WIDEPOINT CORP

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(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 technology 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 and the Company’s ITMS platform has received the FedRAMP Certified 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 June 30, 2026 and for each of the three and six month periods ended June 30, 2026 and 2025 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, 2025 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, 2025. The results of operations for the three and six month periods ended June 30, 2026 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.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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 six months of 2026 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 25, 2026.

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.

Accounting Standards under Evaluation

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.

In September 2025, 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 December 15, 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.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

Reclassification

Certain prior period amounts have been revised to correct an immaterial misclassification in the previously issued consolidated financial statements related to certain interchange cash back rewards. These amounts were previously recorded as revenues but should have been recorded as reductions of cost of revenues. The revision had no impact on previously reported gross profit, loss from operations, net loss, or stockholders’ equity.

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 are often 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.

(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 three and six month periods ended June 30, 2026 and 2025, 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.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

Significant Concentrations

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

The following table presents revenue by significant customers 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 June 30, 2026, the Company had deposits in excess of FDIC limits of approximately $8.7 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 June 30, 2026, the Company had foreign bank deposits in excess of insured limits of approximately €358,600.

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. At June 30, 2026 and December 31, 2025,99% of our unbilled receivables were related to the U.S. Federal Government.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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:

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

During the three and six month periods ended June 30, 2026, property and equipment depreciation expense was approximately $78,100 and $164,700, respectively. During the three and six month periods ended June 30, 2025 property and equipment depreciation expense was approximately $91,400 and $177,300, respectively.

During the three month period ended June 30, 2026, the Company did not dispose of any property and equipment. During the six month period ended June 30, 2026, the Company sold fully depreciated property and equipment with historical cost and accumulated depreciation of $105,200 and received proceeds of $49,043.

During the three month period ended June 30, 2025, the Company disposed of fully depreciated property and equipment with historical cost of $118,800 and accumulated depreciation of $110,600 and recognized a loss on disposal of property and equipment of $8,200. During the six month period ended June 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.

There were no changes in the estimated useful lives used to depreciate property and equipment during the three and six month periods ended June 30, 2026 and 2025.

7. Goodwill and Intangible Assets

The Company has recorded goodwill of $5,811,578 as of June 30, 2026 and December 31, 2025. There were no changes in the carrying amount of goodwill during the three and six months ended June 30, 2026 and 2025.

Intangible assets consists of the following:

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

The Company did not capitalize any internally developed software costs for the three and six month periods ended June 30, 2026 and 2025.

There were no disposals of intangible assets during the three and six month periods ended June 30, 2026 and 2025.

The aggregate amortization expense recorded for the three and six month periods ended June 30, 2026 was approximately $262,900 and $541,500, respectively. The aggregate amortization expense recorded for the three and six month periods ended June 30, 2025 was approximately $486,500 and $967,100, respectively.

As of June 30, 2026, estimated annual amortization for intangible assets is approximately:

8. Credit Agreements

The Company has 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”) that matures on May 28, 2027.

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 6.50%. Outstanding interest on the amount borrowed is payable monthly and all outstanding interest and principal is due on the maturity date. 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 June 30, 2026. The Company was in compliance with its covenants at June 30, 2026.

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.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

10. Income Taxes

The Company’s effective tax rate was 3.0% and (40.9)% for the three and six month periods ended June 30, 2026, respectively. The Company’s effective tax rate was 7.8% and 9.8% for the three and six month periods ended June 30, 2025, respectively. During the three month period ended June 30, 2026, the Company recognized excess tax benefits related to stock-based compensation of $0.4 million as a discrete tax benefit in the provision for income taxes. The Company also recorded an increase in its valuation allowance of $0.4 million against deferred tax assets related to stock-based compensation deductions, based on management’s assessment of the realizability of those deferred tax assets under ASC 740.

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 income (loss) before income tax provision (benefit).

11. Stockholders’ Equity

Common Stock

The Company is authorized to issue 30,000,000 shares of common stock, $.001 par value per share. As of June 30, 2026, there were 9,994,617 shares issued and outstanding.

During the three months ended June 30, 2026,65,900 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 2,718 shares withheld in satisfaction of the employees corresponding tax liability of approximately $27,992. 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.

During the six months ended June 30, 2026,174,619 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 22,621 shares withheld in satisfaction of the employees corresponding tax liability of approximately $134,874. 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.

During the three months ended June 30, 2025,94,920 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 3,681 shares withheld in satisfaction of the employees corresponding tax liability of approximately $15,407. 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.

During the six months ended June 30, 2025,197,933 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 28,208 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.

During the three and six month periods ended June 30, 2026, employees exercised stock options covering 140,000 shares of common stock. The exercises were completed through net-share settlement arrangements. The Company withheld 40,550 shares with a value sufficient to satisfy the aggregate exercise price and employee tax withholding requirements and issued 99,450 net shares to employees. The fair value of shares withheld totaled approximately $280,373. The withheld shares were recorded as a reduction of stockholders' equity.

There were no stock option exercises during the six months ended June 30, 2025.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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 award shares are issued when granted and included in the total number of common shares issued and outstanding. During the six month period ended June 30, 2026, the Company granted 25,223 restricted stock awards. There were no restricted stock awards granted during the six month period ended June 30, 2025.

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 no stock option grants during the three month period ended June 30, 2026. There were 100,000 stock option awards granted during the six month period ended June 30, 2026. There were no stock option awards granted during the six month periods ended June 30, 2025.

For the six month period ended June 30, 2026, the weighted-average grant date fair value per option was $0.68 - $2.51. Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the period then ended as set forth below:

At June 30, 2026, the Company had approximately $0.4 million of total unrecognized share-based compensation expense related to share-based compensation that will be recognized over the weighted average remaining period of 1.1 years.*** ***

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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 and six months ended June 30, 2025, the Company had unexercised stock options of 408,570 and warrants to purchase 150,000 shares of common stock, outstanding, that were anti-dilutive.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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 June 30, 2026 and 2025, the Company recognized approximately $1.7 million and $1.9 million, respectively, of revenue related to amounts that were included in deferred revenue as of December 31, 2025 and 2024, respectively.

During the six month periods ended June 30, 2026 and 2025, the Company recognized approximately $4.8 million and $5.2 million, respectively, of revenue related to amounts that were included in deferred revenue as of December 31, 2025 and 2024, respectively.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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:

(1) Other segment items include sales and marketing costs, general and administration expenses.

WIDEPOINT CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

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.

17. Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.