WIDEPOINT CORP

(Unaudited)

1. Organization and Nature of Operations

Organization

WidePoint Corporation (“WidePoint” or the “Company”) was incorporated in Delaware on May 30, 1997 and conducts operations through its wholly-owned operating subsidiaries throughout the continental United States, Ireland, the Netherlands and the United Kingdom. The Company’s principal executive and administrative headquarters is located in Fairfax, Virginia.

Nature of Operations

The Company is a leading provider of Technology Management as a Service (TMaaS). The Company’s TMaaS platform and service solutions enable its customers to efficiently secure, manage and analyze the entire lifecycle of their mobile communications assets through its federally compliant platform Intelligent Technology Management System (ITMS™). The Company’s ITMS platform is SSAE 18 compliant and was granted an Authority to Operate by the U.S. Department of Homeland Security. Additionally, the Company was granted an Authority to Operate by the General Services Administration with regard to its identity credentialing component of its TMaaS platform. Additionally, the Company’s ITMS platform has received the FedRAMP Authorized status. The Company’s TMaaS platform is internally hosted and accessible on-demand through a secure customer portal that is specially configured for each customer. The Company can deliver these solutions in a number of configurations ranging from utilizing the platform as a service to a full-service solution that includes full lifecycle support for all end users and the organization.

A significant portion of the Company’s expenses, such as personnel and facilities costs, are fixed in the short term and may not be easily modified to manage through changes in the Company’s marketplace that may create pressure on pricing and/or costs to deliver its services.

The Company has periodic capital expense requirements to maintain and upgrade its internal technology infrastructure tied to its hosted solutions and other such costs may be significant when incurred in any given quarter.

2. Basis of Presentation and Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements as of September 30, 2025 and for each of the three and nine month periods ended September 30, 2025 and 2024 included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to such regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. It is the opinion of management that all adjustments (which include normal recurring adjustments) necessary for a fair statement of financial results are reflected in the financial statements for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for the three and nine month periods ended September 30, 2025 are not necessarily indicative of the operating results for the full year.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and acquired entities since their respective dates of acquisition. All significant inter-company amounts were eliminated in consolidation.

Foreign Currency

Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s condensed consolidated statements of operations, depending on the nature of the activity.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring use of estimates and judgment relate to revenue recognition, allowance for credit losses, ability to realize intangible assets and goodwill, ability to realize deferred income tax assets, fair value of certain financial instruments and the evaluation of contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. There were no significant changes in accounting estimates used by management during the period.

Significant Accounting Policies

There were no significant changes in the Company’s significant accounting policies during the first nine months of 2025 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on April 15, 2025.

Accounting Standards Update

Accounting Standards Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted ASU 2023-07 for our annual period beginning fiscal year 2024 on a retrospective basis to all periods presented. The adoption did not have an impact to our financial position, results of operations and earnings per share. See Note 15 for additional information.

Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09,Income Taxes – Improvements to Income Tax Disclosures, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is currently evaluating the impacts of the new standard.

In November 2024, the FASB issued ASU 2024-03,Income Statement—Reporting Comprehensive Income (Topic 220) Disaggregation of Income Statement Expenses (“ASU 2024-03”), to enhance the transparency and decision usefulness of financial information presented in the income statement by requiring disaggregated information about certain income statement expense line items. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is evaluating the impact of these new requirements on its income statement presentation and disclosures.

Out of Period Adjustment

During the three months ended March 31, 2025, the Company recorded an out of period adjustment to correct an error identified by management related to its revenue recognition for certain reselling contracts. The adjustment resulted in a decrease to revenues of $2,695,148, with a corresponding increase to deferred revenue, and a decrease to cost of revenues of $2,461,832, with a corresponding increase in deferred contract costs. The Company has evaluated the impacts of this error, both quantitatively and qualitatively, and has concluded the error was not material to any prior interim or annual period. The correction is not expected to be material to the year ending December 31, 2025.

3. Accounts Receivable and Significant Concentrations

A significant portion of the Company’s receivables are billed under firm fixed price contracts with agencies of the U.S. federal government and similar pricing structures with several commercial entities. Accounts receivable consist of the following by customer type in the table below as of the periods presented:

(1) Government contracts are generally firm fixed price not to exceed arrangements with a term of five (5) years, which consists of a base year and four (4) annual option year renewals. Government receivables are billed under a single consolidated monthly invoice and are billed approximately thirty (30) to sixty (60) days in arrears from the date of service and payment is generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions or a government shutdown, as further discussed in Note 17, that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customers.

(2) Commercial contracts are generally fixed price arrangements with contract terms ranging from two (2) to three (3) years. Commercial accounts receivables are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. Commercial receivables are stated at amounts due from customers net of an allowance for credit losses if deemed necessary.

(3) For the three and nine month periods ended September 30, 2025 and 2024, the Company did not recognize any material provisions of recoveries of existing provision for credit losses. The Company has not historically maintained an allowance for credit losses for its government customers as it has not experienced material or recurring credit losses and the nature and size of the contracts has not necessitated the Company’s establishment of such an allowance for credit losses.

Significant Concentrations

The following table presents consolidated trade accounts receivable by customer as of the periods presented below:

The following table presents revenue by customer for each of the periods presented:

(1) Sales to the U.S. federal government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government.

Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions, the balances of which frequently exceed federally insured limits. If the financial institution with whom we do business were to be placed into receivership, we may be unable to access the cash we have on deposit with such institutions. If we are unable to access our cash and cash equivalents as needed, our financial position and ability to operate our business could be adversely affected. At September 30, 2025, the Company had deposits in excess of FDIC limits of approximately $12.1 million. The Company also maintains deposits with a financial institution in Ireland that are insured by the Central Bank of Ireland up to a maximum of €100,000 per financial institution. At September 30, 2025, the Company had foreign bank deposits in excess of insured limits of approximately €220,200.

4. Unbilled Accounts Receivable

Unbilled accounts receivable represent revenues earned but not invoiced to the customer at the balance sheet date due to either timing of invoice processing or delays due to fixed contractual billing schedules. A significant portion of our unbilled accounts receivable consist of carrier services and hardware and software products delivered but not invoiced at the end of the reporting period.

The following table presents customers that represent ten (10) percent or more of consolidated unbilled accounts receivable as of the dates presented below:

5. Other Current Assets and Accrued Expenses

Other current assets consisted of the following as of the dates presented below:

Accrued expenses consisted of the following as of the dates presented below:

6. Property and Equipment

Major classes of property and equipment consisted of the following as of the dates presented below:

During the three and nine month periods ended September 30, 2025 property and equipment depreciation expense was approximately $81,800 and $242,100, respectively. During the three and nine month periods ended September 30, 2024 property and equipment depreciation expense was approximately $92,000 and $259,400, respectively.

During the three month period ended September 30, 2025, there were no material disposals of property and equipment. During the nine month period ended September 30, 2025, the Company disposed of property and equipment with historical cost of $775,000 and accumulated depreciation of $766,800 and recognized a loss on disposal of property and equipment of $8,200.

During the three month and nine month period ended September 30, 2024, the Company disposed of fully depreciated property and equipment with historical cost and accumulated depreciation of approximately $571,600.

There were no changes in the estimated useful lives used to depreciate property and equipment during the nine month periods ended September 30, 2025 and 2024.

7. Goodwill and Intangible Assets

The Company has recorded goodwill of $5,811,578 as of September 30, 2025 and December 31, 2024. There were no changes in the carrying amount of goodwill during the three and nine month periods ended September 30, 2025 and 2024.

Intangible assets consists of the following:

The Company did not capitalize any internally developed software costs for the three and nine month periods ended September 30, 2025 and 2024.

There were no disposals of intangible assets during the three and nine month periods ended September 30, 2025 and 2024.

The aggregate amortization expense recorded for the three and nine month periods ended September 30, 2025 was approximately $418,700 and $1,385,800, respectively. The aggregate amortization expense recorded for the three and nine month periods ended September 30, 2024 was approximately $558,600 and $1,782,100, respectively

As of September 30, 2025, estimated annual amortization for intangible assets is approximately:

8. Credit Agreements

On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC for the non-recourse sale of eligible accounts receivable relating to U.S. Government prime contracts or subcontracts of the Company. The Purchase Agreement terminated in April of 2024 and was not renewed. Prior to the 2024 termination, we sold a total of $2.9 million of receivables in the three month period ended March 31, 2024, for $2.8 million in proceeds net of fees.

On February 29, 2024, the Company entered into a Loan and Security Agreement (the “Loan”) and Promissory Note (the “Note,” and, together with the Loan, the “Agreements”) with Old Dominion National Bank. The Agreements provide for a $4,000,000 revolving line of credit facility (the “Credit Facility”) maturing on February 28, 2026.

Advances under the Credit Facility are subject to a borrowing base equal to the lesser of (i) $4,000,000 or (ii) 80% of billed accounts receivable less than 90 days outstanding. Interest accrues on the outstanding principal balance of the Credit Facility at an annual rate equal to the Prime Rate published in The Wall Street Journal, subject to a floor rate of 7.25%. Outstanding interest on the amount borrowed is payable monthly and all outstanding interest and principal is due on the maturity date of February 28, 2026. The Credit Facility includes customary covenants and events of default, including the following items that are measured annually: (i) a minimum tangible net worth of $2.0 million; (ii) a minimum annual EBITDA of $1.0 million and (iii)a ratio of current assets to current liabilities of not less than 1.0 to 1.0. The Company did not have an outstanding balance on its Credit Facility as of September 30, 2025. The Company was in compliance with its covenants at September 30, 2025.

9. Leases

Effective March 1, 2025, the Company entered into a new lease agreement to lease office space in the Hampton, Virginia area, that replaced its existing lease in Hampton, Virginia. The lease is for a term of seventy-six months, with a monthly rent obligation of $8,235, subject to annual rent increase of 3%. The operating lease resulted in the Company recording a leased right to use asset of $542,232 and associated liability.

10. Income Taxes

The Company’s effective tax rate was (31.6)% and 1.0% for the three and nine month periods ended September 30, 2025, respectively. The Company’s effective tax rate was 4.2% and 2.8% for the three and nine month periods ended September 30, 2024, respectively. The difference in the effective tax rate and the U.S. federal statutory rate was primarily due to the full valuation allowance the Company maintains against its deferred tax assets and state minimum taxes in the United States. The effective tax rate is calculated by dividing the income tax provision (benefit) by the loss before income tax provision (benefit).

On July 4, 2025, the U.S. enacted H.R. 1 "A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14", commonly referred to as the One Big Beautiful Bill (“H.R. 1”). The enactment of H.R. 1 did not result in a material impact on the Company’s tax position or consolidated financial statements.

11. Stockholders’ Equity

Common Stock

The Company is authorized to issue 30,000,000 shares of common stock, $0.001 par value per share. As of September 30, 2025, there were 9,655,173 shares issued and outstanding.

No shares of common stock were issued under the vesting terms of RSAs during the three month period ended September 30, 2025. During the nine month period ended September 30, 2025, there were 197,933 shares of restricted common stock vested in accordance with the vesting terms of the RSAs. Certain employees received less than the shares vested because they elected to have a total of 28,268 shares withheld in satisfaction of the employees corresponding tax liability of approximately $130,618. The Company’s payment of this tax liability was recorded as a cash flow from financing activity on the condensed consolidated statement of cash flows.

No shares of common stock were issued under the vesting terms of RSAs during the three month period ended September 30, 2024. During the nine month period ended September 30, 2024, there were 692,468 shares of restricted common stock vested in accordance with the vesting terms of the RSAs. Certain employees received less than the shares vested because they elected to have a total of 100,180 shares withheld in satisfaction of the employees corresponding tax liability of approximately $258,400. The Company’s payment of this tax liability was recorded as a cash flow from financing activity on the condensed consolidated statement of cash flows.

There were no stock option exercises during the nine month periods ended September 30, 2025 and 2024.

12. Share-based Compensation

Share-based compensation (including RSAs) represents both stock option-based expense and stock grant expense. The following table sets forth the composition of stock compensation expense included in general and administrative expense for the periods then ended:

Restricted Stock

The Company records the fair value of all restricted stock shares based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock shares are issued when vested and included in the total number of common shares issued and outstanding. During the three and nine month period ended September 30, 2025, the Company granted 71,291 restricted stock awards. There were no restricted stock awards granted during the three and nine month periods ended September 30, 2024.

Stock Options.

The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is calculated using the simplified method. The Company recognizes forfeitures as they occur. There were 120,000 stock option awards granted during the nine month period ended September 30, 2025. There were no stock option awards granted during the nine month period September 30, 2024.

For the three and nine month periods ended September 30, 2025, the weighted-average grant date fair value per option was $1.89. Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the period then ended as set forth below:

At September 30, 2025, the Company had approximately $0.7 million of total unrecognized share-based compensation expense related to share-based compensation that will be recognized over the weighted average remaining period of 1.2 years.

Long-Term Incentive Plan

The Company maintains a long-term incentive plan (LTIP) that covers the period of January 1, 2023 through January 1, 2026. The LTIP has two components of equity-based compensation. The first is 250,000 RSAs that were granted to members of management on April 2, 2024 and vested 33% on the date of grant and 33% on January 1, 2025 with the remainder to vest on January 1, 2026, subject to continued service. The estimated fair value of these RSAs of $640,500 will be recorded over the service period. The second is 250,000 Performance- based Restricted Stock Units (PSRUs) that would vest upon meeting certain revenue or adjusted EBITDA performance targets through December 31, 2025, subject to continued service. The estimated fair value of these PRSUs of $640,500 will be recorded if and when the Company concludes that it is probable that either performance condition will be achieved.

13. Earnings (Loss) Per Common Share (EPS)

The computations of basic and diluted earnings (loss) per share were as follows for the periods presented below:

For the three month period ended September 30, 2025, the Company had unexercised stock options of 408,570, RSAs of 196,378 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive. For the three month period ended September 30, 2024, the Company had unexercised stock options of 288,570, RSAs of 323,020 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive.

For the nine month period ended September 30, 2025, the Company had unexercised stock options of 408,570, RSAs of 196,378 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive. For the nine month period ended September 30, 2024, the Company had unexercised stock options of 288,570, RSAs of 323,020 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive.

14. Revenue from Contracts with Customers

The following table was prepared to provide additional information about the composition of revenues from contracts with customers for the periods presented:

The Company recognized revenues from contracts with customers for the following customer types as set forth below:

The Company recognized revenues from contracts with customers in the following geographic regions:

During the three month periods ended September 30, 2025 and 2024, the Company recognized approximately $750,000 and $382,900, respectively, of revenue related to amounts that were included in deferred revenue as of December 31, 2024 and 2023, respectively.

During the nine month periods ended September 30, 2025 and 2024, the Company recognized approximately $5.9 million and $1.6 million, respectively, of revenue related to amounts that were included in deferred revenue as of December 31, 2024 and 2023, respectively.

15. Segment Information

Segments are defined by authoritative guidance as components of a company in which separate financial information is available and is evaluated by the chief operating decision maker (CODM), or a decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is the chief executive officer and is responsible for reviewing segment performance and making decisions regarding resource allocation.

The Company operates as one segment based on the consolidated information used by its CODM in evaluating the financial performance of its business and allocation resources. This single segment represents the Company’s business, WidePoint, which is providing managed services for government and commercial clients that include Identity Management (IdM), secure Mobility Managed Services (MMS), Telecom Lifecycle Management, Digital Billing & Analytics and IT as a service (ITaaS). The Company presents a single segment for purposes of financial reporting and prepared consolidated financial statements upon that basis.

The CODM assesses performance for the reporting segment and decides how to allocate resources based on consolidated revenue, gross profit and net income (loss), which also is reported on the Consolidated Statement of Operations, in addition to other key financial indicators, including gross margin, guiding strategic decisions to align with company-wide goals. The CODM uses the performance measures and key financial indicators in managing the business, allocating resources, making operating decisions, assessing financial performance, deciding investment decisions such as acquisitions.

The measure of segment assets is reported on the balance sheet as total consolidated assets. In addition, substantially all of the Company's revenues and long-lived assets are attributable to operations is in the United States for all periods presented.

The following table reflects certain financial data for our reportable segment:

16. Commitments and Contingencies

Employment Agreements

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

Litigation

The Company is involved in various legal proceedings arising in the ordinary course of business. Management does not believe that the outcome of these matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flow.

Property Theft Matter

During the third quarter of 2025, the Company identified a theft of certain assets resulting in an estimated loss of approximately $320,000. The Company recognized this amount as a charge to cost of revenues in the third quarter of 2025, representing management’s best estimate of the probable loss. Potential Insurance recovery has not been recorded, as the likelihood of recovery does not meet the probable criteria at this time.

The matter has been investigated internally and resolved operationally, though law enforcement and Insurance investigations will be ongoing.

While the Company believes the recorded amount reflects the best estimate at this time, there remains a possibility of additional exposure related to this matter. Management does not currently expect any additional loss, if incurred, to be material to the consolidated financial statements.

The Company continues to monitor the matter and will adjust its estimates as new information becomes available.

17. Subsequent Events

On October 1, 2025, the U.S. federal government entered a partial shutdown following the expiration of funding under the fiscal year 2025 continuing resolution. As a result, certain federal agencies temporarily suspended or limited operations. The Company is assessing potential impacts on its existing and anticipated government contracts; however, management does not currently expect the shutdown to have a material effect on the Company’s financial position, results of operations, or cash flows.