WidePoint Corp. (WYY) filed Quarterly Report for the period ended 2011-03-31.

Widepoint Corp. has a market cap of $57.66 million; its shares were traded at around $0.92 with a P/E ratio of 18.4 and P/S ratio of 1.13.

Highlight of Business Operations:

Cost of sales. Cost of sales for the three month period ended March 31, 2011, was approximately $8.7 million (or 83% of revenues), as compared to cost of sales of approximately $8.6 million (or 77% of revenues) for the three month period ended March 31, 2010. This increase in cost of sales was primarily attributable to a higher percentage mix in consulting services which tends to provide lower margins and a lower percentage mix of cybersecurity services which tends to provide higher margins. Our cybersecurity services had delays in the delivery of certain deliverables which shifted work into our second quarter of 2011, as well as delays of anticipated awards as a result of delays associated with the U.S. Budget process. We anticipate improvements in our costs of sales as our Cybersecurity Solutions segment adds economies of scale, and expands in relation to our Consulting Services and Products segment. At times, the fluctuation in our Consulting Services and Products segment revenue mix may cause variability in our cost of sales.

General and administrative. General and administrative expenses for the three month period ended March 31, 2011, were approximately $1.9 million (or 18% of revenues), as compared to approximately $1.8 million (or 16% of revenues) recorded by the Company for the three month period ended March 31, 2010. This slight increase in general and administrative expenses over those for the three months ended March 31, 2010 was primarily attributable to the increased costs we incurred for labor in anticipation of new contract awards that were delayed as a result of U.S. federal budget delays. We anticipate that our general and administrative costs in absolute dollars may rise slightly in the future as our support costs rise to facilitate our expectations of a greater revenue base as we continue our efforts to comply with pending additional financial reporting compliance requirements. We believe that our general and administrative costs on a percentage of revenue basis will level out or decrease in future financial reporting periods.

Depreciation. Depreciation expense for the three month period ended March 31, 2011, was approximately $48,000, as compared to approximately $50,000 of such expenses recorded by the Company for the three month period ended March 31, 2010. The decrease in depreciation expense was primarily attributable to the decreased pool of depreciable assets resulting from the full depreciation of certain assets. We do not anticipate any material changes within depreciation expense in the short-term. However, as our revenue base increases within our Wireless Mobility Management and Cybersecurity Solutions segments, there may be a need from time to time to increase the purchase of equipment in support of new revenue streams that may then raise our depreciation expenses.

Income taxes. Income tax benefit for the three month period ended March 31, 2011 was approximately $203,000, as compared to an income tax expense of approximately $39,000 for the three month period ended March 31, 2010. In the fourth quarter of fiscal year 2010, the Company analyzed its ability to utilize net operating losses currently recorded as deferred tax assets and based on this analysis determined that it was more likely than not that the Company would be able to utilize a substantial portion of its federal net operating losses in future periods and recognized a benefit which continued through the three months ended March 31, 2011. The Company incurred a deferred income tax expense of approximately $39,000 for the three month period ended March 31, 2010, as a result of the recognition of a deferred tax liability attributable to the differences in our treatment of the amortization of goodwill for tax purposes versus book purposes as it relates to our acquisition of iSYS in January 2008.

Net cash provided by operating activities for the three months ended March 31, 2011, was approximately $609,000, as compared to net cash used in operating activities of $2.3 million for the three months ended March 31, 2010. This increase in net cash provided by operating activities for the three months ended March 31, 2010 was primarily a result of a decrease in accounts receivable during the first quarter of 2011. Net cash used in investing activities for the three months ended March 31, 2011, was approximately $172,000, as compared to $395,000 in cash used in investing activities for the three months ended March 31, 2010. The decrease in net cash used in investing activities was primarily attributable to lesser amounts invested between the comparative periods with leasehold improvements occurring in the first quarter of 2011 and the asset acquisition of the government business assets of Vuance, Inc. by the Company in the first quarter of 2010. Net cash used in financing activities amounted to approximately $46,000 in the three months ended March 31, 2011, as compared to net cash used in financing activities of approximately $203,000 in the three months ended March 31, 2010. This decrease in net cash used in financing activities primarily related to the exercise of options during the first quarter ended March 31, 2011 as compared to the first quarter of March 31, 2010

As of March 31, 2011, the Company had a net working capital of approximately $5.9 million. The Company s primary source of liquidity consists of approximately $6.2 million in cash and cash equivalents and approximately $6.6 million of accounts receivable and unbilled accounts receivable. Current liabilities include approximately $7.0 million in accounts payable and accrued expenses. The reduction in current liabilities for the three months ended March 31, 2011 was predominately associated with the reduction of accounts payable and accrued liabilities as a result of the acceleration of vendor invoices during the first quarter of 2011.

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