Technest Holdings Reports Quarterly Results and Discusses Strategy for Future Business Growth: Financial News

Technest Holdings Reports Quarterly Results and Discusses Strategy for Future Business Growth
Tuesday November 20, 2007 8:00 am ET

BETHESDA, MD--(MARKET WIRE)--Nov 20, 2007 -- Technest Holdings, Inc. (OTC BB:TCNH.OB - News), 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 three months ended September 30, 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, discussed below. The report, filed with the SEC on November 16, 2007, can be found on www.sec.gov.

On September 10, 2007, Technest announced an agreement to sell its EOIR subsidiary for up to $34 million. 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, the Company has classified EOIR's results of operations as discontinued operations for all periods presented in the consolidated financial statements.

Technest intends to mail to its stockholders and file with the Securities and Exchange Commission (the "SEC") 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 Information Statement carefully. 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.

In addition to providing the financial results for the quarter, the quarterly report discusses the Company's strategy for future business growth.

Business Strategy Going Forward

As a result of the proposed sale of EOIR, the remaining business of Technest Holdings, Inc. 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, medical devices, and consumer retail products.

Management stated: Moving forward, it is our goal to establish the Company as the leading supplier of 3D imaging products and solutions. The broad strategies that we have in place to achieve this goal are as follows:

 
--  Focus on commercialization of products already in the pipeline.
--  Utilize relationships with current industry partners to bring
    technology to market.
--  Develop recurring revenue models.
--  Consolidate our position as a leading innovator in 3-D imaging through
    continued research and development.
--  Continue to develop a robust intellectual property portfolio, and
--  Seek strategic acquisitions.

Technest holds 20 patents in 3D imaging, one of the largest portfolios of patents in this field. Current products leverage several core technology platforms, including:

 
    3D Imaging Technology Platforms:
    3D capture using patented Rainbow 3D technology
    3D processing, data manipulation, and advanced modeling
    3D display in volumetric space

    Intelligent Surveillance Technology Platforms:
    360-degree video acquisition using mirror, lens, and array
     configurations
    2D video detection, tracking, recognition and enhancement software

    3D Facial Recognition Technology Platforms:
    3D facial image acquisition and recognition algorithms and software

    General Technology Platforms:
    High-speed imaging processing hardware and embedded algorithms

Major products, developed and in development, include:

 
--  OmniEye(TM) Wellcam - an ultra-light, portable 360-degree field-of-view
    camera which can be used in military field applications including
    detection of underground weapon caches and search and rescue beneath
    building rubble.

--  Smart Optical Sensor (SOS) - a high speed image processing platform
    that powers the Smart Suite(TM) algorithms, enhancing sensor systems.

--  OmniVision - a software platform for a wide range of security and
    surveillance camera products.

--  Small Tactical Ubiquitous Detection System (STUDS) - state-of-the-art,
    miniature disposable, low-cost motion-tracking, position and imaging
    sensors that permit long-range surveillance at high resolution.

--  3D SketchArtist - a three-dimensional composite sketch tool that
    transforms two-dimensional sketches into rapidly evolving mock-ups that
    can be modified via facial feature, poses, expressions and lighting in
    seconds.

--  3D FaceCam - which changes the way we capture photographs.  Uses range
    from facial recognition to several medical applications including:

        --  Biomedical Engineering - Production of custom-fitting
            prostheses.
        --  Plastic and Reconstructive Surgery - Surgical planning,
            simulation and pre/post-operation comparison.
        --  Patient Communications - Simulation, explanation and
            modification of treatment plans based upon 3D morphing and
            feedback.

--  3D Digitizer System - a turnkey three-dimensional (3D) imaging
    solution.

--  EI Digitizer(TM) (Ear Impression) system - customized for applications
    in the custom hearing aid and ear mold markets.

--  Dental Digitizer(TM) - 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.

Financial Results Reported

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 $561,773 in revenues from continuing operations during the three months ended September 30, 2007 compared with $777,467 during the three months ended September 30, 2006.

The operating loss from continuing operations for the three months ended September 30, 2007 was $1,745,801. Within this amount, non cash items included $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. With this event, Technest once again owns 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 amounted to $92,246. The operating loss for the three months ended September 30, 2006 was $776,826.

Revenues from EOIR's operation, now classified as discontinued, in the three months ended September 30, 2007 were $17,818,559 compared with $19,192,171 for the three months ended September 30, 2006. Although EOIR's order book remained strong, EOIR continued to experience a slow down in the release of orders from the Government resulting in lower revenue. The net income from EOIR's operations was $844,863 in the three months ended September 30, 2007 compared with a net loss of ($504,601) for the three months ended September 30, 2006. The profit improvement was achieved by overhead savings implemented during the previous quarter.

The net loss attributable to common shareholders for the three months ended September 30, 2007 was $908,865, an improvement over the net loss applicable to common stockholders for the three months ended September 30, 2006 of $1,872,291.

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

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.