SOURCE: Technest Holdings, Inc.

May 14, 2007 07:00 ET

Technest Holdings Reports Financial Results for Three Months and Nine Months Ending March 31, 2007

BETHESDA, MD -- (MARKET WIRE) -- May 14, 2007 -- Technest Holdings, Inc. (OTCBB: TCNH), a defense and homeland security company, announced today its operating results for the Company's third quarter and nine months ended March 31, 2007. The complete filing is available at www.sec.gov.

For the third quarter ending March 31, revenues were $17.95 million in 2007 compared to $17.86 million in the same period in 2006. Gross profit for the third quarter was $3.93 million vs. $3.24 million in the third quarter of 2006. The operating loss for the quarter narrowed to $268,926 compared with $795,772 for the same quarter a year ago. The net loss attributable to common shareholders was $0.92 million or $0.05 per share in 2007 compared to a net loss of $1.52 million or $0.10 per share in the third quarter of 2006. For the nine months ending March 31, revenues were $53.67 million vs. $55.14 million for the same nine months in 2006. Gross profit for the nine months in 2007 was $11.00 million compared to $10.30 million during the same period in 2006. The operating loss for the nine month period was $1.59 million compared with $1.08 million for the same period a year ago. The net loss attributable to common shareholders for the nine months ended March 31, 2007 was $4.67 million or $0.28 per share in 2007 compared to a net profit of $21.73 million or $1.36 per share in the same nine months in 2006. The net profit in 2006 was due primarily to a non-cash derivative income in the amount of $25.05 million representing the change in fair value of certain warrants issued by Technest in February 2005. Non-cash charges included in the loss for the nine months ended March 31, 2007 were $5.59 million and net non-cash income for the same period in 2006 was $21.61 million.

Dr. Joseph Mackin, President and CEO, Technest Holdings, commented, "Overall, we are pleased with our third quarter, where our gross profit improvement was due to a larger percentage of high margin services provided compared with lower margin material procurement contracts. Our funded backlog remains strong at over $44 million and we have additional awarded but as yet unfunded contracts in excess of $122 million. Going forward, we expect to execute additional military contracts in the fourth quarter that have been previously awarded but are awaiting processing. These processing delays were the primary cause of our shortfall in revenue in the nine months ended March 31, 2007 compared to the previous year."

About Technest Holdings, Inc.

Technest Holdings, Inc. is a provider of: advanced remote sensor systems, chemical detectors, intelligent surveillance and advanced 3D imaging technology solutions to the defense and homeland security marketplaces. Technest is committed to setting next-generation standards in defense and security through the provision of innovative emerging technologies and expert services. Technest's solutions support military, law enforcement and homeland security personnel. Through strategic development, Technest focuses on the creation of dual-use technology and products with applications in both the defense market and civilian homeland security and law enforcement fields. 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 future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, applicability, benefit and use of our product 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: the functionality of our product; 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

Pursuant to an agreement beginning May 15, 2007, Consulting For Strategic Growth1, Ltd. ("CFSG1") provides Technest Holdings, Inc. with consulting, business advisory, investor relations, public relations and corporate development services. Independent of CFSG1's receipt of cash compensation from Technest Holdings, CFSG1 may choose to purchase the company's common stock and thereafter liquidate those securities at any time it deems appropriate to do so.


               TECHNEST HOLDINGS, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)


                                                   For the Three Months
                                                          Ended
                                                         March 31,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------

Revenues                                        $ 17,945,067  $ 17,855,160

Cost of Revenues (including $278,916 and $-0-
 to related parties in the three months ended
 March 31, 2007 and 2006, respectively)           14,018,027    14,618,076
                                                ------------  ------------
Gross Profit                                       3,927,040     3,237,084
                                                ------------  ------------

Operating Expenses:
    Selling, general and administrative
     (including $250,000 to related parties in
     the three months ended March 31, 2007 and
     2006, respectively)                           3,733,213     3,586,344
  Research and development                            16,241            --
  Amortization of intangible assets                  446,512       446,512
                                                ------------  ------------
Total Operating Expenses                           4,195,966     4,032,856
                                                ------------  ------------

Operating Loss                                      (268,926)     (795,772)
                                                ------------  ------------
Other Expenses (Income), Net
  Interest expense                                   658,245       763,469
  Other income, net                                   (7,077)      (35,633)
                                                ------------  ------------
Total Other Expenses, Net                            651,168       727,836
                                                ------------  ------------

Net Loss Applicable to Common Stockholders      $   (920,094) $ (1,523,608)
                                                ============  ============

Basic and diluted Income (Loss) Per Common
 Share                                          $      (0.05) $      (0.10)
                                                ============  ============

Weighted Average Number of Common Shares
 Outstanding - Basic and Diluted                  16,815,136    15,677,163
                                                ============  ============



               TECHNEST HOLDINGS, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)


                                                   For the Nine Months
                                                          Ended
                                                         March 31,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------

Revenues                                        $ 53,665,577  $ 55,141,077

Cost of Revenues (including $623,482 and $-0-
 to related parties in the nine months ended
 March 31, 2007 and 2006, respectively)           42,665,001    44,845,200
                                                ------------  ------------
Gross Profit                                      11,000,576    10,295,877
                                                ------------  ------------

Operating Expenses:
    Selling, general and administrative
     (including $750,000 to related parties
     in the nine months ended March 31, 2007
     and 2006, respectively)                      11,197,647     9,897,578
    Research and development                          49,858       138,448
    Amortization of intangible assets              1,339,535     1,339,634
                                                ------------  ------------
Total Operating Expenses                          12,587,040    11,375,660
                                                ------------  ------------

Operating Loss                                    (1,586,464)   (1,079,783)
                                                ------------  ------------
Other Expenses (Income), Net
  Interest expense                                 3,120,036     2,359,289
  Derivative income                                       --   (25,046,489)
  Other income, net                                  (41,003)     (118,811)
                                                ------------  ------------
Total Other Expenses (Income), Net                 3,079,033   (22,806,011)
                                                ------------  ------------

Net Income (Loss) Applicable to Common
 Stockholders                                   $ (4,665,497) $ 21,726,228
                                                ============  ============

Basic Income (Loss) Per Common Share            $      (0.28) $       1.45
                                                ============  ============

Diluted Income (Loss) Per Common Share          $      (0.28) $       1.36
                                                ============  ============

Weighted Average Number of Common Shares
 Outstanding - Basic                              16,423,488    15,034,540
                                                ============  ============
             - Diluted                            16,423,488    15,997,985
                                                ============  ============



               TECHNEST HOLDINGS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEET
                           MARCH 31, 2007
                            (Unaudited)


ASSETS
Current Assets
  Cash and cash equivalents                                   $  1,648,919
  Accounts receivable                                            9,545,217
  Unbilled receivables                                           1,146,351
  Restricted cash                                                  250,000
  Inventory                                                          7,450
  Prepaid expenses and other current assets                        140,029
                                                              ------------
    Total Current Assets                                        12,737,966
                                                              ------------

Property and Equipment - Net of accumulated depreciation and
 amortization of $983,055                                          492,025
                                                              ------------

Other Assets
  Deposits                                                          78,737
  Deferred financing costs - Net of accumulated amortization
   of $278,857                                                   1,005,152
  Definite-lived intangible assets -
    Net of accumulated amortization of $4,825,060               10,212,995
  Goodwill                                                      14,035,551
                                                              ------------
    Total Other Assets                                          25,332,435
                                                              ------------
                                                              $ 38,562,426
                                                              ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Accounts payable                                            $ 10,047,535
  Accrued expenses and other current liabilities                 3,814,557
  Due to related party                                             363,297
  Revolving line of credit                                       4,415,184
  Current portion of long-term debt                              1,828,364
                                                              ------------
      Total Current Liabilities                                 20,468,937

Non Current Liabilities
  Long-term debt, less current portion and discount of
   $171,873                                                      2,072,315
                                                              ------------
      Total Liabilities                                         22,541,252
                                                              ------------

Commitments and Contingencies

Stockholders' Equity
   Series A Convertible Preferred Stock - $.001 par value;
    150 shares authorized; 64,325 shares issued and
    outstanding (preference in liquidation of $64,325 at
    March 31, 2007)                                                     --
   Series C Convertible Preferred Stock - $.001 par value;
    1,149,425 shares authorized; 632,185 issued and
    outstanding (preference in liquidation of $1,375,002 at
    March 31, 2007)                                                    632
   Common stock - par value $.001 per share; 500,000,000
    shares authorized; 16,878,451 shares issued and
    outstanding                                                     16,877
   Additional paid-in capital                                   35,907,101
   Accumulated deficit                                         (19,903,436)
                                                              ------------
      Total Stockholders' Equity                                16,021,174
                                                              ------------
                                                              $ 38,562,426
                                                              ============

Contact Information

  • Contact:
    Stanley Wunderlich
    Consulting for Strategic Growth 1
    (800) 625-2236
    (516) 729-3714
    swunderlich@cfsg1.com