October 02, 2007 10:14 ET

Technest Holdings Reports Annual Results

BETHESDA, MD--(Marketwire - October 2, 2007) - Technest Holdings, Inc. (OTCBB: TCNH) yesterday filed its annual report on Form 10-KSB for the year ending June 30, 2007 with the SEC. This report can be found on www.sec.gov

On September 10, 2007, Technest and E-OIR Technologies, Inc. entered into a Stock Purchase Agreement with EOIR Holdings LLC, a Delaware limited liability company ("LLC"), pursuant to which Technest will sell EOIR to LLC. LLC is an entity formed on August 9, 2007 by The White Oak Group, Inc., an Atlanta, Georgia-based private investment firm, for the purposes of facilitating this transaction.

The sale of EOIR to LLC will be structured as a stock sale in which LLC will acquire all of the outstanding stock of EOIR in exchange for approximately $34 million in cash, $11 million of which will be paid at closing and $23 million of which will be paid upon the successful re-award to EOIR of the contract with the U.S. Army's Night Vision and Electronics Sensors Directorate. A majority of the contingent payment of $23 million will be distributed to shareholders in the form of a cash dividend should it be received.

In accordance with SFAS 144, we have classified EOIR's results of operations as discontinued operations for all periods presented in the accompanying consolidated financial statements. All debt required to be repaid upon the sale of EOIR has been included in the liabilities of discontinued operations. Interest expense on this debt has been included in the net loss from discontinued operations. The continuing operations of Technest currently represent revenues largely generated by Small Business Innovative Research Grants (SBIRs) in the field of 3-dimensional imaging and advanced sensor technologies. We use the revenue from these grants to develop future potential products for our business. Technest had $3,396,795 in revenues from continuing operations during the year ended June 30, 2007 compared with $3,542,393 during the year ended June 30, 2006.

The operating loss from continuing operations for the year ended June 30, 2007 was $2,649,606. Within this amount, non cash items included $1,423,470 for the value of stock based compensation and warrants issued to a consultant. In addition, amortization of intangible assets and depreciation charges from continuing operations amounted to $397,012. The operating loss for the year ended June 30, 2006 was $1,881,273.

In the year ended June 30, 2007, Technest charged to interest expense $1,744,102, including $1,586,046 paid in common stock related to liquidated damages incurred for failure to have an effective registration statement. In the year ended June 30, 2006, Technest charged to interest expense $2,303,662, including $2,104,461 paid in common stock related to liquidated damages incurred for failure to have an effective registration statement.

Derivative income represents the changes in the fair value of certain warrants issued by Technest on February 14, 2005. In the year ended June 30, 2006 changes in the fair value of the warrants recorded as derivative income in the statements of operations was $25,046,489. Derivative income had no impact of the Company's cash flows.

Revenues from EOIR's operation, now classified as discontinued, in the year ended June 30, 2007 were $68,349,121 compared with $77,533,227 for the year ended June 30, 2006. Although EOIR's order book remained strong, EOIR experienced a slow down in the release of orders from the Government resulting in lower revenue. The net loss from EOIR's operations was $395,939 in the year ended June 30, 2007 compared with a net loss of $625,837 for the year ended June 30, 2006.

The net loss attributable to common shareholders for the year ended June 30, 2007 was $4,786,696. The net income applicable to common stockholders for the year ended June 30, 2006 was $20,252,664. This was entirely due to derivative income of $25,046,489.

Technest's backlog from continuing operations at the end of June 2007 was approximately $2.2 million and consisted of 18 programs with wide ranging applications from the use of advanced imaging for the tracking of multiple targets to the detection of cancer. As several of these projects move through SBIR phase 2 we intend to develop these products for commercialization.

About Technest Holdings, Inc.

Technest Holdings, Inc. is a provider of: advanced remote sensor systems, intelligent surveillance and advanced 3D imaging technology solutions to the defense, homeland security and healthcare marketplaces. Technest is committed to setting next-generation imaging standards through the provision of innovative emerging technologies. Through strategic development, Technest focuses on the creation of dual-use technology and products with applications in both the defense, civilian homeland security and law enforcement fields as well as healthcare. For more information, please visit the company's website at http://www.technestholdings.com.

Investors are cautioned that certain statements contained in this press release are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or similar expressions. In addition, any statements concerning the proposed transaction, anticipated proceeds, the re-award of the NVESD contract, future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, applicability, benefit and use of our product and services, and possible future actions, which may be provided by management, are also forward-looking statements as defined by the Act. Some of the factors that could significantly impact the forward-looking statements in this press release include, but are not limited to: ability to satisfy the closing conditions in the stock purchase agreement; the re-award of the NVESD contract to a third party; the functionality of our product; our capabilities; a rejection of the Company's products and technologies by the marketplace; and disputes as to the Company's intellectual property rights. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about Technest Holdings, its products, economic and market factors and the industries in which Technest Holdings does business, among other things. These statements are not guarantees of future performance and Technest Holdings has no specific intention to update these statements. More detailed information about those factors is contained in Technest Holdings' filings with the Securities and Exchange Commission. http://www.sec.gov

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

Technest intends to mail to its stockholders and file with the Securities and Exchange Commission (the "SEC") a Proxy Statement or an Information Statement in connection with the proposed transaction, and to file other relevant materials with the SEC. The Statement and other materials filed with the SEC will contain important information about Technest, LLC, the sale of EOIR and related matters. Investors and security holders are urged to read the Statement carefully when it is available. Investors and security holders will be able to obtain free copies of the Statement and other documents filed with the SEC by Technest through the web site maintained by the SEC at www.sec.gov.