediately, but instead, only upon the achievement of certain
contingencies, and 3) as a result of timing differences between the actual issuance by
the Company of shares earned and released from escrow,  the Company should have
recorded the shares earned as of December 31, 2004 as common stock issuable and not as
common stock as those shares would not be released from escrow until after the filing of
the Companys financial statements on Form 10-K for the year ended December 31, 2004.

While the Companys management
believes that the Company did acquire assets in a business sense when it acquired the
stock of Chesapeake, these assets, consisting primarily of Chesapeakes relationships
with various sources of potential business opportunities, did not meet the criteria for
recognition as assets under Statement of Financial Accounting Standards No. 141 (SFAS 141).
 Additionally, the acquisition could not give rise to goodwill because Chesapeake was in
the development stage at the time of acquisition and therefore not considered a business.

Management has acquiesced to the use
of the ORC revenue as a basis for release of the escrowed shares under the belief that
the revenue of ORC, which management believes was acquired as a result of Chesapeake
relationships, qualifies as revenue for determination of the release of escrowed shares.
 For financial reporting purposes, however, the text of the Chesapeake agreement does not
provide sufficient objective evidence of linkage between release of the shares and ORC
revenue to allow for capitalizing the cost of the release as additional acquisition cost
of ORC.  A portion of the shares escrowed in the Chesapeake transaction were released
based on ORCs sales in that year.

As a consequence of these
determinations, previously issued financial statements are being restated to eliminate
the intangible asset associated with the Chesapeake acquisition, reverse the related
amortization expense, expense as consulting fees the cost of the transaction attributable
to the cost of issuance of the non-escrowed shares and other related direct costs at the
time of acquisition, and to record and expense as consulting fees the release of the
shares from escrow at December 31, 2004.

We also determined that certain
amortization costs related to the ORC acquisition should have been recorded in cost of
sales and not in amortization and depreciation; and we determined that under our October
and November 2004 Barron financing agreements, preferred stock recorded should have been
classified as temporary preferred equity and not permanent preferred equity.  As such, we
have restated our financial statements for the year ended December 31, 2004.  At December
31, 2004, the goodwill, intangibles, preferred stock (temporary equity), additional
paid-in capital, and accumulated deficit were adjusted from previously reported amounts
to properly reflect the appropriate accounting treatment.  A summary of the effects of
the restatements are as follows:

F-7

---

Balance Sheet:

|                          
|--------------------------
|
|
|Intangibles               
|                          
|Total assets              
|                          
|                          
|Preferred Stock (temporary
|equity)                   
|                          
|Preferred stock           
|(stockholders equity)     
|                          
|Common stock              
|                          
|Common stock issuable     
|                          
|Additional paid-in capital
|                          
|Accumulated deficit       
|                          
|Total shareholders       
|equity(deficit)           
|                          
|Total liabilities,        
|temporary equity &        
|shareholders equity      
|                          

Statement of Operations:

|                             
|-----------------------------
|
|
|
|Cost of revenues             
|                             
|Gross profit                 
|                             
|General & administrative     
|                             
|Depreciation and amortization
|                             
|Depreciation expense         
|                             
|Loss from operations         
|                             
|Net loss before provision for
|income taxes                 
|                             
|                             
|Net loss                     
|                             
|                             
|Basic and diluted net loss   
|per share                    
|                             
|                             
|Basic and diluted weighted   
|average shares outstanding   
|                             

F-8

---

Statement of Cashflows:

|                      
|----------------------
|
|
|
|Net loss              
|                      
|Amortization expense  
|                      
|Stock compensation    
|expense               
|                      
|Prepaid expenses      
|                      
|Accounts payable and  
|accrued expenses      
|                      
|Net cash (used in)    
|provided by operating 
|activities            
|                      
|Collections on related
|party notes receivable
|                      
|Net cash (used in)    
|provided by financing 
|activities            
|                      

F-9

---

|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 60
days and are stated at amounts due from customers net of an allowance for doubtful
accounts. Accounts outstanding longer than the contractual payment terms are reviewed for
collectability and after 90 days are considered past due.

The Company determines its allowance
by considering a number of factors, including the length of time trade accounts receivable
are past due, the Companys previous loss history, the customers current
ability to pay its obligation to the Company, and the condition of the general economy and
the industry as a whole. The Company writes-off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are credited to the
allowance for doubtful accounts.

F-10

---

|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.

The Companys other revenues are
derived from the delivery of non-customized software.  In such cases revenue is
recognized when there is persuasive evidence that an arrangement exists (generally a
purchase order has been received or  contract signed), delivery has occurred, the charge
for the software is fixed or  determinable, and collectibility is probable.

Significant Customers

During 2004, two customers, Abbott
Laboratories and The Department of Homeland Security, individually represented 12%, and
11% of revenues, respectively, and we therefore are materially dependent upon such
customers.  Due to the nature of our business and the relative size of certain contracts
which are entered into in the ordinary course of business, the loss of any single
significant customer, including the above customers, would have a material adverse effect
on results.  During 2003, four customers, Abbot Laboratories, Spencer Stuart, Manpower,
and Baxter Healthcare, individually represented 18%, 14%, 13%, and 13% of revenue,
respectively.

F-11

---

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.

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:

F-12

---

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

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

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

Software Development Costs

WidePoint accounts for software
development costs related to software products for sale, lease or otherwise marketed in
accordance with Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. For projects
fully funded by the Company, significant development costs are capitalized from the point
of demonstrated technological feasibility until the point in time that the product is
available for general release to customers. Once the product is available for general
release, capitalized costs are amortized based on units sold, or on a straight-line basis
over a 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,
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.

F-13

---

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

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

Basic and Diluted Net
Loss Per Share

Basic income or loss per share
includes no dilution and is computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period. Diluted income or
loss per share includes the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock. The
treasury stock effect of escrowed shares, options and warrants to purchase 20,942,127, 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.

Stock-based compensation

Employee 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-Based Compensation, using the assumptions
below to its stock-based employee plans.

F-14

---

|                                      | Year ended December 31,
|------------------------------------- | -----------------------
|
|Net loss, as reported                 |                        
|Add:  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         |                        

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 

Non-employee based compensation:

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

F-15

---

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.

In May 2003, the FASB issued
Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS 150), which
establishes standards for how companies classify and measure certain financial
instruments with characteristics of both liabilities and equity. It requires companies to
classify a financial instrument that is within its scope as a liability (or an asset in
some circumstances). We believe that the adoption of SFAS 150 will not result in a material change to our financial statements.

F-16

---

|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. | Acquisitions:
|-- | -------------

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-17

---

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)  
|Other assets          
|Current liabilities   
|Deferred tax liability
|                      
|Total                 

| | (1)
Intangible assets.  As part of the Companys preliminary purchase accounting for
ORC, an estimated preliminary          intangible valuation amount of $1,145,523 was
allocated to intangibles for ORCs customer relationships and ORCs PKI
         business opportunity.  An intangible asset was also identified as internally
generated software that was associated with ORCs          PKI-I development of its
PKI phase 1 software product application with a valuation amount of $334,672.  Further, ORC
subsequently          initiated an additional development measure in which ORC was
accumulating the costs associated with the further development          of an additional
software product application, ORCs PKI-II development, with an intangible value of
$175,399, for which ORC          continues to accumulate development costs.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
weighted average lives of 6 and 5 years is associated with the estimated preliminary
purchase valuation of the          intangible value attributed to the ORC purchase
accounting that is related to ORCs customer relationships and ORCs PKI
         business opportunity.  The 5 year period was used as the estimate for the
intangible asset allocated to ORCs customer          relationships, and 6 years was
used as the estimate for the PKI business opportunity.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

F-18

---

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

|                                                                                                                              | As of December 31, 2004
|----------------------------------------------------------------------------------------------------------------------------- | -----------------------
|
|Amortized intangible assets                                                                                                   |                        
|(1)  ORC Intangible (Includes customer relationships and PKI business opportunity purchase accounting preliminary valuations) |                        
|(2)  PKI-I Intangible (Related to internally generated software)                                                              |                        
|                                                                                                                              |                        
|Total                                                                                                                         |                        
|                                                                                                                              |                        
|Unamortized intangible assets                                                                                                 |                        
|(3)  Other (PKI-II Intangible)                                                                                                |                        
|                                                                                                                              |                        
|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-19

---

| | (1) | The
ORC intangible is made up of the estimated preliminary purchase accounting associated
with the valuation assigned by the           Company to ORCs customer relationships and
its PKI business opportunity.  The PKI business opportunity intangible has an estimated life
          of 6 years and ORCs customer relationships has an estimated life of 5 years.
 The PKI business opportunity intangible life was estimated based           upon the contractual life assigned
to the authority to issue PKI certificates by the federal government.  The fair value of
          the PKI business opportunity intangible was estimated using the expected present value of future
cash flows estimated by the Company for ORCs PKI           business opportunity.  ORCs
customer relationship intangible was  estimated based upon an analysis of the historic
life of           ORCs present customer relationships and their present contract
opportunities.  A fair value was estimated using the           expected present value of
the estimated future cash flows generated from those relationships.  The weighted average
life of           this intangible asset class is 5.5 years.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The
PKI-I intangible is related to internally generated software that was associated with ORCs
PKI-I development of its           phase 1 software offerings.  ORC commenced sales of
its PKI-I service in August of 2004.  It has a weighted average life of           5.5
years and is based upon the contractual life assigned to the authority to issue PKI
certificates by the federal           government.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The
PKI-II intangible is related to a secondary PKI software development effort by ORC which
is still ongoing.  Therefore,           no amortization expense has been incurred.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total weighted average life of
all of the intangibles is approximately 5.5 years.

There were no amounts of research
and development assets acquired in 2004, nor any written off in the period.

The
changes in the carrying amount of goodwill for the year ended December 31, 2004 are as
follows:

|                                | Total             
|------------------------------- | ------------------
|Balance as of January 1, 2004   | $                0
|Goodwill acquired during year   | $  2,806,440      
|Balance as of December 31, 2004 | $  2,806,440      

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

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

F-20

---

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-21

---

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 $20,627,872 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:

F-22

---

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

The
Company has determined that its net deferred tax asset did not satisfy the recognition
criteria set forth in SFAS No. 109 and, accordingly, established a valuation allowance
for 100 percent of the net deferred tax asset.

As
of December 31, 2004 the Company had net operating loss carry forwards of approximately
$20,628,000 to offset future taxable income.  These carry forwards expire between 2010
and 2023.  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. | Temporary
Preferred Equity
|-- | --------------------------

Temporary Preferred Stock

Our certificate of incorporation
authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par
value per share, of which 2,045,714 shares were outstanding at December 31, 2004.

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

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

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

F-23

---

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

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

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

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

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

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

| | Registration
Rights Agreement
| | -----------------------------

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

F-24

---

The registration rights agreement
also contains a liquidated damages provision which calls for Barron to receive from
WidePoint a specified amount if: (i) WidePoint fails to file a registration statement
covering the underlying shares of common stock; (ii) the registration statement is not
declared effective by February 22, 2005; or (iii) the registration statement is not
effective in the period from April 23, 2005 (i.e., 180 days following the October 25,
2004 closing of the preferred financing) through the two years following the date of the
registration rights agreement, subject to permissible blackout periods and registration
maintenance periods.  In the event that one of the aforementioned events occurs, the
registration rights agreement calls for WidePoint to pay Barron a cash amount equal to
the lesser of $20,000 or 1% of the purchase price of that portion of the Series A
Convertible Preferred Stock which has not been converted into common stock as of the
occurrence of such event, with such amount to be paid by WidePoint to Barron on a monthly
basis after the occurrence of such event.  Barron is entitled to receive the
aforementioned damages until such time as the registration statement is declared
effective.  Since the registration statement registering the underlying shares of common
stock has not yet been declared effective, Barron is currently entitled to receive such
damages.  If the registration statement is not declared effective by the SEC and does not
remain effective during the above two-year period, the maximum amount of damages payable
pursuant to this provision would be $260,000.

|9. | 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 18,403,407 shares of common stock outstanding, which does
not include escrowed common stock of 5,555,556 and 2,721,987, respectively, that are
associated with shares issued and held in escrow pending contingent release.  The 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.

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.

F-25

---

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 has not been recorded in equity and 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.  The Company  recorded in
equity  816,596 of the common  shares out of 4,082,980  common
shares issued to the Chesapeake  Shareholders  at the time of the  acquisition. The Company
recorded the 816,596 common shares at the time of the acquisition as common stock issuable
and upon the issuance of the common stock by the Companys transfer agent on July 13, 2004, reclassed the common shares as common stock.
  Further,
 for the period ending December 31, 2004, the Company  recorded in equity and released
 544,398 common shares from the escrow to the Chesapeake  Shareholders  after the filing
of the Companys Form 10-K with the Securities and Exchange  Commission with
2,721,987  common shares  continuing to be held within escrow and not  recorded  within
 equity.  The Company  recorded as  compensation  expense the initial  816,596  shares
 issued at the time of the acquisition  of  Chesapeake.  As a result of meeting  certain
 performance  measures,  the  Company  recorded  in equity the release of 544,398
 additional  common shares on December 31, 2004. These shares have been recorded as
common stock issuable as they have not been released from escrow as of December 31, 2004,
per an escrow agreement between the Company and the original Chesapeake shareholders. The
remaining  unearned  Chesapeake  shares  that have not met  certain performance measures
as of December 31, 2004 have not been recorded within equity.

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)

F-26

---

Common stock issuable

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

On December 31, 2004 the original
shareholders of Chesapeake earned 544,398 shares, which will be released from escrow
after the filing of the Companys financial statements on Form 10-K for the period ending
December 31, 2004, per an escrow agreement between the Company and the original
Chesapeake shareholders.  As such, the shares were recorded as Common Stock Issuable as
of December 31, 2004.  Upon the filing of the Companys financial statements on Form 10-K
for the period ending December 31, 2004, the shares will be released from escrow and at
that time reclassed as Common Stock.  The remaining unearned Chesapeake common shares
held in escrow that have not met certain performance measures as of March 31, 2005 have
not been expensed or recorded within equity.

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.

F-27

---

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.

|10. | Financial
Instrument:
|--- | ---------------------

In October of 2004, the Company
issued 10,228,571 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 $3,070,617 for the period ending December
31, 2004, to adjust the difference between the fair-value of these warrants and the
market price.

|11. | 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).

F-28

---

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.

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

F-29

---

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.

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.

|12. | 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:

F-30

---

|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

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.

|13. | 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.

F-31

---

|14. | 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-32