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

|[X] | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF           1934.
For the fiscal year ended December 31, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

OR

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

Commission File Number
000-23967

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

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

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

Securities registered
pursuant to Section 12(b) of the Act: None

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

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

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

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).    Yes   [_]
         No   [X]

The
aggregate market value of the registrants Common Stock, par value $.001 per share,
held as of the last business day of the registrants most recently completed second
fiscal quarter by non-affiliates of the registrant was approximately $1,257,442 based on
the average bid and asked prices of the Common Stock on such date.

As
of March 26, 2004, the registrant had 19,662,893 shares of its Common Stock issued and
outstanding.

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

---

ITEM 1. BUSINESS

# Introduction

WidePoint Corporation
(WidePoint or the Company) 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.

From 1999 through 2002, the Company
undertook several initiatives in an effort to transition the Company from a Millennium
solutions provider to an integrated IT Services company.  In addition
to establishing the WidePoint Corporate identity and brand imagery and
optimizing the organizational structure, management implemented a services strategy
that was responsive to the evolving requirements of the Companys markets, customers
and target markets.

During 2002 and 2003, the Company
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 the Company provides.

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

As a result of the Companys
2003 efforts, the Company was awarded a GSA Corporate Schedule in February of 2004
enhancing its ability to market to federal government markets.  In addition, the
Company agreed to acquire Chesapeake Government Technologies, Inc.
(Chesapeake), on March 24, 2004.  The acquisition of
Chesapeake accelerates the timing of the Companys ability to compete for
federal business due to Chesapeakes existing alliances and expertise
within the federal marketplace.  The Company intends to leverage both
Chesapeakes capabilities its GSA Schedule to expand its revenue base, as
it continues to look for and analyze growth alternatives via selected merger and
acquisition opportunities.

Most of the Companys current
costs consist primarily of the salaries and benefits paid to the Companys technical,
marketing and administrative personnel.  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 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 structure is labor related, the Company must effectively manage these
costs to achieve and grow its profitability.  To date, the Company has attempted to
maximize its operating margins through efficiencies achieved by the use of the
Companys proprietary methodologies, and by offsetting increases in consultant
salaries with increases in consultant fees received from its clients.

2

---

# Business Strategy and
Services

WidePoints strategy for its
project-based initiatives has been to apply a structured delivery methodology based on
industry standard best practices, enhanced with a set of deliverable templates that boost
productivity and effectiveness through its consultants. WidePoint focuses on providing end
results with significant, tangible business benefits through its consultants that possess
recognized industry-standard certifications and years of successful project experience.
WidePoints strategy for its staff augmentation services has been to provide a value
added service based upon its best to market practices developed by the Company
which utilizes a rapid response to the Companies clients of highly trained consultants.

The Company presently focuses on
planning, implementing and supporting IT-based initiatives with the following services:

# Architecture and
Planning Services

| |  | IT
Strategic Planning
| | - | ---------------------

| |  | Software
Selection
| | - | ------------------

| |  | Program
Management
| | - | ------------------

| |  | Project
Management
| | - | ------------------

# IT Outsource Solutions

| |  | Infrastructure
Management
| | - | -------------------------

| |  | Applications
Management
| | - | -----------------------

| |  | Architecture
and Design
| | - | -----------------------

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

# Clients

The client base of the Company is
located predominantly within North America. The Company has experience and expertise in
the successful completion and staff augmentation of projects in the following industries:
manufacturing, consumer product goods, direct marketing, healthcare and financial
services.

3

---

Historically the Company derived, and
may in the future derive, a significant percentage of its total revenues from a relatively
small number of clients. During 2003, four customers individually represented 18%, 14%,
13% and 13% of revenues, respectively. Due to the nature of the Companys business
and the relative size of certain contracts, the loss of any single significant customer
could have a material adverse effect on the Companys results of operations.

# Marketing and Sales

The Company focuses its sales and
marketing efforts on corporations with significant IT budgets and requirements. While the
Company performs work for companies in various industries, the majority of the
Companys revenues for 2003 were derived from contracts and projects with
manufacturing clients, consumer products clients, healthcare clients, and financial
services clients.

The Company markets its solutions
through its direct sales force, and alliances with several strategic partnerships in
specific industries. The direct sales force is responsible for providing highly
responsive, quality service and ensuring client satisfaction with the Companys
services. The Companys strategic partnerships and alliances provide the Company with
additional access to potential clients.

# Competition

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

# Intellectual Property

The Companys intellectual
property primarily consists of methodologies developed for use in application development
solutions. The Company does not have any patents and relies upon a combination of trade
secrets, copyright and trademark laws, and contractual restrictions to establish and
protect its ownership of its proprietary methodologies. The Company generally enters into
nondisclosure and confidentiality agreements with its employees, partners, consultants,
independent sales agents and clients. As the number of competitors providing services
similar to the services of the Company increases, the likelihood of similar methodologies
being used by competitors increases. Although the Companys methodologies have never
been subject to an infringement claim, there can be no assurance that third parties will
not assert infringement claims against the Company in the future, that the assertion of
such claims will not result in litigation, or that the Company would prevail in such
litigation or be able to obtain the license for the use of any allegedly infringed
intellectual property from a third party on commercially reasonable terms. Further,
litigation regardless of its outcome could result in substantial cost to the Company and
divert managements attention from the Companys operations. Although the
Company is not aware of any basis upon which a third party could assert an infringement
claim, any infringement claim or litigation against the Company could materially adversely
affect the Companys business, operating results and financial condition.

4

---

# Personnel

As of December 31, 2003, the Company
had 34 full time employees and 1 part-time employee including 3 persons in sales and
recruiting, 29 persons in consulting, and 3 persons in management and administration. The
Company also periodically employs additional consultants and temporary employees.

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

5

---

ITEM 2. PROPERTIES.

The principal executive office of the
Company consists of approximately 3,500 square feet of office space located at One Lincoln
Centre, Suite 1100, Oakbrook Terrace, Illinois, which is currently being leased by the
Company through July 2007 for approximately $3,500 per month. The Companys rent in
2003 under a prior sublease for the office at One Lincoln Centre was approximately
$66,000.

The Company also leased a branch
office located at 4401 Rockside Road, Suite 405, Independence, Ohio, in approximately
1,131 square feet under a lease that expired on June 30, 2003. The Companys annual
rent in 2003 for such branch office was approximately $12,000. The Company also pays its
pro rata share of increases in real estate taxes and operating expenses for this office.
The Company was subleasing this office space for approximately $1,200 per month.

During 2000, several offices of the
Company were closed and their leases were either sublet, assigned, or have expired. The
Michigan office lease located at 32000 Northwestern Highway, Suite 165, Farmington Hills,
Michigan was sublet to Galaxy Builders in June 2000 for the same terms as those of the
Companys lease for that location. The Companys annual rent in 2003 for that
property was approximately $38,000 and the lease expires on February 24, 2004. The lease
for the former corporate headquarters office of the Company located at 20251 Century
Boulevard, Germantown, Maryland was assigned on December 1, 2000 to GHG Holdings, Inc.,
which assigned lease expired on September 30, 2005. The Company is secondarily liable if
GHG Holdings, Inc were to default on that assigned lease.

For additional information regarding
the Companys lease obligations, see Note 9 of Notes to Consolidated Financial
Statements.

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

ITEM 3. LEGAL PROCEEDINGS.

The Company is not involved in any
material legal proceedings.

6

---

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

The
Companys Annual Meeting of Stockholders was held on December 18, 2003.

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

|Name              | Votes For | Votes Withheld
|----------------- | --------- | --------------
|Steve L. Komar    | 9,470,533 | 1,544,193     
|James T. McCubbin | 9,470,533 | 1,544,193     

Stockholders
ratified the selection of Grant Thornton LLP as the independent accountants for the
Company for the current fiscal year. Such proposal was approved by a vote of 11,012,876
shares for and 1,750 shares against, with 100 shares abstaining.

7

---

PART II

ITEM 5.  MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED              STOCKHOLDER MATTERS.

The Companys Common Stock is
quoted on the NASD OTC Bulletin Board under the symbol WDPT and the Frankfurt
and Berlin exchanges under the symbol ZMX. From July 5, 2000 to March 1, 2001
the Companys Common Stock was traded on the NASDAQ SmallCap Market under the symbol
WDPT.

The stock prices listed below
represent the high and low closing bid prices of the Common Stock for each of the periods
indicated:

|2003           | High  | Low  
|-------------- | ----- | -----
|First Quarter  | $0.17 | $0.08
|Second Quarter | 0.19  | 0.09 
|Third Quarter  | 0.14  | 0.09 
|Fourth Quarter | 0.17  | 0.09 
|2002           | High  | Low  
|First Quarter  | $0.19 | $0.07
|Second Quarter | 0.13  | 0.06 
|Third Quarter  | 0.15  | 0.06 
|Fourth Quarter | 0.16  | 0.07 

As
of March 22, 2004 there were 171 registered holders of record of the Companys Common
Stock and approximately 2,590 beneficial holders of record of the Companys Common
Stock.

Dividend Policy

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

ITEM 6.  SELECTED
CONSOLIDATED FINANCIAL INFORMATION.

The tables below present selected
historical financial data of WidePoint. The WidePoint historical data for the years ended
December 31, 2003, 2002, and 2001 are derived from the historical financial statements of
WidePoint Corporation as audited by Grant Thornton LLP in 2003, 2002 and 2001, included
elsewhere in this Form 10-K.

9

---

The information set forth below
should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations and the historical financial
statements and notes thereto included elsewhere herein.

# Selected Consolidated
Financial Information

|                                   | 2003 | 2002 | 2001 | 2000       | 1999
|---------------------------------- | ---- | ---- | ---- | ---------- | ----
|Statement of Operations Data:      |      |      |      |            |     
|Revenues                           |      |      | $    | 3,293,508  |     
|Cost of revenues                   |      |      |      | 2,460,281  |     
|Research and development expense   |      |      |      | --         |     
|Sales and marketing expense        |      |      |      | 430,065    |     
|General and administrative expense |      |      |      | 693,220    |     
|Facilities closing expense         |      |      |      | --         |     
|Disposition of subsidiary          |      |      |      | --         |     
|Impairment of long-term assets     |      |      |      | --         |     
|Depreciation and amortization      |      |      |      | 12,777     |     
|                                   |      |      |      |            |     
|Loss from operations               |      |      |      | (302,835   | )   
|                                   |      |      |      |            |     
|Other income (expense):            |      |     
|Interest income                    |      |      |      | 11,551     |     
|Interest expense                   |      |      |      | (1,304     | )   
|Other                              |      |      |      | 1,500      |     
|                                   |      |      |      |            |     
|Net loss before income taxes       |      |      |      | (291,088   | )   
|Income taxes                       |      |      |      | --         |     
|                                   |      |      |      |            |     
|Net loss                           |      |      |      | (291,088   | )   
|                                   |      |      |      |            |     
|Basic and diluted loss per share   |      |      | $    | (0.02      | )   
|                                   |      |      |      |            |     
|Basic and diluted weighted average |      |     
|shares outstanding                 |      |      |      | 15,579,913 |     
|                                   |      |      |      |            |     

9

---

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

# Forward Looking
Statements

The information set forth below
includes forward-looking statements. Certain factors that could cause results to differ
materially from those projected in the forward-looking statements are set forth below.
Readers are cautioned not to put undue reliance on forward-looking statements. The Company
disclaims any intent or obligation to update publicly these forward-looking statements,
whether as a result of new information, future events or otherwise.

# Overview

WidePoint Corporation is
a consulting services firm specializing in planning, managing and implementing
Information Technology (IT) solutions. Its staff consists of business and
computer specialists who help customers augment and expand their resident
technologic skills and competencies, drive technical innovation, and help
develop and maintain a competitive edge in todays rapidly changing technological
environment in business.

During 2002 and 2003, the Company
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 the Company provides.
In the continuing effort to differentiate itself and to overcome the highly
competitive environment that has been an obstacle to the expansion of its revenue
streams, the Company has modified its strategic plan; including the launch of a
federal sector business initiative, continued development of new technologies and
capabilities tied to wireless technologies, and the initiation and
expansion of several alliances and relationships to expand the Companys ability
to penetrate new market segments.

For the year ended December 31, 2003,
the Companys revenues decreased by 6% from approximately $3.5 million in 2002 to
approximately $3.3 million in 2003. This decrease was materially due to the negative
pricing pressures that resulted from the highly competitive economic environment that
reduced average billing rates for the Companys consultants.

Most of the Companys current
costs consist primarily of the salaries and benefits paid to the Companys technical,
marketing and administrative personnel.  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 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 structure are 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.

10

---

# Critical Accounting
Policies

Our 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. We believe that the estimates, judgments and assumptions upon
which we rely are reasonably based upon information available to us 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, our financial statements will be affected. The
significant accounting policies that we believe are the most critical to aid in fully
understanding and evaluating our reported financial results include the following:

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

| | Allowance
for doubtful accounts; 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. Our senior management has reviewed these critical accounting
policies and related disclosures with our Audit Committee. See Notes to Consolidated
Financial Statements, which contain additional information regarding our accounting
policies and other disclosures required by U.S. GAAP.

Revenue Recognition

Revenue on time-and-materials
contracts is recognized based upon hours incurred at contract rates plus direct costs.
Revenue on fixed-price contracts is recognized on the percentage-of-completion method
based on costs incurred in relation to total estimated costs. Anticipated losses are
recognized as soon as they become known. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.

In accordance with EITF 99-19 and SAB
104, we recognize our study revenue on a gross basis as we act as a principal in such
transactions, can influence price, are involved in the product specifications and have
credit risk.

Allowance for Doubtful
Accounts

We determine our allowance by
considering a number of factors, including the length of time trade accounts receivable
are past due, our previous loss history, the customers current ability to pay its
obligation to us, and the condition of the general economy and the industry as a whole. We
make judgments as to our 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.

11

---

Accounting for Income
Taxes

We account 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.

We have 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, we
have recorded a full valuation allowance against net deferred tax assets. Although we
believe that our 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 our
historical income tax provisions. Such differences could have a material effect on our
income tax provision and net income in the period in which such determination is made.

# Results of Operations

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.

12

---

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

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

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 income (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 ($0.1)
million for the year ended December 31, 2002.

Year Ended December 31,
2002 Compared to the Year ended December 31, 2001

Revenues. Revenues
for the year ended December 31, 2002, were approximately $3.5           million, a
decrease of $2.4 million, as compared to revenues of approximately           $5.9 million
for the year ended December 31, 2001. The 41% decrease in revenues           in 2002 was
primarily attributable to the severe contraction of IT based           initiatives among
the Companys clients as a result of economic instability           that resulted in
a materially reduced level of capital investment in new           technologies during
2002.

Gross profit.Gross profit for
the year ended December 31, 2002, was $1.0 million, or 29% of revenues, a decrease of $1.8
million as compared to gross profit of $2.8 million, or 47% of revenues, for the year
ended December 31, 2001. The decrease in the amount of gross profit was attributable to a
reduction in revenues and a degradation of operating margins caused by a decrease in
demand for the Companys services as a result of the difficult economic marketplace
during 2002 as compared to 2001.

Sales and marketing. Sales and
marketing expenses for the year ended December 31, 2002 were $0.5 million, or 15% of
revenues, as compared to $0.6 million, or 10% of revenues, for the year ended December 31,
2001. The $0.1 million decrease in sales and marketing expenses for the year ended
December 31, 2002, 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.

13

---

General and administrative.
General and administrative expenses for the year ended December 31, 2002 were $0.6
million, or 18% of revenues, as compared to $2.5 million, or 43% of revenues, for the year
ended December 31, 2001. The $1.9 million decrease in general and administrative expenses
in 2002 was primarily attributable to the Companys efforts to match general and
administrative expenses to the operational requirements of the Companys business
which resulted in a reduction in employees and overhead expenses.

Interest income (expense).
Interest income for the year ended December 31, 2002 was $17,658, a decrease of $26,996 or
50%, as compared to $44,654 for the year ended December 31, 2001. The decrease in interest
income in 2002 was primarily attributable to lower interest rates. Interest expense for
the year ended December 31, 2002 was $1,559, a decrease of $3,672 or 70%, as compared to
$5,231 in interest expense for the year ended December 31, 2001. The decrease in interest
expense in 2002 was primarily attributable to the elimination of the long-term portion of
capital lease obligations.

Facilities closing expense.
The loss from operations for the year ended December 31, 2001 included a one-time charge
of $43,500 for facilities closing expense related to the closure of the Companys
Ohio office.

Asset Impairment.The
impairment of assets for the year ended December 31, 2001 included a charge of
approximately $5.9 million related to the write-down of intangible assets associated with
the purchase of Eclipse in December 1998.

Net income (loss).As a result
of the above, the net loss for the year ended December 31, 2002 was $(0.06) million, a
decrease of $6.8 million, as compared to the net loss of $6.8 million for the year ended
December 31, 2001.

# Liquidity and Capital
Resources

The Company has, since inception,
financed its operations and capital expenditures through the sale of common stock,
convertible notes, convertible exchangeable debentures, the proceeds from an exchange
offer of debt for equity and the exercise of warrants related to convertible exchangeable
debentures. During 2003 and 2002 the Company has financed its operations with its working
capital. Cash used in operating activities for the year ended December 31, 2003 was
approximately $0.3 million, a decrease of $0.0 million versus the cash used in operating
activities of $0.3 million for the year ended December 31, 2002. Total cash used for the
year ended December 31, 2003 was approximately $0.3 million, as compared to cash used of
$0.4 million for the year ended December 31, 2002. The cash used during the year ended
December 31, 2003 was primarily a result of slower collections of accounts receivable and
a reduction in accounts payable, accrued expenses, and other liabilities that resulted
from lesser revenues in 2003 as compared to 2002. Capital expenditures on property and
equipment for the year ended December 31, 2003 were $7,802. There were no Capital
expenditures on property and equipment for the year ended December 31, 2002.

14

---

As of December 31, 2003, the Company
had working capital of $1.1 million. The Companys primary source of liquidity
consists of $0.9 million in cash and cash equivalents and $0.4 million of accounts
receivable. The Companys current liabilities include $0.3 million in accounts
payable and accrued expenses.

The Companys business
environment is characterized by rapid technological changes. In 2003, the Company
continued to implement a strategic plan to reverse its declining revenue trend by
expanding into additional markets and services. The Company requires substantial working
capital to fund these endeavors and the future growth of its business, particularly to
finance accounts receivable, sales and marketing efforts, and capital expenditures. The
Company currently has no material commitments for capital expenditures. The Companys
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. The Company
believes that its current cash position is sufficient to meet its capital expenditure and
working capital requirements for the near term; however, the Companys declining
revenue growth and the investment to add new markets and services make it difficult for
the Company to predict future liquidity requirements with certainty. Over the longer term,
the Company must successfully execute its plans to generate significant positive cash
flows from increased revenues if it is to sustain adequate liquidity without impairing
growth or requiring the infusion of additional funds from external sources. Additionally,
an expansion, such as would occur with the acquisition of a significant new subsidiary,
might also require external financing that could include additional debt or equity
capital. There can be no assurance that additional financing, if required, will be
available on acceptable terms, if at all.

# Contractual Obligations

|                               | Payments due by period
|------------------------------ | ----------------------
|Contractual Obligations        | Total                 
|Long-Term Debt Obligations     | $ --                  
|Capital Lease Obligations      | $ --                  
|Operating Lease Obligations(1) | $ --                  
|Purchase Obligations           | $ --                  
|Other Long-Term Liabilities    | $ --                  
|                               |                       
|Total                          | $ --                  

| | (1).
 The Company had no operation lease obligations at December 31, 2003.  On February 1,
2004 the Company entered into an operating lease for the Companys office located at One
Lincoln Center, Oakbrook Terrace, Il 60181.  The lease runs through July 31, 2007, with
payments in 2004 representing an obligation of approximately $27,800.00 and payments from
2005 to 2007 representing obligations of approximately $113,400.00.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

---

# 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 in the
Competitive Pressures Section of 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 up-date publicly these forward-looking statements,
whether as a result of new information, future events or otherwise.

# Off-Balance Sheet
Arrangements

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

ITEM 8.  FINANCIAL
STATEMENTS AND SUPPLEMENTAL DATA

The
consolidated financial statements and schedules required hereunder and contained herein
are listed under Item 14(a) below.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

We
maintain a set of disclosure controls and procedures designed to ensure that information
required to be disclosed by WidePoint in reports that it files or submits under the
Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms. Within the 90-day
period prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that WidePoints disclosure controls and procedures are
effective.

Subsequent to the date of their
evaluation, there have been no significant changes in WidePoints internal controls
or in other factors that could significantly affect these controls.

16

---

# Part III.

ITEM 10.  DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT.

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

|NAME                | POSITION WITHTHE COMPANY        | AGE | BECAMEDIRECTOR
|------------------- | ------------------------------- | --- | --------------
|Steve L. Komar      | Chairman of the Board of        | 62  | 1997          
|                    | Directors and                  
|                    | Chief Executive Officer        
|James T. McCubbin   | Director, Secretary and         | 40  | 1998          
|                    | Treasurer, and                 
|                    | Chief Financial Officer        
|James M. Ritter     | Director and                    | 59  | 1999          
|                    | Assistant Secretary            
|G.W. Norman Wareham | Director                        | 50  | 1997          
|Mark Mirabile       | Director and Vice President and | 41  | 2002          
|                    | Chief Operations Officer       

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

James
T. McCubbin has served as a director and Secretary and Treasurer of the Company since
November 1998. Since August 1998, Mr. McCubbin has also served as the Companys Vice
President and Chief Financial Officer. Prior to that time, from December 1997 to August
1998, Mr. McCubbin served as the Vice President, Controller, Assistant Secretary and
Treasurer of the Company. Prior to his employment with the Company in November 1997, Mr.
McCubbin held various financial management positions with a wide range of companies. Mr.
McCubbin is a graduate of the University of Maryland with a Bachelor of Science Degree in
Finance and a Masters Degree in International Management.

17

---

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

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

Mark
Mirabile has served as a Director of the Company since his appointment in April, 2002.
Mr Mirabile has also served as the Vice President and Chief Operations Officer for the
Company since December 2001. From June 2000 to November 2001, Mr. Mirabile served as the
Vice President of Sales and Marketing for the Company. Prior to that time, from November
1992 to May 2000, Mr. Mirabile served as the Vice President of Eclipse Information
Systems, Inc. (Eclipse), a wholly-owned subsidiary of the Company. Mr.
Mirabile was a co-founder of Eclipse prior to its acquisition by the Company in December
1998. Mr. Mirabile has over 20 years experience in information technology at both the
executive and technical levels. He has an Associates Degree in Applied Science-Accounting
from Daley Community College in Chicago.

ITEM 11. EXECUTIVE COMPENSATION.

The following Summary Compensation
Table sets forth the annual salary (column c) and bonus (column d) paid and options
granted (column g) during each of the past three years to the Companys Chief
Executive Officer and the other executive officers of the Company at December 31, 2003
whose annual salary and bonus in 2003 exceeded $100,000.

|Summary Compensation Table
|--------------------------
|
|
|
|James McCubbin            
|Vice President & Chief    
|Financial Officer         
|Financial Officer         
|                          
|Mark Mirabile             
|Vice President & Chief    
|Operations Officer        
|                          

18

---

---

1     Does not report the
approximate cost to the Company of an automobile allowance furnished to the above persons,
which amounts do not exceed the lesser of either $50,000 or 10% of the total of the
persons annual salary and bonuses for 2003.

2    Reports the number of
shares underlying options granted during each of the respective years.

The
following Option Grants Table sets forth, for each of the named executive officers,
information regarding individual grants of options granted in 2003 and their potential
realizable value. Information regarding individual option grants includes the number of
options granted, the percentage of total grants to employees represented by each grant,
the per-share exercise price and the expiration date. The potential realizable value of
the options are based on assumed annual 0%, 5% and 10% rates of stock price appreciation
over the term of the option.

|Option Grants Table
|-------------------
|Individual Grants  
|Name               
|Steve Komar        
|Steve Komar        
|                   

---

1  The reported options
were granted by the Company to the named executive officers under the Companys 1997
Stock Option Plan. The options which expire on April 21, 2013 for 50,000 common shares of
the Companys stock vest 25,000 options on July 21, 2003, 12,500 options on April 21,
2004 and 12,500 on April 21, 2005. The options which expire on December 31, 2013 for
50,000 common shares of the Companys stock vest for 100% of the granted options on
December 31, 2004.

2  Based on options for a total of
400,000 shares granted to all employees in 2003.

3  The exercise price is
equal to the fair market value on the date of grant of the option.

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

19

---

The
following Option Exercises and Year-End Value Table is set forth herein because it sets
forth, for each of the named executive officers, information regarding the number and
value of unexercised options at December 31, 2002. No options were exercised by such
persons during 2002.

|Aggregate Option Exercises and Fiscal Year-End Option Value Table
|-----------------------------------------------------------------
|(a)
Name                                                         
|Steve Komar                                                      
|                                                                 
|James McCubbin                                                   
|                                                                 
|Mark Mirabile                                                    
|                                                                 

1  The reported options
were granted by the Company to the named executive officer.

2  Market value of
underlying shares at December 31, 2003, minus the exercise price.

3  The above-reported options entitle
Mr. Komar to purchase from the Company (i) 400,000 common shares at a price of $0.07 per
share through July 7, 2012, pursuant to a stock option granted to him on July 7, 2002
under the Incentive Plan, and (ii) 25,000 common shares at a price of $0.09 per share
through April 24, 2013 pursuant to a stock option granted to him on April 24, 2003 and
which fully vested on July 24, 2003, and iii) 100,000 shares at a price of $0.07 per share
through July 7, 2012, under an option granted on July 7, 2002, with such shares vesting
25,000 shares annually through January 2, 2004 or by the earlier vesting by the
compensation committee, 12,500 common shares at a price of $0.09 per share through April
24, 2013 pursuant to a stock option granted to him on April 24, 2003, with such shares
vesting on April 24, 2004 or by the earlier vesting by the compensation committee, 12,500
common shares at a price of $0.09 per share through April 24, 2013 pursuant to a stock
option granted to him on April 24, 2003, with such shares vesting on April 24, 2005 or by
the earlier vesting by the compensation committee, 50,000 common shares at a price of
$0.13 per share through December 31, 2013 pursuant to a stock option granted to him on
December 31, 2013, with such shares vesting on December 31, 2004 or by the earlier vesting
by the compensation committee.

4  The above-reported
options entitle Mr. McCubbin to purchase from the Company (i) 1,000 common shares at a
price of $1.35 per share through July 3, 2010 under an option granted on July 3, 2000, of
which 1,000 shares are currently exercisable, (ii) 400,000 common shares at a price of
$0.17 per share through January 2, 2011, pursuant to a stock option granted to him on
January 2, 2001 under the Incentive Plan, and (iii) 100,000 shares at a price of $0.17 per
share through January 2, 2011, under an option granted on January 2, 2001, with such
shares vesting 100,000 shares annually through January 2, 2004 or by the earlier vesting
by the compensation committee.

20

---

5  The above-reported
options entitle Mr. Mirabile to purchase from the Company (i) 1,000 common shares at a
price of $1.35 per share through July 3, 2010 under an option granted on July 3, 2000, of
which 1,000 shares are currently exercisable, (ii) 400,000 common shares at a price of
$0.17 per share through January 2, 2011, pursuant to a stock option granted to him on
January 2, 2001 under the Incentive Plan, and (iii) 100,000 shares at a price of $0.17 per
share through January 2, 2011, under an option granted on January 2, 2001, with such
shares vesting 100,000 shares annually through January 2, 2004 or by the earlier vesting
by the compensation committee.

No
Long-Term Incentive Plan Awards Table is set forth herein because no long-term incentive
plan awards were made to the above-named executive officers during 2003.

# Employment Agreements
and Arrangements

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

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

21

---

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

# Compensation Committee
Report on Executive Compensation

The
Compensation Committee consists of Steve L. Komar, G.W. Norman Wareham and James Ritter,
with Mr. Ritter as Chairman of the Committee. The Compensation Committee determines the
compensation paid to the Chief Executive Officer and the other executive officers and
consultants of the Company. Mr Komar, who is currently serving as the Chief Executive
Officer of the Company, does not participate in the determination by the Committee of the
compensation paid to the Chief Executive Officer. The Compensation Committee believes that
for the Company to be successful long-term and for the Company to increase stockholder
value, the Company must be able to hire, retain, adequately compensate and financially
motivate talented and ambitious executives. The Compensation Committee attempts to reward
executives for both individual achievement and overall Company success.

Executive compensation is made up of
three components:

Base
Salary. An executives base salary is initially determined by considering the
executives level of responsibility, prior experience and compensation history.
Published salaries of executives in similar positions at other companies of comparable
size (sales and/or number of employees) is also considered in establishing base salary.

Stock
Options. In 1997, the Company adopted the 1997 Incentive Stock Plan to provide stock
option awards to certain executives of the Company and its subsidiaries. The Compensation
Committee believes that the granting of stock options is directly linked to increased
executive commitment and motivation and to the long-term success of the Company. The
Compensation Committee awards stock options to certain executives of the Company and its
subsidiaries. Mr Komar,who is currently serving as the Chief Executive Officer of the
Company, does not participate in the determination by the Committee of any stock options
to be granted to the Chief Executive Officer. The Compensation Committee uses both
subjective appraisals of the executives performance and the Companys
performance and financial success during the previous year to determine option grants.

Bonus.          The
Company has also implemented an executive bonus program for certain of its
          executives. Such bonuses are based, in part, on the Companys financial
          performance during the previous fiscal year including achievement of gross
          revenue and net income targets. In addition, objective individual measures of
          performance compared to the individuals business unit profit performance
          may be considered. A subjective rating of the executives personal
          performance may also be considered. Bonuses may be paid in cash or Company
          Common Stock or a combination of cash and Company Common Stock. Bonuses are
          typically linked to a percentage of base salary.

22

---

In
early 2003, the Compensation Committee recommended to the Board of Directors and the Board
of Directors approved a compensation package for the Companys Chief Operations
Officer, Mark Mirabile, and the Companys Vice President and Chief Financial Officer,
James McCubbin, that included a base salary of approximately $119,000 in 2003 for both Mr.
Mirabile and Mr. McCubbin , plus a possible bonus for each of them of up to 125% of their
base salary. Receipt of the bonus is subject to the Companys achievement of certain
performance criteria, including gross revenue and net income targets. If the performance
criteria are not achieved or the executive is no longer employed by the Company (other
than for cause termination), a bonus may be awarded in the discretion of the Compensation
Committee. A bonus of $ 43,500 was awarded to Mr. Mirabile and a bonus of $ 31,500 was
awarded to Mr. McCubbin in 2003, based upon the achievement of certain performance
criteria established by the Compensation Committee.

In
determining the 2003 compensation packages for these executive officers, the Compensation
Committee considered certain achievements that both executives provided in satisfying
milestones in executing the Companys strategic repositioning of the Company.

Exceptions
to the general principles stated above can be made when the Compensation Committee deems
them appropriate and in the best interests of stockholders. The Compensation Committee
regularly considers other forms of compensation and modifications of its present policies,
and will make changes as it deems appropriate. The competitive opportunities to which the
Companys executives are exposed frequently come from private companies or divisions
of large companies, for which published compensation data is often unavailable and,
therefore, the Compensation Committees information about such opportunities is often
anecdotal.

Section
162(m) of the Internal Revenue Code of 1986, as amended, establishes a limit on the
deductibility of annual compensation for certain executive officers that exceeds
$1,000,000 per year unless certain requirements are met. The Company does not anticipate
that any employee will exceed such $1,000,000 cap in the near future but will consider
whether any necessary adjustments are appropriate if it becomes likely that any executive
officers compensation may exceed the $1,000,000 limit.

23

---

# Stock Options

1997 Stock Incentive
Plan. In May 1997, the Board of Directors adopted, and in December 1997 the
stockholders of the Company approved, the Companys 1997 Stock Incentive Plan (the
Incentive Plan), which provides for the award of a variety of equity-based
incentives, including stock awards, stock options, stock appreciation rights, phantom
shares, performance unit appreciation rights and dividend equivalents (collectively,
Stock Incentives). The Incentive Plan is administered by The Compensation
Committee and provides for the grant of Stock Incentives officers, key employees and
consultants of the Company to purchase up to an aggregate of 3,000,000 shares of Common
Stock at not less than 100% of fair market value on the date granted. The vesting and
exercisability of any Stock Incentives granted under the Incentive Plan is subject to the
determination of and criteria set by the committee. As of March 26, 2003, options to
purchase a total of 2,112,000 shares of Common Stock under the Incentive Plan, at prices
ranging from $0.07 to $1.35 per share, were outstanding, of which options to purchase
1,886,340 shares were presently exercisable.

1997
Directors Formula Stock Option Plan. In May 1997, the Board of Directors
adopted, and in December 1997 the stockholders of the Company approved, the Companys
1997 Directors Formula Stock Option Plan (the Director Plan). Other than
Messrs. Komar, Wareham, and Ritter, directors of the Company who are not employed by the
Company and who do not perform services for the Company are eligible to receive options
under the Director Plan.

The
Director Plan is administered by a committee which presently consists of Messrs. Komar and
McCubbin. Options become exercisable when vested and expire ten years after the date of
grant, subject to such shorter period as may be provided in the agreement. A total of
140,000 shares of Common Stock are reserved for possible issuance upon the exercise of
options under the Director Plan. During 2003, options granted and vested by the
Directors were returned to the Company and presently no options under the Director
Plan is either granted or vested.

# Directors Fees

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

AUDIT
COMMITTEE REPORT

Overview

The
Board of Directors has an Audit and Finance Committee, which conducted four meetings
during 2003 and presently consists of Steve L. Komar, G.W. Norman Wareham and James
Ritter. Mr. Komar is a director and also serves as the Chief Executive Officer of the
Company. Mr. Wareham and Mr. Ritter are independent, non-employee directors. The Audit and
Finance Committee is responsible for meeting with the Companys independent
accountants to review the proposed scope of the annual audit of the Companys books
and records, reviewing the findings of the independent accountants upon completion of the
annual audit, and reporting to the Board of Directors with respect thereto. All of the
members of the Audit Committee are considered by the Board to be financially literate and
at least two, Mr. Wareham and Mr. Komar, are considered by the Board to have accounting or
related financial management expertise.

24

---

Financial Statement
Review.

The
Audit Committee has: (a reviewed and discussed the audited financial statements with the
management of the Company; (b) discussed with the Companys independent auditors,
Grant Thornton LLP, the matters required to be discussed by Statement on Auditing
Standards No. 61; (c) received from the Companys independent auditors the
written disclosures and the letter required by Independence Standard Board Standard No. 1,
and has discussed with the Companys independent auditors their independence; and (d)
based on the review and discussions referred to in clauses (a), (b) and (c) above,
recommended to the Board that the audited financial statements be included in the
Companys Annual Report on Form 10-K for fiscal year 2003 for filing with the
Securities and Exchange Commission.

Independent Auditors.

The
Companys Board of Directors appointed the accounting firm of Grant Thornton
LLP to serve as the Companys independent accountants for the fiscal year ending
December 31, 2002 and 2001. Upon the recommendation of the Audit Committee, the Board has
selected Grant Thornton LLP as the Companys independent auditor for fiscal year
2003.

The
 foregoing  report is  submitted  by the  members  of the Audit  Committee  as of the
Record  Date:  G.W.  Norman  Wareham (Chairman), James Ritter, and Steve L. Komar.

25

---

# STOCK PERFORMANCE CHART

The
following chart compares the cumulative total stockholder return for the Common Stock of
the Company (and its predecessors) with the Russell 2000 and the RDG Technolgogy Composite
since December 31, 1998.

# [GRAPHIC OMITTED]

|                        
|------------------------
|WidePoint Corporation   
|                        
|Russell 2000            
|                        
|RDG Technology Composite
|                        

# CODE OF ETHICS

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

26

---

ITEM 12.  SECURITY
OWNERSHIP OF CERTAIN BENFICIAL OWNERS AND MANAGEMENT.

# PRINCIPAL STOCKHOLDERS

The
following table sets forth the number of shares of Common Stock beneficially owned as of
December 31, 2003 by: (i) each person known by the Company to be the beneficial owner of
5% or more of such class of securities, (ii) each director of the Company and (iii) all
directors and officers of the Company as a group.

|Directors, Nominees
and 5% Stockholders | Number of
Shares of
Common Stock(1) | Percent of
Outstanding
Common Stock(1)
|--------------------------------------- | ----------------------------------- | --------------------------------------
|Michael C. Higgins (2)                  | 1,488,000                           | 9.6%                                  
|Michael S. Cannon (3)                   | 1,046,730                           | 6.7%                                  
|Steve L. Komar (4)                      | 1,290,000                           | 8.3%                                  
|G.W. Norman Wareham (5)                 | 25,000                              | 0.1%                                  
|James T. McCubbin (6)                   | 1,266,000                           | 8.1%                                  
|James M. Ritter (7)                     | 26,500                              | 0.1%                                  
|Mark Mirabile (8)                       | 1,436,000                           | 9.2%                                  
|All directors and                      
|officers as a group                    
|(5 persons) (10)                        | 4,043,500                           | 25.9%                                 

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

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

(3)              Mr.
Cannon died in November 2001. The address of Mr. Cannon prior to his death           was
PMB 422, 12179 South Apopka Vineland Road, Orlando, Florida.

(4)              Includes
(i) 865,000 shares of Common Stock purchased by Mr. Komar from the           Company on
July 8, 2002 in a private transaction without registration under the           Securities
Act of 1933, pursuant to the private offering exemption under Section           4(2)
thereof, (ii) 400,000 common shares at a price of $0.07 per share through           July
7, 2012, pursuant to a stock option granted to him on July 7, 2002 under           the
Incentive Plan, and (iii) 25,000 common shares at a price of $0.09 per share
          through April 24, 2013, under an option granted on April 24, 2003, with such
          shares vesting on July 24, 2003 under the Incentive Plan. Does not include
          25,000 common shares at a price of $0.09 per share through April 24, 2013,
under           an option granted on April 24, 2003, with such shares vesting 12,500 on
April           24, 2004, and 12,500 on April 24, 2005, and 50,000 common shares at a
price of           $0.13 per share through December 31, 2013, under an option granted on
December           31, 2003, with such shares vesting on December 31, 2004.

27

---

(5)              Includes
(i) 25,000 shares of Common Stock that may be purchased by Mr. Wareham           from the
Company at a price of $0.09 per share until April 24, 2013, pursuant to           a stock
option granted to him on April 24, 2003, with such shares vesting on           July 24,
2003 under the Incentive Plan. Does not include 25,000 common shares at           a price
of $0.09 per share through April 24, 2013, under an option granted on           April 24,
2003, with such shares vesting 12,500 on April 24, 2004, and 12,500 on           April
24, 2005, and 50,000 common shares at a price of $0.13 per share through
          December 31, 2013, under an option granted on December 31, 2003, with such
          shares vesting on December 31, 2004.

(6)              Includes
(i) 865,000 shares of Common Stock purchased by Mr. McCubbin from the           Company
on July 8, 2002 in a private transaction without registration under the
          Securities Act of 1933, pursuant to the private offering exemption under
Section           4(2) thereof, (ii) 400,000 shares of Common Stock that may be purchased
by Mr.           McCubbin from the Company at a price of $0.17 per share until January 2,
2011,           pursuant to a stock option granted to him on January 2, 2001, and (iii)
includes           1,000 shares of Common Stock that may be purchased by Mr. McCubbin
from the           Company at a price of $1.35 per share until July 3, 2010, pursuant to
a stock           option granted to him on July 3, 2000. Does not include (i) 100,000
shares of           Common Stock that may be purchased by Mr. McCubbin from the Company
at a price           of $0.17 per share pursuant to a stock option granted to him on
January 2, 2001,           with such shares vesting annually through January 2, 2004 or
by the earlier           vesting by the Compensation Committee.

(7)              Includes
(i) 1,500 shares of Common Stock owned directly by Mr. Ritter and (ii)           25,000
shares of Common Stock that may be purchased by Mr. Ritter from the           Company at
a price of $0.09 per share until April 24, 2013, pursuant to a stock           option
granted to him on April 24, 2003, with such shares vesting on July 24,           2003
under the Incentive Plan. Does not include 25,000 common shares at a price           of
$0.09 per share through April 24, 2013, under an option granted on April 24,
          2003, with such shares vesting 12,500 on April 24, 2004, and 12,500 on April
24,           2005, and 50,000 common shares at a price of $0.13 per share through
December           31, 2013, under an option granted on December 31, 2003, with such
shares vesting           on December 31, 2004.

(8)              Includes
(i) 865,000 shares of Common Stock purchased by Mr. Mirabile from the           Company
on July 8, 2002 in a private transaction without registration under the
          Securities Act of 1933, pursuant to the private offering exemption under
Section           4(2) thereof, (ii) 170,000 shares of Common Stock issued to Mr.
Mirabile in           connection with the Companys prior acquisition of Eclipse,
(iii) includes           400,000 shares of Common Stock that may be purchased by Mr.
Mirabile from the           Company at a price of $0.17 per share until January 2, 2011,
pursuant to a stock           option granted to him on January 2, 2001, and (iv) includes
1,000 shares of           Common Stock that may be purchased by Mr. Mirabile from the
Company at a price           of $1.35 per share until July 3, 2010, pursuant to a stock
option granted to him           on July 3, 2000. Does not include (i) 100,000 shares of
Common Stock that may be           purchased by Mr. Mirabile from the Company at a price
of $0.17 per share           pursuant to a stock option granted to him on January 2,
2001, with such shares           vesting annually through January 2, 2004 or by the
earlier vesting by the           Compensation Committee.

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

28

---

ITEM 13.  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.

There
have been no transactions, or series of similar transactions, since the beginning of the
Companys last fiscal year, or any currently proposed transactions, or series of
similar transactions, greater than $60,000, to which the Company or any of its
subsidiaries were a party involving any of the directors, executive officers, control
persons, more than 5% security holder known to the registrant, or member of the immediate
family of any of the foregoing persons.

ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES

Audit
Fees

The
Company paid Grant Thornton LLP approximately $33,000 and $32,000 in audit and review fees
for fiscal year 2003 and 2002, respectively.

Financial
Information Systems Design and Implementation Fees

The
Company did not pay Grant Thornton LLP any financial information systems design and
implementation fees for fiscal year 2003 or 2002.

All
Other Fees

The
Company did not pay Grant Thornton LLP any nonaudit fees for fiscal year 2003 or 2002.

29

---

# Part IV.

ITEM 15.  EXHIBITS,
FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.

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

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

| | Report
of Grant Thornton LLP, Independent Certified Public Accountants
| | ----------------------------------------------------------------------

| | Consolidated
Balance Sheets as of December 31, 2003 and 2002
| | ------------------------------------------------------------

| | Consolidated
Statements of Operations for the Years Ended December 31, 2003, 2002, and 2001
| | -------------------------------------------------------------------------------------------

| | Consolidated
Statements of Changes in StockholdersEquity for the Years Ended December
2003, 2002, and 2001
| | -----------------------------------------------------------------------------------------------------------

| | Consolidated
Statements of Cash Flow for the Years Ended December 31, 2003, 2002, and 2001
| | ------------------------------------------------------------------------------------------

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

| | (2) | Financial
Statements Schedule:
| | --- | ------------------------------

| | Reports
of Independent Accountants
| | ----------------------------------

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) | Reports
on Form 8-K
| | --- | -------------------

| | None
| | ----

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

30

---

|EXHIBIT |            
|------- | -----------
|NO.     | 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 ZMAX  Corporation.  (Incorporated  herein
by reference to Exhibit 3.5 to          the Registrant's Registration Statement on Form
S-4 (File No. 333-29833).)
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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

31

---

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

---

*  Management contract or
compensatory plan

32

---

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

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

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

33

---

| | 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)
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

---

*  Management contract or
compensatory plan

34

---

# SIGNATURES

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

|                      | WidePoint Corporation                       
|--------------------- | --------------------------------------------
|Date:  March 30, 2004 | /s/ STEVE L. KOMAR                          
|                      | Steve L. Komar                              
|                      | Chief Executive Officer                     
|Date:  March 30, 2004 | /s/ JAMES T. MCCUBBIN                       
|                      | James T. McCubbin                           
|                      | Vice President - Principal Financial Officer

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

|Dated:  March 30, 2004 | /s/ STEVE L. KOMAR                                                           
|---------------------- | -----------------------------------------------------------------------------
|                       | Steve L. Komar                                                               
|                       | Director and Chief Executive Officer                                         
|Dated:  March 30, 2004 | /s/ JAMES T. MCCUBBIN                                                        
|                       | James T. McCubbin                                                            
|                       | Director, Vice President and Chief Financial Officer, Secretary and Treasurer
|Dated:  March 30, 2004 | /s/ G.W. NORMAN WAREHAM                                                      
|                       | G.W. Norman Wareham                                                          
|                       | Director                                                                     
|Dated:  March 30, 2004 | /s/ JAMES M. RITTER                                                          
|                       | James M. Ritter                                                              
|                       | Director, Assistant Secretary                                                
|Dated:  March 30, 2004 | /s/ MARK MIRABILE                                                            
|                       | Mark Mirabile                                                                
|                       | Director, Vice President and Chief OperationsOfficer                         

35

---

INDEX TO FINANCIAL
STATEMENTS

|                                                                   
|-------------------------------------------------------------------
|Report of Independent Public Accountants                           
|Consolidated Balance Sheets as of December 31, 2003 and 2002       
|Consolidated Statements of Operations for the Years ended          
|December 31, 2003, 2002, and 2001                                  
|Consolidated Statements of Stockholders' Equity for the Years ended
|December 31, 2003, 2002, and 2001                                  
|Consolidated Statements of Cash Flows for the Years ended          
|December 31, 2003, 2002, and 2001                                  
|Notes to Consolidated Financial Statements                         
|Report of Independent Public Accountants                           
|Exihibit 21 - Subsidiaries of WidePoint Corporation                

36

---

# REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Board of DirectorsWidePoint
Corporation

We have audited the accompanying consolidated
balance sheet of WidePoint Corporation (a Delaware corporation) and subsidiaries, as of
December 31, 2003 and 2002, and the related consolidated statements of operations,
stockholders equity, and cash flows for each of the three years in the period ended
December 31, 2003. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance
with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides 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, 2003 and
2002, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2003, in conformity with accounting
standards generally accepted in the United States of America.

GRANT THORNTON LLP

Chicago, IllinoisMarch
26, 2004

F-1

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Balance
Sheets

|                                                                                | December 31,
|------------------------------------------------------------------------------- | ------------
|
|Assets                                                                          |             
|Current assets:                                                                 |             
|Cash and cash equivalents                                                       |             
|Accounts receivable, net of allowance of $18,819 and $3,950, respectively       |             
|Prepaid expenses and other assets                                               |             
|                                                                                |             
|Total current assets                                                            |             
|                                                                                |             
|Property and equipment, net                                                     |             
|Other assets                                                                    |             
|                                                                                |             
|Total assets                                                                    |             
|                                                                                |             
|Liabilities and stockholders' equity                                            |             
|Current liabilities:                                                            |             
|Accounts payable                                                                |             
|Accrued expenses                                                                |             
|Current portion of capital lease obligation                                     |             
|                                                                                |             
|Total current liabilities                                                       |             
|                                                                                |             
|Commitments and contingencies (Note 9)                                          |             
|Stockholders' equity:                                                           |             
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued    |             
|and outstanding                                                                 |             
|Common stock, $0.001 par value; 50,000,000 shares authorized; 15,579,913 shares |             
|issued and outstanding as of December 31, 2003 and 2003                         |             
|Related party notes receivable                                                  |             
|Additional paid-in capital                                                      |             
|Accumulated deficit                                                             |             
|                                                                                |             
|Total stockholders' equity                                                      |             
|                                                                                |             
|Total liabilities and stockholders' equity                                      |             
|                                                                                |             

The accompanying notes
are an integral part of these consolidated statements

F-2

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated statements
of operations

|                                                      | For the Years Ended December 31,
|----------------------------------------------------- | --------------------------------
|
|Revenues, net                                         |                                 
|Operating expenses:                                   |                                 
|Cost of revenues                                      |                                 
|Sales and marketing                                   |                                 
|General and administrative                            |                                 
|Facilities closing expense                            |                                 
|Impairment of long-term assets                        |                                 
|Depreciation and amortization                         |                                 
|                                                      |                                 
|Loss from operations                                  |                                 
|Other income (expenses):                              |                                 
|Interest income                                       |                                 
|Interest expense                                      |                                 
|Other                                                 |                                 
|                                                      |                                 
|Net loss before provision for income taxes            |                                 
|                                                      |                                 
|Income tax provision                                  |                                 
|                                                      |                                 
|Net loss                                              |                                 
|                                                      |                                 
|Basic and diluted net loss per share                  |                                 
|                                                      |                                 
|Basic and diluted weighted-average shares outstanding |                                 
|                                                      |                                 
|                                                      |                                 

The accompanying notes
are an integral part of these consolidated statements

F-3

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Statements
of Stockholders Equity

|                             | Preferred Stock | Common Stock | 
|---------------------------- | --------------- | ------------ | 
|
|Balance, January 1, 2001     |                 |              | 
|Net loss                     |                 |              | 
|                             |                 |              | 
|Balance, December 31, 2001   |                 |              | 
|                             |                 |              | 
|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   |                 |              | 
|                             |                 |              | 

The accompanying notes
are an integral part of these consolidated statements

F-4

---

# WIDEPOINT CORPORATION
AND SUBSIDIARIES

# Consolidated Statements
of Cash Flows

|                                                                 | For the Years Ended December 31,
|---------------------------------------------------------------- | --------------------------------
|
|Cash flows from operating activities:                            |                                 
|Net loss                                                         |                                 
|Adjustments to reconcile net loss to net cash (used in) provided |                                 
|by operating activities                                          |                                 
|Depreciation and amortization expense                            |                                 
|Impairment of long-term assets                                   |                                 
|(Gain) Loss on sale of property and equipment                    |                                 
|Adjustment of warrant valuation                                  |                                 
|Changes in assets and liabilities-                               |                                 
|Accounts receivable                                              |                                 
|Prepaid expenses and other assets                                |                                 
|Accounts payable and accrued expenses                            |                                 
|                                                                 |                                 
|Net cash (used in) provided by operating activities .            |                                 
|                                                                 |                                 
|Cash flows from investing activities:                            |                                 
|Purchases of property and equipment                              |                                 
|Proceeds from sale of property and equipment                     |                                 
|                                                                 |                                 
|Cashflows (used in) provided by investing activities             |                                 
|                                                                 |                                 
|Cash flows from financing activities:                            |                                 
|Collections on related party notes                               |                                 
|                                                                 |                                 
|Net payments on long-term obligations                            |                                 
|                                                                 |                                 
|Cashflows used in financing activities                           |                                 
|                                                                 |                                 
|Net (decrease) increase in cash                                  |                                 
|                                                                 |                                 
|Cash, beginning of period                                        |                                 
|                                                                 |                                 
|Cash, ending of period                                           |                                 
|                                                                 |                                 
|Supplementary cash flow information:                             |                                 
|Cash paid for-                                                   |                                 
|Interest                                                         |                                 
|                                                                 |                                 
|Income taxes                                                     |                                 
|                                                                 |                                 
|                                                                 |                                 

The accompanying notes
are an integral part of these consolidated statements

F-5

---

# Notes to Consolidated
Financial Statements

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

WidePoint Corporation
(WidePoint or the Company) is a consulting services firm
specializing in planning, managing and implementing Information Technology
(IT) solutions. Its staff consists of business and computer
literate 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 business
technology environment.

From 1999 through 2002, the Company
undertook several initiatives in an effort to transition the Company from a Millennium
solutions provider to an integrated IT Services company.  During 2002 and 2003, the
Company 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.  In the continuing effort to differentiate itself and to
overcome the highly competitive environment that has been an obstacle to the expansion of
its revenue streams, the Company has modified its strategic plan; including
the launch of a federal sector business initiative, continued development of new
technologies and capabilities tied to wireless technologies, and the
initiation or expansion of several alliances and relationships to expand the
Companys ability to penetrate new market segments.

As a result of the Companys
2003 efforts, the Company was awarded a GSA Corporate Schedule enhancing its ability to
market into federal government markets.  In addition, the Company agreed to
acquire Chesapeake Government Technologies, Inc. (Chesapeake), on
March 24, 2004.  The acquisition of Chesapeake accelerates the
Companys ability to compete for federal government business due
to Chesapeakes existing alliances and expertise within the federal sector
marketplace.  The Company will leverage Chesapeake and its GSA Schedule to
expand its Revenue base, even as it continues to look for and analyze growth
alternatives via selected merger and acquisition opportunities.

The Companys current costs
consist primarily of the salaries and benefits paid to the Companys technical,
marketing and administrative personnel.  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 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 structure 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 Company may need to raise
additional working and investment capital through either the use of debt and/or the
issuance of additional equity instruments to fund its growth initiatives.  The Company
believes that its cash on hand is adequate to finance operations through 2004.

F-6

---

|2. | Significant
Accounting Policies:
|-- | --------------------------------

Principles of
Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

Investments purchased with original
maturities of three months or less are considered cash equivalents for purposes of these
consolidated financial statements. The Company maintains cash and cash equivalents with
various major financial institutions. At December 31, 2003 and 2002, cash and cash
equivalents of investments in money market and overnight sweep accounts were $250,144 and
$1,207,847, respectively. At times, cash balances held at financial institutions were in
excess of federally insured limits. The Company places its temporary cash investments with
high-credit, quality financial institutions, and as a result, the Company believes that no
significant concentration of credit risk exists with respect to these cash investments.

Accounts Receivable

The majority of the Companys
accounts receivable are due from established companies in the following industries:
manufacturing, consumer product goods, direct marketing, healthcare and financial
services. Credit is extended based on evaluation of a customers financial condition
and, generally, collateral is not required. Accounts receivable are due within 30 to 45
days and are stated at amounts due from customers net of an allowance for doubtful
accounts. Accounts outstanding longer than the contractual payment terms are considered
past due.

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

F-7

---

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

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, 2003 and 2002, unbilled accounts receivable totaled $6,207 and
$5,483, respectively.

Revenue Recognition

Revenue on time-and-materials
contracts is recognized based upon hours incurred at contract rates plus direct costs.
Revenue on fixed-price contracts is recognized on the percentage-of-completion method
based on costs incurred in relation to total estimated costs. Anticipated losses are
recognized as soon as they become known. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Out of pocket
expenses for billable work are recognized as revenuse and such out of pocket expenses are
expensed in Cost of Revenues.

Significant Customers

During 2003, four customers
individually represented 18%, 14%, 13% and 13% of revenues. During 2002, three customers
individually represented 22%, 15%, and 13% of revenue.

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, 2003, three customers individually represented 26%
and 11% and 10% of accounts receivable. As of December 31, 2002, two customers
individually represented 41% and 11% of accounts receivable.

Income Taxes

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

F-8

---

Property and Equipment

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

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

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

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

Long-Lived Assets

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

During the fourth quarter of 2001,
the Company determined that certain of its long-lived assets related to its acquisition of
Eclipse were impaired and should be written off in accordance with the guidance of SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. This analysis was based in part on the Companys
continued refinement of its strategic direction and changes to its business plan that
eliminated the Eclipse business unit. The assets impaired included the remaining
intangible assets related to the goodwill associated with the original Eclipse acquisition
transaction. The Company recorded an impairment charge of $5,853,693 to write-off the net
book value of these long-lived assets in the 2001 consolidated statement of operations.

Basic and Diluted Net
Loss Per Share

Basic income or loss per share
includes no dilution and is computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period. Diluted income or
loss per share includes the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock. The
treasury stock effect of options and warrants to purchase 2,112,000, 1,978,000, and
2,845,500, shares of common stock outstanding at December 31, 2003, 2002, and 2001,
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.

F-9

---

Reclassifications

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

Stock-based compensation

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

|                                          
|------------------------------------------
|2003                                      
|Net loss, as reported                     
|Deduct: Total stock-based employee        
|compensation expense determined under fair
|value based method for awards granted,    
|modified, or settled, net of related tax  
|effects                                   
|Pro forma net loss                        
|Loss per share:                           
|Basic and diluted - as reported           
|Basic and diluted - pro forma             

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.

F-10

---

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, 2003, 2002 and 2001:

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

Fair Value of Financial
Instruments

WidePoint financial instruments
consist of cash and cash equivalents, accounts receivable, and accounts payable. The fair
value of these financial instruments approximates their carrying value as of December 31,
2003, due to their short-term nature.

New accounting
pronouncements

In April 2003, the Financial
Accounting Standards Board (FASB) issued SFAS No. 149, Amendment on
Statement 133 on Derivative Instruments and Hedging Activities, which is effective
for all contracts entered into or modified after June 30, 2003. SFAS No. 149 clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities. The Company has determined that SFAS
No. 149 has no impact on its financial statements.

In May 2003, the FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity, which is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS No. 150 requires that an issuer classify
certain financial instruments as a liability (or an asset in some circumstances). The
Company is not currently the issuer of any financial instruments that would qualify under
SFAS No. 150. Therefore, the Company has determined that the adoption of this
pronouncement did not have an impact on its financial statements.

|3. | Promissory
Notes:
|-- | -----------------

Related Party Notes

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

F-11

---

|4. | Intangible
Assets:
|-- | ------------------

As described in Note 2, the Company
recognized an impairment charge in 2001 related to the acquisition of Eclipse. Prior to
this write-off, intangible assets associated with the Eclipse acquisition were being
amortized over a weighted-average life of 25 years. Accumulated amortization related to
the Eclipse intangibles was approximately $1,167,000 as of December 31, 2001 and the
Company recognized amortization expense of approximately $302,000 during 2001 prior to the
disposition.

Prior to the disposition of the PMC
subsidiary , intangible assets associated with its PMC acquisition were being amortized
over a weighted average life of 10 years.

|5. | Income
Taxes:
|-- | -------------

The Company had no provision for
income taxes for the years ended December 31, 2003, 2002, and 2001.

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

|                                          | For the Years Ended
December 31,
|----------------------------------------- | --------------------------------
|
|Statutory federal income tax rate         |                                 
|State income tax, net of benefit          |                                 
|Amortization and write-off of intangibles |                                 
|Increase in valuation allowance           |                                 
|Non-deductible expenses                   |                                 
|Other                                     |                                 
|                                          |                                 
|                                          |                                 
|                                          |                                 

F-12

---

The
deferred tax assets (liabilities) consisted of the following as of December 31, 2003
and 2002 (in thousands):

|                                          | December 31,
|----------------------------------------- | ------------
|
|Deferred tax assets:                      |             
|Net operating loss carryforwards          |             
|AMT credit                                |             
|Capital losses in excess of capital gains |             
|                                          |             
|Other assets                              |             
|                                          |             
|Total deferred tax assets                 |             
|                                          |             
|                                          |             
|                                          |             
|                                          |             
|                                          |             
|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.

As
of December 31, 2003 the Company had net operating loss carry forwards of
approximately $16,432,701 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.

|6. | Common
Stock:
|-- | -------------

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 3)

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

1997 Stock Incentive Plan

In May 1997, the Company adopted the
1997 Stock Incentive Plan (the Incentive Plan). The purpose of the Incentive
Plan is to provide additional compensation to employees, officers, 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-13

---

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.

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-14

---

The following is a summary of the
WidePoint options activity:

|                               | Number of
Shares | Option Price Range | Weighted-Average
Exercise Price
|------------------------------ | ---------------- | ------------------ | -------------------------------
|Outstanding, December 31, 2000 |                  |                    |                                
|Granted                        |                  |                    |                                
|Canceled or expired            |                  |                    |                                
|                               |                  |                    |                                
|Outstanding, December 31, 2001 |                  |                    |                                
|                               |                  |                    |                                
|Granted                        |                  |                    |                                
|Canceled or expired            |                  |                    |                                
|                               |                  |                    |                                
|Outstanding, December 31, 2002 |                  |                    |                                
|                               |                  |                    |                                
|Granted                        |                  |                    |                                
|Canceled or expired            |                  |                    |                                
|                               |                  |                    |                                
|Outstanding, December 31, 2003 |                  |                    |                                
|                               |                  |                    |                                

As of December 31, 2003 and
2002, options to purchase 1,447,340 and 1,075,673 shares, respectively of common
stock were exercisable with a weighted average exercise price of $0.14 and $0.15,
respectively. The weighted-average remaining contractual life of the options outstanding
at December 31, 2003 and December 31, 2002, was 8 and 8.17 years, respectively.
The weighted-average fair value of options granted in 2003 and 2002 was $0.04 and $0.06,
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 140-156 percent,
risk-free interest rates from 2.70 to 5.28 percent and an expected term of
five years.

F-15

---

Stock Warrants

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.

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

The Company entered into a lease for
its offices location at One Lincoln Centre, Oakbrook Terrace IL, 60181 that runs from
February 1, 2004 through July 31, 2007. There were no minimum lease obligations under
operating leases as of December 31, 2003, but the Company's lease obligations from
February 1, 2004 are as follows:

|Year Ended
December 31, | Operating
Leases
|----------------------- | ----------------
|2004                    |                 
|2005                    |                 
|2006                    |                 
|2007                    |                 
|                        |                 
|Total                   |                 
|                        |                 

Employment Agreements

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

Litigation

The Company is periodically a party
to disputes arising from normal business activities. In the opinion of management,
resolution of these matters will not have a material adverse effect upon the financial
position or future operating results of the Company, and adequate provision for any
potential losses has been made in the accompanying consolidated financial statements.

|9. | Subsequent
events.
|-- | ------------------

On
March 24, 2004, the Company entered into an agreement to acquire Chesapeake Government
Technologies, Inc. Terms and conditions of the subsequent event will be disclosed on an 8K
filing to be filed within 15 days from the of the execution of the agreement.

F-16

---

|10. | 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.

|11. | Selected
Quarterly Financial Data (Unaudited)
|--- | ---------------------------------------------

A summary of selected quarterly
information for 2003 and 2002 is as follows:

2003 Quarter Ended
                                    (in thousands of U.S. dollars except per share
amounts)

|                  
|------------------
|Net Sales         
|Gross Profit      
|Net Earnings      
|Earnings per Share

2002 Quarter Ended
                                    (in thousands of U.S. dollars except per share
amounts)

|                  
|------------------
|Net Sales         
|Gross Profit      
|Net Earnings      
|Earnings per Share

F-17