Good day and welcome to the WidePoint Corporation Third Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Fore of Hayden, IR. Please go ahead sir.

Thank you, operator. Good afternoon all participants in WidePoint's third quarter 2014 financial results conference call. With me today are WidePoint's Chairman and CEO, Steve Komar; and Chief Financial Officer, Jim McCubbin. Steve will provide an overview of the quarterly results and Jim will provide additional financial details. Then we'll open the call to questions from participants. Before I turn the call to Steve, I'd like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, including financial guidance and similar expressions including without limitation, expressions using the terminology may, will, believe, expect, plans, anticipates, predicts, forecasts, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. These forward-looking statements involve a number of risks factors and uncertainties, including those discussed in the Risk Factor sections of WidePoint's Annual Report on Form 10-K and its quarterly reports on Form 10-Q and other SEC filings the company releases. Actual results may differ materially from any forward-looking statements due to such risks factors and uncertainties. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call, except as required by law. I would now like to turn the call over to WidePoint's Chairman and CEO, Steve Komar for opening remarks.

Thank you, David, and good afternoon to all of you that have joined us on our WidePoint Corporation quarterly earnings call this afternoon. We would obviously like to express our appreciation to each of you for your continued interest in our performance and in the company's outlook for the future. First I am pleased to report that WidePoint posted a strong business building second quarter featuring revenues at $14.6 million up substantially from the prior calendar quarter and prior year and over 50% greater than from our first quarter of this year. Jim McCubbin will walk though our operating performance measures and statistics as part of his prepared remarks; however, I would like once more to take a few minutes to share with you some of the events and progress that support this growth and further sets the stage for continued acceleration of our most recent revenue performance. We witnessed quarter-over-quarter growth in all three of our revenue groupings and more specifically realized a continuing ramp-up of task orders in our federal government business with the continued obvious focus on our $600 million blanket purchase agreement or BPA with the Department of Homeland Security. Our biggest driver of near-term revenue growth remains our five-year single awarded BPA with the DHS, which provides for the provision of cellular wireless managed services for all DHS component organizations. We recorded our initial revenue from the DHS award during the second quarter of this year and we expect revenue from this contract to ramp up to over $75 million annually over the next several quarters. We also continue to see additional new wins and contract from our federal business activities with other department level agencies such as Health and Human Services and the Department of Justice. Across all our government markets, we have received…

Okay. Thank you, Steve. Hello everyone. Thank you again for joining our call today. Today in my remarks, I am going to discuss our third quarter financial results including our tax reserve, our recent capital raise as well as provide an update on our expectations for looking ahead into 2015 and what should be driving those results. In the third quarter, revenue rose approximately 19% to $14.6 million as compared to $12.2 million in the third quarter of 2013 as well as an increase of approximately 17% compared to the previous second quarter of 2014. As we stated on our previously quarterly calls, we believe that our first quarter revenue was the bottom point for revenue for the year and we were anticipating increasing revenue quarter to quarter sequentially for 2014. That appears to have been correct. In the third quarter, revenues were up approximately 9% for both of our carrier services and reselling and consulting services. More importantly, revenues were up about 40% in managed services, which represents generally higher gross margins. This is the predominant reasons we saw gross margins increase from approximately 24% to 27% for the corresponding periods. Margins were off slightly sequentially looking back at the same quarter as a result of the greater mix of reselling services as a result of increased purchases related to the government fiscal year ended September 30. We believe that certain device deployed in 2015 and the DHS BPA task orders are recognized, that managed services should continue to further expand, but as carrier services come online from DHS, that margins could be erratic quarter to quarter until we have all the components online. We currently have four remaining components to come online and anticipate one of those four additional components will start to ramp up between December and…

Thanks Jim. Thanks for your comments. I am sure the information you shared will be of great value to our listeners. But on the assumption that we may not have touched on every possible question, I would like to now open the call to our listener’s questions and comments. Operator, if you can assist us by opening the line to our listeners, that will be greatly appreciated.

Thank you. [Operator instructions] And our first question comes from Mike Crawford with B. Riley and Company.

Thank you.

Hi Mike.

Hi. So it's exciting that you are looking to get certain device embedded directly into OEM equipment that time of production as opposed to being sort of externally after the fact, how unique is SPYRUS’ solution and did that company consider working with anyone besides WidePoint to get this trusted CIR capability?

Well we've been in inflammable partnership with SPYRUS for the better part of the year, probably a little bit more than a year and I think it's become a relationship that has sort of honed and come together. So I think I cannot Mike specifically answer your question, because I don't know if they consider anybody else, but I can tell you that we've been working together very closely and very productively with them and this seem to just be a natural extension.

Mike, both companies view this as mutually beneficial. We have something they need and they have something that what we have to offer go-to-market and is profitable for both of us, it's extremely unique with what they're delivering in conjunction with our support and our certain device makes them unique. There is four other players in this market, two very strong players. The market opportunity is very dynamic. We already have pilots that we've just started on and with the combination it does make us unique. There is no others players that I am aware that they've talked to or that could provide the result that we're providing and that's why we're working together. It's also one of the other reasons that many other partners are looking at what we can add to their assembled groups as they go and attack this marketplace.

Okay. Thank you. That's helpful. Just at risk of going into too many acronyms, is this combined solution something that's going to offer just identity and access management or what has enabled enterprise mobility management as well or what that can be covered with that solution?

Windows To Go is literally an opportunity led and pushed forward by Microsoft for Windows 8 where a user can take basically a USB try to keep it simple and not have to carry around a tablet or laptop or a PC and they can plug it into any kind of dumb device, they can immediate access to all of their files to the cloud, access to the cloud as secure okay. Once they pull out that USB, so can a drive, from whatever terminal on, everything is wiped, there is no history behind and so what happens is for portability that's why there is a big driver in doing this. What we do in combination with SPYRUS is allow for very secure connection and secured protocols. We can do it through a federated or a non-federated approach for anyone. They've been working on their component part with Microsoft and they're regarded as one of the best solutions and what we're doing is we're taking two very fine solutions, putting them together and coming up with a very unique offering that gives a lot of trust to those people taking this Windows To Go capability on the road.

Okay. Thank you. And then last question relates to these pilot projects and the opportunity, you said this could lead to one million devices. What would be the timeframe that could happen, how roughly would you be getting paid for offering the service related to these devices and may be anything you can say regarding the pace of ramp-up in providing that service. Thank you.

Well, yes Mike, we can give you some of those answers. Right now their pilot programs with these number of our partners that we will starting up including SPYRUS and others in the end of the fourth quarter, beginning in the first quarter. The pilots will start with maybe a run rate of say like 300 devices per week at that and ramp up over 2015. When we look at the entire universe of those pilots and what they would grow into, it represented -- it represented more than a million units. We believe in the first half of the year a lot of that will be just getting them out there in smaller loads and expanding from there much more dramatically in the second half of the year. I believe for full deployment of that million plus, it could be taking us into 2016. Separately, we've identified also new leads for approximately five million devices through other opportunities with our partners and the partners that are leading these efforts where that's going to be -- we will be closing hopefully those opportunities up with our partners in 2015 and starting to move forward with those. Again like I said, in our prepared remarks, our partners believe that there is a very, very large universe for this, at least 100 million devices and growing. To further refine this a little bit farther, Kyocera and hardened devices and first responders, we believe that there is the potential for two million to four million users in the U.S. and we believe that the universe there alone is up to 25 million around the globe. As we get into the different structured environments and each partner kind of goes after a different area. Kyocera with more hardened structured devices LG and AT&T after…

Let me just add one comment and that is that I am not sure Mike we answered your question about the pilots, the pilots are several. The span both the commercial and the government markets and they're all scheduled for the first quarter of 2015 with the assumption that we will move to market immediately thereafter.

Thank you. And the one other part of the question that was unanswered was how and what point that's paid, I suppose maybe on playing itself on to the device and then for also providing the monthly service.

Mike, right now there is going to be several different ways. One of it is a component where we will get paid either monthly as part of the service fees or component part from the partner, which could range from anywhere we believe from $1 to $5 a month. They also can have an option if they want to prepay it okay, in advance for a year or three years. They can do that, representing may be a slight discount where they’ll get may be $0.25 off or $0.50 off of that forward payment. That's one way. The other way is if they're going to be using a certain chipset we're involved with there may be a payment that we receive upfront as over the next six months, they designed these into the motherboards where we'll get kind of like a portion of that fees that they get on and they bring it out. And then finally there will be other consulting services and wrap around services that will have the opportunity to participate in including some reselling capabilities and various other things just to make sure that these large enterprises get a solution that they need to have. So we'll have some support capabilities as well.

Great. Thank you very much.

You're welcome.

Thank you.

Our next question comes from Mike Malouf with Craig-Hallum Capital Group.

Hi Mike.

Yes hi guys. This is Ross Licero on for Mike. Just had another question about the pilot, you said it was a million potential devices from these customers, could you give us an idea of how many devices are going to be rolled out just for the pilot?

Well the pilots I mean more into -- it's all kind of together where you could have of that million depending on the five or six different pilots different amounts ranging anywhere from as low as 20,000 units to start to 100,000. So it's a range okay and they're looking at in the fourth quarter beginning first quarter on the initiation, they're really looking at more wide propagation in the third quarter and that's what we can address it this moment in time. It's going to be a bit fluid. There is a not a lot we can do about that right now except for be prepared to scale.

Okay. And you said it was average of $1 to $5 a month. What drives the ARPU that you're getting from now, let me accept one versus five.

A lot of that just comes from what level of service and what level of security functionality that they're offering to acquire as well as volume discounting. The less amount, the higher the price and that's an average range of one to five. There is some situations where those cost will be as high as $7 and $10, okay. It really depends on what they want to add. They're paying more for lesser volumes and it ranges. We're trying to take a -- trying to take more of a conservative basis and guide lower because we believe as it scales the price average points will be between that $1 and $5.

Okay. Great and looking towards that additional $5 million potential devices out there, what average -- is the average size of those potential customers?

They're very, very large client opportunities addressing large organizations with some big issues. We can't -- we can't talk about that right now. We are in essence gagged because that's still a marketing and closing scenario. So anything we say now could potentially harm us or harm our relationship. Remember we're not a lead. We're supported by an organization in that.

Great. Thanks for the color.

Thanks.

Our next question comes from Greg Hillman with First Wilshire Securities Management.

Hi Greg.

Hi. Could you talk about the -- I guess some of the two competitors also have the administrative and public key infrastructure, I think they were Verisign and IdenTrust, are they partnering with other people to provide like a similar solution to what you're doing in the [third] [ph] device?

Well right now we have a market lead and what we've done with our next generation identity management with our partners we do not believe at this time they do. I am sure that on Verisign, a lot of what they're doing with credentialing and everything is really focused on a lower level larger market place as it goes to maybe financial as it goes to IdenTrust or others, they're going after maybe European and middle eastern leads and they're more focused on specific software solutions that they have. So there is differentiations between all of us. We just have something that is very addressable for large organizations that are interoperable that have both legacy systems as well as new operating system environments and that's one of the unique capabilities what we can do. We can drive certs. We can offer machine to machine certs. We can offer a lot of different ways to achieve this and we believe we do have a first to market potential right now and that's one of the reasons we're pushing this so hard at this time and one of the reasons that the large partners that are working with us have decided to work with us after looking at others.

Okay. And I noticed that so called the machines talking to one another I guess and they're going to have like a huge number of internet addresses like I think on the trillion and stuff like that. Is there any way you could participate in that? Do these machines need to be secure where you're monitoring things remotely and optimizing things with I don't know utilities and equipments stuff like that? Do you play into that?

We do have the capability to do what you're currently referring to as machine to machine. We tend to work and have been working with very high secured environments and very large devices such as like airplanes or satellites or things like that. In fact they quite -- one are GSA Schedule you will see the price points are quite high anywhere from I believe $195 to in excess of $600. So we're more focused on the high security environment marketplace. But yes, we do have the potential to doing more with that. That's why I said our suite of next generation identity management services because it includes more than just a basic certain device on a mobile phone. Remember we're addressing IP phones and cameras. We addressing point-of-sale terminals. We addressing machine to machine. We addressing various other ways to securitize to a credentialing federated and non-federated platform, multitude of different devices.

Okay. And then finally, you mentioned early in the conversation, somebody mentioned Wave, I think some sort of relationship with Wave, what was that? I think with…

Our partnership with Wave specifically enough addresses their TPM capabilities. You can utilize TPM on Microsoft devices to securitize credentialing and so what it addresses is it addresses a specific marketplace. What we've done is we've partnered up with partners and others that address different verticals as well as different deliver devices and Wave is one of those because they've done a very good job at propagating TPM widely in laptops and depending on Microsoft’s approach it could be also utilized for phones and Microsoft is now pushing into this environment as well. So there is some nice opportunities there for us and Wave. Wave is also partnering up with others and other tool sets as we are. So it should be interesting for any organization within this Next Generation Identity Management environment. Please be aware that recent studies have suggested Next Generation Identity Management is going to grow from marketplace of 7 billion to 42 billion over the next four or five years. That's how important and how large of an opportunity this marketplace is from many different players.

Okay. Thanks very much.

Thank you.

[Operator Instructions] We'll take our next question from [Sam Donaldson] [ph] a private investor.

Gentlemen, congratulations again for expanding the company's reach and revenue. I think that your business plan that you’ve came up with some time ago is really paying off and I think it was the right thing to do to use the shelf a lot but to raise the money as you both said in order to service the new customers and this expanded reach. But that raises the question that in the future with all of this opportunity and all of these new customers that we're hoping are going to come on, how are you going to get the money to service them? Specifically, do you foresee in the next year or so, asking for more stock, which dilutes the stockholder’s equity, but in the long run that they are, or I just let you hear you discuss the possibility that you'll go back to the well of additional stock one again to [dilute them] [ph].

Sure Sam, my pleasure to try and respond and thank you for the kind words. Yes, we're pretty excited about the opportunities and recognize that they are definitely multiple initiatives. When we sat down and basically set up our shelf and put this plan into play earlier this year, we looked ahead and looked at the four or five highest probability potentials. Sat down and though through what it would take to not only handle the development, but also additional marketing initiatives collateral and we came up with a number that we would successfully achieve in our two public offerings. And we believe that it is sufficient for anything except an absolute home run, which Jim was talking about hundreds of millions of devices. Should that come to pass in the next year and half, I suppose we might be in a position that we would have to consider going back to the markets, but that is not out play. We don't think that it is a realistic probability. We think we have enough to do what we have to do to support all of the initiatives that are in place today and I think the easy quick answer is, no, we don't plan to come back to the market and now Jim is going to tell me -- Jim is going to probably tell me that I am wrong, but that's what I believe.

Sam you’ve known me for a long time. We took that half a shelf in February of this year, specifically to raise money for the Softex acquisition and to give us some funding specifically for DHS okay. We have the opportunity where we could have pulled all of it down at that time. To be frank with you, we did not because we were hoping that the efforts of certain device were going to take a little bit longer where we could have monetized DHS and well as other opportunities. So we wouldn’t have to raise any capital. A good news, bad news is the partners like the solution set and thought it would be additive and they pushed us a lot faster than we anticipated. So we had to go back and do the second, but the reason we didn't do it all up front was because we were trying to have as many options not to dilute, even though as for growth capital and it would be additive and that's just -- also we we're the stock price was going to be higher. So wanted to wait. We just needed -- we wanted every opportunity we could have to keep the dilution as small as possible and that's..

I understand that and I think your answer is very reasonable, both of you. I thought it was the right thing to do and in the future if capital is needed, certain Jim if you get that whole hundreds of millions devices, I'll be first one to say float the money, jab the money, service it. Anyone who think that you could expand the company without reaching out with money, which in the short run dilutes something that's in the bottom line along in the business. Here's one, but the real one already you’ve got billions back from planning and the projection is that man has once again proven why is he is there to top of the heat. So no misunderstanding. If it needs to be done, do it, but I just wanted to hear you discuss it as you have.

Sam, I just -- I am a shareholder myself. I want to give us every opportunity to improve our positions and at least that my voice within the company. So we tend to be a little bit more pragmatic and wait until we really have to do something and we try to be wise about it. We don't like to waste money either and God knows you’ve seen me manage the balance sheet for a long time. It drive me crazy if I see waste.

But we appreciate your comments Sam and all we can do is tell you that we will shepherd that requirement very carefully for all the reasons we just talked about.

Well my last word today is I hate to sound like a colleague's cheerleader, but go team go, so far better than so good, great, bye.

Thank you, Sam.

Our next question from John Harrow with Harrow & Associates. John Harrow - Harrow & Associates: Yes, good afternoon. How was such a bright future with so much money potentially on the table. Will we see insiders purchase stock and how about guidance for a change, at least some sort of range.

Well one, most of us have bought and created our positions and that's what we've done. We've already paid taxes and gone out of pocket and I myself have put everything I can put into it. I wish I was a wealthy man and if I was, I would probably buy the whole company. But to that point, we did the best that we can with what we have and also insider purchasing, we're very limited to do something when we're not aware of any insider information and those timetables are very difficult given everything we've been working on for the past couple of years. As we're always aware of something that would put us in harms ways. Our lawyers protect us as best they can and we have to balance that. As it goes to guidance, we do have two analysts covering us. Mike Malouf with Craig-Hallum and Mike Crawford with B. Riley. They're exceptional analysts. They're putting out numbers in guidance, okay. They do communicate with the company. At this time, the company has such great variability because of where we are on our timing, it's not in our best interest to cage us in because it's fluid right now. And that's why we don't give specific guidance and we allow and rely upon our analysts to put that out for us. Okay. John Harrow - Harrow & Associates: Your numbers seem to have been pretty close together the last few quarters. So it seems like putting out guidance wouldn’t be that difficult…

Hello. [Audio Gap]

Sorry about that.

What happened?

David's line set music into the conference.

Oh, okay, fair enough.

Well, I don't know if we've finished with the last caller. I apologize. Hello.

Sorry, we'll go ahead and take our next question from [Dennis Rook] [ph] of OSF HealthCare Systems.

Okay. Yes, Dennis.

Hi, forward-looking as the pilots take off, can you provide any more insight into the margins that each of the field that you’ve been working with for further growth. Will then grow or will they die or back as the more devices you reach into move forward? Will they -- will the margins grow as you get more devices or will they go down as you hit the million devices, two million devices, three million devices?

Well I think to try and respond to that, when we get into that kind of a volume environment, there will be an anticipation that there will be some drop associated with volume purchases. However, versus some of our historic businesses, I would say to you that our starting point in terms of expected margins from this new business will be substantially higher. So what we're talking about, I don't want to be so brave as to say that we will be dealing with a software publishing environment and their margins, but we would be dealing with a very differentiated solution with what I would categorize as very attractive margins. Those might be dilutive somewhat as we move into a high volume environment, but you know what, that's net, net good news.

Okay. Thank you.

Thank you very much.

That does conclude our question-and-answer session. I would like to turn the call back to Steve Komar for closing remarks.

Thank you, operator. It appears we responded to all of our listeners questions. Operator, thanks for your assistance. As a closing comment, we just want to reiterate that we're very excited about WidePoint's business opportunity. In the fourth quarter, but more importantly in 2015, including the further diversification of our revenues and the positive impact of our various initiatives. Our focus continues today at maximizing shareholder value and building a quality business and enterprise. So until we speak again, we thank you very much for your continued interest and hope you have a very pleasant evening. Good night.

Once again, that does conclude today's call. We appreciate your participation.