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What changed in WIDEPOINT CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of WIDEPOINT CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+200 added−212 removedSource: 10-K (2025-04-15) vs 10-K (2024-03-26)

Top changes in WIDEPOINT CORP's 2024 10-K

200 paragraphs added · 212 removed · 143 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

35 edited+13 added−10 removed54 unchanged
Biggest changeAfter a customer is on boarded, we focus on delivering our service as contracted and then upsell and cross sell our TMaaS solution offerings. We may enter into preferred supplier network programs agreements with our customers and offer our TMaaS solutions on similar terms and conditions to their suppliers and customer which in turn could increase our potential sales opportunities.
Biggest changeWe may enter into preferred supplier network programs agreements with our customers and offer our TMaaS solutions on similar terms and conditions to their suppliers and customer which in turn could increase our potential sales opportunities. We also directly ask our customers for referrals into their professional network, customer and supplier groups to drive additional sales opportunities. Indirect Sales Approach.
Additionally, we provide development operations support, artificial intelligence implementation, and the Microsoft stack of technologies to help our customers to be productive, agile, and efficient in a secure environment. provide the above solutions from the cloud that ensures scalability, resiliency, and security.
Additionally, we provide development operations support, artificial intelligence implementation, and the Microsoft stack of technologies to help our customers to be productive, agile, and efficient in a secure environment. We provide the above solutions from the cloud that ensures scalability, resiliency, and security.
Market Pricing. Pricing for services in our market lacks transparency due to the way in which our competitors price their services. Our competitors take advantage of this lack of pricing transparency and prospective customer’s lack of understanding and awareness of market pricing for services.
Pricing for services in our market lacks transparency due to the way in which our competitors price their services. Our competitors take advantage of this lack of pricing transparency and prospective customer’s lack of understanding and awareness of market pricing for services.
We believe that contracts with federal government agencies in particular, will be the primary source of our revenues for the foreseeable future although we are working to increase our footprint with commercial customers through our relationships with large systems integrators and strategic partners.
We believe that contracts with federal government agencies in particular, will be the primary source of our revenues for the foreseeable future although we are working to increase our footprint with commercial customers through our relationships with systems integrators and strategic partners.
While most of our customers use their savings to purchase and upgrade their managed services, our customers could potentially negatively impact our billable revenue base and result in lower profit margins if they decide to retain the savings and not purchase additional higher margin services.
While most of our customers use their savings to purchase and upgrade their managed services, our customers could potentially negatively impact our billable revenue base that could result in lower profit margins if they decide to retain the savings and not purchase additional higher margin services.
Mobile and Identity Management As one of two DoD designated External Certificate Authorities, we offer several different federally certified digital certificates and credentials that enable our customers to provide the strong multifactor authentication (MFA) solution to conduct business through secure portals owned and managed by the U.S. federal government, access government facilities and secure mobile devices that are used to access corporation networks, databases and other IT assets.
Mobile and Identity Management As one of two DoD designated External Certificate Authorities, we offer several different federally certified digital certificates and credentials that enable our customers to provide strong multifactor authentication (MFA) solution to conduct business through secure portals owned and managed by the U.S. federal government, access government facilities and secure mobile devices that are used to access corporate networks, databases and other IT assets.
Our Solutions Our TMaaS framework combines the strengths of our core capabilities into a single secure comprehensive enterprise-wide solution set that offers our customer’s the ability to securely enable and manage their mobile IT and telecommunication assets as described below: Telecom Lifecycle Management We offer comprehensive telecom lifecycle management solutions to enterprises both in the public and the private sectors.
Our Managed Services Our TMaaS framework combines the strengths of our core capabilities into a single secure comprehensive enterprise-wide solution set that offers our customer’s the ability to securely enable and manage their mobile IT and telecommunication assets as described below: Telecom Lifecycle Management We offer comprehensive telecom lifecycle management solutions to enterprises both in the public and the private sectors.
These initiatives are aimed at improving the efficiency and effectiveness of our software solutions and meeting our customer’s changing organizational requirements, as necessary. We determine which enhancements to further develop after assessing the market capabilities sought by potential customers, considering technological advances, feedback on enhancements from our current customer user groups and other factors.
These initiatives are aimed at improving the efficiency and effectiveness of our software solutions and meeting our customer’s changing organizational requirements, as necessary. We determine which enhancements to further develop after assessing the capabilities sought by existing and potential customers, considering technological advances, feedback on enhancements from our current customer user groups and other factors.
We believe the combination of competitive compensation package and career growth and development opportunities have helped increase employee tenure and reduce voluntary turnover. As of December 31, 2023, the average tenure of our employees was approximately eight (8) years and more than one fourth of our employees have been employed by us for more than ten (10) years.
We believe the combination of competitive compensation package and career growth and development opportunities have helped increase employee tenure and reduce voluntary turnover. As of December 31, 2024, the average tenure of our employees was approximately eight (8) years and more than one fourth of our employees have been employed by us for more than ten (10) years.
We do not view our services as a commodity, and comparability of our TMaaS offering against other competitors’ service offerings is not practical due to differences in pricing models described above and overall capabilities among competitors. As a result of this pricing differences between us and our competitors it can be difficult to compare to pricing models in our market.
We do not view our services as a commodity, and comparability of our TMaaS offering against other competitors’ service offerings is not practical due to differences in pricing models described above and overall capabilities among competitors. As a result of these pricing differences between us and our competitors it can be difficult to compare to pricing models in our market.
Our security certification and accreditation represents a significant reduction of security risk for our customers both in public and private sectors. Data Centers We host our proprietary solutions and operate all servers, systems and networks multiple data centers located in North America and Europe, which we may consolidate in the future.
Our security certification and accreditation represent a significant reduction of security risk for our customers both in public and private sectors. Data Centers We host our proprietary solutions and operate all servers, systems and networks multiple data centers located in North America and Europe, which we may consolidate in the future.
We believe that our TMaaS solution offering gives us a strong competitive advantage over our competitors due to our distinctive technical competencies, long-standing client relationships, successful past contract performance with large commercial and government organizations, governmental certifications and authorizations to operate (ATOs) within this space, price and value of services delivered, reputation for quality, and key management personnel with subject matter expertise.
We believe that our TMaaS solution offering gives us a strong competitive advantage over our competitors due to our distinctive technical competencies, long-standing client relationships, successful past contract performance with large commercial and government organizations, governmental certifications and authorizations to operate (ATOs) within this space, price and value of services delivered, reputation for quality, and key management personnel with subject matter expertise. 8 Market Pricing.
We also offer comprehensive mobile security solutions that protect users, devices, and corporate resources, including establishing effective policies to create a scalable, adaptable, successful mobile program. We also offer the same MFA solution to enterprise in the private sectors with the same level of cybersecurity assurance.
We also offer comprehensive mobile security solutions that protect users, devices, and corporate resources, including establishing effective policies to create a scalable, adaptable, successful mobile program. We also offer the same MFA solution to enterprises in the private sectors with the same level of cybersecurity assurance.
All prospective customers tend to initially have price sensitivity and that often changes after we are able to demonstrate that our solutions are superior and will save them time and money. We believe our TMaaS solution pricing is competitive and reflects the value of the solutions provided to our customers.
All prospective customers tend to initially have price sensitivity and that often changes after we are able to demonstrate that our solutions are superior, more secure, and will save them time and money. We believe our TMaaS solution pricing is competitive and reflects the value of the solutions provided to our customers.
ITEM 1. BUSINESS Company Overview We are a leading provider of Technology Management as a Service (TMaaS) that consists of federally certified communications management, identity management, interactive bill presentment and analytics, and Information Technology as a Service solutions.
ITEM 1. BUSINESS Company Overview We are a leading provider of Technology Management as a Service (TMaaS) that consists of federally certified communications management, and identity management. We also provide interactive bill presentment and analytics, and Information Technology as a Service solutions.
Some of our principal competitors include: MDSL/Calero Sortware LLC, Tangoe, Inc., Brightfin, DMI, A&T Systems, and Turning Point Global Services, LLC; Identity Management – Entrust Corp., IdenTrust and XTec Inc.; Digital Billing & Analytics – Amdocs Britebill and Globys Inc.; ITaaS - BMC Software, HPE, StratCore; Next Level Technologies, and many others.
Some of our principal competitors include: Calero Software Solutions LLC, Tangoe, Inc., Brightfin, DMI, A&T Systems, and Turning Point Global Services, LLC; Identity Management – Entrust Corp., IdenTrust and XTec Inc.; Digital Billing & Analytics – Amdocs Britebill and Globys Inc.; ITaaS - BMC Software, HPE, StratCore; Next Level Technologies, and many others.
We have historically grown our business under the direct sales model; however, more recently we have closed a significant portion of our new sales through our partnerships with large systems integrators.
We have historically grown our business under the direct sales model; however, more recently we have closed a significant portion of our new sales through our partnerships with other systems integrators.
Our sales cycle is long and is often affected by many factors outside of our control including but not limited to customer specific proposal and acquisition processes, unique customer service requirements, the customer’s timetable and urgency, changes in key leadership and/or personnel that slows down the proposal or project, an evaluation by different functional groups within the prospective customers organization before a purchase decision is made by the organization, budgetary funding delays, intermittent U.S. federal government shutdowns, competitive bidding processes and other policy constraints, as well as additional factors that may lengthen the sales cycle.
Our sales cycle is long and is often affected by many factors including but not limited to customer specific proposal and acquisition processes, unique customer service requirements, the customer’s timetable and urgency, changes in key leadership and/or personnel that slows down the proposal or project, an evaluation by different functional groups within the prospective customers organization before a purchase decision is made by the organization, budgetary funding delays, intermittent U.S. federal government shutdowns, reductions in U.S. federal government administrative functions, competitive bidding processes and other policy constraints, as well as additional factors that may lengthen the sales cycle.
Our ability to successfully sell our services depends upon the relationships we build and maintain relationships with key decisions makers at existing customers and prospective customer organizations.
Our ability to successfully sell our services depends upon the relationships we build and maintain with key decision makers at existing customers and prospective customer organizations.
Prospective customers in our target market use a wide array of contract vehicles to purchase technology services ranging from individual purchase orders, awards or consolidated service contracts (including blanket purchase agreements and similar indefinite delivery indefinite quantity contracts) that cover a range of technology services, of which we may or may not be able to provide all of the services to serve as the prime contractor.
Prospective customers in our target market use a wide array of contract vehicles to purchase technology services ranging from individual purchase orders, awards or consolidated service contracts (including blanket purchase agreements and similar indefinite delivery indefinite quantity contracts) that cover a range of technology services, of which we may or may not be able to provide all of the services to serve as the prime contractor. 9 Seasonality Our business is not seasonal.
Accordingly, negative changes in federal government fiscal or spending policies (including continuing budget resolutions and government shutdowns) that impact the spending budgets of our key government customers, including Department of Homeland Security, will directly affect our financial performance. 6 We expect all of our customers to be motivated to meet their organizational needs for mobile management, IT management, and security objectives in this challenging environment.
Accordingly, our failure to win a federal contract that is up for renewal or; negative changes in federal government fiscal or spending policies (including continuing budget resolutions and government shutdowns) that impact the spending budgets of our key government customers, including Department of Homeland Security, will directly affect our financial performance. 6 We expect all of our customers to be motivated to meet their organizational needs for mobile management, IT management, and cybersecurity objectives in this challenging environment.
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. 4 IT as a Service We provide comprehensive information technology (IT) as a service offerings (ITaaS), including cybersecurity, cloud services, network operations, and professional services.
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.
Our target market is highly fragmented and we compete with small and large companies that offer different components of TMaaS. We believe that we are presently the only provider of all four of these critical services offerings.
Market Competition Our TMaaS market is centered on mobile management, identity management, ITaaS and digital billing and analytics. Target Markets. Our target market is highly fragmented and we compete with small and large companies that offer different components of TMaaS. We believe that we are presently the only provider of all four of these critical services offerings.
We also hold a number of Indefinite Delivery/Indefinite Quantity (“ID/IQ”) contracts, including, but not limited to: · Department of Homeland Security for Cellular Wireless Managed Services (CWMS) 2.0 ID/IQ Contract (DHS CWMS 2.0 IDIQ). · Subsidiaries of WidePoint are approved subcontractors for the following ID/IQ contracts: o NASA End-User Services and Technologies (NEST) o GSA Alliant 2 o GSA Enterprise Infrastructure Solutions (EIS) o GSA Connections II o National Institutes of Health Chief Information Officer Solutions and Partners (CIO-SP3) o NASA Solutions for Enterprise-Wide Procurement (SEWP) o Department of Justice (DOJ) Enterprise Standard Architecture V (ESA V) We will continue to build on our partnerships with key systems integrators and strategic partners to compete for public and private sector opportunities.
A contract designed to enhance procurement of wireless communications services and devices for U.S. military and associated civilian personnel. · Subsidiaries of WidePoint are approved subcontractors for the following ID/IQ contracts: o GSA Alliant 2 o GSA Enterprise Infrastructure Solutions (EIS) o GSA Connections II o National Institutes of Health Chief Information Officer Solutions and Partners (CIO-SP3) o NASA Solutions for Enterprise-Wide Procurement (SEWP) o Department of Justice (DOJ) Enterprise Standard Architecture V (ESA V) We will continue to build on our partnerships with key systems integrators and strategic partners to compete for public and private sector opportunities.
We also directly ask our customers for referrals into their professional network, customer and supplier groups to drive additional sales opportunities. Indirect Sales Approach. We may use an indirect sales approach to reach new target markets by outsourcing our lead generation and certain business development activities through a third-party channel partner.
We may use an indirect sales approach to reach new target markets by outsourcing our lead generation and certain business development activities through a third-party channel partner.
Our development team is comprised of professionals with hands-on technical and practical customer-side development experience. We believe this allows us to design and deploy enhancements that can resolve real-world problems in a timely manner. 7 We funded strategic product development initiatives as well as platform and portal integrations and other product and portal enhancements during the year.
Our development team is comprised of professionals with hands-on technical and practical customer-side development experience. We believe this allows us to design and deploy enhancements that can resolve real-world problems in a timely manner. In the fourth quarter of 2024 we secured the rights to a new warehousing and configuration facility.
We provide a complete outsourcing solution that includes hardware, software, network and associated management for our clients’ IT needs.
IT as a Service We provide comprehensive information technology (IT) as a service offerings (ITaaS), including cybersecurity, cloud services, network operations, and professional services. We provide a complete outsourcing solution that includes hardware, software, network and associated management for our clients’ IT needs.
Sales commissions, when applicable, are calculated and paid based on net collected gross managed service revenues times a fixed commission rate that declines over the base term of the contract. There are no commissions paid after the base term expires.
Sales commissions, when applicable, are calculated and paid based gross profit of the new business won, as it is earned, multiplied by a fixed commission rate that declines over the base term of the contract. Generally, there are no commissions paid after the base term expires.
If we are unable to keep pace with the intense competition in our marketplace, deliver cost-effective and relevant solutions to our target market, our business, financial condition and results of operations will suffer. 9 Contracting We prefer to serve as the prime contractor when we win contract awards; however, we will often serve as a subcontractor and partner with a large systems integrator to win a larger market opportunity.
If we are unable to keep pace with the intense competition in our marketplace, deliver cost-effective and relevant solutions to our target market, our business, financial condition and results of operations will suffer.
Historically, we have derived, and may continue to derive in the future, a significant percentage of our total revenues from federal government contracts in the United States.
Our government customer base is located predominantly in the Mid-Atlantic region of the U.S. while our commercial customer base is located throughout the continental U.S., Canada, Europe and the Middle East. Historically, we have derived, and may continue to derive in the future, a significant percentage of our total revenues from federal government contracts in the United States.
We also provide “migration to the cloud” services that enables our customers to take advantage of cost savings through economies of scale and elimination of redundancy as well as taking advantage of built in scalability and resiliency of the cloud. Sales Cycle We sell service solutions to government and business enterprises.
We also provide “migration to the cloud” services that enables our customers to take advantage of cost savings through economies of scale and elimination of redundancy as well as taking advantage of built in scalability and resiliency of the cloud. 4 Our Carrier Services We also provide our customers with carrier services, which consists of phone, data and satellite and related mobile services for a connected device or end point.
We have an attractive set of solutions and we believe that government spending for mobility management and for cybersecurity services and solutions will increase for the foreseeable future. Our government customer base is located predominantly in the Mid-Atlantic region of the U.S. while our commercial customer base is located throughout the continental U.S., Canada, Europe and the Middle East.
We have an attractive set of solutions and we believe that government and large enterprise customer spending for mobility management and for cybersecurity services and solutions will increase for the foreseeable future.
As a result we have multiple authorizations to operate (ATOs) from the Department of Homeland Security, the General Services Administration, the Department of Defense, and the Department of Commerce.
Security Certification and Accreditation Our TMaaS solution framework has received multiple security certifications and accreditations from the federal government. As a result we have multiple authorizations to operate (ATOs) from the Department of Homeland Security, the General Services Administration, the Department of Defense, and the Department of Commerce including the FedRAMP® authorization for our proprietary Intelligent Technology Management System (ITMS™).
We also may enter into strategic teaming agreements with another competitor or a vertical supplier to capture a market opportunity.
Contracting We prefer to serve as the prime contractor when we win contract awards; however, we will often serve as a subcontractor and partner with a large systems integrator to win a larger market opportunity. We also may enter into strategic teaming agreements with another competitor or a vertical supplier to capture a market opportunity.
At December 31, 2023, we believe we have substantially completed our capital investments related to our delivery platforms for the foreseeable future; however, future updates and enhancements will be likely to address the changes in technology. Security Certification and Accreditation Our TMaaS solution framework has received multiple security certifications and accreditations from the federal government.
This facility will contain space for our current Mobility Management Depot services, accessory management, IT Configuration, as well as our R2v3 Recycling Center. 7 At December 31, 2024, we believe we have substantially completed our capital investments related to our delivery platforms for the foreseeable future; however, future updates and enhancements will be likely to address the changes in technology.
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Customer Concentrations We derive a significant amount of our revenues from contracts funded by federal government agencies for which we act in capacity as the prime contractor, or as a subcontractor.
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We procure, process and pay communications carrier invoices on behalf of customers. Under many of our carrier services arrangements, we recognize revenues and related costs on a gross basis. A significant portion of our overall reported revenue consists of revenue from carrier services; however, it represents an insignificant portion of our overall reported gross profit.
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For the years ended December 31, 2023 and 2022, we incurred product development costs associated with our next generation TMaaS platform application, Secure Identity Management Solutions, Unified Communications Analytics (UCAS) solution, and data center of approximately $0.9 million and $3.2 million, respectively, which were capitalized.
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This is a commodity type service and margins are nominal, but this is a necessary service to deliver to federal government customers that engage us to provide a full-service solution. Sales Cycle We sell service solutions to government and business enterprises.
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We rely on a combination of patent, copyright, trademark, service mark, trade secret and other rights in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our proprietary service as a solution, technology, operational processes and other intellectual property.
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After a customer is on boarded, we focus on delivering our service as contracted and then upsell and cross sell our other TMaaS solution offerings.
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U.S. patent filings are intended to provide the holder with a right to exclude others from making, using, selling or importing in the United States the inventions covered by the claims of granted patents. Our patents may be contested, circumvented or invalidated.
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Customer Concentrations In 2024 and 2023, 79% and 75% of our revenues were from the Department of Homeland Security for Cellular Wireless Managed Services (CWMS) 2.0 ID/IQ Contract (DHS CWMS 2.0 IDIQ). This contract is up for renewal in a competitive process in November 2025.
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Moreover, the rights that may be granted in those patents may not provide us with proprietary protection or competitive advantages, and we may not be able to prevent third parties from infringing those patents.
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We also hold a number of Indefinite Delivery/Indefinite Quantity (“ID/IQ”) contracts, including, but not limited to: · Department of Homeland Security for Cellular Wireless Managed Services (CWMS) 2.0 ID/IQ Contract (DHS CWMS 2.0 IDIQ), which contract is up for renewal in a competitive process in November 2025. · Navy Spiral 4 Contract, a 10 year multi-award contract with a contract value of $2.67 billion.
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Therefore, the exact benefits of our patents and the other steps that we have taken to protect our intellectual property cannot be predicted with certainty. 8 Market Competition Our TMaaS market is centered on mobile management, identity management, ITaaS and digital billing and analytics. Target Markets.
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By expanding our footprint, we are preparing to scale operations for our Device-as-a-Service offerings. Build-out of this facility should be complete in the second quarter of 2025.
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Additionally, because we derive a large percentage of our revenue from the U.S.
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Additionally, because we derive a large percentage of our revenue from the U.S. Federal Government, their budgeting process also affects the purchasing patterns of our customers that will significantly impact the quarter to quarter financial performance Regulation Our most significant source of regulation relates to compliance with laws and regulations relating to the formation, administration and performance of U.S.
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Federal Government, their budgeting process also affects the purchasing patterns of our the agency customers that will significantly impact the quarter to quarter financial performance Regulation Our most significant source of regulation relates to compliance with laws and regulations relating to the formation, administration, and performance of U.S. government contracts, including: · the Federal Acquisition Regulation, and agency regulations analogous or supplemental to the Federal Acquisition Regulation, which comprehensively regulate the formation, administration, and performance of government contracts; · the Truthful Cost or Pricing Data Act (formerly known as Truth in Negotiations Act), which requires certification and disclosure of all cost or pricing data in connection with some contract negotiations; · the Procurement Integrity Act; · the Cost Accounting Standards, which impose cost accounting requirements that govern our right to reimbursement under some cost-based government contracts; and · laws, regulations, and executive orders restricting (i) the use and dissemination of information classified for national security purposes, (ii) the exportation of specified solutions, technologies and technical data, and (iii) the use and dissemination of sensitive but unclassified data; · the General Data Protection Regulation is a regulation in EU law on data protection and privacy in the European Union (EU) and the European Economic Area (EEA).
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These laws and regulations, among other things: · may in certain circumstances require certification and disclosure of all cost or pricing data in connection with certain types of contract negotiations; · impose specific and unique cost accounting practices that may differ from U.S. generally accepted accounting principles (GAAP); · impose acquisition regulations, which may change or be replaced over time, that define which costs can be charged to the U.S.
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It also regulates the transfer of personal data outside the EU and EEA areas The federal government has audit rights and may review matters such as our performance on contracts, pricing practices, cost structure, and compliance with applicable laws, regulations, and standards.
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Government, how and when costs can be charged, and otherwise govern our right to reimbursement under certain U.S. Government contracts; · require specific security controls to protect U.S.
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If a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. government agencies. 10 Human Capital As of December 31, 2023, we employed 206 full time employees (176 in United States and 30 in Europe), 10 consultants, 10 part-time staff, and 8 subcontractors.
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Government controlled unclassified information and that our suppliers that have access to this type of information comply with cyber security regulations; · restrict the use and dissemination of information classified for national security purposes and the export of certain products, services and technical data; · prohibit the acquisition from or use by contractors of materials, products or services procured from certain countries or entities located outside the United States (e.g., the prohibition on the acquisition of sensitive materials from non-allied foreign nations and prohibition on the acquisition and use of certain telecommunications and video surveillance services or equipment); and To the extent we may be required to deploy or enhance systems, processes, and controls in any of the above areas in order to be able to bid on new and more complex contracts, we may incur additional costs to achieve compliance The U.S.
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Government may audit us or terminate any of our government contracts and subcontracts either at their convenience or for default based on our performance. If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs.
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If a contract is terminated for default, we generally are entitled to payment for our work that has been accepted by the U.S. Government; however, the U.S.
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Government could make claims to reduce our recovery or recoup its procurement costs and could assess other special penalties. 10 Human Capital As of December 31, 2024, we employed 240 full time employees (209 in United States and 31 in Europe), 12 consultants, and 3 part-time staff.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+27 added−22 removed115 unchanged
Biggest changeAll of our government contracts, including but not limited to the DHS IDIQ, contain a standard clause which allows the government to cancel our contract for convenience without penalty. In addition, our contracts with the federal government permit the governmental agency to modify, curtail or terminate the contract at any time for the convenience of the government.
Biggest changeFederal agencies and certain large customers can unexpectedly terminate their contracts with us at any time without penalty. All of our government contracts, including but not limited to the DHS IDIQ, contain a standard clause which allows the government to cancel our contract for convenience without penalty.
Any failure to gain market acceptances of our products and services could have a material adverse impact on our financial results. In addition, many of our competitors have greater resources than us and we if we cannot keep pace with the intense competition in our marketplace, our business, financial condition and results of operations will suffer.
Any failure to gain market acceptances of our products and services could have a material adverse impact on our financial results. In addition, many of our competitors have greater resources than us and if we cannot keep pace with the intense competition in our marketplace, our business, financial condition and results of operations will suffer.
Our long-term success in our industry depends, in part, on our ability to expand the sales of our solutions to customers located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations. We may to expand the international sales and operations of our portfolio of solutions.
Our long-term success in our industry depends, in part, on our ability to expand the sales of our solutions to customers located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations. We may expand the international sales and operations of our portfolio of solutions.
We believe that contracts with federal government agencies will continue to be a significant source of our revenues for the foreseeable future. Accordingly, shutdowns or changes in federal government fiscal or spending policies or the U.S. federal budget could directly affect our financial performance.
We believe that contracts with federal government agencies will continue to be a significant source of our revenues for the foreseeable future. Accordingly, shutdowns or changes in federal government fiscal or spending policies or changes in U.S. federal budget could directly affect our financial performance.
These rights and remedies allow government customers, among other things, to: · terminate existing contracts, with short notice, for convenience, as well as for default; · reduce orders under or otherwise modify contracts; · for larger contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor during negotiations furnished cost or pricing data that was not complete, accurate, and current; · for GSA multiple award schedule contracts, government-wide acquisition agreements, and blanket purchase agreements, demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process, or reduce the contract price under certain triggering circumstances, including the revision of pricelists or other documents · upon which the contract award was predicated, the granting of more favorable discounts or terms and conditions than those contained in such documents, and the granting of certain special discounts to certain customers; · terminate our facility security clearances and thereby prevent us from receiving classified contracts; · cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; 20 · decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity contracts; · claim rights in solutions, systems, and technology produced by us; · prohibit future procurement awards with a particular agency due to a finding of organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors or the existence of conflicting roles that might bias a contractor’s judgment; · subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; and · suspend or debar us from doing business with the federal government.
These rights and remedies allow government customers, among other things, to: · terminate existing contracts, with short notice, for convenience, as well as for default; · reduce orders under or otherwise modify contracts; · for larger contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor during negotiations furnished cost or pricing data that was not complete, accurate, and current; · for GSA multiple award schedule contracts, government-wide acquisition agreements, and blanket purchase agreements, demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process, or reduce the contract price under certain triggering circumstances, including the revision of pricelists or other documents · upon which the contract award was predicated, the granting of more favorable discounts or terms and conditions than those contained in such documents, and the granting of certain special discounts to certain customers; · terminate our facility security clearances and thereby prevent us from receiving classified contracts; · cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; · decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity contracts; · claim rights in solutions, systems, and technology produced by us; · prohibit future procurement awards with a particular agency due to a finding of organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors or the existence of conflicting roles that might bias a contractor’s judgment; · subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; and · suspend or debar us from doing business with the federal government.
These risks include: · geographic localization of our software products, including translation into foreign languages and adaptation for local practices and regulatory requirements; · lack of familiarity with and unexpected changes in foreign regulatory requirements; · longer accounts receivable payment cycles and difficulties in collecting accounts receivable; · difficulties in managing, staffing and overseeing international implementations and operations, including increased reliance on foreign subcontractors; · challenges in integrating our software with multiple country-specific billing or communications support systems for international customers; · challenges in providing procurement, help desk and fulfillment capabilities for our international customers; · fluctuations in currency exchange rates; · potentially adverse tax consequences, including the complexities of foreign value added or other tax systems and restrictions on the repatriation of earnings; · the burdens of complying with a wide variety of foreign laws and legal standards; · increased financial accounting and reporting burdens and complexities; · potentially slower adoption rates of communications management solutions services internationally; · political, social and economic instability abroad, terrorist attacks and security concerns in general; and · reduced or varied protection for intellectual property rights in some countries.
These risks include: · geographic localization of our software products, including translation into foreign languages and adaptation for local practices and regulatory requirements; · lack of familiarity with and unexpected changes in foreign regulatory requirements; · longer accounts receivable payment cycles and difficulties in collecting accounts receivable; · difficulties in managing, staffing and overseeing international implementations and operations, including increased reliance on foreign subcontractors; · challenges in integrating our software with multiple country-specific billing or communications support systems for international customers; · challenges in providing procurement, help desk and fulfillment capabilities for our international customers; · fluctuations in currency exchange rates; · potentially adverse tax consequences, including the complexities of transfer pricing, foreign value added or other tax systems and restrictions on the repatriation of earnings; · the burdens of complying with a wide variety of foreign laws and legal standards; · increased financial accounting and reporting burdens and complexities; · potentially slower adoption rates of communications management solutions services internationally; · political, social and economic instability abroad, terrorist attacks and security concerns in general; and · reduced or varied protection for intellectual property rights in some countries.
Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability. We may be unable to successfully acquire complementary businesses, services or technologies to support our growth strategy .
Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability. 17 We may be unable to successfully acquire complementary businesses, services or technologies to support our growth strategy .
While we believe our customer service, strong customer retention and integrated technology solution sets are among our key differentiators, our competitors may offer introductory pricing and significantly discount their services to gain market share and/or in exchange for revenues with higher margin services in other areas or at later dates.
While we believe our customer service history, strong customer retention and integrated technology solution sets are among our key differentiators, our competitors may offer introductory pricing and significantly discount their services to gain market share and/or in exchange for revenues with higher margin services in other areas or at later dates.
Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in which we are a named party. We may be unable to protect our proprietary software and methodology.
Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in which we are a named party. 23 We may be unable to protect our proprietary software and methodology.
Any delay in completing, or failure to complete, sales in a particular quarter or year could harm our business and could cause our operating results to vary significantly. 13 Our financial resources are limited and the failure of one or more new product or service offerings could materially harm our financial results.
Any delay in completing, or failure to complete, sales in a particular quarter or year could harm our business and could cause our operating results to vary significantly. Our financial resources are limited and the failure of one or more new product or service offerings could materially harm our financial results.
Inflationary pressures on costs, such as inputs for devices, labor and distribution costs may impact our financial condition or results of operations.
Inflationary or other pressures on costs, such as inputs for devices, labor and distribution costs may impact our financial condition or results of operations.
These factors could adversely affect customer demand, the Company’s operations, and its ability to source and deliver services to its customers, which could have a material adverse effect on the Company’s financial results. 14 We currently have access to a credit facility, which provides for short term cashflow needs and requires us to maintain financial covenants and failure to achieve and maintain such covenants could limit our access to debt.
These factors could adversely affect customer demand, the Company’s operations, and its ability to source and deliver services to its customers, which could have a material adverse effect on the Company’s financial results. 14 We currently have access to a credit facility, which provides for short term cashflow needs and requires us to maintain financial covenants and failure to achieve and maintain such covenants could limit our access to needed funds.
Our bylaws provide that the board of directors will determine the number of directors to serve on the board. Our board of directors presently consists of five members. Our certificate of incorporation and bylaws contain certain provisions permitted under the General Corporation Law of Delaware relating to the liability of directors.
Our bylaws provide that the board of directors will determine the number of directors to serve on the board. Our board of directors presently consists of four members. Our certificate of incorporation and bylaws contain certain provisions permitted under the General Corporation Law of Delaware relating to the liability of directors.
In addition, any future acquisition may require us to: · issue additional equity securities that would dilute our stockholders; 17 · use cash that we may need in the future to operate our business; · incur debt on terms unfavorable to us or that we are unable to repay; · incur large charges or substantial liabilities; or · become subject to adverse tax consequences, substantial depreciation or compensation charges.
In addition, any future acquisition may require us to: · issue additional equity securities that would dilute our stockholders; · use cash that we may need in the future to operate our business; · incur debt on terms unfavorable to us or that we are unable to repay; · incur large charges or substantial liabilities; or · become subject to adverse tax consequences, substantial amortization or compensation charges.
Accordingly, we may be unable to pass on the recent increases in costs for labor and supplies as a result of general inflationary conditions to such customers.
Accordingly, we may be unable to pass on the recent increases in costs for labor and supplies as a result of general inflationary conditions or tariffs to such customers.
We have access to a new credit facility, which consists of a variable line of credit primarily to meet short-term working capital requirements. Our credit facility agreement requires us to maintain certain financial covenants measured annually commencing on December 31, 2024.
We have access to a credit facility, which consists of a variable line of credit primarily to meet short-term working capital requirements. Our credit facility agreement requires us to maintain certain financial covenants measured annually on December 31.
If we are unable to meet future covenants, our lender could take adverse actions that might include accelerating in part or in full payment of all unpaid principal and interest, reducing the amount of our credit facility, or offering renewal terms that are unfavorable, or refusing to renew our credit agreement, all of which could have a material adverse impact on our ability to meet periodic short term operational cash flow requirements and manage through prolonged government shutdowns.
We are currently in compliance with our covenants at December 31, 2024; however, if we are unable to meet future covenants, our lender could take adverse actions that might include accelerating in part or in full payment of all unpaid principal and interest, reducing the amount of our credit facility, or offering renewal terms that are unfavorable, or refusing to renew our credit agreement, all of which could have a material adverse impact on our ability to meet periodic short term operational cash flow requirements and manage through prolonged government shutdowns.
If any of these risks materializes, our business and operating results would be harmed.
If any of these risks materialize, our business and operating results would be harmed.
For example, our DHS contract is up for renewal in November 2025 and we may be unable to win such contract or may be required to incur significant concessions in order to renew it.
For example, our DHS contract is up for renewal in November 2025 and we may be unable to rewin such contract or may be required to make significant concessions in order to renew it.
We estimate that the loss of any large contract, without any offsetting aggregate contract wins, could have a significant adverse impact on our operating cash flow and financial results; and we would likely be faced with a decision to initiate cost reduction actions that would largely include reductions in force for personnel and assets affected by the contract loss.
We estimate that the loss of any large contract, such as the DHS CWMS 2.0 IDIQ, without any offsetting aggregate contract wins, would have a significant adverse impact on our operating cash flow and financial results; and we would likely be faced with a decision to initiate cost reduction actions that would largely include reductions in force for personnel and assets affected by the contract loss.
Competitive procurements impose substantial upfront costs and present a number of risks, including: · the substantial cost and managerial time and effort that we spend to prepare bids and proposals for contracts that may not be awarded to us; · requirements to register to conduct business in another state or country could increase our compliance costs; · requirements to post a bid guarantee or similar performance guarantee as part of a bid submission; and · the expense and delay that we may face if our competitors protest or challenge contract awards made to us pursuant to competitive procedures, and the risk that any such protest or challenge could result in the resubmission of offers, or in termination, reduction, or modification of the awarded contract. 19 The costs we incur in the competitive procurement process may be substantial and, to the extent we participate in competitive procurements and are unable to win particular contracts, these costs could negatively affect our operating results.
Competitive procurements impose substantial upfront costs and present a number of risks, including: · the substantial cost and managerial time and effort that we spend to prepare bids and proposals for contracts that may not be awarded to us; · requirements to register to conduct business in another state or country could increase our compliance costs; · requirements to post a bid guarantee or similar performance guarantee as part of a bid submission; and · the expense and delay that we may face if our competitors protest or challenge contract awards made to us pursuant to competitive procedures, and the risk that any such protest or challenge could result in the resubmission of offers, or in termination, reduction, or modification of the awarded contract.
To the extent that price increases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition or operating results may be adversely affected. Furthermore, we may not be able to offset any cost increases through productivity and cost-saving initiatives.
To the extent that price increases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition or operating results may be adversely affected.
In addition, any limitations imposed on spending by U.S. government agencies that result from efforts to reduce the federal deficit, including as a result of sequestration or otherwise, may limit both the continued funding of our existing contracts and our ability to obtain additional contracts.
In addition, any limitations imposed on spending by U.S. government agencies that result from efforts to reduce the federal deficit, including as a result of sequestration or otherwise, may limit both the continued funding of our existing contracts and our ability to obtain additional contracts. 19 The newly formed Department of Government Efficiency (DOGE) could negatively impact our revenues from the government customers.
In addition, if we are required to disclose any of this sensitive customer information to governmental authorities, that disclosure could expose us to a risk of losing customers or could otherwise harm our business. 21 If customers believe that we may be subject to requirements to disclose sensitive customer information to governmental authorities, or that our systems and software products do not provide adequate security for the storage of confidential information or its transmission over the Internet or corporate extranets, or are otherwise inadequate for Internet or extranet use, our business will be harmed.
If customers believe that we may be subject to requirements to disclose sensitive customer information to governmental authorities, or that our systems and software products do not provide adequate security for the storage of confidential information or its transmission over the Internet or corporate extranets, or are otherwise inadequate for Internet or extranet use, our business will be harmed.
Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock. We have identified material weaknesses in our internal control over financial reporting.
In 2021 and throughout 2023, the costs of these inputs and the costs of labor necessary to develop and maintain our networks and our products and services rapidly increased.
In the past few years, the costs of these inputs and the costs of labor necessary to develop and maintain our networks and our products and services rapidly increased.
If our software products are unavailable for significant periods of time, we may lose a substantial number of our customers as a result of these contractual rights, we may suffer harm to our reputation, and we may be required to provide our customers with significant credits or pay our customers significant contractual penalties, any of which could harm our business, financial condition, results of operations. 16 A global pandemic similar to the COVID 19 pandemic, or an epidemic impacting our could have a material adverse impact on our business and operations..
If our software products are unavailable for significant periods of time, we may lose a substantial number of our customers as a result of these contractual rights, we may suffer harm to our reputation, and we may be required to provide our customers with significant credits or pay our customers significant contractual penalties, any of which could harm our business, financial condition, results of operations.
If a federal government customer were to unexpectedly terminate, cancel, or decline to exercise an option to renew with respect to one or more of our significant contracts, such as the DHS IDIQ, or suspend or debar us from doing business with the federal government, our revenues and operating results would be materially harmed.
If a federal government customer were to unexpectedly terminate, cancel, or decline to exercise an option to renew with respect to one or more of our significant contracts, such as the DHS IDIQ, or suspend or debar us from doing business with the federal government, our revenues and operating results would be materially harmed. 21 RISKS RELATED TO PRIVACY, CYBERSECURITY AND TECHNOLOGY Security breaches or cybersecurity events could result in the loss of customers and negative publicity and materially harm our business.
Demand for businesses with credible business relationships and capabilities to provide services to large commercial enterprises and/or governmental agencies at the federal, state and local level is very competitive.
We have in the past and may in the future acquire or invest in complementary and supplementary businesses, services or technologies. Demand for businesses with credible business relationships and capabilities to provide services to large commercial enterprises and/or governmental agencies at the federal, state and local level is very competitive.
Although we require certain of our employees to sign agreements prohibiting them from joining a competitor, forming a competing company or soliciting our customers or employees for certain periods of time, we cannot be certain that these agreements will be effective in preventing our key employees from engaging in these actions or that courts or other adjudicative entities will substantially enforce these agreements.
Although we require certain of our employees to sign agreements prohibiting them from joining a competitor, forming a competing company or soliciting our customers or employees for certain periods of time, we cannot be certain that these agreements will be effective in preventing our key employees from engaging in these actions or that courts or other adjudicative entities will substantially enforce these agreements. 16 We provide minimum service-level commitments to many of our customers, and our inability to meet those commitments could result in significant loss of customers, harm to our reputation and costs to us.
Additionally, frequent changes in mobile computing hardware and software technology, and resulting inconsistencies between the billing platforms utilized by major communications carriers and the changing demands of customers regarding the means of delivery of communications management solutions could affect our ability to efficiently deliver our services and harm our profit margins.
Additionally, frequent changes in mobile computing hardware and software technology, and resulting inconsistencies between the billing platforms utilized by major communications carriers and the changing demands of customers regarding the means of delivery of communications management solutions could affect our ability to efficiently deliver our services and harm our profit margins. 12 To achieve and maintain market acceptance for our solution, we must effectively anticipate these changes and offer software products and services that respond to them in a timely manner.
If we are unable to achieve and maintain our covenants under our credit facility, our business and operating results could suffer and we may need to obtain additional funding or raise capital, which may not be available on favorable terms or at all. We may be unable to sustain profitability . We have a history of operating losses.
If we are unable to achieve and maintain our covenants under our credit facility, our business and operating results could suffer and we may need to obtain additional funding or raise capital, which may not be available on favorable terms or at all. The availability of our line of credit is dependent on having sufficient billed accounts receivable as collateral.
Actual or perceived breaches of our security measures, or governmental required disclosure of customer information could diminish demand for our solution and subject us to substantial liability.
Any of these events could have material adverse effects on our business, financial condition, and operating results. Actual or perceived breaches of our security measures, or governmental required disclosure of customer information could diminish demand for our solution and subject us to substantial liability.
A security breach or cybersecurity event in one of these systems could cause serious harm to our business, damage our reputation, and prevent us from being eligible for further work on sensitive or classified systems for federal government customers. In addition, sensitive personal data could be illegally accessed and/or stolen through a cybersecurity event.
Many of the services we provide involve managing and protecting information involved in sensitive or classified government functions. A security breach or cybersecurity event in one of these systems could cause serious harm to our business, damage our reputation, and prevent us from being eligible for further work on sensitive or classified systems for federal government customers.
If we fail to develop software products and services that satisfy customer preferences in a timely and cost-effective manner, our ability to renew our agreements with existing customers and our ability to create or increase demand for our solution will be harmed. 12 The loss of significant customer contracts, including our IDIQ with the Department of Homeland Security, could also have an adverse impact on our financial results.
If we fail to develop software products and services that satisfy customer preferences in a timely and cost-effective manner, our ability to renew our agreements with existing customers and our ability to create or increase demand for our solution will be harmed.
To the extent we are not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, we will be unable to perform that contract and we may not be able to compete for or win new contracts for similar work.
To the extent we are not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, we will be unable to perform that contract and we may not be able to compete for or win new contracts for similar work. 20 Federal government contracts contain provisions giving government customers a variety of rights that are unfavorable to us, including the ability to terminate a contract at any time for convenience.
If a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. government agencies.
If an audit or investigation were to result in allegations against a contractor of improper or illegal activities, civil or criminal penalties and administrative sanctions could result, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government.
An inability to successfully grow our sales pipeline and close on new business that is profitable could affect our long-term viability, profitability and ultimately limit the financial resources we have available to grow our business and achieve our desired financial results. Federal agencies and certain large customers can unexpectedly terminate their contracts with us at any time without penalty.
An inability to successfully grow our sales pipeline and close on new business that is profitable, adequately control costs, could affect our long-term viability, profitability and ultimately limit the financial resources we have available to grow our business and achieve our desired financial results.
Although we are unable to predict the impact on our ability to source materials in the future, we expect these supply and inflationary pressures to continue into 2024.
Although we are unable to predict the impact on our ability to source materials in the future, we expect these supply and inflationary pressures to continue into 2025. In addition, we may face additional cost pressure via new tariffs imposed on the items we import.
Although we attempt to limit the amount and type of our contractual liability for defects in the applications or systems we provide, and carry insurance coverage that mitigates this liability in certain instances, we cannot be assured that these limitations and insurance coverages will be applicable and enforceable in all cases.
Additionally, in the event we manage third party services on behalf of our customers and fail to execute on approved changes requested by our customers it could result in claims asserted by our customers for substantial damages against us. 22 Although we attempt to limit the amount and type of our contractual liability for defects in the applications or systems we provide and carry insurance coverage that mitigates this liability in certain instances, we cannot be assured that these limitations and insurance coverages will be applicable and enforceable in all cases.
Additionally, rapid changes in technology affect our ability to respond timely with new and innovative product offerings to address new market needs.
We operate in a market that is highly fragmented, price sensitive and subject to fierce competition. Additionally, rapid changes in technology may affect our ability to respond timely with new and innovative product offerings to address new market needs.
Our government contracts generally consist of a base period award with 4 option periods depending on the needs of the agency issuing the contract award. Our commercial contracts have contractual terms of 3 or more years with automatic annual renewals in most cases.
Most of our contracts with customers have terms of three (3) to five (5) years, with optional additional renewal periods. Our government contracts generally consist of a base period award with 4 option periods depending on the needs of the agency issuing the contract award.
Whether or not we are responsible for our software’s failure or defect, we could be required to spend significant time and money in litigation, arbitration or other dispute resolution, and potentially pay significant settlements or damages. 22 Assertions by a third party that our software products or technology infringes its intellectual property, whether or not correct, could subject us to costly and time-consuming litigation or expensive licenses.
Whether or not we are responsible for our software’s failure or defect, we could be required to spend significant time and money in litigation, arbitration or other dispute resolution, and potentially pay significant settlements or damages.
Various provisions of our certificate of incorporation, by-laws and Delaware law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to you and our other stockholders. We are subject to the provisions of Section 203 of the General Corporation Law of Delaware.
A third party could be prevented from acquiring shares of our common stock at a premium to the market price because of our anti-takeover provisions. Various provisions of our certificate of incorporation, by-laws and Delaware law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to WidePoint and our stockholders.
Federal government contracts contain provisions giving government customers a variety of rights that are unfavorable to us, including the ability to terminate a contract at any time for convenience. Federal government contracts contain provisions and are subject to laws and regulations that provide government customers with rights and remedies not typically found in commercial contracts.
Federal government contracts contain provisions and are subject to laws and regulations that provide government customers with rights and remedies not typically found in commercial contracts.
Although we believe that our services and products do not infringe on the intellectual property rights of others, infringement claims may be asserted against us in the future. There is frequent litigation in the communications and technology industries based on allegations of infringement or other violations of intellectual property rights.
There is frequent litigation in the communications and technology industries based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property rights claims against us may increase.
Approximately 45% of our managed service revenue in 2023 was generated under our DHS contracts. If DHS CWMS 2.0 IDIQ were terminated or we did not re-win the contract upon re-bidding in November 2025, it would have a material adverse impact on our future revenue, profitability and cash flows.
Further, the availability of our line of credit is dependent on having sufficient billed accounts receivable as collateral. If DHS CWMS 2.0 IDIQ were terminated or we did not re-win the contract upon re-bidding or another large customer contract was terminated, it would have a material adverse impact on our future revenue, profitability and cash flows.
Additionally, our failure to complete our contractual performance obligations in a manner consistent with the contract could adversely affect our overall profitability and could have a material adverse effect on our business, financial condition and results of operations. 15 If we fail to effectively manage and develop our strategic relationships with key systems integrators, or if those third parties choose not to market and sell our TMaaS offering, our operating results would suffer.
Additionally, our failure to complete our contractual performance obligations in a manner consistent with the contract could adversely affect our overall profitability and could have a material adverse effect on our business, financial condition and results of operations.
Most of our contracts are offered at firm fixed price per performance obligation such as price per unit managed.
Our commercial contracts have contractual terms of 3 or more years with automatic annual renewals in most cases. Most of our contracts are offered at firm fixed price per performance obligation such as price per unit managed.
We could incur losses from such a security breach that could exceed the policy limits under our insurance. Damage to our reputation or limitations on our eligibility for additional work resulting from a security breach in one of the systems we develop, install, and maintain could materially reduce our revenues.
Damage to our reputation or limitations on our eligibility for additional work resulting from a security breach in one of the systems we develop, install, and maintain could materially reduce our revenues. The US Federal Government and many states have enacted laws requiring companies to notify consumers of data security breaches involving their personal data.
The unexpected cancellation or significant reduction in the scope of any of our large projects could have an immediate material adverse effect on our business, financial condition and results of operations.
The unexpected cancellation or significant reduction in the scope of any of our large projects could have an immediate material adverse effect on our business, financial condition and results of operations. 15 Our inability to accurately price and sell our product offerings at an acceptable profit margin that customers are willing to pay will have a negative impact on our business that could extend for a number of years.
If such legislation, or similar legislation, were to be enacted, it would likely reduce the amount of IT services that could be outsourced by the federal government, which could materially reduce our revenues. Unfavorable government audit results could subject us to a variety of penalties and sanctions, and could harm our reputation and relationships with our customers.
If such legislation, or similar legislation, were to be enacted, it would likely reduce the amount of IT services that could be outsourced by the federal government, which could materially reduce our revenues. 24 RISKS RELATED TO OUR SECURITIES AND CAPITAL STRUCTURE Our common stock price has been volatile and is likely to be volatile in the future.
The US Federal Government and many states have enacted laws requiring companies to notify consumers of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures.
These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. Any security breach or cybersecurity event, whether successful or not, would harm our reputation and could cause the loss of customers.
The successful implementation of our strategic goals is dependent in part on strategic relationships with key systems integrators and other strategic partners.
If we fail to effectively manage and develop our strategic relationships with key systems integrators, or if those third parties choose not to market and sell our TMaaS offering, our operating results would suffer. The successful implementation of our strategic goals is dependent in part on strategic relationships with key systems integrators and other strategic partners.
Our policies and procedures stipulate that intellectual property created by employees and its consultants remain our property.
Our policies and procedures stipulate that intellectual property created by employees and its consultants remain our property. If we are unable to protect our proprietary software and methodology, the value of our business may decrease, and we may face increased competition.
We incur significant costs to protect against security breaches and may incur significant additional costs to alleviate problems caused by any breaches.
We incur significant costs to protect against security breaches and may incur significant additional costs to alleviate problems caused by any breaches. In addition, if we are required to disclose any of this sensitive customer information to governmental authorities, that disclosure could expose us to a risk of losing customers or could otherwise harm our business.
Finally, the assumption of liabilities related to litigation or other legal proceedings involving the acquired business may present a significant risk. There can be no assurance that any acquisition we complete achieves the results and/or synergies that we expected. Our sales cycles can be long, unpredictable and require considerable time and expense, which may cause our operating results to fluctuate.
Furthermore, we may not be able to offset any cost increases through productivity and cost-saving initiatives. 13 Our sales cycles can be long, unpredictable and require considerable time and expense, which may cause our operating results to fluctuate.
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RISKS RELATED TO OUR BUSINESS Our market is highly competitive and we may not be able to compete effectively or gain market acceptance of our products and service . We operate in a market that is highly fragmented, price sensitive and subject to fierce competition.
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RISKS RELATED TO OUR BUSINESS We may be unable to renew the DHS CWMS 2.0 IDIQ upon its expiration in November 2025 .
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To achieve and maintain market acceptance for our solution, we must effectively anticipate these changes and offer software products and services that respond to them in a timely manner.
Added
During 2024 and 2023 approximately 79% and 75%, respectively, of our revenues were from the Department of Homeland Security for Cellular Wireless Managed Services (CWMS) 2.0 ID/IQ Contract (DHS CWMS 2.0 IDIQ), which is up for renewal in a competitive process in November 2025. The DHS CWMS 2.0 IDIQ, like other government contracts, is awarded through a competitive procurement process.
Removed
Risks from acquisitions include integration challenges, a failure to achieve objectives, and the assumption of liabilities. Acquisitions, such as our acquisition of IT Authorities, Inc., often present significant challenges and risks.
Added
The costs we incur in the competitive procurement process may be substantial and we may not be successful in our bid to win such a contract or may be required to make significant concessions (or partner with another company) in order to rewin the contract.
Removed
The risks from an acquisition include the Company failing to achieve strategic objectives and anticipated revenue and profit improvements, as well as failing to retain the key personnel of the acquired business. Additionally, failure to meet financial objectives of an acquisition could lead to impairment charges of intangible assets and goodwill in future periods.
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Many of the competitors involved in the procurement process will likely have greater financial and other resources than us. Additionally, there can be no assurance that the DHS will seek another similar contract.
Removed
Our inability to accurately price and sell our product offerings at an acceptable profit margin that customers are willing to pay will have a negative impact on our business that could extend for a number of years. Most of our contracts with customers have terms of three (3) to five (5) years, with optional additional renewal periods.
Added
If we are unable to rewin the DHS CWMS 2.0 IDIQ contract on substantially similar terms or at all, our financial condition and results of operations will be materially adversely impacted. Our market is highly competitive and we may not be able to compete effectively or gain market acceptance of our products and service .
Removed
We provide minimum service-level commitments to many of our customers, and our inability to meet those commitments could result in significant loss of customers, harm to our reputation and costs to us.
Added
The loss of significant customer contracts, including our IDIQ with the Department of Homeland Security, could also have an adverse impact on our financial results.
Removed
We have in the past and may in the future acquire or invest in complementary and supplementary businesses, services or technologies, such as our acquisition in October 2021 of substantially all of the assets of IT Authorities, Inc.
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If we do not have sufficient collateral, that could have a material adverse impact on our ability to meet periodic short term operational cash flow requirements. We may be unable to maintain profitability . We have a history of operating losses.
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RISKS RELATED TO PRIVACY, CYBERSECURITY AND TECHNOLOGY Security breaches or cybersecurity events could result in the loss of customers and negative publicity and materially harm our business. Many of the services we provide involve managing and protecting information involved in sensitive or classified government functions.
Added
Further, our lack of profitability and limits on access to capital may cause us to be disqualified from winning new contracts or recompeted contracts, or require us to team, and thus share in revenues, with another larger prime contractor to be successful in winning.
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Any security breach or cybersecurity event, whether successful or not, would harm our reputation and could cause the loss of customers. Any of these events could have material adverse effects on our business, financial condition, and operating results.
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In addition, our contracts with the federal government permit the governmental agency to modify, curtail or terminate the contract at any time for the convenience of the government.
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Additionally, in the event we manage third party services on behalf of our customers and fail to execute in approved changes requested by our customers it could result in claims asserted by our customers for substantial damages against us.
Added
A global pandemic similar to the COVID 19 pandemic, or an epidemic, could have a material adverse impact on our business and operations.
Removed
As we face increasing competition, the possibility of intellectual property rights claims against us may increase.
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Currently, it is uncertain whether the federal government spending cuts being implemented with the new U.S. Presidential administration and the newly formed Department of Government Efficiency (DOGE) will have a negative impact on our revenues from the federal government.
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If we are unable to protect our proprietary software and methodology, the value of our business may decrease, and we may face increased competition. 23 RISKS RELATED TO REGULATION Our failure to comply with complex procurement laws and regulations could cause us to lose business and subject us to a variety of penalties.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis commitment is actualized through a diverse array of assessment and testing activities, which include: Comprehensive Audits and Assessments : We conduct audits and assessments to scrutinize the efficacy of our cybersecurity measures. Tabletop Exercises and Threat Modeling : Engaging in tabletop exercises and threat modeling allows us to simulate and prepare for potential cybersecurity scenarios, ensuring readiness and adaptability.
Biggest changeWe are committed to maintaining robust cybersecurity defenses through regularly evaluating and improving our policies, standards, processes, and practices. This commitment is actualized through a diverse array of assessment and testing activities, which include: Comprehensive Audits and Assessments : We conduct audits and assessments to scrutinize the efficacy of our cybersecurity measures.
RISK FACTORS, under the heading RISKS RELATED TO PRIVACY, CYBERSECURITY AND TECHNOLOGY in this Annual Report on Form 10-K. We are not aware of any material cybersecurity incidents in the past that have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition. 28
RISK FACTORS, under the heading RISKS RELATED TO PRIVACY, CYBERSECURITY AND TECHNOLOGY in this Annual Report on Form 10-K. We are not aware of any material cybersecurity incidents in the past that have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition.
This process involves measures to identify and prevent cybersecurity threats and mechanisms to mitigate and respond to cybersecurity incidents. Risk Management and Strategy Our cybersecurity program, a pivotal component of our overarching ERM framework, concentrates on several key areas: Collaborative Approach : We employ a holistic, cross-functional strategy to identify, prevent, and mitigate cybersecurity threats.
This process involves measures to identify and prevent cybersecurity threats and mechanisms to mitigate and respond to cybersecurity incidents. 27 Risk Management and Strategy Our cybersecurity program, a pivotal component of our overarching ERM framework, concentrates on several key areas: Collaborative Approach : We employ a holistic, cross-functional strategy to identify, prevent, and mitigate cybersecurity threats.
Executive Experience and Qualifications Our CEO, CFO, each with over thirty (30) years of risk management experience, and the COO with over twenty (20) years of experience including cybersecurity, possess deep expertise in their respective fields, evidenced by their academic qualifications and professional trajectories. This collective experience underpins our robust approach to managing cybersecurity risks.
Executive Experience and Qualifications Our CEO has over thirty (30) years of risk management experience, and our COO with over twenty (20) years of experience including cybersecurity, possess deep expertise in their respective fields, evidenced by their academic qualifications and professional trajectories. This collective experience underpins our robust approach to managing cybersecurity risks.
In addition, we have numerous employees with experience and qualifications related to cybersecurity. We expect to name a Chief Information Security Officer during 2024 as part our cybersecurity program. Our executive officers are responsible for informing the Board and Governance Committee of any material cyber events or risks. Cybersecurity Threats are discussed in ITEM 1 A.
In addition, we have numerous employees with experience and qualifications related to cybersecurity. We have named a Chief Information Security Officer as part our cybersecurity program. Our executive officers are responsible for informing the Board and Governance Committee of any new material cyber events or risks. Cybersecurity Threats are discussed in ITEM 1 A.
Vulnerability Testing : Vulnerability testing is performed to proactively identify and address potential security weaknesses. External Evaluations : We regularly commission third parties to conduct in-depth assessments to ensure an unbiased and comprehensive evaluation. These include information security maturity assessments, audits, and independent reviews of our information security control environment and its operational effectiveness.
External Evaluations : We regularly commission third parties to conduct in-depth assessments to ensure an unbiased and comprehensive evaluation. These include information security maturity assessments, audits, and independent reviews of our information security control environment and its operational effectiveness.
Our executive officers report information to the Board through the Governance Committee regarding the risks that impact the organization, including cybersecurity risks, and any material events. 26 Our cybersecurity framework utilizes the following National Institute of Standards and Technology (NIST) standards: · NIST SP 800-34, Rev 1, "Contingency Planning Guide for Federal Information Systems," November 2010 · NIST SP 800-37 Rev. 2, "Risk Management Framework for Information Systems and Organizations: A System Life Cycle Approach for Security and Privacy," December 2018 · IST SP 800-53, Rev. 5, "Security and Privacy Controls for Information Systems and Organizations," September 20, 2020, updated December 10, 2020 · NIST SP 800-61, Rev 2, "Computer Security Incident Handling Guide," August 2012 Our approach to cybersecurity aims to protect the confidentiality, integrity, and availability of the data we handle.
Our cybersecurity framework utilizes the following National Institute of Standards and Technology (NIST) standards: · NIST SP 800-34, Rev 1, "Contingency Planning Guide for Federal Information Systems," November 2010 · NIST SP 800-37 Rev. 2, "Risk Management Framework for Information Systems and Organizations: A System Life Cycle Approach for Security and Privacy," December 2018 · NIST SP 800-53, Rev. 5, "Security and Privacy Controls for Information Systems and Organizations," September 20, 2020, updated December 10, 2020 · NIST SP 800-61, Rev 2, "Computer Security Incident Handling Guide," August 2012 Our approach to cybersecurity aims to protect the confidentiality, integrity, and availability of the data we handle.
By engaging in these rigorous and diverse testing and assessment activities, we verify the current effectiveness of our cybersecurity measures and identifies areas for continual improvement, ensuring our defenses evolve in line with the dynamic nature of cyber threats.
Based on the insights gleaned from these assessments, audits, and reviews, we dynamically adjust and refine our cybersecurity policies, standards, processes, and practices to continuously enhance our cybersecurity posture. 28 By engaging in these rigorous and diverse testing and assessment activities, we verify the current effectiveness of our cybersecurity measures and identify areas for continual improvement, ensuring our defenses evolve in line with the dynamic nature of cyber threats.
This training aims to equip our staff with the necessary tools to confront these threats effectively and disseminate updates on WidePoint's evolving information security policies, standards, processes, and practices. 27 We are committed to maintaining robust cybersecurity defenses through regularly evaluating and improving our policies, standards, processes, and practices.
Education and Awareness : We understand the importance of informed personnel, so we conduct mandatory, regular training on cybersecurity threats. This training aims to equip our staff with the necessary tools to confront these threats effectively and disseminate updates on WidePoint's evolving information security policies, standards, processes, and practices.
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Education and Awareness : We understand the importance of informed personnel, so we conduct mandatory, regular training on cybersecurity threats.
Added
Our executive officers report information to the Board through the Governance Committee regarding the risks that impact the organization, including cybersecurity risks, and any material events.
Removed
Based on the insights gleaned from these assessments, audits, and reviews, we dynamically adjust and refine our cybersecurity policies, standards, processes, and practices to continuously enhance our cybersecurity posture.
Added
Tabletop Exercises and Threat Modeling : Engaging in tabletop exercises and threat modeling allows us to simulate and prepare for potential cybersecurity scenarios, ensuring readiness and adaptability. Vulnerability Testing : Vulnerability testing is performed to proactively identify and address potential security weaknesses.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeTower, Suite 210 Fairfax, VA 22030 March 2029 11,852 $ 28 $ 328,000 Headquarters, Sales, Operations 8351 N High Street, Suite 200 Columbus, OH 43235 November 2038 18,833 $ 10 $ 195,000 Sales and Operations 2101 Executive Drive, Suite 400 Hampton, VA 23669 December 2024 6,440 $ 17 $ 109,000 Customer Support The following table presents our property locations at December 31, 2023 for our international locations: Base Base Lease Approx.
Biggest changeCost per Annual City, State Zip Code Expiration Sqft Sqft Cost Description of use Fairfax, VA 22030 March 2029 11,852 $ 28 $ 328,000 Headquarters, Sales, Operations Columbus, OH 43235 November 2038 18,833 $ 10 $ 195,000 Sales and Operations Hampton, VA 23669 December 2024 6,440 $ 17 $ 109,000 Customer Support Lewis Center, OH 43035 March 2029 21,236 $ 10 209,600 Customer Support The following table presents our property locations at December 31, 2024 for our international locations: Base Base Lease Approx.
ITEM 2. PROPERTIES All of our property locations are leased. We believe we can obtain additional facilities required to accommodate projected needs without difficulty and at commercially reasonable prices, although no assurance can be given that we will be able to do so.
ITEM 2. PROPERTIES All of our property locations are leased. We believe we can obtain additional facilities required to accommodate projected needs without difficulty and at commercially reasonable prices, although no assurance can be given that we will be able to do so. The following table presents our property locations at December 31, 2024 for our U.S. locations: Lease Approx.
Cost per Annual Physical Street Address Country Postal Code Expiration Sqft Sqft Cost Description of use South County Business Park Dublin 18, Ireland March 2026 6,000 $ 31 $ 185,000 Europe office
Cost per Annual Country Postal Code Expiration Sqft Sqft Cost Description of use Dublin 18, Ireland March 2026 6,000 $ 30 $ 179,000 Europe office
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The following table presents our property locations at December 31, 2023 for our U.S. locations: Base Base Lease Approx. Cost per Annual Physical Street Address City, State Zip Code Expiration Sqft Sqft Cost Description of use 11250 Waples Mill Rd S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent on our results of operations, financial condition, contractual and legal restrictions and any other factors deemed by the management and the Board to be a priority requirement of the business.
Biggest changeAny future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent on our results of operations, financial condition, contractual and legal restrictions and any other factors deemed by the management and the Board to be a priority requirement of the business. Unregistered Sale of Securities None Repurchases of Equity Securities None
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE American under the symbol “WYY”. Holders As of the close of business on March 20, 2024, there were 72 registered holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE American under the symbol “WYY”. Holders As of the close of business on March 31, 2025, there were 81 registered holders of record of our common stock.
Removed
Unregistered Sale of Securities None Repurchases of Equity Securities On October 7, 2019, the Company announced that its Board of Directors approved a stock repurchase plan (the “Repurchase Plan”) to purchase up to $2.5 million of the Company’s common stock.
Removed
Any repurchases will be made in compliance with the SEC’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.
Removed
During November 2021, the Board increased the size of the Repurchase Plan to up to $5.0 million of the Company’s common stock, increasing the amount available for future purchases under the Repurchase Plan to $4.6 million.
Removed
During the three-month period ended March 31, 2022, we repurchased 196,586 shares of our common stock for a total of $818,200 and subsequently in March of 2022, the Board suspended the repurchase plan in order to use the company’s excess funds to invest into the business.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn fiscal 2024, we will continue to focus on the following key goals: ■ Continue to find additional avenues for capturing new sales opportunities in the post pandemic environment, ■ Continue to provide unmatched level of services to our current customer base, ■ Attain full FedRAMP certification in 2024, ■ Grow our recurring high margin managed services revenues, ■ Add incremental capabilities to our Technology Management solution set and develop and acquire new high margin business lines, ■ Leverage our software platforms to grow our SaaS revenues and take advantage of the opportunities emerging from the growth in remote working, 31 ■ Expand our customer base organically, ■ Continue to leverage the R2v3 Certification to further our ESG commitment, ■ Execute cross-sell opportunities identified from ITA acquisition, including Identity Management (IdM), Telecommunications Lifecycle Management (TLM) and Digital Billing & Analytics (DB&A) solution, ■ Growing our sales pipeline by continuing to invest in our business development and sales team assets, ■ Pursuing additional opportunities with our key systems integrator and strategic partners, and ■ Expanding our solution offerings into the commercial space, ■ Explore integration of artificial intelligence into our solution to provide better information security, and improve service delivery while reducing response time and cost.
Biggest changeIn fiscal 2025, we will continue to focus on the following key goals: ■ Winning the DHS CWHS 3.0 re-compete, ■ Continue to find additional avenues for capturing new sales opportunities, ■ Continue to provide unmatched level of services to our current customer base, ■ Leverage our FedRAMP Authorized status as a differentiator from our competitors in pursuing government business, ■ Grow our recurring managed services revenues, ■ Add incremental capabilities to our Technology Management solution set and develop and possibly acquire new high margin business lines, ■ Leverage our software platforms to grow our SaaS revenues and take advantage of the opportunities emerging from the growth in remote working, ■ Expand our commercial customer base organically, ■ Continue to leverage the R2v3 Certification, ■ Execute cross-sell opportunities identified from ITA acquisition, including Identity Management (IdM), Telecommunications Lifecycle Management (TLM) and Digital Billing & Analytics (DB&A) solution, ■ Growing our sales pipeline by continuing to invest in our business development and sales team assets, ■ Pursuing additional opportunities with our key systems integrator and strategic partners, and ■ Expanding our solution offerings into the commercial space, ■ Explore integration of artificial intelligence into our solution to provide better information security, and improve service delivery while reducing response time and cost. 31 Our strategy for achieving our longer-term goals include: ■ Establishing a market leadership position in the trusted mobility management (TM2) sector, ■ pursuing accretive and strategic acquisitions to expand our solutions and our customer base, ■ delivering new incremental offerings to add to our existing TM2 offering, ■ creating and testing innovative new offerings that enhance our TM2 offering, and ■ transitioning our data center and support infrastructure into a more cost-effective and federally approved cloud environment to comply with perceived future contract requirements.
We present a single segment for purposes of financial reporting and prepared consolidated financial statements upon that basis. 32 Revenue Recognition Our managed services solutions may require a combination of labor, third party products and services. Our managed services are generally not interdependent and our contract performance obligations are delivered consistently on a monthly basis.
We present a single segment for purposes of financial reporting and prepared consolidated financial statements upon that basis. Revenue Recognition Our managed services solutions may require a combination of labor, third party products and services. Our managed services are generally not interdependent and our contract performance obligations are delivered consistently on a monthly basis.
On February 29, 2024, we entered into a Loan and Security Agreement (the “Loan”) and Promissory Note (the “Note,” and, together with the Loan, the “Agreements”) with Old Dominion National Bank. The Agreements provide for a new $4,000,000 revolving line of credit facility (the “Credit Facility”).
On February 29, 2024, we entered into a Loan and Security Agreement (the “Loan”) and Promissory Note (the “Note,” and, together with the Loan, the “Agreements”) with Old Dominion National Bank. The Agreements provide for a $4,000,000 revolving line of credit facility (the “Credit Facility”).
Managed services are not interdependent and there are no undelivered elements in these arrangements. ■ Identity service s are delivered as an on-demand managed service through the cloud to an individual or organization or sold in bulk to an organization capable of self-issuing credentials.
Managed services are not interdependent and there are generally no undelivered elements in these arrangements. ■ Identity service s are delivered as an on-demand managed service through the cloud to an individual or organization or sold in bulk to an organization capable of self-issuing credentials.
In accordance with GAAP, goodwill is not amortized but is tested for impairment at the reporting unit level annually at December 31 and between annual tests if events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value.
In accordance with GAAP, goodwill is not amortized but is tested for impairment at the reporting unit level annually and between annual tests if events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value.
The Credit Facility includes customary covenants and events of default, including the following items that are measured annually commencing December 31, 2024: (i) a minimum tangible net worth of $2.0 million; (ii) a minimum annual EBITDA of $1.0 million and (iii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0.
The Credit Facility includes customary covenants and events of default, including the following items that are measured: (i) a minimum tangible net worth of $2.0 million; (ii) a minimum annual EBITDA of $1.0 million and (iii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0.
Our single largest cash operating expense is labor and company sponsored benefits. 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 our facilities under non-cancellable long-term contracts.
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 our facilities under non-cancellable long-term contracts.
Our TMaaS solutions are hosted and accessible on-demand through a secure federal government certified proprietary portal that provides our customers with the ability to manage, analyze and protect their valuable communications assets, and deploy identity management solutions that provide secured virtual and physical access to restricted environments.
Our TMaaS solutions are hosted and accessible on-demand through a secure federal government certified proprietary portal that provides our customers with the ability to manage, analyze and protect their valuable communications assets, and deploy identity management solutions that provide secured virtual and physical access to restricted environments. Strategy During 2024, we completed the integration of the acquired assets of ITA.
This single segment represents our Company’s business, which is providing managed services for government and commercial clients that include Identity Management (IdM), secure Mobility Managed Services (MMS), Telecom Lifecycle Management, Digital Billing & Analytics and IT as a service (ITaaS).
This single segment represents our Company’s business, which is providing managed services for government and commercial clients under the umbrella of Technology Management as a Service (TMaaS), that includes Identity Management (IdM), secure Mobility Managed Services (MMS), Telecom Lifecycle Management, Digital Billing & Analytics and IT as a service (ITaaS).
We recognize revenues and related costs on a gross basis for such arrangements whenever we control the products and services before they are transferred to the customer.
We recognize revenues and related costs on a gross basis when we satisfy customer contractual obligations for such arrangements where we control the products and services before they are transferred to the customer.
During the year ended December 31, 2023, the Company recorded a valuation allowance against a portion of domestic deferred tax assets because management determined that is it more likely than not the Company will not earn income sufficient to realize the deferred tax assets during the carryforward period. 2023 Results of Operations Year Ended December 31, 2023 Compared to the Year ended December 31, 2022 35 Revenues Revenues for the year ended December 31, 2023 were $106.0 million, an increase of $11.9 million (or 13%), as compared to approximately $94.1 million in 2022.
During the year ended December 31, 2024, the Company recorded a valuation allowance against a portion of domestic deferred tax assets because management determined that is it more likely than not the Company will not earn income sufficient to realize the deferred tax assets during the carryforward period. 34 2024 Results of Operations Year Ended December 31, 2024 Compared to the Year ended December 31, 2023 Revenues Revenues for the year ended December 31, 2024 were $142.6 million, an increase of $36.5 million (or 34%), compared to approximately $106.0 million in 2023.
Reselling and other services are transactional in nature and as a result the amount and timing of revenue will vary significantly from quarter to quarter. Revenues by customer type for the periods presented is set forth below: YEARS ENDED DECEMBER 31, Dollar Customer Type 2023 2022 Variance U.S. Federal Government $ 84,475,325 $ 74,416,288 $ 10,059,037 U.S.
Reselling and other services are transactional in nature and as a result the amount and timing of revenue will vary significantly from quarter to quarter. 35 Revenues by customer type for the periods presented is set forth below: YEARS ENDED DECEMBER 31, Dollar Customer Type 2024 2023 Variance U.S. Federal Government $ 118,895,394 $ 84,475,325 $ 34,420,069 U.S.
Definite-lived intangible asset impairment charge for the year ended December 31, 2023 was $0.2 million following impairment testing on definite-lived intangible assets performed during the year. There was no definite-lived intangible asset impairment during 2022. Depreciation and amortization expense were consistent for the year ended December 31, 2023 and 2022.
There was no definite-lived intangible asset impairment during 2024. Definite-lived intangible asset impairment charge for the year ended December 31, 2023 was $0.2 million following impairment testing on definite-lived intangible assets performed during the year.
The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report on Form 10-K.
The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report on Form 10-K. See “Cautionary Note Regarding Forward Looking Statements and Risk Factor Summary.” Our actual results may differ materially.
Provision for Income Taxes Income tax provision for the year ended December 31, 2023 was $0.1 million as compared to an income tax provision of $5.1 million in 2022.
(Benefit) Provision for Income Taxes Income tax benefit for the year ended December 31, 2024 was $4,000 compared to an income tax provision of $0.1 million in 2023.
Net Loss As a result of the factors above, net loss for the year ended December 31, 2023 was $4.0 million or negative $0.46 per share as compared to a net loss of $23.6 million in 2022 or negative $2.70 per share.
Net Loss As a result of the factors above, net loss for the year ended December 31, 2024 was $1.9 million or $0.21 loss per share as compared to a net loss of $4.0 million in 2023 or $0.46 loss per share.
The assessment did not result in any additional impairment of goodwill at December 31, 2023. 34 Accounting for Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.
Accounting for Income Taxes Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.
Operating Expenses Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows. Sales and marketing expense were consistent between the year ended December 31, 2023 and 2022.
Operating Expenses Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows.
The Loan Agreement with Atlantic Union Bank matured in June 2023 and was not renewed. On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC (the “Buyer”) for the non-recourse sale of eligible accounts receivable relating to U.S.
Credit Facility On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC (the “Buyer”) for the non-recourse sale of eligible accounts receivable relating to U.S. Government prime contracts or subcontracts of the Company (collectively, the “Purchased Receivables”). The Purchase Agreement terminated in April of 2024 and was not renewed.
For the year ended December 31, 2023, net cash provided by operations was approximately $0.6 million driven by collections of accounts receivable and temporary payable timing difference, as compared to approximately $6.1 million net cash provided by operations for the year ended December 31, 2022.
For the year ended December 31, 2024, net cash provided by operations was approximately $1.6 million driven by collections of accounts receivable and temporary payable timing difference, as compared to approximately $0.6 million net cash provided by operations for the year ended December 31, 2023. 38 Cash Flows from Investing Activities Cash used in investing activities provides an indication of our long-term infrastructure investments.
A substantial portion of our revenues are derived from firm fixed price contracts with the U.S. federal government that are fixed fee arrangements tied to the number of devices managed.
In the event there are undelivered performance obligations our practice is to recognize the revenue when the performance obligation has been satisfied. A substantial portion of our revenues are derived from firm fixed price contracts with the U.S. federal government that are fixed fee arrangements tied to the number of devices managed.
Cash Flows from Investing Activities Cash used in investing activities provides an indication of our long-term infrastructure investments. We maintain our own technology infrastructure and may need to make additional purchases of computer hardware, software and other fixed infrastructure assets to ensure our environment is properly maintained and can support our customer obligations.
We maintain our own technology infrastructure and may need to make additional purchases of computer hardware, software and other fixed infrastructure assets to ensure our environment is properly maintained and can support our customer obligations. We typically fund purchases of long-term infrastructure assets with available cash or capital lease financing agreements.
Our revenue recognition policies for our managed services are summarized and shown below: ■ Managed services are delivered on a monthly basis based on a standard fixed pricing scale and sensitive to significant changes in per user or device counts which form the basis for monthly charges.
Our actual reported revenue may fluctuate month to month depending on the hours worked, number of users, number of devices managed, actual or prospective proven expense savings, actual technology spend, or any other metrics as contractually agreed to with our customers. 32 Our revenue recognition policies for our managed services are summarized and shown below: ■ Managed services are delivered on a monthly basis based on a standard fixed pricing scale and sensitive to significant changes in per user or device counts which form the basis for monthly charges.
Other (Expense) Income Net other expense for the year ended December 31, 2023 was $(0.2) million as compared to net other income of $1.1 million in 2022. The net other income in 2022 included the fair value adjustments of contingent consideration. There were no adjustments to contingent consideration in 2023.
Depreciation and amortization expense was $1.0 million for the year ended December 31, 2024 as compared to $0.8 million in 2023. 37 Other (Expense) Income Net other expense for the year ended December 31, 2024 was $(0.1) million as compared to net other expense of $(0.2) million in 2023.
Cost of revenues also includes amortization of capitalized software related to delivering our solutions. Cost of revenues for the year ended December 31, 2023 were $90.4 million (or 85% of revenues) as compared to $79.5 million (or 85% of revenues) in 2022.
Cost of revenues for the year ended December 31, 2024 were $123.5 million (or 87% of revenues) compared to $90.4 million (or 85% of revenues) in 2023. Increased carrier services costs as well as costs related to reselling contributed to the increase.
Gross profit percentage for the year ended December 2023 excluding carrier services was 33% as compared to 36% in 2022 due to increased depreciation and amortization expense, an increase in reselling and other services which are lower margin revenues.
The lower gross margin as a percentage of revenues is related to increased carrier services in 2024 compared to 2023. Gross profit percentage for the year ended December 31, 2024, excluding carrier services was 33% and consistent with the prior period.
Strategy During 2023, we obtained FedRAMP “In Process” status for ITMS™ and completed the integration of the acquired assets of ITA. In addition, we focused on increasing our customer base and our sales pipeline and leveraging our strategic relationships with key system integrators and strategic partners to capture additional market share.
In addition, we focused on increasing our customer base and our sales pipeline and leveraging our strategic relationships with key system integrators and strategic partners to capture additional market share. On February 19, 2025 WidePoint’s Intelligent Technology Management System (ITMS) achieved FedRAMP Authorized status from the Federal Risk and Authorization Management Program (FedRAMP) Program Management Office (PMO).
General and administrative expenses for the year ended December 31, 2023 were approximately $15.9 million (or 15% of revenues), as compared to approximately $14.7 million (or 16% of revenues) in 2022.
Sales and marketing expense for the year ended December 31, 2024 were $2.3 million (or 2% of revenues), compared to $1.7 million (or 2% of revenues) in 2023.
For the year ended December 31, 2022, the depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $140,800. Credit Facilities and Other Commitments From June 15, 2017 to June 2023, the Company had a Loan and Security Agreement with Atlantic Union Bank (the “Loan Agreement”).
For the year ended December 31, 2023, the depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $23,800.
We are a leading provider of Technology Management as a Service (TMaaS) that consists of federally certified communications management, identity management, and interactive bill presentment and unified communication analytics solutions and IT as a Service. We help our clients achieve their organizational missions for mobility management and security objectives in this challenging and complex business environment.
Organizational Overview We were incorporated on May 30, 1997 under the laws of the state of Delaware. We are a leading provider of Technology Management as a Service (TMaaS) that consists of federally certified communications management, identity management, and interactive bill presentment and unified communication analytics solutions and IT as a Service.
Advances under the Credit Facility are subject to a borrowing base equal to the lesser of (i) $4,000,000 or (ii) 80% of eligible accounts receivable. Interest accrues on the outstanding principal balance of the Credit Facility at an annual rate equal to the Prime Rate published in The Wall Street Journal, subject to a floor rate of 7.25%.
Interest accrues on the outstanding principal balance of the Credit Facility at an annual rate equal to the Prime Rate published in The Wall Street Journal, subject to a floor rate of 7.25%. Outstanding interest on the amount borrowed is payable monthly and all outstanding interest and principal is due on the maturity date of February 28, 2026.
For the year ended December 31, 2022, cash used in financing activities was approximately $1.5 million and reflects line of credit advances and payments of approximately $15.3 million, payments of approximately $1.5 million finance lease principal repayments of approximately $600,400, repurchases of common stock of $818,200 and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $49,200. 39 Net Effect of Exchange Rate on Cash and Equivalents For the year ended December 31, 2023, the gradual depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $23,800 as compared to last year.
For the year ended December 31, 2024, cash used in financing activities was approximately $0.9 million and reflects line of credit advances and payments of approximately $5.6 million, finance lease principal repayments of approximately $636,500 and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $258,400.
The terms of new Credit Facility prohibit the use of our Factoring Arrangement. Off-Balance Sheet Arrangements The Company has no existing off-balance sheet arrangements as defined under SEC regulations.
We are in compliance with the covenants at December 31, 2024. Off-Balance Sheet Arrangements The Company has no existing off-balance sheet arrangements as defined under SEC regulations.
We believe that our existing cash on hand, our anticipated cash flows from operations, and interim funds available under the Old Dominion Credit Facility, through its maturity on February 28, 2025 will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months. 38 Cash Flows from Operating Activities Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities.
We believe that our existing cash balances and our anticipated cash flows from operations and access to our credit facility will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months. There is no assurance that, if needed, we will be able to borrow or raise capital on favorable terms or at all.
Our mix of revenues for the periods presented is set forth below: YEARS ENDED DECEMBER 31, Dollar 2023 2022 Variance Carrier Services $ 58,233,989 $ 53,339,949 $ 4,894,040 Managed Services: Managed Service Fees and Billable Fees 30,989,985 28,102,695 2,887,290 Reselling and Other Services 16,802,386 12,660,721 4,141,665 Total Managed Services: 47,792,371 40,763,416 7,028,955 $ 106,026,360 $ 94,103,365 $ 11,922,995 ■ Our carrier services revenues increased by $4.9 million to $58.2 million from $53.3 million last year, primarily due to increased contracting activity with our federal customers, where we pay carrier invoices on behalf of those customers. ■ Our managed and billable service fees increased by $2.9 million from $28.1 million to $31.0 million as a result of increased professional services being utilized by out Telecommunications Life-cycle Management customers and projects for Identity and Access Management customers. ■ Reselling and other services increased by $4.1 million from $12.7 million to $16.8 million as a result of selling third-party software for recording and storing text messages which is now required under an expansion of the Federal Records Act and identity management solution to our government customers.
Our mix of revenues for the periods presented is set forth below: YEARS ENDED DECEMBER 31, Dollar 2024 2023 Variance Carrier Services $ 86,793,729 $ 58,233,989 $ 28,559,740 Managed Services: Managed Service Fees 35,754,896 31,285,709 4,469,187 Billable Service Fees 5,133,212 4,985,988 147,224 Reselling and Other Services 14,889,912 11,520,674 3,369,238 Total Managed Services: 55,778,020 47,792,371 7,985,649 $ 142,571,749 $ 106,026,360 $ 36,545,389 ■ Our carrier services revenues increased by $28.5 million to $86.8 million from $58.2 million last year, primarily due to increased contracting activity with our federal customers, where we pay carrier invoices on behalf of those customers. ■ Our managed service fees increased by $4.5 million to $35.8 million from $31.3 million last year as a result of implementing a new commercial contract for a US government end customer later in the third quarter of 2024 and full year of execution on our FEMA contract compared to 2 months of revenue in 2023. ■ Billable services fees remained relatively constant from 2024 to 2023.
We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control, including intermittent U.S. federal government shutdowns related to budgetary funding issues.
We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control. One US government agency, under the Department of Homeland Security, accounted for $14.4 million and $1.4 million of our unbilled receivables at December 31, 2024 and 2023, respectively.
Liquidity and Capital Net Working Capital At December 31, 2023, our net working capital was approximately $1.4 million as compared to $1.8 million at December 31, 2022. The decrease in net working capital was primarily driven by investments in computer hardware and software purchases and capitalized internally developed software costs, which was partially offset by temporary receivable/payable timing differences.
The increase in net working capital was primarily driven by reduced investments in computer hardware and software purchases and capitalized internally developed software costs, as well as, an increase in unbilled receivables primarily drive by administrative delays in billing.
Removed
See “Cautionary Note Regarding Forward Looking Statements and Risk Factor Summary.” Our actual results may differ materially. 30 Organizational Overview We were incorporated on May 30, 1997 under the laws of the state of Delaware.
Added
We help our clients achieve their organizational missions for mobility management and security objectives in this challenging and complex business environment.
Removed
In fiscal 2023, we will continue to focus on the following key goals: · selling high margin managed services, · executing cross-sell and upsell opportunities identified from ITA acquisition, including Identity Management (IdM), Telecommunications Lifecycle Management (TLM) and Digital Billing & Unified Communication Analytics (DB&UCA) solutions, · rowing our sales pipeline by continue to invest in our business development and sales team assets, · pursuing additional opportunities with our key systems integrator and strategic partners, and · expanding our solution offerings into the commercial space.
Added
For those reselling transactions where we are the principal, revenues for product reselling are typically recorded upon delivery while revenues for services reselling are generally recorded over the contractual service period.
Removed
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.
Added
The Company performed its annual impairment assessment and based upon the Company’s market capitalization at December 31, 2024, as well as the absence of any indicators of impairment, the Company concluded there was no impairment of goodwill at December 31, 2024.
Removed
Our strategy for achieving our longer-term goals include: ■ Establishing a market leadership position in the trusted mobility management (TM2) sector, ■ pursuing accretive and strategic acquisitions to expand our solutions and our customer base, ■ delivering new incremental offerings to add to our existing TM2 offering, ■ creating and testing innovative new offerings that enhance our TM2 offering, and ■ transitioning our data center and support infrastructure into a more cost-effective and federally approved cloud environment to comply with perceived future contract requirements.
Added
Billable service fees can vary due to internal projects in our customer organizations. ■ Reselling and other services increased by $3.4 million to $14.9 million from $11.5 million last year. The increase is primarily related to increased reselling of third-party software-as-a-service applications for recording and storing text messages which is now required under an expansion of the Federal Records Act.
Removed
We do not typically have undelivered performance obligations in these arrangements that would require us to spread our revenue over a longer period of time. In the event there are undelivered performance obligations our practice is to recognize the revenue when the performance obligation has been satisfied.
Added
State and Local Governments 409,413 561,378 (151,965 ) Foreign Governments 65,707 79,556 (13,849 ) Commercial Enterprises 23,201,235 20,910,101 2,291,134 $ 142,571,749 $ 106,026,360 $ 36,545,389 ■ Our sales to federal government customers increased primarily because of the increased sales to FEMA of both managed and carrier services that experienced 12 months of revenue totaling $20 million in 2024 compared to 2 months of revenue totaling $1.3 million in 2023, as well as managed services revenues for a government end customer that began in late third quarter 2024.
Removed
Our actual reported revenue may fluctuate month to month depending on the hours worked, number of users, number of devices managed, actual or prospective proven expense savings, actual technology spend, or any other metrics as contractually agreed to with our customers.
Added
Further, other federal customers such as the US Coast Guard, Customs and Border Patrol, saw increased line counts and corresponding carrier services activity, increases year over year in text capture software. ■ Our sales to state and local government customers, which include educational institutions, decreased primarily due to decreased activity in our Identity Management solutions. ■ Our sales to foreign government customers were relatively constant from year to year. ■ Our sales to commercial enterprise customers increased primarily as a result of new increased sales in our ITaaS offering and increased commercial use of our identity management solutions business.
Removed
Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by its fair value.
Added
Cost of Revenues Our cost of revenues includes employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of accessory products and third-party software that we resell to our end customers. Cost of revenues also includes amortization of capitalized software related to delivering our solutions.
Removed
As a result of the significant decrease in the Company’s publicly quoted share price and market capitalization during the second quarter of 2022, the Company conducted additional testing of its goodwill, definite-lived intangibles, and other long-lived assets as of June 30, 2022.
Added
Our cost of revenues will fluctuate due to our revenue mix. 36 Gross Profit The following table illustrates gross profit related to Carrier services and Managed services: YEARS ENDED DECEMBER 31, Dollar Percent 2024 2023 Variance Change Revenues: Carrier Services $ 86,793,729 $ 58,233,989 $ 28,559,740 49 % Managed Services 55,778,020 47,792,371 7,985,649 17 % Total revenue 142,571,749 106,026,360 36,545,389 34 % Gross Profit: Carrier Services - - - Managed Services 19,004,405 15,645,527 3,358,878 21 % Total gross profit 19,004,405 15,645,527 3,358,878 21 % Gross Margin: Carrier Services - - Managed Services 34 % 33 % Total gross margin 13 % 15 % Gross profit for the year ended December 31, 2024 was $19.0 million (or 13% of revenues), compared to $15.6 million (or 15% of revenues) in 2023.
Removed
As a result of this review and additional testing, the Company did not identify an impairment to its definite-lived intangible assets or other long lived assets, but the Company did identify an impairment to goodwill resulting in recording a $16.3 million non-cash goodwill impairment charge for the three month period ended June 30, 2022.
Added
General and administrative expenses for the year ended December 31, 2024 were $17.6 million (or 12% of revenues), as compared to $15.9 million (or 15% of revenues) in 2023. The dollar increase primarily relates to an increase in employee compensation, including compensation expense, and increased health insurance costs compared to the same period last year.
Removed
The Company performed its additional goodwill impairment test with support from an external consultant and estimated the fair value of its single reporting unit based on a combination of the income (estimates of future discounted cash flows) and the market approach (market multiples for similar companies).
Added
Liquidity and Capital Net Working Capital Our sources of liquidity include cash on hand, our anticipated cash flows from operations, and funds available under the Old Dominion Credit Facility, through its maturity on February 28, 2026. At December 31, 2024, our net working capital was approximately $2.4 million as compared to $1.4 million at December 31, 2023.
Removed
The income approach uses a discounted cash flow (DCF) method that utilizes the present value of cash flows to estimate fair value of our reporting unit. The future cash flows for the reporting unit were projected based upon our estimates of future revenue, operating income and other factors such as working capital and capital expenditures.
Added
Cash Flows from Operating Activities Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities. Our single largest cash operating expense is labor and company sponsored benefits.
Removed
As part of our DCF analysis, the Company projected revenue and operating profits, and assumed a long-term revenue growth rates in the terminal year. The market approach utilizes multiples of earnings before interest expense, taxes, depreciation and amortization (EBITDA) to estimate the fair value of our reporting unit.
Added
For the year ended December 31, 2024, cash provided by investing activities was approximately $0.1 million and consisted of $0.2 million in proceeds from factoring arrangement offset by purchases of property and equipment. In 2025, we expect to spend additional funds to pay for, and refresh equipment related to our increasing workforce.
Removed
The market multiples used for our single reporting unit were based on a group of comparable companies’ market multiples applied to the Company’s revenue and EBITDA. The Company performed its annual impairment assessment as of December 31, 2023, using the same external consultant as used in the previous impairment analyses.
Added
Net Effect of Exchange Rate on Cash and Equivalents For the year ended December 31, 2024, the gradual depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $31,900 compared to last year.
Removed
In connection with its annual budgeting and forecast process, the Company projected future cashflows based on existing business, projected new business as well considering modifications to the Company’s cost structure. The market approach utilizes multiples of earnings before interest expense, taxes, depreciation and amortization (EBITDA) to estimate the fair value of our reporting unit.
Added
Prior to the 2024 termination, we sold a total of $2.9 million of receivables for $2.8 million in proceeds net of fees. During the year ended December 31, 2023, we sold a total of $5.2 million of receivables for $5.1 million in proceeds net of fees.
Removed
The market multiples used for our single reporting unit were based on a group of comparable companies’ market multiples applied to the Company’s revenue and EBITDA.
Added
On February 18, 2025, the Company renewed its line of credit for an additional year through February 28, 2026. See Note 21. 39 Advances under the Credit Facility are subject to a borrowing base equal to the lesser of (i) $4,000,000 or (ii) 80% of eligible accounts receivable.
Removed
State and Local Governments 561,378 411,511 149,867 Foreign Governments 79,556 146,538 (66,982 ) Commercial Enterprises 20,910,101 19,129,028 1,781,073 $ 106,026,360 $ 94,103,365 $ 11,922,995 ■ Our sales to federal government customers increased primarily as a result of the increased carrier services revenues of $4.9 million and increased reselling and other services to US government customers of $4.1 million and the remaining increases of $1.2 million is related to a new customer in our IAM business and general increased contracting activity with our federal customers. ■ Our sales to state and local government customers increased primarily due to increased activity to Identity Management solutions. ■ Our sales to foreign government customers decreased compared to last year due to reduction in managed services to one of our foreign customers. ■ Our sales to commercial enterprise customers increased primarily as a result of new customers in our Unified Communications Analytics offering. 36 Cost of Revenues Our cost of revenues include employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of products and third-party software that we resell to our end customers.
Removed
Increased carrier services costs as well as increased depreciation and amortization expense included in cost of revenues contributed to the increase. Our cost of revenues will fluctuate due to our revenue mix. Gross Profit Managed services gross profit increases were offset by lower gross profit experienced in our reselling and other services.
Removed
Gross profit for the year ended was $15.6 million (or 15% of revenues), as compared to $14.6 million (or 15% of revenues) in 2022. The percentage of gross profit to revenues is consistent from year to year.
Removed
The increase primarily relates to an increase in share-based compensation expense compared to the same period last year. 37 Goodwill impairment charge for the year ended December 31, 2022 was $16.3 million following goodwill impairment testing performed as a result of sustained decreases in our publicly quoted share price and market capitalization. There was no goodwill impairment during 2023.
Removed
During the year ended December 31, 2022, the Company recorded a partial valuation allowance on its deferred tax assets related to net operating losses because management determined that it is more likely than not that the Company will not produce taxable income sufficient to realize the deferred tax assets during the carry forward period.
Removed
Our sources of liquidity include cash on hand, our anticipated cash flows from operations, and access to our new credit agreement with Old Dominion National Bank.
Removed
While through most of 2023 we had a factoring arrangement available which is set to expire in April of 2024, the credit agreement with Old Dominion National Bank limits our ability to utilize the factoring agreement in the period prior to its expiration.
Removed
We typically fund purchases of long-term infrastructure assets with available cash or capital lease financing agreements.
Removed
The decrease in amounts capitalized for the year ended December 31, 2023 reflects the capital investments in our delivery platforms beginning to reach completion.
Removed
For the year ended December 31, 2022, cash used in investing activities was approximately $3.4 million and consisted of $3.4 million of computer hardware and software purchases and capitalized internally developed software costs of computer hardware and software purchases and capitalized internally developed software costs, primarily associated with upgrading our ITMS™ and Soft-ex platform, secure identity management technology and network operations center.
Removed
Government prime contracts or subcontracts of the Company (collectively, the “Purchased Receivables”) to replace the Company’s matured Loan Agreement with Atlantic Union Bank. Upon purchase, Buyer becomes the absolute owner of any such Purchased Receivables, which are payable directly to the Buyer.
Removed
The total amount of Purchased Receivables is subject to a maximum limit of $4 million outstanding Purchased Receivables at any time, with an available increase to $14 million, subject to adequate receivables. The Purchase Agreement contains customary fees, covenants and representations.
Removed
Pursuant to the Purchase Agreement, the Company may from time to time offer and sell eligible accounts receivable to the Buyer. The Buyer pays the sales proceed of the purchase of the receivable invoices in two installments; first installment is Initial Purchase Price, which is 90% if the debtor is an agency of the U.S.

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