SOURCE: Technest Holdings, Inc.

February 20, 2008 14:22 ET

Technest Holdings Reports Quarterly Results and Outlines Plans for Future Business Growth

BETHESDA, MD--(Marketwire - February 20, 2008) - Technest Holdings, Inc. (OTCBB: TCNH), a world-class 3D imaging company transforming state-of-the-art technology into real-world products, announced today it has filed its quarterly report ("the report") on Form 10-QSB for the six months and three months ended December 31, 2007. In addition to financial results for the quarter, the report also discusses management's business strategy for the rest of the fiscal year ending June 30, 2008. The report, filed with the SEC on February 19, 2008, can be found on

On December 31, 2007, Technest closed the sale of its subsidiary, EOIR Technologies, Inc., for up to $34 million. The sale of EOIR to an affiliate of the White Oak Group was structured as a stock sale in which White Oak's affiliate acquired all of the outstanding stock of EOIR in exchange for approximately $34 million in cash, $11 million of which was 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, the Company has classified EOIR's results of operations as discontinued operations for all periods presented in the consolidated financial statements.

Business Strategy Going Forward

As a result of the sale of EOIR, the remaining business of Technest is engaged in developing and commercializing its state-of-the-art proprietary 3D imaging software technology, products and solutions to address markets in Defense and Security and innovative Medical Devices.

Gino Pereira, newly appointed CEO of Technest, stated, "The number one priority for Technest is to leverage its considerable intellectual property portfolio to create real-world products and solutions that benefit from 3D imaging and surveillance technologies. We recently established two divisions within the Company to focus on that goal and we expect to deliver some of these solutions during calendar year 2008.

"Technest will continue to focus on our strong portfolio of 3D imaging products developed for the defense industry and to seek new applications in the domestic security markets. In addition, we have formed a new division to create innovative medical devices using our 3D imaging solutions and we expect to begin marketing the first of these products in the second half of calendar year 2008."

3D-ID Product Division - Defense and Security

This division will build on our strong portfolio of surveillance and 3-D recognition products. The products, developed under government Small Business Innovative Research (SBIR) grants, address domestic, urban, and commercial security needs, as well as military defense.

Our major products, developed and in development, include our OmniEye™ Wellcam, OmniEye™ Cerberus, Smart Optical Sensor (SOS), Smart Suite™, Omnivision, Small Tactical Ubiquitous Detection System (STUDS), 3D SketchArtist, and 3D FaceCam.

--  OmniEye™ Wellcam is a portable, ultra-light, highly durable,
    360-degree field-of-view camera which can be used in field
    applications such as detection of underground weapon caches
    and search-and-rescue beneath building rubble.

--  OmniEye™ Cerberus is a re-configurable multi-sensor system that is
    designed for long distance infrared and visible light detection,
    while maintaining seamless panoramic coverage up to 360 degrees.

--  Smart Optical Sensor (SOS) is a high-speed image processing platform,
    powered by our Smart Suite™ algorithms, that allows multiple cameras
    to be deployed easily in a distributed, scaleable network that
    provides autonomous surveillance.

     --  Smart Suite™ algorithms are a portfolio of advanced video
         analysis and augmentation modules that enhance both new and
         existing sensor systems with capabilities including: reliable
         target detection motion tracking, and object classification and

--  OmniVision is a software platform for a wide range of security and
    surveillance camera products. Built as a modular system, OmniVision
    can operate as a standalone application or easily integrate into
    existing systems. The unique architecture of OmniVision puts
    next-generation capabilities within reach of traditional camera and
    digital video recorder systems. The system includes software
    application modules for many different end user needs.

--  STUDS are state-of-the-art, miniature, disposable, low-cost motion-
    tracking, positioning and imaging sensors that permit long-range
    surveillance at high resolution. The system also includes rapidly
    deployable wireless networking and GPS mapping for integration with
    legacy sensors, among other advantages.

--  3D SketchArtist is a three-dimensional composite sketch tool that uses
    our patented three-dimensional morphing technology. The tool can
    transform ordinary two-dimensional sketches into rapidly evolving
    mock-ups that can be modified via facial features, poses, expressions,
    and lighting in seconds.

--  3D FaceCam uses three sensors to create precise, complete 3D face
    images at light speed. By capturing the very highly detailed geometric
    and texture information on a face, the 3D FaceCam overcomes a photo's
    traditional limitations of pose, lighting, and expression. Capture
    speed is less than half a second, enabling rapid processing of large
    numbers of people. 3D FaceCam is also highly accurate, making 3D
    FaceCam ideal for facial recognition.

3D-MD Product Division - Medical Devices

Technest's 3D Digitizer Systems provide turnkey three-dimensional (3D) imaging solutions for creating next-generation medical devices. These systems, currently in development for near-term commercialization, include:

--  The EARCAD (Ear Impression) system, customized for applications in
    the custom hearing aid and ear mold markets. The EARCAD system
    automates the process of converting a physical ear impression into
    a 3D model for streamlined production and quality control. Initial
    applications are for manufacturers looking to streamline their
    operations and enables audiology practices to improve turnaround
    times and accuracy. EARCAD will provide audiologists and manufacturers
    with a total value-added solution from its range of impression
    and non impression scanners and associated software. In
    particular the non impression scanner is well suited to the new
    "behind the ear" fit models which are approaching 50% of all
    hearing aids sold. The Company is currently in discussions with
    several major manufacturers about the implementation of these systems.

    Approximately 2.5 million hearing aids were sold in the United States
    in 2007 and the retail market worldwide was over $6 billion. Market
    penetration still has considerable potential growth as 17.6% of the US
    population, or 56 million people, are over the age of 60 with
    increasing life expectancy.

    This system will be available during mid calendar year 2008.

--  The AFOCAD is being developed -- in collaboration with Northeastern
    University and Spaulding Rehabilitation Hospital in Boston, Mass. --
    as a Rapid Design and Fabrication Product/ Service Platform
    for Custom-Fabricated, Patient Specific, Ankle-Foot Orthoses (AFOs).

    The current market size for AFOs is approximately $1 billion. Many
    stroke and diabetic patients will require an AFO as a result of
    their condition.

    The AFOCAD system is projected to be available before the end of
    calendar year 2008.

--  The Dental Digitizer™ is being developed for applications in the
    dental industry. The system automates the process of creating 3D
    models from dental molds and impressions in a rapid and accurate
    process. This system offers significant benefits in cost, quality,
    and turnaround times for dental labs, dentists, and orthodontists
    in the creation of dental crowns, bridges, aligners, braces,
    and other dental solutions.

    This system is projected to be available in calendar year 2009.

Financial Results Reported

The continuing operations of Technest currently represent revenues largely generated by Small Business Innovation 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 $1,323,573 in revenues from continuing operations during the six months ended December 31, 2007 compared with $1,347,989 during the six months ended December 31, 2006. The gross profit margin improved to 45% for the six months ended December 31, 2006, up from 32% for the equivalent period in 2006.

For the six months ended December 31, 2007, the Company experienced a loss from continuing operations of $2,115,983, compared with $1,918,216 for the same period in 2006. It should be noted that the operating loss for the 2007 period included a non-cash item of $1,380,000 for the fair value of stock issued in consideration for the termination of certain sections of a stockholder agreement dated March 13, 2006 and of a license agreement dated March 13, 2006. This event enabled Technest once again to own the exclusive rights to its substantial intellectual property portfolio which will form the cornerstone for product development following the sale of EOIR. In addition, amortization of intangible assets and depreciation charges from continuing operations for the six months ended December 31, 2007 amounted to $184,191.

For the three months ended December 31, 2007, the operating loss improved to $370,182 compared with a loss of $1,141,389 for the comparable period in 2006.

Revenues from EOIR's operation, now classified as discontinued, in the six months ended December 31, 2007 were $46,099,851 compared with $34,372,521 for the six months ended December 31, 2006. The net loss from EOIR's operations was $1,262,739 in the six months ended December 31, 2007 compared with a net loss of $583,459 for the six months ended December 31, 2006. These losses included costs of $4,075,022 and $486,953, respectively, for costs incurred by Technest that are clearly associated with the discontinued operation.

The loss from discontinued operations includes a loss on disposal $7,949,039 on the sale of EOIR. Should the contingent consideration be received, the Company would record an overall profit on disposal of approximately $15 million.

For more information, please visit the company's website at

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: 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.

Pursuant to a May 15 2007 agreement, 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.

Contact Information

  • Contact:
    Stanley Wunderlich
    Consulting for Strategic Growth 1
    T: 1-800-625-2236
    F: 1-646-205-7771
    Email: Email Contact
    Web site:

    Daniel Stepanek
    EVP Media
    Consulting for Strategic Growth 1
    T: 1-646-205-7767
    F: 1-646-205-7771
    Email: Email Contact