NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
Organization
and Nature of Operations
Organization
WidePoint
Corporation (“WidePoint” or the “Company”)
was incorporated in Delaware on May 30, 1997 and conducts
operations through its wholly-owned operating subsidiaries
throughout the continental United States, Ireland, the Netherlands
and the United Kingdom. The Company’s principal executive and
administrative headquarters is located in Fairfax,
Virginia.
Nature of Operations
The
Company is a leading provider of trusted mobility management (TM2).
The Company’s TM2 platform and service solutions enable its
customers to efficiently secure, manage and analyze the entire
lifecycle of their mobile communications assets through its
federally compliant platform Intelligent Telecommunications
Management System (ITMS™). The Company’s
ITMS™ platform is SSAE 18 compliant and was granted an
Authority to Operate by the U.S. Department of Homeland Security
and the U.S. Department of Commerce. Additionally, the Company was
granted an Authority to Operate by the General Services
Administration with regard to its identity credentialing component
of its TM2 platform. The Company is one of two U.S. Department of
Defense (DoD) designated External Certificate Authorities and
offers ECA certificates, including digital certificates for
internet of things (IOT) and machine identity, PIV (Personal
Identity Verification) and PIV-I (Personal Identity Verification
Interoperability) for the Federal Government including all
contractors to the Federal Government. The Company’s Identity
Management division is FISMA moderate certified and is a Trusted
Root Certificate Authority offering certificates that are
cross-certified under the Federal Bridge. The Company’s TM2
platform is internally hosted and accessible on-demand through a
secure customer portal that is specially configured for each
customer. The Company can deliver these solutions in a number of
configurations ranging from utilizing the platform as a service to
a full-service solution that includes full lifecycle support for
all end users and the organization.
The
Company also provides digital interactive billing and analytics to
both communications service providers (CSPs) and enterprises. Our
customized solutions give their end customers the ability to view
and analyze their bills online via our advanced self-serve user
portal 24/7. Our solutions are delivered in a hosted and secure
environment and provide our CSPs with full visibility into their
revenue model which drives a stronger customer experience and
reduces their operating costs and improves
profitability.
The
Company derives a significant amount of its revenues from contracts
funded by federal government agencies for which WidePoint’s
subsidiaries act in the capacity as the prime contractor, or as a
subcontractor. The Company believes that contracts with federal
government agencies will be the primary source of revenues for the
foreseeable future. External factors outside of the Company’s
control such as delays and/or a change in government
administrations, budgets and other political matters that may
impact the timing and commencement of such work could result in
variations in operating results and directly affect the
Company’s financial performance. Successful contract
performance and variation in the volume of activity as well as in
the number of contracts commenced or completed during any quarter
may cause significant variations in operating results from quarter
to quarter.
A
significant portion of the Company’s expenses, such as
personnel and facilities costs, are fixed in the short term and may
not be easily modified to manage through changes in the
Company’s market place that may create pressure on pricing
and/or costs to deliver its services.
The
Company has periodic capital expense requirements to maintain and
upgrade its internal technology infrastructure tied to its hosted
solutions and other such costs may be significant when incurred in
any given quarter.
COVID-19
The
coronavirus (“COVID-19”) pandemic has created
significant macroeconomic uncertainty, volatility and disruption.
The assessment of how COVID-19 will impact our business is on-going
and encompasses all aspects of our business, including how COVID-19
will impact our customers, employees, subcontractors, business
partners and the capital markets. Although the Company did not
experience significant disruptions during the three months ended
March 31, 2021, we are unable to fully predict the impact the
COVID-19 pandemic will have on our future financial position,
results of operations, or cash flows.
Additionally, changes in
spending policies, budget priorities and funding levels are a key
factor influencing the purchasing levels of government customers.
With the current COVID-19 pandemic, future budget priorities and
funding levels for these customers may be adversely
affected.
2.
Basis
of Presentation and Accounting Policies
Basis of Presentation
The
unaudited condensed consolidated financial statements as of March
31, 2021 and for each of the three month periods ended March 31,
2021 and 2020, respectively, included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Pursuant to such
regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with
accounting principles generally accepted in the United States
(“U.S. GAAP”) have been condensed or omitted. It is the
opinion of management that all adjustments (which include normal
recurring adjustments) necessary for a fair statement of financial
results are reflected in the financial statements for the interim
periods presented. The condensed consolidated balance sheet as of
December 31, 2020 was derived from the audited consolidated
financial statements included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2020. The results of
operations for the three month period ended March 31, 2021 are not
necessarily indicative of the operating results for the full
year.
Principles of Consolidation
The
accompanying condensed consolidated financial statements include
the accounts of the Company, its wholly owned subsidiaries and
acquired entities since their respective dates of acquisition. All
significant inter-company amounts were eliminated in
consolidation.
Common Stock Reverse Split
On
October 23, 2020, the Company filed a Certificate of Amendment to
its Amended and Restated Certificate of Incorporation with the
Secretary of Delaware to effect a one-for-ten reverse stock split
of the shares of the Company’s common stock, effective as of
5:00 pm Eastern Time on November 6, 2020. The Certificate of
Amendment also decreased the number of authorized shares of the
Company’s common stock from 110,000,000 to 30,000,000. All
share, restricted stock awards (“RSA”) and per share
information has been retroactively adjusted to reflect the reverse
stock split.
Foreign Currency
Assets
and liabilities denominated in foreign currencies are translated
into U.S. dollars based upon exchange rates prevailing at the end
of each reporting period. The resulting translation adjustments,
along with any related tax effects, are included in accumulated
other comprehensive income, a component of stockholders’
equity. Translation adjustments are reclassified to earnings upon
the sale or substantial liquidation of investments in foreign
operations. Revenues and expenses are translated at the average
month-end exchange rates during the year. Gains and losses related
to transactions in a currency other than the functional currency,
including operations outside the U.S. where the functional currency
is the U.S. dollar, are reported net in the Company’s
condensed consolidated statements of operations, depending on the
nature of the activity.
Use of Estimates
The
preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant areas
requiring use of estimates and judgment relate to revenue
recognition, accounts receivable valuation reserves, ability to
realize intangible assets and goodwill, ability to realize deferred
income tax assets, fair value of certain financial instruments and
the evaluation of contingencies and litigation. Management bases
its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from those estimates.
There were no significant changes in accounting estimates used by
management during the quarter.
Segment Reporting
Our TM2
solution offerings comprise an overall single business from which
the Company earns revenues and incurs costs. The Company’s
TM2 solution offerings are centrally managed and reported on that
basis to its Chief Operating Decision Maker who evaluates its
business as a single segment. See Note 13 for detailed information
regarding the composition of revenues.
Significant Accounting Policies
There
were no significant changes in the Company’s significant
accounting policies during the first three months of 2021 from
those disclosed in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2020 filed with the SEC on March
23, 2021.
Recently Adopted Accounting Standards
In December 2019, the FASB issued Accounting
Standards Update (“ASU”) No. 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes” as part of its initiative to reduce complexity
in the accounting standards. The standard eliminates certain
exceptions related to the approach for intra-period tax allocation,
the methodology for calculating income taxes in an interim period
and the recognition of deferred tax liabilities for outside basis
differences. The standard also clarifies and simplifies other
aspects of the accounting for income taxes. The standard is
effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020. The Company adopted
the standard on January 1, 2021 and it had no
material impact on the
Company’s condensed consolidated financial
statements.
Accounting Standards under Evaluation
In June 2016, the FASB issued ASU No. 2016-13,
“Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses
on Financial Instruments”
(“Topic 326”). Topic 326 amends guidance on reporting
credit losses for assets held at amortized cost basis and available
for sale debt securities. For assets held at amortized cost basis,
Topic 326 eliminates the probable initial recognition threshold in
current GAAP and, instead, requires an entity to reflect its
current estimate of all expected credit losses. The allowance for
credit losses is a valuation account that is deducted from the
amortized cost basis of the financial assets to present the net
amount expected to be collected. For available for sale debt
securities, credit losses should be measured in a manner similar to
current GAAP, however Topic 326 will require that credit losses be
presented as an allowance rather than as a write-down. This ASU
update affects entities holding financial assets and net investment
in leases that are not accounted for at fair value through net
income. This update is effective for the company for fiscal years
beginning after December 15, 2022, including interim periods within
those fiscal years. The Company is currently evaluating the impact
of the pending adoption of this new standard on its consolidated
financial statements.
3.
Accounts
Receivable and Significant Concentrations
A
significant portion of the Company’s receivables are billed
under firm fixed price contracts with agencies of the U.S. federal
government and similar pricing structures with several
corporations. Accounts receivable consist of the following by
customer type in the table below as of the periods
presented:
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Government
(1)
|
$17,748,775
|
$34,097,906
|
|
Commercial
(2)
|
1,576,495
|
1,898,924
|
Gross accounts
receivable
|
19,325,270
|
35,996,830
|
(1)
Government contracts are generally firm fixed price not to exceed
arrangements with a term of five (5) years, which consists of a
base year and four (4) annual option year renewals. Government
receivables are billed under a single consolidated monthly invoice
and are billed approximately thirty (30) to sixty (60) days in
arrears from the date of service and payment is generally due
within thirty (30) days of the invoice date. Government accounts
receivable payments could be delayed due to administrative
processing delays by the government agency, continuing budget
resolutions that may delay availability of contract funding, and/or
administrative only invoice correction requests by contracting
officers that may delay payment processing by our government
customers.
(2)
Commercial contracts are generally fixed price arrangements with
contract terms ranging from two (2) to three (3) years. Commercial
accounts receivables are billed based on the underlying contract
terms and conditions which generally have repayment terms that
range from thirty (30) to ninety (90) days. Commercial receivables
are stated at amounts due from customers net of an allowance for
doubtful accounts if deemed necessary.
(3) For
the three months ended March 31, 2021, the Company did not recognize any material provisions for bad
debt, write-offs or recoveries of existing provisions for bad
debt. The Company has not historically maintained a bad debt
reserve for its government customers as it has not experienced
material or recurring bad debt charges and the nature and size of
the contracts has not necessitated the Company’s
establishment of such a bad debt reserve.
Significant Concentrations
The
following table presents customers that represent ten (10) percent
or more of consolidated trade accounts receivable as of the dates
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
Name
|
|
|
|
|
(Unaudited)
|
|
U.S. Coast
Guard
|
13%
|
--
|
|
National
Aeronautics and Space Administration
|
10%
|
--
|
|
U.S. Census
Bureau
|
44%
|
70%
|
The
following table presents customers that represent ten (10) percent
or more of consolidated revenues in the current and/or comparative
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
Name
|
|
|
|
|
(Unaudited)
|
|
U.S. Immigration
and Customs Enforcement
|
18%
|
11%
|
|
U.S. Department of
Homeland Security HQ
|
14%
|
--
|
|
U.S. Federal Air
Marshall Service
|
10%
|
--
|
|
U.S. Coast
Guard
|
19%
|
--
|
|
U.S. Census
Bureau
|
--
|
37%
|
4.
Unbilled
Accounts Receivable
Unbilled accounts
receivable represent revenues earned but not invoiced to the
customer at the balance sheet date due to either timing of invoice
processing or delays due to fixed contractual billing schedules. A
significant portion of our unbilled accounts receivable consist of
carrier services and hardware and software products delivered but
not invoiced at the end of the reporting period.
The
following table presents customers that represent ten (10) percent
or more of consolidated unbilled accounts receivable as of the
dates presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
Name
|
|
|
|
|
(Unaudited)
|
|
U.S.
Department of Homeland Security Headquarters
|
24%
|
11%
|
|
U.S.
Immigration and Customs Enforcement
|
27%
|
20%
|
|
U.S. Census
Bureau
|
--
|
25%
|
|
U.S.
Coast Guard
|
11%
|
16%
|
|
U.S. Transportation
Safety Administration
|
14%
|
--
|
5.
Other
Current Assets and Accrued Expenses
Other
current assets consisted of the following as of the dates presented
below:
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Inventories
|
$658,560
|
$990,976
|
|
Prepaid rent,
insurance and other assets
|
1,034,135
|
772,657
|
|
|
|
|
|
Total other current
assets
|
$1,692,695
|
$1,763,633
|
Accrued
expenses consisted of the following as of the dates presented
below:
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Carrier service
costs
|
$8,215,400
|
$11,832,170
|
|
Salaries and
payroll taxes
|
2,125,168
|
2,774,138
|
|
Inventory
purchases, consultants and other costs
|
967,360
|
1,004,303
|
|
Severance
costs
|
7,612
|
7,612
|
|
U.S. income tax
payable
|
22,130
|
28,130
|
Foreign income tax
payable
|
16,410
|
(20,040)
|
|
|
|
|
|
Total accrued
expenses
|
$11,354,080
|
$15,626,313
|
6.
Property
and Equipment
Major
classes of property and equipment consisted of the following as of
the dates presented below:
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Computer hardware
and software
|
$2,303,895
|
$2,271,000
|
|
Furniture and
fixtures
|
456,312
|
462,361
|
|
Leasehold
improvements
|
306,748
|
318,449
|
|
Automobiles
|
32,198
|
31,913
|
|
Gross property and
equipment
|
3,099,153
|
3,083,723
|
|
Less: accumulated
depreciation and
|
|
|
|
amortization
|
2,533,618
|
2,510,684
|
|
|
|
|
|
Property and
equipment, net
|
$565,535
|
$573,039
|
During
the three month periods ended March 31, 2021 and 2020, property and
equipment depreciation expense was approximately $102,300 and
$137,000, respectively.
During
the three month period ended March 31, 2021 and 2020, there were no
material disposals of owned property and equipment.
There
were no changes in the estimated useful lives used to depreciate
property and equipment during the three month periods ended March
31, 2021 and 2020.
7.
Goodwill
and Intangible Assets
The
Company has recorded goodwill of $18,555,578 as of March 31, 2021.
There were no changes in the carrying amount of goodwill during the
three month period ended March 31, 2021.
Intangible assets
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Customer
Relationships
|
$1,980,000
|
$(1,980,000)
|
$-
|
|
Channel
Relationships
|
2,628,080
|
(1,211,837)
|
1,416,243
|
|
Internally
Developed Software
|
1,911,086
|
(1,349,667)
|
561,419
|
|
Trade
Name and Trademarks
|
290,472
|
(133,941)
|
156,531
|
|
|
|
|
|
|
|
$6,809,638
|
$(4,675,445)
|
$2,134,193
|
|
|
|
|
|
|
Balance Sheet Check
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Customer
Relationships
|
$1,980,000
|
$(1,980,000)
|
$-
|
|
Channel
Relationships
|
2,628,080
|
(1,168,036)
|
1,460,044
|
|
Internally
Developed Software
|
1,846,194
|
(1,280,108)
|
566,086
|
|
Trade
Name and Trademarks
|
290,472
|
(129,099)
|
161,373
|
|
|
|
|
|
|
|
$6,744,746
|
$(4,557,243)
|
$2,187,503
|
For the
three month period ended March 31, 2021, the Company capitalized
$569,900 of internally developed software costs, primarily
associated with upgrading our ITMS™ (Intelligent
Telecommunications Management System), secure identity management
technology and network operations center of which $38,500 was
transferred from capital work in progress to internally developed
software during the quarter. Capital
work in progress is included in other long-term assets in the
consolidated balance sheet.
For the
three month period ended March 31, 2020, the Company capitalized
internally developed software costs of approximately $341,000
related to costs associated with upgrading our secure identity
management technology and network operations center.
There
were no disposals of intangible assets during the three month
periods ended March 31, 2021 and 2020.
The
aggregate amortization expense recorded for the three month periods
ended March 31, 2021 and 2020 were approximately $119,000 and
$125,700, respectively.
As of
March 31, 2021, estimated annual amortization for our intangible
assets for each of the next five years is
approximately:
|
Remainder
2021
|
$404,925
|
|
2022
|
373,043
|
|
2023
|
248,061
|
|
2024
|
194,570
|
|
2025
|
194,570
|
|
Thereafter
|
719,024
|
|
Total
|
$2,134,193
|
8.
Line of Credit
On June
15, 2017, the Company entered into a Loan and Security Agreement
with Atlantic Union Bank (formerly known as Access National Bank)
(the “Loan Agreement”). The Loan Agreement provides for
a $5.0 million working capital revolving line of
credit.
Effective, April
30, 2021, the Company entered into a sixth modification agreement
(“Modification Agreement”) with Atlantic Union Bank to
amend the existing Loan Agreement. The Modification Agreement
extended the maturity date of the facility from April 30, 2021
through June 15, 2022.
The
Loan Agreement requires that the Company meet the following
financial covenants on a quarterly basis: (i) maintain a minimum
adjusted tangible net worth of at least $2.0 million, (ii) maintain
minimum consolidated EBITDA of at least two times interest expense
and (iii) maintain a current ratio of 1.1 to 1.0 (excluding finance
lease liabilities reported under lease accounting
standards).
The
available amount under the working capital line of credit is
subject to a borrowing base, which is equal to the lesser of (i)
$5.0 million or (ii) 50% of the net unpaid balance of the
Company’s eligible accounts receivable. The facility is
secured by a first lien security interest on all of the
Company’s personal property, including its accounts
receivable, general intangibles, inventory and equipment maintained
in the United States. As of March 31, 2021, the Company was
eligible to borrow up to $4.9 million under the borrowing base
formula.
The
Company files U.S. federal income tax returns with the Internal
Revenue Service (“IRS”) as well as income tax returns
in various states and certain foreign countries. The Company may be
subject to examination by the IRS or various state taxing
jurisdictions for tax years 2003 and forward. The Company may be
subject to examination by various foreign countries for tax years
2014 forward. As of March 31, 2021, the Company was not under
examination by the IRS, any state or foreign tax jurisdiction. The
Company did not have any unrecognized tax benefits at either March
31, 2021 or December 31, 2020. In the future if applicable, any
interest and penalties related to uncertain tax positions will be
recognized in income tax expense.
As of
March 31, 2021, the Company had approximately $36.1 million in net
operating loss (NOL) carry forwards available to offset future
taxable income for federal income tax purposes, net of the
potential Section 382 limitations. These federal NOL carry forwards
expire between 2021 and 2036. Included in the recorded deferred tax
asset, the Company had a benefit of approximately $36.0 million
available to offset future taxable income for state income tax
purposes. These state NOL carry forwards expire between 2024 and
2036. Because of the change of ownership provisions of the Tax
Reform Act of 1986, use of a portion of our domestic NOL may be
limited in future periods. Further, a portion of the carryforwards
may expire before being applied to reduce future income tax
liabilities.
Management assesses
the available positive and negative evidence to estimate if
sufficient future taxable income will be generated to use the
existing deferred tax assets. Under existing income tax accounting
standards such objective evidence is more heavily weighted in
comparison to other subjective evidence such as our projections for
future growth, tax planning and other tax strategies. During 2020,
in part because the Company achieved three years of cumulative
pretax income in the U.S. federal tax jurisdiction, management
determined that there was sufficient positive evidence to conclude
that it was more likely than not that deferred tax assets were
realizable. It therefore reduced the valuation allowance
accordingly and the Company released $8.2 million of the deferred
tax asset valuation allowance during the fourth quarter of 2020 to
offset the regular tax expense generated by its earnings in 2020.
There were no changes to the valuation allowance as March 31, 2021.
In the future, changes in the Company’s valuation allowance
may result from, among other things, additional pretax operating
losses resulting in increases in its valuation allowance or pretax
operating income resulting in decreases in its valuation
allowance.
Common Stock
The Company is authorized to
issue 30,000,000 shares of common stock, $.001 par value per share.
As of March 31, 2021, there were 9,071,352 shares issued and
outstanding. During the three month
period ended March 31, 2021, there were 104,176 shares of common stock vested in
accordance with the vesting terms of the RSAs. Two employees
received less than the shares vested because they elected to have a
total of 12,526 shares withheld in satisfaction of each of the
employees corresponding tax liability of approximately $140,900.
The Company’s payment of this tax liability was recorded as a
cash flow from financing activity on the consolidated statement of
cash flows.
During
the three month period ended March 31, 2020, there were 83,331
shares of common stock vested in accordance with the vesting terms
of RSAs.
Shares
of common stock issued as a result of stock option exercises and
realized gross proceeds for the three month period ended March 31,
2021, were 2,500 and $10,250, respectively. There were no stock
option exercises during the three month period ended March 31,
2020.
At The Market Offering Agreement
On
August 18, 2020, the Company entered into an
At-The-Market Issuance Sales Agreement (the “Sales
Agreement”) with B. Riley Securities, Inc. (“B. Riley
FBR”), The Benchmark Company, LLC (“Benchmark”)
and Spartan Capital Securities, LLC (“Spartan”, and
together with B. Riley FBR and Benchmark, the “Sales
Agents”) which establishes an at-the-market equity
program pursuant to which the Company may offer and sell shares of
common stock, par value $0.001 per share, from time to time as set
forth in the Sales Agreement. The Sales
Agreement provides for the sale of shares of the
Company’s common stock (“Shares”) having an
aggregate offering price of up to $24,000,000.
The
Sales Agreement will terminate upon the earlier of
sale of all of the Shares under the Sales
Agreement or termination of the Sales Agreement as
permitted.
The
Company has no obligation to sell any of the Shares,
and, at any time, we may suspend offers
under the Sales Agreement or
terminate the Sales Agreement. During the three month
period ended March 31, 2021, the Company sold 100,687 shares for
gross proceeds of $1.1 million. During the three month period ended
March 31, 2021, the Company incurred $45,400 of offering
costs.
11.
Share-based
Compensation
Share-based
compensation (including restricted stock awards) represents both
stock options based expense and stock grant expense. The following
table sets forth the composition of stock compensation expense
included in general and administrative expense for the periods then
ended:
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Restricted stock
compensation expense
|
$157,107
|
$254,499
|
|
Non-qualified
option stock compensation expense
|
25,735
|
26,942
|
|
|
|
|
|
Total
share-based compensation before taxes
|
$182,842
|
$281,441
|
The
Company’s stock incentive plan is administered by the
Compensation Committee and authorizes the grant or award of
incentive stock options, nonqualified stock options (NQSO),
restricted stock awards (RSA), stock appreciation rights, dividend
equivalent rights, performance unit awards and phantom shares. The
Company issues new shares of common stock upon the exercise of
stock options.
Restricted
Stock
The
Company records the fair value of all restricted stock awards based
on the grant date fair value and amortizes stock compensation on a
straight-line basis over the vesting period. Restricted stock award
shares are issued when vested and included in the total number of
common shares issued and outstanding. During the three month
periods ended March 31, 2021 and 2020, the Company granted 50,261
RSAs and 89,175 RSAs, respectively.
Non-Qualified
Stock Options
The
Company estimates the fair value of nonqualified stock awards using
a Black-Scholes Option Pricing model (“Black-Scholes
model”). The fair value of each stock award is estimated on
the date of grant using the Black-Scholes model, which requires an
assumption of dividend yield, risk free interest rates, volatility,
forfeiture rates and expected option life. The risk-free interest
rates are based on the U.S. Treasury yield for a period consistent
with the expected term of the option in effect at the time of the
grant. Expected volatilities are based on the historical volatility
of our common stock over the expected option term. The expected
term of options granted is based on analyses of historical employee
termination rates and option exercises. There were no non-qualified
stock option awards granted during the three month periods ended
March 31, 2021 and 2020.
At
March 31, 2021, the Company had approximately $791,265 of total
unrecognized share-based compensation expense, net of estimated
forfeitures, related to share-based compensation that will be
recognized over the weighted average remaining period of 1.1
year.
12.
Earnings
Per Common Share (EPS)
The
computations of basic and diluted earnings per share were as
follows for the periods presented below:
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Basic
Earnings Per Share Computation:
|
|
|
|
Net
income
|
$585,424
|
$483,888
|
|
Weighted average
number of common shares
|
8,995,103
|
8,384,008
|
|
Basic Earnings Per
Share
|
$0.07
|
$0.06
|
|
|
|
|
|
Diluted
Earnings Per Share Computation:
|
|
|
|
Net
income
|
$585,424
|
$483,888
|
|
|
|
|
|
Weighted average
number of common shares
|
8,995,103
|
8,384,008
|
|
Incremental shares
from assumed conversions
|
|
|
|
of dilutive
securities
|
108,057
|
58,799
|
|
Adjusted weighted
average number of
|
|
|
|
common
shares
|
9,103,160
|
8,442,807
|
|
|
|
|
|
Diluted Earnings
Per Share
|
$0.06
|
$0.06
|
13.
Revenue
from Contracts with Customers
The
following table was prepared to provide additional information
about the composition of revenues from contracts with customers for
the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Carrier
Services
|
$11,348,872
|
$28,143,269
|
|
Managed
Services
|
9,301,971
|
11,522,087
|
|
|
|
|
|
|
$20,650,843
|
$39,665,356
|
The
Company recognized revenues from contracts with customers for the
following customer types as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
U.S.
Federal Government
|
$16,931,731
|
$35,550,474
|
|
U.S.
State and Local Governments
|
53,383
|
25,513
|
|
Foreign
Governments
|
26,096
|
6,169
|
|
Commercial
Enterprises
|
3,639,633
|
4,083,200
|
|
|
|
|
|
|
$20,650,843
|
$39,665,356
|
The
Company recognized revenues from contracts with customers in the
following geographic regions:
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
North
America
|
$19,410,144
|
$38,542,381
|
|
Europe
|
1,240,699
|
1,122,975
|
|
|
|
|
|
|
$20,650,843
|
$39,665,356
|
During the three
months ended March 31, 2021 and
2020, the Company
recognized approximately $942,400 and $801,960,
respectively, of revenue related to amounts that were included in
deferred revenue as of December 31, 2020 and 2019,
respectively.
14.
Commitments
and Contingencies
The
Company has employment agreements with certain senior executives
that set forth compensation levels and provide for severance
payments in certain instances.