11.

Stock Award Programs

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, restricted stock awards, 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. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below.

Valuation of Stock Awards

The Company estimates the fair value of all NQSO 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 a Black-Scholes option pricing model (“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.

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 Awards

During the three month period ended March 31, 2017, the Company granted 300,000 RSAs to its Chief Executive Officer that had a grant date fair value of approximately $246,000. The vesting of these RSAs are tied to attainment of certain financial goals as outlined by the Company’s Compensation Committee of the Board of Directors. There were no RSAs granted during the three month period ended March 31, 2016.

During the three month period ended March 31, 2017, 125,000 RSAs vested upon expiration of the employment agreement between Steve L. Komar and the Company. On January 3, 2017, the Company issued 84,188 shares of the Company’s common stock. Mr. Komar received less than 125,000 shares vested because he elected to have 40,812 of such shares withheld in satisfaction of the corresponding tax liability of approximately $46,000. The Company's payment of this tax liability was recorded as a cash flow from financing activity on the Condensed Consolidated Statements of Cash Flows.

There were no RSAs that were cancelled or expired during the three month periods ended March 31, 2017 and 2016, respectively.

During the three month period ended March 31, 2016, 250,000 RSAs vested upon the Company reporting over $70 million in revenues in its Annual Report on Form 10-K for 2015. On March 15, 2016, the Company issued 209,438 shares of the Company’s common stock in connection with this accelerated vesting event, of which Mr. Komar received 125,000 shares and James T. McCubbin received 84,438 shares. Mr. McCubbin received less than 125,000 shares because he elected to have 40,562 of such shares withheld in satisfaction of the corresponding tax liability of approximately $32,300. The Company's payment of this tax liability was recorded as a cash flow from financing activity on the Condensed Consolidated Statements of Cash Flows.

A summary of RSA activity as of March 31, 2017 and 2016, and changes during three month periods ended March 31, 2017 and 2016 are set forth below:

	2017		2016

NON-VESTED AWARDS	(Unaudited)

Non-vested awards outstanding, January 1,		250,000		500,000
Granted (+)		300,000		-
Vested (-)		125,000		250,000
Non-vested awards outstanding, March 31,		425,000		250,000

Weighted-average remaining contractual life (in years)		2.8		1.7

Unamortized RSA compensation expense	$	243,188	$	72,619

Aggregate intrinsic value of RSAs non-vested, March 31	$	191,250	$	150,000

Aggregate intrinsic value of RSAs vested during the quarter	$	108,750	$	185,000

Non-Qualified Stock Option Awards

During the three month period ended March 31, 2017, the Company granted 600,000 NQSOs to its Chief Executive Officer and valued the award using a Black-Scholes model with the following valuation inputs: 3-year vesting period, 7-year option term, a risk free rate of 2.1%, volatility of 68.2%, no assumed dividend yield, and a forfeiture rate estimate of 4.6%. During the three month period ended March 31, 2016, the Company granted 50,000 NQSOs to a member of the Board of Directors and valued the award using a Black-Scholes model that assumed a 3-year vesting period, 5-year option term, a risk free rate of 1.7%, volatility of 68.0%, no assumed dividend yield, and a forfeiture rate estimate of 7.5%.

During the three month period ended March 31, 2017, there were 60,000 stock options of that were unvested and cancelled, of which 10,000 were unvested and cancelled due to termination of employment and the remainder expired unexercised at the end of the option term. During the three month period ended March 31, 2016, there were 292,000 stock options of that were cancelled, of which 180,000 were cancelled due to termination of employment and the remainder were options granted to members of the Board of Directors that expired unexercised at the end of the option term.

A summary of stock option activity as of March 31, 2017 and 2016, and changes during three month periods ended March 31, 2017 and 2016 are set forth below:

	2017				2016
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
NON-VESTED AWARDS	Shares		Fair Value		Shares		Fair Value

	(Unaudited)
Non-vested balances, January 1,		920,000	$	0.59		841,672	$	0.80
Granted (+)		600,000	$	0.48		50,000	$	0.39
Cancelled (-)		60,000	$	0.68		-	$	-
Vested (-)		-				439,172	$	0.65
Non-vested balances, March 31,		1,460,000	$	0.54		452,500	$	0.90

	2017				2016
			Weighted				Weighted
			Average				Average
OUTSTANDING AND EXERCISABLE AWARDS	Shares		Exercise Price		Shares		Exercise Price

	(Unaudited)
Awards outstanding, January 1,		2,090,668	$	0.86		1,857,668	$	0.91
Granted (+)		600,000	$	0.82		50,000	$	0.68
Cancelled (-)		70,000	$	0.79		292,000	$	0.74
Exercised (-)		30,000	$	0.57		-	$	-
Awards outstanding, March 31,		2,590,668	$	0.85		1,615,668	$	0.94

Awards vested and expected to vest, March 31,		2,392,908	$	0.85		1,608,449	$	0.94

Awards outstanding and exercisable, March 31,		1,130,668	$	0.82		1,163,168	$	0.77

The weighted-average remaining contractual life of the non-qualified stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2017 were 3.7 years, 3.7 years and 2.1 years, respectively. There was no intrinsic value associated with options outstanding, exercisable and expected to vest as of March 31, 2017 as the stock price was below the lowest option exercise price. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on March 31, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. The intrinsic value will change based on the fair market value of WidePoint’s stock. The total intrinsic value of options exercised during the three months ended March 31, 2017 was approximately $9,000.

Stock Compensation Expense

Share-based compensation (including restricted stock awards) represents both stock options based expense and stock grant expense. The following table sets forth the composition of stock compensation expense included in general and administrative expense for the periods then ended:

	THREE MONTHS ENDED
	MARCH 31,
	2017		2016

	(Unaudited)
Restricted stock compensation expense	$	22,054	$	21,786
Non-qualified stock compensation expense		62,963		66,093

Total share-based compensation before taxes	$	85,017	$	87,879

At March 31, 2017, the Company had approximately $730,300 of total unamortized stock-based compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average remaining period of 2.2 years.