WIDEPOINT CORP

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 in the 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 Telecommunications 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. 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 market place 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 period.

2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statement rules and regulations of the Securities and Exchange Commission.

Principles of Consolidation

The accompanying 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.

Accounting Standards Update

Accounting Standards Adopted

In December 2023, the 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 adopted this guidance prospectively for the year ended December 31, 2025. See Note 13 for additional information.

Accounting Standards under Evaluation

In November 2024, the Financial Accounting Standards Board (“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.

In September2025*,the FASB issued ASU No. 2025-06,* Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU amends the guidance under ASC 350-40 for internal-use software. The amendment removes reference to development-stages, clarify when capitalization may begin, and require entities to apply to property, plant and equipment disclosure requirements under ASC 350-10 to capitalize internal-use software costs. The ASU is effective for annual periods beginning after December15,2027,and for interim periods within those annual periods. Early adoption of ASU No. 2025-06 is permitted. The Company is evaluating the impact of these new requirements on its financial position, results of operations and cash flows.

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 loss, 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 Consolidated Statements of Operations, depending on the nature of the activity. See Note 17 for additional information.

Use of Estimates

The preparation of 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. Significant accounting estimates include, but are not limited to, the Company’s valuation of goodwill impairment. To estimate the fair value of its reporting unit, the Company projects future cash flows using management’s assumptions for revenue growth rate, operating margins, and a discount rate. These estimates can significantly affect the outcome of the Company’s impairment assessment.

Other areas requiring use of estimates and judgment relate to revenue recognition, accounts receivable valuation reserves, ability to realize intangible assets, 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.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability. GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

Level 1 - Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

Level 3 - Inputs that are unobservable and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows). The Company measured the fair value of contingent consideration using unobservable inputs (level 3).

The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred.

Financial Instruments

Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents, restricted cash, receivables, and contract assets.

Cash and Cash Equivalents

The Company maintains interest-bearing cash deposits and short-term overnight investments with large financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents for purposes of these consolidated financial statements. Interest-bearing cash deposits maintained by financial institutions in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000, per depositor, per insured bank. Because we maintain multiple accounts across separate legal entities, each entity is separately insured subject to applicable FDIC coverage limits. At December 31, 2025 and 2024, the Company had deposits in excess of FDIC limits, excluding restricted cash, of approximately $8.8 million and $5.5 million, respectively. 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. The Company also maintains deposits with a financial institution in the United Kingdom that are insured by Financial Services Compensation Scheme up to a maximum of £75,000 per financial institution. At December 31, 2025 and 2024, the Company had foreign bank deposits in excess of insured limits of approximately $0.2 million and $0.4 million, respectively.

Restricted Cash

Restricted cash is comprised of cash maintained in Company bank accounts that represent cash deposits to be utilized for the customer’s contractual obligations under their contract with the Company. The Company classifies as restricted cash based on the purpose and availability to fulfill the Company’s direct obligations to its customers.

Allowances for Credit Losses

The Company assesses its ability to collect outstanding receivables and contract assets and provides customer-specific allowances for credit losses and general allowances for the portion of receivables and contract assets that are estimated to be uncollectible. Allowances for credit losses are based on historical collection experience and expected credit losses, customer specific financial condition, current economic trends in the customer's industry and geographic region, changes in customer demand and the overall economic climate in the market the Company serves. Customer accounts receivable balances that remain uncollected for more than 45 days are further reviewed for collectability and are considered past due after 90 days unless different contractual repayment terms were extended under a contract with a customer. The Company will reserve such amounts estimated to be uncollectable.

Inventories

Inventories consist of mobile devices and accessories and identity credential hardware components. Inventories are valued at the lower of cost, using first-in, first-out method, or net realizable value. The Company records a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. For the years ended December 31, 2025 and 2024, there were no inventory write-downs.

Property and Equipment

Property and equipment are stated at historical cost, net of accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives based upon the classification of the property and/or equipment or lease period for assets acquired under lease arrangements. The estimated useful lives of the assets are as follows:

The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2025 and 2024, the Company’s management has not identified any material impairment of its property and equipment.

Leases

The Company has leases for corporate offices that are accounted for under ASC 842, Leases (Topic 842). The leases have remaining lease terms ranging from one year to thirteen years.

The Company determines if an arrangement is a lease at inception. The Company considers any contract where there is an identified asset and that it has the right to control the use of such asset in determining whether the contract contains a lease. A right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and the lease liabilities represent its obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the lease commencement date in determining the present value of lease payments. The lease ROU assets include any lease payments made prior to the rent commencement date. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

Goodwill and Other Intangible Assets

The Company accounts for goodwill and other indefinite-lived intangible assets in accordance with ASC 350, Intangibles (Topic 350). Under ASC Topic 350, goodwill and certain indefinite-lived intangible assets are not amortized but are subject to an annual impairment test, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.

The Company has a single reporting unit and, therefore, goodwill is tested on a consolidated basis. There were no goodwill impairment charges during 2025 and 2024.

Impairment of long-lived assets

The Company reviews long-lived assets such as property and equipment, right of use assets, and intangible assets with finite useful lives for impairment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable by comparing the net book value of the asset group to their estimated undiscounted future cash flows expected from their use and eventual disposition. Impaired assets are recorded at estimated fair value, determined principally by using the present value of estimated future cash flows expected from their use and eventual disposition. As of December 31, 2025 and 2024, the Company’s management has not identified any material impairment of its long-lived assets.

Revenue from Contracts with Customers

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

The Company reports products and services under the categories managed services and carrier services as described below:

Carrier Services. The Company bills for costs incurred to deliver voice, data and satellite and related mobile services for a connected device or end point. These services require us to procure, process and pay communications carrier invoices. We recognize revenues and related costs on a gross basis for such arrangements when we satisfy customer contractual obligations for such arrangements where we control the products and services before they are transferred to the customer. We are the principal in these transactions when we are seen as the primary creditor, we directly issue purchase orders directly to communications carriers for wireline and wireless services, and/or we have discretion in choosing optimal providers and rate plans. For arrangements in which we do not control the product or service, do not have economic risk, and do not have pricing or vendor discretion we recognize revenues and related costs on a net basis. A significant portion of our overall reported revenue is tied to this service component; however, it represents an insignificant portion of our overall reported gross profit. This is a commodity type service and margins are nominal, but this is a necessary service to deliver to federal government customers that engage us to provide a full-service solution. The Company does not assume the credit risk when providing these services for commercial customers due to the increased credit risk involved.

***Managed Services.***The Company delivers managed services under a full-service, quasi full-service or self-service solution to suit our customers’ needs. A significant portion of our reported gross profit is tied to this service component. Revenue is accrued based on what the Company expects will be ultimately invoiced. Differences between accrued revenues and actual billed revenues are adjusted in the period that billings are prepared and such differences have not historically been material. Managed services are not interdependent and there are typically no undelivered performance obligations in these arrangements. The Company aggregates its billable revenue under the following groupings:

Software Development Costs

The Company applies the principles of FASB ASC 350-40,Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that internal use software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended.

The Company also applies the principles of FASB ASC 985-20,Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with development of computer software to be sold to be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, development costs of computer software to be sold are capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

Product Development

Product development expenses include payroll, employee benefits, and other employee related expenses associated with product development. Product development expenses also include third-party development and programming costs, subject matter experts, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Costs related to product development are expensed until the point that preliminary project stage is complete or technological feasibility is reached. Costs incurred during the implementation of product development and enhancements are capitalized and amortized to cost of revenue over the estimated lives of the solution.

For the years ended December 31, 2025 and 2024, the Company did not capitalize any product development costs. See Note 9 to the consolidated financial statements for additional information about capitalization of product development costs.

Judgments and Estimates

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer under a fixed rate or fixed fee arrangement. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Components of our managed service solution are generally distinct performance obligations that are not interdependent and can be completed within a month. The Company’s products are generally sold with a right of return. Historically the returns have been immaterial and recognized in the period which the products are returned. While historically immaterial as well, the Company may provide other event driven credits or disincentives for not meeting performance obligations which are accounted for as variable consideration and recognized in the period which the event occurs.

Contract Balances

A significant portion of contract balances represent revenues earned on federal government contracts. Timing of revenue recognition may differ materially from the timing of invoicing to customers due a long-standing practice of issuing a consolidated managed service invoice. A consolidated invoice usually requires data such as billable hours, units managed, credentials issued, accessories sold and usage data from telecommunications providers and other suppliers. As a result it could take between thirty (30) to sixty (60) days or more after all performance obligations have been met to deliver a complete customer invoice. As a result, the Company may have both accounts receivables (invoiced revenue) and unbilled receivables (revenue recognized but not yet invoiced) that could represent one or more months of revenue. Additionally, the Company may be required under contractual terms to bill for services in advance and defer recognition of revenue until the related performance obligations have been met. In such cases, the Company records a contract asset relating to the associated costs of such transaction.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within thirty (30) to ninety (90) days. Payment terms and conditions for government and commercial customers are described below:

The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers.

Costs to Obtain a Contract with a Customer

The Company typically does not recognize assets from the costs to obtain a contract with a customer and generally expenses these costs as incurred. The Company primarily uses internal labor to manage and oversee the customer acquisition process and to finalize contract terms and conditions and commence customer start-up activities, if any. Internal labor costs would be incurred regardless of the outcome of a contract with a customer and as such those costs are not considered incremental to the cost to obtain a contract with a customer. Incremental costs to obtain a contract with a customer may include payment of commissions to certain internal and/or external sales agents.

Income Taxes

The Company accounts for income taxes in accordance with authoritative guidance which requires that deferred tax assets and liabilities be computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The guidance 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.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies.

The Company recognizes the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained upon audit by the relevant taxing authority.

Basic and Diluted Earnings (Loss) Per Share (EPS)

Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common and restricted stock were exercised or converted into common and restricted stock. The number of incremental shares from assumed conversions of stock options and unvested restricted stock awards included in the calculation of diluted EPS was calculated using the treasury stock method. See Note 16 to the consolidated financial statements for computation of EPS.

Employee Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements under provisions of ASC 718-10. The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award using a Black-Scholes option-pricing model, net of expected forfeitures. Those costs are recognized ratably over the vesting period. Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term ranging from 3 to 10 years. See Note 15 to the consolidated financial statements for additional information about stock-based compensation programs.

3. Fair Value Measurements

The consolidated financial statements include financial instruments for which the fair value may differ from amounts reflected on a historical basis.

Financial Assets and Financial Liabilities Carried at Other Than Fair Value

The Company’s financial instruments include cash equivalents, restricted cash, accounts receivable, accounts payable and other financial instruments associated with the issuance of the common stock. The carrying values of cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair value because of the short maturity of these instruments and past evidence indicates that these instruments settle for their carrying value.

4. Accounts Receivable and Significant Concentrations

A significant portion of the Company’s revenue arrangements consist of firm fixed price contracts with agencies of the U.S. federal government and several large multinational publicly traded and private corporations. Accounts receivable consist of the following by customer type in the table below as of the periods presented:

As of December 31, 2023, the Company had accounts receivable, net of $8.2 million.

(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, government shutdown, and continuing budget resolutions 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 customer.

(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) During the year ended December 31, 2025 and 2024, the Company did not recognize any material provisions or 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 bad debt charges 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 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.

5. Unbilled Accounts Receivable and Significant Concentrations

Unbilled accounts receivable represent revenues earned in connection with products and/or services delivered for which we are unable to issue a formal billing to the customer at the balance sheet 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 not invoiced at the end of the reporting period. An allowance for credit losses was insignificant for unbilled accounts receivable as of December 31, 2025 and 2024.

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

As of December 31, 2023, the Company had unbilled accounts receivable of $16.6 million.

Included in unbilled accounts receivable is $6.8 million and $14.4 million at December 31, 2025 and 2024, respectively, related to a single government customer under our CWMS 2.0 contract, which has experienced administrative delays in billings.

6. Other Current Assets and Other Long-Term Assets

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

Other long-term assets consisted of the following as of the periods presented below:

During the year ended December 31, 2025, $28,885 of internally developed software costs was transferred from capital work in progress to internally developed software and $420,229 was transferred from capital work in progress to property and equipment during the year.

At December 31, 2024, capitalized work in progress consists of internally developed software costs, primarily associated with upgrading the Company’s secure network operations center.

7. Property and Equipment

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

During the years ended December 31, 2025 and 2024, the Company purchased for cash property and equipment totaling approximately $237,400 and $117,900, respectively.

During the years ended December 31, 2025 and 2024, property and equipment depreciation expense was approximately $740,200 and $353,400, respectively.

During the year ended December 31, 2025, the Company disposed of owned 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.

There were no changes in the estimated useful lives used to depreciate property and equipment during the years ended December 31, 2025 and 2024.

8. Leases

The Company has leases for corporate and operational facilities (“real estate leases”).

Real estate leases. Substantially all real estate leases have remaining terms of two (2) to twelve (12) years, with additional five (5) year extensions available. All of these leases require a fixed lease payment that contains an annual lease payment escalation provision ranging from 3% to 4% per year.

The components of lease expense were as follows:

Lease expense is included in general and administrative expenses in the consolidated statement of operations. Amortization of right of use assets is included in depreciation and amortization in the consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

Maturities of lease liabilities as of December 31, 2025, were as follows:

On 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.

On November 1, 2024 the Company entered into a new lease agreement, to sublease from a commercial organization, additional warehouse space in the Columbus Ohio area to support planned growth in its Device as a Service (DaaS) offering. The lease commenced on November 15, 2024 and is for a term of fifty-three months, with a monthly rent obligation of $17,500, subject to annual rent increase of 3.5%. The operating lease resulted in the Company recording a leased right to use asset of $828,608 and associated liability.

9. Intangible Assets

The Company’s intangible assets are comprised of purchased intangibles consisting of customer relationships, channel relationships, telecommunications software, trade names and trademarks and non-compete agreements. Intangible assets acquired in connection with a business combination are valued at fair value and amortized on a straight-line basis over the expected useful life which may range from three (3) to fifteen (15) years or more depending on the intangible asset characteristics.

The Company’s intangible assets also include internally developed software used in the sales and delivery of its information technology service offerings. The Company capitalizes certain internal costs related to software development to deliver its information technology services including but not limited to its Intelligent Telecommunications Management System (ITMS™), Public Key Infrastructure (PKI) and Optimiser Telecom Data Intelligence (TDI™) applications. Significant development costs are capitalized from the point of demonstrated technological feasibility until the point in time that the product is available for general release to customers. Once the product is available for general release, capitalized costs are amortized typically on a straight-line basis generally over the expected functional life which may range from two (2) to five (5) years.

The following tables summarize purchased and internally developed intangible assets subject to amortization as of the periods presented below:

Purchased Intangibles

For the year ended December 31, 2025, there were no disposals or sales of purchased intangible assets.

Internally Developed

For the years ended December 31, 2025 and 2024, the Company did not incur any capitalized development costs. Capital work in progress is included in other long-term assets in the consolidated balance sheet.

The aggregate amortization expense recorded was approximately $1,740,400 and $2,252,000 for the years ended December 31, 2025 and 2024, respectively.

No impairment charges were recorded for the years ended December 31, 2025 and 2024.

As of December 31, 2025, estimated annual amortization for our intangible assets for each of the next five years and beyond is approximately:

10. Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024:

11. Accrued Expenses

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

12. Credit Agreements

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”). On February 18, 2025, the Company renewed the Credit Facility for an additional year until February 28, 2026. On February 25, 2026, the Company entered into an amendment to the Note with Old Dominion National Bank to extend the maturity to May 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 December 31, 2025. The Company was in compliance with its covenants at December 31, 2025.

13. Income Taxes

Income tax provision is as follows for the years ended:

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis beginning with the year ended December 31, 2025. A reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate for the year ended December 31, 2025 is presented accordingly as follows:

The following table summarizes the significant differences between the U.S. federal statutory tax rate and the effective tax rate for the year ended December 31, 2024 based on the required disclosure prior to the adoption of ASU 2023-09:

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets (liabilities) consisted of the following:

As of December 31, 2025, the Company had approximately $42.1 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes that consist of $26.3 million that will expire between 2026 and 2037 and $15.8 million related to years after December 31, 2017 that does not have an expiration under current tax law. NOLs arising in tax years beginning in 2018 and after may only reduce 80 percent of taxable income every year but can be carried forward indefinitely. Included in the recorded deferred tax asset, the Company had a benefit of approximately $59.3 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2026 and 2045.

Under the provisions of the Internal Revenue Code, the net operating losses (“NOL”) and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. Utilization of the net operating loss and tax credits carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of the net operating losses and credits before utilization.

Changes in the valuation allowance for the years ended were as follows:

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, management recorded a valuation allowance against a portion of domestic deferred tax assets because management has determined that it is more likely than not that the Company will not earn income sufficient to realize the deferred tax assets during the carry forward period. During the year ended December 31, 2025, the Company increased the valuation allowance by $0.5 million. If management’s assumptions change and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense.

The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS for tax years 2003 and forward. The Company may be subject to examinations by various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2020 forward. As of December 31, 2025, the Company is currently not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either December 31, 2025 or 2024. In the future, any interest and penalties related to uncertain tax positions will be recognized in income tax expense.

Cash Taxes Paid

The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of the adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025:

14. Stockholders’ Equity

Preferred Stock

The Company’s Certificate of Incorporation authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par value per share. Under the terms of the Company’s Certificate of Incorporation, the board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of preferred stock in one or more series. Each such series of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the board of directors. As of December 31, 2025, there were 7,954,286 undesignated shares of preferred stock remaining available for issuance. There were no issuances of or outstanding preferred stock during the years ended December 31, 2025 and 2024.

Common Stock

The Company is authorized to issue 30,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2025, there were 9,892,565 shares issued and outstanding.

Common Stock Issuances - Employee Stock Option Exercises

The Company issued a total of 42,805 shares of common stock as a result of stock option exercises for the year ended December 31, 2025. The Company issued 25,000 shares of common stock and realized gross proceeds of $61,200 from stock option cash exercises. The Company issued 17,805 shares of common stock upon cashless exercises of options to purchase 40,000 shares of common stock at an exercise price of $2.09 per share based up an average market price of $6.52 per share.

There were no stock option exercises during the year ended December 31, 2024.

Common Stock Issuances – Restricted Stock Awards

During the year ended December 31, 2025, there were 71,291 awards granted and 197,933 shares of 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 consolidated statement of cash flows. During the year ended December 31, 2025, the Company determined an additional 95,028 RSAs were legally issued and outstanding.

During the year ended December 31, 2024, there were 399,496 awards granted and 692,468 shares of 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 consolidated statement of cash flows.

See Note 15 for additional information regarding stock option plans.

Warrants Issued

On March 31, 2022, the Company issued a warrant to purchase 75,000 shares of common stock as part of the contingent consideration earned by ITA for 2021 EBITDA achievement. The warrant contains a strike price of $5.33 and has afour-year contractual term. The warrant is classified within stockholders’ equity at its fair value. The fair value of the warrant was determined to be $108,000 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance. Following such issuance, the Company has outstanding warrants to acquire 150,000 shares of common stock at a strike price of $5.33. These warrants expired as of December 31, 2025.

15. Stock Options and Award Programs

The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below.

Valuation of Stock Awards

Restricted Stock. The Company records the fair value of all restricted stock awards based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock award shares are issued when granted and included in the total number of common shares issued and outstanding. During the years ended December 31, 2025 and 2024, the Company granted 71,291 RSAs and 399,496 RSAs, respectively.

Non-Qualified Stock Options. The Company estimates the fair value of nonqualified stock options using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock option is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, forfeiture rates 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 based on analyses of historical employee termination rates and option exercises. There were 120,000 stock options granted during the year ended December 31, 2025. There were no stock option awards granted during the year ended December 31, 2024.

Option pricing model assumptions for NQSO granted were valued using the following assumptions for the years then ended as set forth below:

Non-Qualified Stock Options

A summary of NQSO activity as of December 31, 2025 and 2024, and changes during the years then ended are set forth below:

The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of the Company’s stock exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2025 are as follows:

Restricted Stock Awards

A summary of RSA activity as of December 31, 2025 and 2024, and changes for the years then ended are set forth below:

Long-Term Incentive Plan

The Company maintained 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 Restricted Stock Awards (RSAs) that were granted to members of management on April 2, 2024 and vested 33% on the date of grant with the remainder to vest on January 1, 2025 and 2026, subject to continued service. The estimated fair value of these RSAs of $640,500 was 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. For the years ended December 31, 2025 and 2024, the performance targets were not met in the service period and accordingly no equity-based compensation was recognized.

Share-based Compensation Expense

Share-based compensation recognized under ASC 718-10 (including restricted stock awards) represents both stock options-based expense and restricted stock expense. The Company recognized share-based compensation expense for the years then ended December 31 as set forth below:

At December 31, 2025, the Company had approximately $0.7 million of total unrecognized share-based compensation expense, net of estimated forfeitures, related to share-based compensation that will be recognized over the weighted average remaining period of 1.2 years.

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

The computations of basic and diluted EPS for the years ended were as follows:

For the year ended December 31, 2025, the Company had unexercised stock options of 168,570 that were anti-dilutive. For the year ended December 31, 2024, the Company had unexercised stock options of 288,570 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive.

17. Accumulated Other Comprehensive Loss

Changes in the Company’s cumulative foreign currency translation adjustments due to translation of its foreign subsidiaries’ Euro currency financial statements into the Company’s reporting currency were as and for the periods presented below:

18. 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.

Legal Matters

The Company is from time to time involved in legal proceedings and claims arising in the ordinary course of business. While the outcome of litigation cannot be predicted with certainty, management believes that the resolution of these matters, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

19. Revenue by Service Type, Customer Type and by Geographic Region

The Company recognized revenues by the following broad service types:

The Company recognized revenues for the following customer types as set forth below:

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

During the year ended December 31, 2025 and 2024, the Company recognized approximately $6.3 million and $2.1 million, respectively, of revenue related to amounts that were included in deferred revenue as of December 31, 2024 and 2023, respectively. The deferred revenue liability was approximately $3.0 million as of December 31, 2023.

20. 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. Our CODM is our chief executive officer and is responsible for reviewing segment performance and making decisions regarding resource allocation.

We operate as one segment based on the consolidated information used by our CODM in evaluating the financial performance of our business and allocation resources. This single segment represents our 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). We present 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:

**(1)**Other segment items include sales and marketing costs, general, administration and overhead costs, and provision for credit losses.

21. Subsequent Events

On February 25, 2026, the Company extended its line of credit with Old Dominion Bank under the same terms as its existing line of credit agreement until May 28, 2026.