On October 31, 2008, Technest Holdings, Inc. sold 1,300 shares of its Series D 5% Convertible Preferred Stock, with a stated value of $1,000 per share, to Southridge Partners, LP, the holder of a majority of Technest's shares of common stock, for a purchase price of $650,000. The certificate of designation of the Series D 5% Convertible Preferred Stock was filed as exhibit 4.18 to Technest's annual report on Form 10-KSB for the year ended June 30, 2008 filed with the Securities and Exchange Commission on October 2, 2008 and is incorporated by reference herein.

The issuance and sale of the securities were not registered under the Securities Act of 1933, but were made in reliance upon the exemptions from the registration requirements of the Securities Act set forth in Section 4(2) thereof.

The Series D 5% Convertible Preferred Stock is convertible into Technest common stock at the option of the stockholder at any time. The number of shares of Technest common stock into which each share of Series D 5% is convertible is determined by dividing $1,000 (the stated value) plus any accrued but unpaid dividends (to the extent to be paid in shares of Common Stock) by $.20 per share. Currently, the 1,300 shares of Series D 5% Preferred Stock issued to Southridge Partners, LP are convertible into 6,500,000 shares of Technest common stock. The holders of Series D 5% Convertible Preferred Stock are entitled to receive cumulative dividends on the preferred stock at the rate per share (as a percentage of the stated value per share) equal to five percent (5%) per annum payable in cash or shares of Common Stock, at the option of the holders. The Series D 5% Convertible Preferred Stock shall be redeemed by Technest upon the receipt of the contingent purchase price from the sale of its subsidiary, EOIR Technologies, Inc.

(d) Exhibits

Exhibit No.         Description           Filed        Incorporated by reference
                                          with
                                          this
                                         Current
                                         Report
                                                  Form     Filing Date   Exhibit No.
4.1         Technest Series D 5%                 10-KSB  October 2, 2008    4.18
            Convertible Preferred Stock
            Certificate of Designations
            filed with the Secretary of
            State of Nevada on October
            1, 2008.
10.1        Securities Purchase             x
            Agreement dated October 31,
            2008 between Technest
            Holdings, Inc. and
            Southridge Partners, LP.