Company Quick10K Filing
Widepoint
Price0.31 EPS0
Shares85 P/E101
MCap26 P/FCF5
Net Debt-7 EBIT1
TEV19 TEV/EBIT31
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-13
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-24
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-22
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-14
10-K 2017-12-31 Filed 2018-03-21
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-29
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-08-24 Shareholder Vote
8-K 2020-08-18 Enter Agreement, Exhibits
8-K 2020-08-13 Earnings, Exhibits
8-K 2020-06-18
8-K 2020-05-14
8-K 2020-05-01
8-K 2020-04-29
8-K 2020-03-24
8-K 2019-12-10
8-K 2019-11-14
8-K 2019-10-07
8-K 2019-08-14
8-K 2019-06-11
8-K 2019-05-14
8-K 2019-04-30
8-K 2019-04-16
8-K 2019-04-12
8-K 2019-03-21
8-K 2019-02-07
8-K 2018-11-14
8-K 2018-09-18
8-K 2018-08-14
8-K 2018-07-03
8-K 2018-05-14
8-K 2018-04-30
8-K 2018-03-21
8-K 2018-02-19
8-K 2017-12-29

WYY 10Q Quarterly Report

Part I. 
Item 1. 
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.  
Item 4. Controls and Procedures
Part II – Other Information
Item 1     
Item 1A Risk Factors
Item 2 
Item 3    
Item 4     
Item 5
Item 6.
EX-31.1 wyy_ex311.htm
EX-31.2 wyy_ex312.htm
EX-32 wyy_ex32.htm

Widepoint Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
604836241202012201420172020
Assets, Equity
3022146-2-102012201420172020
Rev, G Profit, Net Income
1511730-42012201420172020
Ops, Inv, Fin

10-Q 1 wyy_10q.htm QUARTERLY REPORT wyy_10q
 

 
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, 2020
 
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 13, 2020, there were 84,418,523 shares of the registrant’s Common Stock issued and outstanding.
 

 
 
 
WIDEPOINT CORPORATION
 
INDEX
 
Page No.
 
 2
 
 2
 
 3
 
 4
 
 5
 
 7
 
 8

 

 18
 
 
 
 23
 
 
 
 24
 
 
 
 
 
 
 
 24
  
 
 
 24
  
 
 
 24
  
 
 
 24
  
 
 
 24
  
 
 
 25
    
  
 
 25
    
  
 
  
 26
      
  
 
CERTIFICATIONS

27

 
 
1
 
 
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,
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
REVENUES
 $54,783,790 
 $22,093,153 
 $94,449,146 
 $44,010,055 
COST OF REVENUES (including amortization and depreciation of
    
    
    
    
$142,150, $232,968, $301,768, and $465,159, respectively)
  49,726,210 
  18,036,409 
  84,426,234 
  35,699,468 
 
    
    
    
    
GROSS PROFIT
  5,057,580 
  4,056,744 
  10,022,912 
  8,310,587 
 
    
    
    
    
OPERATING EXPENSES
    
    
    
    
Sales and marketing
  439,684 
  415,462 
  931,915 
  808,873 
General and administrative expenses (including share-based
    
    
    
    
compensation of $209,427, $284,111, $490,868 and $373,377, respectively)
  3,733,516 
  3,563,405 
  7,203,608 
  6,698,114 
Depreciation and amortization
  266,404 
  244,064 
  529,632 
  484,612 
 
    
    
    
    
Total operating expenses
  4,439,604 
  4,222,931 
  8,665,155 
  7,991,599 
 
    
    
    
    
INCOME (LOSS) FROM OPERATIONS
  617,976 
  (166,187)
  1,357,757 
  318,988 
 
    
    
    
    
OTHER (EXPENSE) INCOME
    
    
    
    
Interest income
  (68)
  259 
  3,025 
  4,721 
Interest expense
  (76,190)
  (75,372)
  (158,307)
  (152,917)
Other income
  9 
  (9)
  340 
  - 
 
    
    
    
    
Total other expense
  (76,249)
  (75,122)
  (154,942)
  (148,196)
 
    
    
    
    
INCOME (LOSS) BEFORE INCOME TAX PROVISION
  541,727 
  (241,309)
  1,202,815 
  170,792 
INCOME TAX PROVISION
  53,100 
  66,452 
  230,300 
  94,452 
 
    
    
    
    
NET INCOME (LOSS)
 $488,627 
 $(307,761)
 $972,515 
 $76,340 
 
    
    
    
    
BASIC EARNINGS PER SHARE
 $0.01 
 $0.00 
 $0.01 
 $0.00 
 
    
    
    
    
BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING
  83,920,314 
  83,990,722 
  83,880,197 
  83,902,077 
 
    
    
    
    
DILUTED EARNINGS PER SHARE
 $0.01 
 $0.00 
 $0.01 
 $0.00 
 
    
    
    
    
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING
  84,964,261 
  83,990,722 
  84,664,395 
  83,965,994 
 
    
    
    
    
 
  The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
2
 
 
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
THREE MONTHS ENDED
 
 
SIX MONTHS ENDED
 
 
 
JUNE 30,
 
 
JUNE 30,
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
NET INCOME (LOSS)
 $488,627 
 $(307,761)
 $972,515 
 $76,340 
 
    
    
    
    
Other comprehensive income (loss):
    
    
    
    
Foreign currency translation adjustments, net of tax
  27,599 
  13,995 
  (9,731)
  (15,287)
 
    
    
    
    
Other comprehensive income (loss)
  27,599 
  13,995 
  (9,731)
  (15,287)
 
    
    
    
    
COMPREHENSIVE INCOME (LOSS)
 $516,226 
 $(293,766)
 $962,784 
 $61,053 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3
 
 
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
 
ASSETS
 
CURRENT ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 $7,520,725 
 $6,879,627 
Accounts receivable, net of allowance for doubtful accounts
    
    
of $116,898 and $126,235 in 2020 and 2019, respectively
  22,092,308 
  14,580,928 
Unbilled accounts receivable
  26,698,793 
  13,976,958 
Other current assets
  1,397,958 
  1,094,847 
 
    
    
Total current assets
  57,709,784 
  36,532,360 
 
    
    
NONCURRENT ASSETS
    
    
Property and equipment, net
  589,664 
  681,575 
Operating lease right of use asset, net
  5,606,082 
  5,932,769 
Intangibles, net
  2,196,878 
  2,450,770 
Goodwill
  18,555,578 
  18,555,578 
Other long-term assets
  641,381 
  140,403 
 
    
    
Total assets
 $85,299,367 
 $64,293,455 
 
    
    
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
    
    
CURRENT LIABILITIES
    
    
Accounts payable
 $20,107,933 
 $13,581,822 
Accrued expenses
  28,534,306 
  14,947,981 
Deferred revenue
  1,892,243 
  2,265,067 
Current portion of operating lease liabilities
  566,881 
  599,619 
Current portion of other term obligations
  31,887 
  133,777 
 
    
    
Total current liabilities
  51,133,250 
  31,528,266 
 
    
    
NONCURRENT LIABILITIES
    
    
Operating lease liabilities, net of current portion
  5,332,139 
  5,593,649 
Deferred revenue, net of current portion
  354,385 
  363,560 
Deferred tax liability
  2,096,636 
  1,868,562 
 
    
    
Total liabilities
  58,916,410 
  39,354,037 
 
    
    
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; 84,418,523 and 83,861,453 shares
    
    
issued and outstanding, respectively
  84,418 
  83,861 
Additional paid-in capital
  95,759,312 
  95,279,114 
Accumulated other comprehensive loss
  (252,325)
  (242,594)
Accumulated deficit
  (69,208,448)
  (70,180,963)
 
    
    
Total stockholders’ equity
  26,382,957 
  24,939,418 
 
    
    
Total liabilities and stockholders’ equity
 $85,299,367 
 $64,293,455 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4
 
 
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
SIX MONTHS ENDED
 
 
 
JUNE 30,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 $972,515 
 $76,340 
Adjustments to reconcile net income to net cash provided by
    
    
(used in) operating activities:
    
    
Deferred income tax expense
  228,185 
  58,444 
Depreciation expense
  580,089 
  552,140 
Provision for doubtful accounts
  571 
  11,190 
Amortization of intangibles
  251,311 
  397,631 
Amortization of deferred financing costs
  1,667 
  2,500 
Share-based compensation expense
  490,868 
  373,377 
Changes in assets and liabilities:
    
    
Accounts receivable and unbilled receivables
  (20,204,950)
  1,457,869 
Inventories
  (295,057)
  (276,256)
Prepaid expenses and other current assets
  (9,251)
  77,759 
Other assets
  18,334 
  60,411 
Accounts payable and accrued expenses
  19,998,926 
  810,590 
Income tax payable
  (16,784)
  (2,442)
Deferred revenue and other liabilities
  (385,520)
  (89,365)
 
    
    
Net cash provided by operating activities
  1,630,904 
  3,510,188 
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Purchases of property and equipment
  (165,377)
  (140,052)
Capitalized software development costs
  (519,312)
  (125,725)
 
    
    
Net cash used in investing activities
  (684,689)
  (265,777)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Advances on bank line of credit
  1,895,659 
  6,258,000 
Repayments of bank line of credit advances
  (1,895,659)
  (6,258,000)
Principal repayments under finance lease obligations
  (291,315)
  (238,675)
Debt issuance costs
  - 
  (5,000)
Common stock repurchased
  (10,113)
  - 
 
    
    
Net cash used in financing activities
  (301,428)
  (243,675)
 
    
    
Net effect of exchange rate on cash and equivalents
  (3,689)
  (10,563)
 
    
    
NET INCREASE IN CASH AND CASH EQUIVALENTS
  641,098 
  2,990,173 
 
    
    
CASH AND CASH EQUIVALENTS, beginning of period
  6,879,627 
  2,431,892 
 
    
    
CASH AND CASH EQUIVALENTS, end of period
 $7,520,725 
 $5,422,065 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
5
 
 
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
 
 
 
SIX MONTHS ENDED
 
 
 
JUNE 30,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
 
 
 
Cash paid for interest
 $153,609 
 $127,583 
Cash paid for income taxes
 $- 
 $8,904 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6
 
 
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, 2019
  84,112,446 
 $84,113 
 $94,926,560 
 $(186,485)
 $(70,407,218)
 $24,416,970 
 
    
    
    
    
    
    
Stock compensation expense —
    
    
    
    
    
    
restricted
  - 
  - 
  16,737 
  - 
  - 
  16,737 
 
    
    
    
    
    
    
Stock compensation expense —
    
    
    
    
    
    
non-qualified stock options
  - 
  - 
  72,529 
  - 
  - 
  72,529 
 
    
    
    
    
    
    
Foreign currency translation —
    
    
    
    
    
    
(loss)
  - 
  - 
  - 
  (29,282)
  - 
  (29,282)
 
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  384,101 
  384,101 
 
    
    
    
    
    
    
Balance, March 31, 2019
  84,112,446 
 $84,113 
 $95,015,826 
 $(215,767)
 $(70,023,117)
 $24,861,055 
Issuance of common stock —
    
    
    
    
    
    
restricted
  662,740 
  663 
  (663)
  - 
  - 
  - 
 
    
    
    
    
    
    
Stock compensation expense —
    
    
    
    
    
    
restricted
  - 
  - 
  180,863 
  - 
  - 
  180,863 
 
    
    
    
    
    
    
Stock compensation expense —
    
    
    
    
    
    
non-qualified stock options
  - 
  - 
  103,248 
  - 
  - 
  103,248 
 
    
    
    
    
    
    
Foreign currency translation —
    
    
    
    
    
    
gain
  - 
  - 
  - 
  13,995 
  - 
  13,995 
 
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  (307,761)
  (307,761)
 
    
    
    
    
    
    
Balance, June 30, 2019
  84,775,186 
 $84,776 
 $95,299,274 
 $(201,772)
 $(70,330,878)
 $24,851,400 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
Paid-In
 
 
Accumulated
 
 
Accumulated
 
 
 
 
 
 
Issued
 
 
Amount
 
 
Capital
 
 
OCI
 
 
Deficit
 
 
Total
 
 
 
 (Unaudited)
 
Balance, January 1, 2020
  83,861,453 
 $83,861 
 $95,279,114 
 $(242,594)
 $(70,180,963)
 $24,939,418 
 
    
    
    
    
    
    
Common stock repurchased
  (24,164)
  (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
  83,837,289 
 $83,837 
 $95,550,466 
 $(279,924)
 $(69,697,075)
 $25,657,304 
 
    
    
    
    
    
    
Issuance of common stock —
    
    
    
    
    
    
restricted
  581,234 
  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
  84,418,523 
 $84,418 
 $95,759,312 
 $(252,325)
 $(69,208,448)
 $26,382,957 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7
 
 
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. 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 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 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.
 
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 three and six months ended June 30, 2020, 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.
 
8
 
 
 
 
2. 
Basis of Presentation and Accounting Policies
 
Basis of Presentation
 
The unaudited condensed consolidated financial statements as of June 30, 2020 and for each of the three and six month periods ended June 30, 2020 and 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 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, 2019 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, 2019. The results of operations for the three and six month periods ended June 30, 2020 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.
 
Foreign Currency
 
Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s condensed consolidated statements of operations, depending on the nature of the activity.
 
Use of Estimates
 
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring use of estimates and judgment relate to revenue recognition, 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 2020 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 24, 2020.
 
 
9
 
 
 
 
 
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 is currently evaluating the impact of the pending adoption of this new standard on its consolidated financial statements.
 
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,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
Government (1)
 $20,319,761 
 $12,604,582 
Commercial (2)
  1,889,445 
  2,102,581 
Gross accounts receivable
  22,209,206 
  14,707,163 
Less: allowances for doubtful
    
    
accounts (3)
  116,898 
  126,235 
 
    
    
Accounts receivable, net
 $22,092,308 
 $14,580,928 
 
(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 customer.
 
(2) Commercial contracts are generally fixed price arrangements with contract terms ranging from two (2) to three (3) years. Commercial accounts receivables are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. Commercial receivables are stated at amounts due from customers net of an allowance for doubtful accounts if deemed necessary.
 
(3) For the six months ended June 30, 2020, the Company did not recognize any material provisions for bad debt, write-offs or recoveries of existing provisions for bad debt. 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
 
 

Significant Concentrations
 
The following table presents customers that represent ten (10) percent or more of consolidated trade accounts receivable as of the periods presented below:
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
As a % of
 
 
As a % of
 
Customer Name
 
Receivables
 
 
Receivables
 
 
 
(Unaudited)
 
National Aeronautics and Space Administration
  16% 
  21% 
U.S. Census Bureau
  50% 
  18% 
 
The following table presents customers that represent ten (10) percent or more of consolidated revenues in the current and/or comparative periods:
 
 
 
THREE MONTHS ENDED
 
 
SIX MONTHS ENDED
 
 
 
JUNE 30,
 
 
JUNE 30,
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
 
 
As a % of
 
 
As a % of
 
 
As a % of
 
 
As a % of
 
Customer Name
 
Revenues
 
 
Revenues
 
 
Revenues
 
 
Revenues
 
 
 
(Unaudited)
 
U.S. Immigration and Customs Enforcement
  -- 
  15% 
  10% 
  15% 
U.S. Customs Border Patrol
  -- 
  -- 
  -- 
  11% 
U.S. Coast Guard
  -- 
  11% 
  -- 
  10% 
U.S. Census Bureau
  60% 
  -- 
  51% 
  -- 
 
4. 
Unbilled Accounts Receivable
 
Unbilled accounts receivable represent revenues earned but not invoiced to the customer at the balance sheet date due to either timing of invoice processing or delays due to fixed contractual billing schedules. A significant portion of our unbilled accounts receivable consist of carrier services and hardware and software products delivered but not invoiced at the end of the reporting period.
 
The following table presents customers that represent ten (10) percent or more of consolidated unbilled accounts receivable as of the periods presented below:
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
As a % of
 
 
As a % of
 
Customer Name
 
Receivables
 
 
Receivables
 
 
 
(Unaudited)
 
U.S. Immigration and Customs Enforcement
  19% 
  24% 
U.S. Census Bureau
  61% 
  23% 
 
 
 
 
11
 
 
 
 
5. 
Other Current Assets and Accrued Expenses
 
Other current assets consisted of the following as of the periods presented below:
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
Inventories
 $508,826 
 $213,713 
Prepaid rent, insurance and other assets
  889,132 
  881,134 
 
    
    
Total other current assets
 $1,397,958 
 $1,094,847 
 
Accrued expenses consisted of the following as of the periods presented below:
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
Carrier service costs
 $25,379,290 
 $12,274,440 
Salaries and payroll taxes
  2,243,588 
  1,781,628 
Inventory purchases, consultants and other costs
  870,606 
  834,131 
Severance costs
  7,612 
  7,612 
U.S. income tax payable
  3,670 
  8,850 
Foreign income tax payable
  29,540 
  41,320 
 
    
    
Total accrued expenses
 $28,534,306 
 $14,947,981 
 
6.        
Property and Equipment
 
Major classes of property and equipment consisted of the following as of the periods presented below:
 
 
 
JUNE 30,
 
 
DECEMBER 31,
 
 
 
2020
 
 
2019
 
 
 
(Unaudited)
 
Computer hardware and software
 $2,148,624 
 $2,041,978 
Furniture and fixtures
  420,705 
  399,521 
Leasehold improvements
  285,903 
  299,340 
Automobiles
  54,783 
  56,800 
Gross property and equipment
  2,910,015 
  2,797,639 
Less: accumulated depreciation and
    
    
amortization
  2,320,351 
  2,116,064 
 
    
    
Property and equipment, net
 $589,664 
 $681,575 
 
During the three and six month periods ended June 30, 2020, property and equipment depreciation expense was approximately $130,000 and $216,200, respectively, as compared to $140,000 and $275,000, respectively, for the three and six month periods ended June 30, 2019.
 
 
12
 
 
 
 
During the six month periods ended June 30, 2020 and 2019, there were no material disposals of owned property and equipment.
 
There were no changes in the estimated useful lives used to depreciate property and equipment during the three and six month periods ended June 30, 2020 and 2019.
 
7. 
Goodwill and Intangible Assets
 
The Company has recorded goodwill of $18,555,578 as of June 30, 2020. There were no changes in the carrying amount of goodwill during the six month period ended June 30, 2020.
 
Intangible assets consists of the following:
 
 
 
Gross Carrying
 
 
Accumulated
 
 
Net Book
 
 
 
Amount
 
 
Amortization
 
 
Value
 
 
 
 
 
 
 
 
 
 
 
Customer Relationships
 $1,980,000 
 $(1,980,000)
 $- 
Channel Relationships
  2,628,080 
  (1,080,433)
  1,547,647 
Internally Developed Software
  1,623,298 
  (1,145,122)
  478,176 
Trade Name and Trademarks
  290,472 
  (119,417)
  171,055 
 
    
    
    
 
 $6,521,850 
 $(4,324,972)
 $2,196,878 
 
 
 
DECEMBER 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying
 
 
Accumulated
 
 
Net Book
 
 
 
Amount
 
 
Amortization
 
 
Value
 
 
 
 
 
 
 
 
 
 
 
Customer Relationships
 $1,980,000 
 $(1,980,000)
 $- 
Channel Relationships
  2,628,080 
  (992,830)
  1,635,250 
Internally Developed Software
  1,623,122 
  (988,340)
  634,782 
Trade Name and Trademarks
  290,472 
  (109,734)
  180,738 
 
    
    
    
 
 $6,521,674 
 $(4,070,904)
 $2,450,770 
 
For the three and six month periods ended June 30, 2020, the Company capitalized $178,000 and $519,000, respectively, of internally developed software costs, primarily associated with upgrading our secure identity management technology and network operations center. For the three and six month periods ended June 30, 2019, the Company capitalized internally developed software costs of approximately $67,225 and $125,725, respectively, related to costs associated with our next generation TDI Optimiser™ application. There were no disposals of intangible assets during the three month periods ended June 30, 2020 and 2019.
 
The aggregate amortization expense recorded for the three month periods ended June 30, 2020 and 2019 was approximately $125,700 and $198,800, respectively. The aggregate amortization expense recorded for the six month periods ended June 30, 2020 and 2019 waas approximately $251,300 and $397,600, respectively The total weighted remaining average life of all purchased intangible assets and internally developed software costs was approximately 4.5 years and 2.5 years, respectively, at June 30, 2020.
 
 
13
 
 
 
 
As of June 30, 2020, estimated annual amortization for our intangible assets for each of the next five years is approximately:
 
Remainder of 2020
 $202,924 
2021
  333,714 
2022
  273,937 
2023
  194,570 
2024
  194,570 
Thereafter
  997,163 
Total
 $2,196,878 
 
8.        
Line of Credit
 
On June 15, 2017, the Company entered into a Loan and Security Agreement with Atlantic Union Bank (formerly known as Access National Bank) (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of credit.
 
Effective, April 30, 2020, the Company entered into a fifth modification agreement (“Modification Agreement”) with Atlantic Union Bank to amend the existing Loan Agreement. The Modification Agreement extended the maturity date of the facility from April 30, 2020 through April 30, 2021 and changed the variable interest rate from the Wall Street Journal prime rate plus 0.50% to the Wall Street Journal prime rate plus 0.25%.
 
The Loan Agreement requires that the Company meet the following financial covenants on a quarterly basis: (i) maintain a minimum adjusted tangible net worth of at least $2.0 million, (ii) maintain minimum consolidated EBITDA of at least two times interest expense and (iii) maintain a current ratio of 1.10:1.
 
The available amount under the working capital line of credit is subject to a borrowing base, which is equal to the lesser of (i) $5.0 million or (ii) 70% of the net unpaid balance of the Company’s eligible accounts receivable. 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. As of June 30, 2020, the Company was eligible to borrow up to $4.9 million under the borrowing base formula.
 
9. 
Income Taxes
 
In response to the COVID-19 pandemic, the U.S. federal, state and local governments have enacted tax-related relief programs to provide both direct and indirect tax assistance in the form of tax subsidies, exemptions, deferrals and credits.  The Company is continuously analyzing these programs as they are introduced in order to determine our eligibility and the risks and benefits of participation.  
 
During the quarter ended June 30, 2020, the Company elected to participate in several COVID-19 tax-relief programs for which it was eligible. For example, pursuant to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Company exercised the option to defer payment of the employer portion of the Social Security tax, with 50% to be repaid by December 31, 2021 and the remainder by December 31, 2022.  The Company deferred payment of approximately $166,200 of employer Social Security taxes during the quarter ended June 30, 2020.
 
The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS or various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2014 forward. As of June 30, 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 June 30, 2020 or December 31, 2019. In the future if applicable, any interest and penalties related to uncertain tax positions will be recognized in income tax expense.
 
As of June 30, 2020, the Company had approximately $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 2037. Included in the recorded deferred tax asset, the Company had a benefit of approximately $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.
 
 
14
 
 
 
 
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. A significant piece of objective negative evidence considered in management’s evaluation of the realizability of its deferred tax assets was the existence of cumulative losses over the latest three-year period. Management forecast future taxable income, but concluded that there may not be enough of a recovery before the end of the fiscal year to overcome the negative objective evidence of three years of cumulative losses. On the basis of this evaluation, management has recorded a valuation allowance against all deferred tax assets. If management’s assumptions change and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense.
 
10.              
Stockholders’ Equity
 
Common Stock
 
The Company is authorized to issue 110,000,000 shares of common stock, $.001 par value per share. As of June 30, 2020, there were 84,418,523 shares issued and outstanding. During the six month period ended June 30, 2020, the Company granted 2,355,039 restricted stock awards (RSAs), of which 1,737,415 remain unvested. The Company issued 238,572 shares of common stock as a result of the vesting portion of RSAs during the six month period ended June 30, 2019.
 
11.              
Share-based Compensation
 
Share-based compensation (including restricted stock awards) represents both stock options based expense and stock grant expense. The following table sets forth the composition of stock compensation expense included in general and administrative expense for the periods then ended:
 
 
 
THREE MONTHS ENDED
 
 
SIX MONTHS ENDED
 
 
 
JUNE 30
 
 
JUNE 30
 
 
 
2020
 
 
2019