wyy_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2021
or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________________ to ___________________

Commission File Number: 001-33035

WidePoint Corporation

(Exact name of Registrant as specified in its charter)

Delaware		52-2040275
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification no.)

11250 Waples Mill Road, South Tower 210, Fairfax, Virginia		22030
(Address of principal executive offices)		(Zip Code)

(703) 349-2577

(Registrant’s telephone number, including area code)

Securities Registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Common Stock, $0.001 par value per share	WYY	NYSE American

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 10, 2021, there were 9,117,059 shares of the registrant’s Common Stock issued and outstanding.

WIDEPOINT CORPORATION

INDEX

		Page No.
Part I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2021 and 2020 (unaudited)	3

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six month periods ended June 30, 2021 and 2020 (unaudited)	4

	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the three and six month periods ended June 30, 2021 and 2020 (unaudited)	6-7

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six month periods ended June 30, 2021 and 2020 (unaudited)	8-9

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Default Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

SIGNATURES		31

CERTIFICATIONS

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	THREE MONTHS ENDED						SIX MONTHS ENDED
	JUNE 30,						JUNE 30,
	2021			2020			2021			2020
	(Unaudited)
REVENUES	$	19,983,420		$	54,783,790		$	40,634,263		$	94,449,146

COST OF REVENUES (including amortization and depreciation of $120,250, $142,150, $239,333, and $301,768, respectively)		15,991,159			49,726,210			31,926,123			84,426,234

GROSS PROFIT		3,992,261			5,057,580			8,708,140			10,022,912

OPERATING EXPENSES
Sales and marketing		533,528			439,684			1,015,827			931,915

General and administrative expenses (including share-based compensation of $243,821, $209,427, $426,663 and $490,868, respectively)		3,267,587			3,733,516			6,575,249			7,203,608
Depreciation and amortization		253,857			266,404			504,748			529,632

Total operating expenses		4,054,972			4,439,604			8,095,824			8,665,155

(LOSS) INCOME FROM OPERATIONS		(62,711	)		617,976			612,316			1,357,757

OTHER (EXPENSE) INCOME
Interest income		192			(68	)		2,567			3,025
Interest expense		(69,290	)		(76,190	)		(140,306	)		(158,307	)
Other income		2			9			2,498			340

Total other expense		(69,096	)		(76,249	)		(135,241	)		(154,942	)

(LOSS) INCOME BEFORE INCOME TAX PROVISION		(131,807	)		541,727			477,075			1,202,815
INCOME TAX PROVISION		72,924			53,100			96,382			230,300

NET (LOSS) INCOME	$	(204,731	)	$	488,627		$	380,693		$	972,515

BASIC EARNINGS PER SHARE	$	(0.02	)	$	0.06		$	0.04		$	0.12

BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING		9,072,281			8,392,031			9,033,905			8,388,020

DILUTED EARNINGS PER SHARE	$	(0.02	)	$	0.06		$	0.04		$	0.11

DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING		9,072,281			8,496,426			9,191,532			8,466,440

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	THREE MONTHS ENDED					SIX MONTHS ENDED
	JUNE 30,					JUNE 30,
	2021			2020		2021			2020
	(Unaudited)
NET (LOSS) INCOME	$	(204,731	)	$	488,627	$	380,693		$	972,515

Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		19,633			27,599		(35,316	)		(9,731	)

Other comprehensive income (loss)		19,633			27,599		(35,316	)		(9,731	)

COMPREHENSIVE (LOSS) INCOME	$	(185,098	)	$	516,226	$	345,377		$	962,784

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	JUNE 30,			DECEMBER 31,
	2021			2020
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	14,947,372		$	15,996,749
Accounts receivable, net of allowance for doubtful accounts of $86,854 and $114,169 in 2021 and 2020, respectively		8,753,986			35,882,661
Unbilled accounts receivable		12,429,292			13,848,726
Other current assets		1,893,391			1,763,633

Total current assets		38,024,041			67,491,769

NONCURRENT ASSETS
Property and equipment, net		854,053			573,039
Operating lease right of use asset, net		5,744,148			6,095,376
Intangible assets, net		2,286,665			2,187,503
Goodwill		18,555,578			18,555,578
Deferred tax assets, net		5,622,880			5,606,079
Other long-term assets		1,331,146			815,007

Total assets	$	72,418,511		$	101,324,351

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	9,017,637		$	36,221,981
Accrued expenses		12,447,202			15,626,313
Deferred revenue		1,788,379			2,016,282
Current portion of operating lease liabilities		592,639			577,855

Total current liabilities		23,845,857			54,442,431

NONCURRENT LIABILITIES
Operating lease liabilities, net of current portion		5,632,233			5,931,788
Other liabilities		246,037			-
Deferred revenue, net of current portion		430,191			398,409

Total liabilities		30,154,318			60,772,628

Commitments and contingencies (Note 14)		-			-

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; 30,000,000 shares authorized; 9,099,560 and 8,876,515 shares issued and outstanding, respectively		9,100			8,876
Additional paid-in capital		101,871,610			100,504,741
Accumulated other comprehensive loss		(139,931	)		(104,615	)
Accumulated deficit		(59,476,586	)		(59,857,279	)

Total stockholders’ equity		42,264,193			40,551,723

Total liabilities and stockholders’ equity	$	72,418,511		$	101,324,351

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	SIX MONTHS ENDED
	JUNE 30,
	2021			2020
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	380,693		$	972,515
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax (benefit) expense		(20,298	)		228,185
Depreciation expense		504,798			580,089
(Recovery) provision for doubtful accounts		(24,544	)		571
Amortization of intangibles		239,333			251,311
Amortization of deferred financing costs		-			1,667
Share-based compensation expense		426,663			490,868
Changes in assets and liabilities:
Accounts receivable and unbilled receivables		28,567,676			(20,204,950	)
Inventories		(110,791	)		(295,057	)
Prepaid expenses and other current assets		(22,415	)		(9,251	)
Other assets		27,160			18,334
Accounts payable and accrued expenses		(30,488,525	)		19,998,926
Income tax payable		40,017			(16,784	)
Deferred revenue and other liabilities		(177,159	)		(385,520	)
Other liabilities		246,037			-

Net cash (used in) provided by operating activities		(411,355	)		1,630,904

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(90,302	)		(165,377	)
Capitalized hardware and software development costs		(1,159,583	)		(519,312	)

Net cash used in investing activities		(1,249,885	)		(684,689	)

CASH FLOWS FROM FINANCING ACTIVITIES
Advances on bank line of credit		-			1,895,659
Repayments of bank line of credit advances		-			(1,895,659	)
Principal repayments under finance lease obligations		(285,755	)		(291,315	)
Withholding taxes paid on behalf of employees on net settled restricted stock awards		(140,865	)		-
Common stock repurchased		-			(10,113	)
Issuance of common stock/At-the-market offering, net of issuance costs		1,071,045			-
Proceeds from exercise of stock options		10,250			-

Net cash provided by (used in) financing activities		654,675			(301,428	)

Net effect of exchange rate on cash and equivalents		(42,812	)		(3,689	)

NET (DECREASE) INCREASE IN CASH		(1,049,377	)		641,098

CASH AND CASH EQUIVALENTS, beginning of period		15,996,749			6,879,627

CASH AND CASH EQUIVALENTS, end of period	$	14,947,372		$	7,520,725

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	SIX MONTHS ENDED
	JUNE 30,
	2021		2020
	(Unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	140,242	$	153,609
Cash paid for income taxes	$	159,335	$	-
NONCASH INVESTING AND FINANCING ACTIVITIES
Capitalized hardware and software development costs in accounts payable	$	76,245	$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

							Additional
	Common Stock						Paid-In			Accumulated			Accumulated
	Issued			Amount			Capital			OCI			Deficit			Total

	(Unaudited)
Balance, January 1, 2020		8,386,145		$	83,861		$	95,279,114		$	(242,594	)	$	(70,180,963	)	$	24,939,418

Common stock repurchased		(2,416	)		(24	)		(10,089	)		-			-			(10,113	)

Stock compensation expense -
restricted		-			-			254,499			-			-			254,499

Stock compensation expense -
non-qualified stock options		-			-			26,942			-			-			26,942

Foreign currency translation -
(loss)		-			-			-			(37,330	)		-			(37,330	)

Net income		-			-			-						483,888			483,888

Balance, March 31, 2020		8,383,729		$	83,837		$	95,550,466		$	(279,924	)	$	(69,697,075	)	$	25,657,304

Issuance of common stock -
restricted		58,123			581			(581	)		-			-			-

Stock compensation expense -
restricted		-			-			182,928			-			-			182,928

Stock compensation expense -
non-qualified stock options		-			-			26,499			-			-			26,499

Foreign currency translation -
gain		-			-			-			27,599			-			27,599

Net income		-			-			-						488,627			488,627

Balance, June 30, 2020		8,441,852		$	84,418		$	95,759,312		$	(252,325	)	$	(69,208,448	)	$	26,382,957

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					Additional
	Common Stock				Paid-In			Accumulated			Accumulated
	Issued		Amount		Capital			OCI			Deficit			Total
		(Unaudited)

Balance, January 1, 2021		8,876,515	$	8,876	$	100,504,741		$	(104,615	)	$	(59,857,279	)	$	40,551,723

Issuance of common stock -
options exercises		2,500		2		10,248			-			-			10,250

Issuance of common stock -
restricted		91,650		92		(140,986	)		-			-			(140,894	)

Issuance of common stock through at-the-market offering
program, net of issuance costs of $45,392		100,687		101		1,088,297			-			-			1,088,398

Stock compensation expense -
restricted		-		-		157,107			-			-			157,107

Stock compensation expense -
non-qualified stock options		-		-		25,735			-			-			25,735

Foreign currency translation -
(loss)		-		-		-			(54,949	)		-			(54,949	)

Net income		-		-		-						585,424			585,424

Balance, March 31, 2021		9,071,352	$	9,071	$	101,645,142		$	(159,564	)	$	(59,271,855	)	$	42,222,794

Issuance of common stock -
restricted		28,208		29		(29	)		-			-			-

Stock compensation expense -
restricted		-		-		214,852			-			-			214,852

Stock compensation expense -
non-qualified stock options		-		-		28,969			-			-			28,969

Offering costs for the issuance of common stock/
At-the-market offering		-		-		(17,324	)		-			-			(17,324	)

Foreign currency translation -
income		-		-					19,633			-			19,633

Net loss		-		-		-			-			(204,731	)		(204,731	)

Balance, June 30, 2021		9,099,560	$	9,100	$	101,871,610		$	(139,931	)	$	(59,476,586	)	$	42,264,193

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WIDEPOINT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Nature of Operations

Organization

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

Nature of Operations

The Company is a leading provider of trusted mobility management (TM2). The Company’s TM2 platform and service solutions enable its customers to efficiently secure, manage and analyze the entire lifecycle of their mobile communications assets through its federally compliant platform Intelligent Telecommunications Management System (ITMS™). The Company’s ITMS™ platform is SSAE 18 compliant and was granted an Authority to Operate by the U.S. Department of Homeland Security and the U.S. Department of Commerce. 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 is one of two DoD designated External Certificate Authorities and offers ECA certificates, including digital certificates for IOT and machine identity, PIV (Personal Identity Verification) and PIV-I (Personal Identity Verification Interoperability) for the Federal Government including all contractors to the Federal Government. The Company’s Identity Management division is FISMA moderate certified and is a Trusted Root Certificate Authority offering certificates that are cross-certified under the Federal Bridge. The Company’s TM2 platform is internally hosted and accessible on-demand through a secure customer portal that is specially configured for each customer. The Company can deliver these solutions in a number of configurations ranging from utilizing the platform as a service to a full-service solution that includes full lifecycle support for all end users and the organization.

The Company also provides digital interactive billing and analytics to both communications service providers (CSPs) and enterprises. Our customized solutions give their end customers the ability to view and analyze their bills online via our advanced self-serve user portal 24/7. Our solutions are delivered in a hosted and secure environment and provide our CSPs with full visibility into their revenue model which drives a stronger customer experience and reduces their operating costs and improves profitability.

The Company derives a significant amount of its revenues from contracts funded by federal government agencies for which WidePoint’s subsidiaries act in the capacity as the prime contractor, or as a subcontractor. The Company believes that contracts with federal government agencies will be the primary source of revenues for the foreseeable future. External factors outside of the Company’s control such as delays and/or a change in government administrations, budgets and other political matters that may impact the timing and commencement of such work could result in variations in operating results and directly affect the Company’s financial performance. 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.

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

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

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COVID-19

The coronavirus (“COVID-19”) pandemic has created significant macroeconomic uncertainty, volatility and disruption. The assessment of how COVID-19 will impact our business is on-going and encompasses all aspects of our business, including how COVID-19 will impact our customers, employees, subcontractors, business partners and the capital markets. Although the Company did not experience significant disruptions during the six months ended June 30, 2021, we have experienced some supply chain delays, as well as significant reduction in new customer acquisitions due to lack of customer generated requirements. We are unable to fully predict the impact the COVID-19 pandemic will have on our future financial position, results of operations, or cash flows.

Additionally, changes in spending policies, budget priorities and funding levels are a key factor influencing the purchasing levels of government customers. With the current COVID-19 pandemic, future budget priorities and funding levels for these customers may be adversely affected.

2. Basis of Presentation and Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements as of June 30, 2021 and for each of the three and six month periods ended June 30, 2021 and 2020, 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 in the United States (“U.S. GAAP”) have been condensed or omitted. It is the opinion of management that all adjustments (which include normal recurring adjustments) necessary for a fair statement of financial results are reflected in the financial statements for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and six month periods ended June 30, 2021 are not necessarily indicative of the operating results for the full year.

Principles of Consolidation

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

Common Stock Reverse Split

On October 23, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of Delaware to effect a one-for-ten reverse stock split of the shares of the Company’s common stock, effective as of 5:00 pm Eastern Time on November 6, 2020. The Certificate of Amendment also decreased the number of authorized shares of the Company’s common stock from 110,000,000 to 30,000,000. All share, restricted stock awards (“RSA”) and per share information has been retroactively adjusted to reflect the reverse stock split.

Foreign Currency

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

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Use of Estimates

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

Segment Reporting

Our TM2 solution offerings comprise an overall single business from which the Company earns revenues and incurs costs. The Company’s TM2 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.

Significant Accounting Policies

There were no significant changes in the Company’s significant accounting policies during the first six months of 2021 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 23, 2021.

Recently Adopted Accounting Standards

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards. The standard eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted the standard on January 1, 2021 and it had no material impact on the Company’s condensed consolidated financial statements.

Accounting Standards under Evaluation

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“Topic 326”). Topic 326 amends guidance on 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 allowance 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 for the company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company continues to evaluate the impact of the pending adoption of this new standard on its consolidated financial statements.

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3. Accounts Receivable and Significant Concentrations

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

	JUNE 30,		DECEMBER 31,
	2021		2020
	(Unaudited)
Government (1)	$	7,185,598	$	34,097,906
Commercial (2)		1,655,242		1,898,924
Gross accounts receivable		8,840,840		35,996,830

Less: allowances for doubtful accounts (3)		86,854		114,169

Accounts receivable, net	$	8,753,986	$	35,882,661

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

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

SEC Form 10-Q filed by WidePoint Corporation