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, 2022

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

incorporation or organization)

(I.R.S. employer

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 15, 2022, there were 8,733,938 shares of the registrant’s Common Stock issued and outstanding.

WIDEPOINT CORPORATION

INDEX

Part I.	FINANCIAL INFORMATION	Page No.

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six month periods ended June 30, 2022 and 2021	4

	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	5

	Condensed Consolidated Statements of Cash Flows for the three and six month periods ended June 30, 2022 and 2021	6

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six month periods ended June 30, 2022 and 2021	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	33

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Default Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	35

Item 6.	Exhibits	37

SIGNATURES		38

CERTIFICATIONS

Table of Contents

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,
	2022			2021			2022			2021
	(Unaudited)
REVENUES	$	23,057,354		$	19,983,420		$	45,493,781		$	40,634,263
COST OF REVENUES (including amortization and depreciation of $306,938, $120,250, $594,456, and $239,333, respectively)		19,737,710			15,991,159			38,277,412			31,926,123

GROSS PROFIT		3,319,644			3,992,261			7,216,369			8,708,140

OPERATING EXPENSES
Sales and marketing		562,623			533,528			1,137,792			1,015,827
General and administrative expenses (including share-based compensation of $89,385, $243,821, $269,126 and $426,663, respectively)		3,817,316			3,267,587			7,562,545			6,575,249
Goodiwll impairment		16,277,000			-			16,277,000			-
Depreciation and amortization		274,088			253,857			538,449			504,748

Total operating expenses		20,931,027			4,054,972			25,515,786			8,095,824

(LOSS) INCOME FROM OPERATIONS		(17,611,383	)		(62,711	)		(18,299,417	)		612,316

OTHER INCOME (EXPENSE)
Interest income		4,158			192			10,728			2,567
Interest expense		(62,826	)		(69,290	)		(126,347	)		(140,306	)
Other income		669,990			2			971,003			2,498

Total other income (expense)		611,322			(69,096	)		855,384			(135,241	)

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION		(17,000,061	)		(131,807	)		(17,444,033	)		477,075
INCOME TAX (BENEFIT) PROVISION		(3,240,852	)		72,924			(3,291,927	)		96,382

NET (LOSS) INCOME	$	(13,759,209	)	$	(204,731	)	$	(14,152,106	)	$	380,693

BASIC EARNINGS PER SHARE	$	(1.58	)	$	(0.02	)	$	(1.62	)	$	0.04

BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING		8,696,111			9,072,281			8,739,043			9,033,905

DILUTED EARNINGS PER SHARE	$	(1.58	)	$	(0.02	)	$	(1.62	)	$	0.04

DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING		8,696,111			9,072,281			8,739,043			9,191,532

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

Table of Contents

WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	THREE MONTHS ENDED						SIX MONTHS ENDED
	JUNE 30,						JUNE 30,
	2022			2021			2022			2021
	(Unaudited)
NET (LOSS) INCOME	$	(13,759,209	)	$	(204,731	)	$	(14,152,106	)	$	380,693

Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax		(134,854	)		19,633			(139,689	)		(35,316	)

Other comprehensive (loss) income		(134,854	)		19,633			(139,689	)		(35,316	)

COMPREHENSIVE (LOSS) INCOME	$	(13,894,063	)	$	(185,098	)	$	(14,291,795	)	$	345,377

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

Table of Contents

WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	JUNE 30,			DECEMBER 31,
	2022			2021
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	7,192,085		$	6,479,980
Accounts receivable, net of allowance for doubtful accounts of $45,023 and $62,988 in 2022 and 2021, respectively		12,424,600			12,536,584
Unbilled accounts receivable		7,883,179			10,937,415
Other current assets		2,789,387			3,194,009

Total current assets		30,289,251			33,147,988

NONCURRENT ASSETS
Property and equipment, net		1,152,890			841,133
Lease right of use asset, net		5,059,331			6,273,211
Intangible assets, net		6,360,252			6,228,886
Goodwill		5,811,578			22,088,578
Deferred tax assets, net		8,295,569			5,127,482
Other long-term assets		2,787,302			1,782,060

Total assets	$	59,756,173		$	75,489,338

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	14,691,477		$	10,263,015
Accrued expenses		9,810,349			12,344,426
Deferred revenue		1,963,276			2,280,894
Current portion of lease liabilities		634,479			794,175
Current portion of contingent consideration		-			358,000

Total current liabilities		27,099,581			26,040,510

NONCURRENT LIABILITIES
Lease liabilities, net of current portion		5,015,198			6,025,691
Contingent consideration, net of current portion		380,000			1,347,000
Deferred revenue, net of current portion		367,503			400,142

Total liabilities		32,862,282			33,813,343

Commitments and contingencies (Note 17)		-			-

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; 8,725,476 and 8,842,026 shares issued and outstanding, respectively		8,726			8,842
Additional paid-in capital		100,934,729			101,424,922
Accumulated other comprehensive loss		(381,275	)		(241,586	)
Accumulated deficit		(73,668,289	)		(59,516,183	)

Total stockholders’ equity		26,893,891			41,675,995

Total liabilities and stockholders’ equity	$	59,756,173		$	75,489,338

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

Table of Contents

WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	SIX MONTHS ENDED
	JUNE 30,
	2022			2021
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(14,152,107	)	$	380,693
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax benefit		(3,176,568	)		(20,298	)
Depreciation expense		540,361			504,798
Goodwill impairment charge		16,277,000			-
(Recovery) provision for doubtful accounts		(311	)		(24,544	)
Amortization of intangibles		592,544			239,333
Share-based compensation expense		269,126			426,663
Warrants expense		108,000			-
Change in fair value of contingent consideration		(967,000	)		-
Changes in assets and liabilities:
Accounts receivable and unbilled receivables		3,118,288			28,567,676
Inventories		(134,346	)		(110,791	)
Other current assets		532,882			(22,415	)
Other assets		28,272			27,160
Accounts payable and accrued expenses		1,968,727			(30,488,525	)
Income tax payable		(154,418	)		40,017
Deferred revenue and other liabilities		(312,606	)		(177,159	)
Other liabilities		(358,000	)		246,037

Net cash provided by (used in) operating activities		4,179,844			(411,355	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(214,096	)		(90,302	)
Capitalized hardware and software development costs		(1,936,687	)		(1,159,583	)

Net cash used in investing activities		(2,150,783	)		(1,249,885	)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments under finance lease obligations		(297,132	)		(285,755	)
Withholding taxes paid on behalf of employees on net settled restricted stock awards		(

SEC Form 10-Q filed by WidePoint Corporation