| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended | |
or | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________________ to ___________________ | |
| WidePoint Corporation |
| (Exact name of Registrant as specified in its charter) |
| Delaware | 52-2040275 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) |
| 11250 Waples Mill Road, South Tower 210, Fairfax, Virginia 22030 | ||
| (Address of principal executive offices) |
| (703) 349-2577 |
|
| Title of Each Class | Trading Symbol | Name of Exchange on Which Registered |
| Common Stock, $0.001 par value per share | WYY | NYSE American |
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| Large accelerated filer | Accelerated filer | |
Non-accelerated filer
| Smaller reporting company ☑ Emerging growth company |
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STATEMENTS OF OPERATIONS COMPREHENSIVE INCOME BALANCE SHEETS (continued) and Nature of Operations Successful contract performance and variation in the volume of activity as well as in the number of contracts commenced or completed during any quarter may cause significant variations in operating results from quarter to quarter. and Accounting Policies March 24, 2020. U.S. federal government and similar pricing structures with several corporations. Accounts receivable consist of the following by customer type in the table below as of the periods presented: current and/or comparative periods: equipment. Intangible Assets 2019. March 31, 2020. variable interest rate to the Wall Street Journal prime rate plus 0.25%. As of 1.0 year. Contracts with Customers Contingencies In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, the terms “Company” and “WidePoint,” as well as the words “we,” “our,” “ours” and “us,” refer collectively to WidePoint Corporation and its consolidated subsidiaries. restricted environments. Income Taxes.Income tax expense for the March 31, 2019. March 31, 2019. . $143,600. $122,300 2019. EXHIBIT NO.PARTITEMBALANCE SHEETS SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,423,974 $ 9,123,498 Accounts receivable, net of allowance for doubtful accounts
of $78,230 and $344,411 in 2017 and 2016, respectively 7,942,035 5,153,093 Unbilled accounts receivable 6,132,753 8,112,690 Inventories 313,538 123,287 Prepaid expenses and other assets 576,402 385,388 Income taxes receivable - 42,896 Total current assets 21,388,702 22,940,852 NONCURRENT ASSETS Land and building held for sale - 594,376 Property and equipment, net 969,651 736,678 Intangibles, net 3,900,433 4,298,902 Goodwill 18,555,578 18,555,578 Deposits and other assets 85,094 52,456 TOTAL ASSETS $ 44,899,458 $ 47,178,842 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Line of credit advance $ 552,739 $ - Short term note payable 53,650 131,761 Accounts payable 7,826,706 8,665,449 Accrued expenses 8,506,206 7,872,557 Deferred revenue 1,506,010 1,190,558 Income taxes payable 58,258 5,141 Current portion of long-term debt - 94,868 Current portion of deferred rent 56,894 40,397 Current portion of capital lease obligations 20,216 4,097 Total current liabilities 18,580,679 18,004,828 NONCURRENT LIABILITIES Long-term debt related to assets held for sale, net of current portion - 412,180 Capital lease obligation, net of current portion 56,547 - Deferred rent, net of current portion 100,380 86,198 Deferred revenue 13,333 - Deferred income taxes 379,894 398,985 Total liabilities 19,130,833 18,902,191 STOCKHOLDERS' EQUITY Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714 shares issued and none outstanding - - Common stock, $0.001 par value; 110,000,000 shares authorized; 82,946,847 and 82,730,134 shares issued and outstanding, respectively 82,947 82,730 Additional paid-in capital 94,007,140 93,920,095 Accumulated other comprehensive loss (135,664 ) (309,369 ) Accumulated deficit (68,185,798 ) (65,416,805 ) Total stockholders’ equity 25,768,625 28,276,651 Total liabilities and stockholders’ equity $ 44,899,458 $ 47,178,842 REVENUES COST OF REVENUES (including amortization and depreciation of $159,618 and $232,191, respectively) GROSS PROFIT OPERATING EXPENSES Sales and marketing General and administrative expenses (including share-based compensation of $281,441 and $89,266, respectively) Depreciation and amortization Total operating expenses INCOME FROM OPERATIONS OTHER (EXPENSE) INCOME Interest income Interest expense Other income Total other expense INCOME BEFORE INCOME TAX PROVISION INCOME TAX PROVISION NET INCOME BASIC EARNINGS PER SHARE BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING DILUTED EARNINGS PER SHARE DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING 2 OPERATIONS THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) REVENUES $ 18,463,872 $ 22,114,839 $ 55,956,617 $ 60,163,145 COST OF REVENUES (including amortization and depreciation $318,461, $307,235, $895,088, and $887,870, respectively) 15,087,567 18,076,810 45,859,532 48,559,591 GROSS PROFIT 3,376,305 4,038,029 10,097,085 11,603,554 OPERATING EXPENSES Sales and Marketing 532,714 625,481 1,709,892 2,066,995 General and Administrative Expenses (including share-based compensation of ($81,043), $68,088, $138,036 and $204,414, respectively) 3,046,148 3,450,767 10,668,368 10,650,697 Product Development 11,342 2,648 219,141 261,031 Depreciation and Amortization 69,935 84,759 212,874 268,956 Total Operating Expenses 3,660,139 4,163,655 12,810,275 13,247,679 LOSS FROM OPERATIONS (283,834 ) (125,626 ) (2,713,190 ) (1,644,125 ) OTHER INCOME (EXPENSE) Interest Income 1,971 3,012 11,564 10,618 Interest Expense (13,985 ) (20,910 ) (36,402 ) (61,068 ) Other (Expense) Income (1,541 ) 3,779 1,758 11,124 Total Other Income (Expense) (13,555 ) (14,119 ) (23,080 ) (39,326 ) LOSS BEFORE INCOME TAX PROVISION (297,389 ) (139,745 ) (2,736,270 ) (1,683,451 ) INCOME TAX PROVISION 17,212 8,295 32,723 21,029 NET LOSS $ (314,601 ) $ (148,040 ) $ (2,768,993 ) $ (1,704,480 ) BASIC EARNINGS PER SHARE $ (0.00 ) $ (0.00 ) $ (0.03 ) $ (0.02 ) BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING 82,946,847 82,730,134 82,878,287 82,673,570 DILUTED EARNINGS PER SHARE $ (0.00 ) $ (0.00 ) $ (0.03 ) $ (0.02 ) DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING 82,946,847 82,730,134 82,878,287 82,673,570 NET INCOME Other comprehensive income (loss): Foreign currency translation adjustments, net of tax Other comprehensive income (loss) COMPREHENSIVE INCOME STATEMENTS OF COMPREHENSIVE LOSS THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) NET LOSS $ (314,601 ) $ (148,040 ) $ (2,768,993 ) $ (1,704,480 ) Other comprehensive income: Foreign currency translation adjustments, net of tax 45,673 15,366 173,705 46,517 Other comprehensive income 45,673 15,366 173,705 46,517 COMPREHENSIVE LOSS $ (268,928 ) $ (132,674 ) $ (2,595,288 ) $ (1,657,963 ) CURRENT ASSETS Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $123,097 and $126,235 in 2020 and 2019, respectively Unbilled accounts receivable Other current assets Total current assets NONCURRENT ASSETS Property and equipment, net Operating lease right of use asset, net Intangibles, net Goodwill Other long-term assets Total assets CURRENT LIABILITIES Accounts payable Accrued expenses Deferred revenue Current portion of operating lease liabilities Current portion of other term obligations Total current liabilities NONCURRENT LIABILITIES Operating lease liabilities, net of current portion Deferred revenue, net of current portion Deferred tax liability Total liabilities Commitments and contingencies STOCKHOLDERS' EQUITY Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714 shares issued and none outstanding Common stock, $0.001 par value; 110,000,000 shares authorized; 83,837,289 and 83,861,453 shares issued and outstanding, respectively Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity NINE MONTHS ENDED SEPTEMBER 30, 2017 2016 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (2,768,993 ) $ (1,704,480 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Deferred income tax benefit (10,173 ) (12,213 ) Depreciation expense 295,798 336,147 Provision for doubtful accounts 31,187 (7,932 ) Amortization of intangibles 812,164 820,679 Amortization of deferred financing costs 9,485 - Share-based compensation expense 138,036 204,414 (Gain) on sale of assets held for sale (66,683 ) - Loss on disposal of fixed assets 172,472 - Changes in assets and liabilities: Accounts receivable and unbilled receivables (612,010 ) (946,390 ) Inventories (189,607 ) (342,292 ) Prepaid expenses and other current assets (245,637 ) 19,293 Other assets (10,849 ) 6,515 Accounts payable and accrued expenses (552,531 ) 1,309,782 Income tax (payable) receivable 85,891 (11,183 ) Deferred revenue and other liabilities 281,168 (880,982 ) Net cash used in operating activities (2,630,282 ) (1,208,642 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (573,400 ) (145,246 ) Software development costs (360,685 ) (480,355 ) Proceeds from sale of assets held for sale 236,451 - Proceeds from the sale of property and equipment 53,861 - Net cash used in investing activities (643,773 ) (625,601 ) CASH FLOWS FROM FINANCING ACTIVITIES Advances on bank line of credit 11,599,343 18,254,362 Repayments of bank line of credit advances (11,046,604 ) (18,128,355 ) Principal repayments of long term debt (82,440 ) (665,704 ) Principal repayments under capital lease obligations (25,562 ) (26,396 ) Restricted stock award tax liability payment (60,614 ) (32,332 ) Proceeds from exercise of stock options 17,100 - Net cash provided by (used in) financing activities 401,223 (598,425 ) Net effect of exchange rate on cash and equivalents 173,308 87,924 NET DECREASE IN CASH (2,699,524 ) (2,344,744 ) CASH, beginning of period 9,123,498 7,930,303 CASH, end of period $ 6,423,974 $ 5,585,559 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income tax expense Depreciation expense (Recovery) provision for doubtful accounts Amortization of intangibles Amortization of deferred financing costs Share-based compensation expense Changes in assets and liabilities: Accounts receivable and unbilled receivables Inventories Prepaid expenses and other current assets Other assets Accounts payable and accrued expenses Income tax payable Deferred revenue and other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment Software development costs Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Advances on bank line of credit Repayments of bank line of credit advances Principal repayments under finance lease obligations Common stock repurchased Net cash used in financing activities Net effect of exchange rate on cash and equivalents NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of period CASH AND CASH EQUIVALENTS, end of period NINE MONTHS ENDED SEPTEMBER 30, 2017 2016 (Unaudited) SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest $ 23,656 $ 58,125 Cash paid for income taxes $ 8,787 $ 4,031 Cash received from income tax refund $ 2,674 $ - NONCASH INVESTING AND FINANCING ACTIVITIES Fair value of contingent consideration paid in connection with software asset purchase (Note 6) $ 50,000 $ - Insurance policies financed by short term notes payable $ 68,488 $ 62,352 Acquisition of assets under capital lease obligation (Note 6) $ 93,301 $ - 2020 2019 (Unaudited) SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest $ 82,655 $ 63,309 Balance, January 1, 2019 Issuance of common stock — options exercises Issuance of common stock — restricted Stock compensation expense — restricted Stock compensation expense — non-qualified stock options Foreign currency translation — (loss) Net income Balance, March 31, 2019 Balance, January 1, 2020 Common stock repurchased Stock compensation expense — restricted Stock compensation expense — non-qualified stock options Foreign currency translation — (loss) Net income Balance, March 31, 2020 1.Organization and Nature of OperationsMcLean,Fairfax, Virginia. solutions to the government and commercial sectors. The Company utilizes its subject matter expertise and internally developed proprietary software, analytical and reporting tools to deliver its communications and related identity management solutions.. The Company’s TM2 platform and service solutions areenable 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 TM2 platform. The Company’s TM2 platform is internally hosted solutions which areand accessible on-demand through a secure customer portal that provides its customers withis specially configured for each customer. The Company can deliver these solutions in a set of streamlined mobile communications management, identity management, and consulting solutions. The Company’s trusted mobility management solutions provides its customers the ability to efficiently manage, analyze and protect their valuable communications assets, and deploy federal government compliant identity management solutions that provide secured virtual and physical access to restricted environments.Successful contract performance and variation in the volume of activity as well as in the number of contracts commenced or completed during any quarter may cause significant variations in operating resultsconfigurations ranging from quarterutilizing the platform as a service to quarter. a full-service solution that includes full lifecycle support for all end users and the organization.in particular, will be the primary source of revenues for the foreseeable future. External factors outside of the Company’s control such as delays and/or changesa change in government administrations, budgets and other political matters that may impact the timing and commencement of such work and could result in variations in operating results and directly affect the Company’s financial performance. be 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.2.Basis of Presentation and Accounting PoliciesSeptember 30, 2017March 31, 2020 and for each of the three and nine month periods ended September 30, 2017March 31, 2020 and 2016,2019, respectively, 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 accounting principlesin 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, 20162019 was derived from the audited condensed consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2019. The results of operations for the three and nine month periods ended September 30, 2017March 31, 2020 are not necessarily indicative of the operating results for the full year.ReclassificationsUpon the adoption of recent accounting standards as further described below the Company made certain reclassifications to the condensed consolidated balance sheets to comply with the standard and made similar reclassifications to conform to the current year presentation. At December 31, 2016, the Company reclassified deferred tax assets of $48,826 against non-current deferred tax liabilities of $447,811. There was no impact on the condensed consolidated statement of operations or earnings per share as a result of adopting this standard. (loss) 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.Significant Accounting PoliciesThere have been no significant changes in the Company’s significant accounting policies during the first nine months of 2017 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 30, 2017, except as noted below under the section “Recently Adopted Accounting Standards”.trusted mobility managementTM2 solution offerings comprise an overall single business from which the Company earns revenues and incurs costs. The Company’s trusted mobility managementTM2 solution offerings are centrally managed and reported on that basis to its Chief Operating Decision Maker who evaluates its business as a single segment. See Note 13 for detailed information regarding the composition of revenues.8 Recently AdoptedStandardsAccounting Standards Codification 740 “Income Taxes.” In November 2015, ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” was issued. This ASU requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this update apply to all entities that present a classified statement of financial position. The Company adopted this ASUPoliciesquarterthree months of 2017 and reclassified $48,826 of current deferred tax assets to non-current deferred tax assets reflected at December 31, 2016. All deferred tax assets are presented as non-current.Accounting Standards Codification 718 “Compensation-Stock Compensation.” In March 2016, ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” was issued. This ASU provides for areas of simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within2020 from those annual periods. The Company adopted this ASUdisclosed in the three months ended March 31, 2017, and the Company did not recognize any adjustments due to the fact that the Company had a tax-effected full valuation allowance of approximately $9.3 million applied against its U.S. based deferred tax assets, of which approximately $352,200 was applied against unrealized stock option benefits. In the event the Company generates sufficient taxable income to utilize its deferred tax assets the Company may be required to recognize up to $352,200 in deferred tax assets relating to unrealized stock option benefits and a corresponding adjustment to retained earnings. The Company estimates forfeiture rates and adjusts such rates when appropriate.Accounting Standards Codification 230 “Statement of Cash Flows.” In August 2016, ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” was issued. This ASU provides guidanceCompany’s Annual Report on eight specific cash flow issues with the objective of reducing the existing diversity in practiceForm 10-K for those issues. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company early adopted this ASU during the year ended December 31, 2017. The adoption of this accounting standard did not have a material effect2019 filed with the SEC on the Company’s condensed consolidated statements of cash flows presented herein.May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance on revenue recognition. The accounting standard establishes the principles to apply to determine the amount and timing of revenue recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance, as amended, supersedes most of the current revenue recognition requirements, and is effective January 1, 2018. Upon adoption of the new revenue recognition guidance, the Company anticipates using the full retrospective method, which applies the new standard to each prior reporting period presented. The Company has been working on the implementation of the standard and has made good progress in evaluating the potential impact on its consolidated financial statements. There will be some changes to the recognition timing and classification of revenues and expenses; however, the Company does not expect a significant impact to pretax income upon adoption. The Company is also in the process of implementing changes to its accounting policies, business processes, systems and internal controls to support the recognition and disclosure requirements under the new standard.In FebruaryJune 2016, the FASB issued new accountingASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): leases.reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The guidance, whichallowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. This update is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on the Consolidated Balance Sheets. The Company currently anticipates adopting the standard effective January 1, 2019, using the modified retrospective approach, which requires recording existing operating leases on the Consolidated Balance Sheets upon adoption and in the comparative period. The Company is in the process of identifying changes to its accounting policies, business processes, systems, and internal controls in preparation for the implementation. Specifically, the Company is currently reviewing its lease portfolio and is evaluating and interpreting the requirements under the guidance, including the available accounting policy elections, in order to determine the impacts to the Company’s financial position, results of operations and cash flows upon adoption.Accounting Standards Codification 350 “Intangibles - Goodwill and Other.” In January 2017, ASU No. 2017-04, “Simplifying the Testcompany for Goodwill Impairment” was issued. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity should apply this ASU on a prospective basis and for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.2022, including interim periods within those fiscal years. The Company is continuing to evaluatecurrently evaluating the effectimpact of the pending adoption of this guidance will havenew standard on theits consolidated financial statementsstatements.related disclosures.3.Assets Held for SaleIn November 2016, the Company evaluated plans to either expand its facility located in Lewis Center, Ohio (“Lewis Center Facility”) or relocate to a larger facility that could accommodateSignificant Concentrationsgrowth and operational requirements. In December 2016, the Company’s management decided to put the Lewis Center Facility up for sale and identify a larger facility to lease. The Company completed the sale of its Lewis Center Facility on May 22, 2017 at a gross salesreceivables are billed under firm fixed price of $730,000 and received net proceeds of approximately $236,400 after paying off the existing mortgage, broker commissions and other closing costs. The Company recorded within general and administrative expenses a net gain of approximately $66,700 on the sale of its Lewis Center Facility. Assets held for sale are set forth in the table below ascontracts with agencies of the periods presented: SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Land $ - $ 139,656 Building - 537,398 Total Land and building held for sale, at cost $ - $ 677,054 Less: Accumulated depreciation - (82,678 ) Land and building held for sale, net $ - $ 594,376 Long-term debt $ - $ 432,367 4.Accounts Receivable and Significant Concentrations SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Commercial $ 2,275,740 $ 2,319,142 Government 5,744,525 3,178,362 Gross accounts receivable 8,020,265 5,497,504 Less: allowances for doubtful accounts 78,230 344,411 Accounts receivable, net $ 7,942,035 $ 5,153,093 For Government (1) Commercial (2) Gross accounts receivable Less: allowances for doubtful accounts (3) Accounts receivable, net nine month period ended September 30, 2017,date of service and payment is generally due within thirty (30) days of the Company recorded a provision for bad debtinvoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of approximately $31,200contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer.separately wrote-off a specific provision for bad debtconditions 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 approximately $274,500 against the related customer invoice which reduced ending allowancesan allowance for doubtful accounts.accounts if deemed necessary.and nine month periodsmonths ended September 30, 2016,March 31, 2020, the Company did not recognize any material provisions for bad debt, write-offs or recoveries of existing provisions for bad debt or any material recoveries of commercial accounts receivable for which an allowance had been previously established.. The Company has not historically maintained a bad debt reserve 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 a bad debt reserve.10 Customers representingare set forth in the table below as of the periods presented: SEPTEMBER 30, DECEMBER 31, 2017 2016 As a % of As a % of Customer Name Receivables Receivables (Unaudited) Department of Homeland Security (DHS) 46% 47% Customers representingpresented below: Customer Name U.S. Immigration and Customs Enforcement National Aeronautics and Space Administration U.S. Census Bureau are set forth in the table below for each of the periods presented: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 As a % of As a % of As a % of As a % of Customer Name Revenues Revenues Revenues Revenues (Unaudited) Department of Homeland Security (DHS) 60% 62% 60% 63% 5.Unbilled Accounts Receivable Customer Name U.S. Immigration and Customs Enforcement U.S. Customs Border Patrol U.S. Census Bureau represents amountrepresent revenues earned but not yet billed for products and/invoiced to the customer at the balance sheet date due to either timing of invoice processing or services delivered. Unbilled receivablesdelays 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.by customer typetable presents customers that represent ten (10) percent or more of consolidated unbilled accounts receivable as of the periods presented below: SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Commercial $ 285,912 $ 278,862 Government 5,846,841 7,833,828 Unbilled accounts receivable $ 6,132,753 $ 8,112,690 6.Property and Equipment Customer Name U.S. Department of Homeland Security Headquarters U.S. Immigration and Customs Enforcement U.S. Census Bureau Inventories Prepaid rent, insurance and other assets Total other current assets Carrier service costs Salaries and payroll taxes Inventory purchases, consultants and other costs Severance costs U.S. income tax payable Total accrued expenses SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Computer hardware and software $ 1,516,560 $ 1,214,052 Furniture and fixtures 297,291 211,376 Leasehold improvements 242,792 486,467 Automobile 186,623 216,880 Gross property and equipment 2,243,266 2,128,775 Less: accumulated depreciation and amortization 1,273,615 1,392,097 Property and equipment, net $ 969,651 $ 736,678 Land and building held for sale, net $ - $ 594,376 On April 30, 2017, the Company entered into an Asset Purchase Agreement with Probaris Technologies, Inc. (“Seller”) and paid approximately $304,300 to purchase certain commercial identity and authentication software assets (the “Software Assets”). The Company principally purchased the Software Assets to ensure that a key component in the delivery of the Company’s identify management solution offering was neither acquired by a competitor nor no longer made available to license. Also under the terms of the Asset Purchase Agreement, the Company agreed to pay contingent consideration of $100,000 to the Seller if the Seller’s sole government customer renews its license agreement in 2018. The Company estimated the fair value of contingent consideration at $50,000 based on a number of different factors including the current state of the government fiscal budget and planned cuts, as well as changes in the technology and industry that may require expensive development that may not make renewal feasible. Contingent consideration is recorded within “accrued expenses” on the condensed consolidated balance sheets.As discussed further in Note 3, in May 2017 the Company relocated from the Lewis Center Facility to a larger facility in Columbus and abandoned undepreciated building and leasehold improvements with a gross cost and accumulated depreciation of approximately $282,200 and $105,500, respectively. The Company recorded within general and administrative expenses a loss on disposal of approximately $176,700 as a result of the move. Computer hardware and software Furniture and fixtures Leasehold improvements Automobiles Gross property and equipment Less: accumulated depreciation and amortization Property and equipment, net ninethree month periodperiods ended September 30, 2017March 31, 2020 and 2019, property and equipment depreciation expense was approximately $137,000 and $135,000, respectively. fully depreciated owned property and equipment with related cost and accumulated depreciation of approximately $398,600 and building and leasehold improvements with a net book value of approximately $176,700. During the three and nine month periods ended September 30, 2016 there were disposals of fully depreciated owned property and equipment of approximately $309,100.or nine month periods ended September 30, 2017March 31, 2020 and 2016.Assets under capital lease included in the table above consisted of the following as of the periods presented below: SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Automobiles $ 93,301 $ 63,498 Less: accumulated amortization 14,611 36,823 Capital lease assets, net $ 78,690 $ 26,675 During the nine month period ended September 30, 2017, the Company acquired two automobiles under capital lease arrangements2019.recognized a gross asset of $93,301. For the nine month period ended September 30, 2017, the Company disposed of two leased automobiles with a net book value of $47,800 and received gross proceeds of approximately $51,800. The Company recognized a net gain on disposal of approximately $4,100. During the three and nine month periods ended September 30, 2017 there were no material sales or disposals of leased equipment. During the three and nine month periods ended September 30, 2016 there were disposals of fully amortized leased equipment of approximately $309,100.Property and equipment depreciation expense (including amortization of capital lease property) was approximately as follows for the periods presented below: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) Property and equipment depreciation expense $ 100,200 $ 105,200 $ 295,800 $ 336,100 Capital lease amortization (included in property and equipment depreciation expense) $ 6,000 $ 3,400 $ 13,800 $ 10,900 7.Goodwill and Intangible Assets recorded goodwill of $18,555,578 as of September 30, 2017.March 31, 2020. There were no changes in the carrying amount of goodwill during the three month period ended March 31, 2020. Customer Relationships Channel Relationships Internally Developed Software Trade Name and Trademarks Customer Relationships Channel Relationships Internally Developed Software Trade Name and Trademarks ninenetwork operations center. For the three month periods ended September 30, 2017. The Company considered whether there were indicators of impairment during the three and nine month periods ended September 30, 2017.The Company has recorded net intangible assets of $3,900,433, consisting of purchased intangibles and internally developed software used in the conduct of business. For the three and nine month periods ended September 30, 2017,March 31, 2019, the Company capitalized internally developed software costs of approximately $128,000 and $360,700, respectively,$58,500 related to costs associated with our next generation TDI Optimiser™ application. There were no material disposals of intangible assets forduring the three and nine month periods ended September 30, 2017March 31, 2020 and 2016.September 30, 2017March 31, 2020 and 20162019 were approximately $276,400$125,700 and $286,800 respectively. The aggregate amortization expense recorded for the nine month periods ended September 30, 2017 and 2016 were approximately $812,200 and $820,700,$198,800, respectively. The total weighted remaining average life of all purchased intangible assets and internally developed software costs iswas approximately 6.85.0 years and 2.8 years,1.0 year, respectively, at September 30, 2017.8.Line of Credit and Long Term DebtCommercial Loan Agreement FacilityRemainder of 2020 2021 2022 2023 2024 Thereafter Total BankBank) (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of creditcredit.20182021 and replaceschanged the Company’s prior credit facility with Cardinal Bank.interest rate for the working capital line of credit is the Wall Street Journal prime rate plus 1.0%. The facility is secured by a first lien security interest on all of the Company’s personal property, including its accounts receivable, general intangibles, inventory and equipment maintained in the United States.The Loan Agreement requires that the Company (i) maintain a minimum adjusted tangible net worth of at least $4.0 million for the quarter ending December 31, 2017, increasing to $4.5 million for each quarter thereafter and (ii) maintain a current ratio of 1.10:1 tested quarterly.Under the previous credit facility with Cardinal Bank the Company was advanced and repaid approximately $3.3 million during the nine month period ended September 30, 2017. Under the current credit facility with Access National Bank the Company was advanced and repaid approximately $8.3 million and $7.8 million, respectively during the nine month period ended September 30, 2017.September 30, 2017,March 31, 2020, the Company was eligible to borrow up to $4.4$4.9 million under the borrowing base formula.Long-Term DebtLong-term debt consisted of the following: SEPTEMBER 30, DECEMBER 31, 2017 2016 (Unaudited) Cardinal Bank mortgage dated December 17, 2010 (1) $ - $ 432,367 Cardinal Bank term note dated December 31, 2011 (2) - 74,681 Total - 507,048 Less: current portion - 94,868 Long-term debt, net of current portion $ - $ 412,180 Long-term debt related to assets held for sale, net of current portion $ - $ 412,180 (1) On December 17, 2010, the Company entered into a real estate purchase agreement to acquire the Lewis Center Facility for approximately $677,000 and financed a significant portion of the purchase price with a $528,000 ten-year mortgage with Cardinal Bank. On May 22, 2017, the Company completed the sale of this real estate asset and paid off the balance of the mortgage. See Note 3 for additional information regarding the sale of the property.(2) On December 31, 2011, the Company entered into a $4.0 million 5-year term note with Cardinal Bank to fund a portion of the purchase price paid in connection with the asset purchase agreement with Avalon Global Solutions, Inc. dated December 30, 2011. The Company paid the last scheduled installment on January 6, 2017.13 Capital Lease ObligationsAs more fully described in Note 6, the Company acquired two new automobiles at a cost of $93,301 and financed the purchase of these vehicles under a capital lease agreement for $80,527. Minimum lease payments required under these two new capital leases are $695 and $1,210, respectively, and these leases expire in March 2020. The following sets forth the Company’s future minimum payment obligations under these capital lease agreements for fiscal years ending September 30:2017 $ 24,500 2018 24,500 2019 24,500 2020 12,291 Total principal and interest payments 85,791 Less: portion representing interest 9,028 Present value of minimum lease payments under capital lease agreements 76,763 Less: current portion 20,216 Capital lease obligations, net of current portion $ 56,547 9.Income TaxesSeptember 30, 2017,March 31, 2020, the Company was not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either September 30, 2017March 31, 2020 or December 31, 2016.2019. In the future if applicable, any interest and penalties related to uncertain tax positions will be recognized in income tax expense.September 30, 2017,March 31, 2020, the Company had approximately $33.4$37.5 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes, net of the potential Section 382 limitations. These federal NOL carry forwards expire between 2020 and 2036.2037. Included in the recorded deferred tax asset, the Company had a benefit of approximately $30.0$39.5 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2024 and 2036. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic NOL may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.10.Stockholders’ EquityPreferred StockThere were no issuances of preferred stock during the nine month periods ended September 30, 2017 and 2016.14 September 30, 2017,March 31, 2020, there were 82,946,84783,837,289 shares issued and outstanding (including 1,897,154 restricted shares not vested). During the three month periods ended March 31, 2020 and 2019, 83,331 and 99,990 shares of common stock outstanding. The Company issued 186,713 and 209,438 shares of common stock, respectively, as a result ofvested in accordance with the vesting terms of RSAs during the nine month periods ended September 30, 2017 and 2016, respectively.restricted stock awards (RSA). See Note 11 for additional information regarding RSA activity.There were no shares of common stock issued as a result of stock option exercises during the three month periods ended September 30, 2017 and 2016, respectively. Shares of common stock issued as a result of stock option exercises and realized gross proceeds during the nine month period ended September 30, 2017 were 30,000 and $17,100, respectively, from the exercise of such stock options. See Note 11 for additional information regarding the stock incentive plans.11.Stock Award ProgramsThe Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, nonqualified stock options, restricted stock awards, 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 AwardsThe 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 a Black-Scholes option pricing model (“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.Restricted Stock AwardsDuring the nine month period ended September 30, 2017, the Company granted 300,000 RSAs to its former Chief Executive Officer that had a grant date fair value of approximately $246,000. The vesting of these RSAs were tied to attainment of certain financial goals as outlined by the Company’s Compensation Committee of the Board of Directors. In connection with his resignation on June 30, 2017, 150,000 shares immediately vested and the remaining 150,000 were cancelled. As a result of share withholdings to satisfy tax liabilities, the Company issued 102,525 shares of the Company’s common stock to Mr. Nyweide and recognized a non-cash stock based compensation expense of approximately $94,400 in conjunction with this acceleration event. The Company's payment of the tax liability associated with this accelerated vesting was recorded as a cash flow from financing activity on the condensed consolidated statements of cash flows.In addition, during the nine month period ended September 30, 2017, 125,000 RSAs vested upon expiration of the employment agreement between Steve L. Komar (the former Chief Executive Officer) and the Company on January 3, 2017. On January 3, 2017, the Company issued 84,188 shares of the Company’s common stock. Mr. Komar received less than 125,000 shares vested because he elected to have 40,812 of such shares withheld in satisfaction of the corresponding tax liability of approximately $46,000. The Company's payment of this tax liability was recorded as a cash flow from financing activity on the condensed consolidated statements of cash flows.There were no RSAs granted during the nine month period ended September 30, 2016.During the nine month period ended September 30, 2016, 250,000 RSAs vested upon the Company reporting over $70 million in revenues in its Annual Report on Form 10-K for 2015. On March 15, 2016, the Company issued 209,438 shares of the Company’s common stock in connection with this accelerated vesting event, of which Mr. Komar received 125,000 shares and James T. McCubbin received 84,438 shares. Mr. McCubbin received less than 125,000 shares because he elected to have 40,562 of such shares withheld in satisfaction of the corresponding tax liability of approximately $32,300. The Company's payment of this tax liability was recorded as a cash flow from financing activity on the condensed consolidated statements of cash flows.There were no RSAs that were cancelled or expired during the three and nine month periods ended September 30, 2016.A summary of RSA activity as of September 30, 2017 and 2016, and changes during nine month periods ended September 30, 2017 and 2016 are set forth below: 2017 2016 NON-VESTED AWARDS (Unaudited) Non-vested awards outstanding, January 1, 250,000 500,000 Granted (+) 300,000 - Cancelled (-) 150,000 - Vested (-) 275,000 250,000 Non-vested awards outstanding, September 30, 125,000 250,000 Weighted-average remaining contractual life (in years) 0.2 1.5 Unamortized RSA compensation expense $ 1,090 $ 61,700 Aggregate intrinsic value of RSAs non-vested, September 30 $ 81,250 $ 147,500 Aggregate intrinsic value of RSAs vested during the quarter $ 177,750 $ 185,000 Non-Qualified Stock Option AwardsDuring the three and nine month periods ended September 30, 2017 and 2016, employee and non-employee NQSO grants were valued based on the assumptions as set forth in the table below:Employee Stock Option Grants THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) Stock options granted 2,590,000 -- 3,440,000 650,000 Expected dividend yield 0% -- 0% 0% Expected volatility 69.6% -- 68.2%-74.2% 66%-72% Risk-free interest rate 2.0% -- 1.8% - 2.1% 0.9%-1.5% Forfeiture rate 4.2% -- 4.6% - 6.8% -- Expected life 5 years -- 5 years 3-5 years Director Stock Option Grants THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) Stock options granted 100,000 -- 250,000 -- Expected dividend yield 0% -- 0% -- Expected volatility 70.1% -- 69.6% - 70.1% -- Risk-free interest rate 2.0% -- 1.7% - 2.0% -- Forfeiture rate 5.9% -- 4.2% - 5.9% -- Expected life 7 years -- 7 years -- A summary of stock option activity as of September 30, 2017 and 2016, and changes during nine month periods ended September 30, 2017 and 2016 are set forth below: 2017 2016 Weighted Weighted Average Average Grant Date Grant Date NON-VESTED AWARDS Shares Fair Value Shares Fair Value (Unaudited) Non-vested balances, January 1, 920,000 $ 0.59 841,672 $ 0.80 Granted (+) 3,440,000 $ 0.30 650,000 $ 0.40 Cancelled (-) 860,000 $ 0.68 25,000 $ 0.72 Vested (-) 110,000 $ 0.69 534,172 $ 0.69 Non-vested balances, September 30, 3,390,000 $ 0.27 932,500 $ 0.59 2017 2016 Weighted Weighted Average Average OUTSTANDING AND EXERCISABLE AWARDS Shares Exercise Price Shares Exercise Price (Unaudited) Awards outstanding, January 1, 2,090,668 $ 0.86 1,857,668 $ 0.91 Granted (+) 3,440,000 $ 0.59 650,000 $ 0.70 Cancelled (-) 1,402,334 $ 0.97 392,000 $ 0.62 Exercised (-) 30,000 $ 0.57 - - Awards outstanding, September 30, 4,098,334 $ 0.60 2,115,668 $ 0.87 Awards vested and expected to vest, September 30, 3,614,538 $ 0.59 1,989,739 $ 0.88 Awards outstanding and exercisable, September 30, 708,334 $ 0.73 1,183,168 $ 0.82 During the nine month period ended September 30, 2017, the Company awarded 3,440,000 stock options, of which: i) 2,590,000 stock options were awarded as part of an additional compensation plan to align certain key employees with the Company's long term financial goals, ii) 600,000 stock options were awarded to the Company's former CEO and iii) 250,000 stock options were awarded to the members of the Company's board of directors.During the nine month period ended September 30, 2017, there were stock options of 1,402,334 that were cancelled, of which 993,334 were cancelled due to termination of employment, 225,000 were cancelled by the board of directors as part of a compensation plan change, and the remainder expired unexercised at the end of the option term. During the nine month period ended September 30, 2016, there were stock options of 392,000 that were cancelled, of which 205,000 were cancelled due to termination of employment and the remainder expired unexercised at the end of the option term.The weighted-average remaining contractual life of the non-qualified stock options outstanding, exercisable, and vested and expected to vest as of September 30, 2017 were 3.5 years, 3.5 years and 2.3 years, respectively.There was no intrinsic value associated with options outstanding, exercisable and expected to vest as of September 30, 2017 as the stock price was below the lowest option exercise price. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on September 30, 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2017. The intrinsic value will change based on the fair market value of WidePoint’s stock.The total intrinsic value of stock options exercised during the nine months ended September 30, 2017 was approximately $9,000.Share-Based Expense THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, JUNE 30, 2017 2016 2017 2016 (Unaudited) Restricted stock compensation expense $ 5,447 $ 21,786 $ 156,768 $ 65,358 Non-qualified stock compensation expense (86,490 ) 46,302 (18,732 ) 139,056 Total share-based compensation before taxes $ (81,043 ) $ 68,088 $ 138,036 $ 204,414 During the three and nine month periods ended September 30, 2017, the board of directors cancelled 225,000 stock awards previously awarded to employees and recognized a benefit related to cancellation of stock awards. Restricted stock compensation expense Non-qualified option stock compensation expense Total share-based compensation before taxes September 30, 2017,March 31, 2020, the Company had approximately $661,900$548,200 of total unamortized share-based compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average remaining period of 1.43 years.12.Earnings Per Common Share (EPS)EPSearnings per share were as follows for the periods presented below: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2017 2016 2017 2016 (Unaudited) Basic EPS Computation: Net loss $ (314,601 ) $ (148,040 ) $ (2,768,993 ) $ (1,704,480 ) Weighted average number of common shares 82,946,847 82,730,134 82,878,287 82,673,570 Basic EPS $ (0.00 ) $ (0.00 ) $ (0.03 ) $ (0.02 ) Diluted EPS Computation: Net loss $ (314,601 ) $ (148,040 ) $ (2,768,993 ) $ (1,704,480 ) Weighted average number of common shares 82,946,847 82,730,134 82,878,287 82,673,570 Incremental shares from assumed conversions of stock options - - - - Adjusted weighted average number of common shares 82,946,847 82,730,134 82,878,287 82,673,570 Diluted EPS $ (0.00 ) $ (0.00 ) $ (0.03 ) $ (0.02 ) The dilutive effect of unexercised stock options and restricted stock awards excludes 4,223,334 and 2,363,668 of options Basic Earnings Per Share Computation: Net income Weighted average number of common shares Basic Earnings Per Share Diluted Earnings Per Share Computation: Net income Weighted average number of common shares Incremental shares from assumed conversions of stock options Adjusted weighted average number of common shares Diluted Earnings Per Share the computation of EPS for the three and nine month periods ended September 30, 2017 and 2016, respectively, because inclusion of the options would have been anti-dilutive.13.Details of Consolidated Revenue and Revenue by Geographic Regionbased on broad service descriptionsfrom contracts with customers for the periods presented: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, Revenue Mix 2017 2016 2017 2016 (Unaudited) Carrier Services $ 11,245,395 $ 13,532,617 $ 32,191,335 $ 35,721,245 Managed Services 7,218,477 8,582,222 23,765,282 24,441,900 $ 18,463,872 $ 22,114,839 $ 55,956,617 $ 60,163,145 Carrier Services Managed Services: Managed Service Fees Billable Service Fees Reselling and Other Services following table presents our domestic and foreign revenue mixCompany recognized revenues from contracts with customers for the periods presented: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, Geographic Region 2017 2016 2017 2016 (Unaudited) North America $ 17,342,443 $ 20,867,324 $ 52,664,719 $ 56,360,870 Europe 1,121,429 1,247,515 3,291,898 3,802,275 $ 18,463,872 $ 22,114,839 $ 55,956,617 $ 60,163,145 14.Commitments and ContingenciesOperating Lease CommitmentsInfollowing customer types as set forth below: U.S. Federal Government U.S. State and Local Governments Foreign Governments Commercial Enterprises North America Europe 2017, the Company entered into 10-year lease agreement for a 14,382 square foot facility31, 2020 and 2019, we recognized approximately $801,690 and $795,420, respectively, of revenue related to accommodate growthamounts that were included in deferred revenue as of December 31, 2019 and operational requirements in Columbus, Ohio. In late May 2017, the Company moved into the new Columbus, Ohio facility. The lease agreement includes six (6) months of free rent from June 1, 2017 through November 30, 2017. Thereafter, the lease requires monthly minimum rent of approximately $20,700, of which $10,200 covers base minimum lease payments2018, respectively.$10,500 covers estimated annual operating expenses and real estate taxes. Base minimum lease payments are subject to an annual escalation of approximately 3.5% beginning on October 1, 2018. The term of the lease expires on September 30, 2027, unless the Company elects to use an early termination provision that is available in October 2023. Any early termination election would require an immediate payment of a fixed penalty that may range from $260,000 to $265,000.Except as described above, there were no other material leases entered into or modifications of existing leases during the nine month period ended September 30, 2017.Employment AgreementsITEMTEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.·Our ability to achieve profitability and positive cash flows;·Our ability to raise additional capital on favorable terms or at all;·Our ability to gain market acceptance for our products;·Our ability to compete with companies that have greater resources than us;·Our ability to penetrate the commercial sector to expand our business;·Our ability to successfully implement our strategic plan;·Our ability to continue to deliver contracted services and products to our existing customers;·Our ability to sell higher margin services;·Our ability to retain key personnel; and·The risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 30, 2017.trusted mobility solutions to the government and commercial sectors. Our hosted solutions are accessible on-demand through a secure proprietary portal and provide our customers with a setTrusted Mobility Management (TM2) that consists of streamlined mobilefederally certified communications management, identity management, and consulting solutions that provideinteractive bill presentment and analytics solutions. We help our customers with the ability to manage, analyze and protectclients achieve their valuable communications assets, and deploy federal government compliant identity management solutions that provide secured virtual and physical access to restricted environments. Our trustedorganizational missions for mobility management and security objectives in this challenging and complex business environment.arethrough a flexible managed services model which includes both a scalable and comprehensive set of functional capabilities that can be used by any customer to meet the most common functional, technical and security requirements for mobility management. Our TM2 solutions were designed and implemented with flexibility in mind such that it can accommodate a large variety of customer requirements through simple configuration settings rather than through costly software development. Our trusted mobility management solutions have a comprehensive set of functional capabilities that can be used by any customer to meet a comprehensive set of functional, technical and security requirements.For additional information related to our business operations see the descriptionThe flexibility of our business set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 30, 2017. 20 Strategic Focus and GoalsOur strategic focus and goals are driven byTM2 solutions enables our short-term needcustomers to improve our financial performance and return to profitability. Our longer-term strategic focus and goals are driven by our need to expand our critical mass so that we have more flexibility to fund investments in technology solutions and introduce new sales and marketing initiatives in order to expand our marketplace share and increase the breadth of our offerings in order to improve company sustainability and growth.With a focus on solidifying, improving, and expanding our information technology based proprietary solutions and adopting channel driven sales and marketing initiatives, we believe we can reshape our environment and create a more unified set of operational efficiencies and technical solutions. These changes should allow us to grow critical mass and enable better use of our personnel and other resources to scale and grow our business. We further believe that we can expand our business and market share through acquisitions of complementary businesses and strategic assets.As part of our shorter-term strategic focus, we continue to re-evaluate the roles and responsibilities throughout the Company with a focus on eliminating non-value added activities, automating manual processes and recruiting more experienced talent while eliminating redundant and expensive legacy resources.We are also reviewing all client relationships and commencing corrective actions to improve profitability and/or resign unprofitable or non-value added client relationships.We have initiated a number of cost savings efforts including:§closing our Chesapeake VA and Oakbrook IL offices and consolidated the work into our McLean office;§streamlining and reducing staff in our credentialing operations to eliminate duplicative management and non-management positions;§implementing a plan to close our Southern Pines office no later than January of 2018 and consolidate the work into our Columbus, OH office;§renegotiating and/or cancelling one or both of our leases in McLean, VA and/or Fairfax, VA and migrating work into one consolidated location;§reviewing additional configurations to allow us to further consolidate our disaster recovery sites.§renegotiating and realigning commission plans with our channel partner to drive improved performance and reducing non-performing sales resources; and§reducing operational personnel by reducing technology platforms and combining redundant help desk support across functions.Our short-term strategy to drive increased revenue performance and increase our pipeline of new sales opportunities includes:§adopting new pricing strategies,§targeting competitor’s customers with lower introductory pricing during renewal periods to garner increased market share,§utilizing social media marketing enhancements to increase customer awareness of our solutions,§highlighting superior product differentiators in our marketing materials and online presence,§improving, expanding and targeting our current marketing efforts to identify new customers that could utilize our current solutions,§improving our cross selling of our solutions to our current customers,§providing our larger customers with enhanced product opportunities and improved pricing in an effort to increase their short-term purchasing activities, and§utilizing various lead productions opportunities to drive an increase amount of pipeline, and emphasizing higher margin solutions.Longer-term, we are reviewing our intellectual property portfolio and may seek to continue acquiring software assets and new customer relationships in support of expanding our information technology based proprietary solutions and customer reach. Acquisitions of customers and/or software assets, coupled with our longer term initiatives to further consolidate, streamline, and focus on building out a set of core trusted mobility management (TM2) driven solutions may allow us to further differentiate our capabilities to our customers.Our next steps towards achieving our longer-term goals include:§reviewing our current offerings to determine which solutions we believe can be grouped into a unified set of trusted mobility management solutions, and§focusing our efforts away from supporting multiple solutions and introducing new solutions to our commercial enterprise markets.We believe these actions could drive a strategic realignment of services that may include the sale of non-aligned offerings coupled with additional acquisitions of complementary services that could result in a more focused core set of trusted mobility management solutions.The execution of our strategy could require a significant amount of time, expertise and expense. There may be a requirement to raise additional capital, which may be on unfavorable terms to us. There is also no guarantee that we will be able to successfully executequickly expand or contract their mobility management requirements. Our TM2 solutions are hosted and accessible on-demand through a secure federal government certified proprietary portal that provides our strategy or returncustomers with the ability to profitability in a timely fashion or at all. However,manage, analyze and protect their valuable communications assets, and deploy identity management firmly believessolutions that a focused execution of our shortprovide secured virtual and longer term strategies will put us on the path towards returningphysical access to generating positive earnings and cash flow, while also allowing the Company to build critical mass in the future with a more sustainable and improved competitive market position.Results of OperationsThree Months Ended September 30, 2017 as Compared to Three Months Ended September 30, 2016Revenues. Revenues for the three month period ended September 30, 2017 were approximately $18.5 million, a decrease of approximately $3.6 million (or 17%), as compared to approximately $22.1 million in 2016. Our mix of revenues for the periods presented is set forth below: THREE MONTHS ENDED SEPTEMBER 30, Dollar Revenue Mix 2017 2016 Variance (Unaudited) Carrier Services $ 11,245,395 $ 13,532,617 $ (2,287,222 ) Managed Services 7,218,477 8,582,222 (1,363,745 ) $ 18,463,872 $ 22,114,839 $ (3,650,967 ) Carrier services decreased due to fewer large task orders issued under our U.S. Department of Homeland Security (“DHS”) blanket purchase agreement (“BPA”) for carrier services as compared to the same period last year. We are continuing to move away from selling low margin carrier services so that we can refocus our internal resources on delivering higher margin services. Managed services revenue decreased due to non-recurring one-time credentialing sales that occurred last year that did not reoccur, lower billable hourly services as a result of client administrative delays in processing contract renewals and supplier related delays that resulted in delivery and recognition of September accessory and reselling orders after the end of the current quarter, as compared to last year. We believe our managed services revenues will increase over the next year provided that we continue to grow and retain our core client base and successfully ramp up services under recently awarded task orders for the Federal Emergency Management Agency (FEMA) and the U.S. Coast Guard.may fluctuatefluctuates due to customer driven factors including: i) timing of technology and accessory refresh requirements from our customers; ii) onboarding of new federal government customers that require carrier services; iii) subsequent decreases in carrier services as we optimize their data and voice usage; iv) delays in delivering products or services; and v) changes in control or leadership of our customers that lengthens our sales cycle, changes in laws or funding, among other circumstances that may unexpectedly change the revenue earned and/or duration of our services. As a result, our revenue couldwill vary by quarter.CostRevenues. CostCommerce – 2020 Census: Successfully completed the Address Canvassing Program, with approximately 60,000 mobile devices deployed, returned, and decommissioned.revenuesapproximately $20 million during the quarter, including new contract wins as well as exercised option periods and contract extensions with current clientsSeptember 30, 2017 wasMarch 31, 2020 were approximately $15.1$39.6 million, an increase of approximately $17.7 million (or 82% of revenues), as compared to approximately $18.1 million (or 82% of revenues) in 2016. The dollar decrease was driven by lower revenues, the benefit of lower actual project costs, and savings realized as a result of employee and consultant position eliminations within our credentialing operations in July 2017, as compared to the same period last year. Our cost of revenues may continue to fluctuate as we continue to shift away from sales of low margin carrier services.Gross Profit. Gross profit for the three month period ended September 30, 2017 was approximately $3.4 million (or 18% of revenues), as compared to approximately $4.0 million (or 18% of revenues) in 2016. The dollar decrease in gross profit was largely related to a lower ratio of higher margin credentialing sales and hourly billable service arrangements as compared to the same period last year, partially offset by savings realized from the elimination of certain management and non-management positions within our credentialing operations. Additionally, the effect of supplier delays contributed to the decrease in gross profit which pushed recognition of recurring accessory and reselling orders until the fourth quarter.Sales and Marketing.Sales and marketing expense for the three month period ended September 30, 2017 was approximately $0.5 million (or 3% of revenues), as compared to approximately $0.6 million (or 3% of revenues) in 2016. The decrease is attributable to actions we took at the end of the second quarter of 2017 to turnover our sales and marketing teams and renegotiate and/or eliminate legacy sales lead generation and channel partners that were not producing high quality leads and revenue pipelines to match our revenue growth goals. We are focused on expanding our full set of products and services to our existing customers, actively pursuing customer and partner referrals and teaming with larger companies to provide them with additional depth and expertise to bid on larger opportunities.General and Administrative. General and administrative expenses for the three month period ended September 30, 2017 were approximately $3.0 million (or 16% of revenues), as compared to approximately $3.4 million (or 16% of revenues) in 2016. As a result of cost reductions initiatives executed during the first and second quarter of 2017, our personnel costs during the third quarter of 2017 decreased significantly as compared the same period last year. Subsequent to the end of the third quarter of 2017 our Chief Financial Officer resigned his position and as a result we expect to record approximately $0.3 million in one-time severance costs during the fourth quarter of 2017. Except for the one-time severance cost discussed above, we are on target to reduce our continuing general and administrative expense by the end of fiscal 2017. We will continue to identify further opportunities to drive meaningful cost savings and efficiencies in our business model.Product Development. Product development costs for the three month period ended September 30, 2017 were approximately $11,300 (or less than 1% of revenues), as compared to approximately $2,600 (or 1% of revenues) in 2016, reflecting less capitalization of internally developed software costs as compared to last year and a decision made to eliminate development costs associated with certificate on device. During the three month period ended September 30, 2017 we capitalized internally developed software costs of approximately $128,000 related to costs associated with our next generation TDI Optimiser™ application. During the three month period ended September 30, 2016 we capitalized approximately $246,900 in internally developed software costs, of which $127,300 related to Certificate-on-Device (CoD) credentialing tools and applications and $119,600 related to costs associated with certification of our Public Key Infrastructure (PKI) authority to operate and issue identity credentials. We anticipate some additional capitalization of software costs during the fourth quarter of 2017 prior to the launch of our new TDI Optimiser™ application. The costs associated with maintaining and developing new products and services is vital to our ability to compete in our market place and deliver solutions that our customers believe meet or exceed their requirements. These costs over time may rise and fall as we continue to support the development and go to market efforts for new product solutions.Depreciation and Amortization. Depreciation and amortization expense for the three month period ended September 30, 2017 was approximately $69,900 as compared to approximately $84,800 in 2016. The decrease in depreciation and amortization reflects no material increases in our depreciable asset base related to general and administrative activities as compared to last year. 23 Interest Income. Interest income for the three month period ended September 30, 2017 was approximately $2,000, as compared to approximately $3,000 in 2016. The decrease was due to lower amounts of cash and cash equivalents being held in interest bearing accounts and the length of time those deposits were earning interest throughout the quarter compared to 2016. Interest Expense.Interest expense for the three months ended September 30, 2017 was approximately $14,000 as compared to approximately $20,900 in 2016. The decrease in interest expense is due to lower line of credit advances and the length of time such advances were outstanding, as well as the elimination of term debt after the Company paid the last installment in January 2017.Other Income (Expense).Other expense for the three month period ended September 30, 2017 was approximately $1,500 as compared to other income of $3,800 in 2016.Other expense did not include any significant items.Income Taxes. Income tax expense for the three month period ended September 30, 2017 was approximately $17,200, as compared to approximately $8,300 in 2016. The increase in income tax expense for the three month period ended September 30, 2017 is attributable to taxes payable on foreign earnings in the Republic of Ireland.Net (Loss) Income. As discussed above, we made significant labor and discretionary consultant expense reductions during the third quarter of 2017 that enabled us to narrow our net loss for the current quarter. We believe these current quarter expense reductions alone will cut approximately $1.6 million annually from our expense base. As a result of the cumulative factors annotated above, the net loss for the three month period ended September 30, 2017 was approximately $314,600, as compared to approximately $148,000 in the same period last year. Nine Months Ended September 30, 2017 as Compared to Nine Months Ended September 30, 2016Revenues. Revenues for the nine month period ended September 30, 2017 were approximately $56.0 million, a decrease of approximately $4.2 million (or 7%81%), as compared to approximately $60.2$21.9 million in 2016.2019. Our mix of revenues for the periods presented is set forth below: NINE MONTHS ENDED SEPTEMBER 30, Dollar Revenue Mix 2017 2016 Variance Carrier Services $ 32,191,335 $ 35,721,245 $ (3,529,910 ) Managed Services 23,765,282 24,441,900 (676,618 ) $ 55,956,617 $ 60,163,145 $ (4,206,528 ) Carrier Carrier Services Managed Services: Managed Service Fees Billable Service Fees Reselling and Other Services decreasedincreased primarily due to fewer large task orders issued under ouractivities of the U.S. BPADepartment of Commerce contract supporting the 2020 Census, as well as U.S. Coast Guard, U.S. Immigration and Customs Enforcement and U.S. Federal Air Marshall Service. The activities supporting the impact2020 Census are scheduled to wind down in the fourth quarter of our efforts to move away from selling low margin carrier services that are labor intensive to deliver. Managed services revenue decreased2020lower billable hoursexpansion of managed services for existing government and commercial customers, as a resultwell as increases in sales of client administrative delays in processing contract renewals and non-recurring one-time credentialing sales that occurred last year that did not reoccur, all of which was partially offset by an increase in reselling transactionsaccessories to our government customers as compared to last year.ninethree month period ended September 30, 2017 wasMarch 31, 2020 were approximately $45.9$34.7 million (or 82%87% of revenues), as compared to approximately $48.6$17.7 million (or 81% of revenues) in 2016.2019. The dollar decrease is primarily due to lower reselling andincrease was driven by higher carrier services purchases and lower actual estimated project costs associated with certain credentialing contractsrelated to the U.S. Department of Commerce contract, accessories cost of sale and cost reductions initiatives executed during the first and second quarter of 2017,product resale as compared to the same period last year.ninethree month period ended September 30, 2017March 31, 2020 was approximately $10.1$4.9 million (or 18%13% of revenues), as compared to approximately $11.6$4.3 million (or 19% of revenues) in 2016.2019. The decrease in gross profit percentage was largely relateddriven by the increase in carrier services and lower margin reselling services during the quarter. Our gross profit percentage will vary from quarter to a lower ratioquarter and could be negatively impacted due to recognition of higherlow margin credentialing, devicereselling transactions and accessory sales, as well as decreases in billable service arrangements as compared to the same period last year.24 ninethree month period ended September 30, 2017March 31, 2020 was approximately $1.7$0.5 million (or 3% of revenues), as compared to approximately $2.1 million (or 3% of revenues) in 2016. The dollar decrease in sales and marketing expense is due to actions taken during the second quarter of 2017 to streamline our business development and marketing activities and reduce commission rates paid on channel and partner deals. Our sales and marketing costs may fluctuate depending on the effort and subject matter expertise required to respond to a request for proposal for services from a prospective customer.General and Administrative. General and administrative expenses for the nine month period ended September 30, 2017 were approximately $10.7 million (or 19% of revenues), as compared to approximately $10.7 million (or 18% of revenues) in 2016. Included in general and administrative expense for the nine month period ended September 30, 2017 was a gain on the sale of real estate assets held for sale of approximately $66,700, offset by a loss on disposal of the net book value leasehold improvements of approximately $176,700 that occurred when the Company relocated its operations from the Lewis Center Facility to a larger facility in Columbus, Ohio. General and administrative expense (excluding the one-time loss on disposal described above) was higher as compared to last year due to approximately $0.4 million in non-recurring one-time costs including the acceleration of certain RSAs and severance paid to our former Chief Executive Officer, costs to close and consolidate two (2) satellite offices, and employee transition benefits paid as part of our organizational changes to streamline our business.Product Development. Product development costs for the nine month period ended September 30, 2017 were approximately $219,100 (or 1% of revenues), as compared to approximately $261,000$0.4 million (or 1%2% of revenues) in 2016, reflecting less capitalization2019.internally developed software costsrevenues), as compared to approximately $3.1 million (or 14% of revenues) in 2019. The increase in general and administrative expense reflects overhead and administrative costs to support the increased business as well as an increase in share-based compensation expense compared to last year. The decrease was due to a decision we made during the end of the second quarter of 2017 to slow down product development activity related to credentialing and redirect our capital and internal resources on selling and delivering our existing products and services. During the nine month period ended September 30, 2017 we capitalized internally developed software costs of approximately $360,700 related to costs associated with our next generation TDI Optimiser™ application. During the nine month period ended September 30, 2016 we capitalized approximately $480,300 in internally developed software costs of which $343,900 related to certificate on device credentialing tools and applications, $119,600 related to costs associated with our PKI authority to operate and issue identity credentials and the remainder related to other software applications.ninethree month period ended September 30, 2017March 31, 2020 was approximately $212,700$263,200 as compared to approximately $269,000$240,500 in 2016.2019. The decreaseincrease in depreciation and amortization expense reflects no material increasesthe increase in our depreciable asset base related to general and administrative activities as compared to last year. Interestbase. Interest income Net other expense for the ninethree month period ended September 30, 2017March 31, 2020 was approximately $11,600,$78,700, as compared to approximately $10,600$73,100 in 2016.2019. The increase was duein net expense substantially reflects higher interest expense related to higher amounts of cash and cash equivalents being heldan increase in interest bearing accounts and the length of time those deposits were earning interest aslease liabilities compared to 2016. Interest Expense.prior year.Interest expense for the nine month period ended September 30, 2017 was approximately $36,400 as compared to approximately $61,100 in 2016. The decrease in interest expense is due to the elimination of term debt during the first quarter of 2017 after the Company paid the last installment of its term note in January 2017 and to a lesser extent lower line of credit advances and the length of time such advances were outstanding.Other Income (Expense).Other income for the nine month period ended September 30, 2017 was approximately $1,800 as compared to approximately $11,100 in 2016. Other income did not include any significant items.ninethree month period ended September 30, 2017March 31, 2020 was approximately $32,700$177,200, as compared to approximately $21,000$28,000 in 2016. Income2019. Income taxes were accrued at an estimated effective tax expenserate of 26.8% for the ninethree months ended March 31, 2020 compared to 6.8% for the three month period ended September 30, 2017 consisted of tax expense associated with foreign earnings in the Republic of Ireland, partially offset by tax benefit related to vesting of restricted stock awards.(Loss) Income. As a result of the cumulative factors annotated above, the net lossincome for the three month period ended September 30, 2017March 31, 2020 was approximately $2.8 million,$483,888, as compared to net income of approximately $1.7 million$384,100 in the same period last year. 25 stock, seller notes in connection with acquisitions, convertible notes, convertible exchangeable debentures, senior secured loans and the proceeds from the exercise of the warrants related to a convertible exchangeable debenture.securities. Our immediate sources of liquidity include cash and cash equivalents, accounts receivable, unbilled receivables and access to a working capital credit facility with Access NationalAtlantic Union Bank for up to $5.0 million.September 30, 2017,March 31, 2020, our net working capital was approximately $2.8$5.8 million as compared to $5.0 million at December 31, 2016. Our decrease2019. The increase in net working capital was primarily duedriven by increases in revenue, strong receivable collections, and temporary payable timing differences. We utilized our credit facility to net losses incurred while continuing to fund product development ($0.2 million), purchase of certain software assets critical to our credentialing services offering ($0.4 million), non-recurring severance expenses ($0.3 million), and office consolidation and closure costs ($0.1 million) incurredmanage short term cash flow requirements during the nine month period ended September 30, 2017.We must successfully execute our strategic goals and tactically execute our cost savings and new revenue initiatives as described above in order to generate positive cash flows, improve our liquidity position and meet our minimum operating requirements. During the nine month period ended September 30, 2017, we believe we made significant progress towards improving the economics of our business model and we believe that our cost reduction actions to date will cut approximately $2.5 million from our annual operating expenses. In addition to cost reductions made to date we expect to consolidate one additional location and make additional staff adjustments during the fourth quarter of 2017 that will cut approximately $0.4 million from our annual operating expenses. We will continue to identify additional opportunities for cost savings that can further reduce our fixed operating costs and/or provide us better flexibility to match our cost structure with our revenue streams.quarter. We may need to raise additional capital to fund major growth initiatives and/or acquisitions and there can be no assurance that additional capital will be available on acceptable terms or at all.expensesexpense is the cost of labor and company sponsored healthcare benefit programs. Our second largest cash operating expense is our facility costs and related technology communication costs to support delivery of our services to our customers. We lease most of our facilities under non-cancellable long term contracts that may limit our ability to reduce fixed infrastructure costs in the short term. Any changes to our fixed labor and/or infrastructure costs may require a significant amount of time to take effect depending on the nature of the change made and cash payments to terminate any agreements that have not yet expired. We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control.ninethree months ended September 30, 2017,March 31, 2020, net cash used inprovided by operations was approximately $2.6$3.0 million driven by current year operating lossescollections of accounts receivable and temporary collectionpayable timing differences, as a result of complicated invoice submission requirementscompared to approximately $2.4 million for certain government customers that were ultimately resolved during the third quarter of 2017.For the ninethree months ended September 30, 2016, net cash used in operations was approximately $1.2 million driven by operating losses, foreign currency transaction losses and temporary collection timing differences.ninethree months ended September 30, 2017,March 31, 2020, cash used in investing activities was approximately $0.6 million$393,000 and consisted of computer hardware and software purchases and capitalized internally developed software costs, primarily associated with upgrading our secure identity management technology and network operations center.purchase of software assets from Probaris Technologies, Inc.,three months ended March 31, 2019, cash used in investing activities was approximately $142,300 and consisted computer hardware and software purchases and capitalized internally developed software costs related to our TDI Optimiser™ solutions partially offset by proceeds receive from the disposal of leased automobiles and proceeds from the sale of real estate assets held for sale.For the nine months ended September 30, 2016, cash used in investing activities was approximately $0.6 million and consisted of capitalized internally developed software costs substantially related to our Certificate-on-Device credentialing tools and applications; and to a lesser extent normal replacements of computers and peripheral equipment used in operating and administrative functions.provided by (used in)used in financing activities provides an indication of our debt financing and proceeds from capital raise transactions and stock option exercises.ninethree months ended September 30, 2017,March 31, 2020, cash provided byused in financing activities was approximately $0.4$153,800 and reflects line of credit advances and payments of approximately $1.8 million, and reflects scheduled term debtfinance lease principal repayments of approximately $108,000, restricted stock award tax liability payment of approximately $60,600, partially offset by proceeds of approximately $17,100 from the exercise of stock options. The Company was advanced approximately $11.6 million and repaid approximately $11.1 million in line of credit advances.ninethree months ended September 30, 2016, March 31, 2019, cash provided byused in financing activities was approximately $0.6$122,300 and reflects line of credit advances and payments of approximately $6.1 million, primarily reflecting scheduled term debtand finance lease principal repayments of approximately $0.7 million, partially offset by net line of credit advances. The Company was advanced approximately $18.2 million and repaid approximately $18.1 million in line of credit advances.Net Effect of Exchange Rate on Cash and EquivalentsFor the nine months ended September 30, 2017 and 2016, the net effect of exchange rate changes increased the translated value of our foreign cash balances due to appreciation of the Euro relative to the US dollar.There has been no material change in the Company’s exposure to market risk from the information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.ITEMTEM 4. CONTROLS AND PROCEDURES interim chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report on Form 10-Q to ensure information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including our chief executive officer and interim chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.ControlsControl over Financial Reportingcontrolscontrol over financial reporting during the three month period ended September 30, 2017March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.PARTnor its subsidiaries areis not currently involved in any material legal proceeding.2016.ITEMTEM 3DEFAUTLT UPON SENIOR SECURITIESITEMTEM 4MINE SAFETY DISCLOSURESITEMTEM 5OTHER INFORMATIONITEMTEM 6. EXHIBITSFifth Modification Agreement with Access National Bank (incorporated by reference from Exhibit 10.1 to Form 8-K filed on April 29, 2020) Employment Agreement with Jin Kang (incorporated by reference from Exhibit 10.1 to Form 8-K filed on May 1, 2020) Employment Agreement with Jason Holloway (incorporated by reference from Exhibit 10.2 to Form 8-K filed on May 1, 2020) Employment Agreement with Kellie Kim (incorporated by reference from Exhibit 10.3 to Form 8-K filed on May 1, 2020) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith). Certification of interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).Certification of Chief Executive Officer and interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).101. Interactive Data Files 101.INS+ XBRL Instance Document 101.SCH+ XBRL Taxonomy Extension Schema Document 101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF+ XBRL Taxonomy Definition Linkbase Document 101.LAB+ XBRL Taxonomy Extension Label Linkbase Document 101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document 101.INS+ XBRL Instance Document101.SCH+ XBRL Taxonomy Extension Schema Document101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document101.DEF+ XBRL Taxonomy Definition Linkbase Document101.LAB+ XBRL Taxonomy Extension Label Linkbase Document101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document29 WIDEPOINT CORPORATION Date: November20172020By: JINJin H. KANGKang President and Chief Executive Officer By: /s/ Kellie H. Kim Kellie H. Kim Date: November 14, 2017/s/ KITO A. MUSSAKito A. MussaInterim Chief Financial Officer